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Former Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation Aubrey McClendon talks on his mobile phone as he walks through the French Quarter in New Orleans, Louisiana in this March 26, 2012 file photo. (Sean Gardner/Reuters)
Former Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation Aubrey McClendon talks on his mobile phone as he walks through the French Quarter in New Orleans, Louisiana in this March 26, 2012 file photo. (Sean Gardner/Reuters)

BREAKINGVIEWS

Activist investors cut swaggering oil execs down to size Add to ...

Reuters Breakingviews delivers agenda-setting financial insight. Its global correspondents react to stories as they develop, delivering sharp and provocative commentary on big financial news as it breaks.

Activists are bringing oil executives back down to size. First they claimed the scalp of Chesapeake boss Aubrey McClendon for egregiously abusing his position. Now dissenting shareholders have all but ousted SandRidge’s Tom Ward and forced Nabors to cut pay. These are welcome victories in a sector notorious for big, mollycoddled egos.

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SandRidge looked a prime target for agitating shareholders, especially after activists had such success going after Chesapeake. The company has lost more than three-quarters of its value since going public in 2007 without changing its out-of-control pay and perks – from unneeded corporate jets to $150-million in payments to Ward to business given to his son’s company.

When investor TPG-Axon threw its first jabs, though, SandRidge asserted it did not need to yield any ground. It even warned, before recanting, that removing the boss would force a costly buyback of $4.3-billion of debt.

Now SandRidge has sent up the white flag. First, four directors nominated by TPG-Axon will immediately join the board. The company will complete a review of related-party transactions by boss Tom Ward by June 15. And if the board doesn’t fire Ward for cause by June 30, TPG gets one additional seat and control of the board – at which time it will give him the boot. The board has also promised to review strategy, capital expenditure and corporate costs.

Activists are clearly on a roll. Earlier this week, driller Nabors Industries stated it would restructure boss Anthony Petrello’s pay package after pressure from California Public Employees Retirement System and other pension funds. The company will pay Petrello $60-million to give up a lavish pay package – including uncapped bonuses based on a percentage of company cash flow above a certain threshold and $50-million in case he died or became incapacitated. Earlier this month, Hess decided to sell assets, nominate new directors and return capital after Elliott Management launched a campaign against the oil company.

There’s still work to be done. Elliott wants Hess to do more. And New York City’s comptroller has expressed doubts about Nabors’ board. The oil patch may be cleaner, but activists must keep up the pressure.

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