Millions in bonuses for executives at struggling firm.
Top executives’ total is nearly the value that investors place on Pioneer Energy Services
Stacy Locke, CEO of financially troubled Pioneer Energy Services, will receive more than $2.7 million in bonuses — even though the San Antonio-based public oil field services company hasn’t reported a profitable quarter in five years and its stock currently trades at under a dime a share.
Bonuses to four other top Pioneer executives total more than $4.4 million, according to a Sept. 13 filing with the Securities and Exchange Commission.
Combined, the bonuses for Locke and the four executives reach $7.2 million, which is close to the value that investors place on the entire company. Pioneer’s total market capitalization — the dollar value of its outstanding shares — was $8 million as of late Monday, according the OTCQX Market, where the company’s stock is traded.
“This is one of the most egregious examples of executives extracting cash from a deeply troubled company that I have ever seen,” said Rosanna Weaver, a program manager at As You Sow, an organization that promotes corporate responsibility.
Pioneer’s six-member board of directors, which includes Locke, approved the bonuses after conferring with a compensation consultant Sept. 10, according to the SEC filing.
Neither Locke nor Pioneer spokeswoman Lisa Elliott responded to requests for comment.
Company shareholders could have grounds to sue over the bonuses, though courts have ruled against shareholders challenging executive bonus plans, said Steven Clifford, a former CEO of KING Broadcasting in Seattle and author of the book “The CEO Pay Machine.”
“If there was ever a worthy case, this would be it,” Clifford said. But the market capitalization of Pioneer is so small that it would be too costly for shareholders to litigate, he said.
Just over five years ago, in mid-August 2014, Pioneer traded at more than $15 a share. The quarter that ended the next month was the company’s last profitable one.
Oil price drops have made it difficult for Pioneer and many of its competitors. As of June 30, the company had just above $30 million in cash reserves. It also has debt of more than $450 million.
The stock was delisted from the New York Stock Exchange in mid-August because it was unable to keep its share price above $1.00.
The company’s losses haven’t affected Locke’s compensation. He received $2.3 million in cash in 2018, a 4.4 percent increase from 2017 and up 39.4 percent from two years earlier.
However, the millions of shares of stock that Locke and other executives held as part of stock grants had become nearly worthless.
The new executive compensation bonus plan partly eliminates that issue by “temporarily discontinuing the granting of longterm incentive awards,” which are made up of stock options, stock grants and cash payments, all paid over a multiyear period.
Instead, the plan approved by the board Sept. 10 granted a one-time bonus of $1.6 million to Locke; $614,000 to Chief Financial Officer Lorne Phillips, $521,000 to Chief Strategy Officer Carlos Pena, $521,000 to Chief Operating Officer Brian Tucker and $420,000 to Bryce Seki, the company’s general counsel.
The “special incentive bonuses” will be paid upon execution of a bonus award letter, according to the SEC filing. It’s unclear if the executives have already signed the letter.
Another part of the plan, “retention bonuses,” calls for a lump sum of 150 percent of each of the executive officers’ annual base salaries. Like the special incentive bonuses, the payments are due as soon as Locke and the other executives sign for them.
“The board determined that it was in the best interests of the company and its shareholders to restructure the company’s incentive plans to retain key employees and encourage them to devote their best efforts to the company as the company explores various strategic alternatives,” the SEC filing said.
After the quarter that ended June 30, Locke said Pioneer is exploring several options, including potentially merging with another company or being acquired.
The SEC filing shows that Locke received a $1.2 million retention bonus based on his $800,000 salary. Phillips received $622,000, Pena $600,000, Tucker 600,000 and Seki $525,000.
“How is this in the shareholders’ interest?” Clifford asked.
Awarding incentive bonuses quarterly, instead of annually, was troublesome, he said. Executives could be awarded for a profitable quarter even if Pioneer posted a loss for the year.
He also said the awarding of retention bonuses didn’t make sense. Given the track record of Locke and his corporate team, he said, it would be unlikely that they would be hired by another company.
Locke has been at the helm of Pioneer for more than two decades. The company has seen repeated boom-and-bust cycles during his tenure. The last five years have been particularly difficult despite the boom in West Texas’ Permian Basin, a key area of operation for Pioneer.
Rising CEO pay and the gap between workers and the top executive have been increasingly controversial issues. Opinions can differ over a CEO’s compensation increases at a profitable company, but it’s harder to make the case for boosting top executives’ pay and bonuses at an unprofitable one, said Dean Baker, a senior economist at the Center for Economic and Policy Research, a liberal-leaning think tank in Washington, D.C.
“The question is, did you do a good job for shareholders,” he said. “It seems pretty hard to imagine that the top executives of Pioneer should be rewarded.”