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Lundin should learn from Yara

Chairman Ian Lundin flatly refused an independent inquiry into Lundin Petroleum, which is accused of serious human rights violations in Sudan. Not very smart, according to KLP, who think that the Swedish oil company should learn from Yara.

Criticism of the Swedish oil company, Lundin Petroleum, is growing following repeated refusals to initiate an independent inquiry into the role the company played when government or paramilitary forces displaced thousands of people to make way for oil extraction operations by, among others, Lundin Petroleum. The Dutch human rights organisation, Ecos, claims in a report that 10,000 people were killed and 200,000 forcibly displaced in the area, now in South Sudan, where the oil extraction was to take place. The Swedish authorities have long since launched their own inquiry into whether Lundin, where Foreign Minister Carl Bildt previously sat on the board, can be linked with human rights abuses.

Lundin Petroleum management has denied any connection with the events concerned but calls for an independent inquiry into the company’s role have nevertheless increased. Since Christmas, a number of the larger shareholders have considerably reduced their stakes in the company and the share price as fallen by 14% since New Year.

Two weeks ago Lundin boss, Ashley Heppenstall, answered thus to calls for an investigation:

“Trust us or sell your shares,” he said to Dagens Industri.

“Liar”

At Thursday’s General Meeting in Lundin, the debate became heated after Swedish insurance company Folksam put forward a proposal for an independent investigation of the company and obtained support from 21% of the shareholders. The Lundin family, which controls over 31% of the shares voted against. In Norway, following up the proposal would require no more than 10% shareholder support, whereas in Sweden a straight majority is required.

When the debate was opened to the floor, prize-winning journalist Kerstin Lundell, who has written a book about Lundin’s role in Sudan, rose to speak. She was shouted down by Chairman Ian Lundin, who called her a liar and ordered that the microphone be taken from her. Seconds later, the microphone was ripped out of Lundell’s hands.

“We are innocent. In this country, everyone is innocent until the opposite is proven,” said Lundin.

Should reconsider

KLP was among a number of shareholding institutions to vote for the Folksam proposal. As DN reported on Saturday, it is also likely that the Oil Fund was among those giving backing to the investigation.

“The main argument for supporting the proposal is that we believe it would send a strong message from the company that they take the issue seriously. An independent inquiry would show that they are doing what they can to protect shareholders’ assets and maintain a good reputation,” says Jeanett Bergan, head of responsible investments at KLP.

She thinks Yara provided a good example when the company itself initiated an independent inquiry into corruption.

“Yara has shown at a high level that it wishes to get to the bottom of the matter. This sends an important signal. Lundin should learn from Yara,” says Bergan.

In Saturday’s DN, SV’s Snorre Valen proposed that only oil companies with clean records be allowed access to the Norwegian continental shelf. Bergan thinks this would be difficult to administer:

“We should demand sound business practice and be critical when different issues arise. Both shareholders and purchasers should have systems for monitoring and maintaining dialogue with companies but any mandatory regulations would be difficult,” she says.

To date, Lundin management, with the Lundin family at its head, have flatly refused to have an independent inquiry. They should reconsider this position in consideration of shareholders’ assets and the company’s reputation. So says Jeanett Bergan, Head of Responsible Investments at KLP.

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