Occidental Petroleum Corp (OXY). shareholders ejected Chairman Ray Irani from the board in a vote at their annual meeting today, ending the former chief executive’s almost three-decade run at the company.
According to preliminary results, Irani failed to get the majority of votes needed for him to retain his seat, the Los Angeles-based company said. Director Aziz Syriani submitted his resignation as of May 2, the company said in a filing. Edward Djerejian, a former U.S. ambassador to Israel and Syria, will become chairman and Spencer Abraham will be vice chairman.
The vote against Irani forces him to resign his board seat, according to the company’s bylaws. Occidental rose 3 percent to $90.76 at the close in New York.
Irani’s departure is more than a year ahead of the retirement date he announced following previous shareholder criticism of his industry-leading compensation package. According to a new policy the company announced April 29, Irani’s successor as chairman would have to be an independent director.
Occidental’s board surprised shareholders in February with an announcement it was seeking a replacement for Chief Executive Officer Stephen Chazen as the company debated how it should be structured for the future. Chazen, 66, has advocated a North American focus for the company, while Irani wanted to retain the company’s global reach, with drilling assets in the Middle East, Africa and Latin America, said David Neuhauser, a managing director at Northbrook, Illinois-based Livermore Partners Inc.
“I’m not going to tell you every day was a trip to Disneyland,” said Chazen at the meeting, concluding a 10-minute monologue that featured extensive praise for his predecessor.
Chazen didn’t specify what role, if any, Irani may play at the company in the days ahead. “But I’m glad I’m going to be able to talk to him in the future,” he said. A final vote tally will be available Monday, the company said.
Some of the more than 100 shareholders attending Occidental’s annual meeting audibly gasped when Chazen said Irani was “stepping down.” Otherwise there was little hint of the revolt that led to Irani’s downfall as only one shareholder spoke in protest of Occidental’s pay and governance practices.
Chazen concluded his remarks by thanking his wife “for letting me fool around a little longer,” and the room broke out in applause.
The CEO’s remarks about Irani were “kind of like a eulogy,” said Livermore’s Neuhauser, who was among shareholders that voted against the longtime chairman. “I’m satisfied with the outcome and look forward to the company’s new direction.”
Occidental announced a slate of new governance improvements April 29 after investors questioned the role Irani had played in the decision to replace Chazen as CEO. Shareholders including First Pacific Advisors LLC, Cambiar Investors LLC and Livermore Partners advocated that Irani should leave instead of Chazen.
The company reassured shareholders Chazen would stay as CEO through 2014. The governance changes included barring future CEOs from assuming the role of chairman, declaring that chairmen after Irani will be independent, cutting board and executive pay and adding two directors.
Prior to those changes, proxy advisers Institutional Shareholder Services, or ISS, and Glass Lewis & Co. had recommended that investors vote against Irani retaining his board seat and against the company’s executive pay policies in elections held at the annual meeting today. After the changes, Glass Lewis reversed itself and recommended shareholders approve Irani and the compensation plan, while ISS stuck to its ’no’ vote recommendation for Irani to give Chazen clear control over the company’s strategic future.
Today’s vote may make Irani eligible for a lump-sum severance payment of about $38 million and annual payments of $2.2 million, according to the company’s proxy filing. Having to leave under such circumstances may entitle him to $21.6 million in retirement pay and, if it’s considered a termination, about $16.8 million more.
Irani, the best paid oil industry CEO in 2009, has received average annual compensation of almost $80 million since 2001, according to data compiled by Bloomberg. Irani earned more than $45.6 million last year after he gave up the CEO role.
Occidental may be able to avoid the severance payout if Irani stays as an employee after resigning from the board, said Andy Restaino, founder of Technical Compensation Advisors, a Bellmore, New York-based consulting firm.
Occidental directors obtaining the approval of shareholders were Abraham, Djerejian, Chazen, Howard I. Atkins, John Feick, Margaret Foran, Carlos M. Gutierrez, and Avedick Poladian, according to a company filing.
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