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REFILE-European oil firms suffer decade of disruptions to succession plans

Tue, 04th Nov 2014 22:10

(Clarifies date of interview in last paragraph)

By Dmitry Zhdannikov and Michel Rose

LONDON/PARIS, Nov 2 (Reuters) - The change of command justseen at Total, Statoil and BG hasshown another upset in the continuity of management at Europe'soil majors, a fault line that has now been running for the lastdecade.

October was a particularly bad month with Total rushingthrough its succession plan after its charismatic bossChristophe de Margerie died in a plane accident. A few daysearlier it was announced that BG had poached the long-servingbut still relatively youthful chief of Statoil, Helge Lund.

Hidden beyond what looked like totally unconnected headlinesabout the scramble to replace de Margerie and a massive jump insalary for Lund was a broader industry trend -- the scarcity ofveteran heavyweights amongst Europe's big oil firms.

Total has called back as chairman its former head ThierryDesmarest, 68, to be mentor for a year to the new CEO, PatrickPouyanne, 51, who was long-seen as a potential successor to deMargerie, but not just yet.

And a long-time associate of de Margerie said none of theprospective successors was ready as they simply lacked his depthof political and business contacts: "There are perhaps seven oreight bosses in the world who have that, no more".

"When you see articles saying the French president visitedsuch and such a country, taking business leaders with him, itwas very often the other way round. It was de Margerieintroducing the French president to such and such a leader," hesaid.

Meanwhile BG was left without a CEO for six months afterChris Finlayson suddenly stepped down over strategy differenceswith Chairman Andrew Gould.

The company first tried but failed to find a heavyweightreplacement in the United States, several industry sources said.

"They contacted a COO of a big U.S. company but the salarynumbers didn't stack up," according to an industry source.

Instead Lund joins BG with the prospect of seeing his annualpay package jumping to as much as $20 million, from just $2million at state-run Statoil.

"For leaders, there comes a time when it's right to move on,both for themselves and for the company they run," Lund said ofhis move. "I've wanted one more leadership challenge... I thinkI'm too young to retire".

PAYS AND SECRETS

Pay for U.S. executives is generally higher than that oftheir European conterparts, and the oil industry is noexception.

Rex Tillerson, the long-serving chief executive of ExxonMobil, earnt $40 million in 2012, falling to $28 millionin 2013. Chevron's chief John Watson's compensation also fell to$24 million in 2013 from $32.2 million in 2012.

In comparison the pay for Bob Dudley, BP's Americanchief executive, tripled last year to $8.7 million while the payof Royal Dutch Shell's previous chief executive, PeterVoser, halved to $11 million in 2013 following what Shell saidwas a disappointing year.

"If you compare basic salaries and bonuses, the numbers arenot too far apart, but it's the stock options that are attachedto the contract that can make the big difference between U.S.executives' wages and European," said a source familiar withBG's search for its new CEO.

But pay is not the only differentiator which is keeping thetalent in Big Oil on the other side of the Atlantic.

As Statoil embarked on its search for a new CEO this month,the firm's chairman Svein Rennemo said the best candidate doesnot have to be Norwegian but has to understand Norwegiansociety, and that the new boss would not necessarily have toearn much more.

Statoil and Italy's ENI remain state-controlled butBP, Shell and Total are still often seen as national champions.

"It's a question of national interest," said the personclose to de Margerie when asked about leadership at the firm.

Several industry sources told Reuters that during 2010-2011,when BP's share price slumped because of the U.S. Gulf Macondooil disaster UK government officials discussed with Shell and BPa possible friendly tie-up as they feared that another companycould come up with a hostile bid for BP.

DECADE OF TURMOIL

Such government to company connections are much less evidentin the United States.

Exxon angered officials in Washington in 2011 with acontroversial decision to invest in Iraqi Kurdistan, and againin 2014 when it started to drill for oil in the Russian Arcticwhile economic sanctions were being imposed on Russia.

Adding to the cultural and pay differences is the history ofextreme and abrupt changes of leadership at European oil firms.

BP remains the only European firm run by an American andeven if Dudley is a BP veteran, his nomination might have neverhappened if it wasn't for Macondo.

The tragedy forced the previous boss Tony Hayward to resignand BP to opt for a U.S. citizen to fix the huge problem.

Hayward's predecessor, John Browne, who oversaw BP'smomentous takeover in 1998 of Amoco, Dudley's previous employer, and helped turn BP into a true major, had also stepped downearly, after losing a court battle in 2007 to keep secretdetails of his personal life.

At Shell Chairman Philip Watts's time in office was cutshort in 2004 after the company overstated oil reserves. Thesame year, the chairman and CEO of Statoil quit following abribery scandal over Iranian contracts.

To complete the picture of a decade of abrupt changes, ENIhad to bring forward its succession plan this year and replaceits long-serving chief Paolo Scaroni, partially because itlearnt that his successor in waiting, Claudio Descalzi, wasapproached by Shell to become head of exploration, according toindustry sources.

As a result of those changes, no major European firm isclearly identifying successors in waiting at the moment. BP andShell said they had all the right procedures in place butdeclined to discuss details.

That contrasts with U.S. majors, where succession planningand execution was rather smooth over the past decade.

Exxon bolstered its bench of potential successors toTillerson in May when it named long-time employees Jack Williamsand Darren Woods to its management committee, which overseesstrategy. They joined Mark Albers, Michael Dolan and AndrewSwiger and all five are now seen as potential successors.

Meanwhile Chevron, the second-biggest U.S. oil firm, madechanges last October, promoting Jay Johnson, Joe Geagea andPierre Breber to top positions ahead of the retirement of vicechairman George Kirkland, 64, who has been the right hand man ofCEO John Watson, 58, since the latter became CEO in 2010.

"One of my key roles is to have one or more people ready totake my job when the time comes," Watson told Reuters in aSeptember interview. "I spend more time on people issues than onany other single issue inside the company." (With additional reporting by Ernest Scheyder in Williston,Anna Driver in Houston,; Ron Bousso in London, Stephen Jewkes inMilan and Balazs Koranyi in Oslo; Editing by Greg Mahlich)

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