Listen to the howls that have been eminating from anyone who was paying attention. It is totally outrageous and shocking that Exxon's Lee Raymond got $425 $400 $350 in golden parachute payments when he retired as CEO of Exxon in January. Well, except that Exxon's Lee Raymond did not get $350 million in golden parachute payments when he retired as CEO of Exxon in January.
ABC News, purveyor of quality facts nationwide, called it a $400 million retirement package "amid soring gas prices." CBS was little better, calculating the per-day payment Raymond had and then lining up a university professor as comparison. As if Bob Schieffer, the CBS Evening News anchor who announced this miscarriage of justice, isn't from Texas and drives a hybrid to work everyday or something. As Abnormal Returns points out, The New York Times even echoed this day-by-day playback.
The problem is not with the messengers, annoying as they are. The problem is that is they were both wrong.
Raymond got:
$48 million in 2005 salary.
A lump sum of $98.4 million.
$69.9 million in stock option profits.
$183 million in restricted share grants.
Minus the salary, that's $351.3 million dollars. The pig. Except it's not.
The lump sum payment of $98.4 million represents the disbursement of Raymond's accumulated pension over the last 43 years (a good bit of the appreciation of which is related to the rocket-like rise of Exxon's stock over the last 10 years, not just the last 2). And yes, that is forty three (43) years.
$69.9 million in "stock option profits," are only paper gains. Given where Exxon's stock is, it is not all that surprising (the company's price was in the low 30s only 3 years ago, the 20s ten years ago and is in the 60s today) even before you count the fact that these are options that have been granted as long as 10 years ago. Remember, the value of these instruments has been growing at something like 12.5% a year for over a decade.
As for the $183 million in restricted share grants, these too have been accumulating for years. Only $32.1 million of them are 2005 grants. Also, these grants are issued by Exxon with particular restrictions. Specifically, half of them cannot be sold for 5 years and the other half cannot be sold for 10. Ouch. Guess what, gang. If you lock shares up for years and you grow the company in massive strides, you're going to have a big lump sum one day.
Raymond's grants from 1993 alone were worth $620,000 when issued. Today they are worth $32.1 million. Nicely done, Lee. Of course, those with a bone to pick about CEO pay have been both counting these options grants as part of annual salary, and again now that he has retired. A clever ruse, but one we have seen before and one generally cited by CEO Compensation Bonos who either shouldn't be let near a financial calculator because they might hurt themselves or others, or are "just" willfully ignorant.
Bloomberg's Graef Crystal has a good run-down of the details.
The reality that as a long-term incentives package, Exxon's isn't bad. Raymond is getting paid obscene amounts of money, to be sure, but Exxon has been making obscene amounts of money providing a product that Americans thirstily suck down in stunning quantities without a second thought, and a lot of his eventual payout depends on the stock price of Exxon in five to ten years. This makes the package not only long-term but future-term, incentivizing Raymond to do good for the firm even as a retired CEO. Interesting.
Then again, if you have a CEO compensation chip on your shoulder, don't let something as irrelevant as the facts get in your way.
