Diamond Offshore Drilling
Meeting date: May 19, 2015 Marc Edwards, who became CEO on March 3, 2014 received pay of $4.8 million dollars for less than nine months on the job, over $3,000 per hour. This included incentive pay of $1.2 million that came at a time when earnings per share and total shareholder return are both down. It was based on two goals: on based on EBITDA and the other on the fact that he was required to submit a strategic business plan to our Board of Directors by December 31, 2014. Such memos and plans are typically part of the job description for a CEO and should not require extra incentives.
Meanwhile the company paid departing CEO Lawrence Dickerson a total of $2.7 million, of which $2.4 million fell under the “all other pay” category. Almost $2 million of this was severance. This included a special $1 million dollar “retirement bonus” that was not stipulated under his agreement.
The board entered into an employment agreement with Edwards in 2014, which runs through 2016. The agreement stipulates not only salary and target bonus but also, “provides that each calendar year he will be granted RSUs with a target grant date value of not less than $3,000,000.” By basing the award on a dollar amount the board guarantees that is that if the stock price continues to fall the CEO will simply get more and more shares to that the target grant date value has been met.
The agreement also stipulates that Edwards will receive $5 million if he terminates for “good reason” or “involuntary termination without cause.” Of course the agreements are written in such a way that almost any termination will fall under those categories. The board contends that such benefits are necessary because: “It may be difficult upon termination for senior management to find comparable employment within a short period of time.”
It is indeed often difficult for individuals to find new jobs after losing old ones. In anticipation of such an event federal and state governments provide unemployment benefits. The maximum weekly benefit in Texas, the state of the company’s headquarters, is $454 dollars: Edward’s potential severance would be the equivalent of more than 11,000 weeks, or 211 years. Of course, for most workers unemployment benefits run out at 26 weeks.