But now the British small shareholder is the poor relation of our Dutch cousins and we don’t have a meeting of our own any more. True there is still an event and we are entitled to sit in a hotel in Hammersmith whilst the real meeting is beamed to us from The Hague. But it’s a Clog run affair these days and with all the wit and humour that that suggests. That only around 200 of us bothered to journey to the meeting today suggests that it is not, for all, a very appealing prospect. The law requires that these AGM’s take place and that we have the opportunity to vote on the various motions in front of us. But these votes are rather Orwellian – Big Brother has already determined what the outcome will be. Today most of the votes were of the order of 97% “For” and 3% “Against” – so the 200 of us present were unlikely to foist an upset on the Board.
Quite a few of us at the London event were former employees so there was a bit of a reunion over the odd glass of wine after proceedings were over. I would guess that the average age in the hall was about 75 but that didn’t restrict the strength of feelings that were expressed. Virtually all the speakers/questioners were mildly or very hostile to Shell and I found virtually no defenders afterwards either. And I am not talking about the professional protesters here - but the ordinary small shareholders like me. In the past there was usually some chap who would stand up and thank the Board for their efforts and genuflect a little and generate a little ripple of applause. No more.
Corrib natural gas project
Most of the comments and questions about Nigeria were about gas flaring and the danger and risk to the health of local residents in the Delta that this practice brings. Again it seems to me (I am not an expert!) that this is a question of the application of financial resources. The technical solution to reduce and eventually eliminate flaring is employed elsewhere so it could be applied also to all the Nigerian wells if the funding was made available. Of course it would be a big project but for years Shell has been planning to put a stop to flaring but deadlines for achieving this are constantly being put back. In its corporate communications Shell is keen to be seen as environmentally responsible. They could end gas flaring in the Delta to help make this ambition a reality – and (like at Corrib) they might win a few hearts and minds along the way as well.
The Board presented Sakhalin more as a triumph than the disaster it was and they got quite an easy ride from those present at the AGM. There were questions and some of these were informed and pointed but the fact that senior directors’ remuneration was actually increased as a result of the “successful” renegotiation of the project with the Russians (rather than reduced as many of us would think would have been more appropriate!) almost escaped the meeting. When I look at the Sakhalin story it seems almost unbelievable to me that a company of Shell’s stature could manage a project of this scale so incompetently. The story is well documented elsewhere so there is not need to repeat it here – other than to say that I was surprised that nobody in either hall called for heads to roll.
Share performance and buy-backs
The inadequate performance of Royal Dutch Shell shares over the past year (see graphic for comparison with the FTSE 100) was a very live item – as was the company’s continued share buy-back schemes. Questions elicited an extraordinary response from Jeroen van der Veer and CFO Peter Voser. They claimed that there was nothing that they could do about the share price other than to continue to manage the business as competently as they could! The disingenuousness of this response was astonishing to anyone who knows how much time is devoted by Shell to the cultivation of the Financial Analyst stakeholder. Let’s be clear about this – in the past Shell has used the enhancement of shareholder value as a key measure of performance. Whilst dividends keep pace with inflation (although not in Sterling terms now that they are given in $US) the share price underperforms. And in addition the company buys back its shares rather than finding proper investment opportunities for the spare cash (or returning the money to shareholders in extra dividends). Voser claimed that in the long term buy-backs would increase shareholder value – but as one questioner pointed out in the long term we will all be dead! The shareholders hated buy-backs but there was no sign from the Board that this practice will cease. A few less buy-backs and a few more community friendly capital investments would be my personal preference. The share price might do better as well – in the short term anyway!
We were asked to approve the Remuneration report and this led to a lively discussion about the huge salaries that the high-priced help in Shell is now rewarding itself with. Jonkheer Aarnout Loudon is the non-executive director responsible to making sure that there is an argument to defend the multi-million pound salaries and other benefits of the Executive Directors in Shell. Now Jonkheer Loudon may not quite have the common touch – “Jonkheers” are noblemen and right at the top of the pile in the Dutch class system. And the poor man has to struggle on himself with just barely £100,000 a year from Shell to compensate him for his arduous work. But then I suppose apart from helping set his Executive Board members remuneration, he doesn’t really have a lot to do. And perhaps he has some savings to help pay the gas bills to ensure that his is warm during the cold Wassenaar winter nights. One most eloquent speaker in the Hague couldn’t believe how much CEO van der Veer was paid last year (around $10million- excluding pension benefits!) and said that this was more than all the members of the Dutch cabinet combined! He has a point. I know why they pay themselves so much – because they can (and there is always a handy Jonkheer around to help you make the case).
Is Shell in good hands?
That’s the acid test question when once a year we see the heavies who run the company and who protect our investments and (in my case) my pension. I suppose that my conclusion has to be that they are probably as good as we could expect. But let me pose just one question to them. You are all now rich beyond the dreams of avarice and no doubt in your personal lives you live very well indeed. Whether this means yachts and homes in tax havens and art collections and fine wine and private jets I don’t know. Perhaps you are all being prudent so that your partners and families will be looked after. But now you are rich can you imagine what it must be like not to be? To be a poor County Mayo farmer; or a long retired Shell Pensioner of 75 on a pension of £5000 a year; or someone living near a refinery belching out noxious fumes and who doesn’t have the money to move. Can you imagine what it must be like? If you can then why not show some real compassion when you manage Shell’s wealth? Sort out Corrib. Sort out the Delta flaring. Sort out all the other social and human and environmental problems that your business almost inevitably brings with it. You never know – the share price might even go up if people believe they can be sure of Shell again.
© Paddy Briggs 15th May 2007