Two prominent institutional investors are
launching a fight for board seats at
Occidental Petroleum Corp., expressing
their unease about the company's executive compensation and succession
In a letter to directors sent
Friday, Relational Investors LLC and the California State
Teachers' Retirement System, which together own about 1% of
the oil-and-gas company's shares, said they would try to
unseat at least four of Occidental's 13 board members during
the company's 2011 annual meeting.
The shareholders are unhappy over compensation
practices that have made Chief Executive
Ray Irani, who also serves as company
chairman, one of the highest paid CEOs in the U.S. The investors also
fault Occidental for failing to announce a CEO succession plan, even
though Mr. Irani, 75 years old, already exceeds the company's director
retirement age of 75. The board granted waivers for Mr. Irani and two
other current directors at the 2010 annual meeting in May, according to an
A spokesman didn't have any immediate comment Monday, saying he had
just learned about the letter. Earlier Monday, the Los Angeles-based
oil-and-gas company announced the promotion of Chief Financial Officer
Stephen I. Chazen to chief operating officer. Mr. Chazen will continue to
hold the president's post.
Ralph Whitworth, a principal at
Relational, said in an interview Monday that he intends to join the proxy
fight slate, but said remaining candidates haven't been chosen yet. Mr.
Irani and fellow directors come up for re-election annually.
In 2009, Mr. Irani was awarded total direct compensation of $52.2
million—tops among 200 big-company CEOs in The Wall Street Journal's
annual pay survey.
A subsequent analysis conducted by the Journal found Mr. Irani landed
third place on a list of best-paid executives of public companies during
the past decade. He received $857 million over the period.
The study included salaries, bonuses, perks and realized gains on both
restricted stock and stock options.
As of Friday's close, Occidental's stock was up 657% in the past 10
years, compared with a rise of 93% for the AMEX Oil Index over the same
An Occidental spokesman has previously said company directors believe
in "excellent pay for excellent performance.'' Most of Mr. Irani's pay is
tied to Occidental's operating results and share price, the spokesman
said, and all of his stock and option awards are now linked either to
operating results or share price.
In May, Occidental shareholders opposed the company's executive-pay
practices in a nonbinding vote, the first "say-on-pay" vote for the
company. Investors who campaigned against Occidental's pay plans said Mr.
Irani was paid roughly three times as much as other oil-company
executives. They contend the board sets his pay too high and his
performance targets too low.
The July 30 letter from Relational, a San Diego money manager, and
CalSTRS, one of the nation's largest public-employee pension funds,
contains similar sentiments.
Relational and CalSTRS officials have met with Occidental directors
three times in the past year. The latest session occurred in July, but Mr.
Irani "hasn't attended any of them,'' Mr. Whitworth recalled during the
"All appearances indicate that the board is dominated by the CEO and a
few long-serving directors," Mr. Whitworth said. Mr. Irani has led
Occidental since 1990.
In their letter, the investors argued that the board's failure to
implement a CEO succession plan hurts morale and professional development
of senior management.
The dissatisfied investors also aren't satisfied with the change in Mr.
Chazen's titles. "He's already been running the company,'' Mr. Whitworth
observed. Naming him chief operating officer "is purely cosmetic.''
Occidental hasn't had an operating chief in years. James M. Lienert
will succeed Mr. Chazen as financial chief on Aug. 15, leaving his current
position as executive vice president of finance and planning.
Write to Joann S. Lublin at