Activist investor Elliott Management has secured support from influential proxy adviser Institutional Shareholder Services (ISS) for all four of its board nominees in a campaign against oil refiner Phillips 66. This development could provide Elliott an advantage in a shareholder proxy battle anticipated to culminate at Phillips 66’s annual meeting later this month.
ISS, which advises major money managers like BlackRock on proxy voting, recommended that Phillips 66 shareholders support Elliott’s nominees over the refiner’s candidates. Elliott’s nominees include former ConocoPhillips executives Brian Coffman and Sigmund Cornelius, former Targa Resources executive Michael Heim, and former Citadel energy analyst Stacy Nieuwoudt.
The ISS report stated that despite a reshaped board since the pandemic, key industry perspectives have been overlooked and there is significant evidence that the board is unwilling to provide independent oversight of management.
In a significant struggle for Elliott, they have advocated for Phillips 66 investors to support demands for the Houston-based refiner to sell assets, enhance refining business performance, and improve corporate governance.
Elliott, having first invested in Phillips 66 in 2023, increased its stake to $2.5 billion earlier this year, expressing dissatisfaction with the refiner’s failure to fulfill promises, including appointing two independent directors. Only Bob Pease, a former Cenovus Energy executive, was added to the board.
ISS’s recommendation follows another proxy adviser, Glass Lewis, endorsing three of Elliott’s nominees and one of Phillips 66’s candidates. Shareholders are set to vote at the annual meeting on May 21. Only four of the 14 board positions are available for nomination due to staggered elections over a three-year period.
ISS raised concerns about Phillips 66’s corporate governance, specifically criticizing the staggered board elections and questioning Pease’s independence after he supported the decision to appoint CEO Mark Lashier as chair.
The board’s decision to merge the chair and CEO roles highlighted the disconnect with shareholders, according to ISS, indicating a strong need for more independence on the board. Elliott was described as presenting a compelling case for change.
As of Thursday, Phillips 66 shares were just over $118, with a market value of $45 billion. Elliott has pointed out the company’s recent performance lagged behind industry peers Valero Energy and Marathon Petroleum.
Elliott’s previous proxy battles, including those with Hess and Southwest Airlines, were resolved last minute before any vote occurred. Elliott declined to comment, and Phillips 66 and ISS did not immediately respond to requests for comment.
