No, it’s not an April Fool’s joke.
Transocean, the owner of the Deepwater Horizon drilling rig that exploded, killed 11 workers and caused one of the largest environmental disasters in U.S. history, said in SEC filings Friday that 2010 was “the best year in safety performance in our company’s history,” which meant top executives were granted bonuses reflecting those results.
Despite the 11 deaths (nine worked for Transocean) and what was likely a year with fewer overall working hours because of the Gulf of Mexico drilling moratorium, Transocean’s safety metrics still put 2010 ahead of 2009. That year, four Transocean workers died and the company waived executive bonuses “to underscore the company’s commitment to safety.”
Twenty-five percent of the total Transocean executive bonuses are linked to the safety data, which is divided into two components: the rate of incidents per 200,000 hours that employees work and the potential severity of the incidents.
The rate of incidents saw a 4 percent improvement while the severity rate was about 6 percent better than the target rate. Although that would have allowed for a safety award of 115 percent, the company cut the percentage to 67.4 percent.
BP is considered the operator of the project and has been identified in all of the independent reports issued so far as the company most at fault for the accident. And Transocean’s contract with BP essentially frees it of any spill liability. But most of the crew of the rig were Transocean employees.
While the filings don’t appear to spell out specifically how much of the annual bonuses were tied to safety performance, here is the total amount top executives received in “non-equity incentive plan compensation”:
- Steve Newman, president and CEO: $374,062
Ricardo Rosa, chief financial officer: $150,528
Eric Brown, president, legal and administration: $113,612
Arnaud A.Y. Bobillier, executive vice president, asset and performance: $131,040
Ihab M. Toma, executive vice president, global business, $109,040
Robert L. Long, former CEO: $86,912
Cheryl D. Richard, former senior vice president of human resources, technology: $39,245
This is how Transocean explains its safety measurements in its SEC filings:
Safety Performance. Our business involves numerous operating hazards and we remain committed to protecting our employees, our property and the environment. Our ultimate goal is expressed in our Safety Vision of “an incident-free workplace—all the time, everywhere.” The Committee sets our safety performance targets at levels each year that motivate our employees to continually improve our safety performance toward this ultimate goal. Twenty-five percent of the total award opportunity is based on the overall safety metric.
The Committee measures our safety performance through a combination of our total recordable incident rate (“TRIR”) and total potential severity rate (“TPSR”).
- • TRIR is an industry standard measure of safety performance that is used to measure the frequency of a company’s recordable incidents and comprised 50% of the overall safety metric. TRIR is measured in number of recordable incidents per 200,000 employee hours worked.
- •TPSR is a proprietary safety measure that we use to monitor the total potential severity of incidents and comprised 50% of the overall safety metric. Each incident is reviewed and assigned a number based on the impact that such incident could have had on our employees and contractors, and the total is then combined to determine the TPSR.
The occurrence of a fatality may override the safety performance measure.
The Committee set our TRIR target for 2010 at 0.73 and our TPSR target at 38.0. For TRIR, achievement of this target would reflect a 5% improvement over 2009 actual results. For TPSR, the target set for 2009 was maintained as the target for 2010, as 2009 actual results fell short of the 2009 target by 9.6%. Achieving performance at the target levels would result in the Named Executive Officers receiving a payout of 100% of the target bonus amount for this performance measure.
Based on the foregoing safety performance measures, the actual TRIR was 0.74 and the TPSR was 35.4 for 2010. These outcomes together resulted in a calculated payout percentage of 115% for the safety performance measure for 2010. However, due to the fatalities that occurred in 2010, the Committee exercised its discretionary authority to modify the TRIR payout component to zero, which resulted in a modified payout percentage of 67.4% for the safety performance measure.
Transocean is also embroiled in a bit of a dispute with Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation and Enforcement over a set of its employees who are refusing to testify before next week’s hearing of the joint U.S. Coast Guard/BOEMRE investigation panel in New Orleans.