2019 was tough for shareholders of oil major Royal Dutch Shell (RDS.A) (RDS.B). Shares rose just 1.2% for the year, badly lagging the performance of the S&P 500.
However, it was an even worse year for CEO Ben Van Beurden, whose total compensation for 2019 was less than half what it was in 2018, due to an increase in safety incidents and missed financial benchmarks.
Underperformance in 2019 took a bite out of Shell CEO Ben Van Beurden's compensation package. Image source: Getty Images.
All about the bonus
Van Beurden's compensation package is twofold. He receives a set amount of base pay and taxable benefits and then a variable bonus package if the company meets certain goals. In 2019, Van Beurden's fixed compensation increased by 18,000 euros (1.2%) over the prior year, to 1,577,000 euros, or about $1.8 million.
However, in 2018, the bulk of his pay came from 18.2 million euros (about $20.4 million) in variable compensation, which included bonuses for meeting both annual and three-year benchmarks. Tying pay to multiyear goals helps ensure a CEO isn't rewarded for boosting short-term performance at the expense of long-term gains.
Van Beurden's variable pay took a nosedive in 2019.
Missed goals
In 2019, Shell missed its minimum goal for operating cash flow. Add that to seven workplace deaths in 2019 -- up from two in 2018 -- and Van Beurden received no annual bonus based on those metrics. Annual production barely surpassed the company's minimum goal. As a result, Van Beurden's annual bonus fell 73% from the prior year.
The company's three-year metrics were measured relative to oil industry peers -- an easier hurdle. But Van Beurden's bonus from these metrics still fell by 53% from 2018. Overall, Van Beurden's 2019 total remuneration (including pension) was $11.2 million. That's nothing to sneeze at, but a far cry from 2018's $23.8 million.
