Investors Threaten Vote Against Oil Chairman

By Mark Kleinman, City Editor

Disgruntled shareholders in a London-listed oil company are threatening to kick out its new chairman less than two weeks after his appointment.

Sky News has learnt that a group of investors are considering voting against Simon Murray's election as chairman of Gulf Keystone Petroleum at its annual meeting later this month.

The unhappy institutions are led by M&G Investments, the fund management arm of Prudential, which met Mr Murray to discuss its concerns about corporate governance at Gulf Keystone on Friday.

Although Mr Murray will not receive share options as part of his pay package, Gulf Keystone is understood to have refused to disclose the size of the new chairman's annual salary during the meeting, angering the investors.

M&G and others are said to be reluctant to vote in favour of Mr Murray, who is slated to become the new chairman of Gulf Keystone's remuneration committee, until they have seen the full details of his pay.

A large-scale vote against Mr Murray, the former chairman of commodities trader Glencore, would be unusual given that he was only appointed to the role at Gulf Keystone on July 4.

The row is developing into one of the bitterest governance battles seen in the City for years, with M&G backed by heavyweight investors such as Capital Research Global Investors.

M&G has proposed four new directors to join the board, all of whom were rejected by Gulf Keystone this weekend.

"M&G is not seeking representation on the board of GKP, nor has any wish to interfere with its operations. But we do want the election of truly independent non-executive directors who will represent the interests of all shareholders.

"We are not asking for any special relationship with the four candidates: our aim is purely to strengthen corporate governance at GKP," the fund manager said in a statement.

The rebel shareholders are believed to be supported by a group of Malaysian investors and are confident that they will have sufficient backing to secure the election of their nominees.

Insiders said the shareholders were furious at a suggestion by Gulf Keystone that one of their nominees, Jeremy Asher, had been snubbed by the Kurdistan Regional Government.

Investors have long been unhappy with governance and pay at Gulf Keystone, which specialises in exploring for oil in Kurdistan but which has seen its share price fall sharply during the last year.

Todd Kozel, who agreed to relinquish the chairmanship but remains as chief executive, has been a divisive figure at the helm of the company.

People familiar with the situation said that his ex-wife, Ashley, was likely to use her roughly 17m shares to vote against the company at the AGM.

Gulf Keystone is one of the most controversially-governed companies on London's junior AIM market and scrutiny by shareholders has been intensified by the apparent intention to move its listing to the main market.

Mr Kozel's £8.8m award for 2012 actually represented a sharp decline on his pay in the previous year, which topped $22.2m (£14.4m).

Mr Kozel has sought to defend his remuneration by arguing that Gulf Keystone has delivered more than £1bn of value to shareholders and a return of more than 4000% since the company's listing.

An ally of his said recently that the chairman's pay reflected an "overall balanced mix of remuneration and reflects exceptional performance for the year and confidence in future cash flows".

However, Gulf Keystone's shares have fallen sharply from highs triggered by takeover speculation, while it has also been embroiled in legal action brought by a former adviser which has claimed it is owed roughly £1bn in compensation.

Gulf Keystone declined to comment.

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