What is the primary objective of the new executive compensation program?

The primary objective is to link a significant portion of executive compensation to Occidental Petroleum's performance over future periods. This is achieved through performance-based, at-risk awards designed to drive shareholder value and operational success, while also aiming for tax deductibility under Section 162(m) of the Internal Revenue Code.

How is executive pay tied to Total Shareholder Return (TSR)?

The Total Shareholder Return Incentive Award (TSRIA) links executive payouts to OXY's TSR over a three-year period (July 1, 2013 - June 30, 2016) relative to a defined peer group of energy companies. Payouts can range from 0% to 150% of the target award, depending on performance, with a condition that if OXY's TSR is negative or below the S&P 500's TSR, payouts exceeding the target are forfeited.

What are the conditions for the Restricted Stock Incentive Award (RSIA) to vest?

The Restricted Stock Incentive Award (RSIA) requires the company to report cumulative Net Income of $12 billion. The shares will only become non-forfeitable if this cumulative net income target is met by June 30, 2020. Failure to reach this target by the deadline results in the forfeiture of the entire award.

How do oil price fluctuations affect the Return on Capital Employed (ROCEIA) and Return on Assets (ROAIA) awards?

The thresholds for ROCEIA and ROAIA are subject to adjustment based on West Texas Intermediate (WTI) crude oil prices. Specifically, if forward strip WTI prices or actual average WTI prices during the performance period differ by $10 or more from specified benchmarks, the ROCE and ROA thresholds can be adjusted up or down by 2%.

OXY/OXY-WT 8-K: Leadership Changes

Summary

Occidental Petroleum Corporation (OXY) announced on July 26, 2013, a new executive compensation program approved by its Executive Compensation Committee on July 22, 2013. This program involves grants of incentive awards under the 2005 Long-Term Incentive Plan to key executive officers and other employees. The core of this new program is its performance-based and at-risk nature, with a significant portion of potential compensation tied to the company's performance over specified future periods, aiming to qualify for tax deductibility under Section 162(m) of the Internal Revenue Code. The awards are designed to align executive incentives with shareholder value and operational success. These include Total Shareholder Return Incentive Awards (TSRIA), Restricted Stock Incentive Awards (RSIA), and either Return on Capital Employed Incentive Awards (ROCEIA) or Return on Assets Incentive Awards (ROAIA) for specific segments or regions. The structure emphasizes long-term performance, with vesting and payout contingent on achieving pre-defined financial and operational metrics, as well as the executive remaining with the company.

Key Highlights

1Occidental Petroleum has implemented a new executive compensation program emphasizing performance-based, at-risk awards for key officers and employees.
2Awards are designed to align executive pay with company performance over future periods and qualify for tax deductibility under Section 162(m) of the IRC.
3Total Shareholder Return Incentive Awards (TSRIA) are tied to OXY's stock performance relative to a peer group of energy companies over a three-year period, with potential payouts ranging from 0% to 150% of target.
4Restricted Stock Incentive Awards (RSIA) are contingent upon the company achieving cumulative net income of $12 billion by June 30, 2020, with a forfeiture risk if the target is not met.
5Return on Capital Employed (ROCEIA) and Return on Assets (ROAIA) awards are also performance-based, with potential payouts up to 200% of target, influenced by ROCE and ROA metrics, respectively, and subject to adjustments based on WTI crude oil prices.
6Payouts are generally dependent on continued employment, with specific provisions for termination due to death, disability, retirement, or termination for cause, and special conditions in the event of a Change in Control.
7Executives are required to retain 50% of net after-tax shares received from these awards for three years post-vesting.

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Executive Changes (Jul 26, 2013)

Summary

Key Highlights

Frequently Asked Questions