Shell's CEO Pay Soars Amid Profit Slump. Shareholders Face a Test.

The timing could scarcely be worse. As Shell's profits tumbled and households grappled with soaring energy bills, the company's chief executive pocketed £13.8 million—and now shareholders are being asked to approve changes that could inflate his future bonuses by half again. It's a case study in how divorced boardroom remuneration has become from both company performance and public sentiment.

Wael Sawan's total remuneration for 2024 represented a 60% jump from the previous year, with £11.8 million arriving in the form of bonuses—dwarfing his £1.9 million in fixed salary and benefits. Most significantly, Shell is proposing to change its executive pay policy to permit long-term share awards worth up to nine times salary, a leap from the current six times. If shareholders approve this at May's annual meeting, Sawan could eventually pocket bonuses reaching £13.8 million on top of his base package.

For a company that saw underlying earnings drop to £13.6 billion—missing analyst expectations—the optics are atrocious. Yet Shell insists the package is "commensurate with his position at a major global energy company", which is precisely the sort of circular logic that characterises boardroom pay debates. Commensurate with what, exactly?

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The position creates the pay, which justifies the position.

The American drift

What's particularly revealing here is how the proposed policy shift fits into a wider FTSE trend: the steady Americanisation of British executive pay. Moving from six times to nine times salary for long-term awards brings Shell into closer alignment with US energy majors, where CEO packages routinely reach stratospheric levels that would have been unthinkable in British boardrooms a generation ago.

This drift has accelerated noticeably across Britain's largest companies. According to analysis by the High Pay Centre, restraint in executive remuneration at FTSE 100 firms has effectively evaporated in recent years. Andrew Speke, the organisation's interim director, pointed to Shell's pay increase as emblematic of this broader pattern, noting the standard City justification: we must compete with American counterparts.

But competing for what? Shell isn't relocating to Houston. Sawan isn't fielding offers from ExxonMobil. The argument assumes a competitive global market for CEO talent that's far more liquid than reality suggests.

Most chief executives at major companies are internal appointments or sector specialists with deep institutional knowledge—hardly the footloose mercenaries this logic implies. The company will point to its share price, which has risen 26% over the past year. Performance delivered, reward earned.

Rewarding executives for market movements driven by Middle Eastern missile strikes is a novel interpretation of pay for performance.

Except roughly 12% of that gain materialised in the past month alone, driven not by operational brilliance but by geopolitical turmoil—specifically the Iran-US conflict pushing oil and gas prices sharply higher.

The vesting period defence

Shell would argue that year-on-year comparisons mislead, since this represents the first year Sawan could receive his full pay package following the three-year vesting period for long-term share awards. There's technical merit to this. He took the role in January 2023, meaning previous years' figures were necessarily incomplete.

Yet this context doesn't address the fundamental question: why propose a 50% increase in potential future bonuses whilst profits fall and households face rising energy bills? The confluence is what grates. Finance chief Sinead Gorman saw her total package reach £8.5 million, up from £7.25 million, in the same year the company delivered worse-than-expected results.

Energy companies occupy a peculiar position in British corporate life—simultaneously vital infrastructure and symbols of profiteering. When Shell reports £13.6 billion in underlying earnings whilst consumers struggle with heating costs, the political sensitivity should be obvious. That it apparently isn't speaks to how insulated boardroom culture has become from public sentiment.

A test case for shareholder restraint

The High Pay Centre's Speke noted there's "little sign that the Government intends to challenge this trend". He's right. Despite periodic political theatre about executive excess, meaningful intervention remains vanishingly rare. The last Labour government introduced binding votes on pay policy in 2013, but these have done little to constrain the upward trajectory.

Shareholders, particularly large institutional investors, tend to back management recommendations on remuneration with predictable regularity. Shell's shareholder vote in May will therefore function as something more than a routine approval process. It becomes a test case for whether there exists any practical ceiling on FTSE executive pay, or whether the American model—justified by circular reference to American comparisons—is now the irreversible norm for Britain's largest companies.

Judging by recent precedent, the outcome seems depressingly predictable. The pay rises, the profits fall, and the shareholders nod it through whilst everyone involved insists the system works exactly as intended.

More articles by David Adams