Financial Times: A diplomatic antidote to Dutch helm disease
By Martin Dickson
May 22, 2004
A little quiet diplomacy can do a lot of good. As we report today, big British and Dutch investors seem to be moving close to a common front on the changes needed in the way Royal Dutch/Shell is governed.
This is very good news, for in the wake of its oil reserving scandal the Anglo-Dutch group has seemed reluctant to embrace the kind of shake-up that is so clearly required. This particularly appeared to be the case at Royal Dutch, with non-executive directors at Shell Transport, the British side, evidently more willing to embrace change.
UK investors acting on their own would have found it hard to push through reform because Royal Dutch is the dominant partner. It has 60 per cent of the equity and its board is entrenched through its control of priority shares, which carry extra voting rights.
The company ought to be thinking of radical change: scrapping its cumbersome governance structure, involving separate Dutch and UK boards linked through the board of management, and moving to a unitary structure along the lines of other Anglo-Dutch companies, such as Reed Elsevier and now Unilever. It also needs to bring in fresh blood from outside, in the form of a non-executive chairman in line with UK best corporate governance standards.
When the scandal first broke, Dutch institutional shareholders seemed reluctant to rock the boat. But after a dialogue it seems that two huge Dutch pension funds have agreed a common approach with their UK counterparts that goes a long way towards the Anglo-Saxon model.
The company, which will publish its delayed annual report next Friday and then embark on a City charm offensive, has been promising to update shareholders on governance at its annual meeting on June 28. Investors should be pushing for concrete proposals then, and a clear timetable for action.