The Independent: Investors lambast Shell over ousted chairman's £1m pay-off: “the £1.06m pay-off for Sir Philip Watts proved that, even under new leadership, the company was still living in "a parallel universe"

By Michael Harrison, Business Editor

29 June 2004

Shell received a mauling yesterday from shareholders over the "scandal" of the £1m pay-off for its disgraced former chairman, its "abject" environmental record and its cumbersome dual board structure.

Shareholders attending the annual meetings of the Anglo-Dutch oil giant in London and The Hague, tore into the company over the fiasco of last January's reserves downgrade, linking it directly to the lack of accountability and transparency at board level.

The twin AGMs were the first opportunity small shareholders have had to quiz the company since the seismic upheaval in the company's fortunes triggered by the downgrading of its oil and gas reserves by 4.5 billion barrels or 23 per cent. In the Netherlands, there was embarrassment when 40 per cent of Dutch investors voted against a resolution expressing confidence in their management. Shareholders at both AGMs had been promised an update on the progress of Shell's review of its much-criticised corporate structure but they failed to get one.

Lord Oxburgh, the chairman of the UK arm, Shell Transport & Trading, insisted Shell's non-executives could not have known about the reserves problem earlier because the executive directors had been "economical with the information". However, Add Jacobs, the chairman of the Dutch supervisory board, told shareholders he had first been alerted to the issue in November.

Lord Oxburgh told the annual meeting in London's Docklands that the "particularly black cloud that has hung over us has a silver lining". That was the new sense of urgency within the company to emerge as stronger, more open and more transparent business. But one shareholder replied that the £1.06m pay-off for Sir Philip Watts proved that, even under new leadership, the company was still living in "a parallel universe".

Alan McDougall, of the shareholder action group Pirc, said the pay-off flew entirely in the face of the Government's attempts to eradicate payments for failure, adding: "Pay is a litmus test of governance. If you can't get it right on Sir Philip Watts, how can we be sure you will get anything right in the future?"

Jim Stride of Axa Investment Managers, one of the few institutional shareholders to speak at the meeting, said it had been "deeply disappointed" with the events of the last six months and challenged Shell to accept that the reserves downgrade was the direct result of "deep seated corporate and cultural weaknesses" within the group which required radical remedies.

Lord Oxburgh denied there had been a link between the two but volunteered that the board committee reviewing the company's corporate structure was examining a wide range of alternatives, including some which were "quite extreme".

Contrary to what Shell said on the day Sir Philip's departure was announced, Lord Oxburgh disclosed that his severance terms had been agreed the night before in the space of three hours and were "the absolute minimum" it could get away with.

Sir Peter Job, a non-executive on the remuneration committee, added that Sir Philip had been obliged to leave share benefits worth £3m "on the table".   

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