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Shell Survives Shareholder Rebellion

Planet Ark: Shell Survives Shareholder Rebellion

“Not only has Shell been overstating its oil reserves, it has exaggerated its social and environmental performance too”

UK: June 30, 2004

THE HAGUE/LONDON – Embattled oil giant Royal Dutch/Shell survived a shareholder rebellion this week, but not before almost 40 percent of its Dutch stock was voted against key resolutions at the annual general meeting.

Investors gathered in The Hague were asked to agree that Royal Dutch managing directors and its supervisory board “be discharged of responsibility in respect of their management for the year 2003.”

Usually such a vote would be carried almost unanimously, but Monday’s vote saw only 60 percent in favor. Shareholders at a twin meeting in London also showed their disapproval of the disastrous year of reserves downgrades and high-level executive firings. Almost 10 percent of Shell stock was voted against approving executive pay for the year.

The meetings came two months late because of the turmoil caused by the shock news in January that Shell had overbooked its oil and gas reserves by more than 20 percent.

By March it had emerged the reserves problem had been kept secret for months. Three top executives have since been fired, and a series of regulatory probes and lawsuits against the firm on behalf of shareholders and pension holders are under way.

The vote that caused a rebellion in The Hague is usually a formality for Dutch firms. Rebel investors used their votes to embarrass the directors, but they also feared that the resolution could weaken their case in class action lawsuits.

“We are dissatisfied with the way the group is being managed,” said Paul Frentrop of the Union Investment Fund in Frankfurt, which represents about 700 million euros ($851.6 million) of shares.

“It is obviously underperforming,” he said just ahead of the vote. “That is the reason why we shall vote against.”

Geert Raaijmakers of Dutch pension fund ABP said the resolution should not have been proposed.

“It’s not very wise of Shell to put that motion on the agenda,” he said. “With all the investigations that are going on and the lawsuits, it makes it very difficult for the shareholders to have a balanced opinion.”

Directors of the 170-year-old company knew they were in for a humbling day.

“We were aware it was going to be a pretty close vote but we were confident that we would still get enough support,” Chairman Jeroen van der Veer told a news conference after the meeting.

CLEARER LINES Shareholders say the complex structure of the world’s third largest oil firm is partly to blame for its problems. Shell has already made some changes, and earlier this month said it would look further at its options.

A full merger of Royal Dutch Petroleum with London-based Shell Transport and Trading is among the scenarios being considered, though no decision will be taken on any such move until November.

At present, Royal Dutch holds 60 percent of the operating group, while Shell Transport holds 40. Executives from each company are not easily accountable to the boards of the other.

Institutional shareholders have been pressing Shell to get some changes in place quickly, and they remain unhappy with the pace of change. “We regret that you are not going to present today a view on the changes to the corporate structure,” ABP’s Raaijmakers said at the meeting.

Private investors at the meeting objected to the one million pound ($1.8 million) pay-off agreed last week with ex-Chairman Phil Watts, sacked in March for his part in the scandal. Human rights and environmental activists also piled on the pressure.

“Not only has Shell been overstating its oil reserves, it has exaggerated its social and environmental performance too,” said Friends of the Earth Executive Director Tony Juniper.

Shell faces lawsuits this year over its social and environmental conduct in Nigeria and elsewhere.

Its shares were unchanged at 416 pence in London at 1443 GMT and down 0.12 percent at 43.25 euros in Amsterdam. (Additional reporting by Andrew Callus)

Story by Anna Mudeva and Sudip Kar-Gupta


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