Occidental CEO's Bloated Pay Prompts Shareholder Fight

Two of the largest institutional investors in Occidental Petroleum (OXY) are none too happy about the estimated $50 million its chief executive made last year, and they're launching a fight to take over seats on the oil and gas company's board.

Relational Investors LLC and the California State Teachers' Retirement System (CalSTRS) sent a letter Friday to the board of the company announcing their intentions to try to take over four of the 13 board positions at next year's annual meeting. A spokesman for CalSTRS confirmed the contents of the letter, first reported in The Wall Street Journal.

The main gripes are the amount of Occidental Chairman and CEO Ray Irani's compensation and the lack of a succession plan. Irani, 75, reportedly took home $857 million in pay since he took over as chief executive 10 years ago. This year, his pay plan includes a $58 million incentive.

Movement at the Top

On Monday, Occidental announced the appointment of Chief Financial Officer Stephen Chazen to president and chief operating officer. For at least one of the investors, it was a good move.

"Today's appointment of Stephen Chazen as COO is a long overdue positive first step. However we feel it is reactive to issues brought to them by shareholders outside the board room, whereas as a vigorous Board would have been proactive," said CalSTRS spokesman Ricardo Duran. "As a long-term shareholder in Occidental, CalSTRS wants to see an institutional process in place for succession planning to ensure that the excellent returns we've received so far will continue. "

CalSTRS has been an owner of Occidental Petroleum for more than 25 years and has no immediate plans to sell its stake.

Executive compensation experts say that Irani's compensation, an increase of 40% from the previous year, should reflect a higher return than the stock's actual return for investors. Over the last 24 months, the stock has fluctuated from between $70 and $80 a share.

On news of the board takeover bid, Occidental's stock on Monday increased 3% to close at $80 a share.