Houston Chronicle: Shell pays $2 million to Watts: Reserves report forced departure of ex-chairman
By THOMAS WAGNER
June 26, 2004, 12:17AM
LONDON - Royal Dutch-Shell Group of Companies has paid former chairman Philip Watts, who resigned in the wake of the company's embarrassing overstatement of its proven oil and gas reserves, a lump sum severance payment of nearly $2 million, the company said Friday. Watts resigned in March, and his payment was based on his salary as an employee until his normal retirement date in June 2005.
When Watts resigned, the company said he did so in response to the board's wish for "a change of leadership due to a loss of confidence."
The company stunned the oil industry this year when it cut its estimate of proven oil and gas reserves by 20 percent. Since then, it downgraded its reserves estimate three more times, cutting them by a total of 4.47 billion barrels, or 23 percent.
Reserves are an oil company's most valuable asset, and any reclassification into less certain categories can affect its stock price.
The Securities and Exchange Commission, the Justice Department and European regulators are all investigating Shell's overstatement.
A Shell spokesman said Friday the board decided the severance payment was appropriate on the basis of the company's respect for its long-term employees. Watts joined Shell in 1969.
The spokesman, speaking on condition of anonymity, declined to comment on whether the company contemplated any further action regarding Watts.
In addition to Watts' departure, the reserves overstatement led to the resignations of head of exploration and production Walter van de Vijver and finance chief Judith Boynton.
Shell said Friday no director's fees were paid Watts for the period between his resignation and normal retirement date, that Watts received no performance-related annual bonus for 2003 or 2004, and he forfeited some stock options and share grants.
The exercise term of Watts' remaining 2,847,000 stock options has been shortened, so that they expire five years after his resignation or earlier.
In addition, Watts has the legal right to a pension of $153,000 per annum under the Shell pension plan. Watts made contributions to the plan for 35 years.
The Royal Dutch/Shell Group of Companies is considering unifying its corporate structure by uniting the management boards of its two parent companies. It hopes to restore investor confidence in the company.
"We think that shareholders need the power to specifically approve or reject these termination packages," said David Somerlinck, corporate governance policy manager at Pensions Investment Research Consultants, a London firm that represents institutional shareholders.
Meanwhile, two U.S.-based pension funds filed suit against Shell on Friday in state court in New Jersey seeking changes in the company's corporate structure as well as monetary damages.
The suit says that company officers violated the U.S. Sarbanes-Oxley Act by allowing the Shell Group to operate without inadequate internal controls.
The suit was filed by the UNITE National Retirement Fund, based in New York, which represents textile and laundry workers, and the Plumbers and Pipefitters National Pension Fund, based in Virginia. The New York Times contributed to this report.