Financial Times: The trying Dutchman

April 16 2004  

This week, Walter van de Vijver may have become the most dangerous man Royal Dutch/Shell ever crossed.

Even before he was told to resign in early March, the head of Shell's most important division and heir apparent to the chairmanship was known by some inside the Anglo-Dutch energy group as "the tall angry Dutchman".

On Tuesday, after more than a month of silence, the 6ft 7in, 48-year-old former head of exploration and production revealed just how angry he had become. In a statement through his lawyer, he attacked what he said were inaccurate portrayals of his role in Shell's reserves accounting scandal. More worryingly for Shell, he also hit back at allegations that he had been slow to warn senior management about the 3.9bn barrels of oil and natural gas that had been wrongly booked with the US Securities and Exchange Commission.

Who knew about the wrong bookings, and when, are the central questions raised by the investigations that have been launched into Shell by the SEC, the US Department of Justice and several regulators in Europe.

The departure of Mr van de Vijver and Sir Philip Watts, the company's chairman, after the reserves affair broke has already cut Shell's committee of managing directors (CMD) from six members to four, and the company can ill afford further senior losses. But the positions of Jeroen van de Veer, chairman, and Judy Boynton, chief financial officer, could be at risk if Mr van de Vijver were able to provide convincing evidence that he warned the CMD of a reserves problem and can undermine Shell's argument that it told investors of its troubles as soon as they became apparent. If it turns out that reserve errors were played down but Mr van de Vijver was actively involved, he will pose less of a threat to the company.

Shell's senior management and directors have done little to placate Mr van de Vijver, who argues he was not given a credible explanation for his dismissal.

Just a month before the board asked him to resign, he and Sir Philip gave a day-long presentation explaining how Shell had managed for years to overlook the fact that as much as 20 per cent of its reserves did not comply with SEC rules. The two men told investors - angry at the way they had handled the affair - the board had full confidence in them. As they gave their presentations at an hotel overlooking the Tower of London, neither man had any idea that a month later their heads would roll.

Mr van de Vijver had the toughest job - explaining where things had gone wrong - but he needed less coaching from communications experts than Sir Philip, often criticised for his poor public relations skills. That day Mr van de Vijver seemed to be making a particular effort to show he was relaxed and in command, with his huge double-breasted suit swinging open as he strode about the stage.

Although their public images are different, people who have worked with Sir Philip and Mr van de Vijver say they have in common a fierce ambition that sometimes hides their human side. Mr van de Vijver rarely greeted staff when he met them outside the office, especially if they ranked lower in the Shell hierarchy, said one employee. But even though many are ready to criticise Mr van de Vijver's brusqueness, most wonder why he was forced to resign - a doubt rarely raised about Sir Philip's departure.

Mr van de Vijver appears to have inherited many of the difficulties. Most of the wrong bookings were made between 1996 and 2002: for most of that period Sir Philip was head of exploration and production and Mr van de Vijver ran the company's exploration and production division in the US, one of the few regions where there seem to have been no significant misjudgments of reserves. Mr van de Vijver realised all was not well with Shell's reserves after he became responsible for them in June 2001, following Sir Philip's appointment as chairman. By July, Mr van de Vijver had been promoted to the CMD and by February 2002 he is said to have written his first memo warning the committee of inconsistencies.

One Shell executive says Mr van de Vijver's earlier career was not flawless. Some executives felt he had been promoted on the strength of bullish assertions about the production from Shell's ageing North Sea Brent field, where he was in charge before going to the US. But, this executive says, although the episode caused resentment among his successors when the projections proved too optimistic, it was hardly in the same league as the troubles the Dutchman walked into when he became head of exploration and production.

The main allegation against Mr van de Vijver now is that he did not alert the CMD quickly enough to the extent of the company's reserve errors. That finding is expected to be included in an internal audit report that board members have begun to review.

Mr van de Vijver said in his statement this week: "I regularly communicated to CMD regarding the nature and quantity of the potentially non-compliant reserves." This is likely to be his most potent argument as he fights investigations into his and senior Shell managers' conduct.

There is another important difference between Mr van de Vijver and his erstwhile boss. While Sir Philip was a little more than a year away from retirement when he resigned, his Dutch colleague may have thought he was just as close to fulfilling his dream of running one of the world's most powerful companies.

Mr van de Vijver said in this week's statement that he wanted to "move forward with his career elsewhere", after 24 years at Shell. That makes it all the more likely that he will now concentrate his ambition and anger on the fight to clear his name.