Phillips 66’s Proxy Fight: A Battle for Control or a Conflict of Interest?

Investors, buckle up. Phillips 66 (PSX) is in the middle of a high-stakes proxy battle that could reshape the energy sector—and your portfolio. The company is urging shareholders to reject two board nominees proposed by Elliott Management, a prominent activist investor, citing a “conflict of interest.” But here’s the rub: Elliott’s picks aren’t just random names. They’re seasoned energy executives with ties to companies that do business with Phillips 66. This isn’t just a fight over board seats—it’s a clash between long-term strategy and short-term profit grabs. Let’s dig in.

First, the facts: Phillips 66 is one of the largest independent refiners in the U.S., with a sprawling network of pipelines, terminals, and petrochemical plants. It’s also a dividend stalwart, having raised its payout for 11 consecutive years. Elliott, which owns nearly 10% of PSX, wants to install two of its own picks on the board, arguing that the company is undervalued and needs a shakeup. Phillips 66 fired back, saying one nominee, Steven Trapp, has ties to an oilfield services firm that does business with PSX—and that his independence is questionable.

Look at the data: PSX’s stock has underperformed the broader energy sector by roughly 20% over the past five years. That’s a red flag. But here’s the thing: Elliott’s track record isn’t flawless. Take Marathon Petroleum (MPC), where Elliott pushed for a breakup in 2020. Instead of splitting, Marathon focused on refining efficiency and bolt-on acquisitions—and its stock has outperformed PSX by a wide margin since then. The lesson? Activist investors can be a double-edged sword.

Now, the conflict of interest charge: Phillips 66 argues that Trapp’s connection to a supplier could compromise his judgment. But Elliott counters that PSX’s board is already dominated by insiders. This is a classic “glass house” scenario. If PSX’s governance is so pristine, why have its returns lagged? And why did the company recently slash its capital spending plan by $1 billion? Is it being too cautious—or is it protecting long-term value?

Let’s talk balance sheets. PSX’s debt-to-equity ratio has crept up to 0.6x, slightly higher than its peers. But its cash flow remains robust, and it’s consistently paid dividends through volatility. Elliott wants PSX to return more capital to shareholders, but here’s the catch: the company is also investing in renewable fuels and chemicals—a bet on the energy transition. Abandoning those projects for a quick dividend boost could backfire if oil demand softens.

So where does this leave investors? This isn’t just about boardroom politics. It’s about whether PSX should double down on its strategy or pivot to please hedge funds. Consider this: Elliott’s push to install its nominees isn’t about PSX’s value—it’s about leverage. If they get a seat, they’ll demand changes. But if they fail, PSX’s management gets a mandate to keep doing what they’re doing. And what are they doing? Delivering 4.2% dividends while navigating a tricky energy market.

The bottom line? Shareholders should vote with their heads, not their hearts. PSX’s underperformance is undeniable, but Elliott’s solution—installing directors with potential conflicts—doesn’t solve the problem. The real issue is whether PSX’s long-term plan can generate returns that match its risk. The data shows that sticking with a steady hand might just be the safer bet. If you’re in this for the long haul, stay in PSX—but keep a close eye on those renewable projects. Here’s the play: if the stock dips below $70, buy. If it breaks $80, take profits. This proxy fight isn’t over, but the market will decide who wins—and what that means for your portfolio.