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Investing.com -- Shares of Phillips 66 (NYSE:PSX) fell sharply by 13.6% today following a public dispute with Elliott Investment Management L.P. ("Elliott"), which manages funds with over $2.5 billion invested in the company. Elliott has called for significant changes to the Phillips board, citing long-term underperformance and poor governance practices.
Elliott’s letter to shareholders emphasized the urgency for board restructuring to address Phillips’ consistent lag in operating performance compared to industry peers Valero Energy (NYSE:VLO) and Marathon Petroleum (NYSE:MPC), which have outperformed Phillips by 138% and 188%, respectively, over the past decade.
The investment firm has proposed a "Streamline 66" plan, which it believes could propel Phillips’ stock price above $200 per share. This strategy includes simplifying the company’s portfolio, reviewing refinery operations, and enhancing management oversight. Elliott has also nominated four director candidates with industry experience, aiming to inject new perspectives and expertise into the board.
These nominees include Sigmund Cornelius, former CFO at ConocoPhillips (NYSE:COP); Michael Heim, founder of Targa Resources (NYSE:TRGP); Brian Coffman, former executive in charge of refining for Andeavor and Motiva; and Stacy Nieuwoudt, a senior analyst with a background in energy and industrials at Citadel.
Furthermore, Elliott has pushed for a governance change that would require all directors to commit to one-year terms and face election annually, aligning with practices at nearly 90% of S&P 500 companies. This proposal contrasts with the company’s repeated but unsuccessful attempts to de-stagger board elections, hindered by an 80% supermajority voting requirement.
Elliott’s actions and the subsequent stock movement highlight shareholder concerns about Phillips’ direction and governance, potentially setting the stage for a contentious annual meeting scheduled for May 21, 2025. The firm’s aggressive stance and detailed plan suggest a critical juncture for Phillips 66 as investors weigh the merits of Elliott’s proposals against the current board’s strategy.
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