Magazine article Management Today

Brainfood: Behind the Spin - Shell

Magazine article Management Today

Brainfood: Behind the Spin - Shell

Article excerpt

THE DILEMMA

The Anglo-Dutch energy goliath has had a calamitous few months. For a company that includes 'honesty' and 'integrity' among its core values, its admission that it over-stated its oil and natural gas reserves (a crucial yardstick for investors) has been highly embarrassing. On 9 January, Royal Dutch/Shell was forced to cut its proved reserves by 20% after admitting they had been wrongly booked with the SEC. Those implicated in the crisis - Sir Philip Watts, chairman; Walter van de Vijver, head of exploration and production; and Judy Boynton, chief financial officer - were asked to resign. Things got worse. In April, an internal report revealed that its top executive committee had been aware of the over-optimistic claims since February 2002 and ignored warnings that making an unsustainable claim breached SEC rules.

THE SPIN

Shell blamed the crisis on human failings rather than on poor internal structures. Lord Oxborough, non-executive head of the UK divison, said the fact that a 20% shortfall was hidden for up to two years did not have 'significance for the culture of the company as a whole'. So, there are only a few bad apples in Shell's barrel - at the top. John Hofmeister, Shell's HR director, told the FT that systems were in place for any director to raise concerns over the oil group's reserves, 'through audit, human resources or the non-executive process'. …

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