The Financial Times: Listen up
LEX COLUMN Mar 16, 2004
Anyone with a sense of irony will enjoy the "Listening and Responding" section of Royal Dutch/Shell's website. References to "transparency and openness" raise a wry smile. "Forced to listen" would be a more accurate description of recent events. "Forced to respond" would be a welcome addition. Shell is studying other multinationals that have overhauled their board structures, including BHP Billiton. Shell could learn much from the mining group, which maintains two separate companies, but with identical boards, and has primary listings in Australia and the UK.
Shell's "conference" committee may in effect act as a single board. But it should be streamlined - it currently includes all members of both companies' boards - and should be made more accountable to shareholders. Meanwhile, keeping Royal Dutch/Shell's dual listings would maintain stock liquidity and overcome differences in dividend tax structures.
Irrespective of investor pressure, some aspects of Shell's corporate governance may change following the introduction in January of a new Dutch regulatory code. Royal Dutch's 1,500 board-controlled priority shares, which carry the right to nominate directors to Royal Dutch Petroleum, are the type of preferential structure the new code aims to remove. However, the "comply or explain" basis of the code means change is not guaranteed. Investors should maintain pressure for change to ensure more than the barest minimum is enacted. Only then will Shell's website claims be more than a source of ironic humour.