Nabors Industries is slated to pay Eugene Isenberg $100 million – more than the entire company earned in his final quarter as chief executive – and investors are crying foul.
Isenberg, consistently among Houston’s highest-paid executives, stepped down Friday as head of the oil and natural gas drilling company he’s run since 1987, triggering the potential $100 million termination agreement. He will remain as chairman.
The deal, crafted two years ago, entitles Isenberg to the massive final paycheck – plus outstanding stock options and awards valued at $26 million at the end of last year – in the event of his “constructive termination without cause.”
“It defies logic,” said Brandon Rees, deputy director for the AFL-CIO’s office of investment, which owns Nabors shares. “We’re baffled by what the board of directors was thinking in negotiating such an agreement for a CEO who is of retirement age. Nabors will continue to be a focus of shareholder discontent.”
Isenberg, 81, received $13.5 million in total compensation last year. From 2006 to 2010, he got almost $174 million in other compensation, John Daniel, an analyst with Houston-based investment bank Simmons & Co., estimated. During that time, Nabors’ stock price declined 38 percent.
“This year, that under-performance has continued,” Daniel said in a note to investors Monday. Shares of Nabors, which is based in Bermuda but has its main offices in Houston, declined 72 cents to $18.33 Monday. The stock has fallen more than 20 percent this year.
Isenberg’s payment would exceed Nabors’ third-quarter profit of $74.3 million.
No explanation yet
The controversial payment comes as corporate executive pay is drawing scrutiny.
Nabors’ investors were among the first to take advantage of a new federal rule under the Dodd-Frank Wall Street Reform Act allowing shareholders to oppose executive compensation packages with an advisory vote. Of the shares voted at the annual meeting last summer, 57 percent were cast against the pay deals.
Typically, executives receive termination pay when they are forced to leave, either because the board fires them or the company is acquired, said Chris Crawford, executive director for Longnecker & Associates, a compensation consulting firm. “Constructive termination” occurs when an executive is effectively demoted, pressuring him to resign.
Isenberg hasn’t publicly explained why he stepped down. Nabors board members and executives either did not return calls or refused comment.
“It’s definitely unusual to claim ‘constructive termination’ going from CEO to chairman, but it’s way more unusual to stay on as chairman and receive termination” payment, Crawford said. “That’s not a termination.”
The $100 million payout will be recorded as a “contingent liability” in Nabors’ year-end financial statements, the company said in a filing with the Securities and Exchange Commission. The filing doesn’t detail the conditions for the payment.
$50 million for new CEO
The new chief executive, Anthony Petrello, has a similar termination deal that would award him $50 million. He served as chief operating officer under Isenberg.
While acknowledging the $100 million payment may offend some investors, Daniel said there’s validity to Nabors’ argument: He took the company out of bankruptcy in 1987 and turned it from a small Alaska-based drilling contractor with negative shareholder equity into a multi-national company with more than $5.6 billion in value.
“The stock price was $0.37 per share in 1987 and increased 50-fold over Mr. Isenberg’s tenure,” he said.
Recently, some corporate boards have reined in executive severance packages, often called “golden parachutes,” said Cory Morrow, principal at Hay Group, a consulting firm. Some now include sunset clauses, ending the severance deal after an executive has led the company for several years.
“This is clearly an outlier,” Morrow said of Isenberg’s severance. “You can understand severance going into a bankruptcy situation, but 25 years later, is that appropriate?”
Isenberg’s parting package is actually smaller than in 2007, when he was eligible for $329 million in cash. In the years since, the company cut total annual pay by more than 81 percent, according to SEC filings.
Yet, the termination payout remains well above standard, which is two to three times an executive’s salary and bonus.
“If you go over three times, it starts to move out of the norm. Over five times is way outside of the norm,” Crawford said. “Ten times would be a crazy number.”
Wow, those OWS wackos are sure having an impact on Wall Street Fat Cats, aren’t they? Y’all keep camping in the park and Wall Street will keep doing exactly what it wants to do.
How does Obama win reelection? Which side do you suppose will be making excuses for this payout? That’s how.
$100 million? What amount is safe? $50? $500? When the rabble gets to decide what amount is fair, all is lost.
Oh but wait, he will take that 100 million and start new businesses that hire lots of people. And we should give him more of the Bush tax cuts and stop collecting capital gains taxes, etc! That is what the GOP would like us to believe! And it’s just another example of the rich getting richer.
Isenberg brought the company up from the ashers alright. At least they managed to whittle the package down from $329M. When I worked there, rumor was the total package was almost $500M.
Mr. Isenberg has a real hottie that drives him around in a Mercedez. If enough people take offense to this he may have to add a knuckle dragging bodyguard to the mix.
If you want to know what “shady” is just work for Nabors a while and you will learn the true meaning. How they get away from all teh IRS goons by calling themselves a “Bermuda” company is baffling and hilarious at the same time. They file their papers in Bermuda, hire somebody to sit in an office there to open the occasional mail, EXEC’s travel to Bermuda for “Board Meetings” as the entire company is run out of the Houston offices. Not to mention the huge yard where they construct and repair drilling rigs is right by their office as well. Bermuda company, PLEASE.
Kind of in your face, America! The reach money mongers just don’t give a Sh!t! That $100m could be used for jobs, research, anything but lining his pockets with more green! He was already rich beyond anyone’s wildest dreams – Greed/Avarice gone wild.
When the $100 million rabble gets to decide what amount is fair, all is lost.
This kind of story is what fuels this current 99% Occupy Movement BS.
If the company can afford to give away 100 million, then it should go to the shareholders.
Then there is all the tricks on the international side. Taking a rig to a country where entry duties to bring the rig in country are a high % based on rig appraisal? No problem, they just tell the appraiser how low they want the appraisal. Taking a rig into a country where duties are based on net income of the rig, which includes a depreciation deduction? No problem again, now they just have the appraiser inflate teh rig value to a level so high the depreciation deduction leaves no income to pay tax on. Again, things that just scratch the surface from a guy that spent less than a year at that funny farm.
txloanguy, so the investors that are outraged…are they “rabble” now? And diogenes, how would one protest this inequity? Write a letter to the editor?
“defies logic…”, think kickbacks to the Board of Directors and no telling who else.
Stockholders should have approval rights for compensation of top executives – after all – the company belongs to them – not the management.
no wonder gas is so expensive. its a ridiculous payout and cannot be justified.
I wonder how many employees they’ve laid off during the recession. If it’s none, I see no issue…if it’s one or more they should be ashamed.
This is one of those companies that is shady and evades taxes…. based in Bermuda, but run from Houston. SCAM!
Are CEO compensation plans made public to shareholders before they are signed? Shareholders have to hold them accountable for signing these ridiculous deals!
“Capitalism will fail not BY or WITH socialism – no, it will fail through GREED and self-consumption. Capitalism will fall from….within.”-Marx
To answer the question of how could the board of directors approve this, it’s really quite simple, look and see who they are, they’re all the CEO’s of other companies. It’s a rigged game folks.
I wonder how many of the ‘offended’ posters on here know the difference between ‘outrage’ and ‘envy’? I’ll admit on one hand to be kinduv envious of the guy. He had the chutzpuh to craft a massive arrangement 24 years ago, based on certain contingencies, to take the reins of a company that was in the final throes of going belly-up. And he definately turned things around, regardless of the business practices reported by some. And, to the company’s credit, they managed to winnow down the original arrangement to less than a third of what it had been.
On the other hand, there is no way I would stay on as long as he has. I plan on retiring the day I turn 60, if not before. This guy has precious few years left on his own personal clock and he gave away much too much of it to the ‘company store’. So I guess I envy and pity him all at once. And who among us wouldn’t REALLY like to be adopted into his family about now?
More power to him. You all are jealous. I wish I was on the receiving end of this payout. I would tell you all to go to you know where.
Sounds like Eugene Isenberg ought to be paying the $100 mil to the company. Obama will probably hire him as another of his financial advisers to go along with the collection he already has.
Outrage investors????? Heck I smell a shareholder derivative action.
“think kickbacks to the Board of Directors and no telling who else”
Maybe you missed the part where he’s also chairman of the board, in addition to CEO. There’s a good reason why the trend for the past 20 years or so has been for companies to split those two positions.
Not sure what Rees is complaining about. The deal has been clearly spelled out in every annual proxy statement the company has put out since the original agreement. He’s has over 2 years to voice his opposition, but he waited until it hit the news to do so. I hope he’s not receiving a bonus this year, because, as someone paid to manage investments, it appears he’s either incompetent, or just too lazy to perform the appropriate due diligence (or ensure those who report to him do).
I think a lot of people posting here are missing the point.
Shareholders own a part of the company. They have bought in with their own money, will lose/gain money along with the company’s fortunes and therefore have a say AND SHOULD have a say in:
-the company’s selection of board members
-the company’s policies
-the company’s overall business strategy
-what the company spends it’s money on, including executive compensation
That’s how publicly traded companies work!
That’s not communism, that’s capitalism!
It’s just plain obscene to any of the regular workers on the company. If they had that much to give away to one person how much more could they have paid all the workers in the company if it was split? How many regular working Joes got laid off from this company while this fat-cat gets this way over the top obscene bonus?
Russell Vaughan,
It looks like that will be required in the future under Dodd-Frank:
Title X, Subtitle E – Accountability and Executive Compensation
http://en.wikipedia.org/wiki/Dodd-Frank_Wall_Street_Reform_and_Consumer_Protection_Act
Socialism is a philosophy of failure,
the creed of ignorance, and the gospel of envy,
its inherent virtue is the equal sharing of misery..”
– Winston Churchill
I personally do not think the guy should get such a payout since the company’s performance isn’t up to par, but he did and until laws change,
it’s none of the investor’s business what this guy makes.
You invest and get a good return on your investment.
Or not.
It’s never a sure thing.
If I were an investor, I would be cheesed too but there is nothing to be done about it.
Absolutely ridiculous. During these difficult times when many people are out of work, Nabors is going to pay this bozo $100m? Are you kidding me?! Shame on all of you!!! I bet those they let go, refused raises to, etc. are fuming right about now. I would be. I’m angry that I received an excellent performance review, but received NO raise. What motivation do I have to stay with a company that doesn’t appreciate me? I understand that the recent recession tightens the belt, BUT employers need to show appreciation to those that work hard. In this case with Nabors, they need to rethink paying Isenberg. Talk about a lot of animosity. If I was their consultant, I’d advise otherwise.
Yeah, I’d like to have $100MM too but not ill-gotten. What skin did he have in the game for turning the company around? He didn’t own it but it seems like the comp committee is happy to rectify that by giving him more than 1/4 of the current annual earnings.
People stop complaining, he took the company for nothing and turned it into one of the biggest drilling companies in the world. Maybe some thing aren’t right with the deal, but don’t be mad at him for being smart enough to make a deal like this. “Mr. Isenberg enjoy your retirement”
Misplaced outrage. Where’s the outrage over CC Sabathia’s contract with the Yankees? The shareholders can alway vote out the current board or sell their shares.
@EmbarrasedTexan: Your name says it all. Perhaps you would be happier and more content in New York. As to what action should be taken, I suppose continuing disrupting activity, rioting, destroying property and crapping on police cars will surely change things for the better.
TxLoanguy, since when did the stockholders become rabble?
What do you care? It ain’t your money!!!
Corporate GREED at its finest!
This is exactly what anybody with a pulse has come to expect. It is the reason the Republican view of taxing (NOT) the wealthy is so much BS. This reported $100M will produce exactly zero jobs, be invested in growing the economy not at all. And it is justified as because he took the company off-shore to avoid taxes, his business practices are on the shady side of the law, and he managed to keep an energy company making money during a time when we have seen the price of energy skyrocket. Obviously, since this parachute was written by the board they are just taking care of their own, knowing when the time comes they will have some equally exorbitant compensation.
I see somebody above asks if I know the difference between outrage and envy. Yes I do. And this is outrageous. And , per the story, the deal was struck, not 24 years ago, but 2 years ago. So, no , I’m not envious, I’m nauseated.
Self importance and unbridled greed.
Start your own company then…why do you yell at people to create jobs for you? Are you inferior or something? Not capable? Too Lazy…there’s a reason he’s paid that…he can do what you never, ever can especially if you were raised with Liberal views…blame your parents for teaching you that you are capable of nothing…Conservatives believe they can do anything…that’s why they’re better than you.
Want to see more of this idiocy? Keep voting Republican.
I’m not a fan of outrageous payouts either, but Isenberg seems like he actually earned his money. If a CEO can bring a company from the brink of bankruptcy and then greatly expand their market, he deserves to be rewarded. Many CEO’s get huge rewards after having run their companies into the ground; that’s inexcusble.
Hey hey hey! This guy has been running this company for 24 years (since 1987) and he’s 81 years old. If you read this article to completion, “He took the company out of bankruptcy in 1987 and turned it from a small Alaska-based drilling contractor with negative shareholder equity into a multi-national company with more than $5.6 billion in value.” It sounds like this guy earned that $100 million. Why do you get so mad at this guy and not at celebrities who earn/”earn” their millions (e.g. the Kardasians, the Pitts, the Combs, the Lohans, etc…)?
It was the company that got a bargain. Let’s see he took a company with negative net worth and now it’s worth $5.6 billion? I guess the investors would have been happier if the company had gone under, making their shares worthless.
This is EXACTLY what’s going on in the White House with all these loans(bankruptcies) which equal kickbacks……
Exactly Tom, it amazes me how so many people like to see and be part of failure…..
Everyone who thinks this CEO should get his golden parachute is missing the point. Eugene Isenberg was not unfairly compensated during his 25 years with the company. He received millions every year for doing the job he was hired to do, which was turn the company around. He did it, he got paid for it fairly, which I’m sure included plenty of bonuses and stock buys. Why upon retirement should he receive even more? It’s ridiculous. It’s saying he, and he alone, was the only one in the company responsible for its turnaround. I highly doubt that.
I’m all for him getting a nice golden parachute, given that he brought the company out of near bankruptcy. However, as stated in the first paragraph in the story, that’s more than the entire company made in the last quarter. His pay and stock options should be based on how well the company does, not something that gets voted on by board of directors who make hefty bonuses themselves.
Just think how many families he could help for one year on that absurd amount of money. No way is that clown worth that kind of money. But he had some slick lawyers and accountants help him put together the deal. The board was really stupid to accept it in the first place.
From these comments, a bunch of you folks need to start your own businesses so you can pay people more than the going market rate, keep people employed when you have no work for them to do, and give all the homeless food and shelter.
Let me know how that business model works out for ya.
The problem is who do you go after. AFL-CIO is a corrupt organization. Who is paying off Simmons & Co? They are all feeding at the trough…some more than others.