* Elliott supports Hess' five board nominees
* Elliott had earlier proposed a slate of five directors
* Three more incumbent Hess directors stepping down
* Board elects Mark Williams as chairman
By Michael Erman and Erwin Seba
NEW YORK/HOUSTON, May 16 Hess Corp
placed three directors backed by hedge fund Elliott Management
on its board on Thursday, settling a months-long feud over the
oil company's governance and long-term strategy.
The agreement came hours before shareholders were set to
vote on competing slates of directors at the Hess annual
Since Elliott started making its case for change in January,
Hess has announced plans to become a pure play exploration and
production (E&P) company by selling or exiting a number of
businesses and stripping longtime chief executive John Hess of
his role as chairman.
The board elected former Royal Dutch Shell Plc
executive Mark Williams as chairman, passing over Hess'
In exchange for the three board seats, Elliott supported the
election of five independent directors nominated by Hess.
Hess' new board will continue to have 14 directors, Hess and
Elliott said in a joint statement on Thursday. Three incumbent
directors stepped down in order to make room for the Elliott
directors, Hess said.
"We believe this is in the best interests of Hess," John
Hess said, speaking at the company's annual meeting in Houston.
"Hess' future has never been brighter."
The chief executive said that new directors do not presage a
change in the company's latest growth plan announced in March,
which focuses Hess on its E&P operations.
"It was pretty much universally accepted. We'll continue on
that execution," John 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 2.4 percent at $68.91 on Thursday afternoon 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 CEO John Hess and that poor oversight had led to
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.
Directors Samuel Bodman, Craig Matthews, and Ernst von
Metzsch are stepping down for the Elliott-nominated directors,
bringing the number of incumbent directors who have left Hess'
board this year to nine.
"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' board. That is in addition to the five
Hess nominees: Williams, John Krenicki, Fredric Reynolds,
William Schrader and Kevin Meyers.
Hess said last week that if its nominees were elected to the
board, former General Electric Co vice chairman Krenicki
would become chairman of the company. But the board turned to
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.