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The Daily Telegraph: US watchdog digs into Shell bonuses


By Simon English in New York (Filed: 12/03/2004)


America's top financial watchdog is investigating claims that senior Shell executives were encouraged to exaggerate the size of the group's energy reserves. 


At the heart of the inquiry is the suggestion that bonuses were tied to the energy assets booked - a clear incentive to cheat.


Last week Sir Philip Watts was sacked as chairman after admitting that Shell had overstated its "proven" oil and gas reserves by a fifth - nearly 4billion barrels. The level of reserves is a vital factor in evaluating the worth of an energy business.


The Securities and Exchange Commission is delving into the company accounts and asking how high up the management chain the bonus awards went.


A Shell spokesman said: "We don't comment on SEC investigations. Their investigation is a matter for them."


Insiders claim there is almost no connection between pay and reported energy assets, arguing that bonuses and salaries are based on profit and share price. Each business unit is given a "scorecard" based on its performance, which in turn influences bonus payments to executives.


The weighting given to the reserves achieved was somewhere between nothing and 15pc, insiders say.


An internal inquiry led by the group audit committee is looking into the circumstances behind the accounting failures, but it is not clear how much of the findings will be made public.


Earlier this week it was alleged that Shell had known for two years that it was overstating its reserves.


There is speculation in the oil industry that more executives will be fired once the audit committee finishes its report. The audit team has already given its backing to Jeroen van der Veer, the new chairman.


It is not known when the SEC will complete its inquiry.;$sessionid$QMJCETH5JY5CBQFIQMFSFFOAVCBQ0IV0?xml=/money/2004/03/12/cnshell12.xml&menuId=242&sSheet=/money/2004/03/12/ixcity.html&menuId=242&_requestid=55198


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