The Business: Shell UK bosses join push for single board
By Richard Orange
30 May 2004
DIRECTORS of Shell Transport and Trading, the British side Anglo-Dutch oil giant Royal-Dutch-Shell, have swung behind investors pushing for the company to unify its two boards.
A UK fund manager involved in meetings with directors on corporate government told The Business: “I’ve spoken to most of the Shell Transport board and they are very much in favour of changing the structure.”
British directors favour moving towards a unified structure, he said, but most would rather do so by appointing the same boards of Shell Transport and Trading and Royal Dutch. This would avoid the expense and legal headaches of unifying the UK and Dutch holding companies into a single listed firm.
Shell’s directors have held meetings with shareholders to collect views on the company’s structure before it gives the first views about what reforms it is considering at its annual meeting on 28 June.
Directors have held at least two big meetings with investors on the issue since the company published its report into the causes of the reserves crisis on 19 April.
The revelations surrounding Shell’s 4.47bn barrel reserves downgrade this year drew investors attention to the companies eccentric 97 year-year-old structure, in which its businesses are jointly owned by separately listed companies- Shell Transport, with a 40% share, and Royal Dutch, with 60%.
Critics argue the structure dilutes accountability within the company and makes it more difficult for shareholders to influence the company through non-executive directors. So far there is no agreement within the company or among shareholders about how it should be reformed.
“It is not with us like it is with the UK and US investors: we are not against the structure that they have now,” said a fund manager for the Dutch pension fund, PGGM. “We think the company could work in the way it is working now, as long as appropriate checks and balances are in place.”
But Dutch investors, who hold far fewer shares in the two companies than American and UK investors, are finding common ground with their counterparts on the grounds of controls and transparency, fund managers report. Dutch shareholders were outspoken in their calls for more changes to the company’s governance at a meeting with Royal Dutch chairman Aad Jacobs in Holland last weekend.
There is still resistance within the company to unifying the board structure, especially given that the conclusion of the 19 April report into the reserves debacle by lawyer Davis, Polk and Wardwell concluded that structure played little part in the concealment of the extent of the reserves over-bookings.
“The company keeps insisting the reserves debacle has nothing to do with its structure,” said a US fund manager. “It’s very much sticking to that story. But no investors accept that argument.”
But some said the company was beginning to listen. “The process is continuing, and it looks very positive,” said Richard Singleton at ISIS. “There are several views within the company, and that’s why there’s a need for dialogue.” He said the 28 June meeting would provide nothing conclusive but that investors would expect to hear developments on the company’s thinking. It would be nice to have a measure of progress: a proposal, or, more likely in Shell’s case, a set of scenarios,” Singleton said.