I do a blog on CEO pay, so I read a lot of rationalizations for the high pay executives receive. Yesterday I spent hours and hours looking at the proxy statement of a CEO of Schlumberger, a company in a carbon-based line of business that contributes to the climate crisis. The company had a horrible year (as many oil companies did) and slashed many jobs but the CEO’s bonus went up. I wrote at length on the contortions that made that possible here, but wanted to give a summary and reflect a bit here.
Schlumberger is one of those S&P 500 companies that you may never have heard of. It describes itself as “the world’s largest oilfield services company” and specializes in oil and gas exploration technology.
One reason the bonus went up is who they compare themselves to when looking at compensation. In one section of the proxy the company actually brags that “stock price declined only 40% between June 30, 2014 and December 31, 2015.” The word “only” is kind of astonishing, but it is used in the context of comparisons to the price of crude oil and the Philadelphia Oil Service Sector.
However, when it comes to setting compensation the company does not limit it comparison self to oil industry peers but also uses a second peer group of “large companies with significant international operations,” a list which includes such companies as Caterpillar, Merck, and Microsoft. Wouldn’t we all like to pick comparisons? I’d personally like to be paid as someone of my experience would on Wall Street, but you know, since I work at a small non-profit there’s not much chance of that happening. I’m okay with that because I made a choice.
For me this indicates an attitude of “entitlement.” It is an ugly attitude when we see it displayed. The right claimed that term long ago — applying it to the wrong people --- but I guarantee you that any damage that may have been incurred by people on welfare who felt “entitled” to food, are nothing compared to the entitlement the pervades the 1%. These guys think they should have what the other guys have.
Now there’s a lot of talk about “pay for performance” and Schlumberger had set up a very carefully formulated plan, and then completely departed from it. The company set significantly lower earnings per share (EPS) goals for this year than it had in the past, subsequently lowered them half way through the year, and then decided that even those goals should be based on a new accounting principle of “belief” rather than actual numbers.
Management also got rewarded for “proactive efforts in mitigating the downturn.” My best guess for what “mitigated” the downturn were the massive layoff of workers. Many times people tell me that on the whole the amounts involved in executive compensation are “a rounding error” for the company. Technically, that is true at huge companies. But it sure isn’t a rounding error for the individual who was laid off. My dad worked in a factory and I remember the anxiety temporary layoffs caused in our family, and that was with a good union job in the 1970s.
I won’t be posting too many of these on DK, but if you can subscribe to email updates at the blog, or follow me on twitter @LandisWeaver.
Anyway, I needed a break from the nerdy part of my job and a breath of remembering why I do this. Thanks for listening.