There is a valuable lesson that most of us learn early in life and that is, in many circumstances, it is not what one says, but how it is said. Important advice to remember for interpersonal correspondence to be sure, but it is a pearl of wisdom that can be applied to the business world. Unfortunately, some folks at Transocean did not get the memo.
As most investors undoubtedly know at this point, Transocean, the world's largest provider of offshore drilling services, was the owner of the Deepwater Horizon rig, and save for BP (BP), no company has been vilified in the court of public opinion following last April's tragedy in the Gulf of Mexico the way Transocean has been.
That is why Transocean's reasoning behind granting 2010 bonuses to some top executives is just a tad on the specious side. From page 49 of the company's recently filed annual report:
''Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical
safety record as measured by our total recordable incident rate (''TRIR'') and total potential
severity rate (''TPSR''). As measured by these standards, we recorded the best year in safety
performance in our Company?s history, which is a reflection on our commitment to achieving an
incident free environment, all the time, everywhere.''
In other words, Transocean (RIG) deemed its 2010 safety record as adequate enough to laud bonuses on some of its executives. The company has since apologized for the wording in the annual report, but the damage is done. The annual report is filed and will live on for all to see for the rest of time. You can view it (HERE) if interested.
This is a perfect example of ''it is not what you say, but how you say it.'' The issue is not the fact that Transocean granted bonuses. It is the reasoning for the bonuses. By now, most investors are used to controversy surrounding executive compensation. It is basically a fact of life these days. Believe it or not, Transocean President and CEO Steven L. Newman actually made more last year than he did in 2009, almost $1 million to be precise.
I get the feeling that with 10 extra minutes, an intern in the Transocean PR department could have come up with a better reason for the bonuses than the company's safety record. For starters, the company could have said, ''Hey, our stock jumped almost 75% from July through December and our leadership should be rewarded for that.'' Sure, that obfuscates the big drop in Transocean shares in the days following the Gulf spill, but it is a far more plausible reason for the bonuses than the safety record.
At the end of the day, the capitalist in me says Transocean's top priority, following the safety of its employees, should be creating value for its shareholders. If both of those objectives can be accomplished in harmony, all the better. Just avoid insulting shareholders' intelligence when spending their money.
UPDATE: After I finished this piece, I did see a statement issued Tuesday evening that Transocean executives are donating their safety bonuses to the Deepwater Horizon Memorial Fund. In the essence of fairness and because it is newsworthy, a story will be filed on that event in the news section of OilSlick.