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The Independent: Shell set to unify boards to quell investor anger

The Independent: Shell set to unify boards to quell investor anger

“Some analysts say the structure has prevented Shell from making bold strategic decisions”


Posted 5 August 04

ROYAL DUTCH/SHELL is set to unify the boards of its Dutch and British holding companies as a “minimum” concession to shareholders who want change.

The company is six weeks into an internal review of its board structure and is understood to also be considering more radical changes, including a full merger or a takeover of one holding company by the other.

“Both boards accept now that the status quo is not an option,” a senior source said. “They know that the absolute minimum they are going to get away with is a unified board.”

Jeroen van der Veer, the chairman of the committee of managing directors and now the company’s number one executive, is seen as a key “radicaliser”.

Shareholders who have held talks with the boards say that board unification short of a full merger could be achieved easily, with executives and nonexecutive directors of one of the companies also becoming directors of the other. Unilever, another Anglo-Dutch group, recently made similar changes.

A spokesman for Shell would neither confirm nor deny the decision. “Among other alternatives, forms of a unified board to which a chief executive would report are being studied,” he said. “Nothing is ruled out at this stage.”

Change has been forced by Shell investors angered by the revelation of overoptimistic reserves bookings in January this year. This led shareholders, some of whom have long criticised Shell’s structure, to blame a system, where top executives drawn from one holding company are not accountable to the board of the other, for the failure to communicate the problem earlier.

The operating company Royal Dutch/Shell is owned 60 per cent by Royal Dutch and 40 per cent by Shell. At present, executives of the operating group are drawn from the boards of each.

Some analysts say the structure has prevented Shell from making bold strategic decisions, similar to the giant takeover deals executed by its rivals BP and Exxon Mobil in recent years.

News of this latest move came as Mr van der Veer rang the opening bell at the New York Stock Exchange yesterday to celebrate the 50th anniversary of Shell’s US listing.

The group has already made changes this year to a structure that dates to 1907. The UK arm business, Shell Transport & Trading, has made the role of chairman a non-executive post for the first time, to improve investor accountability.

Meanwhile Royal Dutch Petroleum has abolished a set of “priority shares” which gave its directors unusual powers over new board appointments.

Beyond this, Shell has agreed to consider all its options, and a steering group of executive and non-executive directors – including Mr van der Veer – has been looking at the matter since June. It is due to report its conclusions in November. A strategy update is due on 22 September. (Reuters)

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