Tags: Hess | proxy | board | fight

Hess Seats 3 Activist-Backed Directors, Ends Proxy Fight

Thursday, 16 May 2013 12:37 PM

Hess Corp. will put three directors backed by hedge fund Elliott Management onto its board, settling a months-long feud over the oil company's governance and long-term strategy.

Since Elliott started making its case in January for change at Hess, the company has announced plans to become a pure play exploration and production company by selling or exiting a number of businesses and stripping long-time Chief Executive John Hess of his chairman duties.

In exchange for the three board seats, Elliott supported the election of five independent directors nominated by Hess. Shareholders were set to vote on competing slates of directors at the Hess annual meeting on Thursday.

Hess' new board will continue to have 14 directors, Hess and Elliott said in a joint statement on Thursday. Three incumbent directors will step down in order to make room for the Elliott directors, but it is yet to be determined which directors will leave, according to a Hess spokesman.

The company's chairman will be decided by the new board, according to an Elliott spokesman.

"We believe this is in the best interests of Hess," Chief Executive John Hess said, speaking at the company's annual meeting. "Hess's future has never been brighter."

The executive said that new directors do not presage a change in direction on the company's latest growth plan announced in March, which focuses the company on its E&P operations.

"It was pretty much universally accepted. We'll continue on that execution," Hess said.

Hess shares rose nearly 20 percent from the time Elliott's stake was announced in January through Wednesday's close. They were down 2.8 percent at $68.59 in midday trading on the New York Stock Exchange.


Elliott, which owns a 4.5 percent stake in Hess, has been clamoring for change since January, when it launched a campaign to seat the new directors and pitched a plan to break up the company. The hedge fund railed against the incumbent board, alleging that directors were too closely tied to Chairman and Chief Executive John Hess and that poor oversight had led to underperformance.

Hess Corp. has since announced plans to sell or exit its retail gasoline, marketing and trading businesses. It has also agreed to separate the chairman and chief executive roles and de-stagger its board.

Including the three incumbent directors who will be stepping down soon, nine incumbent directors have already left the Hess board this year.

"This is a very qualified, deeply experienced, highly independent board. There is going to be a new era of oversight and accountability and we think that's going to portend great returns for shareholders," Elliott senior portfolio manager John Pike said in an interview.

Elliott nominees Rodney Chase, Harvey Golub and David McManus will join Hess's board. That is in addition to the five Hess nominees: John Krenicki, Fredric Reynolds, William Schrader, Kevin Meyers and Mark Williams.

Two of the three Elliott directors will be appointed to a five-member nominating and corporate governance committee, and the third will join the company's compensation committee.

"The independence of the board is a plus," said Argus Research analyst Phil Weiss. "Hess still has relatively high family ownership for a company of its size. With an independent director and other changes to the board, the role is somewhat diminished as there are more checks and balances in place."

On Tuesday, in an attempt to settle the proxy contest, Elliott Management proposed that all of its nominees and all Hess Corp. nominees be part of a new board. A day earlier, the fund rejected Hess' offer of two board seats.

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Hess Corp. will put three directors backed by hedge fund Elliott Management onto its board, settling a months-long feud over the oil company's governance and long-term strategy.
Thursday, 16 May 2013 12:37 PM
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