London Evening Standard: Shell saga will run and run
19 April 2004
HE first responsibility of a chief executive, I was once told, is to identify a successor - and then sack him. The version of this management game played at Shell was slightly more subtle - set your likely successor impossible targets and watch him twist in the wind.
Shell, one of the world's largest companies, has been in crisis since it announced some months ago that what it had earlier described as proven oil reserves were not proven at all.
In those intervening months chairman Sir Philip Watts has been forced out and so too has the head of exploration and production, Walter van der Vijver. But what no one has been able to explain until today was how a company like Shell, in many ways one of the best managed businesses in the world, could have got itself into such a mess.
Today we know the answer, with the publication of a warts-and-email review of the matter and the demotion of another top person, finance director Judy Boynton.
What this shows is that the number one and number two in the company were at war. Watts had catapulted himself into the top job on the back of a stellar performance as head of exploration and production, during which time reserves soared. His successor in the E&P job, van der Vijver, was distinctly unimpressed with his inheritance and as early as February 2002 expressed in writing his concern at what he thought was the overbooking of those same reserves.
The implication was that Sir Philip had overegged it. But judging reserves is as much an art as a science, so instead of sensibly resolving the issue the two men let it degenerate into a prolonged corporate dogfight, the tone of which is best summed up by a van der Vijver email to Watts which began: 'I'm becoming sick and tired of lying...'
Judy Boynton's sin, for which she has lost her job, was not banging the little boys' heads together, getting them to see sense, take legal advice, or have an independent audit done.
She has paid a high price for the over-inflated egos of her colleagues. But so too have shareholders and although the surviving management would have us believe they are now ready to go forward again, I suspect it will be years before the legal ramifications of this saga will finally be laid to rest and Shell forgiven.