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Different dealings weaken Shell group

The Times: Different dealings weaken Shell group: “deemed responsible for the same horrendously damaging issue of cutting corners”

Business Commentary

By Robert Cole

August 13, 2004

SIR PHIL WATTS and Walter van de Vijver were ejected from the Royal Dutch/Shell group at the same time. They were deemed responsible for the same horrendously damaging issue of cutting corners on reported proven oil and gas reserves.

Mr Van de Vijver, we now learn, is to receive a £2.5 million payoff, more than twice as much as his former boss, as well as a deferred pension of £257,000 a year. Perfectly rational arguments could be made for this seemingly inconsistent treatment. The reality, however, is that although both superficially worked for the same integrated organisation, Mr Van de Vijver is a Royal Dutch man, treated according to Dutch law and practice, while Sir Phil was a Shell Transport chap and so dealt with in Anglo Saxon ways.

This little miniature speaks as much as the volumes of consultants reports, on the underlying issue exposed by the great reserves affair. It shows how proper consistent governance is now undermined at Royal Dutch/Shell by the traditional differences between the two holding companies and their consequential lack of an effective role in the joint operating management company.

This is clearly now going to change. The issue is only whether the two holding companies should be parallel entities with the same directors or whether they should be merged into one. If sterling had joined the euro, a full merger would have made sense. As it has not, a merger would create yet more losers among investors.

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