Elliott Takes Legal Action to Protect the Rights of Phillips 66 Stockholders

Rhea-AI Summary

Elliott Investment Management, managing funds with over $2.5 billion investment in Phillips 66 (NYSE: PSX), has filed a lawsuit in Delaware Chancery Court against Phillips 66 and its Board. The legal action seeks to ensure four board seats are up for election at Phillips' 2025 Annual Meeting.

The dispute arose after Phillips announced that two directors from the 2025 class wouldn't seek reelection and the board size would be reduced from 14 to 12 directors. Elliott argues this violates company governance requiring equalized director classes. Elliott, holding a 5.7% economic interest in Phillips 66, has proposed seven director candidates and will finalize its slate for the Annual Meeting.

Elliott states it will withdraw the complaint if Phillips confirms four director seats will be up for election. The investment firm currently holds 19,900,000 shares, including 15,725,000 direct shares and 4,175,000 shares through derivative agreements.

Positive

• Elliott holds significant stake (5.7%) worth $2.5B, providing strong shareholder influence
• Legal action aims to improve corporate governance and board representation

Negative

• Corporate governance concerns highlighted by board seat reduction controversy
• Potential proxy battle and legal proceedings may create uncertainty
• Contentious relationship between major shareholder and management indicates internal conflicts

Insights

Corporate Governance Specialist

Elliott's legal action against Phillips 66 represents a significant escalation in their activist campaign targeting board control and corporate governance. With a $2.5 billion stake (5.7% economic interest), Elliott is leveraging Delaware Chancery Court to force structural board changes, specifically demanding four board seats be available for election rather than just two.

The crux of this dispute centers on Phillips' February restructuring that reduced the board from 14 to 12 members and rearranged director classes. Elliott characterizes this as "gamesmanship" that violates company bylaws requiring equalized director classes. This appears to be a calculated maneuver by Phillips to limit Elliott's ability to gain significant board representation.

What makes this situation particularly noteworthy is Elliott's already-announced slate of seven director candidates with expertise in refining operations, strategic transactions, and corporate governance. Their "Streamline66" campaign name strongly suggests a focus on operational efficiency improvements and potential restructuring to unlock shareholder value.

This legal confrontation highlights a fundamental disagreement about Phillips 66's strategic direction and governance practices. For investors, this represents a critical juncture where the company's future leadership structure - and by extension its strategic priorities and capital allocation decisions - hang in the balance.

The outcome remains uncertain, but the willingness of Elliott to pursue legal action demonstrates their conviction that significant value creation opportunities exist at Phillips 66 that current leadership has failed to capture.

Shareholder Rights Attorney

This lawsuit represents a textbook example of an activist investor using litigation to enforce shareholder rights against what they perceive as entrenchment tactics. Elliott's complaint focuses on a specific technical violation - the unequal distribution of director classes following Phillips 66's board restructuring - but the broader context reveals a deliberate strategy to overcome defensive maneuvers.

The chronology is particularly revealing: Elliott provided notice of director nominations, then Phillips promptly announced two directors wouldn't stand for reelection and reduced board size from 14 to 12, effectively limiting contested seats. This reactive timing pattern suggests Phillips is actively working to minimize Elliott's potential board influence rather than engaging constructively.

Elliott's complaint also references Phillips' alleged failure to honor previous representations about appointing a mutually agreed-upon director with energy experience, indicating a pattern of resistance to Elliott's input despite their significant $2.5 billion investment.

From a legal perspective, Elliott's strategy is sophisticated - they're seeking expedited proceedings (critical given proxy timeline constraints) while simultaneously offering an off-ramp by stating they'll withdraw the complaint if Phillips confirms four seats will be available. This creates legal pressure while demonstrating reasonableness.

The outcome will likely hinge on the specific language in Phillips' governing documents regarding equalization of director classes. Delaware courts generally uphold clear corporate governance provisions, particularly when board actions appear designed primarily to impede shareholder voting rights rather than serve legitimate business purposes.

Seeks an Order Requiring That Four Board Seats Be Up for Election at Phillips' 2025 Annual Meeting

Asserts Company Has Demonstrated a Pattern of Gamesmanship and Poor Corporate Governance

Requests Expedited Proceedings in Delaware Chancery Court 

WEST PALM BEACH, Fla., March 25, 2025 /PRNewswire/ -- Elliott Investment Management L.P. ("Elliott"), which manages funds that together have an investment of more than $2.5 billion in Phillips 66 (NYSE: PSX) (the "Company" or "Phillips"), today filed a lawsuit in the Court of Chancery of the State of Delaware (the "Court") against the Company and its Board of Directors (the "Board").

The complaint seeks an order requiring that four board seats be up for election at Phillips' 2025 Annual Meeting of Shareholders (the "Annual Meeting").  After receiving Elliott's notice of director nominations, on February 18 Phillips announced that two sitting directors previously in the 2025 class, Gary Adams and Denise Ramos, would not stand for reelection, and that the size of the Board would be reduced from 14 to 12 directors after the Annual Meeting. As a result, there would only be two seats up for election in the 2025 class and then five in each of the 2026 and 2027 classes – which Elliott argues in the complaint is in violation of the Company's governing documents requiring director classes to be equalized.

Despite Elliott privately requesting confirmation, Phillips has still not disclosed how many seats will be up for election or who its nominees will be, requiring Elliott to file a complaint in order to preserve its shareholder rights. The Company's current gamesmanship around its directors follows the Company's previous failure to honor its representations made to Elliott – dating back to February 2024 – that it would appoint a mutually agreed-upon director with energy experience. In its complaint, Elliott states that if the Company ends its defensive maneuvers and confirms that at least four director seats will be up for election at the 2025 Annual Meeting, Elliott intends to withdraw the complaint and no longer proceed with the litigation.

This preference for gamesmanship and disregard for stockholder rights demonstrated by Phillips reinforces why change is urgently needed on the Board in order for the Company to achieve its full value-creation potential. On March 4, Elliott announced a slate of seven highly qualified director candidates with complementary backgrounds and experience related to improving refining and midstream operations, evaluating complex strategic transactions and enhancing corporate governance. Prior to the filing of Elliott's definitive proxy materials, Elliott will identify the final slate of director candidates that will stand for election at the Annual Meeting.

For more information, please visit Streamline66.com.

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

Elliott Investment Management L.P., together with the other participants named herein (collectively, "Elliott"), has filed a preliminary proxy statement and accompanying GOLD universal proxy card with the Securities and Exchange Commission ("SEC") to be used to solicit proxies with respect to the election of Elliott's slate of highly qualified director candidates and the other proposals to be presented at the 2025 annual meeting of stockholders of Phillips 66, a Delaware corporation ("Phillips" or the "Company").

THE PARTICIPANTS STRONGLY ADVISE ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.

The participants in the solicitation are Elliott Investment Management L.P. ("Elliott Management"), Elliott Associates, L.P. ("Elliott Associates"), Elliott International, L.P. ("Elliott International"), The Liverpool Limited Partnership ("Liverpool"), Elliott Investment Management GP LLC ("EIM GP"), Paul E. Singer, Brian S. Coffman, Sigmund L. Cornelius, Michael A. Heim, Alan J. Hirshberg, Gillian A. Hobson, Stacy D. Nieuwoudt and John Pike.

As of the date hereof, Elliott holds a 5.7% economic interest in the Company. As of the date hereof, Elliott Management, the investment manager of Elliott Associates and Elliott International (together, the "Elliott Funds") with respect to investments in the Company by the Elliott Funds and/or their respective subsidiaries, beneficially owns 19,900,000 shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), including 15,725,000 shares of Common Stock and 4,175,000 shares of Common Stock underlying certain derivative agreements in the form of physically settled swaps held by the Elliott Funds (the "Physically Settled Swaps"). As of the date hereof, the Elliott Funds are party to certain notional principal amount derivative agreements in the form of cash settled swaps with respect to an aggregate of 920,500 shares of Common Stock (the "Cash Settled Swaps") and certain exercisable over-the-counter American-style cash settled call option contracts referencing an aggregate of 2,500,000 shares of Common Stock having a strike price of $135.00 and expiring on June 20, 2025 (the "Cash Settled Call Options", and together with the Physically Settled Swaps and the Cash Settled Swaps, collectively, "Derivative Agreements"). Elliott Associates, Elliott International and Liverpool are the direct holders of the shares of Common Stock beneficially owned by Elliott Management, and are party to the Derivative Agreements. Liverpool is a wholly-owned subsidiary of Elliott Associates. EIM GP is the sole general partner of Elliott Management. Mr. Singer is the sole managing member of EIM GP. As of the date hereof, Mr. Cornelius may be deemed to beneficially own 20,000 shares of Common Stock, which are held jointly in an account with his spouse, and Mr. Hirshberg may be deemed to beneficially own an aggregate of 27,018 shares of Common Stock, which are held personally and through two estate planning vehicles of which he serves as trustee and co-general partner, respectively. As of the date hereof, neither Mses. Nieuwoudt or Hobson, nor Messrs. Coffman, Heim or Pike beneficially own any shares of Common Stock.

About Elliott

Elliott Investment Management L.P. (together with its affiliates, "Elliott") manages approximately $72.7 billion of assets as of December 31, 2024. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds' investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. 

Media Contact:         
Casey Friedman                                           
Elliott Investment Management L.P.                                    
(212) 478-1780                                            
cFriedman@elliottmgmt.com

Investor Contact: 
Bruce Goldfarb / Pat McHugh
Okapi Partners LLC
(877) 629-6357
(212) 297-0720
info@okapipartners.com

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SOURCE Elliott Investment Management L.P.

FAQ

What is Elliott Investment Management's current stake in Phillips 66 (PSX)?

Elliott holds a 5.7% economic interest in PSX, managing funds worth over $2.5 billion, including 19.9 million shares through direct ownership and derivatives.

How many board seats is Elliott seeking to contest at Phillips 66's 2025 Annual Meeting?

Elliott is seeking to have four board seats up for election at PSX's 2025 Annual Meeting.

Why did Elliott file a lawsuit against Phillips 66 in Delaware Chancery Court?

Elliott filed the lawsuit to protect shareholder rights and ensure four board seats are available for election, challenging PSX's decision to reduce board size and limit available seats.

How many director candidates has Elliott proposed for Phillips 66's board?

Elliott has proposed seven highly qualified director candidates, though the final slate for the 2025 Annual Meeting is yet to be determined.