As a general rule, corporate giving is a good thing. Unless, of course, it’s used to downplay corporate taking.
Few executives have taken more from their companies than Eugene Isenberg, the outgoing chairman of Nabors Industries. In fact, Isenberg’s haul in recent years had gotten so extreme that earlier this month, under pressure from angry shareholders, he forfeited a $100 million severance package he was set to receive for surrendering his chief executive title. News of the decision, though, came steeped in mentions of charity.
In a news release, Isenberg said he hoped by forgoing the payment that Nabors would use a “substantial portion of these savings for worthy charitable purposes.”
The “savings” apparently refers to the money the company’s long-suffering shareholders won’t have to pay him. The worthy charity, meanwhile, seems to refer to the Nabors Charitable Foundation, a tax-exempt outfit that Isenberg set up a few years ago to provide college scholarships for children of Nabors employees.
Isenberg’s successor, Anthony Petrello, specifically cited the foundation before noting that “the company intends, subject to future operating results, to make charitable contributions to benefit the educational and other charitable needs of its employees and to benefit other community-based causes.”
When he set up the charity, Isenberg pledged to it the after-tax proceeds of his annual base salary, and the charity has awarded scholarships to family members of some 170 Nabors employees.
While educating employees’ children is a worthy cause, Isenberg and Nabors have thrust what is a relatively meager in-house charity in front of shareholders, as if the donations justify the tens of millions the company has showered on Isenberg in recent years.
“It almost felt like special pleading,” said Paul Hodgson, a senior research associate with GMI, a corporate governance firm that has ranked Nabors’ pay practices among the worst of the 456 companies it follows. “It’s not relative to a discussion of the board’s compensation policy as it applies to the CEO.”
But since Nabors cast it in that light, it’s worth looking at how much Isenberg donated relative to his pay. Isenberg’s base salary was $1.2 million in 2010, the company said in a regulatory filing. That was before taxes and included $47,500 in directors fees. That same year, he donated less than $466,000 to the Nabors Charitable Foundation, according to the annual report the foundation filed with the Internal Revenue Service.
That’s less than 38 percent of his base salary and a little more than 3 percent of his total compensation of $13.5 million for the year.
Nabors itself gave almost $124,000, and the foundation awarded almost $319,000 in scholarships and gave about $3,600 for disaster relief in Haiti.
Tax records for the two previous tax years show the charity received no contributions, and in 2009, it didn’t award any scholarships or make any other donations. In the 2008 tax year, it awarded $14,000 to three Nabors employees for Hurricane Ike relief.
Nearly $109 million
During the same period for which the foundation has filed tax returns – 2008 to 2010 – Isenberg received almost $109 million in total compensation.
No one, of course, can say how much is appropriate for anyone to give to charity, and providing almost a half a million dollars for scholarships is admirable. The problem is that Nabors has touted the charitable giving as an excuse for its exorbitant executive pay, as if that somehow should make shareholders feel better about paying so much for the stock’s poor returns in recent years. “As a shareholder, you could argue that this is money that should be reinvested in the firm,” Hodgson said.
Put another way, shareholders have a right to expect a better balance. Nabors’ results may not justify much corporate giving at the moment, but they certainly warrant a lot less taking.
Loren Steffy, firstname.lastname@example.org, is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. His blog is at http://blogs.chron.com/lorensteffy. Follow him on his Facebook fan page and at twitter.com/lsteffy.