Shareholders in Royal Dutch Shell have increased the pressure on the Anglo-Dutch oil and gas group to reconsider its pay policy as a second institutional investor promised to vote against the directors' remuneration report at tomorrow's annual meeting.

Co-operative Asset Management, the ethically styled investment division of the Co-op, is the latest to voice its disapproval of Shell's decision to hand share awards to directors who missed key performance targets.

Guy Jubb, Standard Life Investments' head of corporate governance, spoke out about Shell earlier this month. Like Standard Life, the Co-op said that it had voted against Shell's remuneration policy every year for the past three years.

The Co-op — whose Shell holding is among its biggest investments — also said that it would oppose the re-election of Lord Kerr of Kinlochard as a director because of Shell's “persistent payment of inappropriate executive rewards”. Lord Kerr sits on Shell's remuneration committee and is the only relevant director standing for re-election this year. Abigail Herron, corporate governance analyst at Co-operative Asset Management, said: “Votes against remuneration reports have long been a way for shareholders to voice their concerns, but how long can you go for without it having an effect?

“It is now time for members of the remuneration committee to be called to account.”

Shareholders' public disquiet over pay at Shell means that tomorrow's annual meeting of investors could be a stormy one. RiskMetrics, the voting service watched by pension funds, is advising shareholders to vote against the remuneration report, while the Association of British Insurers has issued an “amber top” alert, noting that investors may have concerns.

Investors are particularly angry at the oil and gas group's apparent “moving of the goalposts” over the share awards.

Under a three-year incentive scheme agreed in 2005, directors, including Jeroen van der Veer, the group's chief executive, could earn up to 200 per cent of their salary in stock, depending on where the group finished in a league table of it and some of its peers.

Shell finished in fourth position, behind BP, ExxonMobil and Chevron, meaning that directors should have failed to qualify for the awards. However, because the difference between third and fourth position was marginal and directors had performed well using other criteria, Shell's board exercised its discretion and decided to grant directors half of what they would have been entitled to had the group finished third.

Mr van der Veer was given 79,000 shares, worth about £1.25 million, under the scheme.

After the conclusion of the three-year plan, Shell has introduced further performance measures, including total shareholder returns, earnings per share and progress on emissions policy.

Shareholders are increasingly prepared to take company boards to task over pay. Before this year's round of annual meetings kicked off, the Co-op said that it would not tolerate companies that used the recession to justify watering down performance targets.

In recent weeks, investors have thrown out the remuneration report at Provident Financial, the sub-prime lender, and registered heavy protest votes at BP, the oil group, Xstrata, the miner, and Rightmove, the property website.

Shell's annual meeting will be held in The Hague. British-based shareholders will be able to watch a live screening from a satellite link in the Barbican Centre in Central London. They will also be able to ask questions.

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