In Shell CEO’s Yarn, A Lesson For Brands

Shell pecten flag, 2016 Shell pecten flag, 2016

Shell·acking The Truth

Shell decided to exit its Russian interests on February 28, 2022. How the company’s boss spun that decision publicly is a brand lesson in what NOT to do. Find out more with The Strategist.

Shell pecten flag ca 2016

This is a post in progress. Read it as we build it!

It’s been tumultuous eight days or so in Ukraine. That, of course, discounts the months of anxiety that must have plagued that country’s citizens as Russia parked its host at Ukraine’s borders over the last several months.

This post is not about the humanitarian crises now unfolding in eastern Europe due to this war but about a particular corporate response to the situation in Ukraine.

As you may or may not have noticed (a lot is going on after all), ‘horrified’ by Russian actions in Ukraine, on February 28, 2022, Royal Dutch Shell decided to exit its joint ventures in Russia.

Per the press release, Shell has $ 3 billion worth of non-current assets in Russia, and the company earned around $ 700 million from that country in 2021.

Here’s how Ben van Beurden, the CEO at Shell, spun the decision on LinkedIn:

It reads like usual CEO-speak on matters that are primarily outside a company’s control but require a response nonetheless. But if you have been following geopolitics in the last decade, some problems loom large with the statement.

Before we dive into those problems, and the lessons therein for brands, let’s take a detour in history. Hop on!

A Detour In History

Shell And Saudi Arabia

Shell had substantial interests in Saudi Arabia. It had two 50:50 JVs in that country

  • Sadaf Petrochemical Complex – Shell sold its share of the JV to its partner SABIC in 2017
  • SASREF Refinery – Shell sold its share of the JV to its partner Saudi Aramco in 2019

The company still owns other oil interests, e.g., lubricants, in the country. Saudi Arabia’s sovereign wealth fund, the PIF, likely owns a small stake in Shell.

Please note that a Saudi Arabia-led military coalition has been bombing Yemen since March 2015. That campaign, designed to oust Yemen’s Houthi rebels, has claimed numerous innocent lives, most recently on January 21, 2022. It is also responsible, in part, for the Yemeni famine that has claimed lives of its own.

Some Russian Vodka

If memory serves me right, post-Soviet Russia began casting a long international shadow only after 2007 when it became clear that the West will continue to ignore the Russian security grievances despite Putin’s Munich speech. Some salient points

  • In 2008, Georgia became the first casualty of the Munich aftermath
  • In 2012, Russia lifted its embargo on arms supplies to Libya and with that began Russia’s Africa campaign
  • Russia annexed Crimea from Ukraine in 2014 and instigated frozen conflicts in Eastern Ukraine
  • 2015, Russian intervention in the Syrian Civil War begins
  • Between 2015 and present, Russia’s shadow over Africa lengthened with operations in Sudan, DRC, CAR, and other countries

I will leave it to you, the discerning reader, to discover the human costs of conflicts listed above before the Russian invasion of Ukraine ten days ago. The point is that Russia has played a part in the loss and displacement of life in these interventions (Crimea being an exception due to largely bloodless annexation). Who can forget the continuing tragedy of the Syrian refugee crisis?

Remember this history as we will return to it in a short while.

Shell’s Shoddy Record

Need I remind you of the excesses committed by the Nigerian military junta in the 1990s as Shell silently watched or abetted the atrocities? Old news, you might say. The company has changed, you might say. But the denials on the company’s actual involvement in these excesses continue today. It’s a classic case of strategy eating culture and is something that deserves a longform treatment of its own. Stay tuned?

We can go back even further to the 1980s when Shell continued to work in South Africa, benefiting from its apartheid regime. I am sure there are other instances of the company working in cahoots with tyrants in restive regions of the world to make the gains it must. But I think we have enough to build a case on the problems with Ben van Beurden’s narrative above.

False Advertising

As the Russians continue their violent campaign in Ukraine, the West and allies like Japan and Australia have responded with economic sanctions.

Accordingly, companies, banks, and wealth funds have faced mounting political pressure from the governments in home countries to liquidate Russian assets in the past few days. Shell’s exit from that country follows from that context.

An Untenable Position

But here comes Ben van Beurden, taking the moral high ground. He conveniently forgot that Shell’s exit decision has come when it has become fashionable to do so. It’s NOT a proactive decision, and it’s NOT driven by corporate conscience.

Here’s what happened

  • They were under pressure from 10 Downing Street (Boris Johnson’s been ratcheting UK rhetoric on Russia) to take this step.
  • Then British Petroleum (BP), which has an eight to nine times higher exposure (than Shell) in Russia, announced a pullout on Feb 27, 2022.

BP’s exit made Shell’s position in Russia untenable from a PR perspective.

Rhetorical Questions For Shell

The whole episode isn’t a novelty. Similar things have happened in the past, and they will continue to occur in the future for as long as there are companies operating in politically charged industries.

What grinds my gears is the hypocrisy in Ben van Beurden’s statement. It raises (revives, really) uncomfortable questions about Shell. For example

  • Why didn’t Shell exit Saudi Arabia during their protracted and bloody campaign in Yemen?
  • Given the ongoing atrocities in Yemen (mentioned before), what is the company doing about its remaining investments in Saudi Arabia?
  • Why was the company silent when Russia propped up the Syrian regime?
  • Why didn’t Shell take its exit decisions as Russia effected killings of nearly 14,000 Ukrainians (civilians and rebels) between 2014 and 2021? Ditto Crimea (bloodless but a transgression nonetheless)!

You can go back to the historical detours we took earlier (and take more via Google) and frame similar questions for Mr. van Beurden. For example Why, despite ample evidence to the contrary, does Shell keep denying its complicity in the excesses of the Nigerian regime? Or, why did it participate in the first place?

Of course, when you think beyond rhetoric, the answers to these questions are clear. There wasn’t an appropriate business case to take action at the time. If there’s money to be made at a relatively palatable PR risk, unscrupulous actors and companies stuck in the 20th-century will continue to do so.

A Common Thread

You may accuse me of fallacies, false equivalences, context blindness*, and whatnot, and you may be correct. But there’s a unifying thread that blunts those allegations: corporate values, or lack thereof, in the face of the human sufferings Shell has stood by.

Shell says its values are honesty, integrity, and respect for people. But my questions above and Shell CEO’s spin on the company’s decision in Russia present a different picture. Note that Shell isn’t the only company paying lip service or potentially defrauding investors on values.

But why rail about corporate values at all?

Because your company’s values are the checks and balances for your actions, they are a company’s guardrails, its red lines. When a company faces tough decisions, and it will, it must fall back to its values to qualify its options.

The Purpose Of This Post

My purpose here is not to expose the rampant corporate doublespeak. It is out there for everyone to see, albeit obfuscated behind the corporate yarn, word-mongering, and finesse. You don’t need me to ‘reveal’ it; it’s always been there.

My objective is not to single out Shell either. It’s hardly the only corporation high on its smugness. I could as well call out BP and its exit from Russia**, or I could change track away from Ukraine and call out greenwashing by every other FMCG company and retailer.

I am also not a cynic airing my empty grievances or an idealist asking companies to give up all pretense of capitalism and become the Red Cross; no!

At The Strategist, we uncover actionable insights for founders, leaders, and innovators and help them navigate a rapidly evolving global business landscape. And that is precisely what we are going to do here using the Shell example distill lessons on corporate values (and, by extension, culture, and strategy).

Let’s get cracking!

*E.g., Crises in Yemen and Syria are politically different from the Ukraine crisis, but from the vantage point of the human cost involved in all these conflicts, does that context matter?
**Although, it is worth noting that BP had more financial skin in the game in Russia and yet it got out first.

Lessons From Shell’s High Horse

There are three broad themes along which I will organize the learning here —

  • Values: A Question of Culture (and therefore Strategy)
  • Non-market Strategy (in a transnational context)
  • Communications and PR (in a polarized world)

Let’s dive into each of these themes one by one in the coming days. In the meantime, here’s a sampling:

Values: A Question Of Culture
(& Therefore Strategy)

The Rest (& The Best) Of
This Post Is In Progress

In the meantime, sign up to get the great stuff right in your mailbox.