#PandemicAndBeyond - In conversation with... Michael Coates, Shell CECO

16 September 2020

Tags: Corporate governance, Pandemic and Beyond, Communication & Engagement

In the next blog of the series, Pandemic and Beyond: the ethical issues, Shell CECO Michael Coates discusses his first year in the role and shares meaningful insights on prioritising ethics during this challenging period.

In your role as Chief Ethics and Compliance Officer of Shell, what are your key priorities?

Since taking on the role of CECO and General Counsel Compliance in 2019, a key priority has been to invest a lot of time in underscoring the importance of absolute integrity for all our employees. We can never stop working to ensure that the highest ethical standards are always followed by all Shell staff around the world.

At Shell our aim is to provide more and cleaner energy and we hope this will increase recognition of the positive contributions Shell can make to society. Ultimately, our success in achieving this depends largely on whether society trusts us.

Investors invest in companies they trust, governments allow trusted companies to operate and consumers buy things from people they trust. We must always keep in mind that earning trust takes time and losing it takes no time at all. And we have to recognise that people can have a hard time trusting companies in the oil and gas industry to do the right thing.

How do you embed your E&C programme in an organisation the size and scale of Shell?

Shell has more than 80,000 employees in 70 countries around the world. We also work with over 150,000 contractors and we have to ensure they also work according to our Code of Conduct.

Shell Ethics & Compliance Office (SECO) has around 170 individuals working full time to do this. We have a central team accountable for risk and assurance, programme development and communications. We have an operational team comprising compliance officers who support businesses and functions with guidance, training and developing compliance tools. And our legal team consists of lawyers with subject matter expertise in the principal topics of the Code of Conduct.

Crucial to their work is getting the message across that doing the right thing is also good business. This tone is set from the top, from both the Board and Executive Committee, and is something that Shell’s CEO, Ben van Beurden, has articulated clearly in messages to all staff on several occasions. As well as having rigorous controls that we review and benchmark regularly we need to have the right culture and mindset. An important part of this is that staff feel free to speak up when they see something wrong.

Our aim is to continue to raise the bar, ensuring our actions not only follow the letter and spirit of the law, but also live up to external expectations. It’s not enough to ensure that we operate legally, we must also ask ourselves whether our actions are ethical and wise. Companies don’t exist in isolation and visionary companies consider the consequences of their decisions on a wide range of stakeholders both today, and many years or even generations, into the future.

What kind of external developments do businesses need to be aware of and how do you ensure you are responsive to these?

Businesses need to keep track of regulatory and legislative developments to ensure they stay compliant and at Shell we continuously assess, and improve when necessary, how we manage business integrity issues. This is something we have to keep working at as risks, standards and expectations continue to evolve. In recent years, Shell has developed its ethics and compliance programme, to strengthen controls and support a culture of strong ethical leadership.

For instance, in 2018 we introduced mandatory ethical leadership workshops for senior executives across our global operations so that they can set a clear example. We are now rolling this out more widely to senior managers. At the boardroom level, we have made a concerted effort to use the experiences of our Board members, gained from working in a variety of countries and industries, to identify ethical dilemmas that could arise from business opportunities.

Where we identify such dilemmas, we encourage robust discussion about how to address these. For example, if we were looking at an opportunity in an emerging market, we would need to consider whether we can operate both safely and ethically, and to our own, stringent environmental standards if the regulatory framework and supply chain are immature. If we were to assess we may be exposed to a real risk, we would then have to consider whether we avoid operating there entirely. An alternative, if we believed we could take steps to mitigate that risk, would be to work with local authorities and agencies to mature and enhance operating standards overall. This would create an opportunity to contribute to economic development over time.

Decisions such as these are rarely ‘black and white’, so it’s important to consider all the competing factors. Often, we also find ourselves navigating opposing stakeholder perspectives where what is “right” for one party is “wrong” for another. We operate in a culturally diverse world where the social norm in one country may be unacceptable in another. Where perspectives diverge in this way, it’s more important than ever that we follow our core values, Business Principles and Code of Conduct and are clear on where we aren’t prepared to compromise.

To help our staff grapple with such issues, and make values-based, ethical judgements regarding significant business decisions, we have been working to develop a new decision-making framework. To ensure the framework is in step with societal expectations, we have asked a panel of independent experts to review it and we look forward to their recommendations in the coming months.

Has the COVID crisis presented new risks which you need to respond to?

The current situation has created significant challenges. The uncertainty around the impact and duration of the pandemic, the stress on personal finances, increased pressure to perform – combined with ongoing social and mobility restrictions – increase the risk of misconduct in any business.

Staff and third parties are under pressure to come up with creative solutions for unprecedented problems and there is a risk that – unwittingly – the line gets crossed.

We have responded by reinforcing the message that adherence to Shell’s compliance rules and the code of conduct remain essential. We have also looked for ways to offer pragmatic, risk-based mitigations to increase efficiency without undermining controls in the current remote working environment.

For instance, we have produced guidance highlighting increased risks for Shell, such as corruption and money laundering risks in supply chain and COVID-19 relief donations, data privacy and cyber risks. We have highlighted antitrust risks associated with discussions with governments and competitors on measures to mitigate the impact of the crisis. And we are supporting business colleagues to promote an increased focus on compliance and assurance.