The Guardian: 'Witch-hunt threatens Shell's stability'

David Gow, industrial editor

Thursday April 15, 2004

Big shareholder warns board over search for scapegoat in reserves scandal

A prominent Shell shareholder last night warned that the energy group faced "destabilisation" in the "witch-hunt" for scapegoats in the crisis over its oil and gas reserves.

Eric Knight, who runs American fund group Knight Finke and represents Calpers, the Californian state pension fund, urged the protagonists in a growing dispute to allow regulators to settle the matter.

His comments came after Walter van de Vijver, the ousted head of Shell's exploration and production division, refused to be the sacrificial lamb for the group's over-booking of reserves.

He resigned last month along with Sir Philip Watts, the former executive chairman, when Shell admitted that for the second time in two months it had been forced to slash its proven reserves - by a further 500m barrels on top of 3.9bn in January.

Mr Van de Vijver broke the pair's silence after reports in the United States said a draft document by lawyers for Shell's group audit committee blamed the two for failing to disclose the reserves problem early enough.

The Dutchman, who worked at Shell for 24 years, insisted he had repeatedly warned the ruling committee of managing directors (CMD) from as early as 2001 about "non-compliant" reserves notified to the US regulator, the securities and exchange commission.

"I regularly communicated to CMD regarding the nature and quantity of the potentially non-compliant reserves and our efforts to assess the magnitude of the problem, prevent reoccurrence and implement offsetting measures," he said in a statement released by his American attorney.

The statement threatens to further undermine the position of Jeroen van der Veer, the new CMD chairman, Malcolm Brindred, the vice-chairman, and finance director Judy Boynton, all of whom were in senior positions when the overbooking occurred.

Mr Van de Vijver said he had "led the charge to communicate the issues fully" when the magnitude of the reserves problem became obvious in late 2003. But, he said, he had been asked "without credible explanation" to resign his executive and board positions on March 3. Sir Philip has yet to comment publicly on his own role and position.

Yesterday Shell said the audit committee had requested no public comment on the reserves issue until the internal inquiry had been completed and debated - "within the next few weeks". Publication should be before the deferred annual meeting on June 28.

The company is understood to feel constrained by the fact that four separate investigations are under way, including one by the SEC and another by the US justice department that could lead to criminal charges.

But Shell is under increasing attack because of its lack of transparency and its failure to communicate effectively with shareholders, a charge levelled notably at the non-executive directors on its two boards.

Mr Knight, who speaks for 1% of the equity and is to hold urgent talks with Aad Jacobs, the head of the Royal Dutch supervisory board, said 15 top shareholders in the Dutch arm were demanding greater dialogue with the boards.

"What we want is to ensure that the process by which the company decides what to do is transparent and structured. It can't just say it will talk to shareholders and then come back in a year's time with a revised corporate structure," he said.

Sharply critical of the way Sir Philip was dismissed, he said the company was run more like the civil service and needed a normal corporate governance structure.

Non-executives: the global great and good

Lord Oxburgh

Appointed interim chairman last month, to be replaced next year after 70th birthday. A geologist, he was rector of Imperial College, London, 1993-2001, after holding a Cambridge chair and serving as chief scientific adviser to the MoD for five years. Made a life peer in 1999; chairs the Lords science and technology committee

Teymour Alireza

A Saudi aged 64; president and founder of a group of retail and distribution firms based in Bahrain and selling global brands such as Versace and Nike. On the Shell board since 1997, chairman of Saudi National Pipe Company and a director of Arabian Gulf Investments and Riyadh Bank

Sir Peter Burt

Aged 60; on the Shell board for two years - a City grandee. Joined Bank of Scotland in 1975, oversaw merger with Halifax as chief executive and was governor until last year. Became ITV chairman in February. Serves on group audit committee

Eileen Buttle

Aged 66; due to step down this year after six years. An environmentalist and biologist, she was a research scientist and policy administrator at MAFF; trustee for several environmental NGOs

Luis Giusti

Aged 59; former chairman and chief executive of Venezuelan national oil firm PDVSA, 1994-1999, joining in 1976. Now a senior advisor at the Center for Strategic and International Studies in Washington. Serves on group audit committee

Mary Henderson

Aged 53; has sat on the board for three years and comes from the US food industry, where she was corporate vice-president of Bestfoods. Non-executive directorships at US arm of Axa and Del Monte. Serves on group audit committee

Sir Peter Job

Aged 62; chief executive of Reuters for 10 years until 2001 and oversaw its transformation into an electronic data provider. Joined as a trainee journalist in 1963, eventually serving as managing director of Reuters' Asian arm in Hong Kong. Non-executive roles include Schroders, Deutsche Bank, GSK and Bertelsmann

Sir John Kerr

Aged 62; entered diplomatic service in 1966 and became its head in 1997 for five years after serving as ambassador to the EU and US, with mid-career shift to the Treasury. Board member since 2002; trustee of the National Gallery, sits on board of Rio Tinto and Scottish American Investment Trust

Sir Mark Moody-Stuart

Aged 63; board member since 2001, when he stepped down as executive chairman of Shell Transport after unsuccessfully trying to transform its structure. Joined Shell in 1966, playing an active role in sustainable development; chairs Anglo American, director of HSBC and Accenture

Dutch supervisory board: Aad Jacobs, chairman, also chairs audit committee; Maarten van den Bergh, an ex-managing director who chairs Lloyds TSB; Wim Kok, former Dutch premier; Jonkheer Aarnout Loudon, chairs ABN Amro and Akzo Nobel; Hubert Markl, ex-president of Max-Planck Society; Lawrence Ricciardi, ex-president of RJR Nabisco; Henny de Ruiter, ex-Shell managing director - latter two are on Shell audit committee.

http://www.guardian.co.uk/oil/story/0,11319,1192233,00.html