Financial Times: Shell board set to back chairman

By Joanna Chung and Carola Hoyos

Published: January 14 2004 22:02 

Royal Dutch/Shell's board is likely to resist some calls by shareholders for the resignation of Sir Philip Watts, the oil company's chairman.

The two boards have "very considerable confidence" in Sir Philip, said one non-executive board member. He said: "My view is that both the boards have full confidence in Sir Philip Watts. One of the good things about Shell is that it does tend to take things on the chin. Shell does have the advantage that what you see is what you get."

A second non-executive director also hinted that mounting speculation surrounding the demise of Sir Philip was premature.

Some of Shell's biggest shareholders have demanded Sir Philip resign after he failed to show up when the company announced it was cutting 20 per cent of its proved oil and natural gas reserves. Sir Philip, whose term ends in June 2005 after he reaches the company's mandatory retirement age of 60, was head of Shell's exploration and production division when the fields in question were classified as proved under US Securities and Exchange Commission rules.

"I think Shell would be helped by replacing one or two people in its top management to regain investor confidence," said Ruben Mikkers, of Robeco, Europe's second-largest stock fund. Currently, top management enjoyed no investor confidence, he said, echoing the sentiment of some of Shell's shareholders, including some based in the UK.

However, those shareholders denied access to Shell's management since last week's announcement, have said they expect their calls to fall on deaf ears.

Several felt that Shell's complicated structure of two companies with two boards made it difficult to know who to approach about their concerns. Indeed, several did not know the procedure for forcing a chairman from his post.

They added that it would be unlikely for Shell's management to launch a campaign against Sir Philip, who they said would be unlikely to go of his own volition.

Shell said the decision to reclassify the reserves - the majority of them in Australia and Nigeria - would have no material effect on its financial statements, or the total volume of hydrocarbons in place.

However, Shell's move suggests the company took an unrealistic view of how quickly it could develop the fields. ChevronTexaco and ExxonMobil, Shell's US partners in Australia, said they took a more cautious approach, never booking the natural gas reserves in the first place.

Reserves are a key measure of an oil company's health. Shell has been among the least successful of its peers in making new finds. But perhaps one of the most damaging factors in the erosion of shareholders' support has been the perception that Sir Philip has a brusque manner and reacts defensively to criticism and questions by his investors.

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