Bloomberg.com: Shell Considers Unifying Board to Improve Governance (Update1)
June 17 (Bloomberg) -- Royal Dutch/Shell Group said it may unify the two boards that have governed the company for almost a century, after the overstatement of its oil reserves led to the replacement of three senior executives and shareholder lawsuits.
``A number of possible structures, and improvements to decision-making, accountability and enhancement of effective leadership, are under active consideration,'' Shell said in a statement on PR Newswire. ``Amongst other alternatives, forms of unified boards, to which a CEO would report, are being studied.''
Calls for changes in Shell's dual structure and improved leadership and accountability have increased after the company reduced its proven reserves four times this year. Shell Transport & Trading Co. of London and Royal Dutch Petroleum Co. of The Hague are run by separate boards in a arrangement dating from their 1907 merger.
The statement from Shell, Europe's second-largest oil company, follows mounting pressure from investors for information on the progress of a review of its structure and corporate governance. Previously, Shell had promised an update at its annual general meeting on June 28.
The shares of Shell Transport rose 1.7 percent to 406.25 pence yesterday, the highest since Jan. 6, three days before the first cut in reserves on Jan. 9. The stock has declined 2.2 percent so far this year, less than an 8.3 percent advance at BP.
Shell gained 1.75 pence, or 0.4 percent, to 408 pence as of 8:07 a.m. in London.
Shell also disclosed the names of the people leading the review. Previously, Shell had declined to say who was conducting the study, saying only a working group is ``exploring all possibilities for improving governance and structure.''
A ``consultative review'' is being carried out by a group drawn from the boards of the two parent companies, including Maarten van den Bergh, Peter Job, John Kerr, Jonkheer Aarnout Loudon and Jeroen van der Veer, Shell said.
They are being assisted by a team of senior executives, including the legal director, the head of group taxation, the group treasurer and the corporate secretaries. Outside legal and tax advisers, and investment bankers, are being consulted, Shell said. They weren't identified in the statement.
The results of the review will be made public in November, Shell said. The company plans to consult shareholders further after that, before the annual meeting in 2005 decides the matter.
Investors told Philip Watts, who was ousted as Shell's chairman in March, in the last month of his tenure that moving to a single board should be a priority.
Now, the Dutch and U.K. parent companies each have their own board, and a group of executives called the Committee of Managing Directors drawn from both sides sets strategy. Another entity, called the Conference, includes directors from both Shell Transport and Royal Dutch.
Shell has already made some changes, such as the appointment of a non-executive chairman, Ronald Oxburgh, to Shell Transport's board. The company also plans to tighten controls on reserves by using outside experts to audit the assessments.
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Last Updated: June 17, 2004 03:10 EDT