Slugcatcher: Modern era puts the muscle on an antiquated Shell

It’s hard to imagine a world without the Royal Dutch/Shell combine that the oil world has learnt to love, and hate – especially as plans are already underway for the organisation’s 100th birthday just three years from now.

But the word reaching Slugcatcher is that all possibilities are on the table as Shell faces up to its recent bad behaviour, rivals run the takeover ruler over a business once considered to be a protected species, and Shell itself contemplates a break-up into more manageable parts with more accountable, and conventional, structures.

Lies told about petroleum reserves are the tip of the iceberg that the public can see, though not quite believe.

How could a company with such a marvellous brand name systematically mislead its own shareholders and the outside world by adopting dodgy accounting practices, over-stating reserves by almost 25%, and producing inaccurate profit results over a period of years?

Slugcatcher does not propose to detail the latest sins of Shell. They can be read anywhere. What is suggested here is that the problems being seen now by outside observers are so deep-seated, and can be traced back over such a long time, that a break-up, or sale, are the only medicine which will completely cleanse Shell.

To understand why such strong views are held it is only necessary to look at the core structure of the business which is 60% Royal Dutch of the Netherlands and 40% Shell Transport of Britain. The structure, created in 1907, has effectively protected the business from threat of takeover, embedded executives (rather than directors or shareholders) at the centre of control, and never recognised, let alone respected, outside criticism.

Quite simply, you are treated as a friend of Shell, and kowtow to its view of the world and do what you are told, or you are an enemy, and treated as such.

Slugcatcher’s closest exposure to this authoritarian, we-are-always-right view of the world was during Shell’s undignified attempts to takeover Woodside Petroleum, and thereby dominate the development of the Australian LNG industry.

It was a ham-fisted effort, doomed to fail because Shell alienated so many people, from simple scribblers to the Prime Minister, with its baseball bat approach to winning friends and influencing people.

The whole episode was so distasteful that Slugcatcher did a bit of digging into Shell and its astonishingly arrogant approach to dealing with the outside world. The most amazing discovery was the role of Shell in the years before World War Two when the co-founder, Sir Henri Deterding, became fascinated by Adolf Hitler.

Anthony Sampson, in his book, Company Man, writes how the British Foreign Office in 1927 wrote that “Sir Henri’s word is law”. In 1935 he negotiated to supply Germany a year’s supply of oil on credit, a year later he retired to live in Germany and became a figure that no-one talks about at Shell. Even a bust of the founder was removed from head office.

The current structure of “rule by executive committee” was put in place to prevent the rise of another dictator like Sir Henri.

Sadly, what has happened is that a strong man has been replaced by a system which is unworkable in the 21st century. The Brent Spar fiasco of 1997 was a sample of a company not listening, the death of Ken Saro Wiwa in Nigeria a disgrace, the Woodside flop an example of botched corporate moves, and the overstated accounts the final straw.

What Shell needs is a single structure (or two), a conventional board of directors and chairman who are answerable to the shareholders, a chief executive answerable to the board, executives answerable to the chief executive, and a culture which engages with the outside world, and doesn’t treat every critic as someone to be ignored or stamped on.

In fact, what Shell needs is to be normalised and for anyone who persists in believing that North European arrogance has a place in the modern world to be drummed out of the business.