Financial Times: Icon of inefficiency
By Martin Dickson
Apr 27, 2004
Posted 28 April 04
It can be hard to make arrogant, blinkered people see sense, so investors seem to have their work cut out persuading the leaders of Royal Dutch/ Shell that really radical change is needed at the top of the organisation.
The FT reported over the weekend that the company is apparently considering increasing the transparency and authority of its dual non-executive boards rather than unifying them in the wake of its oil reserves scandal.
People close to the company believe it is unnecessary to combine the separate Dutch and UK non-executive bodies on the grounds that the structure played no role in the crisis. The system of "conference", where the two companies' non-executives meet with the executive directors, was likely to remain, though perhaps become less gentlemanly.
This, however, seems unlikely to satisfy either Anglo-Saxon investors or the rating agencies. Shell's cumbersome board structure surely helped create the poor oversight that led to the reserves crisis, and presumably also played a role in the company's long-term under- performance of the sector, which is just as much a cause for concern.
A combined board, on the lines of Reed Elsevier, Unilever, or dual-listed companies like BHP Billiton, is intrinsically more efficient, and at least some non-executive members of the Shell Transport board seem to recognise this.
The problem is the conservatives of the Netherlands, who fear loss of control over Royal Dutch, a national business icon.
The company's directors and Dutch fund managers need to be persuaded by whatever means possible that too little change risks making the company a global icon of incestuous Dutch inefficiency. And that will not be good for anyone's business.