CenterPoint’s Lesar tops list of Houston’s best-paid corporate executives
CenterPoint Energy CEO David Lesar, whose 2021 pay package generated pushback by the utility’s shareholders earlier this year, was the highest-paid executive among Houston public companies last year and led a batch of CEOs whose collective pay rose slightly faster than that that of their companies’ workers.
Lesar, the former longtime Halliburton CEO, was named a director of CenterPoint in May 2020 and was tapped two months later as the utility’s CEO. He earned $37.8 million in compensation last year, including $33.4 million in stock awards.
The pay package more than tripled the $12 million in compensation that Lesar received for the last half of 2020.
The pay bumps for local executives illustrated both the economic recovery from COVID-wracked 2020 and the rebound of the energy industry, which has long been backbone of Houston’s economy. Oil prices in 2020 clawed their way back from a devastating crash into negative territory, then jumped 56 percent to about $75 a barrel at the end of 2021 before climbing above $100 mark this year.
U.S. electricity consumption rose about 2 percent last year to about 3.9 trillion kilowatthours, according to the Energy Department.
Of the Houston’s 10 highestpaid corporate executives, eight ran energy companies. Lesar bumped ConocoPhillips CEO Ryan Lance from the top of the 2020 list to No. 2 last year, where Lance also ranked in 2019. Lance oversaw a company that more than doubled its revenues last year to $48.3 billion and generated $8.1 billion in profits year after losing $2.7 billion in 2020.
Halliburton CEO Jeff Miller moved up to No. 3 on the list from No. 5 in 2020, as the company earned a profit of $824 million, swinging from a $235 million loss in 2020. Exxon Mobil CEO Darren Woods was Houston’s fourth-highest-paid corporate executive, as the company’s profits hit $23 billion, compared to a $22.4 billion loss in 2020
Kevin Hourican, CEO of food services company Sysco, was the lone executive in the top five outside of the energy industry, though he slipped to No. 5 from No. 3 the previous year. With the restaurant industry recovering from 2020 lows, Sysco doubled its profits, generating $524.2 million in net income for the year ended July 3, 2021, up from $215.5 million.
Other energy industry executives among Houston’s highest-paid corporate executives included No. 6, Douglas Pferdehirt, CEO of the energy services company TechnipFMC; and No. 10 Jack Fusco, CEO of liquefied natural gas exporter Cheniere Energy.
Overall, Houston’s 10 highest-paid corporate executives collectively averaged $23.1 million in compensation last year, up 9.5 percent from 2020. On average, these 10 executives earned 212 times the average salary of their companies’ workers last year, up slightly from 210 times in 2020.
That said, the executives appeared to manage more than just a rising tide. The average return for shareholders in their companies reached 40 percent in 2021, or more than double the 19 percent gains in the Dow Jones Industrial Average and well above the 27 percent gains in the S&P 500.
Leading a turnaround
For Lesar, his pay package reflected both the challenges of finding experienced leadership in the utilities industry in general and the turnaround he led at CenterPoint. Lesar, who retired from Halliburton in 2017, was tapped to lead the company after former CEO Scott Prochazka stepped down in early 2020 following the Public Utility Commission’s approval of a smaller-thanexpected rate increase for CenterPoint.
The company, which distributes electricity for most of the Houston area, sought a rate increase worth $161 million, but instead agreed to $13 million.
“Executive succession and retention seem to be an important issue. With all of the oil and gas cycles in the past few years, the lack of executive talent is an issue,” said Wes Hart, managing director of the Houston office of Pearl Meyer, an executive compensation consultant. “When oil and gas were doing badly, it was hard to keep people.”
With the economy recovering, CenterPoint rebounded under Lesar’s watch. The company earned $1.4 billion last year, compared to a $949 million loss in 2020, and generated a return of 32 percent to shareholders. Revenue rose 13 percent to $8.4 billion.
The company, however, is facing several wrongful-death lawsuits related to extended power outages that contributed to the deaths of 43 people in Harris County during the 2021 freeze, which knocked out about half the state’s power generation.
Shareholders also rejected Lesar’s compensation package in a non-binding “say on pay” vote. Lesar’s compensation was, in some cases, two to three times higher than that of CEOs at similar utilities, according to the Energy and Policy Institute, a San Francisco watchdog group.
CenterPoint spokesman Geoffrey Castro defended Lesar’s package.
“Overall, nearly 90 percent of Dave’s 2021 total compensation is equity-based, further aligning him with our investors and customers,” he said. “Since July 2020, the company’s total shareholder return has outperformed the Utility Sector Index and peer companies by 39 percent and 38 percent respectively.”
Not all CEOs got a pay raise. Compensation for ConocoPhillips’ Lance fell about 15 percent to $23.9 million. Hourican’s pay last year declined about 10 percent to $23.2 million after he received a one-time payment when he was hired as Sysco’s CEO in February 2020. He received $3.6 million to compensate for forfeited incentives he would have received from his previous employer, CVS Caremark.
The only other member of Houston’s 10 highest-paid corporate executives outside of the energy industry was Hewlett Packard Enterprise’s Antonio Neri, No. 8 on the list. He earned $19.1 million, including more than $13 million in stock awards. HPE, which paid Neri about $13 million in 2020, moved its headquarters to Spring from California’s Silicon Valley last year.
Boys’ club
The list of Houston’s highestpaid corporate executives remained male-dominated. Of the top 50, just two were women. Chandra Holt, named CEO of furniture and appliance retailer Conn’s Inc. last August, earned $11.5 million to rank 25th. Occidental Petroleum CEO Vicki Hollub was 28th, earning $11.1 million in 2021.
Additionally, the compensation levels reflect an executive sector where most compensation is tied to performance. Salaries accounted for less than 7 percent of the compensation earned by Houston’s 10 highestpaid executives.
Lance, Woods and Phillips 66 CEO Greg Garland drew salaries of between $1.6 million and $1.7 million. Those salaries made them the highest-salaried CEOs among the top 10, though accounted for about 7 percent of their total compensation.
Neri’s salary of $1.23 million — just 6.4 percent of his total compensation — was the lowest of the top 10.
“A primary distinction between typical employee pay and executive compensation is that executive pay packages are designed so that the vast majority of an executive's compensation is contingent on a company achieving performance criteria, ” said Ani Huang, CEO of Center on Executive Compensation, a group that studies, analyzes and promotes executive compensation policies. “Since executive pay is so strongly tied to financial performance of the company, and often stock price, it makes sense that it rebounded in 2021.”
Overall, the average compensation for Houston’s 50 highestpaid corporate executives rose 7.1 percent last year to $13.5 million. By comparison, compensation for Houston-area private-industry workers on average increased 3.5 percent last year, according to the Labor Department.