Shelling out a pay rise

British energy giant Shell Plc awards 9% increase to CEO’s pay package

Shell has struggled in recent years, reporting a 16% decrease in revenues last year. It has since embarked on cost-cutting strategies, such as planning to rollback low-carbon energy investment from 20 to 10% by 2030.

Meanwhile, it has shared some of the savings with its shareholders and employees, such as pumping up CEO Wael Sawan’s salary to about $11 million in 2024.

This has outraged environmental watchdogs, yet investors are less concerned.

Compared to its competitor British Petroleum, Shell has enjoyed more success where profit is concerned - netting $23.7 billion last year to Bp’s $381 million.

However, both have reflected a drop in revenues. The companies have both encountered similar issues such as volatility in the oil industry and environmentalism.

Global pressures which spiked oil prices in 2022 have begun to subside. They initially peaked at the start of the Russia-Ukraine war due to sanctions preventing Russian oil feasibly entering the global oil market.

Since Russia is one of the largest oil producers in the world, removing all of their supply pushed up prices significantly.

Since then, Russian oil producers have found methods of continuing to supply oil through countries such as China and India, who are willing to buy at discounted rates.

However, China, the largest oil and gas importer, has seen its previously momentous economic growth now indicate signs of slowing, possibly even to stagnation.

This is bad news for oil giants because as growth prospects wane for China, so does oil demand.

It was also Rishi Sunak, former Prime Minister of the UK, who in 2023 announced a rollback of Net Zero initiatives - such as the postponement of the ban of combustion engines to 2035.

It has been an uncertain few years for gas giants like Shell, who then had to contend with the potential impacts of policy change in the changeover to a Labour government last year. Starmer has updated the UK pledge to cut emissions by 81% once 2035 comes, up by 3 percentage points from the former Conservative 78%. Not the most drastic change.

Shell has responded to this uncertainty by continuing growth in its fossil fuel production operations, intending to increase oil and gas yields by 1% annually until 2030.

It has shifted focus to investor returns rather than Net Zero obligations to alleviate its ailing revenues, having maintained its share buyback program and setting aims to deliver up to 50% of its operational cash flow to its shareholders.

Yet it has been the CEO’s pay increase that has aggravated climate watchdogs, despite the broader workforce also benefitting from a 5.5% rise according to company reports.

Hearing of the news, Global Witness, a corporate scrutiny campaign, labelled Wael Sawan’s pay award as “obscene”.

They have accused the “big oil bosses like Sawan” of “fuelling climate devastation”, citing the company’s persistent endeavours in boosting its fossil fuel operations.

In the past, their accusations have escalated to the charge of ‘greenwashing’ - purporting a brand image of Net Zero initiative, yet lacking substantial action beyond this veneer.

Nevertheless, Shell remains a vital factor in the UK’s future energy security and progress towards mitigating the negative impacts of climate change.

The London-listed company is set to put up to £25 billion into the UK energy industry in their next two five-year corporate strategies, with the majority of this in low-carbon energy such as offshore wind.

Offshore wind has proven a crucial part of the UK’s Net Zero strategy, with its islands exposed to a greater proportion of coastline.

Shell, in spite of its controversies, is yet to wash ashore.