Disclosure Rules on CEO Pay
April 9th, 2007For those of you following the Executive Compensation story (see blog below), the new SEC CEO pay disclosure rules are in effect and we are just starting to witness their output. The NY Times published an interesting article today about some of the complexities inhered in the disclosures (see article here). The article finds them not only difficult to interpret, but difficult to compare to past disclosures. These complexities have not stopped the eye-popping, attention-grabbing headlines (see this article on Alan Mulally’s pay from the Ford Motor Co.). This is likely only the beginning. Let the media frenzy begin…
It will be interesting to see if the new disclosure rules eventually bring clarity, and how the they ultimately impact pay, …if at all.
April 9th, 2007 at 2:12 pm
It’s neat to note that not only does CEO compensation being outlandish when company performance is down by billions and employees are getting cut from the payroll (e.g., Ford) demonstrate the disconnect between pay and performance, but so, too, does astronomical pay when performance is high. Here’s a recent article that tries to justify a $400 million pay package to an oil company CEO. The company claims that this is an example of perfect alignment — the oil company made billions, so it’s OK to pay the CEO nearly a half-billion total. But do we really believe that this CEO was responsible for the currently obscenely high profit figures in the oil industry? A (semi-)trained monkey in the executive suite could have done the same . . . even if you kill people (e.g., BP), you can’t mess up the profitability of an oil company right now.
Occidental boss took home $400M in 2006
CEO nets one of biggest paychecks in corporate history; most from stock options accumulated over last decade.
April 9 2007: 12:33 PM EDT
CHICAGO (Reuters) — Occidental Petroleum Corp.’s chairman and chief executive took in more than $400 million in compensation last year, the company said in a filing, one of the biggest single-year payouts in U.S. corporate history.
The largest part of Ray Irani’s 2006 payout was $270.2 million from the exercise of options awarded from 1997 to 2006, representing more than 7.1 million shares, according to the company’s annual proxy statement, which was filed with the Securities and Exchange Commission in March.
Irani also received $93.3 million in stock and dividends from a deferred stock program when the company closed the plan in October due to increases in liability and expenses for the program, the company said.
Where are they now?
Irani’s salary in 2006 was $1.3 million and his cash bonus was $1.4 million, according to the filing. But stock and option awards and other benefits lifted his 2006 compensation to $55.6 million, the proxy said.
In the proxy, the company said that from December 1990 – when Irani succeeded Armand Hammer as chief executive – through 2005, the company’s stock rose to about $40 a share from $9 and its total shareholder return was 699 percent.
“When you look at this, this is solid pay for performance,” said Richard Kline, an Occidental spokesman. “It serves the best interest of the corporation and the best interest of the shareholder.”
Occidental (up $0.19 to $50.14, Charts) stock edged higher in afternoon New York Stock Exchange trading.
According to the Wall Street Journal, only a few CEOs have ever made more money in one year. In 2001, Oracle Corp. (Charts) CEO Larry Ellison received $706 million from exercising stock options, and in 1998 former Walt Disney Co. (Charts) CEO Michael Eisner received $570 million, according to the newspaper.
Former Exxon Mobil (Charts) head Lee Raymond also received a $400 [million] retirement package last year, which was widely reported and criticized amid soaring gasoline prices.
April 19th, 2007 at 8:15 am
Actually, Towers Perrin’s HR division just released their anthology of articles, “The Year in Executive Compensation 2007,” which provides a pretty thorough overview of the changes brought by the new proxy disclosure rules, among other things.
Interestingly, in one of the pieces, Paula Todd argues that fuller disclosure might have the unintended consequence of driving up CEO pay, due to executives wanting to receive the same/better compensation than their peers. (If it sounds like a familiar argument, it was originally an op-ed in Financial Week over the summer.)