July 2001 Vol. 222 No. 7  International

Kurt S. Abraham,  Managing/International Editor

Executive pay keeps climbing at fast pace

Two years ago, this page examined cash compensation for the top five executives of various major oil companies. At that time, we found that many executives were paid well, and compensation was not always based on performance. Indeed, relatively lavish executive pay at a few firms during the 1997 – 1998 oil price collapse prompted some of our faithful readers to write in and express themselves, including a few comments that cannot be printed here.

Now that times are much better, and oil company cash accounts are flush, this editor thought it would be enlightening to see where top-5 executive salaries have landed. As was done in 1999, figures reflect only the annual cash compensation – base salaries, bonuses and "other compensation." Results do not show long-term numbers, including stock awards. Nor is Shell Oil included, as statistics were not available for this foreign-held firm. Our study group is essentially the same, given that BP has absorbed Arco, and Exxon and Mobil combined subsequent to the last compilation.

As the table shows, base salaries rose 10% in 2000, to $36.98 million, versus $33.61 million in 1999. This compares to $41.28 million in 1998 (when there were 12 companies versus 10 now) and $33.59 million in 1997. On a per-company basis, top-5 base salaries averaged $3.7 million last year, compared to $3.36 million in 1999, $3.44 million in 1998 and $2.8 million in 1997.

The numbers are much more interesting, when bonuses and other compensation are included. Overall, these categories combined were 28% greater than base pay, pushing total annual compensation to $84.36 million. Yes, this is about 12% less than the $95.62-million figure for 1999, but that is only because the ExxonMobil executives’ compensation swelled to $36.7 million in 1999, when they were all rewarded for that merger and the subsequent emasculation of the Mobil side of the combination. Excluding ExxonMobil, bonuses per company were up 19% in 2000, to $7.77 million. ExxonMobil Chairman Lee Raymond and now-retired Vice Chairman Lou Noto received bonuses and other compensation in 1999 totaling $14.1 million and $8.6 million, respectively, while base pay had been $2.1 million and $1.05 million, respectively. Last year, their bonuses were a mere $2.8 million and $1.25 million, respectively, and their base pay was $2.5 million and $1.5 million, respectively.

By contrast, BP’s Sir John Browne received $1.12 million in base salary, the same as in 1999. His bonus did rise 14%, to $1.396 million from $1.23 million. Meanwhile, Phillips Petroleum receives the award for the greatest percentage gap between base salaries and total compensation, at a whopping 287%. Chairman J. J. Mulva last year received $4.52 million in bonus compensation, versus $1.05 million in base pay. Thus, he accounted for nearly half of Phillips’ gap.

Readers who work at other publicly-traded companies, and would like to scrutinize their own top management’s compensation, can visit the SEC website at www.sec.gov and click on the link to the "EDGAR" search mechanism.

More from ANP’s Toniatti. Last month, our regional report on Brazil included an interview with Giovanni Toniatti, the director in charge of licensing, blocks, data, etc., for the national petroleum agency, ANP. This month, we are pleased to provide an additional portion of that interview, which was delayed for various logistical reasons, including the untimely death of his close associate, Ivan Simoes.

Q: How healthy is Brazil’s upstream construction sector?

A: The naval construction sector is in good health, due to the building of the Bijupira-Salema FPSO and a number of supply boats. The tendency is toward steady growth of this sector in the next few years.

Q: What are some operating challenges at the moment?

A: The greatest operating challenges include our production efforts in very deep waters, as well as the transportation and commercialization of natural gas in the Amazonas basin.

Q: Is there a specific, major technological challenge?

A: The major technological challenge is to perfect a production system for ultra-deep waters (depths of more than 1,000 m, or 3,280 ft), including such items as multi-phase pumping and subsea separation.

Q: Can you describe some technological advances that Brazilian firms may have achieved recently?

A: The most recent technological advances were achieved by Petrobrás. Its experience in floating production systems is demonstrated by more than 380 subsea trees already on the seabed, over 3,500 km of flexible lines and umbilicals laid, and 59 subsea manifolds and 29 FPS vessels in operation. In the next three years, Petrobrás plans to install six more deepwater production systems to develop oil fields in the Campos basin. This endeavor accounts for Petrobrás winning OTC’s 2001 Distinguished Achievement Award.

In addition, Mr. Toniatti said that in regard to Licensing Round 3, at least 43 companies had paid the participation tax (which includes access to the block data) by late May. Of that total, 24 companies had paid for all 53 blocks. The licensing award sessions were due to be held on June 19 and 20.