Phillips 66 Issues Statement Following Glass Lewis and ISS Reports

Phillips 66 (NYSE: PSX) today announced that it strongly disagrees with the recommendations issued by Institutional Shareholder Services (“ISS”) and Glass Lewis & Co. (“Glass Lewis”).

“We disagree with the recommendations issued by ISS and Glass Lewis,” said the Phillips 66 Independent Directors. “We remain committed to engaging with and listening to our shareholders on the issues in this campaign.”

The Company notes the following issues and omissions in the reports’ analyses that remain critical factors for shareholders to consider:

• Elliott’s break-up thesis not examined: The reports did not opine on the merits of Elliott’s thesis to break up Phillips 66, which is the primary objective of Elliott’s campaign. In fact, ISS stated clearly that its report “is not an endorsement of a Midstream and/or Chemicals separation.” Supporting Elliott’s directors implicitly supports this risky path and overrides the judgment of Phillips 66’s highly qualified Board. Our Board continually evaluates the portfolio to maximize shareholder value and currently believes that the integrated model is the best path to shareholder value creation. As we always have, we remain committed to regularly and aggressively assessing these options going forward.
  
  
• Concerning assessment of director independence: By recommending against Robert Pease, the reports establish a concerning precedent on evaluating director independence.
  • The reports suggest a director selected and vetted by a shareholder can be determined to lack independence after one month on the board and one vote. The single vote was for a combined CEO and Chair, a policy that is in place at 44% of S&P 500 companies.¹
  • This analysis disregards the fact that Mr. Pease’s vote represented his professional judgment as a 30-year corporate leader and ignores the fact that Mr. Pease was carefully evaluated for his qualifications and independence by Elliott. It also fails to apply any scrutiny to Elliott’s self-interested lack of support for its recently supported director.

• Reliance on board analysis from five years ago: ISS acknowledged that Phillips 66 has refreshed its Board substantially since July 2020. Yet, it still claimed that a lack of Board refreshment prior to the COVID-19 pandemic reflects a need for change now.

• Concerning governance overlooked: ISS and Glass Lewis disregarded Elliott’s ongoing efforts to acquire CITGO. The reports also overlook the fact that this pursuit took place concurrently with discussions of a second director appointment. Notably, neither report mentions anything about Elliott’s misleading disclosures and the overlapping relationships of its director nominees. These are unresolved issues that are highly relevant to shareholder considerations.

Phillips 66 reiterates its commitment to ongoing transformation and governance refreshment. The Company reminds shareholders of key facts including: