Shell corporate governance dubbed ‘weak to moderate’ in S&P ratings
By Ivar Simensen
July 23 2004
Royal Dutch/Shell’s corporate governance profile is described as “moderate to weak” by
Standard & Poor’s in the credit rating agency’s first separate report on transparency
and governance at leading western corporations.
S&P added that measures taken by Shell to improve its corporate governance were
viewed “positively”, although the effectiveness of these remained to be seen.
The many corporate failures at large western companies in recent years have led S&P
to start publishing separate reports on governance issues for companies individually.
Nick Bradley, director of governance services at S&P, said: “Corporate governance
failures [were] the primary reason or an important contributor to many of these failures.”
Companies will be rated from “very weak” and “weak” via “moderate” to “strong” and “very
In the first of these reports, it concluded that “the Shell group’s corporate governance
profile is moderate to weak on a global comparison”.
Meanwhile, the outlook on Shell’s credit rating remains negative and the agency said this
month that the rating could be lowered “should the group fail to effectively correct its
weaknesses in corporate governance and internal controls and to raise proved-reserve bookings
significantly above full replacement during the next two years”.
The Anglo-Dutch energy group was downgraded to AA- from the top AAA rating by S&P in
April after the company admitted that it had overstated its proved oil and gas reserves by more
than 20 per cent.
The admissions led to the departure of several senior executives and an internal review of
the company’s governance policies, which is expected to be published in November.
Mr Bradley said the next report on a company would be published in the next few days. The
agency expects to issue between 100 and 150 reports by the end of next year.
The initial focus would be on US and western European companies but it declined to name any