The Observer: US fund demands shake-up at Shell
By Oliver Morgan
Sunday February 8, 2004
A US institutional investment group backed by Calpers, America's largest pension fund, is demanding fundamental changes in corporate structure at oil giant Shell.
The call comes as Shell chairman Sir Philip Watts prepares to embark on a three-week charm offensive with investors after his refusal last week to stand down in the wake of the company's disastrous reserves downgrade.
The New York-based KnightVinke Institutional Partners are seeking meetings with Watts as part of his consultation with shareholders over the future of the group.
Founder Eric Knight said the current Shell structure, based on separate Royal Dutch and Shell boards in the Netherlands and London, needed fundamental change: 'This is a major blue chip company with high-quality assets and great long-term potential. There are two points - the structures are inappropriate and it is detrimental to [its] value to retain them.'
He added that KVIP was seeking two specific alterations. First, it wants a change to the process of nominations to the Royal Dutch board, which it feels are controlled by existing directors who appoint from their own ranks.
Second, it wants the companies' top executive position changed. Watts is chairman of the committee of managing directors, appointed from the boards of both Royal Dutch and Shell Transport and Trading of the UK. Investors feel his position lacks strong lines of control and accountability. KVIP wants the position replaced by a chief executive officer and an independent single board.
Knight said that KVIP's part-owner Calpers, the Californian state pension fund with $150bn under management, is aware of the position that KVIP is taking on Shell.
The fund's demands are likely to be echoed by other investors on the Watts roadshow. Last week Watts made clear that the company was open to proposals, but that it was making no decisions in advance of consulting the shareholders.