The Times: Former Shell chief awarded £1m payoff
By Jenny Davey and James Doran in New York
June 26, 2004
SIR PHILIP WATTS, former chairman of Shell, the troubled oil giant, has secured a £1 million payoff just months after the oil group was alleged to have misled investors about the scale of the company’s proven oil reserves.
The severance payment, which has sparked outrage among some shareholder groups, came on Sir Philip’s 59th birthday.
The lump sum of £1,057,971 is equivalent to about 15 months’ basic pay.
Sir Philip will also retain 2,847,000 stock options, potentially worth millions of pounds, and the right to a £584,070-a-year pension.
The sizeable payoff comes despite the fact that Sir Philip — like the rest of the senior managers at Shell — had only a three-month notice period.
A spokesman for Shell said that contractual obligations did not apply in this case because Sir Philip had left by mutual agreement.
“The board approached the issue on the basis of the group’s core value of respect for people and with regard to Sir Philip’s longevity of service and prior contribution to the company,” he said.
The payoff prompted the Pensions Investment Research Council to renew calls for the Government to introduce legislation that would enable shareholders to block large payoffs.
Sarah Wilson, managing director of Manifest, the proxy voting agency, said: “Naturally, shareholders will be very upset that Sir Philip has walked off into the sunset with all this money while they are left to pick up the pieces. Any payoff is likely to be taken into account in class action lawsuits.”
Meanwhile it emerged that 27 current and former directors of Shell have been named in a fresh multibillion-dollar class action law suit filed to a New Jersey state court.
The 172-page lawsuit, in which the auditors KPMG and PricewaterhouseCoopers are named as defendants for the first time, accuses the directors of breach of fiduciary duty, mismanagement and fraud, and demands unspecified damages.
The plaintiffs, led by two big American pensions funds, Unite National Retirement Fund and Virginia’s Plumbers and Pipefitters National Pension Fund, are also demanding that shareholders be given the right to elect three directors to the board.
News of fresh legal action comes ahead of an expected stormy annual meeting of Shell’s UK arm on Monday.
FEES PERIL
A sum of £1 million may look a nice birthday gift, but it won’t go far if Sir Philip Watts has to foot the bill to defend a set of class-action lawsuits.
Past and present directors of Shell have insurance, and Sir Philip is likely to be covered. However, not all policies pay if fraud is found.
A top US lawyer may cost up to $1,000 (£544) an hour. A team of up to five could be involved, eating up the payoff in two months.
http://business.timesonline.co.uk/article/0,,8209-1158385,00.html