The International Herald Tribune: Shell urged to bring in new talent
By Heather Timmons NYT, Thursday, March 11, 2004
Some investors seek outside hires at top
LONDON A committee of Royal Dutch/Shell Group directors that is reviewing the overstatement of oil and natural gas reserves is continuing to back the company's top management despite disclosures that senior management knew of the shortfalls in 2002. A growing number of investors, however, are saying that Shell may ultimately need to bring in outside executives to restore confidence.
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For Shell, the idea of hiring from outside would be radical. Over its 97-year history, Shell has nearly always promoted from within to fill management spots. And it almost never hires outside executives to group managing director level, where strategic decisions are made.
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Most Shell executives sign on very early in their careers and spend decades at the company. Philip Watts, for example, who was Shell's top executive before he was ousted last week, began his career as a seismologist in 1969. But a combination of a shrinking management team and a battered reputation has some investors hankering for new blood.
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"Ultimately one would like to see someone from outside the Shell house" added to the top ranks, said Ivor Pether, fund manager for Royal London Asset Management, which manages £23 billion, or $41.5 billion, in shares, including shares of Shell Transport and Trading, one of the two component companies of Shell. "That would be the most positive sign of their receptiveness to the comments and criticism they've received," Pether said.
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Shell surprised investors on Jan. 9, when it disclosed that it was cutting its proven oil and gas reserves by 20 percent, or the equivalent of 3.9 billion barrels of oil. On Tuesday, the committee of directors looking into the overstatement of reserves said it had completed the first stages of an investigation.
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"The group audit committee has delivered its preliminary report to the boards and has recommended to the boards and external auditors that they should feel confident in relying on the representations of the group's current senior management," Aad Jacobs, the committee's chairman, said in a statement on Tuesday night.
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With the March 5 ousters of Watts and the leader of exploration and production, Walter van de Vijver, Shell is left with just four group managing directors. Two of the remaining directors, Jeroen van der Veer, the new chairman, and Judy Boynton, the chief financial officer, were made aware of the reserve issue in 2002, according to internal memorandums obtained by The New York Times. Shell did not disclose that there was a potential problem with the reserves until Jan. 9.
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Still, many investors are hesitant to call for van der Veer and Boynton to resign because it would leave the company with few top executives with known skills and experience. The other two group managing directors, Malcolm Brinded and Rob Routs, are not well known among shareholders and analysts.
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A Shell spokesman said the company was considering adding to the number of managing directors, but he said he could not comment on whether they might come from inside or outside.
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Procuring outside talent may be difficult. Shell in general pays its executives much less than their counterparts at big American energy companies.
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On Tuesday, Shell's audit committee also reiterated its pledge to make the results of the investigation public, but did not say how long that would take.
The New York Times
http://www.iht.com/articles/509817.html