Campaign Overview

Activist investor Elliott Management is gaining traction in its ongoing battle with Phillips 66, an oil refining company, as influential proxy adviser Institutional Shareholder Services (ISS) has endorsed all four of Elliott’s board nominees. This recommendation positions Elliott advantageously ahead of the company’s anticipated annual meeting later this month.

Support from Proxy Advisers

On Monday, ISS publicly advised Phillips 66 shareholders to vote for Elliott’s candidates rather than the company’s own nominees. Notable individuals among Elliott’s nominees include:

• Brian Coffman, former ConocoPhillips executive
• Sigmund Cornelius, former ConocoPhillips executive
• Michael Heim, former Targa Resources executive
• Stacy Nieuwoudt, ex-Citadel energy analyst

This recommendation follows a prior endorsement from another proxy adviser, Glass Lewis, which supported three of Elliott’s nominees and one from Phillips 66.

Corporate Governance Concerns

In its report, ISS raised critical points regarding the board’s governance, noting that despite recent changes, significant industry perspectives appear absent. The report emphasized, “the board is not willing to exercise independent oversight of management.”

ISS criticized the staggered board elections and questioned the independence of current board member Bob Pease after his vote favored the decision to consolidate the roles of chairman and CEO.

Elliott’s Investment Strategy

Elliott Management, which initially invested in Phillips 66 in 2023, has since increased its stake to $2.5 billion, expressing dissatisfaction with the company’s governance and performance metrics. The investment firm has pressed for asset sales, performance improvements at the refiner’s core business, and a comprehensive overhaul of corporate governance practices.

Market Impact and Outlook

As of the last trading session, shares of Phillips 66 were valued at just over $118, bringing the company’s market capitalization to approximately $45 billion. Elliott’s campaign highlights the oil refiner’s underperformance in comparison to competitors like Valero Energy and Marathon Petroleum.

The upcoming vote at the annual meeting on May 21 is crucial, as only four of the 14 board positions are up for nomination due to the staggered election process.