Wage gap soars here
Area CEOs top median pay by up to 935 times
Before his departure in January, John Watson steered Chevron through a painful oilmarket crash, maneuvered billions to turn the fertile Permian Basin into an oil-pumping machine, and drove stock returns three times higher than its larger rival Exxon Mobil as oil prices climbed up from rock bottom.
The U.S. oil major’s now-retired CEO collected a big paycheck for it: $24.8 million. He also enjoyed perks of the Csuite: $27,000 in air travel, $19,000 in financial counseling and $6,500 for the use of a vehicle, among other perks.
Chevron employees didn’t do badly in 2017, either, but nowhere near as well Watson. As he ended his eight-year tenure, he earned 180 times the median employee salary of $138,000.
Data released by U.S. companies for the first time this year highlights the wide gaps between the pay of CEOs middle-of-the road workers, a gap that has ballooned in recent decades as executive compensation packages have grown richer and workers’ earnings have largely stagnated. Over the past half-century,
the average pay of an American CEO has climbed from 20 times greater than that of employees to 271 times, according to the Economic Policy Institute, a Washington think tank.
Companies with headquarters or significant operations in the Houston area last year paid CEOs up to 935 times more than the median employee salary, according to analysis of company filings by the Houston Chronicle..
“CEO pay is growing at an exponential rate compared with stagnant wages for the workforce,” said Rob DuBoff, director of corporate research at consultancy Just Capital. “As companies are growing, what part of the success is translating to the workforce instead of just the Csuite?”
The disclosure of how CEO pay compares to that of workers was required by the law that overhauled the regulation of the financial services industry after the global financial crisis in 2008 and the deep recession that followed. The provision, which went into effect this year, aimed to give investors, employees and the public a better look at how executive pay stacks up and focus attention on issues of fairness.
Companies, however, have other concerns, analysts said. They’re worried employees will read median salaries and either get discouraged because they’re not making that much or leave for rivals that they see pay more.
“Organizations are absolutely concerned their workforce will look at the disclosure and say, ‘Gosh, I can make more money across the street,’” said Steve Seelig, senior regulatory adviser at consulting firm Willis Towers Watson in Washington.
The highest-paid chief executives in Houston and other U.S. energy companies with significant operations in the area earned an average $17 million, about 150 times more than the median employee pay, a Houston Chronicle analysis shows. The CEOs of those companies, which include Halliburton, Nabors Industries and National Oilwell Varco, received between 108 and 935 times what they paid workers earning the median salary.
The highest median pay at these companies ranged from about $110,000 at Sugar Land’s CVR Energy to $193,000 at San Antonio’s Valero Energy. In between were Exxon Mobil where the median pay topped $160,000; Houston’s Apache Corp., with a median salary of about $146,000; and Noble Energy, also of Houston, with median pay of more than $127,000.
Oil field service companies such as Halliburton, which slashed its workforce by nearly 40 percent in the recent downturn, have been hiring back crews for hydraulic fracturing fleets and other operations in U.S. shale fields like the Permian Basin. Halliburton’s headcount has risen from 50,000 in 2016 to 55,000 at the end of last year.
But the industry’s workforce is climbing more slowly than oil prices and production, and labor shortages have quickly materialized. With U.S. unemployment near historic lows, and the oil and gas industry increasingly going digital, production and services companies are competing for talent with technology companies and other industries.
Halliburton, for example, reported the median worker pay at $79,000, which badly lags Facebook, Netflix and Google’s parent company Alphabet. The median pay at these companies ranged from $183,000 to $240,000.
“We’re losing people to Google and Amazon,” said Mahesh Puducheri, global vice president of human resources at Halliburton. “We’ve got to be thinking about, ‘What am I going to do to retain them?’”
Houston’s energy service firms and oil-equipment makers tend to employ large workforces in oil fields and factories, and their employees typically are paid less than companies that extract oil and gas. Those companies tend to have larger CEO-to-employee pay gaps.
Halliburton CEO Jeff Miller earned $23.1 million last year, 290 times the median employee salary. Anthony Petrello, CEO of Houston drilling contractor Nabors Industries, collected $14.1 million and the median employee made about $52,000, a ratio of 268-to-1. Clay Williams, CEO of local oil field equipment maker National Oilwell Varco, made $12.6 million, 239 times the $53,000 of its median employee.
Some pay gaps were staggering. At U.S. oil refiner Marathon Petroleum, an Ohio company with two refineries and offices in Houston, CEO Gary Heminger made $19.7 million in 2017, compared with the median employee’s $21,034, a 935-to-1 ratio. By comparison, rival refiner Phillips 66, Houston’s biggest publicly traded company, reported CEO Greg Garland’s total compensation at $23.8 million and its median worker was paid $170,988, a 138-to-1 ratio.
In its filing, Marathon Petroleum attributed the large gap to its retail stores, which employ some 32,000 people who tend to work less hours at lower pay than at its refineries. If retail workers are excluded, the ratio of CEO pay to median employee pay would shrink to 156:1, the company said in the filing,
Most companies did not respond to requests for comment. A Chevron spokesman said the company emphasizes pay for performance, with the overwhelming majority compensation to top executives tied of factors such as shareholder returns.
Consultants said the increased transparency could lead to uncomfortable conversations with employees who make salaries below the median. Ramesh Anand, president of American Personnel Resources and a recruiter in Houston, said if people realize they’re being underpaid or there’s a major difference between salaries at their competitors, they may decide to move on.
“I can see people reaching out to their friends and saying, ‘If you hear of any positions, let me know,’” Anand said.