Occidental Petroleum shareholders ousted Chairman and former Chief Executive Ray Irani in a dramatic annual meeting that signaled the end of an era for the storied oil and gas producer.
It concluded a nearly three-decade run as a director of the Los Angeles company for the 78-year-old Irani. He first took the reins as CEO in 1990 from oil industry legend Armand Hammer.
Back then, Occidental was considered something of a joke in the industry, with far-flung holdings in such odd areas as film production and horse and cattle breeding. Today, the company is the nation's fourth largest oil company and the industry's biggest producer of oil inside the U.S.
"Irani has done a lot of good for the company for many years, but at some point the old guard needs to change, and you are seeing that change," said David Neuhauser, a managing partner at Livermore Partners, a stakeholder in Occidental. "Just like anybody else, there is a time where you should look for an exit."
The company has been roiled by a boardroom spat that began in February, when the board announced it was seeking a successor to current CEO and one-time Irani-protege Stephen Chazen. He took the helm in 2011 after Irani stepped down following shareholder outrage over his high compensation.
Investors speculated the recent move was a power play by Irani, who was unhappy with the company's sliding share price — the company lost nearly one-fifth of its market value in 2012 — and may have wanted to return as CEO. Several large shareholders publicly came out in support of Chazen, and some called for Irani to step down.
Occidental diffused some of the drama on Monday by bowing to shareholder pressure and announcing that Chazen would remain as CEO through 2014. New rules also barred former Occidental chief executives from serving on the board.
Even with the concessions, more than 100 shareholders on Friday morning crowded into a hotel conference room in Santa Monica to lob questions at the board and hear preliminary voting results.
The audience quietly murmured when Chazen announced that Irani was not attending the meeting. An audible gasp followed when they realized that Irani had lost his seat on the board. Longtime board director Aziz Syriani — also the target of unhappy investors — resigned as well.
The board decided to replace the chairman position with Edward Djerejian, a director of the company since 1996 and a former U.S. diplomat who has served as an ambassador to Israel and an assistant secretary of State.
Shares of Occidental rose $2.67, or 3%, to $90.76 on Friday.
John Chevedden of Redondo Beach, who holds about 50 shares in Occidental, said he was caught off guard by the speed of Irani's departure.
"I guess it's a surprise he's completely gone because he's been around for so long," Chevedden said. "It would be interesting to know what forces were going on underneath."
Going forward, Occidental may require more aggressive measures to jump-start the company into its next phase, analysts said. The board changes could herald the start of dramatic corporate overhaul such as the selling off of its Middle East operations or the breaking up of the company into separate entities.
"The status quo won't make the company grow," said Fadel Gheit, senior energy analyst for Oppenheimer & Co. "They have to think outside of the box with something new, bold and different, and this is to break up the company."
Phil Weiss, an analyst with Argus Research, said the U.S. operations may survive on their own, but other long-term projects overseas need outside income to thrive. He said Irani's ouster was a good development for Occidental.
"It just seemed that what they had tried with Irani and Chazen didn't work very well," he said. "They were looking to run the company without interference."
The meeting was another chapter in the saga of Occidental, a tiny, almost bankrupt oil firm when Hammer bought it in 1956.
Hammer "set it on the course to become one of the world's largest independent oil and gas companies," said Daniel Yergin, Pulitzer Prize-winning author of "The Prize: The Epic Quest for Oil, Money and Power." He "outlasted many would-be successors until Ray Irani, who outlasted him and led the company for two decades until institutional investors said otherwise."
The company must still find a successor to replace Chazen after he steps down at the end of 2014.
Near the meeting's end, around noon, Chazen paid homage to his predecessor and one-time mentor in a speech laden with praise and vaguely reminiscent of an eulogy. A photo of the two executives — clad in suits and smiling together — was projected on two screens.
"I'm not going to tell you every day was a trip to Disneyland," he said. "No one is perfect."