Shell chiefs braced for storm: Investor anger brews over share tax and directors’ pay

The Guardian (UK): Shell chiefs braced for storm: Investor anger brews over share tax and directors’ pay

Monday June 27, 2005

Terry Macalister

Shell tomorrow faces the most important annual shareholders meeting in its 100-year history, as criticism mounts about tax on shareholders, reserves replacement performance and a host of other issues.

The Anglo-Dutch oil group is expected to win overwhelming support for its radical plan to dump its dual-company structure and adopt a unified board following the 2004 reserves fiasco when it admitted it had overstated its reserves by billions of barrels.

But there will be harsh criticism from British small investors in the Dutch Petroleum side of the business. Such shareholders stand to pay out up to £80m in capital gains tax as a result of the shake-up.

Other investors worry that Shell could make a huge and rash acquisition in a desperate attempt to bolster its oil and gas reserves position and get back on a par with rivals BP and ExxonMobil.

Jeroen van der Veer, Shell chief executive, made a pre-emptive strike last week to dilute criticism by announcing a a range of new initiatives aimed at showing he was trying to improve the efficiency and performance of the company.

He said Shell was aware of the problem of small shareholders but could do nothing about it. He also promised to ramp up production by 40% to 5m barrels a day by 2015, but admitted that, in the short term, oil and gas output would remain relatively flat.

He stoked rising City expectations of a spending spree by explaining how the new company structure would allow it to raise cash easily through rights issues, although he said there was no specific takeover target in mind.

Under some methods of measuring reserves replacement, Shell’s record last year was as low as 19%. While Mr Van der Veer said capital expenditure and organisational changes would enable the company to improve this performance considerably, many analysts are convinced the company will resort to takeovers.

The last time Shell bought another firm, Enterprise Oil in 2002, it was considered by industry experts to have overpaid.

Shell will also face flak tomorrow from environmental and human rights campaigners who have been brought together by Friends of the Earth to present a joint delegation to the annual meeting.

Representatives from communities in the Philippines, Nigeria and America have all come to London to express anger about problems that have arisen because of local operations by the oil giant.

Monique Harden, of the US group Advocates for Environmental Human Rights, said: “At past meetings Shell has listened to their concerns, but then failed to act on its promises.”

The oil company denies this, saying all of the complaints made by individual groups and Friends of the Earth itself had been made before, have been looked into and often dealt with. A spokesman pointed out that Mr Van der Veer and chairman Lord Oxburgh had made specific site visits to some plants where there had been problems.

Shell will also come under fire at the meeting for its pay regime, with Mr Van der Veer receiving a £1m bonus for 2004 despite admitting it was probably the worst year for the company’s reputation.

The shareholder activist group, Pirc, has accused the company of constructing a long-term incentive payment plan that gives “the potential for large rewards for only median performance”.

http://www.guardian.co.uk/business/story/0,,1515257,00.html

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