Daily Telegraph: It's a big bite for bureaucrats: “Shell shareholders are writing the cheques and, as the American lawyers get going, they will be writing more and bigger ones.” (ShellNews.net)
City comment
Edited by Neil Collins, City Editor
(Filed: 30/07/2004)
Even given the salaries at the Financial Services Authority (pay peanuts and you get. . .) £17m should cover quite a few of them, so it was a good day for the bureaucrats yesterday. The fine, levied on Shell for breaching the catch-all rules on "market abuse" looks modest compared with the $120m hit from the Securities & Exchange Commission in America, but everything's bigger over there.
In truth, the fines are a classic case of kicking the dog to punish the cat, since those in charge when Shell overstated its oil reserves have all gone (and we may be sure they have been well rewarded for their incompetence). Shell shareholders are writing the cheques and, as the American lawyers get going, they will be writing more and bigger ones.
Needless to say, there's no admission of liability, but the episode does raise the question of the role of regulators when incompetence like this comes to light. What good do the penalties do, and why not £1m or £100m? Would they have jumped in with fines had Shell's error been the other way?
Understandably, the payments rather overshadowed the figures yesterday, although they provided a useful diversion from further criticism of the stately timetable for reform at the top. For all the speed with which the previous chiefs were dispatched, this remains a supremely arrogant company, whose current bosses see nothing wrong with a November deadline for revealing their proposals.
They see no need to rush. The buoyant oil price is doing wonders for the downstream businesses where Shell always excels, and the Siamese twin structure with Royal Dutch is the perfect deterrent to corporate raiders - if any could contemplate taking on such a massive target.
The high price of the black stuff does bring its own problems, as Malcolm Brinded, who's now in charge of exploration, admitted. Shell is pouring money into exploring and developing its own finds, but acquisitions are eye-wateringly expensive. How he must regret letting little Cairn Energy make a fool of Shell by nicking the Mangala project in India, where more oil is being proved up almost daily. At £2.1billion, Cairn's market value is now enough to register even on Shell's radar.
Shell is an immensely strong company that will eventually come to terms with America's finest ambulance-chasing lawyers. Having conceded the principle, it will surely also impose an up-to-date management structure, even if it does seem to display all the sensitivity of a Louisiana mule to the views of its shareholders.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/07/30/ccom30.xml