Shell gets it right (at last)

Well now, here’s a surprise: an intelligent decision by the board of Royal Dutch Shell. It breaks a long sequence of bloomers, going back to the over-generous bid for BG Group six long years ago. But let’s start with the good news, to abandon the awkward dual-listed structure and bring the business to the UK, clipping Royal Dutch off the name en route. As has been suggested here and here, this would have been entirely reasonable after a judge in a lower court in The Netherlands ruled that she knew better than the company and demanded that it do more to reduce its CO2 emissions. A clear case of judicial over-reach, the ruling broke new ground in dictating how a multi-national company should behave to reach some target, even before it had committed any offence.

Shell did complain, in a low-key way, and has appealed the ruling. An earlier move to emigrate would have sent a clear message that there is a cost to crowd-pleasing rulings like this one. As it is, Shell’s new share buy-back policy provides a handy cover to the decision to go, allowing the company to waffle on about how difficult it all is when there are two classes of share. That the classes are there in the first place is a direct result of Dutch with-holding tax on dividends. When the Unilever directors decided it would be a good idea to move the share quote to Rotterdam (sic) the Dutch government promised to reform the tax. When the power play was stymied, and Unilever decided that London was somehow better than a Dutch shipping port, the promise was quickly dropped.

Now, of course, the carrot is being exhumed as part of the Dutch government’s desperate attempt to prevent the move. Ben van Buerden, Shell’s CEO, is not as transparently partisan as Unilever’s Dutchman, who paid the price with his job shortly afterwards. Unfortunately, the charge sheet against Mr van Buerden is already quite long enough. When Shell was paying £47bn for BG, he explained how it would underwrite the dividend for years to come. Well, four years to come, as it turned out, before coping with the debt run up to pay for BG became too much.

Following that strange moment in April last year when the price of oil became negative, the Shell board panicked and slashed two-thirds off a dividend that had only gone up (slowly) for the previous 50 years. Just six months later, it was raised (a bit) along with routine corporate waffle about sustainably growing it in future. Six months later, it was raised again, making three different policies in less than two years. Five weeks ago, when asked whether the company planned to “do a Unilever”, Mr van Buerden reeled off a highly technical list of why it was not worth doing. For a business that must plan for the long term, it is less than impressive. 

Mr van Buerden is already serving out time, and while his successor will not have to seek approval of Shell group plans from the eccentric Dutch courts, the phenomenon that produced the ruling is not confined to The Netherlands. The climate hysterics have discovered a potent weapon for winning judgments right across the West, exploiting poorly-drafted environmental legislation and judges who are constantly told about evil oil companies. For many fund managers. the possibility of reputational damage for being seen to associate with “polluters” far outweighs the potential reward from holding oil company shares. Far better, they argue, not to think about them at all. 

The feeling is mutual

The motto of the Backscratchers’ Mutual Friendly Society is: You scratch my back, and I’ll scratch it too. Of course this would not apply to the Liverpool Victoria Friendly Society, or LV= as it is now excitingly rebranded, in its slow-motion waltz into the arms of new ownership, if not quite new management. This never-ending process seemed to produce an unlikely denouement with the preferred partner being Bain & Co, a private equity business.

It is hardly an obvious fit, but the policyholders might have worn it until they saw the pitiful rewards they were being offered to approve: £100 each for the 1.16m “members”, and a modest boost to the policy value of the 297,000 with-profits policyholders. (LV=’s general insurance business was sold last year). Had chairman Alan Cook (he of the Post Office persecution of innocent sub-postmasters) and CEO Mark Hartigan (salary £1.2m, and likely to stay on with a private equity rewards package) not havered around for a year, and adopted their “don’t bother your pretty little heads with the details” approach, they might have got the deal approved.

That looks highly unlikely now. There is hardly time before next month’s meeting to produce the workings behind these numbers, even if Messrs Cook and Hartigan finally decide to publish them. Causing trouble on the sidelines is Royal London, which has indicated a marginally higher bid than Bain’s £530m, but could offer continued mutuality, or ownership by the policyholders, if it chose to. The LV= members might prefer that, even if it meant giving up the fabulous riches of £100 a head. Either way, persevering now with the meeting to rubber-stamp the Bain proposal looks like a bad idea. 

Powerhouse breakdown

The economic cost of the HS2 rail line was always going to outweigh its gains, but it now appears that the political cost is pretty steep, too. No analysis of the line, inside or outside government, came close to making an economic case, and over the years one justification has followed another, from the advantage to business from getting to/from Birmingham a few minutes faster, to relieving capacity pressure to Liverpool and Manchester. Even before Covid provided all those extra empty seats, that looked unconvincing.

There have been many opportunities to scrap the line – even now, barely a tenth of the total cost has been spent digging up The Chilterns and demolishing half of Euston – but the most egregious reason to go on was the “level up the north” routine. Now one northern arm has been chopped off and the hapless Grant Shapps has to justify the amputation on behalf of his boss. 

This venture was doomed from the start, as almost everyone outside government pointed out. It might have made some sort of sense if the work was started from the north, as our rail correspondent IK Gricer has long argued. Instead, as the website Conservative Home observed, “we have a very British solution – a half-built railway.”