Nabors shareholders OK executive pay after overhaul

HOUSTON — Investors have given Nabors Industries its first symbolic nod of approval on its executive compensation, a sign the land driller’s efforts to rein in large paydays have paid off.

The Bermuda-based company, which has its main offices in Houston, said Monday that nearly two thirds of the company’s shareholders voted in favor of Nabors’ top pay packages at an annual meeting last week. It marked the first time the U.S. land driller clinched the annual advisory vote since 2011, when the vote itself was created in a flurry of regulations stemming from the financial crisis.

The company credited the overhaul of its pay practices that it began last year. The firm had cut CEO Anthony Petrello’s salary, stock grants and other incentives by nearly 80 percent in 2014 after he became the highest-paid U.S. oil executive the year before. And it had tied its top managers’ pay to the company’s financial performance, more in line with current industry norms.

But the day belonged as much to investors as it did to Nabors. Shareholders had pushed Nabors for years to change compensation policies that had perennially lifted its bosses into the upper ranks of the best-paid executives in Houston and the oil industry.

Nabors’ overhaul shows investors are gaining clout, even though their so-called “say-on-pay” vote isn’t legally binding. The driller had taken steps before to respond to investors’ concerns, including limiting executives’ severance payments, but it had never gone so far to change its pay structure before last year.

Last year, some of Nabors’ board members and executives “engaged in dialogue with several of our significant shareholders” to discuss why they rejected the 2013 compensation packages. The investors, Nabors says, were concerned about a “disconnect” between pay and shareholder value and the size of Petrello’s $68.2 million package in 2013.

In 2013, Petrello was the highest-paid oil executive, according to the Associated Press, largely because Nabors had to buy out Petrello’s old employment contract in order to restructure its deal with him. Exxon Mobil Corp. CEO Rex Tillerson’s total pay package was $28 million in 2013, according to regulatory filings.

Last year, Petrello’s total pay came to $14 million, and more than 80 percent of his compensation was tied to financial and operational goals of the company. A fifth of Petrello’s long-term incentives are tied to the company’s shareholder returns over a three-year period, and won’t become available unless Nabors lands in the top quintile of its peer group. About 40 percent of the Nabors executives’ long-term incentives are similarly tied down.

On Monday, Nabors also said the oil downturn has prompted it to extend a 10-percent pay cut to Petrello’s base salary, and that of Chief Financial Officer William Restrepo, for another six months. The pay cuts had initially been implemented late last year and ran through the end of June.

That means the annual rate Petrello’s base salary will be $1.58 million a year for the remainder of 2015, down from $1.75 million, and Restrepo’s will be $585,000, compared to the original $650,000 a year, Nabors said.