Benchmarking and analysis needed for the MBA 560 Corporate Compliance Assignment© BrainMass Inc. brainmass.com June 3, 2020, 8:36 pm ad1c9bdddf
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Company 1 - Royal Dutch/Shell Group
The Situation Facing the Company
Shell is the world's third-largest oil and gas company. The company posted a $6.9 billion dollar profit in the first quarter of 2006 with revenues of $76 billion. Analyst's expectations for 2006 have Shell earning $24 billion for the year. Although present financial statistics indicate that Shell is a tremendous company, other problems indicate that the company is weak. Over the past three years only 38% of all Shell oil pumped has been replaced. Most oil companies are facing the same condition of declining reserves. Shell worsened the issue by exaggerating the size of its reserves in SEC filings for many years. In January of 2004, the company confessed to the problem of overstating company assets. Reducing proven reserves from 16 billion barrels to 11.5 billion barrels in 2004 proved to be a bookkeeping nightmare. "I didn't see the reserves crisis as something isolated?no, I think the whole company was losing ground. We knew it, but we kept on doing more of the same," said Jeroen van der Veer, current chief executive for Shell (Helman, 2006). The chairman, Philip Watts and CFO, Judy Boynton, lost their jobs in 2004.
How the Company Responded to the Issue
Shell responded to the issue in January 2004 by re-categorizing 20% of its proven reserves. This created many questions followed by investigations by Shell and other authorities. The investigations revealed that 100 of the 300 largest oil fields were overbooked. The final findings included four more restatements and $240 million in fines and litigation settlements. Van der Veer pushed forward by launching a new and improved project management team. He has hired 3,000 new technical staff and is training them in the areas of cost estimation, procurement, and reserve classification. The chief executive has hired more reserve coordinators and auditors who are accountable to senior management. Replenishing reserves will no longer yield bonuses and evaluate executives like the past (Helman, 2006). Since a five-person committee of managing directors reporting to a group called the Conference runs the company, the Conference was in charge of driving major changes through pressure from the press and investors. In April 2004, the company formed a steering group that met to address concerns about governance (Beale, ...
A benchmark of two companies as they relate to corporate compliance and governance process. It include an analysis of the topic "Identification of stakeholders' roles in the corporate governance process."