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BP plans to hire two new directors to help it pivot back to oil and gas, as its chair Helge Lund responds to pressure from investors to strengthen the board.
Lund wants the BP board to reflect the company’s new strategy, after it abandoned a drive towards green energy last week to refocus on its core oil and gas business.
The board will increase from 11 to 13 people, with one new director focused on oil and gas and the other taking charge of the remuneration committee, according to two people familiar with internal discussions.
It was not clear what stage BP has reached in the recruitment process, or whether it has consulted with US activist investor Elliott Management, which has built a stake of nearly 5 per cent in the company and wants reduced spending on renewable energy.
BP said at its investor day last Wednesday that it would “fundamentally” overhaul its strategy, scrapping a five-year-old plan to become a major renewable energy player, offering to sell $20bn of assets in the next two years, and cutting spending on green energy by 70 per cent.
“We went too far, too fast,” admitted chief executive Murray Auchincloss, who later revealed to the Financial Times that he wanted to more than double BP’s market value by 2030 by focusing on the company’s core oil and gas expertise.
The changes in strategy did not satisfy Elliott, the New York hedge fund that is now the company’s third-biggest shareholder. A person familiar with Elliott’s thinking said BP’s new plan did not go far enough. It wants big divestments as part of cuts in spending on renewables.
No one is expected to step down as part of the changes, suggesting that BP will have significantly more directors than the average 10-person FTSE 100 board.
Investors are split on whether the board, which oversaw the previous strategy, should now be in charge of the new plan. One top 30 shareholder said it was “problematic” that both chief executive and chair remain in charge despite the “complete turnaround” at the company.
Auchincloss rejected the idea that there was a lack of accountability, telling the FT: “We’ve laid out a very aggressive plan and we now need to be held to account to deliver it, and we will be held to account to deliver it.”
Samuel Johar, chair of board advisory group Buchanan Harvey, said BP’s move was an attempt by Lund to “shore up his position and show that he is an active chair”.
Johar said BP could try to hire board members who would be supportive of Lund, but it would not ultimately “change things dramatically” unless the appointees were nominated or suggested by Elliott.
BP’s plan to expand its board pre-empts any public calls from Elliott for the oil company to overhaul its directors. The activist called for five new independent directors when it bought a 3.4 per cent stake in Canadian oil sands company Suncor in 2022, ultimately securing four appointments.
At US energy group Phillips 66, where Elliott has run an activist campaign since 2023, the hedge fund plans to nominate candidates at this year’s annual meeting, having already secured the appointment of one board member last year.
One energy executive familiar with one of Elliott’s past campaigns expects the hedge fund to seek to replace the BP board members and executives most associated with the 2020 transformation strategy, when it announced plans to slash oil and gas output by 40 per cent by the end of the decade.
“Elliot will be wanting heads,” the person said, adding that the hedge fund is likely to have already identified potential board members to put forward.
The new board member in charge of remuneration will take over from Tushar Morzaria, a former Barclays finance director, who is filling the role on an interim basis following the departure of Paula Rosput Reynolds last year.
Last year’s annual report said BP had tied 10 per cent of executives’ bonus to earnings growth at the company’s “transition growth engines”, the green energy businesses that have now been sidelined.
A further 15 per cent of bonuses were tied to a reduction in BP’s carbon emissions. Last month, BP told its staff that bonuses would be paid out at 45 per cent of target for last year after a year of poor financial and operational performance.
BP declined to comment on whether it would seek to appoint more board directors. The company is due to release its annual report on Thursday.
