Energy bust dings executive pay, but some CEOs still get nice raises – Houston Chronicle

August 18, 2017

By Ryan Maye Handy

Average compensation for Houston’s top executives fell last year as the worst oil bust in a generation battered earnings of the energy companies that dominate the region’s economy.

Average compensation among the 500 highest-paid executives in the Houston area’s publicly traded companies fell by 9 percent, to about $3.3 million last year from $3.6 million in 2015, according to data compiled by corporate consultants Longnecker & Associates.

“This is energy-driven, no doubt,” said Chris Crawford, Longnecker’s president.

But that doesn’t mean that all CEOs went without raises, even as the earnings of their companies took a beating. Greg Garland, chief executive of Phillips 66, saw his compensation rise 9.3 percent last year to more than $25 million,as the Houston refiner’s profit plunged 60 percent to $1.6 billion from $4.2 billion in 2015. The compensation of Halliburton CEO Dave Lesar, who recently gave up his chief executive duties, climbed 12.4 percent to $17.8 million last year, even as his planned merger with Baker Hughes collapsed under antitrust concerns and the oil field services company’s losses widened to nearly $6 billion in 2016 from less than $700 million in 2015.

Anadarko Petroleum Corp. lost nearly $3 billion last year, but the compensation of Al Walker, CEO of The Woodlands-based exploration and production company, rose 9.2 percent in 2016 to $18.7 million. Halcón Resources Corp. filed for bankruptcy last year; when it emerged, CEO Floyd Wilson received shares of the reorganized company that pushed the value of his annual compensation to $24.1 million, nearly 800 percent above his 2015 compensation of around $2.9 million.

Total compensation for executives very rarely gets cut, even in the wake of billions of losses, bankruptcies and thousands of layoffs, said Praveen Kumar, executive director of the Gutierrez Energy Management Institute at the University of Houston and a corporate governance specialist. Often, company boards, which determine executive compensation, are picked and directed by the CEO, who is often the chairman of the board, too, Kumar noted.

Meanwhile, worker pay across the country has stagnated.

“The one compensation that has totally bucked that trend is CEO compensation – that has had no shortage of growth,” Kumar said.

Phillips 66 said it sees executive compensation as a crucial part of attracting and retaining high-quality executives. Halcón and Halliburton declined to comment. Anadarko did not respond to requests for comment.

In 2016, Houston’s energy companies, which dominate the local economy, had one of their worst years since the 1980s – oil prices bottomed out at $26 a barrel from a 2014 peak of $107 and natural gas prices sank to their lowest in nearly two decades as companies laid off tens of thousands in the oil patch and struggled with a sluggish recovery.

The decline in average compensation for Houston’s executives bucked the national trend, in which average executive compensation rose slightly, said Marc Hodak, a partner at Farient Advisors, a California consulting firm specializing in executive compensation and corporate governance. He said it’s likely a sign that Houston’s economy remains weighed down by the effects of the last oil bust.

“The Houston economy is still in the doldrums because of the concentration of energy, versus the rest of the country,” he said.

Executive compensation is a complex mix of salaries, cash bonuses, stock awards, pension benefits and other perks, typically tied to performance goals and comparisons to how much CEOs at similar companies are earning.

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