The Scotsman: Anger over Shell Reserves Crisis: “Oil giant Shell was today given a torrid time by shareholders angry at the crisis over its reserves”
By David Winning, City Staff, PA News
28 June 04
Oil giant Shell was today given a torrid time by shareholders angry at the crisis over its reserves.
At its annual meeting in London, Shell was forced to defend its record in the face of allegations of a cover up and a lack of transparency.
Shell has downgraded its oil and gas stocks four times since January in a crisis that sparked the departure of three top directors, including chairman Sir Philip Watts.
The task facing the company as it battles to restore confidence was underlined by 10% of investors voting against its remuneration package for directors.
Many voiced their disapproval at a £1 million pay-off to Sir Philip after his role in overbooking oil and gas reserves.
Shareholders dubbed the downgrades as “disgraceful” and “a scandal“, questioning why it took Shell so long to discover a problem.
Shell chairman Lord Oxburgh insisted there had been no cover up and action had been taken as swiftly as possible.
“When some of the senior directors are being economical with the information that they passed to the board then it’s very difficult that this could have come to light sooner,” he said.
An internal report in April highlighted email dialogue between Sir Philip and head of exploration and production Walter van de Vijver where the latter said he was “fed up of lying” over the reserves.
This correspondence was raised by investors who sought assurances that such a crisis could not happen again.
Private shareholder John Farmer said: “If shareholders can’t have confidence that directors or the chairman are telling the truth, does that not increase the urgency of accelerating the corporate governance review?”
Shell has pledged to consider changes to its structure that could see its twin boards in London and The Hague merged.
Shareholders hit out at the current structure of directors sitting separately in the two cities as “antiquated” and partly to blame for the debacle over its reserves.
But the review has also drawn public criticism, notably from US investors Knight Vinke Asset Management and pension fund Calpers earlier this month.
They wrote a letter to the Financial Times stating Shell was in danger of losing its credibility by not being more open.
But these accusations were rejected by non-executive director Sir John Kerr who said investors had already been consulted over the focus of the review.
“I personally find it rather weird – the criticism that this is a behind-closed-doors job. It’s absolutely not,” he said.
Shell is due to announce the results of the review in November before putting it to investors for approval at the annual meeting next year.
A vote will also be taken at that meeting on the £1 million severance deal for Sir Philip Watts, unveiled last week.
Lord Oxburgh said the deal was in the best interests of the company and represented the “absolute minimum” for Sir Philip to agree to depart. “The alternative was to open the company to months of potentially damaging wrangling,” he said.
Green campaigners also challenged the oil giant about its environmental record. Lobby group Friends of the Earth staged a demonstration outside the conference hall after accusing the company of causing severe health problems and environmental damage from its activities around the world.