Shell AGM – Securing the comforts of the present generation at the expense of the next

27 May 2014 james
Ben van Beurden, current CEO of Shell
Ben van Beurden, current CEO of Shell

Last week I headed home from the Netherlands, crossing the North Sea from the delta of the Rhine to the delta of the Thames, after having attended the Shell AGM in Den Haag with friends and allies from Greenpeace, ShareAction, Observatorio Petrolero Sur, Milieudefensie and Global Witness.

This year’s Shell AGM was a quieter affair than the previous two. Perhaps the tone was set by the behaviour of the new CEO of the company – Ben van Beurden? His manner was strikingly affable. In response to the questions from activists in the auditorium of the Circustheatre by the beach in Scheveningen, van Beurden answered patiently and with a convincing grasp of the detail. There were challenges to the plans and practices of Shell in Alaska, the Ukraine, Argentina, Nigeria, the Russian Arctic, Ireland, and in relation to corruption, climate change and ‘The Carbon Bubble’. On every matter van Beurden answered at length, his kindly eyes and gentle smile picked up by the video camera, projected on the vast screen behind him and live-streamed on the net. At several points he iterated ‘I’m not saying we are perfect’ or ‘I would welcome talking with you personally’, ‘we had short comings’ or ‘our process has not been flawless.’ Even the chairman of the company, Jorma Ollila, was far less aggressive and far more patient with the questioners than in the previous seven AGM’s that he’s overseen.

Peter Vosser former CEO of Shell (2009 - 2013)
Peter Vosser former CEO of Shell (2009 – 2013)

The tone was markedly different than that set by his predeccessor Peter Vosser, CEO from 2009 to 2013. The belligerant manner of Ollila as chair had been far more in tune with Vosser’s arrogance. Vosser had always seemed high-handed in his response to NGOs at the AGMs, conveying a sense of being affronted that these people had disrupted the privacy of his conversation with his shareholders. This approach reflected the behaviour of Shell towards the NGOs during Vosser’s period as CEO – he must have had a direct hand in the decision in March 2012 to place an injunction against Greenpeace, who were resisting to the company’s Arctic plans. (By contrast van Beurden went out of his way to be in dialogue with Greenpeace last week in Den Haag.)

But Vosser was nowhere to be seen at this year’s AGM. The lack of his attendence to hand on the batton to his successor was intriguing – particularly as Jereon van der Veer, CEO from 2004 to 2009 was very present. In a mark of fondness, he slapped van Beurden gently on the back as he departed. Vosser’s absence lends weight to the persistent rumours that he departed under a cloud – certainly his surprise retirement, at the age of 54, was announced quite suddenly in May 2013. He left van Beurden with the unenviable task of announcing Shell’s first profit warning in ten years within days of his accession to the post of CEO. In March this year the Annual Report was published, which revealed that Vosser had had his total pay for 2013, including bonuses, cut by more than a half to 8.5 million Euros, because of the company’s disappointing performance. Furthermore Ollila announced baldly at the AGM that Vosser ‘had left the company in March 2014’. This line suggests that Vosser has no role as an ‘elder’ to the board, unlike van der Veer, and that he’s been cast out, like the reviled former CEO Phil Watts (2001 – 2004), who has now reinvented himself as an English parish priest.

Jorma Ollila, current Chairman of Shell
Jorma Ollila, current Chairman of Shell

Could it be that the appointment of van Beurden, as a clear outsider in the race to head the company, was part of a decisive turn by Shell that is marked by a new capital discipline and a sell off of a wide range of assets? Could it be that Shell’s strategy is, as van Beurden is at pains to stress, more than ever remorselessly focused on profit and generating a return for shareholders? Could it be that this was what was guiding van Beurden’s manner at the AGM, as part of a different public relations strategy to meet its ‘special publics’ with a new humility and an air of wanting dialogue? Certainly this seems to have been the tone of van Beurden’s presentations to his other ‘special publics’ in the past four months, at the Shell Management Days in March, and the Responsible Investor Day in April.

Perhaps it was the lack of combat in the air at the Circustheater that allowed my mind to drift a little and to reflect on the event itself. On the podium sit the executive and non-excutive directors – 11 men and 1 woman (Yes – probably the worst gender balance in any major multinational). Among them there’s a fair amount of grey hair – the eldest, at nearly 68, is Gerard Kleisterlee. The average age is just under 62. The Board looks out over rows and rows of shareholders in red velvet seats – it is a sea of grey hair. Van Beurden and Ollila are at pains to say they stand at the service of the shareholders – repeatedly they use the phrase ‘your company’. All but a tiny portion in the audience are Dutch citizens, many must have been employees of Shell, and all surely regard their shares as providing a nest egg in their days of retirement. The vast majority of those in the theatre, both in the audience and on the stage, in the quiet of their private thoughts must be driven by a primary concern to ensure the comforts of the closing decade or two of their lives.

The company that they draw their dividends from prides itself on its long range strategic plan. A passage from van Beurden’s essay in the front of the Annual Report, entitled ‘Chief Executive Officer’s Review’ reads:

in the Gulf of Mexico, we worked towards the start of production in early 2014 at our new Mars B development. Peak production is expected to be 100,000 boe/d. It will extend the life of the Mars field, first discovered by Shell in 1989, to around 2050

In an echo of this, Shell’s projects to exploit oil in the Alaskan Arctic, if successful, would pump crude out of that frozen sea from late 2030’s to at least the 2050’s. Shell’s tar sands projects in Alberta are designed to mine bitumen from beneath the forest until the same decade.

The impact of the extraction of tar sands, upon the land and rivers of boreal forests, the territories of the First Nations, and the bodies of the Canadian citizens who live there, will continue long after the last tar sands mine is closed. A tragic and graphic illustration of the impact of oil extraction on immediate ecosystems and communities is provided by the United Nations Environment Programme report on Ogoniland published in 2011. Shell extracted oil in Ogoniland for the better part of 30 years, and by the estimation of the UN’s experts it will cost at least $1billion and a further 30 years to remediate the impact of the crude that has saturated the land and covered the myriad waterways with slicks of oil.

Furthermore Shell’s means of generating profit from capital – some of which is distributed to shareholders – is through financing the transfer of carbon from the lithosphere into the atmosphere. Once in the atmosphere that carbon alters the climate of the planet and will continue to do so for perhaps a century after it is burnt in a refinery, a power station, or the engine of a car.

The company’s method of making money casts a long shadow over the future of the ecosystems of the planet and the future generations of its citizens. The Board of Shell lays out it’s plans for approval before a handful of oil analysts at the Management Day, a clutch of asset managers at the Responsible Investor Day, and an auditorium half filled with senoir citizens from one northern European state. The analysts and asset managers are concerned largely with the next Quarter’s Result, or at best the performance of the Shell stock over the coming year or so. The shareholders sitting around us in the Circustheater are, understandably, concerned about the past (wanting to feel proud of the company they worked for) and about their dividends over the next few years.

It feels like this vast corporation, its executives and its owners, moves forward deeply focused on it’s own strategic plan but with little concern for the wider future. This disparity is so clearly illustrated by Shell’s dismissal of the discussion around the Carbon Bubble. On the Sunday before the AGM the company published a response to the issue, which although more considered than the response of ExxonMobil, still implicitly accepts that its current business strategy will play its part in driving the world’s climate to over 3 ½ degrees of warming. There is a vital question to ask: that if this is the ‘wider future’ which the company is helping to construct, how on earth does it think its ‘strategic plan’ will operate in a world wracked with floods, droughts, storms and sea level rise?

The ferry that I was on ploughed through a sea that was once dry land before earlier dramatic change in the climate. Despite van Beurden’s kindly eyes, the company (executives and owners) seems to blind itself to the impacts of its relentless pursuit of its core means of generating profit. A machine, well crafted to ensure the comfort and safety of the current generation, abandons future generations to the wildness of the storms. This paradox puts me in mind of lines by William Butler Yeats – ‘Their children’s children shall say they have lied.’

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