Governance Problems at Royal Dutch/Shell


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : BSTR155 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate Governance
Case Length : 17 Pages
Period : 2000 - 2005
Organization : Royal Dutch | Shell
Pub Date : 2005
Teaching Note : Not Available
Countries : UK, Netherlands
Industry : Petroleum and Petrochemicals

Abstract:

In January 2004, Royal Dutch/Shell (Shell), the third largest oil exploration and production company in the world, announced that its financial statements had shown inflated oil reserves in the earlier years, and that it would downgrade nearly four billion barrels of its 'proven'oil and gas reserves.

This announcement created a furor among the investors and industry analysts who blamed the complex and opaque twin-board governance structure for the company's problems. Experts believed that this structure lacked accountability and facilitated financial manipulations. The case study examines in detail the twin board governance structure of Shell and the loopholes in such structure.

In order to restore investor confidence, Shell announced a merger of the Royal Dutch/Shell Group of Companies under a single parent company in October 2004. The case highlights the key proposals and examines the pros and cons of this merger plan.

Issues:

Conduct an in-depth study on the twin-board governance structure of Royal Dutch/Shell

Examine how the twin-board governance structure of Shell resulted in lower accountability and transparency

Study the circumstances that necessitated organizational restructuring at Shell

Examine the solution of merging Royal Dutch/Shell Group of Companies under a single parent company

Contents:

  Page No.
'Oil Reserves' Scandal 2
Background Note 3
The Twin-Board Structure 4
The Drawbacks 6
The Restructuring 7
The Criticism 9
Exhibits 12

Keywords:

Royal Dutch/Shell, Oil reserves controversy, Corporate governance, Management structure, Twin-board structure, Three-way matrix structure, Organizational restructuring, Accountability, Management control, Merger proposal

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