EnCana, an oil and gas company, announced this weekend that it plans to split itself into two: "one a natural gas company with an outstanding portfolio of early life, North American, natural gas resource plays and the other a fully integrated oil company with industry-leading in-situ oilsands properties and top-performing refineries, as well as an underlying foundation of reliable oil and gas resource plays."
So it said in a Mothers-Day release/
This presumably means that it has decided that the 'synergies' from those two lines are negative: they're more profitable apart than together.
There has been a good deal of discussion in recent years about the "agency" problem in corporate governance. The boards of directors are formally the agents of the investors, and in a situation where a split-up works best for those investors, should work toward a split up. But do they?
Some economists argue that an empire-building impulse prevents or obstructs such developments. To put it baldly: a typical CEO would rather be at the top of a large company than of one of two smaller ones. This may even be the case when it means he's the boss of an under-performing large company rather of a better-performing small one. That (if true) makes them untrustworthy agents.
In this one case, anyway, it would seem not to be true. So hurrah for the board of EnCana. I hope their mothers are proud.
Though no shareholder-activist campaign seems to have been required to force their hand, I'll observe (if only to tie this entry in clearly with the over-arching themes of this blog) that such campaigns are often directed at producing precisely such a restructuring effect.
Subscribe to:
Post Comments (Atom)
1 comment:
This is a Very good example to show the importance of Corporate Governance.Any one(from miners to CEO's) can take a coaching on corporate governance that will help them improve their business. You can learn more from the Corporate Governance Website, along with 600+ resources on Boards and Corporate Governance.
Post a Comment