Big Pay=Big Problems For Big Oil Execs

Todd Shriber
 
Printer Friendly Version

Americans love money, there is no getting around that. Those that have it usually want more and those that do not have a lot aspire to have more of it, but with that said, most Americans have standards when it comes to what can be perceived as excessive pay. And when it comes to excessive pay, no groups are more vilified than professional athletes and CEOs of large companies.

In the sports world, baseball players, namely those that play for the team in New York that wears pinstripes are the most egregious offenders. The most notable being third baseman Alex Rodriguez, who under his current contract, makes $21.5 million a year. Assuming A-Rod were to play in all 162 games this year (he will not reach that total because has missed games due to injury), that salary works out to $132,716 PER GAME.

That is a tidy sum and tidy enough to draw the ire of sports fans, but head over to corporate America if you really want to make your blood boil. Picking the sectors that have CEOs whose pay may be deemed ''excessive'' is not hard, but the results in terms of who the men are that are commanding these big paydays might be surprising.

Big oil is a prime suspect when it comes to big pay, but the offenders are the real surprise and one may be paying a heavy price for his heavy compensation. News broke this evening that Ray Irani, CEO of Occidental Petroleum since 1990, will schedule his retirement date at the company's upcoming October board meeting. Officially, Irani, 75, will be retiring but it is fair to speculate his compensation might have led to an invitation to leave the fourth-largest U.S. oil company.

Before speculating that age is a factor, 75 is not all that old anymore, particularly when it comes to leading a major company. After all, Irani replaced Armand Hammer who was 91 when he stepped down. So back to pay. Irani made $31.4 million in 2009, making him the third highest paid CEO in the U.S. According to Forbes, John Watson, CEO of Chevron, made about $8.8 million last year. Rex Tillerson, CEO of ExxonMobil, made $10.53 million. That placed Tillerson at 95 on the highest paid CEOs list despite the fact that he runs a much a larger company than Irani does.

Occidental (OXY) shareholders have a right to be irked by Irani's big paydays because 2009 was not a one-off event. Forbes says his compensation for the past five years has been astounding $743.55 million. That means Irani made more than $407,000 per day over that time. That is enough to make A-Rod green with envy. In all fairness, Occidental shares are up 78% in the past five years, easily outpacing Chevron (CVX) and Exxon (XOM), but saying that Occidental is up 80% in that time means the company paid Irani almost $9.3 million for every 1% in capital appreciation.

Irani is not the only potential offender. Anadarko Petroluem's James Patterson made $23.5 million last year to run a company that is also far smaller than Chevron or Exxon. That pay may have been warranted in 2009 when Anadarko shares jumped 60%, but Patterson, who ranked second in the energy industry in terms of 2009 pay, is going to have some explaining to do if he takes home comparable pay this year because, thanks to its exposure to the Gulf of Mexico oil spill, Anadarko (APC) shares could easily finish down in 2010.

The lesson in Irani's departure is simple and should be heeded by CEOs in every industry: If you are going to take home the big bucks, you better deliver the goods to shareholders.

Archives:200920102011201220132014201520162017