Carl Icahn Wins ISS Support for Initial Step to Shake Up Occidental

(Bloomberg) -- Carl Icahn’s effort to revamp Occidental Petroleum Corp.’s board got a boost from a prominent shareholder advisory firm Thursday.

Institutional Shareholder Services Inc. urged the oil explorer’s investors to support Icahn’s initial steps in his push to replace four directors. Doing so would also allow shareholders to have a voice on how the company handled its $38 billion agreement to buy Anadarko Petroleum Corp.

Occidental has argued that Icahn’s proposals divert attention at a pivotal point in the company’s history. While that’s a fair point, it’s equally important for shareholders to determine whether “this is a board that has adopted a parental ’I know best’ attitude,” ISS said.

Icahn said in an interview Thursday he has been “extremely encouraged” by the number of shareholders who have spoken out about their concerns over the way the company has acted since he went public with his campaign. He said he was “very pleased” with the ISS report.

“The company has made statements that I am disruptive in the boardroom,” he said. “I believe my own record over the past 30 years completely proves the fact that this another disingenuous statement by the company.”

He has consistently delivered strong results by holding executives and boards accountable when they have shown an inability to manage, he said.

Icahn is seeking to replace Occidental Chairman Eugene Batchelder and three other directors over concerns about the Anadarko deal not being subject to a shareholder vote. He also doesn’t like the $10 billion in financing the company has agreed to take from Warren Buffett’s Berkshire Hathaway Inc. to help finance the largest oil industry deal in four years.

Right now, Occidental’s bylaws make it difficult for Icahn to rally enough support from shareholders to call a special meeting to even consider his proposals. So he’s taking a different approach.

The first step in that process: getting 20% of shareholders to ask Occidental’s board to set a record date for determining which investors would be allowed to vote on the matter. ISS supports that -- though the advisory firm said that doesn’t imply that it supports Icahn’s nominees or proposed changes at this point.

If Icahn wins the necessary support, he said he would seek to replace the directors through written consent.

Occidental said it disagreed with ISS’s recommendation to support the first step and only later focus on whether Icahn’s proposal would harm or further shareholder interests.

“Having acknowledged that the Icahn Group’s solicitation would divert management and board attention away from the very thing that is critical to long-term shareholder value – a successful integration of Anadarko – we believe that ISS’ logic in supporting this first step is flawed,” the company said in an emailed statement. It noted that the board had unanimously decided that setting the record date was not in the best interest of shareholders.

ISS also said in its report that the level of investor opposition to the reelection of Occidental’s directors in May is evidence of substantial frustration with the board that should be addressed.

“The fact that shareholders are seemingly being prevented from opining on a transformational and controversial transaction, along with the self-evident complexity of the consent solicitation process, suggests that a more open and thorough debate regarding Occidental’s strategic direction and overall governance would be beneficial,” it said.

--With assistance from Kevin Crowley and Joshua Fineman.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Simon Casey

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