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NYSE governance standards
The Corporate Governance Standards of the New York Stock Exchange (NYSE) allow foreign private issuers, like Royal Dutch Shell, to follow home country practices on most corporate governance matters, but require them to disclose any significant ways in which their corporate governance standards differ from those followed by US companies.
Royal Dutch Shell is an English company listed on the London Stock Exchange and is subject to the authority of the Financial Services Authority (FSA) in the United Kingdom. Consequently, Royal Dutch Shell follows the corporate governance principles set out in the UK Combined Code on Corporate Governance (Combined Code). Set forth below is a summary of the significant ways in which our corporate governance practices differ from US companies under the NYSE listing standards.
Non-Executive Director Independence
The Board of Royal Dutch Shell consists of a majority of members who are wholly independent of any personal business connection with Royal Dutch Shell and are therefore considered independent under the Combined Code. Royal Dutch Shell has, however, not separately determined whether each of them would also meet the independence requirements of the NYSE listing standards.
Nominating/Corporate Governance Committee and Compensation Committee
The NYSE listing standards require that a listed company maintain a Nominating/Corporate Governance Committee and a Compensation Committee, both composed entirely of independent directors and with certain specific responsibilities. Royal Dutch Shell’s committees, called the Nomination and Succession Committee and the Remuneration Committee, respectively, comply with these requirements except that the terms of reference of the Nomination and Succession Committee require only a majority of the committee members to be independent.
Audit Committee
As required by NYSE listing standards, Royal Dutch Shell maintains an Audit Committee for the purpose of assisting the Board’s oversight of the company’s financial statements, its internal audit function, and its independent auditors. Royal Dutch Shell’s Audit Committee is in full compliance with the Securities and Exchange Commission’s Rule 10A-3 and Section 303A.06 of the NYSE Listed Company Manual. Although in full compliance with Rule 10A-3, including Rule 10A-3 independence provisions, Royal Dutch Shell has not separately determined whether each of the Non-Executive Directors would also meet the separate independence requirements of the NYSE listing standards. Additionally, in accordance with English law, Royal Dutch Shell’s Audit Committee makes recommendations to the Board, for it to put to shareholders for approval in General Meeting, regarding the appointment, re-appointment and removal of independent auditors. Consequently, Royal Dutch Shell’s Audit Committee is not, in accordance with NYSE listing standards, directly responsible for the appointment of independent auditors.
Shareholder Approval of Equity Compensation Plans
Royal Dutch Shell complies with the listing rules of the UK Listing Authority which require shareholder approval for the adoption of equity compensation plans which are either long-term incentive schemes in which directors of Royal Dutch Shell can participate or schemes which may involve the issue of new shares. Under the UK Listing Authority rules, such plans cannot be changed to the advantage of participants without shareholder approval, except for certain minor amendments, for example to benefit the administration of the plan or to take account of tax benefits. The rules on the requirements to seek shareholder approval for equity compensation plans, including those in respect of material revisions to such plans, may deviate from the NYSE listing standards.
Code of Ethics
The NYSE listing standards require that listed companies adopt a code of business conduct and ethics for all directors, officers and employees and promptly disclose any waivers of the code for directors or executive officers. Royal Dutch Shell has adopted “Business Principles” which satisfy the requirements of a code of ethics and apply to all officers, directors, and employees. Royal Dutch Shell also has internal procedures in place by which every employee can raise in confidence accounting, internal accounting controls and auditing concerns. Additionally, any employee can report irregularities to the management of Royal Dutch Shell through a worldwide dedicated telephone line and website without jeopardizing his or her position in Royal Dutch Shell.
