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The Wall Street Journal: Occidental’s $416.3 Million CEO: Pay Package Puts Irani in Lofty Air

By RUSSELL GOLD
April 7, 2007; Page B3

Talk about your six-figure paychecks — and then some.

Ray R. Irani, longtime chairman and chief executive of Occidental Petroleum Corp., received compensation last year valued at $416.3 million, making it one of the richest corporate paydays ever.

Nearly two-thirds of the money came from exercising stock options, reflecting huge gains that Occidental’s share price has made in an era of rising oil prices.

Only a handful of CEOs have ever made more money in a year. In 2001, Oracle Corp. CEO Larry Ellison gained $706 million from exercising stock options. Walt Disney Co.’s former CEO Michael Eisner scored $570 million in 1998.

Former Exxon Mobil Corp. Chairman and CEO Lee Raymond was criticized last year when it was reported that his total compensation package for the year before was $69.7 million, including options exercised. He also received a pension valued as a lump-sum payment of $98.4 million because he was retiring.
 
Dr. Irani, who has led the Los Angeles-based oil company since 1990, received $52.8 million in salary, bonus, stock awards, options and participation in incentive programs. That was the highest amount among his peers at U.S. oil companies that have reported.

But the biggest slices of his compensation came elsewhere. The company decided to end a deferred-shares program last year; exiting from the program earned Dr. Irani $93.3 million. And he exercised options for Occidental stock valued at an additional $270.2 million.

“Dr. Irani’s compensation package is fair and appropriate. … Dr. Irani has grown the company substantially and he has created wealth for Occidental shareholders,” says company spokesman Richard Kline.

Critics of high executive compensation contend that Dr. Irani isn’t directly responsible for most of the Occidental Petroleum wealth creation. Its rising share price has come mostly from the rising price of crude oil, a global phenomenon having to do with factors outside Dr. Irani’s control such as tight supply and rising demand in Asia.

“How much is the value he provides versus the value being provided by economic circumstances,” asks Paul Hodgson with the Corporate Library, a governance research firm in Portland, Maine. Mr. Hodgson says his compensation should have been structured to reflect the gains from rising crude prices.

Dr. Irani, 72 years old, may have more large paydays ahead. Occidental disclosed additional supplemental retirement funds and deferred-compensation plans valued at $124 million, including deferred shares worth $83 million at the end of last year that will be distributed in 2007, according to company officials. He also owned 5.8 million shares at the end of February, including exercisable options with a value of $289.3 million.

Dr. Irani has led the company since December 1990, when he took over for Occidental’s legendary founder Armand Hammer. Dr. Irani is well-known for his personal connection with Arab leaders that sometimes allow Occidental to compete for Middle East projects that would otherwise go to larger companies. This past week, the company said it had been prequalified to bid on a $10 billion gas development in Abu Dhabi, joining a select group of large companies, including Exxon and Royal Dutch Shell PLC.

Write to Russell Gold at [email protected]

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