Daily Telegraph: Shell's failure was huge but the rewards have been ample: “It would be hard to imagine a more extreme form of top management failure than that at Shell” (ShellNews.net)

City comment

Edited by Neil Collins, City Editor

(Filed: 13/08/2004) 

It would be hard to imagine a more extreme form of top management failure than that at Shell, and the executives involved deserved to pay for it with their jobs and reputations. Sir Philip Watts will surely never get another senior post in a public company, and his successor in charge of Shell's exploration and production is also likely to present a serious challenge to a recruitment specialist.

It all looks pretty harsh until you see what the pair have been paid to go away. We already knew about Sir Philip's £1m, and now we are told that Walter van de Vijver is to be comforted with 3.8m, or about £2.5m in real money.

To encourage him to help the company with its inquiries into the missing oil reserves, half will be paid in instalments. Even so, for most people on three months' notice (as he was), a payment equivalent to four years' money after being fired for incompetence would be a pleasant surprise indeed.

Compared to the $137m that Shell has agreed to pay the authorities here and in America, the payoffs to the two directors are little more than rounding errors - but those executives were the people whose persistent failures caused the fines in the first place.

Had they done their jobs properly, and not covered up the growing hole in the company's stock in trade, they would almost certainly have retired after a complete working life at Shell, laden with more money than they could ever hope to spend, and offered the pick of non-executive directorships if they could be bothered.

That is the prize for getting to the top of a major company and not screwing up. We have come to accept this, even if the scale of the payments looks mind-boggling to everyone except their opposite numbers, and the growing army of remuneration consultants who keep telling them how underpaid they are (relatively, of course).

These two did screw up. They had to go, but a seven-figure award for doing so is pretty eye-watering. Nobody wants to see a fallen top executive reduced to filling in Gordon Brown's impenetrable welfare forms in old age, but there's little danger of that here. Sir Philip had worked for Shell for 35 years, and had already earned a pension of £584,070 a year. Mr Van de Vijver has only clocked up 25 years, and must wait until 2015 to collect his annual 385,388. All-in-all, not a bad reward for failure.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/08/13/ccom13.xml