Sunday, May 21, 2017

The Shareholders Are Restless

Shell shareholders to vote for new climate change goals

Investors including the Church of England and activists will send signal to Anglo-Dutch company’s board at AGM this week
 
A group of retail investors have tabled the resolution at Shell’s AGM, asking it to establish carbon emission reduction targets. Photograph: Toru Hanai/Reuters
Shell shareholders including the Church of England, European pension funds and Dutch activists will send a signal to the board of the Anglo-Dutch company this week by voting for it to set new climate change goals.

The challenge comes from a Dutch group of retail investors, who have tabled a resolution for Shell’s annual general meeting on Tuesday, asking the company to establish carbon emission reduction targets.

“A large group of institutional investors will make their dissatisfaction with the company’s position evident by voting for this resolution,” said Mark van Baal of Follow this. The Church of England is among investors supporting the proposal, along with several European pension funds.

“I’m not expecting that it will pass but the resolution is well-worded and we support its intent – it’s something the board should be taking note of,” said Adam Matthews, head of engagement for church commissioners at the C of E.

Shell’s board has asked shareholders to vote against the resolution, which to pass would require 75% to vote in favour. Shell argued that unilaterally setting targets would harm the company and that the emissions from the burning of its oil and gas were largely covered by country’s individual climate plans under the Paris accord.

Independent European proxy advisory group ECGS recommends investors back the climate resolution, but major advisers Glass Lewis and ISS oppose it. The Guardian understands no major institutional investors intend to support it.

A Shell spokesperson said: “We’re pleased the key proxy agencies share the view of Shell’s board of directors that the resolution is not in the best interests of the company, its shareholders or the fight to tackle climate change.

“The only realistic way that Shell could reduce its customers’ emissions would be by reducing the volume of products we sell to them. This would simply drive customers to other suppliers, make no real difference to overall emissions, damage our business and undermine our efforts to play an active role in the energy transition.”

Separately, the UK-based investment group Pensions & Investment Research Consultants (Pirc), which represents around 1% of shareholders, has urged investors to reject both the directors’ pay last year and Shell’s future remuneration policy.

CEO Ben van Beurden’s total pay was £7m in 2016, up 60% from £4.7m in 2015, which Pirc said was excessive at 453% of his salary.

ISS has also raised concerns over the £1.94m payout for a former chief financial officer, Simon Henry, which it said was not in line with practice in the UK. However, overall it backed the remuneration for last year.

Pirc said the future pay policy was not without concerns for shareholders because when directors leave they would receive an automatic payout linked to their annual bonus, but on balance it backs supporting the policy in a binding vote.

Activists are also expected to use the AGM as an opportunity to pose questions about an Italian investigation into an allegedly corrupt oil deal by Shell in Nigeria.

The meeting comes two days before major oil-producing countries meet in Vienna to decide whether to extend production cuts for a further nine months in an effort to shore up the oil price, which is hovering around $50 a barrel.
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BP shareholders urged to reject chief's £9m pay package

Campaigners claim strategy appears ‘misaligned’ with climate change threat but another successful revolt deemed unlikely
 

Unlike Shell, BP has been criticised for not removing oil and gas production targets from its pay policy. Photograph: Andy Buchanan/AFP/Getty Images
BP shareholders are being urged to vote against executive pay packages this week on the grounds they are too high and not taking climate change seriously.

The UK-based firm suffered a rare and humiliating shareholder rebellion last year when chief executive Bob Dudley’s £14m pay package was voted down, against the backdrop of record company losses.

Another uprising is unlikely at the AGM on Wednesday, when investors will be asked to approve the £9m salary for Dudley in 2016 – 40% lower than in 2015 – as higher oil prices pushed the company back into profit.

However, for the first time in three years, shareholders will also decide on a binding new pay policy for 2017-20, which would lead to a £2.9m cut in Dudley’s maximum payout.

BP’s chief executive Bob Dudley. Photograph: Suzanne Plunkett/Reuters

Campaigners are encouraging investors to vote against the policy on the grounds that company strategy appears “misaligned” with the Paris climate deal’s goal of avoiding dangerous global warming.
ShareAction acknowledged BP was doing better than rival Shell on removing oil and gas volume production targets from its pay policy, but said BP’s corporate strategy was failing to adapt the firm for a lower carbon world. 

The group added that a green light would lock in a pay policy at a “critical” time for addressing climate change, as 2020 is seen as the last year by which carbon emissions must peak for the world to be likely to keep temperature rises below 2C.
The Church of England, which has BP in the top holdings of its £9bn funds, said it would be voting against both Dudley’s pay and the remuneration policy.

“We’ve noted this year that there has been some improvement on executive remuneration. That said, it is still an extremely large award when you look at the whole package and compared to peers so we obviously remained concerned,” said Adam Matthews, head of engagement for the church commissioners.

But with just 50% of shareholders needed to approve the remuneration policy, it is unlikely to be derailed.

The three big proxy shareholder advisory services – Glass Lewis, ISS and IVIS – have recommended a vote in favour or have no concerns with the policy, the first time all three have been supportive for several years.

Separately, the authoritative Carbon Disclosure Project placed Shell one spot above BP at four out of 10 in a new league table of how oil and gas companies have responded to investor concerns on climate change. The group called Shell’s link between remuneration and carbon emissions a “landmark”, and noted that BP had no equivalent measure.

Anglo-Dutch rival Shell’s AGM, which takes place on 23 May, will also have its remuneration and climate change policies scrutinised.

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