An activist hedge fund's nominees to the Hess Corp board of directors said they were waiving their right to receive a controversial pay package under which the fund will pay them extra if the oil and gas company outperforms its peers under their watch.
The pay package had become a point of contention in the heated proxy battle between the oil and gas company and hedge fund Elliott Management, which nominated the slate of directors. Hess said the pay -- which would not be available to the company's other directors -- compromised the nominees' independence.
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Hess shareholders are set to vote on the board nominees on Thursday.
Hess and Elliott Management, have been lobbying investors to back their nominees. Hess said last week that it would separate the posts of chairman and chief executive, stripping longtime CEO John Hess of his chairmanship.
If elected, the Elliott nominees would have been eligible to receive $30,000 from the hedge fund for every percentage point that Hess outperformed its peers over their first term as directors.
"As we have said all along, Elliott`s directors compromised their independence and judgment by agreeing to accept Elliott`s compensation scheme," Hess lead director John Mullin said in a statement.
"The admission today by Elliott and its nominees makes it clear that shareholders agree that Elliott`s scheme was unacceptable," he said.
Elliott Management, which owns a 4.5 percent stake in Hess, has been clamoring for change at the company since January, when it launched its campaign to seat the new directors and pitched a plan to break up the company. The hedge fund has railed against the current board, alleging that directors are too closely tied to Hess Chief Executive John Hess and that poor oversight has led to underperformance.
As Hess has mounted its defense against Elliott's arguments, the company has announced plans to exit its retail gasoline, marketing and trading businesses and assembled its own slate of new independent directors for its board.
In a letter to shareholders, the five Elliott nominees called the attention paid to their pay arrangements a distraction.
"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," they said in the letter.
Hess shares rose 11 cents to $69.41 on the New York Stock Exchange in midday trading on Monday.
(Reporting By Michael Erman; editing by John Wallace and David Gregorio)