Article and Open Letter to Dr William Cox
By Alfred and John Donovan: 26 February 2007
The following is an extract from a PRNewswire press release published on 21 February 2007.
“For the fourth consecutive year, Shell is the world’s best oil company in sustainability, social responsibility (CSR), corporate governance, ethics and transparency, according to the 4th annual oil/gas ranking by the sustainability research and rating firm Management & Excellence (M&E), Madrid.”
We published the PRNewswire release together with a headline insert (*absolute BS) and a related explanation at the foot of the article:
The headline: PRNewsWire: Shell World’s Most Sustainable and Responsible Oil Company 2007 (*Absolute BS)
Our comment:
*Comment added by John Donovan of ShellNews.net: This PR report must qualify as the biggest load of BS in the history of PR propaganda. Amongst the claims, it says that Shell has been number one in ethics and transparency for the last four years. That includes the time period of the reserves scandal when three senior executives were forced to resign and Shell paid hundreds of millions in fines and settlements. The debacle made headlines around the world was described as the biggest fraud in corporate history (on a BBC programme) and a related multi-billion global class action lawsuit is still in progress. Shell CEO Jeroen van der Veer has confirmed that Shell has already set aside £500 million to settle. It will not be enough. What about the PR debacles in Ireland and Sakhalin-2? Have the clowns responsible for this rubbish not visited the Wikipedia article covering Shell’s reputation. Unlike this report, it is a balanced and neutral article.
http://en.wikipedia.org/wiki/Royal_Dutch_Shell_Environmental_and_reputational_issues
Dr William Cox, the Managing Director of the Spanish company responsible for the report took umbrage at my comments and we received the following email from him on 23 February 2007.
From: Dr. William Cox, Management & Excellence SA [w.cox@management-rating.com]
To: john@shellnews.netSent: Fri 23/02/2007 11:16
Subject: Shell most sustainable oil company
Who sits in a glass house shouldn´t throw stones. I can´t find anything minimally serious, objective or clean about your website.
Clean up your act!
Dr. William Cox
Managing Director
Management & Excellence S.A.
www.management-rating.com
C/ Serrano 93, 3
28006, Madrid
Spain
Tel: +34 915902950
Fax: +34 915902955
Our email reply of 23 February 2007: -
Dear Dr Cox
Thanks for your email.
I am delighted to hear from you.
Before I provide a substantive response, can you please let me know if Shell is a client of your company?
Regards
John Donovan
We await a reply.
His company operates on a commercial basis. We are non-profit making and do not even accept advertising or donations. We are not seeking a penny from anyone, including Shell.
We note that Dr Cox decided to launch an attack on our website instead of setting out a reasoned argument in support of the survey findings. Was his company unaware of the extremely negative events in recent years involving Shell which reflects badly of the honesty, integrity and competence of Shell management?
Dr Cox implies in his email that we are not “objective”. There is nothing new in that accusation. We are often accused of being anti-Shell. The reverse is the case if the criterion is support for Shell’s Statement of General Business Principles requiring honesty, integrity, transparency and respect for people in all of Shell’s dealings. We endorse and support the SGBP 100%. That is what puts us at odds with hypocritical Shell executives who say that they support the principles and then engage in fraud, cover-up and other morally repugnant misdeeds.
To take just one point, how on earth can Shell get top ranking for “transparency” when during the survey period Shell paid out hundreds of millions of US dollars in fines and court settlements for what the Chairman of the US Securities & Exchange Commission has publicly branded as a fraud – the reserves scandal? Major events reported in the media relating to the scandal – the cover-up, the resignations, official inquiries, fines, settlements, the forced merger into Royal Dutch Shell Plc etc., occurred mainly in 2004 and 2005 (although the reverberations still continue in 2007).
Any deliberate attempt by Management & Excellence SA (M & E) to deceive investors would of course be a serious matter.
We are told that this is the fourth consecutive year (presumably 2003, 2004, 2005 and 2006) that Shell has been the highest ranked oil company for sustainability, social responsibility (CSR), corporate governance, ethics and transparency. How much faith can investors/stakeholders have in a rating methodology capable of conjuring up rankings which anyone familiar with the oil business knows has absolutely no relationship to reality?
Is Dr Cox aware of Thomson Intermedia's '10 best' and '10 worst' lists for the first quarter of 2004, also conducted in the period covered by the M & E report? Shell was at the top of the “10 worst list”: in other words, the worst of the worst.
How does Dr Cox explain the findings of a corporate reputation study of 60 major companies by Harris Interactive published on 6 December 2005 by the Wall Street Journal? At the time of the Harris Interactive survey, Shell’s reputation remained in the corporate gutter, literally ranked alongside the likes of Enron. Further information about the relevant survey and a selection of newspaper headlines/stories, all published in the period covered by the M & E ratings report, is printed at the foot of this article.
Under the circumstances, ranking Shell as the world’s best oil company in the various categories including ethics and transparency undermines the credibility of the entire report published by M & E. We would argue that the rankings create a false impression about the corporate behaviour of this morally bankrupt multinational giant. If our analysis is right, investors, particularly those with an ethical agenda, will be misled. If Shell is or has been a client of the company who compiled and published the results, it could give rise to scepticism that the M & E ratings are nothing more than a con-trick designed to project a favourable image for even the worst companies.
The facts about Royal Dutch Shell, as opposed to its apparently highly effective multimillion dollar global brain washing campaigns (e.g. Profits and Principles), indicate that Shell management suffers from abysmally poor governance. Almost everything in the control of Shell management turns into a disaster. The only saving grace has been the one factor over which Shell management has had no involvement: the high price of oil.
The controversies/litigation listed below, which includes some of the previously cited events, all have relevance to the period of the survey results:-
THE CORRIB PIPELINE: The Corrib pipeline debacle has resulted in over two years of negative publicly for Shell. Five courageous Irishman, now known collectively as "the Rossport Five", were imprisoned at the behest of Royal Dutch Shell for the high crime of opposing Shell’s plans to ruthlessly exploit the national resources of the Irish nation without proper regard for environmental issues and the feelings of local people.
DR JOHN HUONG: Shell has threatened to have reserves whistleblower Dr Huong, a former Shell production geologist, jailed for standing up for Shell's claimed core principles of honesty, integrity and openness. EIGHT Royal Dutch Shell companies have obtained multiple High Court Injunctions and Restraining Orders against Dr Huong in respect of information posted on our website under his name. Shell has also instituted proceedings against Dr Huong for alleged contempt of court demanding his imprisonment for exercising his fundamental right to freedom of speech. This is in direct contravention of Shell’s claimed support for freedom of expression under the UN Universal Declaration of Human Rights.
SECRET CENSORSHIP OF THE “TELL SHELL INTERNET DISCUSSION FORUM: In November 2005, Shell temporarily “suspended” its "Tell Shell Forum" in response to our exposure of its secret censorship of "feedback" posted on the forum. As of February 2007, it remains suspended. Shell management appears frightened to hear what its employees and others have to say about its activities.
TAX REFUSNICKS: Shell was rightly castigated in the press about its horrendous treatment of British investors in Royal Dutch who were faced with huge tax liabilities resulting from the merger of Royal Dutch/Shell. Shell performed an embarrassing volte-face in response to the avalanche of criticism and offered new tax-free merger terms to the "refusnicks". However, the u-turn incurred the wrath of other shareholders who had already accepted the terms of the "final" offer and were left with multi-million pound tax bills.
WHITE ELEPHANT PROJECTS: In September 2005, we described the Sakhalin2 cost overrun as the biggest miscalculation in commercial history. Subsequent events have proven us right. Shell has lost untold billions. Costs have also spiralled on the Bonga field in Nigeria, the Athabasca oil sands project in Canada and most recently, the Pearl GTL project in Qatar — priced at $5 billion at its launch, but now estimated at $20 billion.
CAIRN ENERGY: Shell has been embarrassed by news that Cairn’s oil discoveries in oil fields bought for a song from Shell are even bigger than anticipated – billions of barrels at a time when Shell is desperately short of reserves. Shell sold off drilling licence rights for a pittance in a key oil field in Rajasthan, north-west India. Cairn has subsequently drilled 100 wells - 12 of which have struck black gold – some 2.5 billion barrels of oil. Cairn bought the prospecting licence from Shell for just $7.25m (£4m) in 2002.
THE SHELL FOUNDATION: On 28 September 2006, an article published in The Guardian newspaper said that "An attempt by Shell to portray itself as a model of corporate social responsibility was undermined last night after Whitehall documents showed its charitable arm discussing a key commercial project with a British government minister." The article entitled "Campaigners attack Shell’s charity arm over Sakhalin talks" related to The Shell Foundation. The Charity Commission subsequently conducted an inquiry and according to an article published in The Guardian on 17 October 2006, concluded that The Shell Foundation “has fallen short of the good governance and decision-making that we expect from large charities”.
SHELL’S UNLAWFUL DEDUCTION OF EMPLOYEE RETIREMENT FUNDS: In September 2004, 399 ex-employees of Shell won a lawsuit at the Miri High Court in Malaysia concerning the administration by the defendant Shell Group companies of Shell employee retirement funds. The Shell companies in question - Sarawak Shell Bhd and Sabah Shell Petroleum Co Ltd - were ordered to pay nearly RM100 million to the plaintiffs, 399 former employees known as Project Team A, who filed their suit on 29 November 2002 alleging an unlawful deduction from their retirement funds. According to a report of the hearing, counsel for the plaintiffs objected to an application by Shell for a stay on the grounds that “a majority of the plaintiffs are well over the age of 60 and in weak and declining health”. A story in the New Straits Times published on 7 October 2004 reported in relation to the former Shell employees, that “Some have died. Others are losing their memory and many are ailing.” Shell filed an appeal against the decision based on a legal technicality. The appeal decision is still pending and the ex-employees still suffering.
BRENT BRAVO: Brent Bravo is an offshore production platform operated in the North Sea by Shell EP. On 11 September 2003 two workers on the platform, Sean McCue and Keith Moncrieff, were inspecting pipework when they were overcome by a large release of gas and died. On 27 April 2005, following a Health and Safety Executive (HSE) investigation, Shell was fined £900,000 after pleading guilty to offences under Health and Safety legislation. The HSE said after the case that “…Shell … has admitted to fundamental failures in health and safety management on Brent Bravo. This has been reflected in the penalties imposed by the court today. Essential barriers to the unplanned release of hydrocarbon gas that should have been in place were not [and] as a direct consequence of these failures, two men died.” The results of a subsequent Fatal Accident Inquiry released on 18 July 2006 concluded that the deaths “might reasonably have been prevented”. On 1 January 2005 Another worker, electrician Graeme Burns, died while carrying out maintenance work on Brent Bravo.
NIGERIA: Fourteen individual plaintiffs have charged Royal Dutch Shell with violations of customary international law. This is in relation to Shell's oil operations in Ogoniland, an area located in the Niger River delta area of Nigeria. The complaint alleges that “Shell engaged in militarized commerce in a conspiracy with the former Military Government of Nigeria and that Shell knowingly instigated, planned, facilitated, and participated in unprovoked attacks by the Nigerian military against the unarmed residents of Ogoniland, resulting in extrajudicial murder, crimes against humanity, torture, rape, cruel, inhuman and degrading treatment, arbitrary arrest and detention, forced exile and the deliberate destruction of private property." The litigation is in progress. In 2004, Shell admitted after the leaking of a Shell internal report, that the corporate behaviour of Royal Dutch/Shell in Nigeria fed a vicious cycle of violence and corruption. KEN SARO-WIWA: In 2005 Shell received global negative publicity arising from the 10th Anniversary of the execution/murder of Ken Saro-Wiwa in which many people believe Shell was complicit.
GASOLINE PRICE FIXING ALLEGATIONS: In 2005 Shell Oil US President, John Hofmeister, was summoned with other oil company execs to appear before Congress on gasoline price fixing allegations. They were publicly accused of lying to Congress.
FICTITIOUS TRADES: In January 2006, Royal Dutch Shell Plc agreed to a $300,000 settlement in respect of allegations that “two of its subsidiaries engaged in “fictitious” crude oil futures trades on the New York Mercantile Exchange.” Shell Trading U.S., located in Houston and London-based Shell International Trading and Shipping, agreed to pay $200,000 to settle a Commodity Futures Trading Commission case. Nigel Catterall, then head of the futures desk for Shell Trading U.S. agreed to pay $100,000. Bloomberg reported that Catterall and Shell engaged in prearranged trades for oil futures at least five times between November 2003 and March 2004.
LEAD ROLE IN PRICE FIXING CARTELS: In September 2006, The European Commission fined Shell $137m for their role in a cartel that fixed the price of bitumen. According to a report published in the Houston Chronicle, "the EU Commission said the company was an instigator, took the leadership in the cartel and was a repeat offender". The report went on to state that "Shell’s fine was increased by 50 percent because of its involvement in previous cartels and another 50 percent for instigating and leading the cartel."
DOMAIN NAME DEBACLE: In August 2005, Shell management lost its attempt via proceedings issued through the World Intellectual Property Organisation to seize the dotcom domain name for its own new company ROYAL DUTCH SHELL PLC: www.royaldutchshellplc.com. That was despite incurring professional fees of $115 million (USD) for setting up the unified company. The fact that a private individual, one of the authors of this article, owns and uses the Royal Dutch Shell Plc dotcom domain name, stands as a monument to the breathtaking incompetence of Shell management. Jeroen van der Veer and his colleagues knew before anyone else of their plans for the unified business to trade under the name ROYAL DUTCH SHELL PLC but failed to ensure that the corresponding top level domain name was secured.
THE RESERVES SCANDAL: It is salient to note that 2004 has been described in the press as Shell’s "Annus Horribilis". It was in January 2004 that the news first broke about the Shell reserves scandal. It seems that the deluge of negative publicity was missed by those responsible for the M & E ratings report, or was not deemed relevant. Shell has already paid a quarter of a billion dollars (USD) in fines imposed by financial regulators and for class action law suit settlements, all arising from the reserves scandal.
Shell shareholders have had to pick up the entire tab including the cost of paying millions in attorney fees on behalf of the likes of fat cat executives, Van der Veer and Brinded. The most recent settlement was akin to a plea bargain in respect of Van der Veer, Brinded and Van den Bergh. Shell settled to stop the shareholder derivative class action lawsuit proceeding. The Lead Plaintiffs were United National Retirement Fund and the Plumbers and Pipefitters National Pension Fund. Their action had alleged that the defendants had acted in breach of their fiduciary duties to Shell companies, abused their control over the Companies, aided and abetted breaches by others, and/or committed gross mismanagement and/or constructive fraud. On 31 August 2005, Shell announced a $9.2 million dollar settlement of the claim. Shell has already agreed to a proposal to pay a $90 million dollars settlement in respect of a class action lawsuit brought against Shell by its American employees.
Shell is faced with a separate US class action securities fraud case which has been given permission to proceed by a Federal Judge. District Chief Judge John Bissell accepted that Shell and named former and current Shell directors, including Jeroen van der Veer, have a case to answer for alleged securities fraud in relation to the hydrocarbon reserves scandal. Stanley Bernstein of Bernstein Liebhard & Lifshitz LLP, the lead US plaintiff lawyers bringing the class action case on behalf of the Pennsylvanian State Retirement Funds, described the scandal on the BBC TV Money Programme in the following terms: "There are a lot of investors and many maybe more investors that were affected by this fraud than any other fraud in history".
The following are extracts from the same programme broadcast on 15 July 2004.
COMMENTS ABOUT CURRENT SHELL CHIEF EXECUTIVE, JEROEN VAN DER VEER: "signed statements declaring that the submission known as a 20F was a true and faithful description of Shell’s reserves"; "He signed false financial statements"; "he signed certifications that the financial statements met with SEC guidelines."
DESCRIPTIONS USED IN THE PROGRAMME ABOUT THE CONDUCT OF SHELL MANAGEMENT: "deceit"; "false pretences"; "falsely exaggerating"; "misled the world"; "basically they had been told a lie"; "embellished on the numbers"; "exaggerated the numbers"; "basically we lied to you"; "cover it up"; "doctoring the books"; "inventing numbers"; "certifying the reserve which he knows doesn’t exist"; "reserves replacement and production growth were inflated"; "I am becoming sick and tired of lying about the extent of our reserves"; "cover-up"; "actually destroyed documents"; "the scandal blew up and the company’s reputation carefully nurtured over a century was destroyed"; "Shell has lied intentionally and deceived the public" ; "now they know that Shell lied to them and cost them money"; "a fraud perpetrated over a long period of time"; "a fraud perpetrated by the very heads of the company".
There was none of the usual caveats which precede statements or comments which would otherwise be labelled as libellous: e.g. "allegedly". The above descriptions were applied without any such qualification. They were put on record as statements of FACT.
The Harris Interactive Survey as referred to above: findings published by THE WALL STREET JOURNAL: Ranking Corporate Reputations: Bottom 10 (Worst Reputations): At 54. Royal Dutch Shell: 55: Tyco International: 57: Halliburton: 60: Enron: Tuesday 6 December 2005: READ
Related Wall Street Journal article also dated Tuesday 6 December 2005: READ
A selection of 2004 newspaper headlines
The Times: How Shell blew a hole in a 100-year reputation
The West Australian: Investors howl for Shell's blood
The Independent: Lies, cover-ups, fat cats and an oil giant in crisis
Daily Telegraph: Shell drops 'bombshell' on reserves
The Sunday Times: Shareholders can no longer be sure of Shell
Financial Times: Observer Column: Shell-shocked
(Corporate slogans consigned to the dustbin of history no. 94: "You can be sure of Shell.")
Daily Telegraph: Memos expose Shell's years of lying
Minneapolis Star Tribune: Dutch/Shell Group exec was 'sick and tired' of lying
The Independent: Bribery and corruption put fresh dent in tarnished image of Shell
London Evening Standard: Shell 'has lied for 10 years'
No multinational has ever endured such a sustained barrage of negative publicity.
CONCLUSION
Now that I have taken you on a tour of the controversies and scandals involving Shell, do you agree Dr Cox that it is preposterous that Shell should be ranked by your company as the world’s best oil company in sustainability, social responsibility (CSR), corporate governance, ethics and transparency?
Regards
Alfred and John Donovan