However, with the passage of time, the company realised that they had to compete with other companies in the global arena. Oil companies such as Exxon were giving Shell a run for their money because they were globally managed. In order to respond to this trend, the company opted to change its corporate governance style. They opted to control almost all their downstream sectors through their headquarters in London and The Hague. (Shell, 2008)
Corporate governance within Shell had been carried down from almost a century of its existence. In certain scenarios, some critics have argued that this form of structure has cost the company in a number of ways. This is largely because shareholders in the company do not have as much clout as members of the board. The disadvantage of this structural approach can arise when the shareholders feel that their rights are in danger but can do very little to protect it.
Bp has been faced with a number of corporate governance challenges. First and foremost, the company grappled with accusations from critics who claimed that it was doing business with a group that had been responsible for human rights abuses in the Baku Ceyhan pipeline. To add insult onto injury, BP was also faced with huge problems in its pricing strategies. This was especially seen in the United Kingdom. In Colombia, the Company was confronted with a law suit where it had been accused of colluding with terrorists to protect their clients. It lost millions of pounds in paying off that settlement. This goes to show that when companies make miscalculations and fail to implement ethical codes, they are the ones who pay for it through expensive law suits and tarnished images.
Companies need to have specified code of conduct and ethics principles that will guide their day to day practices. Shell as a company has well written down rules that assist employees in sticking to the company's goals and principles. Some of these codes of conduct include; honesty, trust and integrity. While stakeholders and employees may be well aware of rules, abiding by them is another issue altogether. (Zenobank, 2008)
The enormity of this matter came to fore during the 2004 business ethics disaster; at that time, the company announced that twenty percent of all the oil reserves that it claims to have a hold to were overestimated. The revelation of such a matter brought shock waves within the Oil trading sector and even resulted in the company's poor performance. In response to this issue, the company changed its leadership structures. This business dismissed its managing Director - Sir Philip Watts and also changed their management structures. Besides this, the company also responded by providing opportunities for whistle blowers to report any irregularities through an official company website. (Beasnat & Cummins, 2005)
BP also has a valid code of ethics and its company purports to a sound code of conduct. However, much like its counterpart Shell, the company seems to have fallen short of these high expectations. An example of how the company did this was when it hired an expensive public relations manager to create an Image of an