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Daily Mail: Board reforms will suit Shell

Daily Mail: Board reforms will suit Shell

“Call it a triumph of globalisation – or call it a total mess.”

Ruth Sunderland
13 August 2004
Posted 14 August 04

THE senior oilmen who resigned in the wake of Shell’s reserves crisis this year must rank pretty high up the league table of executives who are rewarded for failure.

Dutchman Walter van de Vijver, the former exploration boss, is receiving a golden handshake of up to €3.8m or £2.54m.

Given that he has been portrayed as an ineffectual whistleblower, some may wonder why he is being handed an even bigger golden handshake than the £1m-plus doled out to departed chairman Sir Philip Watts.

It may also strike some as surprising that a third senior executive, former finance director Judy Boynton, remains on the payroll.

The company has been fined £82.5m by US and UK financial regulators but that is pocket change, given that it made nearly £5bn in the first half of this year alone.

Investigations into the affair, where Shell overstated reserves by a fifth, are still being carried out by the Dutch financial watchdog, the US Justice Department and Amsterdam stock market Euronext.

Watts and other executives may still face class-action suits and possible criminal charges in the US.

But so far, Shell and its former bosses seem to have got off lightly considering the scale of the debacle.

The fiasco has forced the group to countenance overdue reform of its cumbersome board and management structure.

Its historic Anglo-Dutch roots have turned into a gnarled mess of reporting lines and confusion over accountability.

Royal Dutch, the holding company, currently represents 60% of the combined group, the UK arm 40%. Critics observe other problems. These include persistently poor exploration results, which worsened the temptation to over-egg reserves.

Nothing is simple at Shell, a group that reports its figures in no less than three currencies – pounds, euros and dollars. Call it a triumph of globalisation – or call it a total mess.

The group is moving towards unifying its boards in London and the Hague, and going further by considering a merger of the British and Dutch companies.

The question of a merger – in effect, a takeover by Royal Dutch – is potentially tricky. Concerns have been raised that it might create hideous tax problems, though it should not necessarily be beyond the wit of well-paid advisers at Rothschild and Citigroup to find a way around this.

In any event, complications should not be allowed to stand in the way of reform.

A unified board, a credible outside chairman and some robustly independent non-executive directors are the very least shareholders should expect.

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