Shareholders Facing Challenges At Shell Agm Business Essay

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The assignment is about Shell which is a global group of energy and petrochemical company. Their headquarters are in the Hague, and the Netherlands. The parent company of the Shell group is Royal Dutch Shell plc, which is incorporated in England and Wales, as stated on Shell official website.

Shell strategy is to reinforce its position as a leader in the oil and gas industry in order to provide a competitive shareholder return while helping to meet global energy demand in a responsible way.

It has been mentioned in Shell's 2006 annual report published on 16th May that the company has too many flaws as the Friends of Earth criticized it a lot because of its poor performance related to environmental pollution and ethical issues.

The assignment mainly revolves around the concept of sustainability and ethical behaviour of the company. Before going for further steps we have to understand first what Business Ethics is and what Sustainability is.

Crane and Matten, (2004:8) defines business ethics as:

"Business Ethics is the study of business situations, activities and decisions where issues of rights and wrong are addressed."

According to the world commission on environment and development sustainability it says that:

"Forms of progress that meets the needs of the present without compromising the ability of future generations to meet their needs."

Comparison between Shell and Friends of Earth

The table below shows the comparison between Friends of Earth and Shell.

Friends of Earth(FOE)


FOE is the world's largest grassroots environmental network. Their campaign is on today's most urgent environmental and societal issues.

FOE main objectives are-

Climate justice and energy

Food sovereignty

Economic justice

Forest and biodiversity

FOE through their program on climate Justice and energy fight for the justice for the communities affected by climate change and promote energy sovereignty, the right of communities to choose their own sustainable energy sources.

FOE program on Economic Justice-Resisting Neo-liberalism challenges the current economic model by exposing and resisting corporate power and the new Global Europe strategy, while identifying and promoting initiatives that generate sustainable livelihoods.

FOE mission is to collectively ensure environmental and social justice, human dignity, and respect for human rights and people's rights so as to secure sustainable societies.

Shell is a global group of energy and petrochemical company. Their innovation approach ensures that they are ready to help tackle the challenges of the new energy future.

Shell main commitments are-

Economic responsibility

Social responsibility

Environmental responsibility

Shell through their sustainable development program providing their customers with solutions and a variety of energy products, materials and services, which meet their requirements economically and does not harm to the environment.

Shell Company integrates the economic, environmental and social aspects of business in order to achieve sustained financial success, safeguard environment and develop company reputation as a partner and provider for first choice for a wide range of audiences.

Shell Company is committed to protecting the environment by setting highly challenging improvements targets to progressively reduce emissions and discharges.

Shell and Friends of Earth comparison (source: & Shell 2006 CSR report)

Looking at the comparison shows that Shell and FOE are working hard for their sustainable future. As FOE is the world's organisation community their main focus is to protect environment and dealing with societal issues.

On the other hand Shell is also taking part in environment and societal issues as well as working to improve their standard.

Carroll's Model of CSR and Shell

Carroll's Model of CSR (1991):

Crane and Matten, (2004:43) shows that:

For responsibilities as a corporation Carroll's present a model consisting of four components.

Economic responsibility

Legal responsibility

Ethical responsibility

Philanthropic responsibility

Economic responsibility:

Shareholder demands a reasonable return on their investments. The first component of Carroll's CSR Model is the basis for all the subsequent responsibilities, which rest on a this ideally solid basis. Economic components are as follows:

It is important to perform in a manner consistent with maximising earnings per share.

It is important to be committed to being as profitable as possible.

It is important to maintain a strong competitive position.

It is important to maintain a high level of operational efficiency.

It is important that a successful firm be defined as one that is consistently profitable.

Shell responds in respect to Carroll's Model:

According to the Shell annual financial report 2006 it states that:

Shell total income from revenue was $318,845million but in 2005 it was 306,731 which is 4% increase from last year.

Looking at the gross profit which was $54,109million in 2005 increased to $55,856million in 2006.

Earnings per share in 2005 were $3.79 and 3.97 in 2006 shows clearly increase of 5%.

Similarly if we look at the total assets there is increase in 2006 as it was $235,276million but in 2005 it was $219,516million.

Above all if we look at the income of the whole period which is $26,311million, there is an increase of 2% as compare to 2005 which was $26,261million.

The financial statement of Shell in 2006 report transparently exhibits that there is increase in profits as compare to last year. Therefore, Shell has a strong competitive position in society.

According to the report, Shell fulfils the economic responsibility as a corporation and it is acceptable as the company earnings are increasing than the previous year.

Legal responsibility:

A legal responsibility in Carroll's CSR model mainly consists of following points:

It is important to perform in a manner consistent with expectations of government and the law.

It is important to comply with various national and international laws and regulations.

It is important to be a law abiding corporate citizen.

It is important that a successful firm be defined as one that fulfils its legal obligations.

It is important to provide goods and services that at least meet the minimum legal requirements.

Shell response to legal responsibilities:

Shell does not follow the legal components of Carroll's CSR and has failed to perform legal responsibilities as a corporation as it states that:

On the Island of Sakhalin in the Russian Far East, environmental companies have resorted to legal action to challenge the legality construction works by Shell.

Experts have also criticised Shell's Sakhalin project 2, the world's largest integrated oil and gas project because of the threat posed to the last remaining population of Western Pacific Grey Whales whose feeding ground lie off the land which was an illegal act.

In NIGERIA following a community action, a court has ruled that Shell's persistent practice of flaring gas breached local human rights as well as illegal act under Nigerian law.

Ethical responsibility:

Ethical responsibility of Carroll's CSR includes the following points:

It is important to perform in a manner that is consistent with the expectations of societal mores and ethical norms.

It is important to recognise and respect new or evolving ethical/moral norms adopted by society.

It is important to prevent ethical norms from being compromised in order to achieve corporate goals.

It is important that good corporate citizenship be defined as doing what is expected morally or ethically.

It is important to recognise that corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations.

Shell response to ethical responsibility:

As per CSR report in 2006, Shell General Business Principles state:

"We will respect the human rights of our employees..."and "…conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business…"

Shell Ethics code of conduct:

Each CEO addresses Shell:

They should do their work with the highest standards of honesty, integrity and fairness and expect the same in their relationships with others while maintaining a work and business climate fostering such standards.

Avoidance of conflicts of interest stipulated in applicable terms and conditions of employment.

Avoid having any financial interest in works of or contracts awarded by a Shell company or a company associated with a Shell company.


To construct the Nanhai petrochemicals complex in China, more than 2,700 households were resettled to Chinese and World Bank standards. Shell joint venture supported the government's programme to provide higher quality housing for resettled villagers, and is continuing to help to find employment, build skills and create small businesses which is an ethical act.

It shows that Shell is gratifying their responsibility as a corporation according to the ethical component of Carroll's CSR Model.

Philanthropic responsibility:

It comprises the following points:

It is important to perform in a manner consistent with the philanthropic and charitable expectations of society.

It is important to assist the fine and performing arts.

It is important that managers and employees participate in voluntary and charitable activities with their local communities.

It is important to provide assistance to public and private educational institutions.

It is important to assist voluntarily those projects that enhance a community's quality of life.

Shell response to philanthropic responsibility:

Benefits Communities:

The following points have been mentioned in 2006 CSR report:

Shell is a key member of Port Dickson community. They are constantly looking for appropriate ways to contribute to the social wellbeing of the community and to the wider public, which grant the Company its licence to operate and grow.

Shell is providing employment and business opportunities, as well as invests in programmes and initiatives to raise the socio-economic status of Port Dickson and improve the locality's standard of living and quality of life.

The programmes Shell organised and participated in 2006 were:

Joint road safety campaign for LPG drivers

Safety day with local fence line residents

"We Care We Share" programme with the Blind Association of Nigeria Sembilan and Malacca.

Promoting Education :

Looking at CSR report 2006 shows:

Shell has also supported the government's call for the increased application of the English Language in local schools by sponsoring efforts to promote the use of English in communication for students.

Moreover, through a strategic and sustained SP Plan Shell aims to:

District-level English public speaking competition

District-level English debating competition

District-level English drama competition

District-level English choral speaking competition

Looking at Shell contribution towards communities and promoting education at district levels shows that Shell is fulfilling the philanthropic responsibility as a corporation.

Elkington's TBL and Shell Sustainability

Elikington's Tripple Bottom Line:

Crane and Matten, (2004:24) provides evidence to show that:

Elkington's view of the TBL is that it represents the idea that business does not have just one goal namely adding economic value, but it has an extended goal set which necessitates adding environmental and social value too.

In order to develop an understanding of what the components of sustainability actually represent, it is necessary to examine them separately.

Those components are:




Economic perspective:

A narrow concept of economic sustainability focuses on the economic performance of the corporate itself:

The responsibility of management is to develop, produce and market those products that secure long term economic performance for the corporation.


This includes a focus on strategies that lead to a long term rise in share price, revenues and market share rather than short term explosions of profits at the expense of long term viability.

Shell and Economic Sustainability:

According to CSR report 2006 and the economic perspective of Elkington's TBL it shows that shell is committed towards the economic sustainability as shell is working on the following projects.

Growth in China:

The Nanhai petrochemicals complex in southern China started production early in 2006. It is one of the biggest and most sophisticated petrochemicals projects. Shell has been involved in and represents one of Shell's largest single investments in petrochemical. The $4.3 billion development, a 50:50 joint venture with Chinese company CNOOC, employs 1,500 people, 95% of them locals.

Progress in Sakhalin:

The Sakhalin project took major steps forward. By the end of 2006 construction was more than 80% complete. More than 20,000 people were working on the development and over $8 billion worth of contarcts had been awarded to Russian contracts.

As many experts criticised this project, working on this project illustrates Shell is committed towards sustainable development.

Social perspective:

It has the following points:

This is a new development. It has arisen from concerns about the impact of business activities on indigenous communities in less developed countries and regions.

The inclusion of social considerations has marked a shift in the way notions about sustainability were put forward.

The key issue in the social perspective of sustainability is that of social justice. Despite the impressive advances in standards of living that many of us have enjoyed, there are growing disparities of income and wealth within many countries.

In a more just an equitable world, living standards will lead to more economic prosperity.

Shell and Social sustainability:

Social Performance Plan:

Shell CSR report 2006 says that:

Corporate Social Responsibility (CSR) commonly known as Social Performance (SP) in Shell Group.

Through a strategic and sustained SP Plan Shell aim to:

Contribute to the development of communities within which Shell operate

Treat employees with dignity and respect

National Day celebration with pre-school children

Refinery visit by various NGOs, Government bodies and students

District-level English public speaking competition

District-level English choral speaking competition

Looking at the social performance plan of Shell Company it demonstrate that Shell is committed to the social sustainability according to Elkington's TBL.

Environmental perspective:

Elkington's TBL environmental perspective comprises of following points:

The concept of sustainability emerged mainly from environmental concerns.

The basic principles of sustainability in the environmental perspective concern the effective management of physical resources so that they are conserved for the future.

All bio-systems are regarded as having finite resources and finite capacity, and hence sustainable human activity must operate at a level that does not threaten the health of those systems. Even at the most basic level, these concerns a need to address a number of critical problems like green house gases from industrial plants and consumer products.

Shell and environmental responsibility:

Protecting the environment:

CSR report 2006 illustrate that:

In order to form a sustainable development, Shell is emphasizing on:

Global warming potential

Recycling of wastes

Global warming potential:

As a part of Shell sustainable development, the Shell has devised a method to compare the relative effect of greenhouse gases [GHG] on the climate. A factor known as Global Warming Potential (GWP) provides relative measurement of the warming influence of a gas relative to that of CO2 over a 100 year time's horizon.

In 2006, Shell recorded GWP of 1,287 kT CO2 equivalents or a 9% increase from 2004 baseline performance.

Recycling of wastes:

Shell continued to see success in recycling a large portion of wastes that originates from its refinery operations. A total of 2,661 MT of spent Fluid Catalytic Cracking (FCC) catalysts was reused as raw feedstock at cement plants in Perlis and Nigeria Sembilan.

Looking at the Shell contribution towards environment shows that shell is committed to the environmental sustainability according to Elkington'sTBL.

Ethical implications

Ethical implication:

Main ethical implications that case refers to on Shareholders, NGOs, local community and Management are:

Environmental responsibility implication

Social responsibility implication

Legal responsibility implication

Environmental responsibility implication :

Generally responsibility of environment means to keep the environment clean from all those dangerous affects that cause harm to the living organisms.

Environment concerns for the business include

Earth's air



These issues affect businesses and others in the world.

Environmental protection act:

According to environmental protection act 1990 it states that "Pollution of the environment" means pollution of environment due to release(into any environment medium)from any process of substances which are capable of causing harm to man or any other living organism supported by the environment.

Case study shows that shareholders and NGOs were facing many troubles regarding environmental issues.

As the Friends of Earth's Corporate Campaigner Hannah Griffiths said:

"Despite years of campaigning, media exposure and pressure, Shell is still damaging the environment and harming communities. The bottom line is that Shell will not clean up its act until it is forced to do so. MPs have a fantastic opportunity to make UK businesses operate more sustainably and they have a duty to act to protect communities and our environment."

Experts have also criticised Shell's Sakhalin 2 project-the world's largest integrated oil and gas project-because of the threat posed to the last remaining population of Western Pacific Grey Whales whose feeding ground lie off the island.

Looking at the environmental perspective Shell remain totally unethical towards its responsibility of environment.

Social responsibility implication:

According to the Woopidoo source social responsibility defined as:

The term social responsibility refers to the idea that companies and corporations should contribute wealth or resources solely dedicated to the improvement of society as a whole. The principal of social responsibility dictates that these entities should contribute at least a small amount of resources to the general well being of humanity. These actions should not, in anyway, be profit generating.

Social responsibility includes:

Human rights, Employee Rights, Monitoring, Corporate Governance and accounting, Environment protection, Supplier relations, Business ethics, marketing issues and Stakeholders right.

Looking at the shell CASE it shows that local communities were criticizing the Shell company actions against the well being of human.

As in Nigeria, following a community action, a court has ruled that Shell's persistent practice of flaring gas breached local people's human rights, as well as being illegal under Nigerian law.

Communities also claimed that they have been fobbed off by the Shell.

Shell looked to be totally failed in performing their responsibility towards society.

Legal responsibility implication:

Crane and Matten, (2004:44) states that:

According to Carroll's model of CSR, legal responsibility comprises of the following:

It is important to perform in a manner consistent with expectations of government and the law.

It is important to comply with various national and international laws and regulations.

It is important to be a law abiding corporate citizen.

It is important that a successful firm be defined as one that fulfils its legal obligations.

It is important to provide goods and services that at least meet the minimal legal requirements.

Communities claim the illegality of Shell and carelessness of management.

As under Nigerian law, Shell's persistent practice of flaring gas breached local people's human rights, which was an illegal act.

Communities outline the major flaws in Shell's local engagement strategy, including the clear conflict of interest created by the fact that many of the people recruited to engage in Shell's local panels receive direct or indirect financial benefit from Shell, its foundation or other related processes.

As this was also an illegal act and against the legal responsibility.

Ethical decision making for Shell

Decision making of Shell:

Looking at the 16th May, 2006 report shows that Company had taken many decisions against the well being of humanity as well as environment.

These main issues occurred mainly due to inappropriate decision making.

Decision making in term of ethics is defined as:

'The process of choosing a course of action following ethical principles'.

Human rights, social responsibility and environmental protection are main ethical subjects.

As a part of making decision for Shell, an Ethical decision making model is required.

This can be done by following steps as mentioned below:

Steps in decisions making

Stages in ethical decision making

Five ethical principles

Steps in decision making:

Robbins and Judge, (2010:5) shows that:

In order to make decision for a company like Shell there is need to follow some steps, steps are:

Identify problem

Identify criteria

Allocate weight to criteria

Develop alternatives

Evaluate the alternatives

Select the best alternative

Stages in ethical decision making model:

In Crane and Matten, (2004:113) it has been given that:

There are four stages in ethical decision making model.

Recognise moral issue

Make moral judgements

Establish moral intent

Engage in moral behaviour

According to the John 1991, summarising the four stages in two points as-

First two stages distinguish between knowing what the right thing to do is and actually doing something about it.

Last two stages distinguishes between wanting to do the right thing, and actually knowing what the best course of action is.

Recognise moral issue:

In order to go for any decision recognise moral issue like:




Recognise decision you are making are honest

To what extent your decision are true like decision you made fulfils the responsibility what is required

To what extent you are fair with your society in making decisions

Making moral judgements:

Consider everything before making decision

Decision can be right or wrong

Can be ethical or unethical and

Legal or illegal

Establish moral intent:

Always make right choice

Consider social and environmental perspectives in your decisions

Look for Pros and Cons of business

Engage in moral behaviour:

Employ broad minded thinking

Avoid selfishness

Observe ethics in decision

Five ethical principles:

Implement these ethical principles in decision making.

Get involved source 2003-2010 demonstrate that:

Five ethical principles are given below:

Respect Autonomy

Do No Harm

Benefits Others

Be Just

Be Faithful

Respect Autonomy:

People reserve the right to decide how to spend life, as long as their actions do not affect others well-being.

Do Not Harm:

The people concerned are liable to avoid causing either physical or psychological harm to others.

Benefit Others:

It is a duty to better the welfare of others, even where such actions might turn out to an obstacle to the freedom of the person who volunteers service.

Be Just:

People suppose that fair dealing with all, to afford each their due portion, and in general, follow the golden rule.

Be Faithful:

The people in charge should stick to their words, speak the truth, try to be honest and show respect and manners in human discourse.

In short, when making a decision, an ethics check is always needed.

Moreover, following ethical decision-making model and ethical principles will resolve problems for Shell and will protect it against any criticism.


At the end I would say that Shell is working hard for its sustainable future despite facing too much criticism. I have analysed that Shell has a worldwide business. Although Shell has taken many wrong steps, it is still operating and providing fuels to many countries.

In my opinion, no company is perfect. Every company has good and bad aspects. Shell has admitted many mistakes but CSR report of Shell shows that Shell is learning from its mistakes and is trying its best to raise its standard by working on various projects.