Occidental Petroleum Corp. (Oxy) has approved a "say on pay" policy that will give shareholders a nonbinding advisory vote on executive compensation beginning at the 2010 annual meeting.
The advisory vote by Oxy's board of directors gives shareholders the ability to advise the board on its philosophy about the annual pay of the most highly compensated executives at the company.
"We welcome ongoing input from our stockholders," said CEO Ray R. Irani. "Oxy's board of directors strives to maintain an ongoing, constructive dialogue with the goal of achieving continuous improvement in all aspects of our corporate governance, including executive compensation."
Irani, who has headed Oxy since 1990, received an estimated $77.6 million in overall compensation in 2007, according to company documents.
"In recent years, we have engaged in direct discussions with stockholders on various important governance issues, including 'say on pay,' put a significant amount of executive compensation 'at risk' based on the company's performance and expanded and improved the executive compensation disclosures in our proxy statements. We are now taking an additional significant step forward by adopting 'say on pay,' providing for a regular advisory vote," Irani said.
Additionally, Oxy noted that it is supporting Congressional efforts to establish "clear guidelines, setting a common standard and adopting legislation to mandate an advisory vote on executive compensation at all U.S. companies. This would enable investors to have a consistent tool to give feedback at all companies in which they invest."
As a result of the board's action, The Needmor Fund, the lead proponent, along with its co-filers have withdrawn the "say on pay" stockholder proposal that was planned for the annual meeting. If the Needmor proposal had been approved by stockholders, it could not have taken effect until the 2010 meeting, Oxy noted. A similar proposal failed to be approved by shareholders at the company's 2007 and 2008 annual meetings.
"We believe one important way to ensure that shareholders maintain a meaningful voice in executive compensation decisions is to submit executive pay packages to a nonbinding shareholder vote," said Tim Smith of Walden Asset Management, the investment manager for The Needmor Fund. "When tied to a robust investor communication program on executive compensation, which provides an avenue for detailed share owner feedback, the vote has additional meaning."
The American Federation of State, County and Municipal Employees, AFL-CIO, together with its co-filer, The Firefighters' Pension Fund of the City of Kansas City, MO, also agreed to withdraw their "hold through retirement" and "golden coffin" shareholder proposals that were related to Oxy's executive compensation practices. This followed the board's approval to expand the proxy statement intent on equity retention and death benefits.
"Allowing shareholders to provide input on executive compensation packages is more important than ever in the current economic environment," said Daniel F. Pedrotty, director, AFL-CIO Office of Investment. He said Oxy had given investors "a critical tool to hold the board accountable."
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