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Shell edges closer to shake-up

Financial Times: Shell edges closer to shake-up

“in the wake of the Anglo-Dutch oil group’s reserves crisis”

By Sundeep Tucker in Rio de Janeiro and Ian Bickerton in,Amsterdam

Jul 09, 2004

Some of the most powerful figures within Royal Dutch/Shell are willing to concede shareholder demands for a unified board and a clearer management structure, according to several people close to the situation.

Such a move would mark the end of a century-old governance structure whose effectiveness has been called into question by investors in the wake of the Anglo-Dutch oil group’s reserves crisis. While observers warn that the company has yet to make a final decision on a governance shake-up, senior insiders are said to favour a move to unite its dual-board structure of Dutch and UK arms, as well as addressing the issue of replacing its management committee with a more conventional structure under a chief executive.

Shell said: “Small sub-groups of the review committee are meeting shareholders and continuing our dialogue with them. This is progressing well.” It declined to comment on details of the talks.

The development comes as members of the five-man committee charged with changing the governance structure have embarked on a series of face-to-face meetings in an attempt to soothe investor concerns over the pace and remit of an internal structural review.

It is the first time large shareholders have managed to talk directly to members of the committee such as Sir John Kerr, a non-executive director of Shell Transport & Trading, who chairs the review, set up after the reserves crisis forced the departure of three senior executives.

Lord Oxburgh, chairman of Shell Transport, the group’s UK arm, told investors at the company’s annual meeting last week that the review team was considering some “extreme structures”.

Investors who have met Sir John and his colleagues on the review committee believe Shell is “actively considering” the creation of a unified board, an independent chairman and a single chief executive.

Eric Knight, managing director of Knight Vinke – an activist investor in Shell – said that, although he had not been involved in discussions with the review body, his contacts with the company confirmed the opinion of other shareholders.

Mr Knight said: “There is a high degree of confidence that investors will end up with what we want. That is, a streamlining of the structure with a unified board and some clarification of the role of the chief executive.”

The company has said it will decide on a new structure by November.

Shell’s governance problems have been a big topic of discussion at this week’s International Corporate Governance Network conference in Rio de Janeiro.

© Copyright The Financial Times Ltd

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