Annual meeting: May 20, 2015 Halliburton’s total shareholder return declined over 20% in fiscal year 2014, but CEO David Lesar’s pay declined only 1%. His pay of $20.5 million works out to over $10,000 per hour. His cash incentive, which should most closely track company performance, actually increased from $10.1 million to $10.8 million this year, even as the company announced over 9,000 layoffs.
Maximum bonus achieved 6 times in last 10 years
According to the company, in the past ten years, the Annual Performance Pay Plan achieved maximum performance levels six times, target performance only twice, and fell short of threshold performance level twice. This suggests that goals may have been too modest. We note that the company uses Cash Value Added (CVA) as the sole criteria for annual bonus, and that 2014’s target CVA was set below achieved 2013 achieved CVA.
Two of the red flags Halliburton received in our analysis of the company in 2014 were based on the significant increase in non-performance pay and on the significantly high salary. The high salary also inflates the bonus, with a maximum bonus of 300% of salary.
Halliburton plans to purchase rival Baker Hughes and has said it is willing to sell off assets in order to get past anti-trust regulations. These transactions will further muddy the financials of the company, making it harder to evaluate performance metrics, a particular concern given the excessive pay history of the company.
Ownership stake is down:
Lesar also realized an additional $16 million through the exercise of stock options in 2014. His ownership stake declined from 1,394,230 on March 6, 2014 to 993,711 on March 12, 2015.