“BIG NEWS: Phillips 66 $PSX survives shareholder vote against Elliott: 2-2 split, sources tell @semafor. This despite ISS and GL both endorsing Elliott in its first ever US proxy vote. Prelim results released soon.”
11 replies (most recent on top)
It’s clear to me that so much of the investor class is ill - informed relative to what this whole process actually means, why it’s relevant, or what is in train at Phillips 66. And I do believe that is exactly what the powers that be at the company want. Plays into the existent plan.
First- if you blindly supported the white proxy, or blindly buy what ML & KM (from the ELT) and / or what board members tell you - or feel that the status quo is fine as long as you feel that it makes your job more secure - then don’t bother reading any further. You are entitled to that as a passive retail shareholder. And you are likely resistant to change, anyway. As my Grandmother, a school teacher from the Deep South would say: “Well, God bless your heart!” And good luck. I mean that sincerely.
To others on the retail investor side sincerely trying to understand and support the right thing to maximize your returns relative to this part of your portfolio - and who still have some questions for leadership - no matter which way you voted - I urge you to:
- Understand what a classified & staggered board is, what its designed to achieve (and prevent), and how Phillips 66 has structured it / layered it to keep more control; despite continually putting their own proposals forward to supposedly declassify the board……and why they are never ratified. The independent “Staggered Board Shenanigans at Phillips 66 ” article from last month by Yale Law Professor Macey is a very good one to read, and understand. Note that only 9pct of S&P 500 firms in the authors’ estimation go to such extraordinarily cumbersome lengths to maintain control of important levers related to the governance process.
- understand why you buy and/ or hold the Phillips 66 equity (post vesting or post when your return expectation has been met/exceeded). And what your time horizon is. Both from a realistic point of view. Sounds simple, but so many don’t do it (it’s a given that the blind followers don’t). A lot of smart folks can’t articulate just why they have so much of it in their holdings vs liquid alternatives. Once you understand that, find a couple of sources of independent equity / security analysis relative to Phillips 66 and other refiners and midstreamers in the sector. Despite chinese walls, etc and regulatory restrictions; bulge-bracket and larger sell side shops still can be compromised and fall into the category of cheerleaders (although some are very good); find quality smaller, independent or buy-side analysis that yes, you probably have to pay a little bit of $ for. There is a reason that the head of IR at Phillips 66 (who is very talented, despite what some folks say here) was lifted by Phillips 66 originally from the buy side, and not a bulge bracket bank. Pay attention to what insiders do at the top of the company-it’s easy to see.
- Understand what a Proxy process at a public company truly is, and what it’s designed to achieve relative to the governance process. And why proxy challenges (particularly from the likes of/types of investors like Elliott) are often settled before an actual vote/annual meeting.
- Relative to the above, and other general board knowledge there are lots of good independent board education sources out there, and quite a bit of this information is available for free. Emeritus, Board Effect, CFO.org, Corporate Governance Institute, National Association of Corporate Directors and many others have quite a bit of free documents and research papers out there. Even the consulting firms like Deloitte, EY, McKinsey and KPMG (who sadly, often don’t practice what they preach relative to governance-so tread lightly relative to the consultant stuff online - keep it VERY high level from that end).
Don’t let either Phillips 66 leadership, or the blind followers mentioned in the first paragraph (like the poster who said “it’s just two seats” pooh-pooh what happened here; it’s extraordinary. It just about never happens. And took a Herculean effort by Elliott to achieve, even given Phillips 66’s poor performance vs peers that they continue to deny. They (Elliott) likely aren’t going anywhere soon; this isn’t a situation like BH & Buffett where they can be paid to go away via large scale buyback for obvious reasons. This was absolutely a mandate for change, particularly given the long sitting Phillips 66 director (ex CoP, with midstream experience) rejected by shareholders.
And it’ll happen, in my opinion. And will come around again. Anyway, governance is better at Phillips 66 today than it was before the vote.
X, formerly known as twitta
The board isn’t split. 2 seats of 12.
Yeah, the person saying that it’s a win for PSX doesn’t know what they are talking about. It’s a statement that FORCED change is needed and desired by shareholders, and that what PSX is doing/has done is not nearly enough. They aren’t ready for a full blow up, but do want a significant changes to the strategy as it’s weak, and they aren’t buying it.
The other poster nailed it. This is probably the worst case scenario, unless it works out to an Engine #1 scenario at XOM or something; that was also a case where a partial slate was elected and XOM was forced to change tack relative to capital allocation-and did so.
The so called “trolls” aren’t going away in this case. Will likely get worse, id think. More short term uncertainty.
Market clearly hates that Elliott was not successful.
Another battle looms in 2026
Sell sell sell
To the commenter saying this is a win: no, it is not. It could have been a win for P66. Now, you have a split board. This is why the market is reacting as it is - that uncertainty and split signals rough times ahead. A clear path would have been better. Elliott put up a weak slate, especially Coffman, but they still gained two seats. Don’t think anyone really wins in the near term with this outcome.
Will trolls on this board finally go back into hiding? 2-2 split is a WIN for P66 all things considered.
Current board director Bob Pease, who was previously backed by Elliott in an earlier settlement with Phillips 66 before the activist investor turned against him, and Nigel Hearne, the chief operating officer of Harbour Energy, were likely to be Phillips 66 nominees elected to the board, the people added.
Phillips 66 shareholders voted in favour of two Elliott-backed directors. Former ConocoPhillips executive Sigmund Cornelius and ex-Targa Resources executive Michael Heim — were probably set to be added to the board as a result of the vote, according to people familiar with the matter.”
2 seats to Elliott
https://www.ft.com/content/17ce84c5-030e-4727-a1ac-3659fff4cfbf