The blogosphere was abuzz toward the end of last week about Lee Raymond’s reported $398,000,000 retirement package. The obscene package contrasts sharply with Raymond’s congressional testimony, at the height of the post-Katrina gas gouging crisis, that “”We’re all in this together, everywhere in the world.”
When you make $190,915 7 days a week, 365 days a year you aren’t in it with us. You don’t pump your own gas. In fact, I doubt you even see the guy who pumps your gas. Why would you? Let’s say your driver stopped to pump your gas on the way to your jet. It takes 3 minutes. That’s $400 of time, wasted. You could have jawboned oil prices up to $50/barrel in that time! Or doodled out a plan for world domination!
Sheesh. It’s numbers like this that have to give folks who believe in shareholder democracy some pause. This information was available last year, at the latest, but Exxon’s stock has been on a flier of late. Nor will forseeble changes in corporate governance prevent this type of compensation plan, whatever happens in Disney.
Needless to say, I think that the scope of this compensation package provides further evidence for the need of a windfall tax on Big Oil, not least because it would amount to the Kaldor-Hicks transfer that nominally supports arguments for permitting price gouging after catastrophes. Other taxes are equally attractive, because there is no incentive based reason that I buy that justifies a $398,000,000 pension plan.
Now, I’ll admit that Raymond was CEO of Exxon from 1993-2005, and had led the company from strength to strength. But Exxon wasn’t downtrodden when he assumed control, and reaping profit from an oil company couldn’t have been incredibly hard in an era of global instability, increasing demand for oil worldwide sparked by growth in China, the continued immunity of OPEC to antitrust liability, and, shucks, a war in the Mideast or two. I don’t know what in my book would qualify you for a retrospective paycheck like the one Raymond will collect. But steering the ship to its berth when the moon was full and the waters calm sure isn’t it.
[p.s. If you want to read a great case talking about oil company profit-taking during oil shocks, check out Eastern Air Lines v. Gulf Oil, 415 F. Supp. 429 (S.D. Fla. 1975), which I taught my class last week. Fun case. Great facts.]
[Update: Bill Sjostrom corrects my reliance on mainstream media reports and suggests that the real value of the pension is slightly under $100,000,000. Fair enough Bill. The other $200,000,000 looks to be largely composed of previously issued options and restricted grants of stock, i.e., potentially incenting compensation. But the windfall argument remains.]