In a surprise move, Fluor Corp. reached outside its ranks for new leadership, announcing Wednesday that Shell Oil Co. President Philip J. Carroll will become Fluor's new chairman and chief executive this summer.
The appointment of Carroll, a 37-year oil industry veteran, marks the first time in its 109-year history that Fluor has not picked a chairman from its executive ranks.
Carroll, 60, will replace Leslie McCraw, the company's longtime chairman and chief executive, who took an early and unanticipated retirement in January to battle recurring cancer. Carroll assumes his new position July 1, a day after retiring from Shell.
He'll be taking over the reins of one of the nation's largest publicly traded companies, a major corporate citizen that employs nearly 2,500 people at its Irvine headquarters and supports numerous area charities and civic groups.
Many observers had expected the top job to go to one of three inside contenders who have jointly run Fluor since McCraw retired.
But Carroll has turned Shell around, and that experience is expected to help Fluor complete its recovery from a year of jarring disappointments.
And his knowledge of the energy industry should help the international engineering and construction services giant pursue its expansion into the lucrative gas, oil and energy development field, said analyst Tobias Levkovich of Solomon Smith Barney.
Fluor shocked investors and analysts early last year when it announced that it would take a $140-million write-off to cover cost overruns on two major contracts and said that a three-year expansion drive had created a bloated operating structure that was diminishing the company's profits.
Company officials launched a major reorganization and have said that most of the problems are behind them now, though they expect profits to remain depressed through 1998.
Carroll's job will be to tighten Fluor's focus, keep a lid on operating costs and return it to the 15% annual growth pace that had made it a darling of the investment community. He'll have five years to do the job because Fluor has a mandatory retirement age of 65.
Carroll, who is leaving Shell on June 30 because of its policy requiring top executives to retire at age 60, declined Wednesday to comment. He said he wanted to focus his attention on Shell until he leaves.
He joined the oil company in 1961 as a petroleum engineer and moved through numerous domestic and overseas assignments, including posts as managing director in London and head of corporate administration at Shell's Houston headquarters from 1986 until 1993. He was named president in 1993.
As head of Shell Oil, Carroll led a wholesale overhaul of operations, slashing employment by more than 10% to about 21,000 and engineering joint-venture relationships with other major oil exploration and refining companies. The company posted a profit of $781 million the year he became president. Last year, earnings were nearly three times higher at $2.1 billion. Revenue during the same period rose 37% to $29 billion from $21.1 billion.
"Phil Carroll brings great energy, chemical and process industry experience, proven global leadership skills and a demonstrated track record of building shareholder value," said Bobby Inman, chairman of the Fluor board committee that ran the search for a new chairman.
Industry analyst Michael S. Dudas said Wednesday that Carroll is "a conservative choice, a low-key but very effective person who has done a lot for Shell."
The market seemed unimpressed by the news: Fluor's stock fell 44 cents to close at $47.31 a share on the New York Stock Exchange.
Until Carroll comes on board, Fluor remains under the direction of a four-member office of the chairman, led by Texas oilman Peter J. Fluor, a great-grandson of Fluor's founder and a member of the company's board since 1984.
Other members of the chairman's office--all contenders for the top job in recent months--are James O. Rollans, chief administrative officer; James C. Stein, president of the company's Fluor Daniel operating unit, and Donald L. Blankenship, president of the company's fast-growing and highly profitable A. T. Massey coal mining subsidiary.
Stein, a 54-year-old engineer and longtime Fluor manager, had been considered by many to be the leading inside candidate. He was hand-picked by McCraw last year to take over the reins at Fluor Daniel and to develop and implement a reorganization and cost-cutting plan to restore the engineering and construction services business to robust health.
In the past year, Stein has pared operating costs by more than $100 million and helped refocus Fluor Daniel on its core businesses.
But Fluor's board of directors wasn't focusing exclusively on company insiders as it searched for a new chairman. Some suggest there might have been a reluctance to elevate any of the top officers.
"They may have felt some pressure to go outside the company because of the perception that Fluor's problems were caused by insiders," said Robert Toomey, a Seattle-based industry analyst with the Piper Jaffray brokerage.
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Philip J. Carroll: A Profile
Title: Chairman/chief executive (effective July 1)
Education: Bachelor's and master's degrees in physics, Loyola University and Tulane University, respectively
Background: Began oil industry career in 1961 as a petroleum engineer at Shell Oil Co.; named vice president of public affairs in 1979, executive vice president of administration in 1988 and president/chief executive in 1993; to retire from Shell to join Fluor Corp. in July
Personal: Married, three sons
Residence: Houston, relocating to Southern California
Directorships: American Petroleum Institute, Boise Cascade Corp., National Urban League, National Action Council for Minorities in Engineering, Texas Medical Center
Affiliations: University of Houston System Board of Regents, Tulane University Board of Administrators, Business Higher Education Forum, Baylor College of Medicine Board of Trustees, National Petroleum Council and the (Texas) Governor's Business Council
Source: Shell Oil Co.