Energy Business

Did Chevron Just Make Itself More Open to Activist Investors?

Chevron Corp. (NYSE: CVX) has followed the path of a trend of what some larger companies have started to allow of late under their corporate governance practices. The company has amended its bylaws to allow proxy access under certain circumstances to certain shareholders. What this accomplishes is that Chevron’s board of directors just made the second largest U.S. oil company by market cap more accessible to activist investors or institutional investors who might be interested in making their voices loudly heard.

Chevron issued an 8-K filing with the U.S. Securities and Exchange Commission (SEC) on Wednesday. It confirmed that Chevron’s board of directors has amended its bylaws to add an advance notice provision, implement proxy access and make a number of clarifications and refinements.

The effective date for such action is September 30, 2015. In short, proxy access effectively is available now to any institutional investor or activist investor who meets the criteria. These criteria are low on one hand, but it has a threshold that realistically keeps the action available to longer-term shareholders rather than just a short-term opportunist.

Wednesday’s SEC filing said:

Article IV, Section 6 of the By-Laws adds an advance notice provision for nominating persons for the Board and proposing other business to be considered by the stockholders at an annual meeting of stockholders or a special meeting of stockholders. Article IV, Section 7 of the By-Laws implements proxy access and permits up to 20 stockholders owning 3% or more of the Corporation’s outstanding common stock continuously for at least three years to nominate and include in the Corporation’s proxy materials directors constituting up to two individuals or 20% of the Board, whichever is greater, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the By-Laws.

The amendments to the By-Laws also move the positions of Chairman and Vice-Chairman from the “Officers” section in Article II to “The Board of Directors” section in Article I and require that the independent members of the Board appoint an independent Lead Director in the event the independent members of the Board appoint the same person to the positions of Chairman of the Board and Chief Executive Officer (a pre-existing requirement under the Corporate Governance Guidelines of the Corporation). The amendments clarify that, in the Chairman’s absence, the Lead Director will chair meetings of the Board and meetings of stockholders. The amendments establish the quorum requirement for meetings of committees of the Board in Article I, Section 6. The amendments also include changes that refine the process for stockholders calling a special meeting in Article IV, Section 1 and add a severability provision in Article X. The amendments also make additional clarifications and refinements to the By-Laws.

Before thinking that Chevron could now just fall prey to one tiny activist that no one has ever heard of and without much money behind them, a 3% stake in Chevron’s common stock would currently be worth $4.5 billion or so. That being said, the top 10 shareholders were shown to own just over 25% of Chevron’s outstanding shares as of June 30, 2015.

Wednesday’s news release was more of a coincidental release than the cause of a big gain, which was with a big market bounce. Chevron shares were up 2.8% at $78.42 late in the day, within a 52-week range of $69.58 to $120.51.

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