Transocean drew the ire of many this past weekend for awarding safety bonuses to executives for the drilling company’s performance in 2010 — despite the death of 11 workers on the Deepwater Horizon.
“What a slap in the face to those who died, their families and those who got hurt and all those who were affected on the Gulf coast from the Horizon incident,” a reader wrote, responding to our original post.
Secretary of the Interior Ken Salazar and the former co-chair of the Presidential Spill Commission William Reilly also criticized the move.
“Some companies just don’t get it,” Reilly said. “I think Transocean just doesn’t get it.”
The reactions prompted Transocean to apologize on Monday – not for the bonuses, but for the language in the filing in which it said 2010 was its best year for safety — and to donate the bonuses to a fund for the victim’s families.
But maybe readers and regulators shouldn’t be angry about the existence of Transocean safety bonuses and should be upset about their size — as in maybe the bonuses are too small.
Bear with me for a moment on this one.
The cash bonus system that Transocean used in 2010 had four components (or five, depending on how you look at it), according to the company’s proxy filing:
- Safety Performance (25%)
- Total Recordable Incident Rate (“TRIR”)
- Total Potential Severity Rate (“TPSR”)
- Cash Flow Value Added (“CFVA”) relative to our annual budget (50%);
- Newbuilds (10%); and
- Enterprise Resource Planning (15%).
There’s plenty of legal precedent that says corporate officers’ first duty is to their shareholders, that they put share price ahead of being nice to kittens and old ladies (assuming they don’t break any laws in the process of dissing the kittens and old ladies).
Obviously, no one at the company wants an injury or a death to occur. But if safety really matters to a firm, if the goal really is “an incident-free workplace—all the time, everywhere,” as stated, shouldn’t the incentive be more than just 25 percent of total cash bonuses?
There are already pay incentives for Transocean executives based on total shareholder returns — stock and stock options worth several million were granted this year based on that metric.
Why not just have all the shareholder-related performance targets lead to equity-related payouts and have the safety measures lead to cash payouts, and large ones at that?
Following the Exxon-Valdez accident Exxon Mobil seemed to have found a way to make safety a priority from the top of the company down to the average worker.
Is one-quarter of one incentive program at Transocean enough to tell workers the bosses really value safety?