The Guardian (UK): Things won't be so vague after move to The Hague: “Change happened for two reasons. First, the scandal of overstated reserves did not just require an apology but a full corporate grovel. The story is the biggest scandal of the post-bubble era and only the sky-high oil price prevented Shell's crisis descending into corporate breakdown. After yesterday's nasty little shocker -a fresh downgrade of 900m barrels of reserves - the investors could have asked the directors to perform public somersaults and expect to see them in gym kit by lunchtime. (ShellNews.net)
Nils Pratley
Friday October 29, 2004
Based in The Hague, with a Dutch chief executive and a Dutch chairman, for Royal Dutch Shell yesterday's reforms might seem a shift in power to the Netherlands.
Do not believe it: this is an outright victory for the British and American financial institutions which demanded that Shell organise itself as a normal company. They have been granted their wishes in spades. The new company will be a full-blooded member of London's FTSE 100, its management subject to the same laws of shareholder accountability as BP.
If you thought that was the case already, you haven't been paying attention to how they saw things in the Netherlands. Over there, Royal Dutch seemed a quasi arm of the state. The royal family still has a stake; Wim Kok, the former prime minister, is on the supervisory board; and the country's last EU commissioner spent 16 years at Shell.
The sense of Dutchness was embodied in the 60% stake held by Royal Dutch. The fact that the actual shareholders in Royal Dutch were mostly the usual crew of international institutions didn't seem to matter; the Dutch establishment still thought it had the power of veto over radical reform.
Yesterday proved they do not. Dutchmen may have the top jobs now, but that was probably the fig leaf required to make the reforms acceptable in Amsterdam. The company said chairman Aad Jacobs would be replaced by an external appointment in 2006.
Change happened for two reasons. First, the scandal of overstated reserves did not just require an apology but a full corporate grovel. The story is the biggest scandal of the post-bubble era and only the sky-high oil price prevented Shell's crisis descending into corporate breakdown.
After yesterday's nasty little shocker -a fresh downgrade of 900m barrels of reserves - the investors could have asked the directors to perform public somersaults and expect to see them in gym kit by lunchtime.
Second, the twin structure was absurd. Directors in different companies at tempting to sing in harmony was a formula for confusion at best and in-fighting at worst. Given that these executives were attempting to manage more than 100 operating companies, bad decisions were inevitable.
But the reserves scandal was no natural result of that structure. Inaccurate financial reporting is ultimately the work of individuals and, to their credit, no Shell executives yesterday were attempting to blame the twin-headed model.
A host of Shell's other problems were probably exaggerated by the structure, such as the massive underspending on exploration during the late 90s. The industry-beating returns on capital earned in the 80s and early 90s seem to have created complacency; the inward-looking structure ensured it bred.
One company and one board don't guarantee success, but it's a start. Shell still has legal battles to fight, but it remains a powerful organisation.
http://www.guardian.co.uk/business/story/0,3604,1338526,00.html