UK - The Local Authority Pension Fund Forum (LAPFF) is continuing its drive to reform oil companies' pay deals by now calling for Anglo-Dutch oil giant Shell to attach safety-related performance targets to its management remuneration packages.
The association is urging its 39 members, which between them hold over 1% of Shell shares, to vote against the remuneration report at the company's May 15 annual general meeting (AGM) as it wants Shell to "link management of non-financial issues such as health and safety to its long-term incentive plans."
The current annual bonus and the sustainable development component of the bonus represents a maximum of only 5% of a Shell director's potential pay package.
"The forum does not consider this to be an adequate incentive, given the critical importance of issues like safety and the oil sector," the LAPFF said today.
The LAPFF is also concerned about Shell's climate change targets, arguing Shell's target to reduce emissions to 5% below 1990 levels by 2010 is inadequate.
Calling for an adjustment of Shell's target in the bonus calculation so directors are "adequately stretched before receiving a payout", the LAPFF commented: "The target effectively allows for a 20% increase in emissions between 2006 and 2010 rather than providing a real incentive for further emissions reduction."
This latest move by LAPFF, whose members have combined assets in excess of £75bn, follows earlier action in March against remuneration packages at BP but which it failed to impress upon the British oil giant.
LAPFF members last month attempted to use their 1.2% stake in BP to vote against a remuneration report at its AGM.
Ebba Schmidt, consultancy services executive at PIRC, told IPE: "One of the more direct outcomes was that the opposition to the remuneration report was four times higher than in the year before." However, BP has not committed to anything, said Schmidt.
"At the AGM they argued quite strongly against any such suggestion."
The LAPFF said it will attempt to put further pressure on BP and is continuing the dialogue.