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Daily Telegraph: Shell boards survive as showdown evaporates

Daily Telegraph: Shell boards survive as showdown evaporates

By Christopher Hope, Business Correspondent (Filed: 29/06/2004)

Shell’s embattled boards came through two stormy annual meetings in Britain and the Netherlands yesterday but a promised showdown with institutional investors failed to materialise.

In London, Lord Oxburgh of Liverpool, Shell’s UK chairman, was forced to deny there had been a board level “cover-up” over Shell’s announcement that it had overstated its proven reserves of oil and gas by more than 20pc.

Meanwhile, in The Hague, 40pc of Shell’s Dutch shareholders voted against a routine resolution “discharging” its directors and supervisory board of responsibility for Shell’s 2003 accounts.

Shell’s two top executives, Sir Philip Watts and Walter van der Vijver, were fired over the affair after independent consultants found that they had been lying about the full extent of the company’s oil and gas reserves for years.

Last week, Shell said it had handed a pay-off of £1.06m to Sir Philip – far in excess of what he was entitled to under his three-month contract.

Shareholders in London were incensed. Chris Smith, a private shareholder, said: “What was the point of his contract? If the company believes he should receive a payment, I suggest that the board should do what I do in my company and club together to pay for it.”

John Farmer, another shareholder, said Sir Philip should have been dismissed for “gross misconduct” rather than offered the pay-off.

Institutional investors such as Isis, Deutsche Asset Management and Morley Fund Management were present but shied away from asking confrontational questions. However, the Pensions Investment Research Consultancy said the payment to Sir Philip was a “litmus test for governance” at Shell.

Lord Oxburgh said the payment was in the best interests of the company and saved months of wrangling. The non-executive directors had released information about the overstatement as soon as possible.

He said: “There has been no cover-up. The first idea that the non-executive directors of your board had of the problem was in January this year. The boards have asked ourselves what could have been done to avoid this.

“Frankly, when some of the directors were economical with the information they passed to the board, then it is very difficult to see how this could have come to light sooner.”

Lord Oxburgh said that a working party appointed to review Shell’s structure – it is 40pc-60pc owned by Shell Transport in the UK and Royal Dutch in the Netherlands – would announce its findings in November. He said: “Nothing is ruled in and nothing is ruled out. I gather that some extreme structures have been considered by the relevant group. We are making efforts to improve our communications. We are concerned we have not talked to our shareholders in the past.”

Lord Oxburgh also rejected a suggestion that a shareholders’ representative be appointed to the board. Later 10pc of shareholders in Shell Transport voted against the Shell’s remuneration policy.

Aad Jacobs, chairman of Royal Dutch’s supervisory board, told the meeting in The Hague that Shell had compiled a 60-page report outlining the “options and opportunities” facing the oil and gas group.

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