Here's why Santos (ASX:STO) is attracting some investor ire this week

This could have annoyed Santos shareholders this week.

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Key points

  • Some Santos shareholders might be seeing red this week after the company's CEO was appointed to another ASX 200 board
  • Kevin Gallagher's new spot at the board table of Mineral Resources was announced after Monday's close
  • An investor group has spoken out in disapproval of the appointment. It believes the CEO should be focusing on its recent merger and the energy transition

Owners of Santos Ltd (ASX: STO) shares might have been irked this week by news the company's boss is taking a seat on another S&P/ASX 200 Index (ASX: XJO) board.

That's led an activist investor group to question if the Santos board is "out of touch", saying the company's CEO should be focused on its recent $22 billion merger and the energy transition.

At the time of writing, the Santos share price is $7.18.

Let's take a closer look at Gallagher's new role and why some investors are riled up about it.

Could this have Santos shareholders up in arms?

Santos shareholders might be seeing red after the company's CEO was appointed to the board of iron ore and lithium producer Mineral Resources Limited (ASX: MIN).

Mineral Resources announced Gallagher's new position on Monday night.

It sparked comments from Australasian Centre for Corporate Responsibility's director of climate and environment, Dan Gocher. Gocher said that it's unusual for ASX CEOs to sit on the board of another company:

The appointment of Santos CEO Kevin Gallagher to the board of ASX-listed Minerals Resources will not be received well by shareholders in either company.

Santos shareholders expect Gallagher to be entirely focused on the integration with Oil Search, and the acute risks posed by the energy transition… The Santos board's approval of this appointment suggests the board is out of touch and has failed to comprehend investors' expectations of modern CEOs.

Additionally, analysts are reportedly concerned about an overlap between the two companies, potentially creating conflicts for the energy giant's boss.

The apparent red flag is Mineral Resources' subsidiary, Energy Resources, which is drilling for gas in the Perth Basin.

Mineral Resources chair, Peter Wade commented on Gallagher's appointment as a non-executive director, saying:

[Gallagher's] extensive corporate background and knowledge of the Australian energy market will be of great value to [Mineral Resources].

Gallagher has reiterated his intent to continue his tenure at Santos. That's despite the new appointment having sparked concerns he might be eyeing an exit.

Santos provided Gallagher with a $6 million incentive pay scheme early last year for his delivery of projects and transitions to 2025.

The Australian Financial Review quoted the CEO as saying:

I remain fully committed to leading Santos successfully out until the end of 2025…

I have very few external commitments outside my Santos role, and I am confident there will be no conflict on my time through taking up this non-executive role

Santos share price snapshot

The Santos share price has had a great start to 2022.

It has gained 13% since the final close of last year. Though, it's only 6% higher than it was at this point in 2021.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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