BLOOMBERG: Shell Names Nokia Chief Executive Ollila as Chairman (Update6): “Shell, Europe's second largest oil company, ousted former Chairman Philip Watts and two other senior executives, paid a record fine in the U.K. and lost its top tier credit rating after announcing the restatement of its oil and gas reserves last year.”: “Cost overruns and delays at Shell projects such as its Sakhalin oil and gas venture in Russia have also spurred concern about the company's project management and internal control, according to analysts and investors.” Posted Friday 5 August 2005
Aug. 4 (Bloomberg) -- Royal Dutch Shell Plc, seeking to restore investor confidence after overstating oil and gas reserves for three years, said it picked Nokia Oyj's Jorma Ollila as chairman following an eight-month search.
Ollila, Nokia's chairman and chief executive officer, will succeed Aad Jacobs in the non-executive role at The Hague-based Shell from June 1, 2006, said Bianca Ruakere, a Shell spokeswoman. Ollila, 54, who turned Nokia into the world's biggest mobile phone company, this week said he'll step down as CEO next year.
Shell, Europe's second largest oil company, ousted former Chairman Philip Watts and two other senior executives, paid a record fine in the U.K. and lost its top tier credit rating after announcing the restatement of its oil and gas reserves last year. Ollila is the company's first chairman from outside Shell's home countries of the Netherlands and Great Britain.
``Ollila has been highly regarded as a very good leader with a lot of vision and strategic thinking,'' said Thor Udenaes, who manages $1 billion in stocks, including Nokia, at SEB Asset Management in Stockholm. ``Shell is bringing in someone from a different industry with a different perspective. Investors will probably take that as good news.''
Cost overruns and delays at Shell projects such as its Sakhalin oil and gas venture in Russia have also spurred concern about the company's project management and internal control, according to analysts and investors.
Global Search
Shell had been looking for a replacement for Jacobs after merging its U.K. and Dutch parent companies last month and had indicated it might break with tradition by choosing a successor from outside. The company, formerly Royal Dutch/Shell Group, last week posted lower-than-expected profit for the second quarter as production fell.
Shell chose Ollila after a global search by recruitment consultant Egon Zehnder International that began in December last year. The company identified more than a dozen senior executives in the U.S., the U.K. and continental Europe before settling on Ollila, Shell's Ruakere said.
The company chose Ollila partly because of his experience leading a company with operations in some 140 countries, about the same number as Shell, she said.
``This is a wonderful opportunity with a great global company at a pivotal time for the energy industry,'' said Ollila in a statement earlier today. He wasn't immediately made available by Nokia for comment. Ollila will be paid 500,000 pounds ($888,600) per year, for an initial three-year term, said Shell's Ruakere.
Explosive Growth
``They have had problems in corporate governance in the past and maybe that is one of the reasons they want someone with a good track record,'' said Ville Ahoranta, a fund manager at Etera Mutual Pension Insurance Co. in Helsinki, which oversees around $6.2 billion in assets.
Shell's `A' shares in London today slipped 10 pence, or 0.6 percent, to 1,790 pence. Nokia lost 1.1 percent to 13.02 euros.
Under Ollila, Nokia's sales surged more than 10-fold to peak at 31.2 billion euros ($38.4 billion) in 2002 and the stock has jumped more than 100-fold since 1992, the year Ollila took over.
He turned the former maker of toilet paper and rubber boots into a company that controlled more than a third of the global market for mobile phones. Nokia's success in the 1990s turned it into Europe's most valuable company by market value by the end of 1999.
Reserves Overstatement
Watts was ousted by Shell in March 2004 as chairman of the committee of managing directors, the top executive role, and replaced by Jeroen van der Veer, a managing director who ran Shell's chemicals business. Shell was fined by the U.S. Securities and Exchange Commission and the U.K. Financial Services Authority, which levied a record 17 million-pound ($30 million) penalty.
Shell reported in March this year that it had overstated its 2002 oil and gas reserves by 41 percent. The company first announced the overstatement in January 2004, which prompted Standard & Poor's to lower the company's debt to AA+ from the top- rated AAA level three months later.
After announcing the merger in October, Shell streamlined its management structure, naming Van der Veer as group chief executive and abolishing the dual-company committee, which had been blamed for slowing down decision-making.
`Slightly Surprised'
Ollila this week said he intends to remain at Nokia as non- executive chairman of the business, based in Espoo, Finland. He will be replaced as CEO by Olli-Pekka Kallasvuo.
``I am slightly surprised because he's made his career in a consumer business and oil is completely different,'' said Miska Kuhalampi, who helps manage assets worth $1.6 billion, including Nokia shares, at Aktia Asset Management in Helsinki. Still ``before he came to Nokia he had a financial background, so he could be a good chairman for any company.''
Ollila was born in Seinaejoki, Western Finland. He earned a masters in political science in 1976 from the University of Helsinki, a masters in economics in 1978 from the London School of Economics, and a masters degree in engineering in 1981 from the Helsinki University of Technology.
Ollila joined Nokia's finance department in 1985 after seven years working for Citibank Corp. One of his first assignments at Nokia was to broaden the company's ownership base abroad by handling a directed share sale to billionaire George Soros.
Break with Tradition
Shell's merger combined two companies that started with what Shell calls an ``alliance'' in 1907. Then, Henri Deterding of Royal Dutch agreed to bail out Marcus Samuel at Shell, which was struggling with too much debt. The deal then was to cooperate in all aspects of business, while maintaining separate identities, according to a Shell-sponsored history.
The company's former U.K. business, Shell Transport and Trading Co., traditionally appointed a U.K. Chairman, while a Dutchman took the position at Royal Dutch Petroleum Co.
Investors have said the company's new structure, with one stock, will help make acquisitions easier. Shell has paid cash for acquisitions throughout its history, preventing multibillion dollar transactions such as BP Plc's $56 billion stock purchase of Amoco Corp. in 1999 and the $31.8 billion acquisition of Atlantic Richfield Co. in 2000. Irving, Texas-based Exxon Mobil Corp. also has used shares for purchases. Both have overtaken Shell in size.
To contact the reporter on this story:
Dale Crofts in Amsterdam at dcrofts@bloomberg.net
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