Split Decision From Proxy Firms on Oxy Board


Occidental CEO Stephen Chazen scored a split decision from two proxy advisor firms Thursday. Without explicitly commenting on the status of Chazen, Institutional Shareholder Services recommended shareholders vote against the re-election of executive chairman Ray Irani and lead independent director Aziz Syriani at the May 3 annual meeting. Egan-Jones Proxy Services recommended the reelection of all board members.

Meanwhile, Chazen received public support from a second, albeit small, shareholder this week. ISS’ report is certainly supportive of Chazen; however, its effect remains uncertain. The firm previously recommended voting against Irani and Syriani in 2009-11 with no success.

Regardless, we could see support building for Chazen over the next couple of weeks especially if larger shareholders publicly weigh in, which could force the board to amend its succession plan to allow Chazen more time at the helm, even if all board members are eventually re-elected. The additional time may prompt Chazen to pursue a restructuring of the company that he might otherwise not do with his time limited.

Potential restructuring could range from a spin-off or sale of the chemical business to a split of the company along domestic and international lines. A master limited partnership of the midstream business remains a possibility as well. We think the improvement plans initiated late last year will be reflected in the upcoming first-quarter earnings and should be enough to drive shares higher. We continue to see shares as undervalued and maintain our $102 fair value estimate and narrow moat rating.


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