A leader of the shareholder revolt against pay and bonuses at Royal Dutch Shell said Wednesday that his group hopes the 'no' vote to the company's compensation practices will inspire changes in company policies.

Shell's remuneration report was voted down with 59.42 per cent of shareholders opposed at shareholder meetings in the Hague and London on Tuesday.

All other resolutions sailed through.

The report was controversial because the remuneration committee exercised its discretion to award bonuses to executive directors even though they missed performance targets.

The vote was not binding on management.

"I think the effect is at least a moral effect.

Shell is not obliged to do anything with it, but PR-wise they need to take it seriously," said Errol Keyner, deputy director of the Dutch Shareholders Association.

"The least Shell has to do is to change its policy in such a way that it will be adhered to by the executive board members," making discretion subject to shareholders vote, he said in a telephone interview.

Shell's chief executive, Jeroen van der Veer, received salary and other compensation worth euro10.3 million last year.

Peter Job, chairman of the remuneration committee, defended its decision to release one-fourth of the shares potentially available to executive directors, and said it was not the first time that discretion had been used in this way.

"From the remuneration committee's point of view, we are looking back over record years, not excluding 2008, and following a policy which has been clearly and publicly stated, not objected to previously by shareholders, and applied with all due process," he said in a letter dated May 6.

Shell chairman Jorma Ollila argued that Shell had been reining in compensation, giving only 14 per cent of the potential awards over the past four years.

"We take the outcome of this vote very seriously and we will reflect carefully upon it," Ollila said on Tuesday.

Shareholder aversion to pay and bonus awards has been demonstrated this year at the part-nationalised Royal Bank of Scotland, where 80 per cent of shares voted 'no'; and in revolts at the AGMs of BP, Heineken and Volvo.

Such votes are not binding.

"The big difference between this year and last year is that the whole world has changed," said Ruth Bender, senior lecturer on financial accounting at the Cranfield School of Management.

Compensation

"I think the concern arises because the economic situation is radically changed, whereas in past years the institutions didn't care if executives were getting a lot of money, because they were getting a lot of money as shares rose," she said.

The difficulty of forcing change in compensation, which in many cases has already been paid, was exemplified in the 80 per cent 'no' vote at Royal Bank of Scotland.

Shareholders, which included the British government, the majority shareholder, joined in the revolt, backed by widespread public outrage at the pounds701,000 (US$1.86 million) annual pension taken away by Fred Goodwin, the former chief executive.

"RBS was overwhelmingly rejected, but the new chairman said: we've consulted a lot of lawyers and we can't do anything about it," Bender said.

- AP