Shell investors to vote on company overhaul

Investors in Shell will vote today on the most far-reaching overhaul in the oil giant’s 100-year history which could give it a market value of more than £120bn (€180.4bn).

The Anglo-Dutch group is proposing to scrap its twin-board structure as it battles to eliminate failings that led to its reserves crisis last year and has already won the public support of key shareholders.

But hopes of a smooth meeting could be dashed as environmental groups vow to attack its environmental record in Nigeria, while investors may express anger at executive pay levels and Shell’s failure to replace its reserves.

Assets of the company are currently split on a 60-40 basis between Royal Dutch Petroleum, with its headquarters in The Hague, and London-based Shell Transport.

A unified company – to be called Royal Dutch Shell – will have a market value of more than £120bn (€180.4bn) at current prices to vie with major rival BP as the biggest company in the FTSE 100 Index.

Shell Transport is presently the sixth biggest top-flight firm.

According to City experts, it will represent around 10% of the Footsie and the energy sector as a whole will rival the size of the banking sector.

Shell needs the approval of its UK shareholders and Royal Dutch Petroleum investors in the Netherlands today before it can unify around a single board and chief executive.

The move is designed to boost transparency and accountability after its present structure of two sets of directors meeting separately in the UK and the Netherlands was blamed by the City for contributing to the reserves fiasco.

Shell, which made profits of £9.3bn (€14bn) last year, downgraded its reserves five times during a crisis that claimed the scalps of three senior executives and led to regulators in the UK and US imposing fines totalling £82.7m (€124.4m).

Investor group RREV has advised its clients to vote in favour of the unification proposals. It is jointly controlled by the National Association of Pension Funds in the UK and ISS, the leading governance organisation in the United States.

RREV chief executive Tim Sawyer said: “We view the proposed governance structure positively as a unified board structure, should provide more efficient channels of communication and decision-making processes.”

If the unification proposals are approved then Shell will begin its new era as a unified company on July 20.

Shell has also responded to the reserves debacle by tightening its remuneration policies, eliminating potentially-lucrative stock options as rewards for executive directors.

But the company could face criticism for its decision to hand chief executive Jeroen van der Veer a bonus of €1.35m on top of his annual salary of €1.28m for a year in which it replaced only 19% of the oil that was pumped out of the ground.

Environmentalists were angered when Shell conceded last month that it would miss targets to end the controversial practice of burning unwanted gas in Nigeria.

Shell also revealed that more oil spills occurred in Nigeria over the past year than at any time since the turn of the millennium, although the majority of the 236 incidents were caused by sabotage as local people sought access payments or clean-up work.

Friends of the Earth said representatives from Nigeria, Brazil, South Africa, Congo and the Philippines were travelling to London to protest about Shell’s environmental record.

It claims Shell has done little to improve the situation for communities close to its refineries and which suffer from oil spills, contamination, leaking pipelines and pollution.

Tony Juniper, executive director at Friends of the Earth, said: “If Shell operated to these standards in western Europe, there would be an outcry. So why is it acceptable for companies to operate like this overseas?”

Friends of the Earth has pledged to erect a gallows outside the meeting hall in London to mark the 10th anniversary of the execution of Ken Saro-wiwa, the Nigerian activist who led criticism of oil exploitation in his homeland, and protest against damage to the environment caused by Shell’s activities.