The Business: Shell: What cloud is Oxburgh on?
25 April 04
It is difficult to conclude that there are no heroes at Shell, not even Walter van de Vijver, the sacked head of exploration. For all his complaints, via e-mails to Sir Philip Watts, who got dumped as chairman, he failed to push Watts into disclosing to shareholders that Shell had grossly overbooked its assets until the scale of the problem was too large for Watts to conceal.
Van de Vijver claims he "led the charge" for public disclosure. but Watts and others blocked him. Why then did he not report his concerns to the Securities and Exchange Commission (SEC) when he must have been aware Shell was in breach of its listing rules?
The game of blaming everybody else continues - un undistinguished spectacle for a board of one of the world's largest companies and once regarded as a model of corporate probity.
The explanation given by Lord Oxburgh and Aad Jacobs, non-executive chairman of the parent company boards, that the crisis arose because of human failings and not internal systems failure, does not wash either. The problem came about because of the board's failure to act earlier when they began to suspect something was amiss. Oxburgh says the audit committee's report is an account of management failure illustrated by "ill-considered hyperbolic e-mail chatter". What cloud is Oxburgh on?
Just one example puts that silly claim to rest: "I am sick and tired of lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings" - a 9 November 2003 e-mail from Van de Vijver to Watts.
On the evidence so far it is clear that Watts is largely to blame for the over-statement of the reserves and their concealment until January this year because he had known about the problem for many years and said nothing to investors.
Nobody on the two boards can, or should, escape blame. As the audit committee report says, the climate for deception was ripe. It cites lax internal standards and auditing systems which allowed Watts and others to produce massively aggressive or premature bookings of reserves.
The full unpublished report runs to 240 pages or so and is now in the hands of regulators and will no doubt compound Shell's legal problems. Whether or not all the directors knew about the cover-up or not, they are clearly in breach of their fiduciary duties to shareholders. If they didn't know, they should have. Few of the excuses we are hearing are likely to survive regulatory scrutinity, nor will the new chairman Jeroem van der Veer's "it wasn't me guv" plea. Theirs is a shameful performance that will overhang Shell's shares for a long time to come.