Question. Why would there be a "Board" if Ewing Oil was an Independent Oil Company?
As Ewing Oil had been a family owned company, board members had to be picked by them. So you can‘t expect much resistence by them.
Ewing Oil was one of the last of the independent oil companies (privately owned by the Ewing family, and usually run by J.R.
it's hard to imagine a company worth over a billion dollars with an international operation being run successfully by one or two people who manage everything from the finances, the staff, the research, the drilling, exploration, the strategy, the acquisitions etc., and still have time to spend most to the day shagging several different women.
Each one of you are correct, and I have some inside knowledge about this I'm happy to share with you:
Let's use Ewing Oil as an example, and let's say it's the early years when Jock owned and ran the company. Now, Jock may be smart but he can't know
everything. So he creates an advisory board. This advisory board would consist of people who are active and successful in their industries, and would consist of a banker, an attorney, a real estate professional, a tax pro, and a compliance expert, among others. They would meet monthly to advise Jock and give him a point of view from their experience. Here is how a discussion could flow:
Jock: I'm thinking of purchasing the Mainwaring Refinery
Real Estate Pro: They aren't issuing permits to build new refineries, so Mainwaring should go up in value over the years. Sounds like a good investment.
Compliance expert: Be careful, Jock. There may be spills from 20 years ago that everybody forgot about. Once you buy that refinery, you buy the liability for any spill that ever happened there, even before you owned it.
Attorney: I know a good remediation company. They can do soil and water tests at Mainwaring and also in the two towns near the refinery. I'd make the deal contingent on those tests.
Banker: I agree, and would go one step further. You and Mainwaring can each contribute one million dollars to an escrow fund, to be used for monitoring and compliance while you are working towards closing the deal.
Jock: Sounds good. I'll set up the deal that way, and will move ahead on it next week. Now, the next order of business . . .
By reading that example, you can see how helpful it is to have an advisory board.
"But, Lastkidpicked, wouldn't Ewing Oil already have attorneys, bankers, and compliance officers working for them?"
Glad you asked!
The difference is that the board is made up of people outside Ewing Oil, so they bring a whole different perspective. And they are there to advise Jock, but they don't work for him and are not paid by him, so they can speak freely and not worry about saying the wrong thing."
"Wait-- They're not paid for this?"
Again, glad you asked! Most of the board members are successfully employed or own a successful business. They don't need the money from being on the board, and so they are not paid at all, or paid a small stipend. The general agreement is that the banker serves on Jock's board once a month, and Jock serves on that banker's board once a month. Jock would bring to the table his knowledge of the oil business and his opinion of where the market is headed.
But in 2021, a company with the profits of Ewing Oil is not likely to be an independent oil company. The oil business now is not the oil business of the 1970s and 1980s, and Ewing Oil were under pressure from the likes of West Star Oil even in the 1980s. It would be far harder to resist them today.
Mustard makes a good point here, and again I am in the middle of it right now here in Texas. The Seven Sisters (or today, the Supermajors) have lots and lots of reserve cash on hand. When times are good, they add to that cash reserve. When times are bad, they use that cash to go on buying sprees and buy up the smaller companies who are struggling.
There is a great scene in
J.R. Returns . Carter Mckay is president of Westar and is getting ready to buy Ewing Oil from Cliff Barnes.
J.R. I thought we should talk. You're buying Ewing Oil from Cliff. Why? He's no threat to you.
McKay: Ewing Oil has some good fields and we have the money to develop them.
J.R. And if this deal goes through, what would happen to Ewing Oil? Would it cease to exist?
McKay: Like Jonah and the Whale, we would swallow it whole.
J.R. Picking off the independents, one by one. Is that it?
McKay: Something like that.
And this is happening in Texas right now. The price of crude is down from a few years ago, the world is moving toward renewables, and it's a bit of a scary time for the independents. So the bigger fish are swallowing the smaller fish as we speak.
It's fascinating to watch
Dallas, all these years later, and see how well they mirrored what is happening now. Or as
@James from London would say, life imitating art.