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Dialogue of the deaf

Financial Times: Dialogue of the deaf

By Jane Fuller

Jun 15, 2004

What is the point of having meetings with shareholders to talk about corporate governance if there is no free and frank discussion of the alternatives?

This unsatisfactory state of affairs seems to be governing Royal Dutch/ Shell’s meetings with investors. Yesterday it was representatives of the Association of British Insurers who emerged disappointed from a meeting with Lord Oxburgh, acting chairman of the UK arm of the Anglo-Dutch oil group, and Sir Peter Burt, senior independent director.

Shell has made some changes since its shocking confession that it had overstated reserves and the racy Davis Polk and Wardwell report on what went wrong. Apart from the rolling heads, these include welcome reforms to the way reserves are reported and a beefing up of the chief financial officer’s role.

But because the bulk of the changes so far are specific to the reserves problem, the assumption is that Shell will not fundamentally change its overall governance structure. Non-continental investors are convinced that the dual structure is part of the problem: Dutch and UK boards and a supervisory board and committee of managing directors.

Unity is fostered in joint committees. But these do not address the central issue of diluted accountability and sheer confusion over who is responsible for what.

Shell’s explanations of its corporate governance in its (dual) annual reports still read like “our way of doing things”.

The one ray of hope yesterday was the hint that the review was indeed wide-ranging. Let’s hope that this means the slaughtering of sacred cows will be on the agendas after all at the (dual) annual meetings on June 28.

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