We’ve written before about the activist investor saga at the oil giant, Occidental Petroleum Corp., so we thought it only fitting to provide the happy ending, arrived at last week.
The basics of the conflict were that some shareholders thought the long-standing chief executive, 75-year-old Dr. Ray R. Irani, was getting paid too much and that the company didn’t have a good succession plan. Shareholders already had approved a non-binding negative vote on management pay practices.
There was little doubt that on a relative basis, Irani was quite well paid. The company also has done very well by shareholders. The company produced a total return of 874% for shareholders in the past decade, The Wall Street Journal reported.
The California State Teachers’ Retirement System (CalSTRS) and San Diego money manager Relational Investors LLC were so aggrieved they publicly sent a letter about plans to offer four competing director nominations to Occidental’s board, which they lambasted.
But now peace apparently is the order of the day at Occidental Petroleum. Irani will give up being CEO in May 2011. He’ll serve as chairman through 2014. Stephen I. Chazen, the president, will succeed as CEO. One board seat will go to dissident investors, The Wall Street Journal reported.
Both men will take slimmer though potentially still significant compensation packages. “The direction they moved on the compensation is very good,” said Anne Sheehan, the director of corporate governance at CalSTRS, as quoted in the Journal.
The point made in previous columns on this issue is worth repeating here. CalSTRS and Relational owned about 1% of Occidental’s shares, below the threshhold of the rule recently approved (but under legal challenge) by the SEC that would allow some big holders to nominate directors whose candidacy would be carried on the proxy materials distributed annually by companies.
The point then as now is that big institutional investors are capable, powerful entities that didn’t need the extra and potentially divisive power that will eventually come to them through the SEC’s so-called proxy access rule in order to exert influence at major public companies.