Governance Problems at Royal Dutch/Shell
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Case Details:
Case Code : BSTR155 Case Length : 17 Pages Period : 2000 - 2005 Organization : Royal Dutch | Shell Pub Date : 2005 Teaching Note :Not Available Countries : UK, Netherlands Themes: Corporate Governance
Industry : Petroleum and Petrochemicals
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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.
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Excerpts Contd...
The Criticism
Though the merger proposal was lauded by the investors and many corporate
governance experts, a few analysts did express doubts about the success of the
merger.
They felt that the merger proposals might not have far-reaching benefits
because they thought that there did not seem to be any major structural changes
planned that would open up the nomination and election process for independent
board seats.
Also, the equity distribution, the share-exchange ratios, dividend distribution
and tax implications in the new company were considered very complex for common
shareholders to understand.
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Analysts felt that the single board was not going to be a panacea for all the
cultural clashes between the Dutch and the English managers, because the
single board was again going to comprise the bi-national directors.
How the
differences in their operational styles were going to be resolved was not
made clear. Analysts commented that good governance meant competence and a
management team that would abide by corporate ethics; whether it was a uni-structure
or twin structure organization was immaterial.
They felt that the twin-board system had worked well for nearly a century
and, therefore, there was no point in blaming the company's twin-board
structure for company's governance problems.
Therefore, analysts commented
that the merger proposal was just a public relations gesture of the
management to appease disgruntled investors and in reality, the introduction
of a unified board might not achieve any major benefits...
Exhibits
Exhibit I: Stock Performance before and after the Oil Reserves Scandal the
Royal Dutch Petroleum Company
Exhibit II: Royal Dutch/Shell Group Organizational Structure
Exhibit III: Management Team under the Three-Way Matrix Structure
Exhibit IV: Merger Proposals Vis-à-Vis shareholders
Exhibit V: Proposed Structure of the Single Tier Board
Exhibit VI: Stock Performance after the Merger Announcement the Royal Dutch
Petroleum Company
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