The Times: Shell's axe falls on top directors

By Carl Mortished, International Business Editor and Richard Miles
March 04, 2004

SHELL cleared the decks of its top management yesterday and launched a search for a new chairman, the first time in its century-long history that the oil multinational has looked outside for leadership.
The decision to seek an outsider to run the board of Shell Transport & Trading, the UK holding company, came as the Anglo-Dutch group removed Sir Philip Watts, executive chairman, and Walter van der Vijver, head of exploration, blaming them for the disastrous misreporting of 20 per cent of oil and gas reserves.

The sudden departure of Sir Philip, who only last month insisted that he would stay the course, restores Dutch control of the dual-listed group. Jeroen van der Veer, the Dutch head of Shell chemicals, was named Sir Philip’s replacement as chairman of the committee of managing directors (CMD), the college of executives that runs the group.

Lord Oxburgh, the senior non-executive director on the Shell Transport board, will become interim non-executive chairman of the UK company, while Malcolm Brinded, head of Shell’s gas and power division, will step into Mr van de Vijver’s shoes to run exploration. Sources within Shell confirmed that a search was being launched for a permanent non-executive chairman of Shell Transport whose identity would be revealed in time for the annual meeting in May.

Demands for change from US investors, who have been critical of Shell’s dual-listed structure and collegial management, will have weighed heavily against Sir Philip.

His departure comes after a meeting last week with Knight Vinke Institutional Partners, a specialist fund backed by CalPERS, the California state pension fund, which owns a big slice of Royal Dutch stock. The fund manager yesterday said management changes were not a panacea. It added: “The directors would be mistaken if they believed the departure of Sir Philip Watts and Walter van de Vijver will be sufficient to alleviate shareholders’ concerns while preserving the existing structure.”

The directors went, after three decades of service, with none of the plaudits usually handed out. By the afternoon, their biographies had been deleted from Shell’s website and the company hinted darkly at internal investigations. It said: “The group audit committee’s review of the facts and circumstances surrounding the January announcement of the recategorisation of reserves led the board to seek changes of leadership in the group.”

The company said that no compensation had been agreed for Sir Philip, who is on three months’ notice.

Analysts were stunned by the upheaval, having believed that Sir Philip had won the right to stay on to repair the damage caused by the reserves downgrade. Insiders point to lingering Dutch resentment at the dominance of UK executives. Four out of the five most recent CMD chairman have been British. Royal Dutch Petroleum accounts for 60 per cent of Shell’s ownership.

The clear-out caused Shell Transport stock to rise 12p, but it closed just 7p higher at 383p. Jon Rigby, of Commerzbank, noted that the reserve replacement problem remained. He said: “The incumbents are faced with the same challenges. They don’t go away because Sir Philip and Walter van de Vijver are gone.”