By DANIEL GILBERT
and JOANN S. LUBLIN
Chevron's board is cutting compensation for its chief
executive and other top executives in the wake of a string of
accidents and other operational problems since late 2011,
according to people familiar with the matter.
Chevron's board on Wednesday trimmed equity awards by 11%
and bonuses by at least 10% for CEO John S. Watson and several
other executives, one of the people said.
"When things go poorly, the pay should reflect it," this
person said. The directors "absolutely want to deliver a
message to management."
Chevron has been performing well financially. But in
February, the company disclosed it reduced the number of
stock-options and performance shares awarded to Mr. Watson from
last year, without revealing the bonus cuts or explaining the
cause of the reductions.
Mr. Watson's 2012 compensation package was valued at $24.7
million, about half of which came from equity grants awarded
the previous year.
The same equity awards, which are tied to how Chevron's
stock performs, were reduced for four other top executives,
according to filings with the US Securities and Exchange
Lloyd Avram, a spokesman for the company, said the board was
"The company does not have a comment to provide until such
time as the board meeting has concluded," he said.
Unlike other oil companies criticized in recent years for
lavishly rewarding top brass, Chevron's executive pay practices
have not prompted controversy among shareholders. An advisory
vote on its compensation for 2012 was supported by 95% of votes
cast at Chevron's annual meeting last year.
The San Ramon, Calif.-based energy giant has been leading
its peers in profit and stock performance; shares are up 12%
this year, outperforming larger rival ExxonMobil and its $233
billion stock-market value recently topped that of Royal Dutch
But Chevron has also suffered a string of operational setbacks
since late 2011. Oil leaks from the seafloor at its Frade field
off the Brazilian coast in November 2011 and March 2012 led the
company to halt production there, forfeiting daily production
of 29,000 bbl of oil and its equivalent in natural
gas. The field has yet to restart and Chevron is still
fighting the resulting legal quagmire.
In January 2012, a drilling rig in Nigeria operated by a
Chevron subsidiary exploded, resulting in two deaths. And in
August 2012, a huge fire broke out at its Richmond refinery after a badly corroded pipe
ruptured. A state agency said in January it would seek fines
totaling nearly $1 million for the incident.
Safety has become critical for oil companies operating under
increasingly tough regulatory scrutiny, a concern heightened by
the 2010 BP Gulf of Mexico oil spill.
Mr. Watson earlier this month touted Chevron's safety
performance to analysts in New York, saying that its 250,000
employees had a total of 70 injuries that required them to miss
a day of work last year.
"That's not just the best in the industry, it's world-class
performance," he said, adding that the company still had room
Dow Jones Newswires