Shell clams up on reforms

SHELL'S attempt to put the reserves scandal behind it by blitzing investors with some big spending numbers did not inspire market confidence.

The company faces a huge credibility gap over its past exploration failures, so there is not much optimism that upping exploration and production spending to $15bn a year will necessarily produce a turnaround by 2009.

Investors would rather see more of the benefits of high oil prices returned by share buybacks, as at BP, than trust Shell's pledges of wonderful returns.

There might be more faith in Jeroen van der Veer and his remade management team if they had done more to enlighten the world on the group's reshaping. But on this they remain resolutely silent in grand old Shell style.

Nevertheless, Shell-watchers did spot some clues among the myriad of figures being tossed around. The company is quietly reorganising its imperial structure, which gave huge autonomy to national companies and operating units. A symbol of this is the decision to bring two huge parts of the enterprise, oil products and chemicals, under one roof.

The Shell language is changing. It has always been a global company, though one which consisted of a series of competing empires, rather than a whole. But now there are signs of a 'globalised' operating company emerging that makes decisions more centrally. After all, it was the autonomy of some of the exploration units that may have been a factor which led to the over-generous counting of reserves when former boss Sir Philip Watts, who presided over the scandal, was at the helm.

It is almost a given that Shell, like Unilever and Reed Elsevier before it, will aim for a unified board of management. There is no point in having two main boards with different objectives pulling in two directions. But sceptics might note than the unitary structure does not appear to have done Unilever, which has lost touch with key markets, that much good.

To go with the unitary board there will be a single operating company so that the lines of control are much clearer. This leaves open the question of whether the two Shells - Royal Dutch quoted in Holland and Shell Transport & Trading in London - should become one. It is clear that there is discord on this already.

Shell believes that the merger of the two could expose the company to a long and complex process, which would create value only for the investment banks and lawyers, and leave investors with a ghastly capital gains tax liability. It would rather spend the money on exploration, extraction and pipelines.

There is some logic to this. At this stage of the game, a more unified and functional organisational structure - that is actually capable of delivering - may be more critical than a full marriage.

Weston move

ASSOCIATED British Foods is one of the sleeping giants of the London market. The Weston family's 54% stake ensures that it does not receive the same exposure as some of its rivals. Yet at a time when bigger food enterprises have stumbled, ABF, under the direction of Peter Jackson, 57, has made enormous progress.

It has organised itself sensibly, nurtured some great brands like Twinings and Ryvita and remains a force in the less fashionable ingredients market. Shareholder returns over the last five years have been in the order of 60%.

Jackson is unusual among Britain's chief executives in that he prefers working lunches over sandwiches to fancy restaurant meals, spends his weekends walking and has avoided being in the class of fat cats. He has grown a retail business in Primark that has withstood the challenge from Tesco.

Now the family is soon to reclaim its inheritance. An announcement is expected shortly that George Weston, the 40-year-old son of the late chairman Gary Weston, is to take the reins. He looks well qualified with a good Oxford degree and a top-ranked Harvard MBA.

ABF has until now been something of an agglomerating enterprise. But the change of leadership could provoke more focus including the long talked-about float or sale of Primark.

Offshore dreams

THE United Nations Conference on Trade and Development has made a great discovery in its 2004 World Investment Report.

Offshoring - the process of shifting jobs overseas which began with American production switching to Canada and Ireland - has reached a 'tipping' point. Production and services are now moving from rich to poor countries.

Maybe it is time for Unctad itself to consider exporting its bureaucrats from salubrious Geneva to a cheaper, less benign location.