Because the program was compiled using Cygwin, you have to use Cygwin-specific ways of formatting the path. This means you have to reverse the '\' symbol in your directory path to '/', e.g.:

C:/somepath/somefolder/

If for some reason that doesn't work, use the 'cygdrive' feature like this:

cygdrive/c/somepath/somefolder/

Put it together with the -d switch and you get:

-d "C:/somepath/somefolder/" or -d "cygdrive/c/somepath/somefolder/" (Quotes are optional but recommended.)

In fact, you should always use this syntax with shntool if you want to refer to any directory or file outside of the working directory.

Hope this helps.