Under pressure from shareholders, oilfield services giant Nabors Industries Ltd. on Monday said it plans to separate the roles of chairman and CEO after Anthony Petrello's tenure ends and said it would allow shareholders to have proxy access to include director nominees.
The initiative builds upon others announced last year, reflecting pressure from some of its biggest stockholders. In 2012 shareholders scored an industry first by approving a nonbinding resolution that gave them power to oust members of the board (see Daily GPI, June 6, 2012). The nonbinding resolution would have allowed large investors to list competing board candidates on official company ballots.
With the board's approval of the new initiatives, proxy access policy has been instituted to allow shareholders to do just that. Any shareholder owning 5% of shares for at least three consecutive years would be eligible. The policy would be reviewed in three years.
"During the last two years, we have made significant progress in updating our corporate governance," said Petrello. "Since 2011, we have declassified the board, restructured compensation to better align with business performance and worked closely with shareholders to address their concerns. These changes reflect the results of our commitment to strengthening our corporate governance and compensation practices, and open the door to an even more focused commitment to the generation of long-term value for shareholders."
Nabors also adopted a policy limiting severance payments to 2.99 times an executive's salary and bonus, formalizing an initiative already implemented in the employment agreements of the CEO and CFO. In addition, the board agreed to ask shareholders to approve an advisory vote to extend its shareholder rights plan at this year's annual meeting. The company has implemented a policy requiring public announcement of the board's "reasoning" if any director resignations are not accepted.
Nabors also clarified its governance guidelines so that the lead director may add agenda items for board meetings, and clarified that the board would include gender in its diversity considerations.
Petrello thanked the California State Teachers' Retirement System (CalSTRS) for its support and "open-minded approach throughout our governance discussions and to Blue Harbour Group for their helpful role."
"These changes provide significant benefits to Nabors shareholders," said CalSTRS' Anne Sheehan, director of corporate governance. "After many productive conversations with Nabors...regarding proxy access and other issues, we commend the positive progress the company has made in strengthening its corporate governance principles on the issues of most interest to shareholders.
"In particular, only a handful of companies have implemented proxy access, and this policy is a significant step in the right direction. We appreciate management's commitment to more transparency and accountability and look forward to seeing what the future holds for Nabors."
Blue Harbour, a large shareholder, appreciates the "renewed commitment of management and the board to good corporate governance," said CEO Clifton S. Robbins. "Having passed this milestone, Nabors' management now can redouble their efforts to advance the company's strategic objectives, which already have begun to deliver significant value to shareholders."