Elliott Rejects a Proposal by Hess to End Proxy Fight

The Hess Corporation on Monday offered a concession to an activist investor, after the investor’s board nominees waived their rights to a controversial compensation plan.

Hess, an oil and gas company, said it was prepared to support two of the five nominees put forward by the activist hedge fund Elliott Management. But the proposal, which was intended to end the proxy fight being waged by Elliott, was promptly rejected by the hedge fund.

Elliott, which has said Hess suffers from a lack of discipline and poor oversight, said on Monday that Hess’s latest proposal was a “PR stunt.”

“If Hess were serious, they would have engaged in substantive conversation with Elliott rather than blast out desperate press releases,” Elliott said in a statement Monday evening.

The back-and-forth was the latest development in the ongoing fight between Elliott and Hess, which said on Friday it would separate its chairman and chief executive roles. The company hopes that all five of its board nominees are elected at the annual meeting on Thursday.

Elliott’s slate of nominees for the board, which have garnered the support of the influential proxy advisory firms Institutional Shareholder Services and Glass Lewis, announced on Monday that they would give up a compensation plan that could have paid them millions of dollars.

The arrangement, which would have tied director compensation to Hess’s stock price, was causing an “ongoing distraction,” the nominees said in a letter to Hess shareholders on Monday.

“While each of us believes that these arrangements are appropriate and consistent with the performance of our duties as independent directors, each of us has made the decision to waive our right to receive these payments from Elliott,” the letter said.

The compensation plan, which was described by Steven M. Davidoff in the Deal Professor column in April, would have paid any nominees who win a seat and serve for a year an aggregate $30,000 for each percentage point Hess’s stock price outperforms a peer group of stocks over three years from January 2013.

Hess responded favorably to that letter from Elliott’s nominees, saying in a statement that it showed the nominees acknowledging that the proposed compensation plan was “wrong.”

“As we have said all along, Elliott’s directors compromised their independence and judgment by agreeing to accept Elliott’s compensation scheme,” John Mullin, the lead director of Hess, said in a statement.

Hess then went further, saying it was “ready to be responsive” to the possibility of adding directors nominated by Elliott to the board. The company said it was prepared to add two of Elliott’s nominees “whom we would choose in consultation with shareholders.”

“We would effect this change promptly after annual meeting if all five of Hess’ new, independent nominees are elected,” the company said.

That did not sit well with Elliott, which said in a statement: “Hess should accept all five shareholder nominees and replace as many of their incumbent directors with management’s nominees as is reasonable.”