Hess Corp (NYSE:HES) is in a proxy fight to place five new board members who will support an investor activist Elliot Management. Chairman and CEO John Hess who inherited the corporation from his father naturally opposes. He thinks everything is just fine.
Elliot points out a lot of the independent directors have close ties to the Hess Family. The new lead independent director who until recently was an executor of the family’s estate. That does sound bad.
Elliot management wants to pay the directors cash bonuses in addition to base fees. The bonuses would be ties to how well the corporation’s stock was doing. Hess’s incumbent directors up for re-election are leaving the board. Hess has recruited several new outside nominees to run.
Only a portion of Hess directors stand for re-election each year, so a majority of its 14-person board isn’t at stake. Bad governance according to many experts. But who is asking?
Lets take a look at what some of the issues may be. If you look at individual Hess Board Members you will notice they are rather elderly. While grey hair and gravitas is quite becoming in the board room. You do need an energy level as well.
Nicholas Brady 81. Former Treasury Secretary. Former Chairman of Dillon Read & Co. Director of Franklin Templeton.
Robert Wilson 71 Former Vice Chair of Johnson and Johnson. Director of Charles Schwab.
Ernst von Metzsch 72 investor.
John Mullin 70 Former Managing Director Dillon Read.
Frank Olson 79 Director or Trustee of various Franklin-Templeton Mutual funds.
Thomas Kean 76 Former Governor of New Jersey. Director of Franklin Resources.
Edith Holiday 60. Former Assistant to President of United States and Secretary of Cabinet. Director or Trustee of various Franklin-Templeton Mutual Funds.
Craig Mathews 68 Former Vice Chair & COO Key Span.
Samuel Bodman III 73 Former Secretary of Energy and Deputy Secretary Treasury. chair and CEO of global Specialty Chemicals.
Risa Lavizzo-Mourey 57 President and CEO of Robert Wood Johnson Foundation.
Samuel Nunn Lawyer and for 24 years Senator for Georgia. sits on board of Coca Cola and GE.
James Quigley Newly appointed as of March 1, 2013. not much of a corporate profile provided.
Lots of high level politicians. Very strong Dillon Read and Franklin Templeton flavouring. Not too strong on the diversity of experience factor.
Activist investors have learned the art of leverage. 51% voting control is very difficult. But if you can control the board by other means that’s just as well.
Investors do not pay enough attention to the selection of directors. Otherwise Hess would not have been able to mix this particular concoction.
In a future post more on Hess proposal for new directors and who does Elliot Management favour.
George Gutowski writes from a caveat emptor perspective.