Transocean chairman’s retirement: submission or strategy?

The sudden announcement Monday that Transocean’s board chairman plans to retire could be viewed as an acknowledgement that billionaire investor Carl Icahn has the votes to get the incumbent ousted at this week’s contentious annual meeting.

Or it could be part of a strategy to appease large institutional shareholders who want fresh blood but may support J. Michael Talbert for re-election for a final year if he were to then step down and allow a transition for picking a successor who sees things the company’s way rather than Icahn’s.

The chess game will be decided Friday when Transocean shareholders meet in Zug, Switzerland. Among the items on the agenda: the election of directors and dueling dividend proposals.

“I suspect Mike’s announcement in some part reflects a desire to take this issue off the board, if you will,” said Martin B. McNamara, a Transocean director and head of the board’s corporate governance committee, in an interview.

“To the extent he has become a bit of a symbol, this will hopefully enable people to focus back on what we think is the most important issue, which is what is the right process for the company going forward,” McNamara added.

Icahn said in an open letter to shareholders after Talbert’s announcement that they shouldn’t be fooled.

“After facing strong shareholder dissent, and in what appears to be a last ditch effort to preserve his re-election, Mike Talbert has promised shareholders that if elected, he will shortly resign,” Icahn said. “We find it to be utterly absurd that a chairman facing the prospect of losing his directorship would be so brazen as to ask shareholders to return him as chairman so that he and the board can then pick his successor.”

Read more: War of words intensifies over Transocean board shakeup effort

Icahn has nominated three allies to serve on the board and replace three existing directors, including Talbert. He also has proposed a $4-a-share-dividend. Transocean is pushing for its entire slate of directors and a $2.24-a-share dividend.

For its part, the Swiss drilling contractor said in a regulatory filing that Talbert’s retirement “is not due to any disagreement with the company or its management regarding any matter relating to the company’s operations, policies or practices.”

In an accompanying statement, Transocean said that if Talbert is re-elected for another one-year term, the 66-year-old will retire from the board before the next annual meeting in 2014. McNamara’s committee plans to quickly seek its own candidate to fill the vacancy.

“With Mr. Icahn, who is a significant shareholder, and all of our shareholders we welcome their input and suggestions they have,” McNamara said. “That communication I think can occur in a more orderly fashion than a proxy contest. I’m not sure a proxy contest is a good forum for an exchange of ideas.”

But don’t expect Icahn’s board nominees to be among the people recruited by the board to replace Talbert next year if he is re-elected to the board this week.

“We don’t see that they would be contributors to the board,” McNamara said. “Their independence is subject to a greater question than our typical nominee. We have recommended against them. We don’t think they compare favorably to the people we nominated or anyone we would be likely to recruit in the coming time.”

Two independent shareholder advocacy groups oppose Icahn’s dividend proposal, but they are split over his board picks.

Glass Lewis & Co. has recommended that Transocean shareholders elect Icahn nominee Samuel Merksamer to the board and reject incumbent nominee Talbert. It does not support Icahn’s other two nominees _ Jose Maria Alapont and John Lipinski.

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Institutional Shareholder Services supports Alapont and Merksamer and has recommended the removal of Talbert and incumbent nominee Robert Sprague. ISS doesn’t support Lipinski.

Icahn said Monday that a third group, Swiss proxy advisory firm Ethos Foundation, has recommended that institutional investors vote in favor of electing all three Icahn nominees.

Icahn, who disclosed earlier this year that he had acquired a sizable stake in the company and that he would aggressively push for change, has accused the current board of failing to create shareholder value and the company of lagging its peers in performance. Icahn also has said the three current board members he is seeking to oust have been Transocean directors through all of the “value destructive transactions” he has cited.

“While we are more than willing to work with other independent board members to have a comprehensive debate to formulate a consensus plan to move forward to create value, there is no point debating that actions taken by this board in the past have contributed to terrible shareholder returns,” Icahn said in his latest letter to shareholders. “Their decisions and historical shareholder returns are a matter of public record and are simply facts. It is time for change.”