What you need to know about the oil group's top executives.
Royal Dutch Shell (LSE: RDSB) is the largest company on the FTSE 100 (UKX), accounting for nearly 9% of the index. Yet compared to the top executives at rival BP (LSE: BP), who are often in the news, if not always for the best of reasons, Shell's directors keep a low profile. So it's time to turn the spotlight on them.
Management can make all the difference to a company's success and thus its share price. In this series, I'm assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not.
To me at least, the best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. On the other hand, some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot. I've collated all my FTSE 100 boardroom verdicts on this summary page.
This is Shell's top team:
|Jorma Ollila||(non exec) Chairman|
|Peter Voser||Chief executive|
|Simon Henry||Chief financial officer|
Unlike BP which has four executive directors, Shell has just two executives on its board. Its former executive director for exploration and production, Malcolm Brinded, stepped down in April with a £2m payoff on top of his £10m 2011 remuneration.
Jorma Ollila is the man who turned Nokia (NYSE: NOK.US) from a struggling conglomerate into a mobile phone giant, first as head of its mobile phone division and then as CEO and Chairman, a post that he relinquished just last May. That's an impressive track record -- except that following the turnaround he remained on board to see Nokia become a struggling mobile phone manufacturer. He became Shell's chairman in 2006.
Apart from a successful two year stint as CFO of Asea Brown Bovery, Peter Voser has worked for Shell for 30 years, becoming CEO in 2009.
Ollila and Voser have steered Shell's diversification geographically and technologically, with a major push into natural gas. It has avoided the major safety scandals and political interference that have dogged BP. Shell's controversies have been in the environmental field – in Nigeria and the Arctic – and it has a long-standing reputation for over-generous boardroom remuneration. Voser's pay was doubled in 2011 to over £10m.
Simon Henry is also a long time Shell employee, and became CFO in 2009. The eight non-execs variously have impressive backgrounds in business, finance, law and diplomacy. They include Guy Elliot, CFO of Rio Tinto (LSE: RIO) and tipped as a possible successor to Ollila.
I analyse management teams from five different angles to help work out a verdict. Here's my assessment:
|1. Reputation. Management CVs and track record. |
Ollila's reputation may have been dented.
|2. Performance. Success at the company. |
Diversification and performance over top team's 3 year tenure is good.
|3. Board Composition. Skills, experience, balance |
Good mix. FD not from the profession and CEO/CFO both company men.
|4. Remuneration. Fairness of pay, link to performance. |
Reputation for over generous remuneration sticks.
|5. Directors' Holdings, compared to their pay. |
Despite large holdings within a deferred benefit plan, actual shareholdings of directors are small.
Overall, Shell scores 12 out of 25 for me, a middling result within the FTSE 100 and well below BP's 16. Shell directors' lavish remuneration and lack of skin in the game count against them. But they have been in post longer than BP's top team, and have delivered a decent result.
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Tony has shares in Shell and Rio Tinto but no other shares mentioned in this article.