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Testy Annual Meeting Focuses on Shell’s Scandal

The New York Times: Testy Annual Meeting Focuses on Shell’s Scandal

“A few of Shell’s top executives mislead shareholders and the financial world, he said. ”In the United States they’d have been taken away in handcuffs.”


Published: June 29, 2004

THE HAGUE, June 28 – At its first annual meeting since it became engulfed in an oil reserve scandal, the Royal Dutch/Shell Group on Monday tried to contain the fury of shareholders, but the company may have inadvertently made things worse after an executive raised doubts about when he was first informed of the reserve discrepancy.

Shareholders – demanding to know how the company could have overbooked 4.5 billion barrels of oil and gas reserves and also when company officials first knew about it – appeared surprised when Aad Jacobs, supervisory board chairman of the Royal Dutch Petroleum Company, said he was told of “an issue with reserves” in November.

Shell’s overstatement of its reserve estimates did not become public knowledge until early January.

Mr. Jacobs said he was having lunch last November with Walter van de Vijver, then head of exploration and production, when a problem with reserves was mentioned.

Mr. Jacobs said he advised Mr. van de Vijver to “go talk to your colleagues and the chairman,” referring to Sir Philip B. Watts, then chairman of Royal Dutch/Shell. Both Sir Philip and Mr. van de Vijver resigned this year in the wake of the reserves scandal.

During the shareholders’ meeting here Monday, Mr. Jacobs said he first learned in early January that Shell was making the first of what were eventually four revisions of its proven reserves.

The Shell Transport and Trading Company, the other half of the Royal Dutch/Shell Group, held a simultaneous shareholders meeting in London. A Shell Transport spokesman said that the phrase “an issue with reserves” could have referred to just about anything because oil and gas companies routinely struggle with reserve problems.

Shell’s nonexecutive directors have said many times since the reserve restatement that they were not aware of any problems until just before the Jan. 9 public announcement. During the Shell Transport meeting in London, its chairman, Lord Oxburgh, reiterated this. Responding to a shareholder question, Lord Oxburgh said: “There was no cover-up. The first awareness nonexecutive directors had was in January of this year.”

Shell’s reserve scandal is the subject of several regulatory investigations in both the United States and Europe. Shell revealed on Monday that the Securities and Exchange Commission in the United States has interviewed at least 30 people in connection with the reserve problems, many of them company employees. No current or former Shell employees have been charged.

Shell’s two shareholder meetings in two countries, Britain and the Netherlands, reflect its two-headed corporate structure, and investors have been clamoring for the company to become more streamlined.

The Shell Group’s top executive, Jeroen van der Veer, told shareholders that a steering committee was looking into simplifying the company’s structure.

But, in a meeting with the press after Monday’s meeting, Mr. van der Veer dismissed a reporter’s suggestion that the luncheon exchange between Mr. Jacobs and Mr. van de Vijver might have raised red flags in a more streamlined company. “That’s nonsense,” Mr. van der Veer said.

Shareholder groups from both the United States and Germany pressed Shell officials on Monday to consolidate the companies, naming one chief executive and one board.

“One could view Shell as a supertanker with a committee instead of a captain at the helm,” said Eric Knight, managing director of Knight Vinke Asset Management in New York. “When a ship is going through a storm, you need someone at the helm – not a committee.”

Shareholders in The Hague took particular issue with a nearly $2 million severance package awarded to Sir Philip after his resignation.

“It is unfathomable that, as punishment, he is awarded a platinum handshake,” one shareholder said. Peter Paul de Vries, the director of the Dutch shareholders’ association VEB, echoed the sentiment of many. A few of Shell’s top executives mislead shareholders and the financial world, he said. “In the United States,” he said, “they’d have been taken away in handcuffs.”

Heather Timmons, in London, contributed reporting for this article.

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