Even a Beverly Hills billionaire who banks sticky black oil money faster than the goo shoots up from derricks must take a pay cut someday. Times may be that bad, America.
Gas for Angelenos heads to $4.50 per gallon. Energy costs force choices like driving versus staying home. And even Ray Irani, Occidental Petroleum's chief executive officer, reduced his salary when he stepped down as CEO last week. Irani held that position — along with the job of chairman — since 1990.
During many of those years, his massive paydays earned national press, criticism and stockholder furor.
Ponder these numbers, if you can count the zeros:
In 2006, Irani netted $400 million in compensation.
In the 10-year span from 2001 to 2010 he boasted earnings of $857 million, according to The Wall Street Journal.
As the recession wreaked havoc in 2009, California, where Occidental is based, posted the most home-foreclosure filings in the country. Some 3,368 housing units were foreclosed in Los Angeles during the first quarter alone, a 341 percent jump from the same time period in 2007. About 8.4 million Californians went without health insurance, while 28.9 percent of Los Angeles County residents were uninsured for all or part of the year.
That year, Irani's compensation was $31.4 million.
In 2010, the CEO made $76.1 million. He lives on St. Pierre Road in a celebrity-studded Bel-Air neighborhood, a former haunt of Sonny and Cher and Jennifer Lopez and Marc Anthony; his mansion dreams of being a French chateau and has 14 bathrooms.
“Irani represents everything that is fucked up about corporate America,” states Josh Harkinson, a staff writer for Mother Jones who has written about compensation issues. “Why should he get a shitload of money while so many people in America are getting screwed?”
“I don't want to make it sound like CEOs don't work,” says Richard Dawson, a Utah blogger, weighing in on Irani's retirement. “But I don't think he works 2,303 times as much as an average American who makes $33,000.”
“As far as pay goes, he's been an utter hog,” says respected executive-compensation expert Graef Crystal. “He has a compliant board that just gives him everything. Apparently there's not a pay package that's too big for them.”
Crystal's study of executive compensation predates Irani's tenure as CEO of Occidental. He has written extensively on such matters since 1986, contributing to The New York Times, The Washington Post and The Wall Street Journal, among other publications, and taught at Boalt Hall Law School at the University of California, Berkeley. During that time, Crystal frequently noted Irani's outsized pay packages.
The author of widely followed The Crystal Report catalogs a litany of Irani excesses, like the requirement Irani installed into an early contract that had Occidental Petroleum stockholders essentially paying Irani's income taxes. And then there was Irani's infamous compensation contract written in such a way that each day it extended itself for another seven years.
“It was the most unprecedented contract I have ever seen,” Crystal says. “It has the most wild salary bonuses.”
When Occidental moved to cancel that contract, consultants valued the remaining time on the agreement at $95 million. The company bought out Irani for that sum. Yet payment on Irani's new five-year contract began immediately — meaning, says Crystal, for five years Irani “double-dipped.”
Crystal emphasizes a caveat to his criticism: “In terms of compensation, you can't say enough bad things about the way this man has been paid, but to be fair, he has a tremendously good performance record. I'd like to say that he's a hog and a dog, but I can only say he's the former,” he says.
Compared to the S&P 500 Integrated Oil and Gas index, which includes Occidental, Crystal says Occidental beat such competitors as Chevron, Exxon Mobil and ConocoPhillips by 11.6 percentage points, on the basis of 10 different time windows within the last decade.
Harkinson isn't moved, saying, “It's true that Occidental Petroleum's profits were decent last year; its stock went up 23 percent. But stock in other Fortune 500 companies went up 23 percent, too. … Look at Apple. It made mind-blowing profits last year and Steve Jobs earned a dollar.”
As Irani's tenure at Oxy as CEO ends, his oversized compensation leaves a troubling legacy, with critics like Dawson noting that 1 percent of Americans claim almost 25 percent of the country's income.
“People are willing to say it's OK for a chief executive [to be rewarded so enormously] because they must have earned it somehow,” Dawson says. “At the same time, these same people criticize paying schoolteachers. They want to break up the government unions in Wisconsin. Yet somehow they don't want to attack the wealth of these outrageous executives.”
Irani did not give up his title easily. His gigantic compensation had raised objections before, but beginning in 2009, the California State Teachers' Retirement System (CalSTRS) began a disciplined campaign that resulted in Irani relinquishing his CEO title.
At the annual company meeting one year ago, shareholders made their displeasure known in a nonbinding vote that rejected Occidental's executive compensation policies. After that, CalSTRS and Relational Investors, a private equity firm, held discussions with compensation representatives.
By last August, leaders at the teachers' retirement fund concluded that Occidental had not taken, and would not take, meaningful actions to address their concerns — and made an open threat to run their own slate for the board of directors to wrest control of Oxy.
In a strongly worded letter to Oxy's board, Anne E. Sheehan, director of corporate governance for CalSTRS, said, “CEO pay at Occidental functions essentially as a corporate giveaway program.”
Finally, in October 2010, Irani announced he would retire as CEO — and that his pay would be reduced. His chosen successor is Stephen I. Chazen, elevated from chief financial officer.
Irani will remain as executive chairman until the end of 2014.
Today, at least publicly, CalSTRS and Relational Investors have returned to the Occidental fold. A representative of Ralph Whitworth, one of Relational Investors' principals, told the Weekly there would be no comment “beyond the public announcements that we've made.”
There's been no specific public disclosure of what Irani will be paid as chairman of the board.
In response to questions from L.A. Weekly, Sheehan issued a written statement: “He will make less than Mr. Chazen, whose own pay has been calibrated to be more in line with his peers at similar other companies.”
And Irani, massively compensated CEO (ret.), might have a bit more time to settle into his Bel-Air neighborhood, where every house comes with a history — as does his.