22 December 2008
By John Donovan
On 12 December news surfaced that the Dutch pension fund of the oil giant Royal Dutch Shell is heavily in deficit, with a 40% plunge in value as a result of share market turmoil. A $45 million exposure to the “Madoff” fraud was revealed a few days later following speculation surrounding the stability of the Shell Dutch pension fund.
Reuters reported that Shell would need around 2 billion euros ($2.65 billion) to return the fund to within Dutch legal requirements. The Shell Dutch pension fund must submit a recovery plan to the Dutch regulator indicating how it will, within a period of 3 years, be able to eliminate the deficit.
Shell also admitted the $45 million exposure to the $50 billion Madoff fraud the biggest fraud in history, eclipsing even Shells own massive securities fraud revealed in January 2004, when management deliberately fooled the stock markets by overstating Shell’s hydrocarbon reserves. Top executives of Shell, including the Group Chairman, Sir Phillip Watts, were forced to resign in disgrace.
News of the latest debacle made global headlines after I published on my website royaldutchshellplc.com, a letter to Shell Dutch pensioners from the Shell Dutch pension fund. Many news organisations, including Reuters, the Financial Times and the International Herald Tribune, kindly acknowledged our role in breaking the story.
Richard Wiseman, the Chief Ethics & Compliance Officer of Royal Dutch Shell Plc ignored emails I sent to him on the matter and on related ethical issues raised by Shell pensioners including a former Shell executive, Paddy Briggs. Paddy regularly writes informative, insightful and impartial articles about Shell, including his recent article entitled Shell pensioner poverty.
Paddy had a long distinguished career with Shell, which included a leadership role in the worlds largest re-imaging programme at over 38,000 Shell stations worldwide.
It is notable that Mr Wiseman has been willing to talk about himself in recent email correspondence with me, but not about the plight of Shell pensioners. That position does not strike me as being ethical, or in compliance with Shells claimed business principles, which include honesty and transparency. If Shell management practised what it preaches, there would have been no reserves fraud. In other words the claimed principles are themselves a fraud.
Neither is there anything new about Shell playing fast and loose with employee retirement\severance funds, as is evident from earlier articles authored by me.
The latter article also included news of Shells appalling treatment of its employees in Malaysia and Sudan.
There was a happy outcome to the claim brought against Shell by its Ethiopian employees.
It is not much more than a year ago that Shell decided to take a pensions holiday in relation to the retirement fund for its UK pensioners. There were signs of definite concern expressed by the journalists who authored BBC and Daily Telegraph news reports.
With unfortunate timing, the Shell pension fund trustees took a break from making contributions not long before the advent what has been described as the biggest global financial crisis since the Great Depression.
Shells funding ratio tumbles
IPE.com 12 December 2008 16:10:
NETHERLANDS The Dutch pension fund of Anglo-Dutch oil giant Shell has seen its funding ratio plummet 160% to 85% in less than a year.
Shell announced the bad news in a letter to its members yesterday, revealing the cover ratio at the end of November stood at 85%, and the value of its investments had dropped by 40% since the beginning of this year.
The fund had already contacted the regulator DNB about its funding position of 105% in October as Dutch regulations stipulate the cover ratio of a pension fund must be at least 105%, and any shortfall must be repaired within three years.
Shells Dutch fund, whose assets are managed by the Shell Asset Management Company (SAMco), invests heavily in equities, with around 70% of its assets allocated to the class.
The fund said its investments are spread globally, though on the basis of higher growth expectations it has a higher than average allocation to emerging markets.
As a consequence of the drop, Shell has decided the discounts on certain contributions will expire from next year.
Dutch media reported pension giant PFZW, the second-largest Dutch pension fund, had also dropped below 105%, and had a cover ratio of 96% at the end of November.
If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email [email protected]
Author: Carolyn Bandel