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Shell apologises to angry shareholders

Financial Times: Shell apologises to angry shareholders

“When somebody is asked to leave under a shadow and yet paid a huge amount of money, it is usually to keep them quiet isn’t it?”

By Ian Bickerton, James Boxell and Sundeep Tucker

Jun 29, 2004

Nearly six months have passed since Royal Dutch/ Shell issued its first reserves bombshell and shareholders were yesterday itching to attack the company’s management at the dual annual meetings.

Both private and institutional shareholders turned up in force at the ExCel exhibition hall in east London to air their grievances – and they were legion.

Shareholders were particularly incensed by the £1m pay-out for Sir Philip Watts, the former chairman. One asked: “When somebody is asked to leave under a shadow and yet paid a huge amount of money, it is usually to keep them quiet isn’t it?”

Yet another questioned why directors had been given 20 and 30 per cent pay rises when the dividend had increased by just 3 per cent. “This is a world-class salary for a world-class scandal.”

The atmosphere was even more tetchy in the Circus Theatre in Scheveningen where Royal Dutch Petroleum, the larger Netherlands-based arm of the Anglo-Dutch company, held its annual meeting. Shareholders delivered a sharp rebuke to management when 40 per cent of those who voted refused to back a resolution to “discharge the responsibility” of the managing directors and the supervisory board for 2003.

Directors on both sides of the English Channel knew they were in for a humbling day – and had prepared a choreographed corporate apology.

“These recent months have felt simply dreadful,” Jeroen van der Veer, group chairman, told the six-hour meeting. “I agree that such a crisis should never have happened. But it has, and I sincerely regret this.”

Lord Oxburgh, acting chairman of Shell Transport and Trading, offered his “sincere apologies” to UK-based shareholders for the debacle. Malcolm Brinded, Shell’s head of exploration and production, offered his “sincere regrets” and also described recent events as “dreadful”.

Investors at both meetings were told that the company was committed to improving its “leadership, accountability and teamwork” so that the crisis was never repeated. At both meetings, the institutional investors, as promised, turned up in force to seek assurances about Royal Dutch/Shell’s review into governance and structure, which the company recently disclosed would report back to shareholders in November.

In a rare show of public criticism, PGGM and ABP, two leading Dutch pension funds, said they “regretted” the company’s refusal to call a special shareholders’ meeting to discuss corporate governance or accelerate the publication of its proposals.

“It is a pity that you are keeping the market and your organisation in a position of uncertainty,” said a spokesman for the funds. “The risk is that it appears that you have not been listening [to investors] but are concentrating on your own plans.”

Eric Knight of Knight Vinke, a US-based shareholder that has publicly called on Royal Dutch/Shell to include independent and investor representatives on the review committee, said yesterday’s events were “positive”. He later revealed that Aad Jacobs, chairman of the group audit committee, had agreed to meet him.

In the UK, City investors showed up in numbers last seen at the stormy annual meeting of British Sky Broadcasting in November. Representatives from Axa Investment Managers, Morley Fund Management, Isis Asset Management, Deutsche Asset Management, the Co-operative Insurance Society and Pirc, the investor lobbyist group, all had their say. There was mixed satisfaction to the responses they received, and a certain resignation at management’s reiteration that it would take another five months to decide on a new governance structure.

Responding to one private shareholder’s complaints, Lord Oxburgh said: “It’s not in anyone’s interests for this to be rushed. There have been innumerable suggestions from the outside. But we all know how to run other people’s businesses better than we know how to run our own.”

© Copyright The Financial Times Ltd

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