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Shell faces twin-pronged attack

The Scotsman: Shell faces twin-pronged attack

NICK BEVENS

BUSINESS EDITOR

28 June 2004

OIL giant Royal Dutch/Shell holds simultaneous annual general meetings in London and The Hague today, facing what could be a massive investor defeat on two key motions which ask shareholders to absolve directors from responsibility for the company’s recent troubles.

Shareholder mood will be further darkened by Friday’s news that former chairman Sir Philip Watts, who quit in the wake of the oil and gas reserve estimates scandal earlier this year, has just been given a pay-off worth just over £1 million. Shell is 60 per cent owned by Royal Dutch Petroleum, with the rest held by Shell Transport. About 25 per cent of Royal Dutch stock is owned by US-based investors, and in The Hague they are understood to be following the recommendation of Institutional Shareholder Services (ISS), the influential proxy voting service, which has called for a vote against “discharging” directors – led by Jeroen van der Veer, Shell’s president – from their legal liabilities.

Since the start of the year, Shell has been plunged into crisis after it admitted it had overstated its reserves by 20 per cent, putting enormous pressure on Shell and its executives to reform its dual-board structure and corporate governance.

After four downgrades of the reserves, and the departure of its top brass as a result, Shell is now also facing a dozen lawsuits in the US filed by pensions funds angry at the performance of the company.

The army of lawyers swarming around the group has been joined over the weekend by securities lawyer William Lerach, a key actor in many of the biggest shareholder class action suits of the past two decades.

Lerach’s suit asks the court to force officers to return to the company bonuses based on overstated financial and operating performance.

The 172-page suit also urges Shell to consolidate its unique dual-company structure, take steps to increase accountability and give shareholders the right to name three directors.

As the oil giant braces itself for the stormy meetings, two leading fund managers representing blue-chip City institutions confirmed that they have ditched all their Shell shares.

Socially responsible investment (SRI) funds belonging to Investec Henderson Crosthwaite and Morley Fund Management have sold all Shell shares in recent months. The move is significant, because SRI decisions increasingly affect mainstream analysts’ investment recommendations.

The Association of British Insurers, meanwhile, which will send representatives to the meeting in Docklands, said it is seeking reassurances that Shell will maintain a dialogue during an expected year-long review into its troubled operations.

The ABI’s head of investment affairs, Peter Montagnon, said yesterday: “The ball is in Shell’s court to come up with ideas for change that shareholders can support.”

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