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In the separation agreement filed earlier this week, Occidental Petroleum (NYSE: OXY ) agreed to pay outgoing chairman and former CEO Ray Irani perks for life, including tax, accounting, and estate planning up to $430,000 a year; security benefits and services up to $470,000 a year; plus another $50,000 a year for a "travel security professional." In addition, an HQ office, with designated parking space, and a home office will be set up and supplied to Irani, including all furniture and equipment, as well as continued use of his two personal assistants for a time. There's also $10 million in liability insurance and $5.7 million in life insurance, and director and officer liability insurance of $100 million, and medical and dental benefits also for life.
In addition to these costs, a separation payment of $14 million will be made, along with any unpaid pro rata salaries, bonuses, long-term incentives, and other share awards. The total cost of these benefits to the company -- well, to the shareholders, in fact -- is $26 million plus about $1.3 million in annual costs for the rest of Irani's life. And the board seems to think it got a good deal because it beat him down from a $16 million lump sum and $1.6 million in annual costs.
There's a reason that Irani and Occidental have been referred to for some time as exemplars of pay excess.
About the only thing it looks like he'll have to pay for is the price of any tickets to the company's box seats at the Staples Center and the Kennedy Center.
How did we get here?
The shareholders did not elect Irani to the board at the 2013 annual meeting and he deemed this to be a constructive termination. So, the shareholders exercise their democratic right to get rid of a chairman already well past retirement age and he stuffs them with a hefty bill. It's hardly an encouragement for other shareholders to exercise their rights if it's going to be so expensive.
Having got rid of the Jack Welches (NYSE: GE ) , the Lou Gerstners (NYSE: IBM ) , and the Hank McKinnells (NYSE: PFE ) of this world, it might have been felt that the days of the imperial CEO with the lifetime of perks was over. Clearly not. As a separation agreement, I dearly hope the shareholders get a chance to vote on it again, at the next annual meeting, and vote it down. But then he'd probably sue....
However, the final question in this questionable transaction, could be: does he need it? This is an executive who owns $720 million in Occidental shares, and has been paid a minimum of $40 million a year for decades and much more than that in most years; topping or being included on the highest paid CEOs on numerous occasions. Undoubtedly in a position to pay for his own tickets.
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