Oil and gas supermajor Shell is set to tie the bonuses for its top executive directors more closely to the group's performance in reaching its net-zero goals, if shareholders approve the plan at the annual general meeting in May, Reuters reported on Monday.
Two years ago, Shell became the first supermajor to set short-term emission reduction targets and link these targets with executive pay, yielding to growing investor pressure about establishing short-term emission goals.
Since then, Shell and other European majors, including BP, Total, Repsol, Equinor, and Eni, have pledged to become net-zero emission energy businesses by 2050 or sooner. Big Oil has also started to report more metrics about the greenhouse gas emissions of its operations and has pledged to continue with efforts to curb carbon dioxide (CO2) and methane emissions from its projects and developments and the products it sells to customers.
The energy transition and the push from investors for greater transparency have now evolved to tying executive bonuses more closely to supermajors' performance of climate initiatives.
Shell, according to Reuters, is proposing to double the weighting of the company's performance in reaching net-zero emissions to 20 percent of the long-term incentive plans (LTIP) for executive directors.
That's also written down in the oil major's Directors' Remuneration Report for 2020.
Aligning executive pay with strategy, Shell also intends to remove the metrics linked to liquefied natural gas (LNG) production and liquefaction volumes from the annual bonuses.
The weighting of the progress in the energy transition performance measures is set to grow to 15 percent from 10 percent.
Shell is proposing a "Refreshed annual bonus scorecard to give greater alignment with updated strategy, with a focus on financial delivery, operational excellence, progress in the energy transition and safety."
Last year, Shell's directors did not get any bonuses, while chief executive Ben van Beurden took a 41-percent pay cut, the remuneration report showed.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More