Hess Continues Push for Board Nominees in Proxy Fight

Hess Corp. stepped up an ongoing push for its director nominees Monday after two proxy advisory firms last week recommended shareholders back the board slate put forth by dissident holder Elliott Management Corp.

Hess's five director nominees released a letter to shareholders defending their role, while Hess separately accused proxy advisory firm Institutional Shareholder Services Inc. of having an "institutional bias toward activist shareholders," an allegation the firm denied.

The proxy battle between the oil company and Elliott, a hedge fund that owns about 4.52% of Hess's shares, has gone on for months.

Elliott has argued Hess's board has sat by, allowing management to pursue costly and ineffective strategies that have eroded the company's value. Meanwhile, Hess has said it is on track to transform itself into a more focused exploration and production company, and Elliott is pursuing a destructive and flawed plan to break up the company.

Hess shareholders will vote on the board composition at the annual meeting May 16 in Houston.

In Monday's letter, the Hess nominees solicited the support of shareholders, saying Elliott's characterization that Hess's board members are required to support the company's strategic plan as a precondition for serving on the board "is simply false."

In response, Elliott Management called Hess's plea "desperate," adding, "rather than address the real operational and governance issues that have plagued the company for nearly two decades, Hess has decided to attack the independent shareholder advisory services."

Meanwhile, Hess said ISS has "adopted a pervasive policy of bias in favor of the activist," citing a recent New York Times survey that shows the advisory firm has backed the insurgent slate in 73% of cases so far in 2013.

Hess cited prior proxy contests in which ISS has backed the insurgent slate, including battles between AOL Inc. and Starboard Value LP, Motorola Solutions Inc. and Carl Icahn, Actelion Ltd. and Elliott, and Target Corp. and Pershing Square Capital Management.

ISS disputed the charge, saying it has recommended shareholders vote in favor of management nominees in 45% of cases since 2011 and only fully backed a board slate from a dissident shareholder in 12% of circumstances.

In its report last week, ISS cited the company's "significant underperformance," and what it said are signs that the board's "new-found attentiveness to the business is a response to the proxy contest," adding Hess's transformation appears to have occurred only on the surface and a slate of board members already aligned with the company's management isn't in the best position to oversee the company.

Two other proxy firms have weighed in. Glass Lewis & Co. on Wednesday sided with the dissidents, concluding that while the shift toward becoming a pure exploration and production company may be the right one, "we find little cause to suggest that the current board is best suited to oversee that change."

Egan-Jones Proxy Services, however, said Hess's efforts at transformation are translating into lower spending and driving production growth, and the dissidents haven't offered a persuasive strategy.

Copyright (c) 2013 Dow Jones & Company, Inc.

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