Financial Times: Investors call for no more Shell shocks
By Sundeep Tucker and Clay Harris in London, Ian Bickerton in,Amsterdam and Carola Hoyos in New York
Mar 10, 2004
British institutional investors and Dutch unions agreed that they did not want further Royal Dutch/ Shell management scalps, after indications yesterday that the company's board was advised in 2002 of huge shortfalls in proved oil reserves.
London-based investors in the Anglo-Dutch combine were keen that the disclosures should not force the departures of more Shell executives, such as Jeroen van der Veer, the new chairman, or Judy Boynton, chief financial officer.
Sir Philip Watts, chairman, and Walter van de Vijver, head of Shell's exploration and production division, were forced to leave last week. Mr van der Veer said on Friday there was "a loss of confidence in [their] leadership, and then they resigned".
The New York Times yesterday quoted internal Shell memos that suggested senior executives had discussed problems with reserves, and strategy about how to respond to questions, in early and mid-2002. Shell said only that the investigation by its internal audit committee was continuing.
William Claxton-Smith of Insight, which owns 1.1 per cent of Shell Transport, said: "It appears that the two most responsible are no longer there. After that, can all the non-executives be expected to be accountable for this level of detail?"
One of the top 10 investors said: "The board has acted and got rid of the central characters. Rather than more bloodletting, we are much more interested in why things went wrong and why they didn't tell shareholders."
Another large investor said: "The latest revelations will put more pressure on the board and do concern us. But we hope it is viewed as a systemic problem and not individual negligence. UK investors are wary that Shell has already been destabilised enough."
One senior UK fund manager added: "Shell has already lost two senior people and rather than shoot the whole board, I think shareholders will lay off - assuming nothing more serious comes out, that is."
He added: "If there was a mass clear-out every time a company got into problems, there would be nobody left to run the show. What is interesting is what the SEC makes of it all. Presumably, any fines, if they are levied, will not really hit the company's bottom line."
The mood was echoed in the Netherlands. One senior trade union negotiator at Shell said his organisation would not be pressing for further management changes. "There is nothing for us to gain from more disruption at the top," he said. "There is always a risk that the stock will go down and that will put extra pressure on cost-savings programmes and therefore on employment."
However, the official said that media reports left him with no doubt that "they [senior management] acted too late". He added: "Van der Veer must have known about this when Sir Philip Watts did. They work so closely together." He continued: "I don't think that Shell are going to replace [Mr van de Veer]. They are going to let the storm blow over. I think Shell will sit and wait to see if it has an impact [on the share price] and if it hasn't they will leave him where he is."
PGGM, the Dutch pension fund and Shell shareholder, said it would wait for the outcome of the internal report before commenting.
Shell is under formal investigation by the US Securities and Exchange Commission. The Authority for Financial Markets, the Dutch securities regulator, said yesterday it was "looking into the matter in order to establish the facts".
At least 14 US law firms have announced plans to file class action suits. One lawyer said a "flurry" of suits was expected before the deadline on March 26. None of the actions has reached the stage at which documents would have changed hands.
Ms Boynton was one of three executives, together with Sir Philip and Mr van de Vijver, the departed exploration head, involved in a presentation to investors and analysts in February on what had gone wrong.
If she left, Shell's committee of managing directors would fall to three members, half the number at the start of last week.