New York Times: Shell Structure Has to Change, Investor Says
By BLOOMBERG NEWS
Published: February 9, 2004
Knight Vinke Asset Management, a fund that invests in undervalued stocks and is partly owned by the California Public Employees' Retirement System, called yesterday for changes in the board and management structure of the Royal Dutch/Shell Group.
Two publicly traded companies make up Royal Dutch/Shell: Royal Dutch Petroleum, which is based in The Hague and owns 60 percent, and Shell Transport and Trading, which is based in London and owns the rest.
Nominations to the supervisory and management boards of Royal Dutch/Shell are controlled by the members of the boards, Knight Vinke said in an e-mail statement, and shareholders are unable to participate in the process.
The Royal Dutch/Shell Group is managed by committee at the operating level, which "acts as a deterrent to strong leadership," the statement said.
Eric Knight, managing director of Knight Vinke, said: "Critical aspects of the group's governance and management structures are out of line. It is inappropriate and detrimental to value for a blue-chip company of this quality to retain such structures."
The calls for change came after Shell told investors last month that its proven oil and gas reserves were 20 percent lower than previous estimates. The chairman, Sir Philip Watts, has said that Shell is willing to ponder its century-old ownership structure.
A Shell spokeswoman, Bianca Ruakere, said that Sir Philip would be meeting with investors who represent about 35 percent of the shares over the next month to discuss their concerns, adding, "It's not a commitment to change, but a commitment to listen."
Knight Vinke said the group "should be managed by a unified board with a strong independent element selected with meaningful shareholder involvement from both sets of shareholders." It added that the chief executive needs "greater authority and accountability."
A six-member committee manages the group, with Sir Philip as its leader, and it reports to the two boards.
Shell's British shares have lagged behind those of Exxon Mobil and BP and their predecessor companies in 6 of the last 10 years, according to Bloomberg data.