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Page added on June 9, 2020

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CEOs Bank Big Bonuses As Oil Companies Go Bankrupt

Business

When public oil and gas companies are doing relatively well, many are happy to adopt a pay-for-performance model to reward CEOs and executives.

However, the tables are quickly turned when things go to the dogs. When these companies go bankrupt, the misery is shared by employees who lose their jobs; retirees see their benefits and pensions go up in smoke, while shareholders and bondholders get wiped out. In sharp contrast, it’s very common for blue-chip executives who have run their companies to the ground to receive multi-million dollar golden sendoffs. Indeed, top executives of oil and gas companies going through Chapter 11 frequently receive very fat payouts in the form of cash bonuses, stock grants, and other benefits that often exceed payments during the good times.

It’s not any different this time around.

At a time when hundreds of thousands of employees in the U.S. shale industry have lost their jobs, Bloomberg has reported that some 35 executives at Whiting Petroleum Inc.(NYSE:WLL), Chesapeake Energy Corp.(NYSE:CHK) and Diamond Offshore Drilling Inc.(OTCMKTS: DOFSQ) are set to receive nearly $50 million after their companies declared bankruptcy or are on the verge of doing so.

Rewarding Failure

It’s the manner in which these head honchos continue to award themselves fat bonuses despite federal legislation to crack down on the practice that really grates.

The board at Whiting, an oil and gas producer that filed for Chapter 11 in Aprilapproved a $6.4M bonus for CEO Brad Holly just days before the company went under, exceeding his previous annual compensation package by nearly a million dollars.

In May, California Resources Corp. (NYSE:CRC) warned investors about “…a substantial doubt about the company’s ability to continue as a going concern…” but still went ahead and guaranteed company executives their 2020 bonuses.

So, what’s the justification for this egregious, bizarre, and perverse practice?

According to Kelly Mitchell, an analyst at corporate watchdog group Documented, companies do it so as to incentivize these executives to stick around because they understand the company better and, ostensibly, have better odds of pulling them through. Never mind the fact that their decisions are very often to blame for the company’s sad situation in the first place. They also do it in a bid to cut costs and maximize value for creditors using tools such as tax credits or untapped resources.

No Accountability

You could argue that this practice is not unique to the energy industry and is, in fact, common in corporate America–and you would be right.

Last year, former Equifax CEO Richard Smith, walked away with a very generous ~$19.6 million in stock bonuses, $24-million pension and $50,000 in tax and financial planning services after the credit agency suffered one of the worst data breaches in the history of the U.S. Interestingly, none of Smith’s compensation was docked under the company’s clawback provision meant to hold top executives accountable for their actions or inactions, which was negligence in this case.

In 2014, American retailing giant, Target Corp., paid ex-CEO Steinhafel more than $30 million after he handed in his resignation following another massive hacking attack that saw millions of customers’ personal records stolen.

You can also rationalize that energy executives are not individually responsible for the oil price collapse that has adversely impacted their companies (though they share collective responsibility for the overproduction that triggered the collapse).

But whichever way you slice it, it’s clear that oil and gas companies go too far with their bonus payments to executives. Over the past decade, the leaders of 15 large E&P companies collected more than US$2 billion in aggregate compensation despite their companies posting total returns of -15% compared to a 150% gain by the S&P 500 Index over the timeframe.

It’s hard to justify the hefty rewards being awarded to executives of fallen energy companies. In the case of Equifax and Target, their respective stocks did suffer big selloffs after the hacks but quickly recovered and have actually outperformed their peers by quite a wide margin since the events. In contrast, WLL shares are down 89% in the year-to-date; CRC has lost 83.5%, CHK has returned -91.5% while DOFSQ is down 95% YTD, much worse compared to the sector benchmark, XLE, which is down a more modest 30.5% YTD. Bloomberg has reported that energy companies use their peers, not the broad market, as the benchmark, and executives of companies that perform less badly than others tend to be rewarded–bankruptcy is the ultimate underperformance, meaning these guys should not be getting such huge bonuses.

Energy companies need to have some level of accountability for their executives when things go awry. They have a willing accomplice, though. According to Patrick Hughes, judges tend to sign off on these fat payouts more often than not despite laws introduced in 2005 to limit their size.

OilPrice.com



8 Comments on "CEOs Bank Big Bonuses As Oil Companies Go Bankrupt"

  1. Theedrich on Tue, 9th Jun 2020 3:28 pm 

    The Yid agitprop media has gutted America. Instead of a nation, only a self-hating, narcotics-addicted, mob of servile trash is left.  The so-called military-industrial complex and ultrarich banks hold the levers of power.  The zombified masses are told to commit suicide for the sake of “American values” which are only mystified fantasies of peoplehood.  The national conglomerate and its subjugated nations are dominated by the culture of paranoia known as Zionist Jewry, whose only interest besides global power is dissolution of the White race.

    The TV-hypnotizees are led by screaming Negroes and debased talking heads claiming “moral authority” — an updated version of the divine right of kings.  The aforesaid military-industrial complex pretends to have superiority in the accelerating international arms race, so as to keep the proles asleep.  In reality, as the populace rots in body and soul, that complex is inferior in true military lethality, and maintains its pretense only through its global reserve currency, the dollar.  On top of that, the U.S. has thrown the entire world into internecine chaos by destroying the Mohammedan behives of the Middle East and North Africa, and causing the invasion of Europe by the subhuman trash from those areas.

    The favorite of the majority of the masses is the Democrat party, the party of Jews, Negroes, psychotics and low-level criminals.  The Republicans have a few rational members left, but many of them are too interested in lining their own nests with money to care about the nation as a whole.  They want outhouse-alien slaves to do the dirty work that “Americans don’t want to do” (any more, because they are spoiled brats).

    In short, there is no longer any reason for the existence of the United States as an empire.  The sooner it is dumped into the ashcan of history, the better.

  2. SocialRevolutionComing on Tue, 9th Jun 2020 4:40 pm 

    Like I said, Blacks people control Whites Westerns nations, Whites have transferred the ownership and control Western civilization to Blacks and Leftists.

    Globalists are directly responsible for that. Globalists are the ones that have been pushing mass migration and Whites guilt so they can enrich them self and them self only.

  3. SocialRevolutionComing on Tue, 9th Jun 2020 4:42 pm 

    In short, there is no longer any reason for the existence of the United States as an empire. The sooner it is dumped into the ashcan of history, the better.

    Replace United States with Whites Western nations.

  4. What A Waste on Tue, 9th Jun 2020 5:38 pm 

    mindless sock shit from juanPee

    SocialRevolutionComing said In short, there is no longer any reason for the ex…

    SocialRevolutionComing said Like I said, Blacks people control Whites Westerns…

    put some wings on me supremacist muzzies jerk said now some lib news outfits are putting wings on sai…

    Low English Speaker Genius Whitey Supertard President Trump said just when I thought the whitey supertard president…

    Saint George and Saint Amaud “muzzie” Abery Looking down on us said Saint Amaud is a saint of good luck. You get lucky…

    FamousDrScanlon said The purpose of life is to disperse energy The trul…

    Not All Your Planet Belong to You said “Engineering challenge” != we can achi…

  5. JuanP Deranged Lunatic on Tue, 9th Jun 2020 6:16 pm 

    What A Waste (Davy) on Tue, 9th Jun 2020 5:38 pm

  6. Zero juan on Tue, 9th Jun 2020 6:24 pm 

    JuanP Deranged Lunatic on Tue, 9th Jun 2020 6:16 pm

    What A Waste on Tue, 9th Jun 2020 5:38 pm

    zero brains and all troll

  7. JuanP Derangement on Tue, 9th Jun 2020 8:19 pm 

    Zero juan (Davy the Pink Poodle) on Tue, 9th Jun 2020 6:24 pm

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