Elliott wins support in Phillips 66 fight
It had been more than a decade since influential proxy adviser Institutional Shareholder Services backed a full slate of board directors nominated by an activist investor in a fight against a large-cap US company.
Twelve years ago, Elliott Management notched such a victory in its campaign against oil and gas company Hess.
Late on Monday, Elliott repeated the feat with ISS encouraging Phillips 66 shareholders to vote in favour of the hedge fund’s four board nominees ahead of a showdown at the oil refiner’s annual meeting later this month.
And the similarities between the two campaigns don’t end there.
Both were overseen by veteran Elliott portfolio manager John Pike, and the campaigns called for major asset divestments. In Hess’s case, the company settled in the twilight hours before a shareholder vote. Perhaps that’s the fate that now awaits Phillips 66.
In its report, ISS took aim at Phillips 66’s poor performance compared with industry rivals, and subpar corporate governance, including a decision to hand chief executive Mark Lashier the role of chair and the company’s failure to overhaul its staggered board election model.
ISS said Elliott presented a “compelling case for change” as it endorsed the hedge fund’s nominees.
Emboldened by the endorsement of ISS as well as Glass Lewis, another key proxy adviser, Elliott said “it is clearer than ever that urgent and meaningful change is needed in the Phillips 66 boardroom”.
On Tuesday, Phillips 66 barked back.
It said: “Elliott is seeking rapid, irreversible change in pursuit of a short-term thesis that would introduce significant risks to Phillips 66 shareholders.”
The next twist in the tale might be a last-minute settlement between Elliott and Phillips 66, to draw a close to one of the most volatile campaigns in years.
If a settlement does not materialise, Phillips 66 and Elliott will be heading into the unknown.
The activist investor would then face the first full-blown proxy vote against a major US corporation in its history.