smh.com.au: Shell reputation reserves close to empty
April 22, 2004
Posted 6 May 2004
The closely guarded reputation of Royal Dutch/Shell was in tatters this week as British newspapers accused the oil giant of lies and a cover-up after an explosive internal report admitted executives knew of problems with reserves more than two years ago.
Amid the clamour on Tuesday, a leading Shell shareholder publicly rejected the company's claim that there was nothing fundamentally wrong with its structure. Robert Talbut, chief investment officer at fund manager Isis, said: "They have attempted to present this as being down to a couple of bad apples.
"I would actually say that what it shows up is that accountability and information flows were not to the standard we would expect in a major public company.
"Shell has been an under-performing company for 10 years and there are a lot of issues to address. They need to improve accountability and overall corporate governance."
Mr Talbut stopped short of calling for further resignations but said the company needed to bring in high-quality external management.
Another fund manager, who asked not to be named, said: "The management have made mistakes. We would support changes to the company's structure. What they have at the moment is not best practice."
At the press conference to discuss the conclusions of the report, by US law firm Davis Polk & Wardwell, Shell directors said the reserving problems were caused by "individual failings" rather than "structural deficiencies".
Shell said it had seen about 50 per cent of shareholders (by volume) and planned to continue holding discussions about the best way forward for the company.
However, Milberg Weiss, which specialises in class-action lawsuits on behalf of investors, confirmed on Tuesday night it was planning to step up its legal assault on Shell. The firm plans to fly partners to the UK to attract clients and hold talks on potential new avenues for lawsuits in the US.
"Lies, cover-ups, fat cats and an oil giant in crisis," was the damning verdict on the front page of The Independent newspaper, which said Shell was facing the "biggest corporate scandal for almost 30 years".
"Secrets and lies" was how the influential Lex column in the Financial Times saw it.
"Such a cover-up has destroyed the company's long-standing reputation for caution and probity," it said in an editorial comment.
Shell cut its booked proved oil and gas reserves by a total of 4.35 billion barrels, or 22 per cent, to 15 billion as of the end of 2002, and to 14.5 billion at the end of 2003.
"Deceitful Shell needs 10 years' to rebuild exploration business," said The Times, which called the saga "a tale of lies, intrigue, backstabbing and cover-up".
AFP and The Telegraph, London