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The numbers might make even Jeremy Lin envious: Ten Houston-area business executives last year received compensation packages worth a combined $215 million.
The top 100 pay packages issued by publicly traded companies here increased by an average of 12.8 percent for the year, according to Longnecker & Associates, an executive compensation consulting firm that compiles the annual list for the Houston Chronicle. The increase was driven primarily by higher incentive pay.
It is a much smaller gain than the 35 percent boost of a year earlier, but Longnecker analysts noted that because companies were further along on the economic rebound by 2010, executive performance was evaluated from a generally higher base.
Landing the biggest corporate payday in 2011 was Marathon Oil CEO Clarence Cazalot Jr. As with others on the list, his base salary of $1.4 million was a mere fraction of his total compensation.
Counting $21.8 million in cash bonuses, $6.4 million in stock options, a pension boost of $1.6 million and more than a quarter-million dollars in contributions to a company thrift program, Cazalot was a $31.5 million man last year. His total compensation was triple what it was in 2010.
Marathon also employs the highest-ranking woman on this year’s list. Chief Financial Officer Janet Clark was No. 36 with $8 million in total compensation.
Grouped with Cazalot in the top 10 were senior executives from, in descending order of the size of their pay packages, ConocoPhillips, LyondellBasell Industries, Anadarko Petroleum Corp., Cooper Industries, Nabors Industries, American National Insurance, Schlumberger and Halliburton. A second Nabors executive was No. 9 on the list.
The combined compensation for the 10 highest-paid executives would have been a lot bigger if not for disgruntled Nabors shareholders, whose protests led outgoing CEO and chairman Eugene Isenberg to give up on
his plan to leave with a $100 million payout.
Instead of topping the heap, the octogenarian Isenberg wound up at No. 6, with $19.5 million in total compensation, including $15.6 million in annual incentive pay.
Joining him in the top 10 was his successor as Nabors CEO, Anthony Petrello, who last year was awarded a sliver under $16 million in total direct compensation.
Josh Henke and Tyler Brown, Longnecker & Associates consultants, said shareholders, particularly major institutional investors, are growing more assertive in registering displeasure at compensation they don’t feel is warranted.
This is the second year of federal “say on pay” rules that allow shareholders to hold nonbinding votes to declare the pay awarded by companies’ boards of directors a pass or a fail.
Last year, shareholders nationwide gave 44 failing grades, Henke and Brown said. Through the first half of 2012, the number of fail votes already had reached 57, including one cast by Nabors shareholders. Though the votes don’t overturn any compensation award, Henke described them as “a shot across the bow” — a warning to directors and compensation committees that they can be held accountable.
“I think shareholders are becoming more adept” in asserting their legal rights, he said.
The Longnecker & Associates analysis was based on 2012 proxy filings from the area’s 135 largest publicly traded companies. The average compensation for the 547 executives at their companies for all of 2010 and 2011 rose 1.1 percent. The median growth was 4.1 percent.
Henke said the top 100 grew at a bigger rate because that list includes the year’s most successful companies, and it often includes more than one executive from the biggest of those.
At ConocoPhillips, which in May spun off its refineries, pipelines and chemical plants into a separate company, a spokesman noted that the $27.7 million pay package awarded to James Mulva, the now-retired chairman and CEO, was determined by a three-person panel of independent directors advised by a consultant.
“Our executives are paid competitively with our peers,” spokesman Daren Beaudo said in an email. “Shareholders have responded positively to our executive officers’ compensation in the ‘say on pay’ voting.”
A Marathon spokeswoman said the $31.5 million combination of cash, stock options and retirement-plan benefits awarded to its CEO, Cazalot, was calculated carefully to reward his leadership and the company’s performance.
“It all comes back to how strongly the corporation is performing,” spokeswoman Lee Warren said. “Last year, it was a remarkable year.”
She cited the spinoff of Marathon’s downstream operations, its acquisition of a top five acreage position in the core of the prodigious Eagle Ford oil play and strong operational improvements. For example, she said, production and proved reserves both grew, while capital spending was kept below original estimates.
The company’s board of directors decided to reward Cazalot’s leadership in these areas with a $3 million cash bonus, up from $2.5 million for 2010.
But the lion’s share of Cazalot’s incentive compensation — $18.8??million — was part of a separate “non-equity incentive plan” specifically tied to how much the company returned to shareholders in the form of stock-price increases and dividends. Cazalot did not receive anything in this category the last two years.
Marathon’s stock rose 33 percent in 2011, and Warren said the company’s internal calculations ranked its performance in total shareholder returns No. 1 among its peer group for the year.
Similarly, a LyondellBasell official cited the accomplishments of CEO James Gallogly since he took over in May 2009 in explaining how it was decided he deserved $23.5 million for his work in 2011. That placed him right behind Mulva, for the No. 3 spot on the list.
Of the total awarded to Gallogly, $12.4 million was in cash and virtually all of the rest was an accounting adjustment to cover unvested stock options held by Gallogly, related to a special dividend paid to shareholders last fall.
Company spokesman David Harpole noted that the mammoth petrochemical company was in bankruptcy with
$24 billion in debt at the time it was recruiting Gallogly and wanted to structure a compensation plan that would attract an executive of his stature. LyondellBasell’s creditors and a federal bankruptcy judge approved the plan, Harpole said.
The results over the last two years, he said, “speak for themselves.” The company emerged from bankruptcy in April 2010 and is a profitable industry leader.
On paper, Gallogly fared much better for his work in 2010, when his compensation totaled $77.1 million. That would have put him on the top of last year’s list, but LyondellBasell wasn’t included in the survey because of its bankruptcy.
Harpole noted that $72.5 million of Gallogly’s compensation comprised stock options that vest over a five-year period but had to be reported in full for 2010. Those stock options included $41.3 mil-
lion worth that were part of Gallogly’s hiring, Harpole said, and $31.2 mil-
lion awarded in recognition of his work in 2010.
A spokesman for Cooper Industries declined to comment for this story. Representatives for the other featured companies did not reply.
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