In oil rout, some US energy bosses spared pain
More cash, lower targets and bigger share awards - not all U.S. energy bosses are feeling the full impact of tumbling oil prices in their paychecks. Some oil and gas companies are making it easier for their top managers to meet performance goals or are offering more cash as a prolonged oil slump keeps share prices at lows not seen in five years, filings show.
Among the beneficiaries are bosses of both solid performers and struggling companies, and the changes may rankle investors facing losses.
Oilfield services company Schlumberger NV, for example, used lower earnings targets for the second half of 2015, which helped its CEO Paal Kibsgaard receive total pay of $18.3 million, only slightly below the 2014 level. The company's shares fell 18 percent last year, about half the decline of its index and have since recovered about 7 percent.
Linn Energy , meanwhile, whose shares nosedived 87 percent last year under the weight of its swelling debt and dwindling financing options, announced a new incentive plan last month for its top executives that focuses more on cash rather than stock. Dallas-based oil and gas exploration company Exco Resources Inc will offer its directors restricted stock worth $140,000 a year - about 10 times the value of shares awarded in 2014, according to securities filings, even though its shares fell 43 percent last year. In another example, Halcon Resources Corp - built by its CEO Floyd Wilson, who has made a fortune launching and selling off oil companies - disclosed in a securities filing last week that Wilson received $3 million and three other top executives $800,000 each in exchange for an agreement to stay for at least another year.
A representative for Halcon, which has hired financial and legal advisors to navigate the downturn, did not return messages.
Schlumberger declined to comment beyond its recent proxy statement. An Exco representative said the new plan makes its director pay more competitive and aligns their compensation with performance of the company.
A representative for Linn Energy told Reuters in February the compensation changes were designed to ensure management stayed on to secure the company's future. The company did not respond to requests for further comment. Offering executives financial incentives to stay through upheaval, be it a merger or restructuring, is a common practice.
But whatever the merits, frequent changes in incentives "can absolutely undercut the relationship between pay and performance," said Ken Bertsch, head of the Council of Institutional Investors, whose members include big pension funds and asset managers. Anne Simpson, who oversees corporate governance at the $279.5 billion California Public Employees' Retirement System, told Reuters that it planned to take a hard look at pay adjustments in coming months when proxy votes are due.