Heads Roll at Shell

The ruler of Royal Dutch/Shell ( RD) ( SC) has been dethroned.

Shell Chairman Sir Philip Watts satisfied calls for his head by passing on his crown instead. Two months after slashing its reserves -- and denying investors access to top management -- Shell has officially replaced its No. 1 man. Watts, who oversaw production when reserves were aggressively booked, is stepping down immediately. Walter van de Vivjer, current CEO of Shell's production division, has been stripped of his powers as well.

Shell said on Wednesday that both men are leaving "by mutual consent." The company tapped Lord Oxburgh to serve as interim nonexecutive chairman. It reassigned several other top executives as well.

"Investors wanted action. They wanted closure," explained Oppenheimer analyst Fadel Gheit, who recommends buying the company's stock and owns shares himself. "Any time they can get the attention of management or the board, that's a positive."

Shares of both Royal Dutch and Shell -- hit hard by the reserves downgrade in January -- inched up 1.3% on news of the shake-up. The stocks were trading at $50.26 and $42.64, respectively, late Wednesday morning.

For Gheit, at least, the news came as a surprise. He thought management had "gotten off the hook" after apologizing to Wall Street and receiving a vote of confidence from the company's board. Instead, he said, Watts is leaving his post more than one year early. And his young lieutenant -- once viewed as Watts' successor -- is following him out the door.

"I feel sorry for van de Vivjer, in a way," Gheit said. "There aren't too many big oil companies that have an opening for a man of his qualifications. ... But I think that, basically, investors wanted some revenge -- they wanted some heads to roll -- and they got their wishes."

Gheit doubts the executives did anything illegal or even unethical when booking past reserves. He says the management team instead suffered from "bad judgment" in the past. He is also quick to point out that some fellow leaders -- and lingering problems -- still remain at the company.

Specifically, Gheit believes the company should finally abandon its archaic organization as a "double-headed monster with one leg in London and one leg in Amsterdam." He's far less enthused about playing musical chairs in the executive suite.

"It's the Titanic that's going to sink," he said. "Forget about the chairs. ... I think there's something wrong with the system -- not with the people."

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