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Shell faces legal fight over alleged human rights abuse and pollution home

Jeroen van der Veer’s tenure as chief executive ends amid outcry over bonuses, environmental record and human rights abuses

  •, Tuesday 26 May 2009 16.20 BST
Jeroen van der Veer, outgoing Shell chief executive 

Jeroen van der Veer, outgoing CEO of Shell, at the company headquarters in London Photograph: Sarah Lee/Guardian

Jeroen van der Veer might have expected to step down from the chief executive role at Shell next month showered in praise for resurrecting one of the world’s biggest, although heavily tarnished corporate brands.

But while the durable Dutchman has over recent years returned some lustre to the image of the global oil group, he will end on a low note amid a blizzard of bad publicity.

Shell will be pilloried tomorrow in a New York court for alleged human rights abuses. It is accused of becoming the most polluting company in the oil world and has even been attacked by its shareholders for executive greed.

It has certainly been a long and winding journey for the 62-year-old oilman who once told the Guardian he preferred riding his bike to work because petrol was too expensive.

He had been promoted to the top job in 2004 after the Anglo-Dutch company threw out his predecessor, Sir Phil Watts, for presiding over an overstatement of oil reserves in submissions to the US Securities & Exchange Commission.

The then exploration director, Walter van de Vijver, was also dismissed leaving the company’s share price and its reputation in such tatters that analysts speculated it would be taken over by a resurgent BP, then led by John Browne.

In fact, under van der Veer’s steady hand, Shell gradually recovered its credibility in the City. It embarked on the most ambitious internal growth strategy building a huge new portfolio of gas-to-liquid, liquefied natural gas and tar sand projects as well as more traditional oil exploration and production schemes in the Gulf of Mexico and Brazil.

He successfully bought out minority stakes in major businesses such as Shell Canada and ruthlessly sold off non-performing assets, particularly in downstream refining.

A period of positive restructuring ironically came as BP began to suffer its own reversal of fortunes with Browne himself pushed out in 2007 after the Texas City fire, Alaskan pipeline spills and propane trading irregularities.

But while BP is now in recovery mode and keeps a low profile under its new chief executive, Tony Hayward, it is left to Shell once again to hit the headlines for all the wrong reasons.

Lawyers from Shell will tomorrow represent the oil group as it faces charges that it colluded in human rights abuses and even torture in the Niger Delta which led to the hanging in 1995 of Ogoniland campaigner and poet, Ken Saro-Wiwa. Saro-Wiwa campaigned against gas flaring in the Niger Delta (the burning of gas released as part of the oil extraction process.)

Shell has refused to comment on the court case ahead of the hearings, but the continued flaring of gas in the Niger Delta has laid it open to greater criticism from environmentalists.

Friends of the Earth and other groups have just compiled a new report, “Illegitimate Energy,” in which they claim that the Nigerian operations plus a major commitment to Canada’s tar sands and liquefied natural gas leaves it as the most polluting oil producer in the world.

“When Shell’s total resources are taken into account, the amount of greenhouse gases emitted per barrel of oil equivalent produced will outstrip those of its nearest competitors. The data shows that in the age of carbon reduction, Shell is fast heading in the opposite direction, massively increasing the carbon intensity of its production of oil and gas,” the report says.

Shell admits it has a problem : “Our upstream energy intensity has risen by around 27% since 2000 as fields age and more heavy and harder-to-reach oil is produced,” according to its latest Sustainability report. But the company denies the sort of carbon estimates attributed to its tar sands operations, saying they are exaggerated and might largely be solved through the use of carbon, capture and storage (CCS).

While the green lobby can more easily be dismissed by van der Veer and his army of public relations officials as wrong-headed, it is harder to ignore the opinions – and votes – of its shareholders. Just under 60% of Shell shareholders at simultaneous meetings in The Hague and Londonvoted down its plans to award millions of pounds of shares to executivesdespite missing performance targets which should have reduced the payout to zero.

The vote against the Shell pay report was the second biggest rebellion seen at a FTSE 100 company. Only at the Royal Bank of Scotland, where the government used its 70% stake as a protest vote against former chief executive Sir Fred Goodwin‘s £17m pension pot, has dissent been greater .

Sir Peter Job, chairman of Shell’s remuneration committee, said he had exercised “discretion” to award the shares to the five executives, including outgoing chief executive Jeroen van der Veer. The shares, which have already been granted, were worth about £3.6m last night but a spokesman for Dutch shareholder group VEB spoke for many when he said: “I think the system is sick and needs fixing. They’ve missed something which has happened in the world over the last year – people don’t accept such bonuses any more.”

Peter Voser, chief financial officer, who takes over from van der Veer on 1 July, will need to act swiftly to restore investor confidence in the oil group. Linda Cook, executive director of gas and power, and one of the directors to receive the controversial share awards, resigned unexpectedly and will leave the group next week. She had been in the running for the top job, Shell gave no reason for her resignation.

Van der Veer said in a statement: “I am most grateful to Linda Cook for her many important contributions to the success of our company. Shell’s LNG capacity has risen by over 60% in the last five years, with more to come.” She is expected to forego a loyalty bonus of £800,000.

But while Shell has been trying to appease its investors, non-governmental organisations said pay was ultimately a side issue compared to the more important one of environmental damage.

“Shareholders need to start worrying more about Shell’s impact on the planet than the impact of the company’s pension packages on their pockets,” said Richard Howlett, campaigner at Platform, one of the organisations in a ShellGuilty campaign.

He added: “Shell are planning to invest $5bn (£3.3bn) in tar sands – the dirtiest means of oil extraction. This money would more than cover the cost of ending gas flaring in Nigeria. Shell needs to wake up to its responsibility for environmental devastation.”

Van der Veer has always been confident that the oil company is doing all it can to meet a responsibility to take care of the planet while also meeting a growing demand for affordable energy.

There may be storm clouds gathering over corporate headquarters at the Hague but the Shell boss will cycle off into semi-retirement satisfied that he saved the brand from what his colleagues would regard as an even worse fate: surrender to BP, which would spell its ultimate extinction.

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