The Wall Street Journal: Royal Dutch/Shell: “There has so far been very little transparency about these issues.”

15 July 04

Royal Dutch/Shell Group is finding it harder to ignore cries for change to its corporate-governance practices. The Anglo-Dutch oil and gas giant has added two investment banks to the team looking at the options, beefing up expectations that Shell might do the unthinkable and unpick its 100-year-old double-headed structure.

But what exactly does that mean? Should Shell merge its two separately listed companies, one Dutch and the other English? Or should it keep the companies and simply merge its boards? What about its listings?

In a sense, what Shell achieves is more important than how it achieves it. The oil and gas company needs to find a way of managing the business that is both more efficient and transparent. The only way of really doing that is by unifying the two boards. The company would then be more accountable to its shareholders, each set of which can currently lobby only one side of the company. This has largely insulated the oil giant from its investors until now. A stronger, unified board could then pin down committees like the four-man Committee of Managing Directors, which sits in no-man's land above the Shell and Royal Dutch boards and doesn't seem to report to anyone.

Does that mean Shell needs to collapse its double-headed structure, as Reed Elsevier, another Anglo-Dutch company, did? Well, that would certainly be the cleanest approach. This would cut out the extra cost and bureaucracy associated with two headquarters. It would also send a strong signal that the "us vs. them" mentality would no longer plague Shell. But it might be complicated. There would be tax liabilities, and it might trigger change of control clauses in its various joint ventures. Determined directors might well be able to find ways around these issues. Then again, these may be obstacles that are too hard to shift.

There has so far been very little transparency about these issues. If Shell were true to its old form, it would just take its banks' analysis and keep it secret until it announces its plan in November. But if Shell really wants to change, it won't just present its shareholders with a done deal.

--Bill McIntosh, Robert Cyran and Fiona Maharg-Bravo