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The Independent: Shell hit by audit row as investors call for shake-up


By Saeed Shah

22 March 2004


Shell is to hold a crunch meeting with institutional shareholders this week amid reports that its auditors had refused to sign off its accounts.


The embattled Anglo-Dutch oil giant was forced last night to deny that its joint auditors, PricewaterhouseCoopers and KPMG, had not approved its final accounts, saying these were never presented to the accountancy firms.


However, Shell would not comment on whether the auditors had been concerned about earlier drafts of its accounts. Andy Corrigan, a spokesman for Shell, indicated the company was prepared to make further management changes. Shell has already been forced to ditch Sir Philip Watts, its chairman, and Walter van de Vijver, its head of exploration, over a savage downgrade in the company's stated reserves base.


Lord Oxburgh, a company non-executive director who was hastily appointed to the new position of chairman of Shell's UK arm, will defend the group in a meeting with the Association of British Insurers, one of the most powerful shareholder organisations in the City. Mr Corrigan said: "Shell is considering the views of investors with respect to overall corporate governance, including the composition and operation of the parent company's boards."


Last week, there was a further downgrade of reserves and a postponement of the publication of Shell's annual report, due on Friday. According to reports over the weekend, both auditors had rejected the company's accounts over concerns about the quality of information provided by Shell and worries over legal liability - the Securities & Exchange Commission has launched its own investigation into the reserves downgrades. PwC and KPMG declined to comment.


Mr Corrigan said Shell's board had decided on Wednesday night not to go ahead with publication of the annual report.


Industry sources said the auditors would have seen earlier versions of the annual accounts by Wednesday, as the publication date was so close. Mr Corrigan said: "The accounts were not presented to the auditors... The decision was made by the board not to publish the accounts, pending much greater clarity on the reserves situation with the completion of the reserves review."


Shell has commissioned an external consultant, Ryder Scott, to carry out a review of its reserves. Last week's downgrade came before this review was complete, prompting speculation that more downgrades and resignations are yet to come.


It has been suggested that investors are unhappy with the way that Jeroen van der Veer was appointed to succeed Sir Philip, without consultation with shareholders. There is also said to be pressure on the company's finance director, Judy Boynton, over the company's financial controls.


The ABI and its members are expected to demand in the meeting this week that Shell unify its board structure, which is split between a Dutch and a UK board. Some investors want "new blood" brought on to the Shell boardroom. Robert Talbut, of the fund manager Isis, said: "We want a single structure with a new independent chairman."


In addition to regulatory probes in the UK, US and Holland, Shell faces up to 16 lawsuits filed in the US on behalf of investors. As well as current Shell directors, these lawsuits threaten to disrupt in the boards of other major UK-listed companies.


Former Shell executives, named in the legal actions, now chair Lloyds TSB (Maarten van den Bergh), Anglo American (Sir Mark Moody-Stuart) and Rio Tinto (Paul Skinner).


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