What is the practical impact of the NQSO amendment on Occidental's executives?

The amendment to NQSOs will effectively reduce the number of shares executives receive upon exercising their options. Instead of receiving shares for the full option grant, they will receive a reduced number of shares equivalent to the 'spread' (the difference between the stock price at exercise and the option's strike price), after accounting for tax withholding. This means the value executives realize from their options is more directly tied to the actual appreciation of Occidental's stock.

What is the key threshold in the new Golden Parachute Policy?

The key threshold is that Occidental shall not grant "Golden Parachute Benefits" to any Senior Executive that exceed 2.99 times their salary plus bonus, unless such grant is approved by a vote of the Corporation’s stockholders. This limit applies to various forms of termination payments related to salary and bonus upon separation, including those triggered by a change in control.

Are there any exceptions or exclusions to the Golden Parachute Policy?

Yes, the policy has several exclusions. It does not include salary, incentive compensation, or vacation pay that has already been earned or accrued prior to termination. It also excludes payments related to offsetting excise taxes (tax gross-ups) under Section 4999 of the IRC. Furthermore, accelerated vesting of equity awards (like stock options) is excluded if it is consistent with broad-based employee plans or required by the terms of such plans that were previously approved by stockholders.

OXY/OXY-WT 8-K: Material Agreements

Q: Why did Occidental adopt a new Golden Parachute Policy?

The new policy was adopted in direct response to a shareholder proposal passed at the 2005 Annual Meeting, where 58.72% of shareholders voted in favor of seeking shareholder approval for future golden parachutes exceeding 2.99 times an executive's salary plus bonus. The Board views this as a mandate to align executive severance packages more closely with shareholder expectations.

Summary

Occidental Petroleum Corporation (OXY) filed an 8-K on October 18, 2005, detailing two significant executive compensation-related actions. First, the company amended outstanding non-qualified stock options (NQSOs) for Section 16 reporting officers. This amendment, requiring optioneer consent, will reduce the number of shares received upon exercise, with the net shares calculated based on the spread between the option price and the exercise value, after tax withholding. This change aims to align the value received by executives more directly with the actual appreciation of the stock. Second, and more significantly for investors concerned with corporate governance, Occidental's Board of Directors adopted a new Golden Parachute Policy. This policy was implemented in direct response to a shareholder proposal at the 2005 Annual Meeting that requested shareholder approval for future golden parachutes exceeding 2.99 times an executive's salary plus bonus. The new policy establishes this 2.99x threshold as a general limit, requiring stockholder approval for any golden parachute benefits to Senior Executives that exceed this amount. The policy defines "Golden Parachute Benefits" broadly but excludes certain items like earned salary, tax gross-ups, and accelerated vesting consistent with broad-based plans.

Key Highlights

1Occidental Petroleum amended outstanding non-qualified stock options (NQSOs) for Section 16 reporting officers.
2The NQSO amendment will reduce the number of shares received upon exercise, based on the spread between exercise price and market value.
3A new Golden Parachute Policy was adopted by the Board of Directors.
4The new policy sets a limit of 2.99 times salary plus bonus for Golden Parachute Benefits to Senior Executives.
5Benefits exceeding the 2.99x threshold will require stockholder approval.
6The policy aims to balance executive retention needs with shareholder desire for oversight on significant severance packages.
7The Board retains discretion to seek stockholder approval after a tentative agreement if timely approval is impractical.

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Material Agreement (Oct 18, 2005)

Summary

Key Highlights

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