Financial Times: Shell in more controversy with Watts pay-off
By Sundeep Tucker and James Boxell in London
Posted 26 June 04
Royal Dutch/Shell sparked a fresh bout of investor anger on the eve of its annual meetings when it announced on Friday that Sir Philip Watts, its former group chairman, is to receive a pay-off worth five times his contractual entitlement.
Sir Philip, who presided over the embattled oil company's reserves crisis, will be given £1.06m - the equivalent of 15-months' salary - even though he was on a three-month service contract.
Concerned investors had written to the embattled Anglo-Dutch oil company this month to demand that Sir Philip be paid only his minimum contractual entitlement.
The disclosure will provide fresh ammunition for critics who were already planning to use the dual annual meetings on Monday to question company directors.
Tim Breedon, group director of investments at Legal and General, one of Shell's leading UK investors, said: "Under the circumstances, we are very disappointed that Shell seems to have exceeded the minimum stipulated."
Pensions & Investment Research Consultants, the investor activist group, described the pay-off as "outrageous" and demanded that shareholders be awarded the right to approve pay-offs exceeding six months' salary.
The Association of British Insurers said that "you have to bear in mind that employment lawyers are involved and the pay-off is about as good as can be expected". Shell said it had decided on 15 months because Sir Philip had not been sacked but had left by mutual agreement after losing the confidence of the board.
It is understood that the company did not want to become embroiled in a legal wrangle, which could have cost it more than £1m.
Shell said Sir Philip's three-month notice had not been served as he resigned by mutual consent and therefore a severance agreement was reached.
The board approved his severance payment "on the basis of [Shell's] core values of respect for people and with regard to Sir Philip's longevity of service".
It said the pay-off was a separate matter from investigations by the US Securities and Exchange Commission into the reserves debacle, which led to Shell cutting its reserves estimates four times this year.
Sir Philip could still be sued by Shell if he is found by investigators to have been responsible for any wrongdoing.
In addition to his pay-off, Sir Philip will collect an annual pension of £584,000.
Meanwhile it emerged yesterday that two US pension funds with small holdings in Shell - the Unite National Retirement Fund and the Plumbers and Pipe-Fitters National Pension Fund - have filed a lawsuit against several former and present Shell directors and its accounting firms, PricewaterhouseCoopers and KPMG.