International

SEC data shows interesting top-executive pay trends for major companies

July 1999 Vol. 220 No. 7
International

Kurt S. Abraham,
International Editor

Major execs’ pay declines (sort of) in tandem with layoffs

A few months ago, during lunch with a good friend, a "middle manager" at a major U.S. oil company, I was regaled with tales of the consequences of implementing his upper management’s decisions, some humorous, others nearly tragic. Then, at one point, he grew more serious.

"I’m really fed up with these idiots making boneheaded decisions," said my friend. "The only thing on their minds is enhancing shareholder value and damn the operational consequences. Then they expect the rest of us to clean up their mess while tying one hand behind our backs by laying off a bunch of people. And you know what else, I’ll betcha they’re jacking up their own pay while jerking the rest of us around."

My friend’s "rant" got this editor’s curiosity working overtime. Could upper management at U.S. major oil companies be so callous as to raise its own pay while laying off thousands of employees during a time of incredibly low oil prices? To find the answer, the vast World Oil Research Department (consisting solely of your’s truly) swung into action. Fortunately, the Securities and Exchange Commission (SEC) requires all publicly held U.S. companies to file a plethora of financial reports — within this paper maze lay the details of the major oil firms’ executive compensation.

Now that the majors’ last reports for 1998 have trickled in, we can announce the findings. Our results only consider annual cash compensation, i.e., base salary, performance bonus and so-called "other compensation." Results do not include long-term compensation, including stock awards that are much harder to pin down. We also had to leave U.S.-based Shell Oil Co. out of the tabulation, because executive statistics are not available for that foreign-held firm.

Lo and behold, as shown in the Table, total Top-5 executive compensation among the 12 firms was down 9.3% last year, at $65.4 million. This is extremely coincidental to the fact that the number of major company employees, which we tabulated (see the table’s right half), also fell 3.8%, to 363,533. However, as usual, the devil is in the details. It seems that total cash compensation fell, because low oil prices and poor financial results pushed executives’ performance bonuses down. Nonetheless, my friend’s contention about executives rewarding themselves is partially true. That’s because this group of majors (excluding Amoco, which failed to break 1997 compensation into categories) boosted upper management’s pay by an average 8.4%. This contrasts with the 3%-to-4% raises that their rank-and-file got last year, if they got raises at all. Only at Mobil and Occidental did Top-5 base pay go down. Texaco, Unocal and Conoco were particularly brazen, raising Top-5 base salaries by 38.2%, 22.2% and 19.6%, respectively.

So, overall, the execs lowered their bonuses, but they compensated partially by raising base pay. By the way, the ultimate Top-5 execs were these chairmen: Lee Raymond (Exxon), $3.30 million; Lucio Noto (Mobil), $2.49 million; Kenneth Derr (Chevron), $2.46 million; Archie Dunham (Conoco), $2.23 million; and Mike Bowlin (ARCO), $1.89 million. Raymond, Noto and Derr all made more money than in 1997, despite the industry being in the toilet.

"Just say no" in Yemen. Somebody tell the malingering sociologists of the world to pack their bags for Sana’a, because a major cultural shift may be underway in Yemen. According to the BBC World Service, President Ali Abdullah Saleh has declared publicly that he is giving up the traditional habit of chewing "qat" (pronounced "kot"), hoping that his fellow citizens will follow his lead and give up chewing qat, too. For the uninitiated, qat is a bitter-tasting leaf that, when chewed, behaves as a mild stimulant, similar to a low-dosage amphetamine. According to Reuters, Yemenis spend $6 million daily to chew qat despite warnings of health risks, including cancer.

This reminds your editor of a government / Hunt Oil Co.-sponsored press tour in December 1987 that celebrated the beginning of crude exports from Marib field in what was then eastern North Yemen. Nothing equals the experience of a wild afternoon ride in a tour bus, whose driver is chewing vast quantities of qat. In this same bus rode the governor of the local state and his bodyguard, both of them chewing qat. Watching a bodyguard chew qat and playfully finger his AK-47 can make one’s heart skip a beat or two.

Anyway, President Saleh tried to combat qat two years ago, telling local authorities to expand sporting facilities and cultural centers as a way of weaning Yemenis off qat. Newspapers showed him running, bowling and shooting billiards. Now, he proclaims that he is exercising regularly and learning how to use computers. Maybe he will learn how to play those "violent video games" that the Clinton White House keeps railing against.