100 MILLION DOLLARS
is what the CEO of one of the many companies in the energy sector receives as bonus for retiring, in addition to another 26 millions in other perks.
CEO's final payout of $100 million under fire
By SIMONE SEBASTIAN and TOM FOWLER, HOUSTON CHRONICLE
Published 09:10 p.m., Monday, October 31, 2011
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.
This case shows strange concepts of property, ownership in US corporations.
Nabors' OWNERS, the shareholders, investors, have seen nothing but losses in the last years. As a corporation, Nabors has a BOARD OF DIRECTORS that is supposed to work for the good of the corporation, that is, to provide income to the owners.
This board, that supposedly works for the owners, has given to one of its own ilk a huge bounty against the interests, the will of the owners.
I hope the owners find some recourse in the basics of law and jurisprudence to fight these corporate predators.
This post has been edited by One_of_us: 01 November 2011 - 10:28 PM