Updated: Wednesday 4 January 2006: 05.00am EST
By Alfred Donovan
In 9 January 2004 – almost two years ago – the bombshell news of the Shell reserves fraud broke on an unsuspecting world. Negative news about the scandal inundated the media in the following days and months with the sackings of senior executives, regulatory and criminal investigations, class action law suits, followed eventually by multimillion dollar fines and settlements.
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The explosive news headlines included for example: –
The Times: How Shell blew a hole in a 100-year reputation
The West Australian: Investors howl for Shell’s blood
The Independent: Lies, cover-ups, fat cats and an oil giant in crisis
On 4 July 2004, The Sunday Observer published a company reputation assessment carried out by Thomson Intermedia. The survey and article (see link below) were based on monitoring company news in every UK national newspaper on a daily basis. It ranked the top ten brands/companies with the highest reputation and at the other extreme, the 10 “Worst”. No prizes for guessing Shell’s ranking; the Worst of the Worst.
The Observer: Bad publicity – not goodbye, but good buy: “Shell illustrates how a steady barrage of negative publicity can bring a company to its knees”: “The company’s reputation is now in tatters”: “We list the latest batch of leaders and laggards in the corporate publicity league in the accompanying table. These rankings are based upon news reports in the last three months. The current ’10 worst’ list is led by Shell.”
The publication of the Thomas Intermedia survey happened to coincide, almost to the day, with the launch by Shell of a defamation suit against Shell whistleblower Dr John Huong, a Shell geologist who had worked diligently for the company for 29 years. Dr Huong’s falling out with Shell management stemmed back to his decision to place on record, in a Shell internal document, his conscience drive concern about safety issues and the fabrication of reserves volume for the Kinabalu oil field, where he was the production geologist.
Dr Huong blew the whistle internally at Shell at a time when such deceit in regards to reserves reporting had only just started. That was in 1997. History might have been very different if Shell management had listened. Instead EIGHT Royal Dutch Shell companies got together and sued him for libel in respect of articles published under his name on this website. Not so much a case of David vs. Goliath as David vs. King Kong.
So here we are two years on. Has Shell’s reputation recovered from the reserves fraud and other scandals e.g. Nigeria; Sakhalin2 $16 BILLION cost overrun; the Cairn fiasco; the Rossport Five debacle; Brent Bravo tragedy, etc? Recent reports confirm that the answer in NO.
The New York Times published a report last month under the headline: “New Surveys Show That Big Business Has a P.R. Problem”. John D. Hofmeister, who runs the United States operations of Shell Oil Company, is quoted as saying: “This is a challenging time for big corporations”. The modern feeling, he said, is “big is bad.” That certainly appears to be the overwhelming public and stakeholder perception of Royal Dutch Shell.
This incidentally is the same John Hofmeister who posted a message on the “Tell Shell Forum” a few years ago applauding and encouraging its policy of open uncensored debate. I wonder what his thinking is now, after the facility has been suspended following exposure by me and other Tell Shell contributors of Shell’s secret censorship of postings by Shell employees? An innovative medium to encourage feedback has been ruined because Shell senior management does not want to hear the truth. Shell General Counsel Richard Wiseman confirmed to me by email in November 2005 that Shell has been censoring postings on the site.
On 6 December 2005, The Wall Street Journal published the results of a corporate reputation study of 60 major companies by Harris Interactive. They confirm that Shell’s reputation remains in the corporate gutter literally ranked alongside the likes of Enron.
A BLIND EYE CULTURE
Instead of dealing properly with the reserves volume, Asset integrity and safety issues exposed by Dr Huong, Shell management preferred to turn a blind eye. Shell did the same in respect of other misdeeds happening elsewhere, including the theft of intellectual property, health and safety shortcuts which put lives at risk and a rigged tendering process. In the latter case, companies were deliberately cheated by Shell in accordance with a cunning premeditated plan to deceive participants who thought they had reached a final short list stage in a major contract tender.
Small Shell shareholders and Shell dealers have also been adversely affected by Shell management misdeeds. The same applies to North American consumers who purchased tainted Shell gasoline and people living in many locations in the world which have been polluted by Shell’s operations e.g. Port Arthur in Texas and the Nigerian Delta.
The consequences of such a blatantly unscrupulous corporate culture brought about by a Shell management famed for its arrogance and denial has inflicted incalculable lasting damage to Shell’s reputation, as the surveys confirm.
Is there any real prospect of a turnaround when many of the same management figures tainted by the reserves fraud and other scandals and debacles are still at the helm of Royal Dutch Shell Plc?
With regards to Sakhalin, we have on the one hand President Putin slamming Shell for letting the costs spiral out of control and on the other, an eminent scientist, Professor Richard Steiner from the University of Alaska marine advisory programme, resigning from the mega-project after branding Shell management as “clever, stubborn rascals”
Unfortunately Shell management still appears to exist in a fantasy land where logic, fact and basic human decency are perverted. It prefers hype, spin, deceit, intimidation, victimization and turning a blind eye to wrongdoing.
Any regular reader visitor to this website will probably be astonished at our candid commentary about Shell and perhaps wonder why Shell management has not taken action against us in the libel courts, but instead has preferred to apply pressure by proxy i.e. Dr John Huong. The reason is that we have a mass of documentary evidence which confirms the deeply ingrained culture of cover-up and deceit which resulted in the reserves fraud and other scandals which have destroyed Shell reputation. There is no libel if what is stated is the truth.
My conclusion is that there in no prospect of Shell acting in accordance with its Statement of General Business Principles while the current discredited management with discredited hard-nosed policies remains in place. It follows that Shell’s reputation is likely to remain where it belongs, in the corporate gutter.
THE WALL STREET JOURNAL: Ranking Corporate Reputations: Bottom 10 (Worst Reputations): At 54. Royal Dutch Shell: 55: Tyco International: 57: Halliburton: 60: Enron: Tuesday 6 December 2005: READ
THE WALL STREET JOURNAL: Corporate Reputation Survey: “Companies with the best and worst reputations”
PUBLIC PERCEPTIONS: Royal Dutch Shell – No 54 out of 60
SINCERITY OF CORPORATE COMMUNICATIONS: Lowest Percentage of Positive Ratings for Sincerity: Royal Dutch Shell – Grouped with Tyco, Halliburton, Enron etc
CORPORATE WEB SITE RECALL: Under “Lowest Recall”: Royal Dutch Shell grouped with MCl-WorldCom, Enron etc
Tuesday 6 December 2005: READ
Selection of articles from the early months of 2004:
Daily Telegraph: Shell drops ‘bombshell’ on reserves
The Sunday Times: Shareholders can no longer be sure of Shell
Sydney Morning Herald: Shell rubs out 4bn barrels
Houston Chronicle: Shell chairman says he won’t quit
The New York Times: SEC investigates Shell’s cut in reserves
The Boston Globe: SEC opens formal probe of Shell’s oil reserves
Los Angeles Times: SEC Launches Formal Probe of Shell Oil
CBS MarketWatch: Law Offices Of Charles J. Piven, P.A. Announces Class Action Lawsuit Against the Royal Dutch Petroleum Company and the Shell Transport and Trading Company, PLC
(MARKET WIRE) NY: Class Action Lawsuit Commenced Against the Royal Dutch/Shell Group
Hoovers.com: Shareholder class action filed against The Royal Dutch/Shell Group, Royal Dutch Petroleum Co, and The Shell Transport and Trading Co, PLC by the law firm of Schiffrin & Barroway LLP.
ChannelNewsAsia: Shell name dragged through mud after explosive report: “The closely guarded reputation of Royal Dutch/Shell was left in tatters as British newspapers accused the oil giant of lies and a cover-up after an explosive internal report admitted executives knew of problems with reserves over two years ago.”: “”Lies, cover-ups, fat cats and an oil giant in crisis,” was the damning front-page verdict of the Independent newspaper, which said Shell was facing the “biggest corporate scandal for almost 30 years”. (ShellNews.net) 20 April 04
Financial Times: Observer Column: Shell-shocked (Corporate slogans consigned to the dustbin of history no. 94: “You can be sure of Shell.”)
Daily Telegraph: Memos expose Shell’s years of lying
Minneapolis Star Tribune: Dutch/Shell Group exec was ‘sick and tired’ of lying
Mail on Sunday: Chairman Jeroen van der Veer in frame over Shell scandal – could lead to 20 years in jail
The Independent: Bribery and corruption put fresh dent in tarnished image of Shell
CNN.com: Shell admits blame in Nigeria: “Royal Dutch/Shell has taken responsibility for contributing to the fighting and corruption in oil-rich Nigeria”.
Reuters: “Leaked” Report says Shell actions feed Nigeria violence: “corporate behaviour of Royal Dutch/Shell in Nigeria feeds a vicious cycle of violence and corruption”
London Evening Standard: Shell ‘has lied for 10 years’
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