Unhappy shareholders are urging
entire board to follow CEO William Wise out the door.
In a notice to the board on Tuesday, Selim Zilkha, a major El Paso shareholder, called for the company's current board to resign. He also put himself and eight potential replacements up for election as new directors. Zilkha, an energy executive whose former company is now owned by El Paso, also informed the board that influential company critic Oscar Wyatt has already thrown his support behind the proxy fight.
El Paso became the nation's largest pipeline operator after acquiring Coastal, a company founded by Wyatt, two years ago. Wyatt has since accused El Paso of using Enron-like business and accounting practices that have put the company's shareholders at great risk.
In a statement, El Paso urged shareholders to reject the proposal, calling it highly disruptive.
Wyatt currently owns 4.68 million El Paso shares. Zilkha owns 8.9 million shares, even after executing numerous sales as the stock declined last year.
In Tuesday's notice to the board, Zilkha pointed out that El Paso's stock is currently trading at its lowest levels in decades and has lost 90% of its value in the past year alone. The stock, up 7.4% to $4.50 Tuesday morning, has enjoyed a slight rebound since Wise was asked to step down from his post as CEO last week. But Zilkha insisted that more change is needed.
"The recent announcement that William A. Wise intends to resign his positions with El Paso is woefully inadequate to address the many problems that plague El Paso," Zilkha wrote. "Throughout El Paso's sharp decline in share value, the current board of directors has failed the stockholders miserably."
Karl Miller, a former El Paso executive who now leads an energy-related acquisition firm, has long insisted that El Paso and other energy traders need entirely new leadership before they can recover and move on.
"El Paso has been mismanaged through the gross incompetence of the current board of directors and executive management," said Miller, who has no stake in the company. "This action has been a long time coming."
Besides Wise, El Paso's current board includes 10 other members, most of whom have little experience in the energy industry. Among the current directors are a retired grocery executive, a floor care company chairman, a Mexico bank executive, a city attorney and various consultants. Zilkha is proposing a new, nine-member board dominated by veterans of the energy industry.
The new candidates, who will seek election at El Paso's next shareholder meeting, are as follows:
Gerald Bennett, CEO of Total Safety, a company that provides safety services to energy and industrial companies.
Robert Black, a retired Texaco executive.
Charles Bowman, a retired professor of petroleum engineering at Texas A&M University.
Ronald Burns, an investment executive who previously served as CEO of Entergy.
Stephen Chesebro, a former executive of both PennzEnergy and Pennzoil.
Ted Earl Davis, an energy consultant and former executive of Conoco.
John Murphy, the former CEO of Dresser Industries.
John Singleton, a retired federal judge who now provides arbitration and litigation counseling services.
Zilkha, 50% owner of a wind energy company and the former owner of a company now operated by El Paso.
Outside El Paso directors currently receive $80,000 a year, at least one-fourth of it in stock, for their services.