Oh, to be an oil company CEO in a time of rising energy prices. They can almost feel their wallets filling up.
The Chronicle’s annual survey of executive pay was dominated by oil company executives such as James Hackett, the head of Anadarko, who got a $24.3 million pay package, including about $13.5 million in stock awards and options, even though his company owns 25 percent of the well involved in the worst offshore oil disaster in U.S. history.
Hackett took a pay cut last year but still wound up No. 2 on the list as Anadarko’s shares recovered from the Macondo oil disaster and delivered for him and his investors, generating a 23 percent return last year, including reinvested dividends.
The same is true at Apache, where CEO Steven Farris got $19.3 million after the company’s stock posted a 16 percent return.
Things were so good that Houston’s perennial poster boy for runaway pay, Eugene Isenberg at Nabors Industries, barely made the top 10.
ConocoPhillips notables
Then there’s ConocoPhillips, which had three executives who did.
James Mulva, the chief executive, was the fourth-highest-paid executive in Houston, with compensation totaling almost $18 million.
John Carrig, who retired as president in March, weighed in at No. 9 on the list with more than $14 million.
And Alan Hirshberg, who joined the company from Exxon Mobil in October, still managed to land at No. 8 despite just two months of eligibility. As senior vice president for planning and strategy, Hirshberg had time to collect only $173,000 in salary but was showered with a $9.4 million signing bonus that vests over three years. If he played in the NBA, he might have had his own TV special.
Like those of other oil companies, ConocoPhillips’ investors also rode the wave of rising prices, as the company’s shares returned 39 percent last year.
But here’s the difference: ConocoPhillips’ performance has less to do with its executives’ ability to run an oil company, or even with rising oil prices, and much more to do with gimmicks to prop up the company’s stock price.
Chopping the workforce
While the executives padded their wallets, the company was furiously cutting many other expenses as part of its two-year plan to sell off $10 billion worth of assets. That plan also included eliminating 4 percent of its workforce to save money.
The company cut almost 3,000 jobs in the past two years, according to its annual reports filed with the Securities and Exchange Commission.
At the same time, it spent about $5 billion buying its own shares in the open market and has announced plans to spend $10 billion more on the program. Share buybacks support the stock price, and by boosting earnings per share, also goose the value of executive stock options.
The ConocoPhillips executives capped off a year of these games by announcing this month that they’re going to split the company in two.
Apparently, the split was a key part of the strategy Hirshberg was brought in to develop. As an added bonus — no pun intended – the timing of Hirshberg’s recruitment, the amount the company paid to get him, and his pedigree as an Exxon Mobil manager make him a leading choice for the CEO job when Mulva retires next year, after the split is complete.
What about growth?
The irony: Whatever the strategy, it apparently doesn’t include plans for the one thing all companies need: growth. In a conference call with analysts, Mulva essentially said ConocoPhillips has no plans to boost reserves in the next few years.
For a guy who just landed an $18 million pay package, you’d think he’d have a little more to offer in the way of vision.
It’s better than some members of the executive pay list in recent years who’ve profited even as their company’s performance slid – such as the aforementioned Isenberg.
But the buybacks and cost-cutting aren’t a replacement for a long-term growth strategy. The rise in oil prices also presents companies with a chance to reinvest and expand the business, and for that reason, shareholders have a right to expect more for their money.
Loren Steffy is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy. Follow him on Twitter at http://twitter.com/lsteffy.
