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Financial Times: Reforming Shell’s culture

Published: March 29 2007

Lord Browne must be envious. When he announced that he would leave the helm of BP earlier than expected, the oil major’s market capitalisation jumped by almost £2bn. On Wednesday, when his counterpart at Royal Dutch Shell, Jeroen Van der Veer, said he would, in contrast, stay on a bit longer, shares in BP’s arch rival rose.

To be fair, the latter had more to do with an oil price spike. Mr Van der Veer turns 60 in October, so he would normally retire in June 2008. He will leave 12 months later instead, so the extension is pretty small. Still, it is a measure of how far Shell has come from the dark days of 2004 that investors can take any tinkering with governance in their stride. After all, Mr Van der Veer was tasked with rebuilding trust in Shell after a reserves scandal that lifted the lid on a decrepit corporate culture.

Much progress has been made on this front; most obviously, the collapse of Shell’s dual-headed structure and – count them – three boards into a unified whole. Last year’s opportunistic swoop on Shell Canada’s minorities, following share price weakness, suggests a bit more vim compared with the inertia on display when Shell’s rivals were consolidating in 1999 and 2000.

Some critical functions have, sensibly, been drawn back to the centre, particularly capital planning and exploration. That underpins a clearer strategy although whether Shell’s big bet on unconventional fossil fuels ultimately pays off remains an open question. But big challenges remain, particularly in Russia and Nigeria. Mr Van der Veer will now remain in place until there is more clarity on these issues, which is welcome. On the other hand, the announcement will inevitably fuel speculation that Shell may be struggling with succession issues. On that score, at least, Lord Browne may have some sympathy.

Copyright The Financial Times Limited 2007

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