Royal Dutch Shell will link long term executive pay to its “energy transition” plan. The Dutch-Anglo firm will be setting specific three and five-year carbon reduction targets every year, to which the executive pay will be correlated. The change is set to be implemented following a shareholder vote in 2020.
According to the Director of Ethics and Engagement at the Church of England pensions board, the Shell decision, “sets a benchmark for the rest of the oil and gas sector”. Royal Dutch Shell, the 5th biggest oil and gas company in the world by revenue, carries significant weight in driving sustainable development in the industry. This move to tie executive pay to carbon reductions not only incentivises executives to act on carbon reduction targets, it signals to other energy providers how they should be thinking and acting as well. Is executive pay commensurate with carbon reductions a publicity stunt or will it hasten the pace at which Shell transitions to a renewable energy and services provider? Will other energy companies follow suit? What other kinds of incentives could be more effective in charging the oil and gas industry energy transition?
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