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The Times: How did Shell's assayers let plate pass as pure silver?



April 21, 2004


CALL it the senior common room or the officers’ mess, but membership of the managing directors’ committee at Royal Dutch/Shell has been one of the more coveted prizes in European business.


A roll call of recent alumni reveals a glittering trail — Sir Mark Moody-Stuart, now chairman of Anglo American. Paul Skinner, chairman of Rio Tinto, and Maarten van den Bergh, who is heading the board of Lloyds TSB. They are at the top table today because they did time at Shell. Service as a Shell managing director has been not just a meal ticket, but a passport to prestige, favour and fortune.


Until Monday, when the world caught a glimpse of an alternative Shell. Had someone blundered? Shell was supposed to be politeness, probity and professionalism. Instead we saw bullying and backstabbing. The silver in the directors’ dining room is found to be just plate.


Was it all a sham? Or is someone forging the passports to glory? Who hired Sir Philip Watts and Walter van de Vijver, the managing directors accused of concealing the reserves problem? How do you obtain a key to the managing directors’ washroom in an organisation such as Shell? The non-executive directors of Royal Dutch Petroleum and Shell Transport and Trading ought to provide an answer. When asked, however, Lord Oxburgh, a distinguished academic who has been thrust into the job of Shell chairman, said it was a good question.


In theory, the best Shell trainees earn their spurs in Nigerian swamps and their pips in committee rooms at head office. Tested in the laboratory, the oil that burns with the brightest flame rises to the top of the barrel. There are occasions, however, when something less pleasant floats to the surface.


Ultimately, the boards of Royal Dutch and Shell Transport choose the managing directors and set their pay. They chose the two men who were then dismissed in March.


It is easy to criticise nonexecutive directors. Are they to blame if an executive lies or conceals? Probably not. Are they to blame if three out of the six managing directors are found to be inadequate? Shell has no shortage of non-executives. Royal Dutch has seven and Shell Transport has nine. They are paid an annual fee of £50,000. Former executives — Sir Mark and Mr Van den Bergh — take part in their deliberations. In 2002 Sir Mark was a member of the remuneration and succession review committee, the body that approves company managing director appointments.


Is it comforting to know that your former boss is on a committee that approves your appointment to high office? Or should the former boss feel discomfort? Is it possibly a conflict of interest? Monday’s publishing storm from Shell revealed the discomfort of Mr Van de Vijver, lumbered with a portfolio riddled with holes and a boss who caused the leaks. Mr Van de Vijver might have useful views, were he free to comment.


Off-target on the oligarchs


ADDING insult to injury, Standard & Poor’s removed Shell’s triple-A rating on Monday. That is a blow to vanity, not to cashflow, but the same cannot be said of the rating agency’s relegation of Yukos to junk status. The Russian oil group last week received a tax demand for $3.5 billion (£1.9 billion) and a Russian court ordered that its assets be frozen.


The Kremlin does not do things in half-measures. Picture the Inland Revenue lobbing a £10 billion tax demand to BP, requesting immediate settlement and the sequestration of BP’s assets.


The trouble with this political gamesmanship — at least three quarters of the tax bill is fines and surcharges, not unpaid tax — is that it has exactly the opposite effect intended by the Russian Government. President Vladimir Putin has said that he wants to enforce respect for the rule of law and the tax code. His Finance Minister recently held out the prospect of an amnesty for the rich oligarchs, provided they pay their taxes and don’t meddle with politics, a finger clearly pointed at Mikhail Khodorkovsky, the former Yukos chief.


If the Kremlin wants to curb the oligarchs’ political power, it should not wave trumped-up tax bills at their companies but look at the source of the problem, the extraordinary concentration of ownership in a few hands. That this concentration is not in the public interest was made apparent in a recent World Bank report and was acknowledged by the chief executive of Yukos when he chided core shareholders for failing to settle the row over Yukos’s merger with Sibneft.


Secret plotting in corridors and smoke-filled rooms . . . Is it the Kremlin or a joint meeting of oligarchs? Who can say?,,8210-1082118,00.html

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