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Corporate Governance

: The Race to the Bottom

The Director Compensation Project: Occidental Petroleum

By Greg Lebouton

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This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2007’s Fortune 100 and using information disclosed in each company's 2008 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. Meeting stock exchange requirements is mandatory for most listed companies.

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards. Directors are not independent if they received over $100,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). This is a looser restriction than the equivalent NASDAQ Rule, 4200(a)(15), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also know as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Occidental Petroleum (OXY-NYSE) 2008 proxy statement.

Name	Fees Earned or Paid in Cash ($)			Stock Awards ($) (1)			All Other Compensation ($) (2)			Total ($)
Spencer Abraham		$	102,000		$	257,500		$	8,486	$	367,986
Ronald W. Burkle		$	72,000		$	257,500		$	0	$	329,500
John S. Chalsty		$	108,000		$	298,700		$	31,161	$	437,861
Edward P. Djerejian		$	102,000		$	257,500		$	3,678	$	363,178
R. Chad Dreier		$	98,000		$	257,500		$	0	$	355,500
John E. Feick		$	98,000		$	257,500		$	2,144	$	357,644
Irvin W. Maloney		$	108,000		$	257,500		$	1,356	$	366,856
Rodolfo Segovia		$	112,000		$	298,700		$	29,516	$	440,216
Aziz D. Syriani		$	94,000		$	339,900		$	4,112	$	438,012
Rosemary Tomich		$	128,000		$	339,900		$	0	$	467,900
Walter L. Weisman		$	94,000		$	257,500		$	41,500	$	393,000

Director Compensation . Occidental Petroleum board met six times last year. Although six directors received more than $100,000 in director’s fees paid in cash, the non-employee directors as a group averaged $392,514 in total compensation for their services. As can be seen in the table, much of the directors’ compensation came in the form of stock awards and “other compensation,” which are considered director’s fees for purposes of complying with exchange rules.

Director Tenure . Mr. Syriani, the lead director, has a tenure of twenty four years, so there is concern as to whether he remains independent. Additionally, Mr. Syriani chaired the key Audit Committee, despite him not being an Audit Financial Expert. Three Directors have 23 to 27 years tenure each, and there are concerns of independence and succession.

CEO Compensation . The compensation paid to the CEO, Ray R. Irani, was $77,628,745 last year; a relatively small portion of which came in the form of cash ($1,300,000). $1,891,414 of Mr. Irani’s compensation was "other compensation." Roughly half of his compensation was tied to stock awards, and while most of the remaining compensation was in the form of options awards.

Full post as published by The Race to the Bottom on May 07, 2008 (boomark / email).