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Large shareholders put pressure on Shell after dividend cut

“If you don’t understand where a company is going and they no longer pay a [large] dividend as before, why would you still own the share,”…

English translation of an article published today by the Dutch Financial Daily newspaper, the FD

Large shareholders put pressure on Shell after dividend cut

Shell CEO Ben van Beurden about the dividend cut: ‘No chairman wants this on his track record, but it is wise to do it.’ Photo: Chris Ratcliffe / Bloomberg

From our editor: 8 JUNE 2020

Shell is under increasing pressure from large shareholders who want more clarity on how the company plans to spend its money now that the company has cut its dividend by 67%.

In recent weeks, some of the world’s largest pension funds and institutional investors have had conversations with Shell’s chief executive officer and CFO urging them to clarify Shell’s strategy to use capital; from new projects to distributions to shareholders. That writes the Financial Times Sunday.

‘Angry at Shell’

At least four large international investors want to know from Shell how the company plans to create value for shareholders in the coming years now that the company has sharply reduced its dividend.

“If you don’t understand where a company is going and they no longer pay a [large] dividend as before, why would you still own the share,” said one of the major shareholders to the FT. “We are angry with them for lowering the dividend.”

$ 125 billion

The dividend cut came a year after Shell announced it would distribute a total of $ 125 billion to shareholders in the coming years.

Shell did not want to respond substantively on Sunday. “We are in constant dialogue with our shareholders on a variety of topics. We are not going into the content of these conversations, “said a spokesman for the FD.

Eumedion does not recognize harsh criticism

Rients Abma, director of Eumedion, the interest group of institutional investors, finds it hard to place the harsh criticism. Although he called the dividend cut at the end of April “wry” for all investors, he did understand that “the board should now prioritize financial prudence.”

“That still stands,” Abma said in a response to the FD on Sunday. He points out that the question and answer session that Shell organized prior to the shareholders’ meeting amply discussed the dividend decision and policy; no harsh reproaches of this kind were made in this session. ”

Abma also points out the votes during the shareholders’ meeting. There, 99.14% of the shareholders voted for the reappointment of Van Beurden and 94.95% for the reappointment of Holliday.

“Extremely challenging conditions”

Shell surprised the market in late April with a two-thirds cut in dividend. It was the first time since World War II that the company cut the dividend. Shell said it took the drastic step as macroeconomic conditions continue to deteriorate as a result of the corona outbreak and there is considerable uncertainty about the medium and long term.

Shell CEO Ben van Beurden spoke of ‘extremely challenging circumstances’ and expressed gloom about a rapid recovery. “A difficult day for the company,” said the Shell CEO. ‘No chairman of the board wants this on his track record, but it is wise to do’.

What will Shell do with saved money?

“We understand that Shell cut the dividend because they couldn’t pay it. So now there is no sudden bag of money that requires extra accountability, “said a spokesman for pension provider APG. “Before this crisis started, Shell’s dividend was already very high compared to other oil companies, so it was all the more difficult for them to maintain.”

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