Ray Irani, the head of Occidental Petroleum (OXY) made $270 million from exercising stock options last year, putting his compensation for gains on options higher than any other CEO in America.
While the amount appears to be obscene, Irani did preside over a company where the revenue has gone from $11.5 billion in 2004 to $18.2 billion last year. Operating income has almost doubled during that time to $8.1 billion. The stock is up almst 55% over the last two years, but was doing no better than the S&P when measured from June 2005 to January 2007. That means that, for shareholders, 2006 was not a terribly good year.
Irani and his board would argue that his compensation is based on the body of his work and that over the long haul, he has done a very good job.
But, that point of view sets aside two important considerations. The first is that OXY has really done no better than a company like Exxon. In other words, being in the oil business is good no matter who runs the company. And, there is the matter of the weak performance of the company’s shares last year.
Whether right or wrong, the investing public remains cynical about the way that management at large companies is paid. In an industry where the tide is rising, it may even make more sense to pay CEOs less. Their jobs are easier and they have fewer challenges and problems to solve.
On that basis Irani made way, way too much money.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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