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Royal Dutch Shell Malaysian pension fund controversy

 By John Donovan
 The following is an email received in June 2004 by Alfred Donovan and Dr John Huong. A name and email address were supplied. It relates in part to a court action brought against Shell Malaysia by several hundred Shell employees. A Malaysian High Court Judge decided that Shell had acted “unlawfully in making” deductions from employee retirement funds. Shell appealed the verdict.   
The case dragged on for many years, while in the meantime, many elderly retirees were sick and dying. Shell eventually managed to evade its legal and moral obligations partly by exploiting a legal loophole relating to litigation time limits.
The employees never really had a chance of winning in a country where justice can be bought by the litigant with the deepest pockets. Shell has been in bed for decades with the Malaysian dictatorship regime and its puppet state oil company: Petronas.

If you haven’t seen the attached, it may interest you to know that the attached is a copy of Sarawak Shell Berhad/Sabah Shell Petroleum Company’s internal management exchange which was leaked by one of the employees who is disgusted with Shell. You may take note that Shell cheats on paying the Retirement Benefit Fund resulting in the class action at Miri High Court by ex and current staff of Sarawak Shell Berhad/Sabah Shell Petroleum Company.

One of your supporters


Staff Sentiments – Demotivators / Motivators

1. Defined Contribution Scheme / Retirement Benefit Fund / – Funds Closure

In 1997, Shell Malaysia staff (all) was given an option to remain in the Retirement Benefit Fund or join the Defined Contribution Scheme. 80% of staff joined the DCS, on a ‘rosy picture’ painted by the Scheme Proposers and trusting that the Company would not have come up with a scheme that would ultimately result in an erosion to their long term benefits.

In 1997, when you joined the DCS your benefits then was calculated as follows:
Relevant earning x years of service x a factor (1.5 for less than 15 years, 1.75 for less than 20 years, 2.0 for less than 25 years and 2.25 for 25years+. Age is also related to the factor).

Two events happened since then:
1) DCS in the SSSPF, performed poorly
2) Company decided to close the Funds, with better benefit given to the 20% staff remaining RBF. ( relevant earning today x years of service x 2.25 – maximum factor irrespective of years of service). For some PBO gives additional benefit. There was no redress given to those who joined DCS.

– All the DCS members feel cheated by the company meaning that 80% of staff are stressed, having suffered a heavy financial loss as a result of joining this scheme proposed by the Company. There is a saying going on in the company – Do not believe in the company.
– The junior staff union has initiated action in the industrial court for breach of Collective Agreement
Other Issue:
– There is a court case action going on, suing the company for illegal clawback of benefits.
– Many staff up to now are not following this case
– Many staff now suspected that there is a relationship between the fund closure and the court case
– Some staff have signed up with the lawyers to pursue the case, this is a first time that regular staff are taking up legal action. This is unprecedented in the history of this illustrious company.

Given the above,
– How to motivate the majority of local staff?
– Many local staff are highly stressed over this huge financial loss
– There is no loyalty from the staff,
– There is no trust from the staff of management
– Many continue to work and deliver on their professional capacity, others do what need to be done just for the pay, – is this be sustainable when there is no fire / passion in the staff?

2. Job Basket / Promotion
There is strong perception from the staff that the Company is trying to come up with blockers to promotion and not the other way round. Hopefully CBD will change all this but, with a job basket constraint this is a big blocker. If Brian is to achieve his aim in promoting technical competence and retention /remaining in technical ladder, there needs to be a target for technical staff to aim at in remaining as a technical specialist. This means a technical ladder, as opposed to the current Revised Hay Job evaluation.

If promotion is not to be used as a motivator, then we need to provide other tools to recognise technical specialist, such as unconstrained salary increase, and not tied to JG.

3. IPF / Variable Pay
Performance rating is such an imprecise soft art and yet we are able to designate a person’s performance to a decimal point. In terms of monetary reward the decimal point is insignificant but it created unnecessary tension among peers and colleagues. Further because the IPF has to be averaged to 1, for an IPF of 1.6 for one person, six others have to suffer, even though they have put in a good performance. If everyone does very well in the team, they all suffered because they all need to be rated to 1.0.

Is this HR product a motivating tool? Why all these issues continue to fall on deaf ears and improvement process applied ?

Up to now, Variable Pay is a very substantial amount in the local pay cheque. Staff can related to it, as they are judged by what happened in SMEP and their personal / team contribution. With EP Global, EPA and then Operating Unit and team and self, there is little clarity on how the Variable Pay will work out for 2004. If there is a major reduction because of current global EP not meeting or EPA not meeting targets and for which they have no contribution, then there is likely to be a big HOO – HAA and more de-motivation .

4. Manpower / Staff Category / Recruitment
– Every year, we went through business manpower planning exercise, put up justifications for appropriate resource level to deliver the business, but the magic total company manpower number always remains cast in concrete, and most request for additional manpower not supported. Nevertheless, we are still expected to deliver the programme anyway. This has led to alternative means to man up eg engagement of OGP and paying a high cost for it.
– When we recruit new staff, by default, they have to be STCs before Jan 2004, they cannot be recruited as regular staff. Now, we say there are too many STCs, let us convert them to regular. The HR Policy for conversion of STC to regular require a delta CEP of at least 2. For many solid STCs who are in SG4 in their mid 40’s, this becomes the blocker.
How can we be motivated if our HR partners are like this.

5. Pay Scale
Shell Malaysia Chairman, and Malcolm Brindle when he was here made the same statement regarding the competitiveness of the Local Staff against the Local Market. That is, SMEP staff pay is at the 90 percentile and the Company wants only to be in the 75 percentile as a longer term goal. In other words, you are currently overpaid.

– we are regional Hub, we are required to work on a higher level of support, for SSB/SSPC and other OU as required, but we are prepared to pay local pay compatible to local market
– we want to recruit the best brilliant graduate (CEP of LC), but only prepared to pay top quartile
– we want to be performer of first choice, but only prepared to pay top quartile
– we want to retain our staff, but only prepared to pay top quartile
– we want our staff to be passionate and deliver , but only prepared to pay top quartile
– we want them to develop into technical professional and be a global resource, but only prepared to pay top quartile
– we expect only high performance from all, but only prepared to pay top quartile
– we expect commitment …., but only prepared to pay top quartile
Within the company, we also have many categories of staff, manpower services, short term contracts, ESS and local staff, services contracts staff etc.

Services contract staff, expatriate contract staff are paid well above regular staff. Local short term contract staff pay are comparable to regular staff, though some discrepancies exist.

Are we paying local staff adequately compared to the Global Shell, are we exploiting the ‘perceived low cost’ centre at the expense of staff?
6. Work Environment (Regional vs Local) / Empowerment
Empowerment – after EPA go-live, our authority has mostly been taken away, probably due to the increased layer in EPA organisation. I cannot even sign for my own travel to KL, and my request for some refreshment for meetings get ignored or challenged. Little things like these, and hand phones, house telephone call charges for company business, salary is paid correctly, business expenses paid promptly, quickly, can make people feel differently.

It is quite obvious that staff are working in excess of 40 hrs a week and this is seen to be normal. You travel on your own time, at night or weekend to save work hours. Time off for excessive hours worked must be approved and there is not means to record excessive hours worked or clear means of compensation.
7. Small Benefits Erosion ( Malaysian Staff)
Some of those annoying things that are thought as great Products /Best Practices:
– Travel using HSBC credit card ( you can get free credit cards nowadays) and not pay allowance in advance, staff experienced late payments such as claim made in March but only paid in June. This is lucky that the staff follow up otherwise most cases left forgotten and ended up subsidizing company business.

– Exchange rate using the current rate and not the rate during travel, some cases staff lose on exchange rate.

– Absorb the passport cost of staff, as long as they have to travel across border even once for their work instead of a minimum of five times before you can claim

– Provide departmental pool cars for those can use it to move about the area, instead of insisting on mileage claims. This waste a lot of useful time and most of the time staff subsidize company activities as they just do not have to time to claim and it is a small amount of RM5 – 10.

– Introduction of IBVA eroding the benefits of infrequent international travels for MSS as the TAA was taken out. Worst still the implementation of IBVA was introduced retrospectively last year (Announce in August and back dated to 1/7/03), many employees were asked to return TAA.

– Erosion of travel allowance. e.g In Netherland, the daily allowance for meals inclusive of incidentals is only 37 Euro which is not even enough to cover a dinner in the hotel. It is really insulting to see one of the recommendations for staying in Grand Winston is about the availability of four star restaurants. Our allowance can only cover MacDonald! It is also very humiliating when our restrictions are not applicable to other OUs. Our BSP colleague is traveling by Taxi!

– Clothing allowance is now once every three years. (few years back, it was six months).

– Despite the drastic decrease in interest rate in the country and many companies offering interest free car loan to their employees, the interest rate applicable in SM-EP is still 4 % since the day I joined this company 21 years ago. Replacing JG 2 cars is seen by and large as eroding of status image for local Senior Staff.

– Erosion of administration support? There is no/inadequate support for miscellaneous claims eg. offshore location allowance, mileage claim, safety gears , helping in preparing reports, copy CDs, arranging meetings, preparing presentation packs, maintaining electronic filing, etc, etc.

Retain, reinstate those small little sweeter to staff. Make staff feel respected and trusted. Package HR changes in a positive manner eg don’t tell staff you have a company paid holiday but you have to pay tax on it.

8. CEP
For the numbered category, there is no meaning in a CEP. The best one can get to is a SG2, and more likely SG3 for majority and some SG4. We also want people to be immersed technically and so why this detractor for them? CEP is important only for the talent development group. See also 4 above.

9. Leave Issues
Staff can sell back leave each year, 5 days maximum. Staff can carry over leave each year to a maximum of 15 days, and last year due to transition 20 days and all days not utilised forfeited. Some staff for operations reason, cannot take leave and also for those who are on project work offshore (for the installation, HUC) have accumulated days off for their offshore work. There should be flexibility to sell those days that staff are not able to clear off. This small jesture will go a long way to motivate staff who want more money to spend and who want to work rather than take leave.

10. Office Conditions
Need decent offices to work in, and ergonomics furniture especially chairs, telephones, spare portable laptops and projectors, adequate stationeries. . We should have a fully stuffed up pantry for staff to allow staff to have extra cuppa, drinking water dispensers at various corners etc. Put flowers, potted plants etc to brightened up the place. We also need to have a display hall to show students, visitors etc our business, our achievement and our technologies. As is, the office is appalling.
We also need enough car parks to accommodate staff and visitors, instead of don’t park illegally, but we do not have car parking space for you.
11. Staff Attraction – Blame culture
There are very little positive attraction for staff to work to deliver projects. You are overworked, there is no time for courses & conference and sometimes you cannot go on leave because the project is at the critical work phase. With the barebone manning, there is no relief. If things are ok, you are ok. If it get problematic, you will share a large part of the problem, irrespective of the effort spent to get things going and right.

Are we really out of the woods on blame culture? Continue inaction, non visible actions on these issues means condoning the practices.

We need to have a positive attraction for staff to get again into projects and rewarded aptly for taking them up.

12. Housing / Facilities
Guess there is already enough grouses on the availability of camp houses, facilities (club eg KSL) and others.

13. Image / Reputation Issues
Given these many poor perceptions by the local staff, it is an uphill battle to turn staff around and to gain trust / loyalty. If we continue to protect the low cost centre image, the deliveries will continue to lack energy and imagination, and good chance of missing on targets.

A word describing current Shell situation: ‘ BEGGARDLY’

There is a need to regain the trust and loyalty of staff, to show respect for staff if we are to strive for best performer, best people etc.

There is a long way to go, and seeds of changes need to be planted now



Malaysia: Judiciary and corruption (For obvious reasons the legal jurisdiction of choice for Shell): 25 Sept 2007

HRH Sultan Azlan Shah speaks out on crisis in Malaysian judiciary: 31 October 2007

Malaysia: Shell’s legal jurisdiction of choice where justice can be bought by the highest bidder: 14 February 2008

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