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Financial Times: Lord Browne sets his successor a deadline

EXTRACT: Any significant strategic steps – such as the abandoned internal discussions about a merger with Royal Dutch Shell – will now be taken on by his successor.

By Carola Hoyos

Published: July 26 2006 03:00 | Last updated: July 26 2006 03:00

Lord Browne’s successors yesterday all sat like a gaggle of schoolchildren in the front row of the company’s conference room, listening attentively as their chief executive declared that, without a shadow of doubt, he would be leaving BP at the end of 2008.

That leaves the handful of eager hopefuls, each of whom run various businesses for BP, 18 months of jockeying for position.

The man for them to woo is undoubtedly Peter Sutherland, BP’s chairman, who clearly demonstrated his authority yesterday by achieving what he had set out to do when he pulled aside Lord Browne last Friday and demanded he make clear that his retirement date would be in 2008.

The tensions between Mr Sutherland and Lord Browne over the timing of the latter’s exit raises questions about how much power the chief executive will exert in his remaining 18 months over strategy.

Lord Browne appeared mindful of the challenge yesterday as he noted: “We need to get on. We’ve got great results, we have a big agenda of things to do.”

He acknowledged that: “Peter is not a pushover and indeed nobody is in BP.”

Any significant strategic steps – such as the abandoned internal discussions about a merger with Royal Dutch Shell – will now be taken on by his successor.

An independent consultant has been working on succession planning, with the matter of Lord Browne’s departure date having been referred to the chairman’s committee made up of non-executive directors.

That committee includes three former Amoco directors, Walter Massey and John Bryan and Erroll Davis, as well as Dr DeAnne Julius, former Royal Dutch Shell and World Bank chief economist, Douglas Flint, former KPMG partner and HSBC finance director, Antony Burgmans, Unilever chairman, and Sir Iain Prosser, BP’s deputy chairman and former Bass executive and Lloyds TSB director.

Although he is not part of that committee, Lord Browne said in his careful statement yesterday that he would “fully support that process. I’ve been given input to it. It’s the board’s final decision”.

Mr Sutherland is expected to leave a year later, once a successor is in place as chief executive, people close to the chairman said.

However, before he goes it will be up to him to pick a candidate, almost certainly from within BP, in part because there are few outside executives that have been identified as capable of running the world’s second-biggest listed energy group, but also because BP has spent several years grooming the five contenders.

All already run huge businesses in their own right and are viewed as perfectly able by most investors. Lord Browne said yesterday that he had put forward “more than three” names of possible successors, but added that the decision was the board’s.

The candidates are said to include John Manzoni, head of refining and marketing, and possibly the closest to Lord Browne’s mould; Tony Hayward, the youthful-looking head of exploration and production who is tipped as a favourite; his deputy Andrew Inglis; and Iain Conn, who manages BP’s internal functions.

Also in the running is the jovial Bob Dudley, who was the only one absent from yesterday’s presentation. Instead he was at his desk in Moscow busily steering TNK-BP, the company’s Russian joint venture, through the political uncertainties thrown up by the Kremlin.

The next chief executive’s task will be even more daunting than dealing with Russian unpredictability. The industry faces tough challenges and international oil companies are finding it more and more difficult to grow as oil-rich countries jealously guard the world’s remaining reserves of oil and gas. But the man who takes over in 2008 will inherit a company in much better shape than it was when Lord Browne took over more than a decade ago. Tony Alves, analyst at brokers Peel Hunt, said Lord Browne had led during a period of huge change in the oil industry and would leave the company in good shape. Given the size of BP, Mr Alves said few investors would consider not holding shares on the basis that Lord Browne was or was not at the helm.

Investors appeared to be more concerned about a smooth succession at BP.

Samuel Johar, chairman of Buchanan, Harvey and Co, the headhunter, said: “I think it is the correct decision for Lord Browne to step down. A certain amount of apprehension by somebody who has spent his entire working life in one company is understandable.”

But he added that the board lacked independence and that this had contributed to it mishandling the situation and allowing the rift to leak. “Usually companies time the retirement of the chief executive and chairman in a way that there is a suitable gap between the two departures. BP is in the somewhat strange situation whereby the chief executive will have served 13 years by 2008 and the chairman will have been in situ for more than nine years,” he said.

For Lord Browne, who yesterday confirmed what everyone already knew when he said “I am absolutely hooked on business,” those will be soothing thoughts as he watches his underlings home in on his desk while he plots his own second act.

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