The Sunday Telegraph (UK): New Shell may be radical, but can it cure its culture?: “While Jeroen van der Veer, the first ever chief executive, was unveiling New Shell last week, there was a painful reminder of Old Shell. The directors calmly revealed yet again - the fifth time - that the company's "proven" reserves were questionable. Around 900m barrels may have to be reclassified, potentially bringing the amount overbooked to 5.4bn or almost one third of reserves.” (ShellNews.net)
Sunday 31st October 2004
Royal Dutch Shell plc. A year ago it would have been unthinkable to apply those three small - but immensely significant letters - to the Anglo-Dutch oil giant which was all too content, some would say smug, with its historic dual structure, two boards and committees of managing directors.
Well, Shell has surprised us all by opting for the most radical solution - a unified company, with a single board of executive and non-executive directors. It is a seismic event by any measure. At long last Shell is leaping into the 21st century after years of living with an unwieldy board structure which confused accountability and at times paralysed decision-making. Frankly, it had to be done, following the company's plunge into crisis when it was forced to admit it overstated its oil and gas reserves.
Shell blamed human failings for the overstatement fiasco and ousted three top executives including Sir Philip Watts. But changing structure is not the same thing as changing culture.
While Jeroen van der Veer, the first ever chief executive, was unveiling New Shell last week, there was a painful reminder of Old Shell. The directors calmly revealed yet again - the fifth time - that the company's "proven" reserves were questionable. Around 900m barrels may have to be reclassified, potentially bringing the amount overbooked to 5.4bn or almost one third of reserves.
To van der Veer, Shell was being far more accountable, ready to come clean with bad news. Maybe, but the manner of the announcement was just a bit too blase and smacked of the kind of arrogance which has afflicted the oil giant. For too long Shell has assumed its culture somehow made it superior - a notion which has been shattered in the past 10 months.
The fact is that Shell will have to run to stand still - it needs to narrow the gap on its rivals since it has a Reserve Life - the measure of the time an oil company can keep producing from its assets until they run out - of 10 years against 14 for both BP and ExxonMobil.
Shareholders should be cheering that Shell has sorted out its corporate governance and converted to good old Anglo-Saxon style capitalism. Van der Veer should now have the tools to drive the business forward with his mantra of LAT - Leadership, Accountability and Teamwork. Can we be sure the culture is changing? Not yet, especially if the CEO is still resorting to using three-letter acronyms.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/10/31/ccom31.xml