Her resignation was the latest saga in the ongoing controversy that has surrounded Shell’s accounts and reserves for the past two months. It also involved a further restatement of the company’s reserves.
The report found that the compliance role of the finance function ‘was not effective’ on the reserves, and although Boynton was responsible for ensuring that financial disclosures to the market and regulators were correct, she took ‘virtually no action’ to check the facts behind the figures.
Instead, she relied on Shell’s existing ‘checks and balances’, and was ‘reassured’ that its exploration and production department was ‘focused on issues’.
Davis Polk & Wardwell investigated Shell over its ‘recategorisation’ of four billion barrels of oil reserves for the period up to the end of 2002. The report was requested by Shell’s group audit committee and external auditors KPMG and PricewaterhouseCoopers.
The ‘strained’ relationship between former chairman and chief executive Sir Philip Watts and exploration and production CEO Walter van de Vijver also came under the microscope. They have both since quit Shell.
Vijver had expressed concern about the EP department’s ability to meet various targets or ‘external promises’, particularly those related to reserves. He stated in a letter that ‘…EP was in a far worse state in mid 2001 than was ever portrayed by my predecessor to senior management’.
In an email to Sir Philip, Vijer also said that he was ‘sick and tired of lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings’.
Shell has fully accepted the findings and ‘will ensure prompt action on its recommendations’. Consultant Ryder Scott Company is expected to be appointed as full-time external auditors of the oil reserves.
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