I’ll give Chazen credit where its due: In Q3 2015, he came out with the VSP. --- That was a solid action – incentivize (mostly-) highly-compensated folks, who, based on their age, would have exited in a few years anyway, to leave sooner. That drove operating costs down. VSP was a necessary thing; it was a good thing.
So what to do now? Certainly no more “cheerleading” memos. And no more ‘ride the employees” programs like this new “dependent audit” they are conducting.
First, the Office of the CEO should confess to his mistakes. He knows what they are; so do we. --- Look at the earlier threads on this board. Acknowledge we still have a cost problem at current WTI. Then call for SHARED sacrifice until WTI goes up.
Shared sacrifice for the employees could mean: Roll back the employee benefits Chazen put in place: end the gym reimbursements, end PSA-matching for bonuses (non-existent this year), reduce the PRA/PSA contribution (one of them was increased from 6%- 7% during the boom years). Address (end) the PRA 12% contribution for highly-compensated employees – its insane that the PRA contribution is higher for employees who are already highly compensated. Put the 3-year vesting schedule back in place. End the antiquated “employee appreciation” gift program (where 3rd rate gifts are provided at 5-year increments to employees). And by the way, how many personal cell-phones is OXY now paying for, vs 7-10 years ago? At what $70/phone? --- The phone program has become a defacto new benefit (financial burden for OXY).
Its very telling of OXY’s arrogance they don’t have a corporate-wide program to solicit employee ideas for cost-cutting. START ONE!!! (Ideally, where ideas can be provided anonymously, to prevent retaliation.)
SHARED sacrifice for management: Compensation MUST be reduced until WTI increases. Chazen should forego that $2MM vacation check --- which he’s getting due to a special board-approved waiver vs. the 296 hour cap. A moratorium on “special” compensation (the RSU’s, etc.) for management above the PSA/PRA matches which employees receive. The low stock price and operating losses should be evident to all that whatever management “does” is kinda irrelevant. --- Its all about the price of WTI. – So providing large incentives is an unnecessary expense. Directors too, should receive a lower stipend until WTI recovers.
SHARED sacrifice for investors means the divd must be cut, until WTI increases. Paying divds not being earned is RUINOUS for the long-term. Employees “get this” --- and see no long term at OXY so long as the divd is maintained with WTI sub-$40. A cut will be forced on OXY in a year or so if WTI doesn’t increase. The cash just won’t be there (unless we do some type of capital-raising) Take action now and get ahead of the curve.