Oxy Discloses It Paid $95 Million to Chairman

Occidental Petroleum Corp. disclosed Monday that it made a one-time payment of $95 million to Chairman and Chief Executive Ray R. Irani when it rewrote his contract, a move that has drawn sharp criticism from employment experts and oil analysts, especially in light of the company’s lackluster performance.

But Oxy portrayed the deal as representing a sacrifice by Irani and thanked him and President Dale Laurance--who received a lump-sum payment of $17 million--for agreeing to stay on the job.

“We are very pleased that our senior executives have agreed to continue providing Occidental with their leadership under these amended employment agreements,” said George O. Nolley, chairman of the board’s compensation committee.

Irani, 62, received the payment after the Oxy board of directors rewrote his employment contract to reduce his salary and tie his compensation more directly to the company’s financial performance, the company said. Laurance’s contract was similarly redrawn.

In a filing with the Securities and Exchange Commission, the oil and gas company said the settlement with the two top executives represents a savings compared with its potential obligations if the old contracts, which contain some open-ended commitments, remained in place. Oxy would not comment beyond its official statement.

But compensation expert Graef Crystal, publisher of the well-known Crystal Report on Executive Compensation, said of the agreement and lump-sum payment that “there is no economic benefit . . . only an economic penalty” to Occidental shareholders. “They’re paying him twice.”

“Some execs play a high-risk, high-rewards salary game, like Lee Iacocca. He got a salary of $1 a year, but got rich with stock options when Chrysler’s shares went up,” Crystal said. “Irani’s the reverse of that. He’s a low-risk, high-reward kind of CEO.”

Irani’s guaranteed compensation, which Crystal said totaled more than $5 million for each of the last two years, came under criticism at this year’s annual meeting of shareholders, who complained that executives were making hay while the stock price languished.

In a study of 1,000 top executives last spring, Crystal concluded that Irani was the most highly paid chief executive in the land in terms of guaranteed compensation--as opposed to compensation based on performance.

“Is his compensation high? It’s wild,” Crystal said Monday.

What rankles shareholders about the high salary and big lump-sum payments is the anemic performance of Oxy stock in recent years. Crystal’s study concluded that since Irani took over the helm from the late Armand Hammer in December 1990, compounded shareholder return has averaged 7.55% annually.

That’s about one-third the 20.23% average shareholder return earned by companies included in the Standard & Poor’s 500 index, Crystal said. Oxy shares also have lagged the rest of the oil and gas industry.

The $95-million lump sum is the “actuarially determined discounted value” of the discontinued retirement benefits and other eliminated obligations, the Westwood-based company said in its SEC filing.

Under the new contract, Irani’s base salary is reduced to $1.2 million from $1.9 million. The contract term that guaranteed his salary for seven years and was renewed at the start of each day on the job was also eliminated. His new contract is for a fixed five-year term.

The automatic bonus Irani received, which was equivalent to 60% of his salary, has been terminated, and his bonus is now up to the discretion of the Oxy board of directors. An automatic annual stock award of 101% of his salary has also been terminated and is now left up to the board’s discretion.

The company will also stop paying Irani’s annual state and local income tax, which in 1995 amounted to nearly $1 million. The company had also been paying the tax on the tax reimbursement. Irani received that as an incentive to move to California in 1983 from Connecticut, where he was an executive at Olin Corp., Crystal said.

The new employment contract also does away with a lump-sum death benefit equal to seven times Irani’s annual compensation, which would have exceeded $35 million if he died this year.

* OIL FIELD SOLD

Occidental Petroleum will pay $3.65 billion for the Elk Hills field. A1