CalSTRS to Oppose Occidental Petroleum Executive Compensation Advisory Vote
Letter to director critical of ‘wildly excessive pay’ in excess of peer group median.
WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) announced today it will vote against the advisory vote approving executive compensation and the election of all incumbent board members at Occidental Petroleum’s (NYSE: OXY) 2010 Annual Meeting in Los Angeles on May 7.
In a letter to company representatives, cosigned by Relational Investors LLC, CalSTRS said it is “frustrated with the board’s consistent failure” to design an executive compensation plan with appropriate rewards and targets. The letter pointed to outsized payments relative to performance which impairs employee morale.
“We support extraordinary pay for extraordinary performance, but not wildly excessive pay,” CalSTRS said its letter. “By setting awards too high and targets too low, OXY’s board essentially set up a give-away program where tens of millions of dollars of pay is not truly at risk.”
CalSTRS said it favors the long-term, performance based nature of OXY’s executive compensation program, but awarding excessive amounts to the CEO “wastes shareholder money and creates enormous pay disparities,” relative to its external peers and to other internal executive officers. “Since 2004, targeted compensation for OXY’s CEO has averaged approximately 325% of its peer group median,” the letter said.
To remedy the problems, CalSTRS recommends the board:
- Reduce the targeted compensation award to levels commensurate with the peer group;
- Establish return on equity targets reflecting current commodity pricing expectations (such as futures strips) and deployment of excess capital;
- Improve the transparency surrounding how and why the board sets specific compensation targets.
Two leading proxy advisory firms, Glass Lewis and RiskMetrics, are also recommending to vote against the advisory vote.
CalSTRS has been involved in corporate governance issues, such as executive compensation, for more than two decades. Read about CalSTRS principles for executive compensation.
The California State Teachers’ Retirement System owns more than 1.3 million shares of Occidental Petroleum and, with a portfolio valued at $138 billion, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 848,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.
Relational Investors LLC is an employee—owned Registered Investment Adviser and asset management firm, which manages approximately $6 billion. The firm serves some of the largest pension funds and institutional investors in the world. Relational’s mission is to create long-term value for clients by applying its “relational” strategy. The firm invests in and strives to create excess performance in publicly traded, underperforming companies that it believes are undervalued in the marketplace.