Chevron Corp. (CVX) recently elected two directors to its board including a female chemical engineering professor named Alice P. Gast. Adding new faces will mostly strengthen the U.S.-based oil company’s management, although both Chevron’s recruits might struggle to find enough time to fulfill their duties and the board’s composition still has room for improvement.
Three of the people on Chevron’s board, Donald B. Rice, Robert J. Eaton and Charles R. Shoemate, retired at the company’s 2012 shareholder meeting this spring. All were more than 70 years old and had served for seven, 12 and 14 years respectively; while experience has its merits, long familiarity with management can interfere with a director’s ability to remain objective, so it will help to replace these men with people who have fresher perspectives.
Chevron said Oct. 3 that Dr. Gast will serve on its audit committee, a role that Mr. Shoemate had held the previous year. Her addition enables Chevron to benefit from having more sensitivity to the needs of female staff and clients, given that forty percent of the world’s largest publicly-traded companies have not appointed even one woman to their boards, according to our latest survey. Credit Suisse also published research this August finding that companies with market capitalization over $10 billion who had women on their boards outperformed those with all-male boards. Of course, women remain grossly under-represented among Chevron’s supervisors, with only two on its now twelve-person board, but at least the situation has improved.
Dr. Gast has experience that can clearly benefit an oil company. She was vice president for research, associate provost and Robert T. Haslam chair in chemical engineering at Massachusetts Institute of Technology from 2001 to 2006, and a professor of chemical engineering at Stanford University and the Stanford Synchrotron Radiation Laboratory from 1985 to 2001. As one of three science envoys named in 2010, Dr. Gast was tasked with traveling to the Caucasus and Central Asia in order to advise the White House, the Department of State, and the U.S. scientific community about ways to deepen existing ties and foster new relationships there.
That said, Dr. Gast has so many duties, she might find it challenging to pay close attention to Chevron. Not only has she been the president of Lehigh University since 2006, she also serves on the board of trustees of King Abdullah University of Science and Technology, the board of governors of The New York Academy of Sciences, the board of directors of Lehigh Valley Association of Independent Colleges, and the Patriot League council of presidents.
Chevron’s other new director elected in May, Charles W. “Wick” Moorman, also appears overboarded, as he is the chairman, CEO and president of the transportation company Norfolk Southern Corp. Not helping matters, he serves on the board of WHRO Public Broadcasting and the University of Virginia Medical Center operating board, along with being a trustee of the Chesapeake Bay Foundation, the Chrysler Museum of Art and the Nature Conservancy of Virginia.
Some might have other objections. Neither Moorman nor Dr. Gast is an independent director with experience in environmental matters relevant to hydrocarbon exploration and production, as a stockholder had requested at Chevron’s annual meeting this May. “A company’s inability to demonstrate that its environmental policies and practices are in line with internationally accepted standards can lead to difficulties in raising new capital and obtaining the necessary licenses from regulators,” the stockholder said, also noting earlier problems such as an Ecuadorian court judgment in February 2011 that found Chevron liable for $8.6 billion in damages arising from the contamination of Amazonian resources by Texaco between 1964 and 1992. Chevron’s board recommended that shareholders vote against the proposal, explaining that no director should have sole designated responsibilities for a specific matter. In addition, Chevron said its board already includes a number of independent directors whose professional activities have brought them experience with environmental matters relating to world trade, manufacturing, technology and public policy. Voting results indicate that 79% of shareholders agreed with the board.
While Chevron’s board continues to have room for improvement, the recent appointments are a step in the right direction. In another sign that Chevron’s management is doing a better job than some rivals, the company’s financial data give it an Accounting and Governance Risk (AGR ®) score of 40, indicating an average level of risk.
Region: North America
Country: United States
Industry: Integrated Oil / Gas
Market Cap: $ 232,381.0 mm (Large Cap)
ESG Rating: D
AGR Rating: Average (40)