The Governance Gamble: Elliott’s Push for Change at Phillips 66

In the high-stakes world of corporate governance, few battles capture the tension between activist investors and entrenched management like Elliott Management’s 2025 proxy contest at Phillips 66 (NYSE: PX). Shareholders of the midstream and refining giant face an unprecedented choice: back Elliott’s radical reforms to shake up the board and operations or side with Phillips 66’s defense of its governance structure. The outcome could redefine the company’s trajectory—and its stock’s value.

Elliott’s Bold Reforms: A Catalyst for Change or a Power Grab?

Elliott, the influential activist fund behind the “Streamline 66” campaign, has staked its reputation on overhauling Phillips 66’s governance. Its primary demand is the election of four independent directors—including Nigel Hearne and Howard Ungerleider—to a board currently led by CEO Mark Lashier, who also serves as chairman. Elliott argues this dual role has fostered a “culture of complacency,” citing Phillips 66’s failure to meet its $14 billion mid-cycle EBITDA target by 2025.

The firm’s second pillar is an annual resignation policy, a non-binding proposal requiring directors to submit to yearly re-election. Elliott frames this as a voluntary mechanism to enhance accountability, bypassing the need for a shareholder vote requiring 80% supermajority approval—a threshold it deems prohibitively high.

But Elliott’s vision comes with risks. reveal a company struggling to sustain growth. While EBITDA has fluctuated between $8 billion and $12 billion since 2020, the 2025 target remains elusive, with refining margins and operational inefficiencies cited as key drags. Shareholders must weigh whether governance changes can reignite growth or if Elliott’s push is a distraction.

Phillips 66’s Defense: Legal and Ethical Concerns

Phillips 66 has fired back, accusing Elliott of conflicts of interest and legal overreach. The company highlights ties between Elliott’s ally Gregory Goff and CEO Lashier, citing Goff’s undisclosed financial arrangements and his firm’s purchase of Phillips 66 shares during the proxy battle. Phillips 66 also disputes Elliott’s legal footing, arguing the annual resignation policy violates Delaware law by effectively declassifying the board without the required shareholder vote.

Legal experts have sided with Phillips 66, warning directors who adopt such a policy could face breach of fiduciary duty claims. This raises a critical question: Could Elliott’s reforms destabilize the company’s governance structure and expose it to lawsuits?

The CITGO Sale and Strategic Uncertainty

At the heart of the debate is the CITGO sale process, which Phillips 66 must complete by July 1, 2025. Elliott claims the company has been opaque about the process, while Phillips 66 accuses Elliott of interfering via Goff’s entities. The sale’s outcome is pivotal: CITGO contributed nearly 15% to Phillips 66’s 2023 EBITDA. A delay or unfavorable terms could amplify financial pressures, making governance reforms more urgent—or more risky.

Shareholder Crossroads: Voting and Beyond

Shareholders must cast ballots via GOLD proxy cards (Elliott) or WHITE cards (Phillips 66) by the May 21 annual meeting. While Elliott’s proposals are non-binding, their success hinges on signaling shareholder sentiment. Historical data shows that activist campaigns succeed when they align with clear underperformance: . Here, Phillips 66’s missed EBITDA targets and stagnant stock price since 2021 may favor Elliott.

Yet legal and operational risks loom. If the annual resignation policy is deemed illegal, the board could face costly litigation. Meanwhile, the CITGO sale’s resolution could either resolve uncertainties or deepen them.

Conclusion: A High-Wire Act for Shareholders

The Elliott-Phillips 66 clash epitomizes the tension between governance reform and operational stability. Elliott’s case rests on its ability to demonstrate that structural changes will unlock value—a tough sell given Phillips 66’s complex refining and midstream assets.

Financially, shows it has underperformed competitors, supporting Elliott’s claims. However, its debt-to-equity ratio of 0.4x (as of Q1 2025) and dividend yield of 4.2% suggest management has prioritized stability.

If shareholders side with Elliott, they risk legal and operational disruptions but gain a chance to reset governance. A Phillips 66 victory would preserve continuity but leave investors questioning whether complacency will persist.

In the end, this is a referendum on whether corporate governance can drive value in a mature energy sector—or if it’s a sideshow to bigger operational challenges. The answer will shape not just Phillips 66’s future, but the playbook for activist campaigns in an era of heightened shareholder activism.

Disclosure: This analysis is based on publicly available information and does not constitute investment advice.