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The Guardian: Shell investors vent fury on ‘incompetent’ board

The Guardian: Shell investors vent fury on ‘incompetent’ board

“This company is giving world class salaries to non-executives for a world class scandal.”

Terry Macalister

Tuesday June 29, 2004

Small shareholders seized the first public opportunity to vent their anger with the Shell board, accusing it of incompetence and of rewarding failure, at yesterday’s annual meeting in London.

However, there was no big rebellion by institutions even though nearly 40% of investors voted against management resolutions at a parallel annual meeting in The Hague for the Dutch arm of the dual-listed company.

Attempts to get chairman Lord Oxburgh to reveal any moves to change the complex structure of the group were unsuccessful. He would say only that “extreme structures” were being considered – but did not explain what he meant.

The world’s third largest publicly quoted oil group has seen its shares hammered and three top directors pushed out after a scandal surrounding the downgrading of reserves by 23% this year.

There were harsh words at the cavernous ExCel centre in Docklands, particularly about the £1m payoff given to former chairman Sir Philip Watts, who was sacked in March.

Small shareholder John Farmer said Sir Philip should not have left by mutual consent but should have been dismissed without payment, for “gross misconduct”. The company was being run by “underperforming, deceitful directors and the non-executives did not even realise,” he fumed.

Alan MacDougall, managing director of Pensions Investment Research Consultants, described Sir Philip’s golden goodbye as a “concrete example” of reward for failure. It showed why the government was looking at legislation in this area. “If you don’t get it right on Phil Watts then how can we have confidence about you in future?”

Lord Oxburgh fought back, claiming Mr Farmer’s comments were completely unfair. “I must say clearly on behalf of the board the assertions you have made about Sir Philip’s character are unsubstantiated.” Lord Oxburgh said he and his colleagues had re-examined all their actions. “If the same happened again, we would probably do the same,” he argued.

He had tried to defuse expected tension by starting the meeting with an expression of regret. “Let me start by offering a sincere apology for the failures that led to the significant restatement of the group’s proved reserves.”

Managing director Malcolm Brinded said he had called a meeting of 400 managers and asked whether “we understand the word ‘humility'”. Many at the meeting believed they did not, and Sunil Pal, a shareholder of 10 years, compared the 3% dividend rise with the 30% increase in non-executive payments. “This company is giving world class salaries to non-executives for a world class scandal.” He read out inflammatory emails from Sir Philip and told the board: “If this was America, all of you would be prosecuted.”

Mr Pal remained frustrated by the answers he received and said former chairman Sir Mark Moody Stuart – still with Shell and Anglo American in a non-executive capacity – should accept particular blame and resign from all boards.

Up to 20% of investors at the London meeting voted against or abstained from management resolutions but there were no public calls for resignation. “I’m very surprised that people did not stand up and say that,” Lord Oxburgh admitted afterwards.

It was more turbulent at The Hague, where shareholders were asked to agree, as is customary, that the managing directors and the supervisory board of Royal Dutch were “discharged of responsibility in respect of their management for the year 2003”. Nearly 40% then voted against them.

James Moorhouse, another private shareholder in London, expressed his frustration about the large investors who made a lot of noise in the press and yet had not spoken at the meeting. He asked specifically about Robert Talbot of Isis and Eric Knight of Knight Vinke Asset Management.

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