Friday, July 09, 2004

End of An Era?
Based on reports in the Financial Times and elsewhere, it is looking increasingly likely that Royal Dutch/Shell will accede to investor pressure and radically alter its governance structure. This would effectively end the world's oldest unconsummated joint venture and result in Shell looking--and acting?--more like its largest competitors, Exxon and BP. It would also stifle some of the wild scenarios currently circulating, such as the one in which Total takes a controlling interest in Royal Dutch and leverages this into a takeover of its much larger European peer.

While it may be past time for such a change, I doubt that a standard, US-style corporate governance structure would have prevented the recent management problems relating to the overbooking of reserves and their tardy disclosure. One has only to look at this week's indictment of Ken Lay, the former chairman of Enron, to deflate that notion. Rather, Shell's current weakness presents investors with an an ideal opportunity to push through a pet peeve. Only time will tell if the result better positions the company to deal with the challenges that lie ahead for the industry.

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