By JOANN S. LUBLIN And GUY CHAZAN
Anger at BP PLC’s handling of the Gulf oil spill is prompting one of its largest U.S. shareholders to call for changes on the company’s board.
The California Public Employees’ Retirement System, the biggest U.S. public pension fund, is conferring with BP officials next Wednesday amid criticism from some institutional investors that the board’s response to the spill has been too passive.
A person familiar with the situation said Calpers, which held 60.6 million BP shares as of June 30, is concerned about the “quality and competence of the board” and will urge changes in its makeup. The person described directors’ response to the spill, the worst in U.S. history, as “disastrous.” A BP spokesman declined to comment.
BP has denied accusations that its directors have been passive-or have kept too low a profile-during the crisis. BP Chief Executive Tony Hayward said last month he had received “extraordinary support” from the BP board, adding that two nonexecutive directors, William Castell, former head of GE Healthcare, a unit of General Electric Co., and Paul Anderson, an ex-CEO of BHP Billiton Ltd., had been on extended trips to the U.S. to witness BP’s emergency response to the spill first-hand.
But some investors still feel the board has failed in its duties-especially in regard to oversight of BP’s U.S. operations. BP suffered a string of mishaps in the U.S. prior to the Macondo well blowout, including a fatal explosion at its Texas City refinery in 2005 and an oil spill in Alaska the following year.
The person familiar with the situation said one of the questions Calpers executives will likely raise when they speak to BP officials next week is whether the board took adequate corrective steps in the aftermath of Texas City. Calpers hasn’t decided yet whether to seek a replacement for BP Chairman Carl-Henric Svanberg or Mr. Hayward.
Calpers is one of many big shareholders hammered by the Gulf crisis. BP’s shares have lost about $82 billion in value since the start of the spill, triggered when a drilling rig the company was leasing in the Gulf of Mexico exploded and sank nearly 12 weeks ago. BP is still struggling to plug the leak and cope with its escalating liabilities, which some analysts have estimated could reach $80 billion.
In the face of intense political pressure in the U.S., BP agreed last month to set aside $20 billion to cover compensation claims, and dismayed investors by suspending its dividend for the year.
BP shares have recovered somewhat in recent weeks, rising around 22% since hitting a 14-year low on June 25 amid growing optimism that the company might be close to capping the leaking Macondo well. The first of the two relief wells BP is drilling should intercept and kill Macondo some time in August, and possibly earlier.
The stock has also been buoyed by reports that sovereign wealth funds in the Middle East may be interested in buying stakes in the company.
Messrs. Svanberg and Hayward have been holding several meetings with investors in recent weeks, as part of a charm offensive designed to reassure them “that we approach the situation [in the Gulf] from a position of strength,” a spokesman said.
However, many investors suspect that once the well is capped and the company has a better handle on its liabilities, BP may jettison both men. One U.K. institutional investor, who met with Mr. Svanberg late last month, said he didn’t expect either man to remain once BP caps the well, but is reluctant to press for management changes until then. Another said he didn’t expect a clear-out until a full inquiry had established the precise causes of the Gulf disaster.