Big Oil lets sun set on renewables

Comments on article in "The Guardian" 11th December 2007:



http://www.guardian.co.uk/business/2007/dec/11/oil.bp

This report should not come as a surprise to anyone who knows Shell well. Over the past thirty years or so Shell has tried a variety of diversifications but failed to make any of them work:

Minerals: Billiton …………..…...SOLD
Nuclear: General Atomic…..……SOLD
Coal: Shell Coal…………….……SOLD
Power Generation: Intergen……SOLD
Agrochemicals:………………….SOLD
Forestry…………………………..SOLD
Solar………………………………SOLD

The reasons for these failures are not particularly complex. At the top in Shell there is a culture which is really only comfortable with the familiar – not for them the challenge of “unknown unknowns”. There is a bias for the scientific, technological and the quantifiable and an aversion to uncertainty. So the people who rise to the top are not original thinkers or creative – they are the apparatchiks who play the corporate games most successfully. As these top executives have rewarded themselves more in more in recent times there has been an increase in the safety first mindset. The huge remuneration and pension packages that are on offer do not encourage originality or risk taking – they cause retreat to the familiar where income streams can be more accurately predicted. This sheer lack of imagination is well illustrated by the share buyback schemes which continue – essentially Shell is saying that it has no capital investment, acquisition or diversification opportunities so the only thing it can think of doing with the windfall earnings from $90+ oil is to buy its own shares.


The other force in play at Shell at the moment is the continued centralisation of decision making. The traditional upstream oil and gas businesses do need central decision making but other areas (Renewables is one) are substantially local in character and far smaller in scale. Shell does not have the processes in place to manage decentralised businesses any more. In the past strong and independent country based “operating companies” often stepped out into non traditional activities where they saw a local opportunity. Since the power of these local companies has been curtailed there is no longer the organisation in place to encourage such experiments.


The changing Shell culture is placing one of its historically traditional businesses at risk – the huge network of petrol stations around the world. There is no more local business than retailing as any retail professional will tell you - the great retailers (McDonalds for example) really do “think global and act global”. There is always hands-on local management in every country or region in which McDonalds operates with globally developed products, services and offers being tailored to the local market. Shell used to do that in the past when the operating company structure was in place. But since its demise “Retail” (that most local of businesses) has been centralised and now has to kow-tow to the ridiculous nostrum that it is really a “global business”. Shell is gradually walking away from hands-on Retail in many markets and it would be no surprise if the business is not disposed of entirely in time.



The irony of all of these changes is that the centralisation of decision-making and the narrowing focus has not brought better corporate governance. There was nobody more adverse to risk and to delegation that Phil Watts – a hands-on manager if ever there was one - but the facts now emerging about the reserves scandal over which Watts presided showed that this centralisation was one of the causes of the problems. How ironic that in the post Watts era the centralising trends have continued with so-called “global businesses” now existing across the board. One of the reasons for this is the fear of legal actions and the presumption that the risk of these is reduced by not delegating or placing trust in subordinates. There are now far more lawyers in Shell than there ever were in the past and there is hardly a business decision made without the lawyers being consulted. So whilst the executive directors of Shell richly reward themselves this is not in recognition that these rewards are partly a compensation for the directors for having to take greater personal risk. How close Phil Watts has been to following the Enron directors, the Nat West three and Conrad Black into the criminal courts we don’t know – but you can be sure that the current Shell board will be very conscious of the need to avoid personal liability. Again this means that they are reluctant to move away from the very familiar.


The one area where Shell has been willing to go public and try and differentiate itself has been in its corporate communications and its green posturing. As Terry Macalister rightly points out Shell has “trumpeted its commitment to a low carbon future by signing a pre-Bali conference communiqué” – in my opinion an astonishing act of hubris. There can be little doubt that Shell is only in Renewables at all because they believe that this will paint them greener than in reality they are. Let’s be clear about this – the whole business imperative of Shell is to exploit hydrocarbon resources. That is what they do. Every hydrocarbon molecule that they find, produce, refine, transport or market contributes to global warming and climate change. My view is that there is nothing immoral in this – oil and gas are the main drivers of economic growth and prosperity and will remain so for the foreseeable future. Shell’s considerable skills in this business, combined with their good track record in reducing there own carbon emissions at refineries etc., should be a source of pride. There is really no need to be apologetic about Shell’s strong position as a global player in the oil and gas exploration and production world and Greenpeace’s suggestion that Shell “…needs to become not just an oil company but an energy company” with a strong commitment to Renewables is wishful thinking. Shell has neither the competences nor the inclination to move away from its traditional businesses – on the contrary all the signs are that they are retreating back to familiar ground rather than being creative or genuinely diversifying in their investments.

Corporate Social Responsibility - an oxymoron...

I think that it is very important to make a distinction between State power over the individual and state power over institutions – especially private sector businesses. In an ideal world, I agree, that it would be good if individuals were free to pursue their lives peacefully and lawfully with the minimum of intervention from authorities. This does, of course, require that there is a code of behaviour which people follow that goes beyond what the law says they should do. But it doesn’t always happen. For example, the hope that pub or restaurant customers who smoked would be sensitive to the feelings and comfort of other customers who did not smoke was shown to be a forlorn one! The banning of smoking in public places came about, at least in part, because too many smokers could not be relied upon to care about others. Some might argue that the legislation was anti-libertarian – I would argue the opposite. My freedom, and the freedom of the majority population who don’t smoke, was hugely enhanced by this legislation of which I approve wholeheartedly.

Essentially the test should be to ensure that the worth of legislation is determined by its contribution to overall utility - there has to be judgment about the point at which you curtail freedoms. You cannot, of course, conceive of an “anything goes” world without laws. Commercial organisations – especially big businesses tend to argue for self-regulation. They want to be free to police themselves – but there is no evidence that this ever works. The imperative of a company is overwhelmingly a shareholder driven imperative – indeed the law states that it must be. So for a corporation to suggest that it follows self-imposed “Corporate Social Responsibility” rules is so much poppycock. When faced with the choice between profits and principles they will choose profits 99% of the time! So government HAS to legislate to curb the powers of business and ensure that they serve more than the narrow self-interest of their shareholders. Nobody else will do it!

(c) Paddy Briggs December 2007

Shell says “No to Yes”

Just when you thought it was safe to buy a newspaper or a serious magazine again up pops Shell with more of its absurd corporate advertising. The “Say No to No” campaign, running again this week, almost defies belief in its self-congratulatory and disingenuous copy and tone. Let’s first take a look at one of the ads – the one with the teacher writing on the blackboard – here, word for word, is what it says:

"Say No to No

Isn't it high time someone got negative about negativity?Yes it is.Look around. The world is full of things that, according to nay-sayers, should have never happened."Impossible.""Impractical.""No."And yet "yes."Yes, continents have been found.Yes, men have played golf on the moon.Yes, straw is being turned into biofuel to power cars.Yes, yes, yes.What does it take to turn no into yes?Curiosity. An open mind. A willingness to take risks.And, when the problem seems most insoluble, when thechallenge is hardest, when everyone else is shakingtheir heads, to say: let's go."

The tag line is “Real energy solutions for the real world” and the implication is that Shell has these solutions because of the position it takes (as described in the copy). So Shell is not negative then? Shell is up there with those who found continents and played golf on the moon. With Columbus and Neil Armstrong. With NASA. With the fifteenth century Spanish court of Ferdinand and Isabella. Shell is a risk taker just like they were? What arrant nonsense.
Shell is one of the most risk averse, short-sighted and cautious enterprises of modern times. And especially in its energy category. When other companies made acquisitions (Exxon for Mobil, BP of Amoco, Chevron of Texaco, Total of Elf…) Shell stayed nervously out of the fray. When opportunities arose Shell said “Yes to No”. They shook their heads and said not “Lets’ go” but “let’s not”.

Shell always says “No” to diversification – to the risks of getting out of their comfort zone. Here’s an (incomplete) list to prove this point:

Minerals: Billiton ……………...SOLD
Nuclear: General Atomic………SOLD
Coal: Shell Coal…………………SOLD
Power Generation: Intergen……SOLD
Agrochemicals:………………….SOLD
Renewables……………………….?

As far as alternative energy (Renewables) is concerned can their be the slightest doubt that it would go the way of the other diversifications – if it wasn’t for the phoney “green” kudos it brings to Shell’s reputation?

The comfort zone of Shell gets narrower as the years roll by not wider. All of the daily emphasis is on the traditional businesses and in particular on the upstream – the search for oil and gas. Old world, old energy, old core competences. I don’t mind this at all either as a small shareholder or as a pensioner – but I do object when I am being bamboozled into believing something that patently isn’t true.

And isn’t it pretty negative to sell or franchise your brand – your most valuable intangible asset? And Shell is selling its brand – for example in Ireland where the Shell branded petrol stations now have little or nothing to do with the company at all. The Shell logo stands over petrol stations that Shell has sold and which it no longer controls. Here is what Shell in Ireland says about this:

“In July 2005, Shell announced that it had signed sale and purchase agreements with Topaz Distribution and Logistics for the divestment of the majority of Shell’s oil products businesses in the Republic of Ireland and Northern Ireland. The agreements relate to Shell’s retail, commercial fuels, lubricants, marine, and supply and distribution businesses.

Topaz will continue to use the Shell brand and Shell UK will continue to supply high quality fuels and lubricants to the company, which means that the Shell brand will remain visible in Ireland and service to customers, dealers, and distributors will be maintained.”

So the “Shell brand will be visible” – as if this, in itself, is something that consumers could be concerned about. A brand is more than a logo – it stands for a total commitment to the customer. Shell has walked away from its customers in Ireland and divested itself of this commitment. Shell is also walking away from a host of other markets, because it perceives that it cannot operate these businesses profitably. Who is being negative now? Who is saying “Yes to No” again not “No to No”?

One of the cases for the powerful multinationals is that their very financial strength should allow them to be long term in their outlook. They ought to be able to ride the waves of the squally world of business. Shell was built up on this very philosophy – risks were really taken in the past – new ventures, new countries, new markets, new technologies. Not all worked, but the sheer size of the organisation meant that it could ride the storms and tolerate the failures that will inevitably happen when you really do take risks. The Shell of today is utterly different from this – far more short term in its thinking and far more risk averse. And yet they have the supreme arrogance to think that they can credibly preach the virtues of “a willingness to take risks” and to suggest that they are on the moral high ground – an organisation that rejects negative thinking. It isn’t true – and I, for one, am sick and tired of being lied to by those who want me to believe that it is.

© Paddy Briggs December 2007

Alastair Campbell on the Oil Companies in Britain

Crisis management and the Oil Industry


At a recent event with Alastair Campbell – formerly Tony Blair’s Press Secretary and chief spin doctor – he discussed (inter alia) crisis management. One of the crises that he talked about which happened in September 2000 in Tony Blair’s first term was the protests by haulage companies about fuels prices. The crisis involved the blockading of fuel facilities (refineries and depots) and very nearly brought the country to a grinding halt. Campbell described how the crisis was handled at Number 10 and elsewhere in the Government apparatus. When asked about the role of the oil companies, including Shell and BP, Campbell said that they were “hopeless” and showed a complete lack of leadership retreating completely from the fray. Campbell commented that he felt that this abrogation of any responsibility in the matter was particularly shameful given the excessive salaries that top executives in the oil industry paid themselves!

In Campbell’s diaries (pages 471ff) he describes a meeting with the “oil company executives” and describes them as “…not a very pleasant, compelling or impressive group of people” and specifically that “…the BP and Shell people were not impressive. I guess part of them was happy for this to be seen as a government problem…the guy from BP said that he was worried that they would be left holding the baby.” Later as the crisis began to be solved the Prime Minister called the oil companies in again. Here is how Campbell described that meeting:

“TB [Blair] said he wanted to read the riot act because he wasn’t happy with their systems, and didn’t really feel that they had pulled out the stops. Mark Moody-Stuart [chairman of Shell] was dreadful. He had earlier asked if TB minded if he sent his deputy. Yes he would was the answer. It was pretty tense at time, not least when JP [John Prescott] had a go at their contracts system.”

I think that I can throw some light on this matter from my own experiences in Shell (although I was not working in the UK at the time of the fuel crisis in 2000). Sixteen years earlier (in 1984) I had been responsible, as a member of Shell’s executive team in Scotland, for the management of the company’s commercial/industrial business in that country. Shortly after taking up my appointment the miners’ strike hit the United Kingdom – Scotland was one of the hardest hit areas. One of the issues that I had to deal with was in respect of the Ravenscraig plant of British Steel. If the furnaces at Ravenscraig did not get coal then they would shut down and could not be restored again. Ravenscraig would have to close. The normal supply route to Ravenscraig for coal was by train directly to the plant, but the rail unions, in sympathy with the miners, refused to move coal supplies. So the only solution was to have dozens of trucks on a permanent journey from a coal import port at Hunterston on the west coast of Scotland to Ravenscraig – a journey of some sixty miles. Shell’s interests were twofold – Ravenscraig was a huge customer, the largest consumer of Shell lubricants in Europe. And the haulage company running the coal supply trucks was a Shell customer as well! But there was clearly a problem – on the one had we did not wish to be seen as taking sides in the miners’ strike which was the hottest political issue of the time. On the other hand we had a duty to look after our customers and, as a long established business in Scotland, most of us also felt a sense of duty towards the thousands of people who relied on British Steel (and their suppliers) for their livelihoods. With the consent of my bosses in London the action that I and my colleagues took was to approach the Transport Union (TGWU) and ask them whether they would sanction our continued supply of diesel fuel to our customer – the road haulage company involved. I had a long meeting with the TGWU shop steward and we came to an agreement – it was, of course, a very difficult decision for this official as on the one hand he was instinctively in support of the miners but on the other he also had a duty to his members (Shell’s drivers) and to our customers. Anyway we kept fuel supplies going and Ravenscraig was saved.

The key point of the Scottish story and its relevance to the situation sixteen years later described by Alastair Campbell was that back in 1984 we had staff on the ground at a reasonably senior level to help resolve this crisis. Also the drivers were our own staff and we genuinely worked together as a team. By 2000 most of this had gone. Shell had cut back its business to such an extent that only junior staff would have been at the fuel facilities that were under siege. And these staff, unlike my colleagues and me back in 1984, were not empowered to act. Further the drivers and other staff were no longer Shell employees and had no loyalty to Shell. All delivery of Shell fuel in the UK had been contracted out to haulage companies – the very ones, no doubt, also involved in the protests against the government - John Prescott was quite right to “have a go at the contracts system”! In the Thatcher/Major years Shell had ruthlessly eradicated the unions from its UK operations as well – so there were no Shop Stewards to talk to either. Finally Moody-Stuart, although Chairman of Shell Transport and Trading at the time, would have had little or nothing to do with Shell’s downstream business in the UK. Shell UK once a fairly large and independent operating arm of Shell was by the year 2000 neutered, moving out of its offices at Shell-Mex House and losing its independence and focus. Regional offices, such as the one I worked from in Glasgow back in 1984, had long since closed. Although there was a figure-head Country Chairman he had little or no line authority and the sort of bias for action that we saw back in 1984 was entirely absent. There was nobody to pick up the ball and run with it.

(This is an extract from Paddy Briggs’s book “The Changing face of Shell” to be published in 2008)

Shell in Pakistan

Shell in Pakistan

When multinational corporations embrace a commitment to Human Rights the test is not (only) the immediate check as to whether such a commitment gels with their history and their current behaviour but also how they respond when the circumstances change in one of their areas of operation. So as the eyes of the world are on Pakistan at the moment and we are all asking whether the livelihoods and security of the millions of innocent citizens in that benighted country have been better protected by General Musharraf’s “second coup” it is also reasonable to look at the response of the many multinationals operating there particularly those, like Shell, which have boasted a commitment to Human Rights.

The imposition of virtual martial law in Pakistan has been condemned by the respected “Human Rights Commission of Pakistan” as well as by opposition parties, lawyers and other Human Rights groups in the country and abroad. So in the circumstances what do corporations, like Shell, say or do? Clearly an over precipitate reaction would help nobody but if, as is likely, the restrictions on opposition and the suspension of legal restraints on Musharraf’s Junta continue, and all democratic processes are suspended, can a company which has so openly embraced Human Rights credibly remain silent?

Words are cheap and of no value unless they stand for more than just self-promoting hype. Shell Pakistan is a significant player in that country’s energy sector and has declared that it has “Business Principles” which are to: “… conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business, and to give proper regard to health, safety, security and the environment”. So what will Shell Pakistan do or say now that “fundamental human rights” have been suspended? If it is argued that for commercial reasons they should do nothing then one must question what the point of the Human Rights commitment was in the first place. There is no obligation on Shell in Pakistan, or anywhere else, to make a Human Rights commitment. But if they have chosen to do so it is reasonable to ask what this really means when political circumstances change so radically that individuals’ freedoms are threatened – as is presently clearly the case in Pakistan.

Will Shell condemn the suspension of Human Rights in Pakistan referring to their published commitment of support for the principle such rights and to the company’s general support for the UN’s “Universal Declaration of Human Rights”? Don’t hold your breath!

Response to article on Brand Channel re gasoline brands

Response to article on Brand Channel. See:

http://www.brandchannel.com:80/start1.asp?fa_id=388



The substantive point about gasoline brands is that marketing is only an incidental activity for oil companies – nearly all of their efforts are on the “upstream” (the search for and exploitation of oil and gas reserves). As a 37 years service Shell veteran, now retired and active as a brand consultant, I can assure you that the chapter on marketing in the average oil executive’s memoirs would be one blank page. This is not to say that there aren’t competent marketers in the oil companies – just that they linger low in the hierarchies and that they have no prospects of reaching the top if marketing is “all” they can do. When the boards of Shell or BP or ExxonMobil and the rest meet the agenda items are rarely if ever about customers, brands, channels of distribution, market share, communications and the other imperatives that drive the business in proper branded marketing companies. The discussions are about exploration, production, refining and all the other key business activities – the so-called “upstream”.

The irony of the almost complete ignorance of oil company top executives about branded marketing is that these companies are amongst the world’s biggest branded retailers. Shell ahs more than 40,000 Shell braded gas stations in over 100 countries, but in a recent extensive interview for the London Guardian newspaper Shell CEO Jeroen van der Veer didn’t even mention Shell’s marketing business once - see: http://tinyurl.com/ytxhjf . Everything in an oil major is top down and that top is so far removed from its consumer customers (motorists for example) that they probably wouldn’t recognise one if they saw one. This leads to minuscule and wholly inadequate amounts of money being allocated to advertising and other brand promotion initiatives. The culture of the men at the top is essentially a cost minimisation culture. When you drill for oil you can secure a completive advantage by doing it more efficiently (cheaply) than your competitors. As any marketer knows this is a mindset which leads for disaster in marketing. It is 35 years since the late Stephen King’s seminal “What is a brand” (recently reprinted by JWT here in the UK and circulated with Campaign magazine) which showed (even proved) that brands which invest consistently over time prosper and those that do not fail. That is a lesson that the oil industry has forgotten.

I believe that the only way that oil companies can properly exploit their brand potential is to separate completely their “upstream” from their marketing business. And I mean completely – not just some fudged separation within the same corporate structure. Only when the main preoccupation of the top management of Shell or BP is with the brand and with the customer will we start to see proper and focused branded marketing in this important sector. Please see my article in “Market Leader” magazine for the development of this argument: http://tinyurl.com/3dau4e .

Business and Human Rights

The myth of Corporations’ commitments to Human Rights

“Shell supports the Universal Declaration of Human Rights and believes that business, as an integral part of society, can make an important contribution to furthering these rights”. Shell statement


“Business doesn't have to choose between profits and principles, Royal Dutch/Shell Group Managing Director Jeroen van der Veer told the Globalisation, Ecology and Economy conference in the Netherlands today.”

“We have to be particularly attentive to our contribution to local economic and social development and to human rights issues.” Christophe de Margerie, Chief Executive Officer: Total

The focus of the attention underway at present on the grotesque abuses of Human Rights in Burma has rightly drawn attention to the part that the Oil company Total plays in shoring up the appalling regime in that benighted country. Total is heavily involved in Burma – especially in a major pipeline project – and you need to be terminally naïve to think that such investment does not give support and comfort to the Burmese dictators. That a multinational oil company thinks that it is acceptable to be active in Burma is deplorable – even more so when you see the self-promoting statements saying that they are “attentive to human rights” as in the recent remarks of the company’s CEO.

If the dark arts of Public Relations are to have any moral underpinning then the contradictions between rhetoric and actions, such as those of Total have to be avoided. There is frankly no point in having your PR Department issue “commitments”, on the one hand, whilst your business managers go their own sweet way in ignoring these so-called assurances on the other. My experience in Shell, and I have little doubt that most oil multinationals are just the same, is that commitments to human rights are not worth anything at all. I could choose many examples to illustrate this assertion (Nigeria the most obvious) and which suggest that when push comes to shove the choice will nearly always be Profit rather than Principles – whatever Mr van der Veer and others might like to say. To be fair it is true that Shell has moved away from involvement in Chad, Cameroon, Peru and elsewhere partly because of concerns about the reputational damage which could have resulted. But these withdrawals are the exception rather than the rule. Back in 1991 EIRIS (Ethical Investment Research Service) stated that Shell was operating in 24 Countries where extra-judicial executions or disappearances had been reported, 44 countries where torture has been reported, 36 Countries where 'official violence against citizens' was reported, and 26 countries which were holding prisoners of conscience. Shell continues to operate in most of these countries today. To illustrate the dichotomy between rhetoric and behaviour let me choose two examples of which I have personal experience.

China

Back in the late 1980s I was working in Hong Kong and, increasingly, in China – and part of my job was to try and boost Shell’s brand and to advise on the avoidance of damage to Shell’s reputation. China was beginning to open up to the West and Shell was hungry for a piece of the action. Some of us in Shell felt that China’s pursuit of economic change would be accompanied by a change to the repression that had characterised the country for forty years or more – that the people would be given greater personal freedoms as well as greater wealth (we were wrong, of course). Others simply pursued the money and developed investment and other plans to be part of China’s economic progress. Amongst these was the Chief Executive of the Shell Companies in China and Hong Kong whose mantra was “China is very big” and who was determined to give Shell every chance to succeed - not for him any uncomfortable concerns about human rights! In the spring of 1989 the emerging democracy movement in China was brutally cut down when the tanks entered Tiananmen Square and it seemed for a moment that or Chief Executive’s dreams were likely to be shattered. He went into a sort of denial mode saying that as soon as things calmed down all would be normal again. Within a few months Shell was back at the negotiating table with Chinese officials as if nothing had happened in Beijing in April at all.

In August 1989, in an attempt to suggest that there were likely to be some squally waters ahead for Shell unless we acted with greater care and sensitivity, I wrote a mock newspaper article entitled “Do Tanks go well on Shell”. Here is the text of this mock article:

Do Tanks run well on Shell?

On Friday it emerged that Shell, the Anglo/Dutch multinational that is now the world’s largest energy company, is to invest over one billion US Dollars in a Refinery and Petrochemical complex in Southern China. Although officially only a commitment to a “Feasibility Study” at this stage, informed sources within the industry say that Shell is unlikely to proceed to this study unless they are fairly certain of a positive outcome. Observers of China say that such an outcome can be virtually guaranteed given the PRC Government’s wish to demonstrate to the world that the confidence of western business is returning following the political disruption in China earlier this year.

The Shell Group has had its share of controversy in recent years, not least because of its continued presence in South Africa. Shell’s role in sanction busting in Rhodesia is alos not forgotten. Those with longer memories will recall the questionable role played by Henry Deterding (One of Shell’s founding fathers) at the time of the Nazi military build up in the 1930s. Despite this rather ignoble history the announcement of the Refinery plan comes as a surprise. The plan would be the largest foreign investment by far in China. For it to be announced (however much that announcement is covered in caveats) in 1989 seems insensitivity on a grand scale. Shell may believe (as one of their Hong Kong directors said) that “Business is separate from politics”, it is doubtful whether many of the people of Honk Kong would agree. Firstly the announcement of an investment of this size gives a signal to China that no matter what they do to their own citizens the international business world will turn a blind eye. Secondly the investment is unquestionably strategic in nature. By building facilities that will produce a full range of oil and chemical products Shell will play its part in ensuing that the People’s Liberation Army in the South of China does not fall short of the essential products it needs. (The refinery will also produce a wide range of materials that can be used in Chemical warfare, including Naphtha used with such devastating effect by US forces in Vietnam).

For Shell morality and business have always been uneasy bedfellows. Once again it seems that you can be “Sure that Shell” will pursue what it seems to be its commercial objectives and be deaf to public opinion”

This mock article was circulated only to the twelve members of our Hong Kong and China management team and was meant to stimulate thought. In fact a storm broke out and or CEO instructed me personally to get back every copy and to destroy them! It had struck too exposed and vulnerable a nerve and in the CEO’s view even to discuss the possibility that Shell might be criticised for being back in China in a big way just months after the Tiananmen Square massacre was unacceptable. The rest is history. Shell did pursue the project and although it changed radically in format, took far longer than was planned and cost far more construction was completed and commercial operations stared last year. The “CSPCL Nanhai” complex at Daya Bay is, according to Shell, the largest single investment ever made by the Shell Group in the petrochemicals sector.

The point about this story is that although back in 1989 Shell did not have any open commitment to Human Rights it did institute such a promise in the 1990s and declare it openly. But notwithstanding this commitment the project went ahead in a country which has been accused of continued human rights abuses on a huge scale. My perhaps mischievous attempt to make us think about what we were doing way back in 1989 had little effect (other than to brand me as a trouble-maker in the eyes of some!). So you can imagine my scepticism when all the human rights commitment hype started to emerge from Shell Centre in the 1990s!


Saudi Arabia

In March 1997 Shell issued a “Statement of General Business Principles” (SGBP) to the world which included the following statement “…to express support for fundamental human rights in line with the legitimate role of business.” The launch of the SGBP was a much hyped event and the responsibility of those working in operating companies around the world was to promulgate them in the public domain. I was working in the Middle East at the time and part of my role was to communicate with “stakeholders” about Shell and try and enhance our reputation. I discussed ways to promote the SGBP with my management colleagues - including the production of local language (mostly Arabic) versions. I was a little way into my task when I received a phone call from the head of Shell’s businesses in Saudi Arabia instructing me not to promulgate Shell’s commitment to Human Rights in that country for fear of upsetting the rulers of this seriously human rights abusing state. “What should we say them?” I asked “That Shell supports human rights – except where it doesn’t because if we did our business prospects might be damaged?” Once again, as you might imagine, I got into a bit of trouble and the SGBP were never circulated at all in Saudi Arabia and a number of other counties where it might have damaged our business. Hypocrisy – of course! Profits before Principles – likewise!

© Paddy Briggs
September 2007

Royal Dutch Shell AGM 15th May 2007

Royal Dutch Shell AGM 15th May 2007

In the good old days small shareholders of Shell Transport and Trading, the British arm of the Shell Group, could pop along once a year to see our Board of Directors and see the colour of their eyes as they answered our questions. We knew that they were a bit of a dodgy lot – well trained in the arts of obfuscation and the giving of elegant sounding but unrevealing answers to all our questions. Twinkly old Mark Moody-Stuart would wiggle his eyebrows in astonishment when anyone suggested impropriety and Phil Watts would glower down at us contemptuously as if we were all particularly inattentive students at his bible class. We suspected that deep down they were really, all of them, only just on the right side (or the wrong side in Watts case) of being mendacious bastards – but at least they were our bastards!

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

But let’s deal with the professional protesters first both in London and The Hague. By far the most moving were the folk from County Mayo in Ireland who are very vocal opponents of the Corrib Natural gas project. One speaker, Willie Corduff (pictured) , was an obviously totally sincere critic of Shell who in a softly spoken voice told us about the loss of his farm and his livelihood as a result of Shell’s project plans. He had gone to jail for 90 days in June 2005 for protesting against Shell but although he was aggrieved, and seemed to have every right to be, he was remarkably unbitter – as well as eloquent. Other speakers on Corrib were a bit more strident and this whole session reminded me so much of the Brent Spar debate of the mid 1990s. Shell’s defence was to apologise for the errors of failed consultation that had occurred early in the project planning stage but to claim that most of the local community was now behind the scheme and that Ireland as a whole would benefit from it. I know little about the details of the Corrib project but (as with Brent Spar) Shell seems to have the technical highground but has lost the hearts and minds of people they need to have on their side. The solution is clear. They must be prepared to invest more capital in the project to ensure that the concerns of all the local people like Willie Corduff are addressed. It’s as simple as that. Every effort must be made to make the design of the terminal and the pipeline acceptable – and if that costs more money then so be it. The final solution for Brent Spar cost far, far more than what would have been the cost had Shell been able to do what they originally wanted to do. If they want to get Corrib on stream then they must make it a model project in environmental, safety and local community terms – and above all see that it is perceived to be this by all. Even if their technical boffins say a particular refinement is not really necessary then they must still do it if that is what the locals want. The people of Rossport deserve no less. Getting senior Shell executives to spend money when they don’t really think that it is necessary is not the easiest of tasks – but that is what must happen if the project is to go ahead – the protesters made it clear that they will fight Shell all the way if some major compromises on the project scope are not made. We shall see if Malcolm Brinded was listening and got the message.

Nigeria

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.

Sakhalin
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!

Remuneration
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

Article from "Market Leader" Autumn 2006

Managing brands in the oil industry - the case for demerger
(Unedited version)

Reproduced with permission of Market Leader, the strategic marketing journal for business leaders. To subscribe visit www.warc.com/bookstore © Copyright WARC and The Marketing Society.”

The recent call by the respected financial advisor JP Morgan Cazenove for oil giant BP to split itself into two separate corporations, upstream (exploration and production) and downstream (marketing), will have struck a chord with many marketers in the international oil industry, as well as with the financial sector. In this article ex Shell Brand executive Paddy Briggs explains some of the background to the issue and outlines what the marketing and especially brand advantages of such split for BP, Shell and the other oil majors would be.

Marketing drives production…

Experienced marketers know that there are often tensions in companies between those in the factories who produce, and those in the marketplace who sell. But in the best customer-driven companies these tensions are usually resolved by managers making a judgement about what is in the best long-term interest of the brand, and therefore of the consumer. All of the world's great brands do, of course, have to source or produce their products and services - but the manufacturing process is always subservient to the market and must always deliver products that the consumer wants to buy at a price that they can afford. The world's great brands have reached their prominence by having a customer obsessive mindset throughout their organisations - and especially at the top.

…but not in the oil industry.

Consider, for a moment, an oil industry multinational such as BP or Shell. The success of these energy companies over the past seventy-five years has been primarily built on their technological competence and innovations in the "upstream" and on their willingness to invest heavily in the search for new hydrocarbon assets. This imperative undoubtedly still drives the business today - it is the main source of the companies' profit streams and it is where, by far, the largest proportion of the companies' investments are made. Unsurprisingly most of the members of the senior management teams of these corporations have been chosen from amongst their successful practitioners in the upstream.

But most multinational oil companies are also world-scale branded marketing businesses - they are, then, a curious amalgam of a global, branded consumer business (on the one hand) and a high technology raw material extraction, production and processing business (on the other) - and there is only the very loosest connection (and no interdependency) between these two segments. Shell or BP’s consumer business (most visibly their petrol station networks) is not in any way dependent on their production business for its products, which can be (and are) obtained from any available supply source. Whilst there may be “value added” along the supply chain from production to consumption this is incidental – there is no need to have a vertically integrated structure in order to realise that value - each segment is independent.

The call to split up BP.

Cazenove's suggestion that BP be split into two quite separate businesses and corporations will have probably been welcomed by BP's marketers - for in all oil Majors managers in the “downstream" struggle daily with the reality that marketing is the poor relation of exploration and production. The consumer end of the business is always subordinate to the upstream search for, and production of, Crude Oil and Gas. Consumer-driven marketing and production-driven geology, engineering and technology are quite different disciplines - and there is little evidence that those with talents for the latter field can also be competent in the former. But whilst the upstream is their main focus of attention, and their main source of profitability, companies like BP, Shell and ExxonMobil also have substantial marketing assets, strong marketing brands and millions of customers. Shell is the world’s leading branded retailer (in any product category) with around 45,000 petrol stations in around 100 countries (compare this with McDonalds 30,000 restaurants). But in my experience matters related to this huge business occupied little of the time of the company's senior management and were rarely agenda items at board meetings.

Successful marketing requires focus on a single skill.

Historically the big players in the oil industry created vertically integrated businesses with marketing, as the final link in the chain. In the past marketing was a core competence to such an extent that many of the most memorable advertising campaigns in both the inter-war year and the post war decades were from the oil industry. Mention "You can be sure of Shell" or "Esso Blue" to a British baby-boomer and he or she will sing you the jingles that went with the campaigns. In the years before the first oil crisis of 1973 we were all "going well with Shell" and believed that the "Esso sign meant happy motoring". In Britain one of the reasons for this marketing success was the existence of a company, now long forgotten, called "Shell-Mex and BP Ltd." - a joint venture between Shell and BP to market products under these two brand names in the British Isles which was, for a time, one of Britain’s largest companies. Shell-Mex and BP was "only" a marketing company and it did not even run refineries. The company’s products came mostly from its parent companies which then substantially left it alone to build its business. Because it was exclusively a “single skill” marketing business Shell-Mex and BP’s board of directors, and all of its managers and employees, concentrated principally on brand management and on the customer. It was also a very innovative company creating the concept of self-service at petrol stations and the domestic central heating market amongst many other customer-led products and services.

Yielding lost value

The likelihood that dedicated marketing companies would more successfully manage consumer brands in the oil industry was no doubt part of Cazenove's thinking in their suggestion for an upstream/downstream split for BP. Cazenove has suggested that such a demerger could "yield £35bn of lost value to shareholders" - an astonishing sum but no doubt they have done the math. Certainly the downstream businesses of the Oil Majors are huge concerns with assets, revenues and an international scope that would make them world class businesses on their own. The most compelling reason for a demerger is, however, not just that the resultant downstream businesses would be substantial but that the management of them would be 100% focused on the brand and on the customer. Take the most visible asset that a BP or a Shell has - their worldwide networks of petrol stations. In some markets tentative steps have been taken in recent years to use these assets to market a wider range of goods and services (notably convenience stores). Imagine how much extra impetus would be given if this retailing, rather than being seen primarily as the thing that you do at the end of the integrated oil chain, was the primary focus of the business.

Extracting maximum brand value

The brand implications of a upstream/downstream split for Shell or BP would have to be carefully considered but coincidentally each of these corporations has an obvious strategic brand solution readily available.

For Shell the Shell brand and logo and visual identity system could be allocated to the new downstream marketing business. The existing petrol station networks and product brands would pass to the new corporation as its most valuable tangible and intangible assets. The upstream business could be re-branded "Royal Dutch" - the traditional name of the Dutch part of the Shell Group and a name that is already familiar. (At this year's first Annual General Meeting of "Royal Dutch Shell plc" the "Royal Dutch" part of the corporate name was very prominent - along with its "crown" symbol. A ready-made corporate brand for the new upstream company is already substantially in place.)

For BP there is also an attractive and fairly easy to implement solution to the brand issue in the event of a split. The BP name and logo could be allocated to the upstream company and the downstream business could be re-branded "Castrol" - exploiting the high brand value and excellent reputation of this famous lubricant brand which is now part of the BP family. There is no reason why the Castrol name could not be "extended" also to brand petrol stations and other marketing assets and products.

In both companies the refineries would remain separate from the marketing business and could form a third independent business. As we have seen there is no need for oil marketing companies, however large, to also own and operate production facilities.

Reputation management

Another advantage of a split as suggested is that virtually all of the reputation damage that oil companies have received in recent years has come from their upstream not from their downstream activities - but damage any part of an integrated oil company and you potentially also harm the consumer brand. The petrol station is the most visible manifestation of an oil company and can become the focal point for protesters. Demerge the consumer brand from the upstream business and not only to you remove the risk of this type of brand damage you also put all of your reputation management and communication efforts for that branded downstream business into areas that are close to the consumer. For example the oil companies’ failures to communicate the rationale for petrol price increases over the years have been directly attributable to their lack of internal focus on developing effective communications with the consumer stakeholder.

More than twenty years ago Tom Peters[1] wrote “The most successful [companies] of all are those diversified around a single skill”. If ever a business need to concentrate on the “single skill” of marketing to maximise its business potential it is the oil industry – with the added benefit, of course, that the explorers and the drillers and the refiners could also focus 100% on what they do best. Shell (or rather "Royal Dutch") might even improve its oil reserves, as well as maximising the potential of its brand, if it took the step to demerge!

---

[1] “In Search of Excellence” , Peters and Waterman, Harper Row, 1982

Article in Media Week

Why there’s a role for agencies to play in helping clients manage CSR

In a world where corporate social responsibility plays an important role in decision-making, former Shell brand manager Paddy Briggs says the media industry must embrace the “climate of concern” to succeed.

A remarkable and welcome shift in the positioning of advertising professionals is beginning as they move away from the traditional stance that the advertising world has taken.
Your feature (Doing the right thing, page 30, 7 June) on the changing climate for advertising in a world increasingly concerned with social and moral issues, was timely. This position is still summarised in the International Advertising Association's (IAA's) stated role that it will "champion the freedom to advertise responsibly without unwarranted restrictions".
The problem with this pose was often that what was "responsible" was determined by the client, egged on by their agency if high billings were promised, rather than from any more socially concerned perspective. If the communications were "legal" – by far the acid test – and if they could, if necessary, be somehow defended as "decent, honest and truthful", then that was enough.

It was, of course, the tobacco industry, a major provider of funds to the IAA, that was behind the IAA's "free to advertise products which are legal" principle.

Unwavering support

It's no secret that some advertising agencies, unwaveringly supported by the IAA, have conspired with tobacco clients for decades to find ways of continuing to promote cigarette brands, even though media channels are increasingly blocked to them.
If you doubt that they continue to do this, even in a world where corporate social responsibility (CSR) plays an important part in business decision-making, just watch a Formula One Grand Prix.

At Media Week’s Media 360 conference in April, all of us on the "From Social Problem to Your Problem" panel – and many in the audience – argued that communications agencies should have a role to play far further "upstream" of a potential problem or issue than is currently the case.
What if, instead of being presented with an issue that is causing reputational damage to a client or a sector and then being briefed to help minimise the damage, for example by producing information style advertising, the agency had actually helped identify the potential problem in the first place?

In my more than 10 years with different Shell companies around the world, as a client of a wide range of communications agencies of all types, I rarely met any employees of these agencies who were anything less than smart and articulate. I say this neither to ingratiate myself with these agencies in my post-Shell life as a brand consultant, nor to repay any debts, but to suggest to the communications world – and especially to their clients – that in these agencies there is an underutilised well of talent to be exploited. Too often, the role of an advertising agency or a design house or a media buyer is seen far too narrowly as "merely" a provider of these professional services. While agency and client may sometimes comfort one another with talk of "strategic marketing" and work together on the production of cerebral "communications plans", all too often these plans are heavy on the communications components and woefully weak on the real business strategy of the client.

That communications planning, often de-coupled from a client's business plan, is regrettable in many areas, but particularly so when a client is in or approaching the squally rapids of reputation risk.All too often, an "issue" emerges and a media world hungry for stories will run with it. Yet we find that the client or the industry group is totally unprepared and incapable of responding quickly or coherently to the challenge. When, 10 years ago, Shell was in the headlines daily because of its plan to dump a redundant oil platform, Brent Spar, in the ocean, we were wholly ill-equipped to handle the furore this plan had stirred up.

Reputational risk

While it is true that Shell was culpable in not seeing the reputational risk of the Brent Spar disposal plan – and this was to lead to much soul searching – it is also true that Shell's raft of communications agencies were nowhere in the loop.
When the various elements of communications – corporate advertising, PR, direct marketing, etc – were eventually deployed, it was in a firefighting exercise to improve Shell's damaged reputation among key stakeholder groups. But what if instead of problem solvers, the various communications agencies had been sufficiently immersed in Shell's business that they had actually helped anticipate the problem before it happened?
Most communications professionals I have worked with over the years have told me that it is essential that an agency fully understands a client's business before they start to prepare creative, or a media plan, or a DM programme. But how many of these professionals have really taken this to its logical conclusion and demanded that the client more thoroughly brief them on the client's business – including a briefing on what I call the business "stress points"?
A business "stress point" is defined as a social, environmental, economic, commercial, legislative or other trend that can potentially impinge upon the client's business.
The key word here is "trend", because it suggests that most changes do not come out of the blue but that they can be anticipated – if the necessary processes are in place to do this.
Brent Spar, seen in isolation, was about the right way to dispose of a big lump of metal. In fact, what it was about was the boundaries of CSR which were not, in this case, determined by the law or by technology, but by public perceptions.
Shell's plans were perfectly legal and most experts said that the proposed solution was technically the best. But in the public's mind, the proposal was environmental vandalism– therefore it was. "Perceptions are reality because people believe them to be true".
The current issue of child obesity is another case that illustrates the need for an agency to be directly involved in the issue identification process at the beginning. Children have not all of a sudden become fat – what has happened is that childhood obesity has suddenly emerged as an issue and fast-food firms, among others, have conveniently been the media's Aunt Sally.
The industry has responded to the challenge and advertising, etc, has played a part in promoting, for example, the new healthier eating options at the fast-food outlets. But this all seems very reactive with the businesses and their marketing agencies only acting because of the threat to their reputations as good citizens.

I would argue that this is an issue which could have been, and should have been, anticipated well in advance and that communications agencies could have played an important role in helping clients identify the social trends that were possibly going to lead to child obesity being an issue.
This would have required the role of the agencies to be redefined in such a way that they not only produced professional communications plans, but that they contributed to (or even facilitated) client sessions which worked on analysing business risks.
The possibility of child obesity emerging as an issue was surely identifiable many years ago and an agency could not only have helped a client identify this business "stress point", but help them develop a business and communications plan to minimise the risk. In this case, in fact, an early realisation of the potential problem could have been turned into a business opportunity. To be the first food provider to offer and promote the "healthy eating" option could have led to a potential profit stream, as well as being promotable as socially responsible and thereby enhancing the brand's reputation.

Clearly, a move to a world in which clients accept that there is merit in having their communications agencies role much less narrowly defined, and to accept them as being much more involved in their business, needs the agencies themselves to demonstrate that they can genuinely add value. This requires the agencies to develop and promote competencies in such areas as CSR and to inculcate these competencies into all of their processes. It also requires that client/agency partnerships are much more open and enduring than is sometimes the case.
However, there is no reason why the very large and multinational communications conglomerates, in particular, should not see part of their role as being to provide challenges to their clients in such a way that future social, and other, changes which could be potential business risks, and/or opportunities, are anticipated much earlier. This should lead to fewer surprises and genuine opportunities for companies and brands to differentiate themselves from their competitors.

Finally, it is also self-evidently essential that the IAA, and some others in the communications world, move away from their out-of-date and facile positioning that they will "fight for consumers' freedom to exercise their right to choose". This was always over simplistic, and shamelessly and self-interestedly protecting their income streams and it brought the industry into disrepute. In the future, the prizes will go not just to the brands and the agencies which communicate most creatively or cost effectively, but also to those that understand the "climate of concern" within which business is now conducted – and to those who spot a social trend before it potentially overwhelms them.

Paddy Briggs is managing partner at consultancy BrandAware. He previously worked for Shell for 37 years, including 15 in brand management

Article in "Market Leader"

The story of Shell- how a great brand fell from grace
(Unedited version)

Reproduced with permission of Market Leader, the strategic marketing journal for business leaders. To subscribe visit www.warc.com/bookstore © Copyright WARC and The Marketing Society.”

In his seminal book on brand and design “Corporate Identity” (published in 1989) Wally Olins describes three different forms of corporate structure:; the “endorsed”, in which the corporation has a group of activities and companies which it endorses with the group name and identity (e.g. General Motors) ; the “branded” where a company operates through a series of brands which may be unrelated to each other or to the corporation (e.g. Unilever) and the “monolithic”, in which a corporation uses one name and visual identity throughout . For his example of a “monolithic” structure Olins chose Shell. “More than 90 percent of Shell’s business throughout the world bears the Shell name” he wrote, “…the reputation of Shell is symbolised to a quite extraordinary extent by its name and visual imagery”. Research around this time showed not only that Shell was highly respected but also that the Shell logo was the most recognised commercial symbol in the world. Shell was the brand leader in the oil industry and also, by some measures, the largest business of all types in the world in the Fortune 500 lists. Heady days indeed! Where did it all go wrong?

In the late 1980s I was working for Shell in Hong Kong, and increasingly in China, where we were making every effort to maximise the benefits of the unique strength of the Shell identity that Wally Olins had so accurately described. By striving to offer the highest levels of customer satisfaction in all of our many consumer businesses we were also consciously trying to ensure that the corporate reputation of Shell was enhanced and valued. When senior Shell executives visited the Territory for discussions on a multitude of large scale China investment projects their task was hugely aided by the fact that the Shell brand was already known and respected in Hong Kong. Around the world there were well over one hundred similar country-based Shell companies pursuing a similar strategy.

The norm in the oil industry is vertical integration - an oil company manages the full hydrocarbon stream from exploration for oil all the way to the point when petrol is put in the tank of a customer’s car. Until fairly recently this operation was generally conducted under one brand name and this has always been the case for Shell. In recent years mega-mergers in the sector have clouded the issue somewhat and some of the companies have created, often temporarily, a more multi-branded structure. BP dropped the “Amoco” from their corporate name as soon as they could (although they have kept the brand equity rich “Castrol” name) and Total equally swiftly discarded the “FinaElf” from their title. As well as the obvious external benefits of having a single name there are internal benefits as well. As Olins described it “A single name [“Shell”] and visual identity became significant as a rallying point for staff…employees…could identify with the whole enterprise”.

Given the huge commercial benefits that can accrue from having a brand name (and visual identity system) as familiar as Shell’s you would think that this value would be fully understood throughout the company and that the organisation structure would be designed to maximise brand value for the benefit of all of its diverse businesses. It would also be reasonable to assume that all of the most important actions of the company and its key employees would be at least in part driven by an ambition further to enhance brand equity and to protect corporate reputation. I was soon to discover that in Shell this was not necessarily the case. Looking back fourteen years from today, Shell’s then position looks like a golden era and it is true that few of us at the time thought that the pride that we had in our then strength presaged a calamitous fall.

In 1990 I was called back from Hong Kong to head up a project, “Retail Visual Identity” (RVI), to redesign Shell’s global petrol station network. From the start I assumed that the RVI project, if we were successful, would contribute far more than “just” the enhancement of Shell’s competitive position in the Retail sector. Shell’s petrol stations were the most public face of Shell. We were present in this sector in 120 countries world-wide and we had more than 45,000 outlets. We were not just the biggest petrol retailer but the biggest branded retailer in any sector (McDonald’s, at the time, had around 15,000 restaurants). Extensive consumer research had shown that the Shell brand had extraordinary strength and that we had an enviable reputational advantage - but it also indicated that some consumers felt our visual identity was beginning to look a bit tired.

By the autumn of 1990 a number of things about RVI were beginning to become clear. The average cost of re-imaging a petrol station was assessed at around $30,000 which meant that the overall cost of the project was well over a billion dollars. It was also clear to the project team from looking at what Shell’s competitors, particularly BP, had achieved that it would be necessary to complete the exercise as quickly as possible – within three years at the outside. The senior Shell executive responsible for seeking approval for this funding was David Varney[1] – the head of the global marketing Division within which I worked. Varney’s presentation to Shell’s Committee of Managing Directors (CMD) was masterly. Eschewing any return on investment calculations (which would have been largely fictitious anyway) he told the Managing Directors that Shell had to re-image its networks because we lagged behind the competition and that, whilst we would do all we could to minimise costs, there was really no alternative but to proceed. It was a typically robust message from Varney and one that a perhaps slightly bewildered CMD accepted.

The sense of elation that we had that we were rolling was soon to be tempered however. It became rapidly clear that the project was seen only as a marketing project. In other words that RVI was narrowly seen as being about the repositioning of the “brand” in Retail - it was not seen as being part of a more complete plan to enhance Shell’s corporate “reputation”. This seemed to many of us a non sequitur – Wally Olins had shown that for monolithic brands there could be no distinction made between the brand in the market place and the overall reputation of the company. By ensuring that Shell’s 45,000 petrol stations gave a far higher level of customer satisfaction we thought that we would make a major contribution to the enhancement of the overall reputation of the Group.

For Shell’s top management the RVI project was just about the re-imaging of our petrol station networks. The crucial consequence of this doubtful logic was that Shell companies (“Operating Companies”) around the world would be expected not only to fund the implementation of RVI themselves but to do so narrowly out of their Retail budget and earnings. So RVI, rather than being a project with momentum and with a strong central commitment and funding, became vulnerable to the vicissitudes of local company priorities. The imperative to effect the changes within three years disappeared and for many years most parts of the world had networks combining sparkling new RVI sites with outdated and in many case poorly maintained sites for which the re-imaging funds could not be found. In effect around the world there were two Shells – and at the top in the Group there was little or no interest in addressing this problem.

That Shell operates at times in a sort of parallel universe where the normal logic of businesses in the real world is suspended, and singularly Shell behaviour patterns emerge, became increasingly apparent to me at this time. The long drawn out and inconsistent implementation of RVI showed that, whilst any branded retailer (including those in the petroleum sector like BP) would see that there was an urgent need to implement a new brand identity as quickly as possible in Shell there was no such imperative. Similarly whilst any global brand would want to drive implementation of a repositioning exercise centrally, Shell was happy to leave the exercise to local decision making. And finally whilst a brand repositioning exercise of this type is a vital and significant strategic marketing project ,and a reputation building corporate identity project as well, demanding central funding and a firm bias for action Shell was prepared to let it drift and was unwilling to allocate any central funds. A strategic project, driven by the sort of “must do” logic so eloquently articulated by David Varney, cannot flourish in a world where ever more demanding performance indictors are put in place and which requires ever shorter returns from any investment.

Through most of its history Shell had been an immensely self-confident brand. This confidence had huge benefits in that, for example, when a new marketing opportunity occurred (e.g. a market entry) there was an expectation that by transferring experience from similar existing operations a successful presence could be built. And the self-confidence also led to a patient acceptance that to establish a profitable business in a new market would take time. In the 1990s this self-confidence began to be eroded and there was a growing reluctance to take risks. This corporate nervousness also led to a period of introspection and to the almost daily search for external gurus to advise on problems - real or imaginary. A bias for the over quantification of every problem crept into the culture leading to over elaborate studies, delayed decisions and missed opportunities.

Those of us working in brand management viewed these trends with alarm. We knew the truth of Lord Leverhulme’s remark “I know half my advertising is wasted, but I don’t know which half!" And we also knew that strong brands stay strong because there is an understanding that they need continuous investment. Whilst any brand manager will strive not to waste any of his communications budget he also knows that advertising is more an art than a science. With the obsessive bias for quantification in Shell, and the ever shorter term measurement periods, advertising budgets were vulnerable and duly attacked. We also viewed with concern the absolute failure of the organisation to recognise that brand investment (RVI, advertising etc.) enhanced Shell’s corporate reputation if it was done well. Historically the tag line “You can be sure of Shell”, whilst mainly associated with products and services, also created a reference frame within which all of Shell’s diverse business was carried out. In this period of the mid 1990s there was a complete unwillingness to recognise this reality – above all to see that brand and reputation are two sides of the same coin – even that they are synonymous. There was no organisational recognition that the management of reputation, and the soon to become a necessity to develop a Corporate Social Responsibility (CSR) policy, were inherent parts of brand management.

It was in 1995 that two events brought the whole reputation management issue into sharp relief in Shell. The extensive protests against Shell’s plans to dump a redundant Oil Platform “Brent Spar” in the North Atlantic caused much heart-searching and eventually led to the abandonment of the plans. In Nigeria around the same time that the political activist Ken Saro-Wiwa implicated Shell during his “treason” trial by saying “…the ecological war that [Shell] has waged … will be called to question sooner than later and the …crime of the Company's dirty wars against the Ogoni people will also be punished.” When Saro-Wiwa was executed on trumped-up charges some of the world-wide condemnation of the act was aimed at Shell who by association was implicated.

In 1995/6 Shell suddenly burst into a frenzy of activity designed to restore the perceived damage to its reputation resulting from Brent Spar and Nigeria. A raft of processes and initiatives was launched which was designed to find out the views of key “stakeholders” about Shell - and programmes were subsequently initiated to communicate a CSR message. This activity was undertaken by a team which was organisationally completely separate from those responsible for the management of the Shell brand. There was no integration of the CSR (etc.) work with Marketing and no understanding that this was necessary. Crucially the CSR team were almost all professional “buy-ins”. They were skilled practitioners in subjects like Sustainable Development and CSR – but few of them had any practical experience of the Energy industry and they were almost all new to Shell. They worked in London, remote from Shell’s local operations around the world, and few of them made any visits to local Shell companies. There was a complete disconnect between the management of the brand and the management of reputation. Throughout the Group quite different people were involved in the marketing communications activity, which promoted brands, and the new corporate identity initiatives, which were designed to enhance Shell’s reputation. The marketing communications budgets were severely cut whilst the comparatively well-funded “corporate” advertising and other “reputation” initiatives grew in significance - but with few links being made to the brand communications work.

Running in parallel with these changes in respect of the presentation of the external face of Shell, internally there was an emphasis throughout the organisation on behavioural change. The argot of “Old Shell” and “New Shell” was commonly used to describe what was supposed to be a step change in behaviour. Some of this was a change in process and in particular in decision making (greater centralisation was the main consequence) but most of the changes centred on a drive for greater efficiencies and lower costs. The old Shell structure was torn apart and the new “businesses” that were created cut across the old lines of geographic control and the country and its “operating company” became wholly subordinate to these vertically structured global businesses. The cost control imperative led not only to the decimation of brand communications budgets but also to swingeing reductions in levels of marketing staff in Operating Companies and to a greater regionalisation or centralisation of decision making. We were getting further and further away from our customers and no longer “thinking globally and acting locally” - the corporate behaviour that had historically created Shell’s global brand strength.

Whilst all of these developments were damaging to the long term health of the Shell brand, and the failure to institute a proper dialogue between marketers and those managing the reputation enhancement initiatives was counter-productive, what none of us could have imagined was that the much hyped “New Shell” would be remembered not so much for these errors but for catastrophic failures of behaviour. In early 2004 it was revealed not only that Shell had been systematically overstating its oil reserves for some time but that senior executives recognised that they had been mendacious. Heads rolled – including that of the Group chairman Sir Phil Watts and the resultant crisis was far, far greater than anything that had occurred in the 1990s.

If there had been a more confident and integrated approach to brand management (in keeping with the reality that Shell is a “Monolithic” brand corporation) and if there had been a better funded and consistent brand management exercise over the years could this disaster have been avoided? If those working on the corporate reputation initiatives had been more steeped in Shell, and if they had better understood where the business stress points were, could they have much earlier seen a potential problem? Certainly if there had been a real understanding and commitment that behaviour throughout the organisation had to match the rhetoric of the corporate CSR communications then the charge of hypocrisy would have been avoided. The crucial mistake was the lack of co-ordination of all the many aspects of the management of Shell’s public face and the lack of proper checks and balances to pick up the warning signs of dysfunctional behaviour. As many as a hundred people (perhaps more) must have known that Shell was fabricating facts about its reserves. Did none of them see the potential brand damage that this would cause? A truly brand aware company would have identified the risks much earlier.

Finally many global corporations have a director at board level who takes charge of all aspects of that corporation’s brand and reputation. Shell had no such position. By contrast John Browne CEO of BP was advised by one of his communications agencies to appoint a Board level individual as brand and reputation guardian. “Who should it be” he asked. “You” was the reply. Browne accepted this recommendation and BP’s brand has never looked back. BP’s reputation, their share price and the morale of their staff has never been higher. The lesson for Shell is clear – but is it too late? We shall see.

[1] Varney spent almost 30 years at Shell before moving in 1997 to become chief executive of energy company BG. Varney joined MMO2 in 2001 to oversee its demerger from BT, and his other roles include chairman of Business in the Community since January 2002 and council member of the Confederation of British Industry.

How to avoid brand attacks..

From the "Financial Times" Special report on Responsible Business

"The best thing is to try to avoid brand attacks in the first place. According to Paddy Briggs, a former brand and reputation specialist at Royal Dutch/Shell, behaviour is more important than how effectively a company promotes its brand and values.

'If you behave well, the likelihood is your brand will be strong. If you behave badly, and communicate that you are behaving well, not only will you bring your brand into disrepute, you might actually go to jail' says Mr. Briggs"

PR Professionals should avoid the spin and help the client to tell the truth!!

It was Alex Carey, quoted in "The Public Relations Industry's Secret War on Activists", who said "The 20th century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy."

Four years ago "PR Week" magazine reported the results of a survey which asked 1,700 PR executives about the ethics in their industry. The results showed that 25 percent admitted they lied on the job and 39 percent said they had exaggerated the truth. Anyone who has worked in PR, Advertising or corporate communications knows the value of being selective in what you say. A stout defence is always that your message is not untruthful – although, of course, it may well be only a part of a greater truth. As Gerald Ratner found to tell the unvarnished truth about your products or services may be very dangerous!

In April 2004 an Email emerged in which a Shell Managing Director wrote to his Chairman saying "I am becoming sick and tired about lying about the extent of our [oil and gas] reserves and the downward revisions that need to be done because of far too aggressive/optimistic bookings." Both executives (along with some others) left Shell in disgrace and they are now being pursued by various regulatory authorities on both sides of the Atlantic. To all of us with a stake in Shell this was a shameful event – not least because of the revelation that the obfuscation over reserves was not just incompetence, but came from systemic mendacity.

It may be that we now live in a world where we expect to be lied to. We were authoritively told that Saddam’s Iraq had weapons that threatened us. It wasn’t true. We have lauded western-style democracy because we believed that the system placed limits on the behaviour of governments - Guantanamo Bay and Abu Ghraib have shown that no such limits exist. And in the corporate world we have been told that modern corporations have a sense of social responsibility (CSR) which stops them from acting like the bad old capitalists of old. But is that really true? My experience with Shell, and my study of other current corporate cause celebres, suggests that the “wicked” Henry Ford or Andrew Carnegie or Andrew Mellon probably had more deeply embedded moral values than many of today’s industry leaders.

What do you make of the statement by the CEO of Imperial Tobacco in an interview in “The Guardian” that “… the biological mechanisms between smoking and the cause of diseases are still unknown?” He suggests in this remark that he knows better than the World Health Organisation (and all other medical bodies around the world) for whom the links between smoking and cancer and heart disease are beyond doubt. He suggests it because his own self interest – and the business of his company - requires that the matter be seen as doubtful even though the reality is that the true facts have been known for a long time.

In Shell I was part of a process which formulated and distributed the Group’s “Business Principles” which included the statement that "Shell companies do not make payments to political parties, organizations or their representatives or take any part in party politics."Shortly after the publication of these principles I was in Houston where I was told that Shell in the United States ignored this rule and made donations to both major parties. And notwithstanding Shell’s problems over truthfulness this year this hypocrisy has continued. The US Centre for Responsive Politics has reported that in 2002 Shell managed to end up on the losing side by giving more to the Democrats than it did the (winning) Republicans.

Shell’s hypocrisy over political payments is, of course, sadly consistent with its mendacity over other things and yet this is a corporation which seemingly embraced CSR and promoted itself as a model of disclosure. Another example is the commitment to Human Rights in the “Business Principles”. Shell says that it to expresses “support for fundamental human rights in line with the legitimate role of business”. However Amnesty International has stated that Shell is “…implicated in environmental and human rights abuses in the Niger Delta area [of Nigeria]” and when I worked for Shell in the Middle East I was specifically instructed by the President of Shell in Saudi Arabia only to allow distribution of the “Business Principles” if the Human Rights commitment was removed.

At the extreme of corporate dysfunctionality there are corporations like Enron and professional advisers like Arthur Anderson whose behaviour was undisputedly illegal as well as amoral. Shell is in the next rank and we must await the regulatory authorities reports before making a complete judgment on the alleged venality of Shell’s executives. But it is not unreasonable to conclude that greed and pride were the deadly sins that drove Shell’s executives to do what they did. They saw their personal rewards being under threat because of poor (reserve replacement) performance and they saw their status and post Shell earning potential being put at risk from exposure of the truth.

Whilst few would argue that corporate deceitfulness of the scale that we are witnessing today is entirely new (from the Industrial Revolution onwards some businesses have operated without due regard for some of their stakeholders) what is new is the modern regulatory climate and the need not just to be seen to be behaving properly but actually to do so. When the behaviour does not match the rhetoric it not only brings the corporation into difficltulies but it brings the whole profession of PR into disrepute. We have thick skins and like politicians and the media we are used to charges of spin and of being in the propaganda business. I believe that we can be and should be part of the solution not part of the problem. This requires us not just to respond to PR briefs but to question their legitimacy. No PR person or advertising executive should be briefed to peddle untruths – but it is up to us to challenge the substance of briefs and to refuse to get caught up in the dark world of protecting companies or their executives by systematically lying about them.