Corporate Governance and Leadership: Challenges Faced by Shell Company

This report provides an in-depth analysis of Royal Dutch Shell's corporate governance and leadership, focusing on the challenges and controversies the company has faced. It examines Shell's CSR policies, including its approach to sustainability and ethical behavior, and delves into the company's governance structure, including the roles of the Board, committees, and executive teams. The report highlights key issues such as criminal charges related to corruption and environmental pollution, exploring the impact of these issues on the company's reputation and operations. It reviews relevant legislation and compliance measures, examines the company's ethical conduct, and assesses its sustainability efforts. The report concludes with recommendations for improving corporate governance and leadership practices within Shell, offering insights into how the company can navigate its current challenges and maintain a sustainable balance in the oil and gas market.

Running Head: CORPORATE GOVERNANCE AND LEADERSHIP
CORPORATE GOVERNANCE AND LEADERSHIP
Name of the Student
Name of the University
Author Note

1CORPORATE GOVERNANCE AND LEADERSHIP
ExecutiveSummary
This paper aims to look at the CSR and leadership of the Shell Company and aims to study
the various challenges and controversies faced by the company. The paper studies the Annual
Report of 2016 and 2019 to look at the revenue generation, market structure and stakes held
by the Company. The study, further, concludes on the role played by Shell in the oil and gas
production market reeling under the present day challenges of climate and environment
besides a crucial state of maintaining a sustainable balance (Skjærseth & Skodvin, 2018).

2CORPORATE GOVERNANCE AND LEADERSHIP
Table of Contents
Introduction................................................................................................................................3
Literature Review.......................................................................................................................3
Corporation................................................................................................................................4
Governance Structure.................................................................................................................4
Various approaches used by Shell in boardroom decision-making:......................................5
Issue............................................................................................................................................6
Legislation and Compliance.......................................................................................................7
Ethical Behavior.........................................................................................................................7
Sustainability..............................................................................................................................8
Leadership and Governance Challenges....................................................................................9
Recommendations......................................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................10

3CORPORATE GOVERNANCE AND LEADERSHIP
Introduction
This paper aims to study the various scandals and charges pressed against Royal
Dutch Shell, popularly known as ‘Shell’. It primarily focuses on the criminal charges pressed
against Shell in Nigeria and Netherlands (The Independent, 2019). Shell has a lot of charges
against corporate abuse, related to transport and environment pollution, which is being
created by it across the world (Epstein, 2018). This is widely responsible for the acceleration
of the changes in climate as well as the complicity, associated with the murder of the activists
who were simply defending their houses that suffered severe damage, caused by the mining
and digging operations of the Company (Corporatewatch.org, 2019).
Literature Review
With each passing year, the charitable and not-for-profit organizations come together
to pitch their projects before the big, corporate houses towards the development of an
environmentally safer, educationally richer and healthier environment that aims to promote
the common good. In this process, thousands of currencies are funded by several corporate
houses in assurance of some benefit in return. Corporate social responsibility (CSR) is also
referred to as corporate citizenship, corporate conscience, social performance or sustainable
responsible business refers to a type of autonomous regulation in the corporate paradigm that
is integrated into a business model (Fontaine, 2013). The CSR policies are self-regulating,
mechanisms within the modes of the operations whereby the business organizations not only
monitors but also makes sure active compliance of the same, in the spirit of law, international
norms as well as ethical standards (Fontaine, 2013). The CSRs aim to remain accountable for
the actions of the company besides encouraging a healthy impact using its governance and
activities upon the consumers, business environment and communities, employees,
stakeholders as well as all other members of the listed company. The Royal Dutch Shell

4CORPORATE GOVERNANCE AND LEADERSHIP
essentially requires good CSR approaches and policies to free the Company from its recent
scandals of child exploitation for labor and increased pollution (Lee, Herold & Yu, 2016).
Corporation
The company has an origin, which is Anglo-Dutch. Its current president, Bruce
Culpepper, heads the company in all its undertakings. Recently, in January, 2018, the
company — Royal Dutch Shell had obtained a whopping stake of 44% in Silicon Ranch, a
company involved in the generation of solar energy and run by the CEO of the company,
Matt Kisber (Nashville Post 2019).
Shell is an oil and gas marketing Company which has cemented its position as a
leading company in the energy sector. It has earned immense revenue by exploiting energy
sources of the fossil fuels, gas and oil reserves (Bentham, 2019). The Company was founded
in the year 1907 as the outcome of the merger between Shell Transport and Trading
Company and Royal Dutch Petroleum Company (Corporatewatch.org, 2019). It has its
headquarters in Hague and London.
Governance Structure
The Governance is all about making a company achieve higher standards that it can
live up to. It is applicable to all the fields of decision-making across the oil and gas giant
namely, Shell, involving the Board of Royal Dutch Shell Plc., the four Board Committees,
Executive Committee, and the departmental teams and also the employees who work under
their supervision. The governance procedures are applied during the financial year of 2016,
the Nomination and Succession Committee paid special attention to the division of Executive
Committee domain of talent with several meets with the prospective candidates who could
satisfy the requirement of a senior leader in the company in the future. Robert Setubal and
Catherine Hughes were two prominent international leaders who joined the Company’s

5CORPORATE GOVERNANCE AND LEADERSHIP
Board in the year 2016 in the role of Non-executive Directors, upon the approval of the
shareholders in the Annual General Meeting (AGM). The Board also gratifies Patricia
Woertz with respect to her valuable contribution and commitment to the Corporate and Social
Committee, the Board and the Remuneration Committee in the past three years
(Reports.shell.com 2019). The year 2016 was considerable vital as the Company had lost its
major shareholders and profit during this year. In the year 2019, the Company is a t a much
better position. However, it is caught up amidst innumerous controversies.
Mindful reports presented by Dame Helen Alexander, Sir Philip Hampton and Sir
John Parker studies the areas where women are in positions of leadership, besides the ethnic
diversity. The Company, hence, is committed to forming a diverse board of members with
strong females in leadership positions as their belief suggests a directly proportional
relationship between performance and diversity (Tomlinson, 2017).
Various approaches used by Shell in boardroom decision-making:
 Non-Executive Director Independence: This means that on an average, at least one
half of the members of the Board should consist of the non-executive directors,
barring the Chairperson as determined according to the Board.
 A Nominating or Corporate Governance Committee and a Compensation Committee:
The New York Stock Exchange (NYSE) standards list a few requirements, according
to which, a company that is listed needs to retain a power to nominate or a committee
looking into corporate governance and an employee compensation committee, both
consisting of independent directors who are assigned with specific areas of
responsibilities (Epstein, 2018). The Company also has a Remuneration Committee as
well as a Nomination and Succession Committee who abide by these stipulations
except the terms of reference for the latter (Reports.shell.com 2019).

6CORPORATE GOVERNANCE AND LEADERSHIP
 Audit Committee: It is also the NYSE guidelines, which requires the Company to
maintain a committee for audit purposes in order to aid the Board with its dealings of
financial statements, the independent auditors and the internal audit function of the
organization. This committee is engaged in making recommendations for the Board to
put them before the shareholders for their approval ion the general body meetings,
discussing the appointment, removal or re-appointment of the independent auditors.
 Shareholder’s Approval and Compensation Plans based on shares: The Company also
complies with the rules put forth by United Kingdom Listing Authority (UKLA) that
requires the approval of shareholders. It is so, because, in order to adopt any
compensation plan, which is share-based or an incentive plan that is long-term where
more Directors can participate, involving issues concerning new shares or any transfer
of the treasury shares.
 Business Conduct Code and Ethics Code: The Shell General Business Principles also
satiate the NYSE requirement, which abides by a code of conduct in the business
areas for all its directors, employees and other officers (The Independent, 2019). The
Company also internalizes procedures where any of its employee can raise concerns
pertaining to controls in internal accounting, confidence accounting and auditing. This
could also be done over telephone or internet where one need not jeopardize his or her
position.
Issue
There are criminal charges over Shell for a Nigerian oil license in the Netherlands
with a corruption scandal, amounting to 1.3 billion dollars (Enyoghasim et al., 2019). The
Dutch Public Prosecutor’s Office (DPP) is gathering evidences against the 2011 valuable
acquisition of the offshore oil field by Shell, called OPL 245 (The Independent, 2019). The
two former senior executives of Shell, Malcolm Brinded and Peter Robinson are in between a

7CORPORATE GOVERNANCE AND LEADERSHIP
segregated criminal trial over the purchase in Italy. The prosecutors in Italy allege that Eni,
the oil giant in Italy and Shell, were both part of this deal. Eni knew that 1.1 billion dollar of
the fee was moving to a corporate organization, which was managed by Dan Etete, the
previous Nigerian oil minister and also a condemned money launderer (Manzie, 2018). It was
then that dollars of huge amounts were dispersed to a wide count of closely connected
officials as well as middlemen, who were provided with some money that was being utilized
in order to purchase a jet for private ownership, luxury shotguns and fine art, armored
Cadillac(s), allege the prosecutors.
Legislation and Compliance
Claudio Descalzi, the chief executive of Eni besides Paolo Scaroni, the predecessor
are both charged for the case. All of these individuals as well as the companies who are
charged with these criminal charges, deny the allegations. Further, a communication
from June 2010 stated that Etete had received a letter from Goodluck
Jonathan (GLJ), the former president of Nigeria, which directed the former
to divert certain portion of revenue to GLJ as components of all financial
transactions.
The Federal Government of Nigeria Huge sued J. P. Morgan in
London, for “gross negligence” and transfer of huge amount of money
through them. In court proceedings, J. P. Morgan stated that the highest
anti-money laundering authority of United Kingdom had supported them
for making these payments despite the raise of a series of reports of
suspicious activities by the bank (Isabella, 2018).

8CORPORATE GOVERNANCE AND LEADERSHIP
Ethical Behavior
After the final sale of the ownerships in 2011, the payments passed via the Nigerian
government into Malabu’s accounts, through London banks. Shell states that it has paid the
Nigerian state for the acquisition and had, thereby acted in a proper way.
Emails even revealed that Shell had hired a former MI6 agent, who continues to
remain a defendant in this case, was in continuous contact for a span of at least two years
from at least 2009 with Mr. Etete before the closure of the business agreement. The agent is
recorded to have written about lunches and champagne with Etete in Paris where the
discussion of the deal had taken place.
In an email to an executive of Shell, he had written that Etate was extremely money
minded and had strong sense of financial accounting. He had strong financial knowledge.
Sustainability
Interestingly, the amount of money that is allegedly distributed as bribe is found to be
even more than the Nigeria budget for healthcare for the entire 2018, a country where an
enormous amount of wealth, derived from oil, lives simultaneously with poverty stricken
people of 87 million (Hoffmann & Kristensen, 2017).
On the whole, Nigeria shall remain deprived of $6 billion for future oil revenues, as
per the deal agreement, from OPL 245, a research found by Global Witness (The
Independent, 2019). Shell goes ahead to state that it does not believe in the existence of a
case that needs to be answered. After a long term of continuous denial, it was in 2017 when
Shell admitted that it knew about the presence of Mr. Etete after the OPL 245 deal (Anis &
Siddiqui, 2015).

9CORPORATE GOVERNANCE AND LEADERSHIP
In the last few days under the authority of Sani Abacha, in the year 1998, the oil field
was awarded by Mr Etete – holding a quarter of known reserves for Nigeria – Malabu Oil and
Gas, a company that later emerged as one of the controllers.
Leadership and Governance Challenges
However, the new charges, which has surfaced in the Netherlands will lead to the
opening up of Shell’s another side on the various battles. Even the Anglo-Dutch firm faces a
claim of a billion-dollar fraud and corruption from the government of Nigeria, stemming
from the OPL 245 (The Independent, 2019). Nigeria claims that dollars of hundreds of
millions were diverted for “bribes and kickbacks” from the public purse. The case was also
investigated by the Swiss, US and French authorities (Ledgerwood, 2017). Separately, Shell
is also faced with legal actions from the innumerous residents in the state of Nigerian delta
that the decades of oil spills from the pipelines of the company has ruined their livelihoods.
Recommendations
The organization should not only work towards improvisation in the recent times but
also work towards a sustainable development. It not only harms human lives but also threaten
the aquatic or marine ecosystem (The Independent 2019). Thus, Shell should look forward to
stabilize its market reputation before others, and depicts itself as a culturally fit organization.
Conclusion
The Shell is a globally popular company for its market branding and reputation. It has
also been existing from a very early time and works ahead for the continuance of customers
and stakeholders. However, the company has several other criminal charges pressed against it
and requires a clear good image of the company situation and finances. This will help enable
a better governance.

10CORPORATE GOVERNANCE AND LEADERSHIP

11CORPORATE GOVERNANCE AND LEADERSHIP
References
Anis, M. D., & Siddiqui, T. Z. (2015). Issues impacting sustainability in the oil and gas
industry. J. Mgmt. & Sustainability, 5, 115.
Bentham, J. (2019). The Scenario Approach to Possible Futures for Oil and Natural Gas. In
Managing Sustainable Business (pp. 5-19). Springer, Dordrecht.
Corporatewatch.org. (2019). Royal Dutch Shell Company Profile – Corporate Watch.
Retrieved 26 September 2019, from https://corporatewatch.org/royal-dutch-shell-
company-profile/
Enyoghasim, M. O., Anochiwa, L., Agbanike, F. T., Uwazie, I. U., Kalu, E. U., Onwuka, O.
K., ... & Ogbonnaya, I. O. (2019). Oil Exploration and Exploitation in Nigeria and the
Challenge of Sustainable Development: An Assessment of the Niger Delta.
International Journal of Energy Economics and Policy, 9(4), 369-380.
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
Fontaine, M. (2013). Corporate social responsibility and sustainability: the new bottom
line?.International Journal of Business and Social Science, 4(4).
Hennchen, E. (2015). Royal Dutch Shell in Nigeria: where do responsibilities end?. Journal
of Business Ethics, 129(1), 1-25.
Hoffmann, J., & Kristensen, M. E. (2017). Sustainable Oil and Profitable Wind.
Isabella, M. (2018). THE ROLE OF ROYAL DUTCH SHELL’S CORPORATE SOCIAL
RESPONSIBILITY IN NIGERIAN COMMUNITY DEVELOPMENT (2015-2017)