Oil rig operator Transocean (NYSE:RIG) reviewed the proposal submitted by funds affiliated with activist investor Carl Icahn calling for a $4-per-share dividend and seeking representation on the board of directors, but it rejected them because they're in direct conflict with Transocean's disciplined capital allocation strategy.

Transocean's board said the dividend would adversely affect the company's ability to operate and compete effectively in a cyclical and capital-intensive industry.

"Following its review and in light of these proposals," the board said in a statement, "Mr. Icahn is pursuing a highly flawed agenda focused exclusively on potentially generating temporary returns at the expense of the company's ability to operate successfully and create sustainable value over the long term."

Further, the board said Icahn's hand-picked candidates would pursue his "potentially damaging short-term agenda," which is not in the best interest of the company and all of its stakeholders.

At Icahn's urging, though, Transocean had agreed to reinstate the dividend and said it will recommend an annual payout of $2.24 a share at the annual meeting. Icahn previously indicated that it was insufficient, saying it "further highlights a long track record of weak capital allocation strategy."

Transocean's board recommends shareholders vote against Icahn's dividend proposal and reject his slate of candidates for the board.