Daily Telegraph: Shell investors blast 'bad apples' excuse
By James Moore (Filed: 21/04/2004)
One of Shell's leading shareholders yesterday publicly rejected the company's claim that there was nothing fundamentally wrong with its structure.
The attack followed Monday's publication of a damning internal report that revealed former executives had lied for years about the state of the company's oil and gas reserves.
Robert Talbut, chief investment officer at fund manager Isis, said of the situation at Shell: "They have attempted to present this as being down to a couple of bad apples.
"I would actually say that what it shows up is that accountability and information flows were not to the standard we would expect in a major public company."
Mr Talbut added: "Shell has been an underperforming company for 10 years and there are a lot of issues to address. They need to improve accountability and overall corporate governance." He stopped short of calling for further resignations but said the company needed to bring in high-quality external management.
Another fund manager, who asked not to be named, said: "The management have made mistakes. We would support changes to the company's structure. What they have at the moment is not best practice."
At the press conference to discuss the conclusions of the report, by US law firm Davis Polk & Wardwell, Shell directors said the reserving problems were caused by "individual failings" rather than "structural deficiencies".
Shell said it had seen around 50pc of shareholders by volume and planned to continue holding discussions over the best way forward.
However, Milberg Weiss, which specialises in class action law suits on behalf of investors, confirmed last night that it was planning to step up its legal assault on the company. The firm plans to fly partners to the UK to attract clients and hold talks on potential new avenues for law suits in the US.
Mark Solomon, a partner in the firm, said: "Following the recent revelations it is clear that there is a growing clamour for creative action. We are going to hold strategy meetings with institutional clients and a wider presentation for people who may be part of the class or who may be able to take individual action." Milberg Weiss is working with UK firm Class Law.
Mr Solomon said they were certain to target former directors. However, Sir Philip Watts, the former chairman of Shell's committee of managing directors, continued to maintain his silence. His Washington-based lawyers did not return calls yesterday.
The strategy is the opposite to that adopted by Walter van de Vijver, the former head of exploration and production, whose "pointed exchange" of e-mails and memos with Sir Philip were the centrepiece of the report.
Mr Van de Vijver, who told Sir Philip he was "sick and tired of lying" about Shell's reserves, defended his conduct again on Monday. His lawyer said he was the only person with the "courage and integrity" to push for change.
Despite the turmoil surrounding Shell, Deutsche Bank upgraded its price target for the company's shares yesterday and reiterated its "buy" advice. Analyst J J Trainor said he expected that lawsuits would "plague the company and its former directors for years to come".
However, he believed that the uncertainty surrounding the report was now out of the way. He said many of the tough decisions had been made and pointed out that Shell was trading at a substantial discount to BP and Exxon Mobil. The shares finished the day flat, losing 0.75p to 389p.