April 11 (Bloomberg) -- Occidental Petroleum Corp. investors should remove Chairman Ray Irani and the lead independent director after the board decided to replace Chief Executive Officer Stephen Chazen, proxy adviser Institutional Shareholder Services said.
Shareholders should oppose the re-election of Irani and Aziz Syriani at the oil producer’s May 3 annual meeting, ISS, a unit of MSCI Inc., said in a report yesterday. ISS is the first proxy adviser to advocate for board changes after Occidental’s stock fell for two consecutive years, the worst performance in more than two decades, according to data compiled by Bloomberg.
First Pacific Advisors LLC and other investors have called for Irani to leave after the February announcement the company is seeking a new CEO less than two years after Chazen took over. Shareholders can’t discern who’s in charge at the Los Angeles-based company and the turmoil is delaying moves to boost the share price, said David Neuhauser, a managing director at Northbrook, Illinois-based Livermore Partners Inc.
“It’s crystal clear that Ray Irani should remove himself from the situation and allow Chazen to retain full operational control,” Neuhauser, who helps oversee $100 million in assets including Occidental shares, said in an e-mail yesterday. “Occidental must address this issue and not allow for this to become a sideshow.”
Melissa Schoeb, an Occidental spokeswoman, didn’t respond to telephone messages left for comment. The company has said Irani played no role in the decision to replace Chazen and there is no “fight at the top” of Occidental, the largest crude producer in the continental U.S.
Occidental rose 3.5 percent to $84.20 at the close in New York, the most since Sept. 13. The shares have climbed 9.9 percent this year as Chazen, a geologist and former investment banker, targeted a drilling-cost reduction of 15 percent for 2013.
Egan-Jones Proxy Services urged Occidental investors to re-elect Irani and all nine other directors on the May 3 ballot. Board committees overseeing key responsibilities such as audits and executive pay are populated with independent directors, and every member of the board attended at least 75 percent of last year’s meeting, Egan-Jones said in a note to clients today.
Chazen, Occidental’s third CEO since 1957, took over in 2011 after Irani agreed to step down amid a shareholder revolt over executive compensation. Irani’s pay totaled more than $200 million for the past four years, according to proxy filings.
Occidental said the decision to replace Chazen was made unanimously by a group of independent directors without the participation of Irani, who is scheduled to retire from the board next year.
The Occidental board has been the highest paid in the energy industry and second-highest among all companies in the Standard & Poor’s 500 Index, according to the 2012 Spencer Stuart Board Index Report. Directors made an average of $754,000 each in 2011, more than at Amazon.com Inc., Goldman Sachs Group Inc. and Exxon Mobil Corp.
Occidental has fallen 21 percent since Chazen became CEO and began to focus on boosting crude output in Texas and California rather than the Middle East and North Africa.
Investors and analysts including Cambiar Investors LLC and Oppenheimer & Co. have said Occidental should consider selling or spinning off assets outside the U.S. that are more susceptible to political upheaval, in a breakup that might be worth $35 billion.
Ten of the company’s 11 directors are up for re-election at the meeting next month. Rosemary Tomich, who has served on the board since 1980, isn’t running for re-election. ISS recommended shareholders vote in favor of the other eight directors.
“Whether or not a CEO change is warranted is not clear,” ISS said in the report. “What is clear is that the board failed in its effort to communicate effectively and steward the company and its shareholders through a challenging succession planning process.”
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