Last year, oil prices soared to new heights. And so did the payout for Occidental Petroleum Corp. Chief Executive Ray R. Irani, who took home more than $460 million in compensation in 2006.
Oil and natural gas producer Occidental, based in Westwood, often has been criticized over the years for the generous pay it doled out to Irani and other top officers. But the amount pocketed by Irani in 2006 tops previous years' compensation and ranks among the largest payouts ever collected by an executive at a U.S. public company.
The biggest portion of Irani's compensation came from cashing in more than 7 million shares from stock options that were awarded back to 1997, a move that netted the executive $270.2 million, according to a regulatory filing by the company. More than 900,000 shares worth $45 million became payable to Irani in 2006.
That total was further boosted by the company's decision to discontinue a deferred stock program in October 2006 because the liability and expense of the program had "grown substantially." Irani picked up share distributions and associated dividends worth $93.3 million from the plan at its closure.
On top of that, Irani was paid $55.6 million in salary, bonus, stock awards, deferred compensation and other benefits, according to the company. Irani's 2006 salary of $1.3 million was unchanged from the previous year, and his bonus of $1.4 million was more than 60% lower than his 2005 bonus of $3.64 million.
In justifying Irani's pay, the company cited Occidental's "superior operating performance" and its "exceptional growth in stockholder value."
Occidental's stock price, around $9 at the end of 1990 as Irani succeeded Armand Hammer as chairman and chief executive, had risen to $48.60 a share at the end of 2006. The company's market capitalization grew to $42.5 billion at the end of last year from $32.1 billion at the end of 2005. Occidental also increased its shareholder dividend and spent $1.5 billion to repurchase nearly 31 million shares of common stock in 2006.
The firm's compensation committee gave Irani credit for reviving Occidental's investment in Libya and increasing its holdings in other countries in the region. Irani "has developed particularly strong relationships with government leaders in a number of Middle East countries" that are "a competitive advantage for Occidental and have allowed Occidental to establish credibility similar to that enjoyed by significantly larger oil companies," the committee said.
Irani's compensation has been a target for corporate governance groups and at least one of the company's shareholders. Emil Rossi of Boonville, Calif., is asking shareholders to back a proposal that would change Occidental's executive compensation plans. It will be voted on during Occidental's May 4 annual meeting.
"As a long-term shareholder, I support pay policies for senior executives that provide challenging performance objectives that motivate executives to achieve long-term share-owner value," Rossi, who owns 800 shares, said in the proposal. "I believe that a greater reliance on performance-based equity grants is particularly warranted at Occidental given the runaway pay ... for our CEO."
Times staff writer Kathy M. Kristof contributed to this report.