Occidental Petroleum Corp. (OXY) Chairman Ray Irani should retire and Chief Executive Officer Stephen I. Chazen should be allowed to continue as CEO, shareholder First Pacific Advisors LLC said in a letter to the company today.
Chazen has the “confidence of Wall Street” and shareholders are “troubled by the infighting in the corporate suite” at Los Angeles-based Occidental, First Pacific Managing Partner Steven Romick said today in a letter to the company. First Pacific held more than 2 million Occidental shares as of Dec. 31, according to data compiled by Bloomberg.
Occidental said in February it was beginning a search for a new CEO to succeed Chazen, without saying when Chazen was expected to leave. The CEO’s contract expires in January 2015, the company said.
Romick called on the company to cancel the search.
“This is the wrong time to transition to a new CEO,” Romick said in the letter. “We believe that Oxy has in place an effective and respected CEO who should be empowered to manage an orderly transition in the future.” A CEO search should resume “when this transition is more appropriate,” he wrote.
Melissa Schoeb, a spokeswoman for Occidental, didn’t immediately return a call and an e-mail seeking comment on the letter.
Shareholders have begun to question the board’s independence and oversight after the surprise announcement that they were seeking a replacement for Chazen. The move “raised questions of whether there’s a split between Chazen and the board,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, in an interview today.
Occidental’s shares have fallen 5.8 percent since the Feb. 14 announcement even as peers including ConocoPhillips (COP) and Anadarko Petroleum Corp. (APC) have risen modestly, according to data compiled by Bloomberg.
“Any time you have questions about the future of the company and leadership strategy, it’s going to weigh on shares,” Youngberg said.
Irani stepped down as CEO in 2011 and agreed to retire from his role as chairman in 2014 amid shareholder unrest over his compensation, which was more than $200 million in the past four years, including in 2011 and 2012 after he was no longer chief executive, according to proxy filings.
After Irani handed Chazen the reins, Occidental shares declined in both 2011 and 2012, the first time shares have fallen in back-to-back years since 1992, according to data compiled by Bloomberg.
Romick defended Chazen’s record, saying as second-in- command to Irani he contributed to shares rising at an average annual rate of 20% from 1999 to 2012.
“We want Irani to leave now,” Romick said in a telephone interview today. “We don’t feel that it’s time yet for Chazen to leave the company.”
Occidental’s 11-member board, all but one of whom will be up for re-election at the company’s annual meeting May 3, has consistently been the highest-paid in the energy industry and among the highest of all companies on the Standard & Poor’s 500 Index, according to the 2012 Spencer Stuart Board Index Report. Occidental directors made an average of $754,000 in 2011, more than at Amazon.com Inc., Goldman Sachs Group Inc. and Exxon Mobil Corp., the report says.
Rosemary Tomich, who has served on the board since 1980, is not standing for re-election.
Proxy advisers Institutional Shareholder Services, or ISS, Glass, Lewis & Co. and Egan-Jones Proxy Services may issue recommendations to shareholders as soon as next week on whether to keep the board intact.
“The board’s too insular, they’re too old, they’re not necessarily well equipped for the industry as it’s structured today,” said Ted Harper, a fund manager at Frost Investment Advisors LLC, whose firm manages more than $8 billion and owns Occidental shares. “There needs to be some new blood.”
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