The Independent: Shell still wrestling with its moment of shame: “Shell is bluntly accused of making false and misleading statements about its oil reserves over a five-year period, of doing so despite internal warnings that the statements were false” (ShellNews.net)

JEREMY WARNER

United Kingdom; Aug 25, 2004

SHELL CAN only hope that yesterday's parallel statements from the Financial Services Authority and the US Securities and Exchange Commission on the reserving debacle that threatened to engulf the company earlier this year finally closes the chapter on one of the darkest and most disreputable periods in its history.

The statements themselves make humiliating reading for a company that invests so heavily in public trust. Where once you could be sure of Shell, there seems very little you can be sure of now. Shell is bluntly accused of making false and misleading statements about its oil reserves over a five-year period, of doing so despite internal warnings that the statements were false, and then of blithely failing to correct the misleading impression given.

Despite the publication of a detailed account of what went wrong, it is still extraordinarily difficult to understand how a company as supposedly hedged around with corporate governance checks and balances as Shell could have practiced market abuse on such a scale. As previously trailed, a $120m out of courts settlement has been reached with the SEC. At the same time, the FSA has settled its market abuse enforcement action for pounds 17m. Both authorities make the point that the fines would have been considerably higher but for the degree of co-operation the company has shown, yet the truth is that as far as the City and the public are concerned, there has been very little obvious contrition so far.

Three of the executives at the centre of the scandal have been forced to resign, but the rest of Shell's two boards remains untouched. There has been no public statement of apology while the company's response to the failings which allowed the scandal to happen - an internal review of corporate governance procedures - has been woefully inadequate.

Few have confidence in the review producing anything of worth. The chairman, Jeroen van der Veer, insisted yesterday that the company had been working at "incredible high speed" over the summer to bring about changes that were fair to all investors. Whether the six months that have elapsed between now and the scandal first breaking can reasonably described as incredible speed is open to question, but then all things are relative, and at the glacial pace that seems to characterise decision making within Shell, six months must seem like no time at all.

Mr van der Veer promises to give an update towards the end of September. I think we can already guess what it will say. The present dual-domiciled structure will remain in place with the assets 60 per cent attributable to the Dutch company and 40 per cent to the British. On the other hand, the company will move to a unified board with joint chairmen, in the manner of that other Anglo-Dutch goliath, Unilever. Whether that will be enough to satisfy investors, or indeed begin the long march back to peer group competitive rates of reserve replacement without the need constantly to fiddle the numbers, remains to be seen.

The Shell supertanker seems to have such difficulty in changing course that by the time it eventually manages it, the oil may well have run dry altogether.