Hess to Strip CEO of Chairman’s Role After Annual Meeting
Hess Corp (HES)., the oil company that’s in a proxy battle with billionaire Paul Singer’s Elliott Management Corp., said it will strip Chief Executive Officer John B. Hess of the chairmanship after its annual meeting next week.
John Krenicki, a company nominee and former CEO of General Electric Co (GE).’s energy unit, will become chairman if he’s elected to the board at the May 16 meeting, New York-based Hess said in a statement today. The separation of the CEO and chairman roles will occur even if shareholders vote in favor of Elliott’s board nominees, Jon Pepper, a Hess spokesman, said today in an e-mail.
Elliott, the second-largest Hess shareholder, has accused John Hess of poor management and proposed five new board members to increase accountability. The company, which is seeking shareholder support for its own board-member changes, has announced asset sales this year that will yield $3.4 billion as it exits refining, gasoline retail and other units to become a pure oil exploration and production business.
Shareholders are “expressing a desire for better accountability, increased board oversight, and the adoption of best-in-class corporate governance practices,” John H. Mullin, Hess’s lead director, said in the statement. “We understand our shareholders’ views, and recognize that our corporate governance structure should have been improved sooner.”
Hess’s actions are the latest attempt to placate increasingly active energy-industry shareholders. Occidental Petroleum Corp. Chairman Ray Irani was forced to step down last week after almost three decades at the company as investors voted against him.
Transocean Ltd., owner of offshore oil rigs, is fighting board nominees from billionaire investor Carl Icahn and SandRidge Energy Inc. agreed to board changes after being challenged by shareholder TPG-Axon Capital Management LP.
Chesapeake Energy Corp. co-founder Aubrey McClendon was stripped of his chairmanship before stepping down as CEO last month.
“I don’t know how far-reaching the effect is, so close to the date,” Phil Weiss, an analyst at Argus Research in New York who rates the shares hold and owns none, said of Hess’s chairman announcement in a phone interview. “If they were very confident, they might not do this.”
Splitting the chairman and CEO roles at Hess is one of several items on the agenda for a vote next week.
“Hess has been the poster child for bad governance,” Quentin Koffey, a portfolio manager for New York-based Elliott, said in a phone interview today. “This is a last-ditch effort to change their image. Frankly, its disingenuous because it’s something they recommended against only weeks ago.”
The Laborers’ International Union of North America, a Hess shareholder, said it filed a proposal last November asking the board to separate the chairman’s role.
“We are pleased to hear that the company has adopted our proposal and we look forward to continuing to work with Hess leadership on good governance, executive compensation practices and other issues of mutual concern,” the union said in an e-mailed statement.
John Hess, 59, has been chairman and CEO of the company since his father, Leon Hess, retired in 1995. Leon Hess, a former owner of the New York Jets football team, formed the company in 1933 to deliver oil to residential customers near his home in Asbury Park, New Jersey, according to Hess’s website.
“They want to show they’re not as entrenched as Elliott made them out to be and will do whatever shareholders would prefer,” Fadel Gheit, an analyst at Oppenheimer & Co. in New York, said in a phone interview. He rates the shares at outperform, the equivalent of a buy, and owns none. “Even if you have the lead, you still play to protect the lead.”
To contact the reporter on this story: Jim Polson in New York at email@example.com
To contact the editor responsible for this story: Susan Warren at firstname.lastname@example.org