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of how the stakeholder concept has become the dominant strategic orientation for
Shell and BP in the petroleum industry.

Box 2.2 Case study: stakeholder management
in the petroleum industry 36

In terms of economic and geopolitical importance, drama and controversy, the
petroleum industry has no counterpart in the 20th century. Great explorations and
technological innovations went hand in hand with public scorn and outrage.
Nowhere is this characterization more true than among the select group of firms
operating at the apex of the petroleum industry, including the industry giants Royal
Dutch Shell and British Petroleum. Both companies have gone through tumultuous
periods at one time or another in the 1990s, and have realized the value of a broader
stakeholder orientation (instead of a narrower production or shareholder orientation)
as a result.

Royal Dutch Shell

Shell was one of the first truly international corporations and has been one of the
ten largest companies in the world for nearly a century. Historically, its regional operat-
ing units were the dominant elements in a decentralized management structure. The
company is now somewhat more centrally controlled through a committee of man-
aging directors and is organized globally into five lines of business: exploration and
production, chemicals, gas and coal, international renewables and oil products. Shell
had, historically, a strong technical and engineering orientation in all of its strategies
and operations, and placed a strong emphasis on long-range planning based on the
construction of competing ‘scenarios’ about major long-term market trends that
would affect its economic status and market operations.
In the 1990s, Shell executives came to believe that its corporate identity and reputa-
tion were at stake in both the marketplace and the policy arena. One reason for this,
executives believed, was Shell’s weak organizational structure, which was clearly
inadequate for effective control of a global enterprise and stymied them in their
desire to build a strong reputation in the marketplace. In March 1995, the CEO of
the Dutch parent company announced that partly for this reason the group wished
to drastically change its organizational structure. The old matrix structure, with regions,
sectors and functional responsibilities, would disappear. The proposed new structure
consisted of separate business organizations, each led by a business committee with
worldwide responsibility. A newly created strategy and business services unit would
control strategy, finance, personnel and corporate communications (‘public affairs’)
at the group level. Corporate communications activities would thus become more
centralized after these changes, with the aim of controlling communications better
and channelling messages more effectively to Shell’s audiences.
At the height of this restructuring exercise, of which one of the aims was
to strengthen its corporate communications, Shell, ironically, got enmeshed in two
communications crises. In June 1995, Royal Dutch Shell found itself in heated debates
with a whole range of critics (including The Movement for the Survival of the Ogoni