shareholder wealthy maximization and value creation

BP launched a partnership with Russian state oil company Rosneft in last month; it formed a company called TNK-BP which is considered as the third biggest oil company in Russia. This joint venture is regarded as an opportunity to boost BP’s shareholder wealth after last year’s Gulf of Mexico oil spill.

The fundamental objective of BP is to protect and enhance shareholder value in a sustainable way, in both the short and long term. Peter Sutherland, the Chairman of BP, says that BP will still continue its policy of returning cash in excess of its investment requirements to its shareholders both through buybacks and progressive dividend policy (2006).

Nevertheless, in the end of January, ARR (a group formed by shareholders from Russian) argued that BP’s alliance with Rosneft breaches their shareholder agreement. Therefore, a legal decision on “Russian shareholders winning the injunction to halt the share swap” has been made by the High Court of London in the first of February. The court’s decision is considered as “legally just” and “morally” to the benefits of shareholders.

Moreover, a decision made by BP in January is to sell its Texas City refinery. This implies that BP divesting its assets in order to increase its value creation. Since the explosion makes BP had a terrible reputation in Texas City, there is no point to increase investments in there. This can be one of the reasons to BP’s strategy: extend cooperation within the whole world’s oil companies.

Since managers are selected on behave of shareholders, they are supposed to acting in the interests of those owners. Gerard Kleisterlee, the former chief executive of Philips, is appointed as the next chairman of Vodafone. Many analysers argued that Kleisterlee does not have broad experience of the telecoms industry. However, shareholders in Vodafone think that Kleisterlee is eligible as he has worked in Philips for ten years for chief executive, hence, he should be well placed to supervise the UK group. Nevertheless, shareholders in Mouchel are disappointed about managers’ rejection on several bid approaches over the past year. At Mouchel’s annual meeting on Monday, several shareholders said they were frustrated that the board has not made clear its position on the bid approach. Moreover, shares in Mouchel lost as much as 79% of their value last year, for the company’s fate is determined by managers. It is assumed that managerialism is a disaster for company’s development, for agent only acts on themselves instead of shareholders’ benefits.