Yahoo News: SEC Examines Shell's Bonus Awards
Dow Jones Business News
Thu Mar 11, 1:04 AM ET
NEW YORK -- The Securities and Exchange Commission (news - web sites) is examining whether bonuses and other incentives may have encouraged managers at Royal Dutch/Shell (NYSE:RD - News) Group to overstate the company's energy reserves, said people familiar with the situation, as the agency's probe continued into an accounting firestorm that has rocked the oil industry, Thursday's Wall Street Journal reported.
The SEC probe is at an early stage and no findings have been reached. The agency is looking at the extent to which Shell tied bonuses awarded to executives to the booking of oil and natural-gas reserves by the company. Reserves -- estimates of the amount of oil and gas a company thinks it can pump and sell -- are critical to investors' assessments of an energy company's value.
Among the questions the SEC is asking is how many Shell executives received such bonuses and how high up the management chain these bonus awards went, according to these people.
Shell's audit committee, which is conducting an internal probe into the reserve issue, also requested detailed information from company management about whether reserve bookings affected employee bonuses, according to a person familiar with the situation. But the committee -- made up of non-executive directors from the separate boards of Shell's two parent companies -- was told that while reserve bookings played a role in the bonus scheme, the bookings didn't materially affect any individual's compensation, according to this person.
A Shell spokesman said the company was cooperating with the SEC's review but it would be inappropriate to comment on it.
Shell's shock disclosure on Jan. 9 that it would slash its reported oil and natural-gas reserves by 20% raised questions about whether senior executives or managers at Shell's various operating units around the world had financial incentives to overstate reserves. Early last month, Philip Watts, Shell's ousted chairman, said the bonus plan wasn't a factor in the reserve overbookings.
Shell has two holding companies, Royal Dutch Petroleum of The Hague Netherlands, and London-based Shell Transport & Trading Co.
Wall Street Journal Staff Reporters Chip Cummins, Susan Warren and Susan Pulliam contributed to this report.