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Financial Times: Shell ‘had systems in place’ to hear fears over reserves

Financial Times: Shell ‘had systems in place’ to hear fears over reserves

 By Carola Hoyos

Published: April 29 2004 5:00 | Last Updated: April 29 2004 5:00

A senior Royal Dutch/Shell executive has insisted that there were systems in place for any director to raise concerns over the oil group’s reserves position with the board.

John Hofmeister, Shell’s director of human resources, told the Financial Times that the issue could have been raised “through audit, human resources or the non-executive process” if it was not being addressed under normal reporting lines.

His statement is in stark contrast to assertions made last month by Walter van de Vijver, head of exploration and production, that he could not bypass Sir Philip Watts, the chairman, to make his concerns over reserving more widely known.

“Because the unspoken rule within the company is that you are not supposed to go directly to individual board members or the group audit committee, I had to rely on the chairman and chief financial officer to advise the group audit committee and assumed that happened in early December [2003],” Mr van de Vijver has said.

However, Mr Hofmeister said: “The way our processes are set up, it should have gone through audit, human resources or the non-executive process.

“It is our desire and intent that all Shell staff speak their mind on any issue that concerns them at any level of the Shell organisation. HR processes were intact and available for anyone to use.”

Mr Hofmeister’s comments also reinforce the prevailing board view that there is nothing wrong with the Shell corporate structure, in spite of vocal demands from its UK shareholders for a unified board. UK shareholders control 40 per cent of the Royal Dutch/Shell group, with the balance held in the Netherlands.

Mr van de Vijver and Sir Philip were both asked to resign in March. Internal auditors revealed earlier this month that they had been aware of the problem since February 2002.

Mr Hofmeister defended Shell’s human resources process, saying that the reserves scandal had not forced the company to rethink the way it appoints, promotes and develops people or how people raise concerns.

However, he said the human resources process had been under review last year when independent advisers found that one of Shell’s weaknesses was a “sense of self-confidence that was perhaps less sensitive to some external competitor factors that we could be considering”.

His comments come as Shell announces its first quarter results today. Analysts expect to see current cost net profit of $3.2bn-$4.1bn (£1.8bn-£2.3bn), compared with $1.86bn in the previous quarter, which included $1bn in asset write-downs, and $3.9bn a year ago.

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