Flush the pipes

Accountability flows from failed pipeline merger

At least one good thing is flowing from the failed marriage of Williams Companies and Energy Transfer Equity: accountability. Nearly half the board of Williams - including the chairman and two activist investors - quit after they failed to oust Chief Executive Alan Armstrong. The departing directors supported the pipeline group's collapsed sale to ETE, which Armstrong had opposed. It's an uncommon win for good governance in the oil patch.

The boardroom fallout is almost as convoluted as the deal that precipitated it. Armstrong, a Williams veteran who became boss in 2011 and wanted the company to stay independent, was overridden after eight of 13 Williams directors, including Frank MacInnis, the company's longtime non-executive chairman, voted in favour of what was at the time a $33-billion takeover by ETE.

The deal quickly soured as falling oil prices dragged down the shares of both companies, leading ETE to look for a way out. Armstrong was left in the unusual position of having to go to bat for a merger he had initially opposed. The tie-up finally unravelled over the past week when ETE was legally able to wiggle out on a technicality.

Along with Williams' chairman, Corvex Management's Keith Meister and Soroban Capital's Eric Mandelblatt, a pair of activists who pushed for the ETE sale, also packed it in rather than continue to back an executive and strategy they disagree with. While their dissatisfaction with Armstrong appears to predate the merger, it's sensible for them to step down after backing a failed deal, even if it fell apart due to circumstances beyond their control.

Armstrong will keep his job, for now. But he won't exactly be breathing easy. Meister and Mandelblatt still have their shares and will presumably resume their roles as outside activists. That'll keep the pressure on as Armstrong seeks damages from ETE and charts an independent way forward for Williams.

The US energy sector is rife with cosy boards that too often give management a pass. Halliburton boss David Lesar is still in place after foreseeable antitrust problems derailed his company's $35-billion merger with rival oil-services company Baker Hughes, leading to one of the world's biggest-ever break fees. In its own convoluted way, Williams looks like a departure from the industry's norm.