The Daily Telegraph: Shell chairman quits in 'seismic changes'
By Christopher Hope, Business Correspondent (Filed: 04/03/2004)
Sir Philip Watts, the chairman of Shell, resigned yesterday in one of the most fundamental corporate shake-ups in the oil giant's 97-year history.
The departure comes two months after Shell's shock announcement that it had overstated its proven oil reserves by 20pc - or 3.9 billion barrels. That announcement sent Shell's shares down by 10pc and prompted some investors to call for changes in the management and its corporate structure.
Sir Philip, 58, chairman of the committee of managing directors, is leaving with Walter van der Vijver, 48, the head of exploration and production.
Sir Philip, who joined the company as a seismologist in 1969, was head of exploration and production from 1997 to 2001. Last month, he said that the overstating of the reserves - which went back to 1993 - was an "embarrassment".
He also gave an "unqualified apology" for failing to speak to investors when the extent of the unproven reserves was announced.
A Shell spokesman said that the company's boards - Shell Transport & Trading in the UK and Royal Dutch Petroleum in Holland - had asked them to go. He said: "The resignations were to accommodate the boards' wishes for a change of leadership at the group."
The pair, who leave immediately, will receive just three months' basic salary because there are no termination payment clauses in their contracts.
Calculated on 2002 salaries, Sir Philip - who was due to retire next year - would get £186,000 and Mr van der Vijver would receive €184,000. The full payoff is likely to be higher when pension contributions are included.
The resignations were announced in a five paragraph statement which detailed a complex reshuffle, approved at a Shell board meeting yesterday.
Sir Philip is being replaced by Jeroen van der Veer, 56, who previously ran Shell's chemicals arm. Rob Routs, a member of Royal Dutch's board, takes over chemicals and Malcolm Brinded, who runs gas and power, adds exploration and production to his responsibilities.
Lord Oxburgh of Liverpool, 69, the senior non-executive director at Shell Transport, is promoted to the new role of "interim non-executive chairman".
The news stunned Shell employees. One said: "It is a complete shock, a seismic change. The thought was that van der Vijver would take Phil's job. Everyone is surprised that he is going."
Shell Transport's shares closed up 7.5 at 383.5p. Investors said that the departures vindicated their concerns about the way Shell was being run.
William Claxton-Smith, director of UK equities at Insight, which owns 1.1pc of Shell Transport, said: "We are pleased to see developments but we don't know what it means because we are not Kremlinologists."
Another fund manager, who asked not to be named, said: "The move reflects our concern and will help restore confidence in the group's leadership and strategy." A third institutional investor said: "We feel it is a very significant change - the most fundamental shake-up in the group's history."
Shareholders were particularly pleased Shell had created the new position of non-executive chairman at Shell Transport. One said: "It is a step in the right direction, but there is a hell of a lot still to do." The Association of British Insurers, which represents many UK shareholders, said it was pleased Shell was changing its ways.