Phillips 66's Governance Crisis: Elliott Management's Bold Stand for Shareholder Value
15min read Elliott Management, one of the most influential activist investors in the energy sector, has reignited a high-stakes governance battle with phillips 66 (NYSE: PSX), a major U.S. refiner and midstream operator. In a scathing May 2 shareholder letter, Elliott accused the company of fostering a “culture of complacency” under CEO Mark Lashier, whose dual role as chairman and CEO has centralized power and stifled independent oversight. The letter, paired with a proxy contest and legal action, underscores a deepening rift over governance, operational performance, and shareholder rights that could redefine Phillips 66’s trajectory.
The Governance Fault Lines
Elliott’s critique centers on three critical governance failures:
Rejection of Independent Oversight: Despite being a top-five shareholder since 2023, Elliott alleges Phillips 66 has refused to engage with independent directors. The firm proposed 10 candidates for two board seats in 2024, including five former energy CEOs, but Phillips 66 only added one—Robert Pease—and failed to fill the second seat.
Legal Battles Over Transparency: After Phillips 66 declined to disclose details about its 2025 director elections, Elliott filed suit in Delaware’s Court of Chancery to compel transparency. The company later nominated two directors without consultation, which Elliott calls a “token gesture” to avoid accountability.
Stagnant Board Structure: Phillips 66’s classified board requires an 80% shareholder vote to declassify—a hurdle Elliott calls “out of step with best practices.” The firm’s proposed non-binding resolution to adopt annual director elections was dismissed by Phillips 66 as “illegal,” despite such policies being common and voluntary.
The stakes are high. Phillips 66’s EBITDA has lagged its $14 billion mid-cycle target, a shortfall Elliott attributes to poor decision-making under Lashier’s leadership. Meanwhile, reflects investor skepticism, with PSX down 18% year-to-date compared to the sector’s 9% decline.
The Nominees and the Push for Accountability
Elliott’s four nominees—Brian Coffman, Sigmund Cornelius, Michael Heim, and Stacy Nieuwoudt—bring deep industry expertise:
- Coffman led refining at Motiva and ConocoPhillips, managing assets now part of Phillips 66.
- Cornelius served as ConocoPhillips’ CFO, offering strategic finance insights.
- Heim co-founded Targa Resources, a midstream leader.
- Nieuwoudt, a former BlackRock executive, provides investor perspective.
The letter also rebuts Phillips 66’s April 24 rebuttal, addressing claims of nominee coercion, transparency violations, and conflicts of interest. For instance, Elliott clarified that it paid nominees up to $100,000 (to be reinvested in PSX stock), a standard practice to incentivize participation, and denied undermining independence. It also dismissed accusations against Gregory Goff—a Phillips 66 investor and Elliott ally—as “baseless,” emphasizing his 40-year energy career and independent support.
The Broader Implications
Elliott’s campaign highlights a growing tension in energy governance. Yale’s Jonathan Macey and Dartmouth’s Mark DesJardine, cited in the letter, argue that Phillips 66’s classified board structure is indefensible, as directors could voluntarily adopt annual terms without legal hurdles. Meanwhile, Lashier’s focus on “empire-building”—evidenced by his 2024 remark, “We can be bigger”—has drawn criticism for prioritizing scale over shareholder returns.
The proxy battle’s outcome hinges on shareholder votes. shows a pattern of declining support for management, with 45% of shareholders opposing classified board terms in 2024. This trend suggests Elliott’s nominees could gain significant backing, especially if investors align with its push for operational and governance reforms.
Conclusion: A Crossroads for Phillips 66
Elliott’s letter paints Phillips 66 as a company at a crossroads: either embrace accountability and unlock value through governance overhauls or risk prolonged underperformance. The data underscores the urgency:
- Phillips 66’s EBITDA is $2.5 billion below its 2025 target.
- Its stock underperforms peers, even as refining margins have rebounded.
- Governance experts and shareholders increasingly reject structures that insulate leadership from scrutiny.
With the proxy vote looming, investors face a choice between Lashier’s centralized model and Elliott’s vision of independent oversight. The outcome could set a precedent for energy firms balancing growth with shareholder interests—a lesson that may ripple far beyond the refinery gates.
