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European oil firms suffer decade of disruptions to succession plans

LONDON/PARIS, Nov 2 (Reuters) - The change of command just seen at Total, Statoil and BG has shown another upset in the continuity of management at Europe's oil majors, a fault line that has now been running for the last decade.

October was a particularly bad month with Total rushing through its succession plan after its charismatic boss Christophe de Margerie died in a plane accident. A few days earlier it was announced that BG had poached the long-serving but still relatively youthful chief of Statoil, Helge Lund.

Hidden beyond what looked like totally unconnected headlines about the scramble to replace de Margerie and a massive jump in salary for Lund was a broader industry trend -- the scarcity of veteran heavyweights amongst Europe's big oil firms.


Total has called back as chairman its former head Thierry Desmarest, 68, to be mentor for a year to the new CEO, Patrick Pouyanne, 51, who was long-seen as a potential successor to de Margerie, but not just yet.

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

"When you see articles saying the French president visited such and such a country, taking business leaders with him, it was very often the other way round. It was de Margerie introducing the French president to such and such a leader," he said.

Meanwhile BG was left without a CEO for six months after Chris Finlayson suddenly stepped down over strategy differences with Chairman Andrew Gould.

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

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

Instead Lund joins BG with the prospect of seeing his annual pay package jumping to as much as $20 million, from just $2 million 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 of his move. "I've wanted one more leadership challenge... I think I'm too young to retire".


Pay for U.S. executives is generally higher than that of their European conterparts, and the oil industry is no exception.

Rex Tillerson, the long-serving chief executive of Exxon Mobil, earnt $40 million in 2012, falling to $28 million in 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 American chief executive, tripled last year to $8.7 million while the pay of Royal Dutch Shell's previous chief executive, Peter Voser, halved to $11 million in 2013 following what Shell said was a disappointing year.

"If you compare basic salaries and bonuses, the numbers are not too far apart, but it's the stock options that are attached to the contract that can make the big difference between U.S. executives' wages and European," said a source familiar with BG's search for its new CEO.

But pay is not the only differentiator which is keeping the talent 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 does not have to be Norwegian but has to understand Norwegian society, and that the new boss would not necessarily have to earn much more.

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

"It's a question of national interest," said the person close 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 Macondo oil disaster UK government officials discussed with Shell and BP a possible friendly tie-up as they feared that another company could come up with a hostile bid for BP.


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

Exxon angered officials in Washington in 2011 with a controversial decision to invest in Iraqi Kurdistan and again in 2014 when it started to drill for oil in the Russian Arctic while economic sanctions were being imposed on Russia.

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

BP remains the only European firm run by an American and even if Dudley is a BP veteran, his nomination might have never happened if it wasn't for Macondo.

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

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

At Shell Chairman Philip Watts's time in office was cut short in 2004 after the company overstated oil reserves. The same year, the chairman and CEO of Statoil quit following a bribery scandal over Iranian contracts.

To complete the picture of a decade of abrupt changes, ENI had to bring forward its succession plan this year and replace its long-serving chief Paolo Scaroni, partially because it learnt that his successor in waiting, Claudio Descalzi, was approached by Shell to become head of exploration, according to industry sources.

As a result of those changes, no major European firm is clearly identifying successors in waiting at the moment. BP and Shell said they had all the right procedures in place but declined to discuss details.

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

Exxon bolstered its bench of potential successors to Tillerson in May when it named long-time employees Jack Williams and Darren Woods to its management committee, which oversees strategy. They joined Mark Albers, Michael Dolan and Andrew Swiger and all five are now seen as potential successors.

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

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

Published on:
November 3, 2014
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