The Observer: Shell chiefs face vote of confidence: US shareholder activist wants to punish directors

The Observer: Shell chiefs face vote of confidence: US shareholder activist wants to punish directors

Oliver Morgan, industrial correspondent

Sunday June 20, 2004

Shareholders in Royal Dutch are being urged to vote against Chairman Jeroen Van der Veer and eight other directors at the oil giant’s annual general meeting a week tomorrow.

Influential US-based shareholder activist Institutional Investor Services is recommending voting against two key motions to ‘discharge directors of their responsibilities’ for the last year, at the Royal Dutch AGM in the Hague, which is being held concurrently with that of Shell, the London-based arm.

Such motions – which, in effect, call for shareholders to confirm their confidence in the company’s management – are required by Dutch law. Voting against the motions would be a serious blow to the directors’ public credibility and could lead to mass resignations.

The move follows four oil reserve downgrades totalling 4.47 billion barrels since January, which have plunged Royal Dutch/Shell into crisis.

The recommendation is strongly worded. ‘ISS policy dictates that poor performance that can be directly linked to flagrant error or neglect on the part of the board or management … may constitute grounds for voting against discharge. In the case of Royal Dutch, the actions (or inactions) of the management board appear to have contributed to the decline in profit for 2003 while harming the image of the company, thus damaging shareholder value.’

ISS also advises shareholders to vote against the motions because if they were to discharge the directors, ‘they will face a greater challenge if they subsequently decide to pursue legal action against these parties’.

ISS recommendations are used by 750 pension funds and institutional investors and are among the most influential in the world.

The recommendations are directed against the seven members of the Royal Dutch supervisory board, headed by Aad Jacobs, and the two members of its management board. The latter two, Van der Veer and Rob Routs, are also on the three-strong Committee of Managing Directors, the executive team that runs both the Netherlands-based Royal Dutch and London-based Shell arms of the business.

Shareholders are mindful of the gravity of such an action, but are giving it serious consideration.

Eric Knight of Knight Vinke Asset Management, who has been openly critical of the company, said: ‘This is a very serious step to take. We have not made up our minds yet as to what to do, and we will be consulting with other shareholders this week.

http://observer.guardian.co.uk/business/story/0,6903,1242807,00.html

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