1. “Energy Sector”
Shell Pakistan Limited
“Corporate Governance Practices”
Subject: Corporate Governance
Submitted To: Sir Ishtiaq Ahmed
Class: MBA-V Submitted By:
1. Qasim Raza
2. Faiza Batool
3. Faisal Hafeez
Department of Management Science
NATIONAL UNIVERSITY OF MODERN LANGUAGES
SECTOR H-9, ISLAMABAD

2. History:
Shell has a rich legacy and long association with Pakistan. The company is a subsidiary of Shell
Petroleum Limited, United Kingdom (immediate Parent) which is a subsidiary of Royal Dutch
Shell plc (ultimate parent). The company markets petroleum products and compressed natural
gas. It also blends and markets various kinds of lubricating oils. Shell Pakistan Limited is a
limited liability company incorporated in Pakistan and is listed on the Karachi and Lahore Stock
Exchange.
The objective of Shell Pakistan Limited, are engage to efficiently, responsibly and profitably in
oil, gas, chemical and other selected businesses and to participate in the search and for
development of other sources of energy to meet evolving customer needs and the worlds growing
demand for energy. We believe that oil and gas will be integral to the global energy needs for
economic development for many decades to come.
Company Goals:
The goal of our company is to constantly improve on our customer’s experience, and in an
increasingly competitive environment, Shell’s commitment to providing top quality, right
quantity and superior service has been the driving strength of our business in Pakistan.
Core Values at Shell Pakistan Limited:
.
Being at Shell Pakistan Limited is about core values of honesty, integrity and respect for people
are at the heart of the way we manage our business.

3. Financial Reporting and Auditing
1. Company Information:
 Board of Directors
Sarim Sheikh (Chairman)
Rafi H Basheer
Farrokh K Captain
Chang Keng Chen
Imran R Ibrahim
Naseer N S Jaffer
Zaffar A Khan
Michael Noll
Haroon Rasheed
Omer Y Sheikh
Badaruddin F Vellani
 Managing Director & CEO
Sarim Sheikh
 Audit Committee
Badaruddin F Vellani
Imran R Ibrahim
Michael Noll
 External Auditor
A. F. Ferguson & Co.
 Legal Advisors
Vellani & Vellani
Advocates & Solicitors

4. 2. Audit committee:
 Members of audit committee
Shell has audit committee formed by board having 3 members all of them including chairman
are non-executive directors. Meeting of audit committee held at least one meeting prior to
approval of final results. According to report of the director financial statements prepared by
management are fairly state its affairs, results of operations, cash flows and change in equity.
There is appropriation and consistency in use of accounting policies. All related party transaction
was placed before the audit committee and have been reviewed and approved by the Boards of
Directors in accordance with the requirement of the code.
 External auditor
Externally it is audited by A. F. Ferguson & Co. In their opinion he is best of information given
to them like balance sheet, profit & loss, cash flow statement and statement of changes in equity
with their notes are conformed to approved accounting standards in Pakistan. External auditor
play a vital role for gives “True and Fair view” on company financial statements and to develop
their good image in the market by increase in share price. Moreover, the opinion of external
auditor on company’s financial statement creates shareholders trust on the company’s growth.
3. Financial Reporting:
The financial statements have been prepared under the historical cost convention, as modified by re-
measurement of certain financial assets and final liabilities at fair value and recognition of certain staff
retirement and other service benefits at present value.
The financial statements of Shell Pakistan are prepared according to the Companies Ordinance 1984, and
directives given by the SECP and the approved accounting standards applicable in the Pakistan. They
followed approved accounting standards compromise of such International Financial Reporting standards
Accounting Standards (IFRS) issued by the International Accounting Standard Boards (IASB) as are
notified under the provisions of ordinance.
1. Financial assets are classified as are held for trading if acquired principally for the purpose of
selling in the short term.
2. Loans and receivables are non-derivative financial assets with fixed and determinable payments
that are not quoted in an active market.
3. There were no held to maturity financial assets in the balance sheet.
4. Gain or loss from changes in fair values of monetary and non-monetary securities classified as
available for sale are recognized in other comprehensive income.
5. Stock-in-trade is valued at the lower of the costs, calculated on the first-in first-out basis, and net
realizable value.

5. Directors Benefits
1. Director Bonuses :
Aggregate amount charged in the financial statement in respect of the staff retirement benefit
schemes as follows:
2011 (Rupees’ 000) 2010
- In respect of pension and gratuity scheme 104,232 180,982
- In respect of provident fund 56,331 32,224
- In respect of post retirement medical benefit scheme 10,461 10,387
171,024 223,593

6. 2. Remunerations of Chief Executives, Directors and Executives:
____________________2011________________
Chief Executives Directors Executives
__________ (Rupees’000) __________
Short-Term Employees Benefits:
Managerial remuneration 35,769 51,922 866,922
(Including Bonus)
Housing:
Rent 5,540 - -
Utilities 847 1,032 24,144
Other items 108 270 6,468
Medical expenses _95_ _262_ 22,836
42,359 53,486 920,370
Post-employment Benefits:
Company’s contribution to pension,
Gratuity and provident fund _1,675_ 2,563 115,484
44,034 56,049 1,03,5854
No of person (s) at year end ___1__ ___3__ 389__
1. Shell Pakistan Ltd charged aggregate amount in financial statements for the year for fee to 6 Non-
executive Directors was Rs. 1,120 Thousands (2010: 5 Non-executive Directors Rs. 1,080
Thousands).

7. 2. The Chief executive, Executive Directors and some of the Executives were also provided with fee
use of company maintained cars and are entitled to certain benefits from Shell group. The Chief
Executive was also provided with the furnished accommodation.
3. Stock Options:
Shareholders Category No. of Shareholders No. of Shares Held
Directors
Mr. Farrokh K. Captain 1 469,816
Mr. Imran R. Ibrahim 1 45,084
Mr. Zaffar A. Khan 1 5,156
Mr. Badaruddin F. Vellani 1 125
Chief Executive Officer - -
Directors’ / CEO’s Spouses
Mrs. Samina Ibrahim 1 17,864
W/o Mr. Imran r. Ibrahim
Executives 3 2,435

8. Corporate Social Responsibility
Social issues are generally given more political, economic, and media emphasis in developing countries
than environmental, ethical, or stakeholder issues. The shell has comprehensive set of policies and
programs relating to the society which they integrate with their business operations and decision making
processes.
1- Training for Development:
Shell is providing corporate social responsibilities through giving training to the student. And also pay
attention on the government staff to give them training to protect the development and also to NGO’s
sector and private and school students.
2- Training for Employment:
 Shell provides corporate social responsibilities to train the public on different level to for
employment. The benefit of this opportunity is provided to the graduate students and diploma
holders.
 For their own employees there is Health Safety Environment standards in the country to get the
complete control company want to train their employees so that in case of emergency it is helpful.
3- Road Safety:
 The responsibility of shell to provide road safety to their employee families and their citizens.
 The Social Investment portfolio at Shell is aligned with three broad global thematic areas:
Enterprise Development, Road Safety and Access to Energy & Education.
 It has conducted a number of Road Safety related campaigns with stakeholders in the public and
private sectors.
 Shell also hosts the Shell Eco-marathons around the globe where student teams design, build and
race ultra fuel efficient cars.
4- Life Skills:
 The other corporate social responsibility of the shell is to develop personal youth.
 Under the corporate social responsibility the social environment is most important to protect the
environment and manage the desirable resources.
 They respect the people and made development projects for them to protect and safeguard.

9. 5- Concern for environment:
 Shell contributes to sustainable development by helping the world meet growing energy
needs in economically, environmentally and socially responsible ways. .
 Sustainable development for Shell also means benefitting local communities it works in,
reducing the impact its operations have on the environment, adding business value to
customers and business partners, and developing and creating opportunities for staff.
Internal Controls and Financial Control
Internal controls:
Internal controls are methods or procedures adopted in a business to:
 Safeguard its Assets
 Ensure financial information is accurate and reliable
 Ensure compliance with all financial and operational requirements
 And generally assist in achieving the business objective
 To improve the communicational barriers among management and field employees
 To adopt the upgraded technology for purification of crude oil into different products (high speed
diesel, Kerosene oil, High octane diesel, Petrol etc) and also produce By-product from real
products.
 Better environment culture in the organization with highly professional management team.
Statement of Compliance with code of conduct:
1. The company continues to encourage effective representation of Independent non-executive
Directors and Directors representing minority interest on its Board of Directors. At the present,
the Board includes five Independent non-executive Directors, two of whom represent minority
shareholders.
2. The Directors have confirmed that none of them is serving as a director in more than ten listed
companies, including this company.
3. To the best of our knowledge all resident directors of the company are registered tax payers and
none of them has defaulted in payment of any loan to a banking company, a DFI or NBFI or
being a member of Stock Exchange, has been declared as a defaulter by that stock exchange.
None of the Director or their spouse is engage in the business of stock exchange.

10. 4. The Board has adopted the vision/ mission statement and overall corporate strategy and has
formulated significant policies of the company.
5. The board met at least once in every quarter and all its meetings were presided over by the
chairman.
6. All the powers of the Boards have been duly exercised and decision on material transaction
(including appointment and remuneration) and terms and conditions of employment of the CEO
and other executive directors have been taken by the Board.
7. No change occurred in the office of the CFO and company secretary during the year under
review.
Financial Controls:
1. Trade mark and manifestations fees and Global Infrastructure Desktop charges are based on the
agreement entered into by the company with the Shell Group of Companies.
2. Expenses recovered from or charged by related parties are based on actual charged by or
recovered from the related parties.
3. Capital expenditures contracted for but not incurred as at September 30, 2011 amounted to
approximately Rs. 283,794 thousands.
4. Commitment for rental for assets under operating lease agreements as at September 30, 2011
amounted to Rs. 2, 827, 198 thousand.
5. Letter of credits and bank guarantees outstanding as at September 30, 2011 amounted to Rs.
3,309,313 thousand.
6. The accumulated levy up to September 30, 2011 amounted to Rs. 69,216 thousand.
Risk Management Profile
The company activities are exposed to be numerous financial risks namely credit risk, foreign exchange
risk, interest rate risk and liquidity risk. The company finances its operations through equity, borrowings
and management of working capital with a view of maintaining appropriate mix between various sources
of finance to minimize risk and provide maximum return to shareholders.
Credit Risk
Credit risk represents the accounting loss that would be recognized at the reporting date if counters parties
failed completely to perform as contracted. Credit risk arises from cash equivalents and deposits with
banks and financial institutions, as well as credit exposures to customers, including trade receivables and

11. committed transactions out of financial assets aggregating Rs. 7,509,734, the financial assets subject to
credit risk amount to Rs. 7,495,935 Thousands.
Market Risk
Market risk is the risk that fluctuates as a result of changes in market interest rates, foreign exchange
rates, and change in market sentiments, speculative activities, supply and demand of securities and
liquidity in the market.
i). Currency Risk
Currency risk is the risk that fair value of future cash flow of financial instruments will fluctuate because
of changes in foreign exchange rates. Foreign currency risk arises where payable exists due to imports of
goods transactions with foreign related parties as well as trade receivables from foreign related parties.
The company primarily has foreign currency exposures in US Dollar (USD), Great Britain Pound (GBP)
and Euro (EUR).
ii). Interest Rate Risk
The company analysis its interest rate risk on regular basis by monitoring existing facilities and market
interest rate. At Dec 31, 2011, if interest rate on company’s borrowings had been 1% higher/ lower with
all other variables held constant, post profit would have been for the year would have been lower/higher
by Rs. 102, 343 thousand (2010: Rs. 64, 912 thousand) mainly as a result of higher/ lower interest
exposure on variable rate borrowings.
iii). Price Risk
The company is not exposed to equity securities price risk as currently the company has no investment in
listed securities.
Liquidity Risk
The liquidity risk is the risk that an enterprise will encounter difficulties in raising funds to meet
commitments associated with financial instruments. Through the functions the company continuously
monitors its liquidity positions. Company ensures the availability of funds by maintaining commitment
with credit line. When the company manages its capital the prime objective is to safeguard its capital and
provide returns to shareholders and other stakeholders and reduce cost of capital. In order to maintain
capital structure, the company may adjust amount of dividend that is paid to shareholders and
stakeholders and issue new shares to reduce debts.

12. References:
Available on Demand
Further Queries:
1. Qasim Raza Qasimraza555@gmail.com
2. Faisal Hafeez faisal.malik89@hotmail.com