Chevron has come to the FT to explain that Chevron’s apparent generousity toward its chief executive, Dave O’Reilly, while Exxon was cutting back the pay package of its chief executive, Rex Tillerson, last year, was not as clear cut as it seems. At a time when Big Oil was seeing big drops in earnings amid the economic downturn and falling commodity prices, it did look as if Chevron was being particularly nice.
The pay package of Rex Tillerson, the chief executive of ExxonMobil, the US’s biggest oil producer, fell 16 per cent in 2009. For 2009, Tillerson’s total pay, including salary, bonus and stock, was $27.2m, according to Exxon’s proxy filing with the US Securities and Exchange Commission. In 2008, his total pay had been $32.2m.
Yet O’Reilly, Chevron’s chairman and chief executive, received a total pay package of $15.2m in 2009, up 10 per cent from 2008. In 2009, O’Reilly’s salary increased almost 9 per cent to $1.79m, and stock and option awards totalled $9.9m, which was up from $8.65m in the year-earlier period.
Chevron however notes some of the numbers look better than they really were because O’Reilly retired at the end of the year. Here is how Chevron explains it:
The salary increase is not entirely accurate. You used the total pay figure for 2009 (found in the summary compensation table), which includes the Dec. 16 – 31 pay period, which is normally paid in 2010. Due to Mr. O’Reilly’s retirement, that payment was accelerated to 2009 to comply with California labor law (described in footnote 2). It is more accurate to compare the annualized amounts reported in the table in footnote 2 (1.65 million versus $1.75 million) – which results in a 6 per cent increase in salary.
You note that his perks more than double. As you correctly point out, this figure includes accrued vacation. Again, that figure is included as a result of his retirement – his “perks” in the traditional sense didn’t necessarily double. If you exclude accrued vacation, his total “All Other Compensation” is $262,289, which is less than $266,884 – which was reported last year.
That said, O’Reilly still seems to have come off better than Mr Tillerson, given the relative sizes of the companies. After all a 6 per cent salary increase is still generous given all that was going on in the industry and to the companies themselves. That said, Mr O’Reilly had put Chevron in a position to start reaping the benefits of the hard work he had done in previous years. Indeed, analysts have said Chevron is poised to excel in exploration and production going forward, with 25 projects of net Chevron investment of over $1bn expected to start or obtain final investment approval within the next three years.
After years of being criticised for lacklustre performance in this division, Chevron already has begun a turnaround. Its oil and gas production increased 7 per cent for the year, as it recorded an impressive 57 per cent success rate in exploratory drilling, adding 1.1bn barrels of net proved reserves, replacing 112 per cent of its production, the company reported in March. So perhaps O’Reilly did deserve payment for setting the company up so nicely for his replacement.
