| What's wrong with this picture? |
SAN FRANCISCO -- ChevronTexaco Corp. more than doubled the paycheck of CEO David O'Reilly last year, rewarding him with a $3.2 million bonus for engineering a deal that created the nation's second-largest oil company and set the stage for 4,500 job cuts.
Besides giving O'Reilly a special bonus for overseeing Chevron's $39 billion takeover of Texaco, the San Francisco-based company also paid its chairman and chief executive $970,833 in salary and a $1.8 million award for beating the board's profit goal last year, according to documents filed Monday with the Securities and Exchange Commission.
The $5.97 million in salary and short-term bonuses represented a hefty raise from the $2.86 million that O'Reilly received in 2000 -- his first year as CEO. During 2001, ChevronTexaco said it had increased O'Reilly's salary 11 percent from $900,000 to $1 million.
In 2001, ChevronTexaco also paid O'Reilly $1.14 million under a long-term compensation plan measuring the company's performance dating back to 1999 and awarded him 150,000 stock options that will be worth $21.2 million if the company's shares appreciate by 10 percent annually during the next decade.
Although the merger bonus may look large, it's not especially big measured by precedents set by other oil industry executives.
After Exxon bought Mobil in 1999 to form the nation's biggest oil company, the company paid its CEO, Lee R. Raymond, a $12.5 million merger bonus. Other oil company CEOs also have received larger merger bonuses than O'Reilly did, said industry analyst Fadel Gheit of Fahnestock & Co.
ChevronTexaco handed out a total of $4 million in merger bonuses to its next four highest-paid executives.
Vice Chairman Glenn Tilton and Vice President John Watson each received $1.5 million merger bonuses, while Vice Chairman Richard Matzke and Vice President Peter Robertson each received $500,000.
ChevronTexaco is rewarding its top executives for their work in the merger amid a cost-cutting spree designed to pare the company's expenses by $1.8 billion annually. The streamlining will include 4,500 job cuts from a payroll of about 56,000 employees at the time of the merger's completion.
"It's unfortunate that one of the ways that executives are rewarded today is based on how many people they put out of work," Gheit said.
Shortly after O'Reilly took charge in 2000, Chevron launched into one of the most profitable periods in its history as the company cashed in on rising oil and gas prices.
The run of prosperity ended in the final quarter of last year when ChevronTexaco posted a $2.5 billion loss as the company absorbed charges to pay for the merger and devalued some of its holdings.
Despite $12.2 billion in operating profits during O'Reilly's first two years as CEO, ChevronTexaco's stock has remained flat. Chevron's shares gained $1.20 to close at $85.30 during trading Monday on the New York Stock Exchange. The shares were worth $86.62 just before O'Reilly became CEO.
|
If you have come to this page from an outside location click here to get back to mindfully.org |