Nabors Industries Ltd. (NBR), the oil-drilling firm whose pay
practices have long rankled some investors, is paying Chief
Executive Anthony Petrello $60 million to give up potentially
unlimited annual bonuses and tie his future compensation more
closely to company performance.
In a securities filing on Monday, Nabors said it will pay Mr.
Petrello $27 million in stock, $18 million in cash, and restricted
stock valued at $15 million to rewrite his employment contract. He
won't be able sell some of the restricted shares until 2016.
Mr. Petrello, a 22-year Nabors veteran, succeeded longtime CEO
Eugene Isenberg in October 2011. Mr. Isenberg was in line for a
$100 million payment when he stepped aside but later agreed to give
up the money.
Messrs. Isenberg and Petrello had long had contracts
guaranteeing them bonuses based on a percentage of Nabors's cash
flow above a specified amount. Following shareholder complaints,
the formulas were changed in 2009 to lower the potential
payments.
In the new contract, Mr. Petrello agreed to eliminate the bonus
formula. He also gave up a potential $50 million payment if he died
or was disabled, and he agreed to tie more than 80% of his
compensation to Nabors's financial or share-price results. Nabors
shares have fallen 13% since Mr. Petrello became CEO.
The new contract sets Mr. Petrello's salary at $1.7 million and
makes him eligible for an annual bonus of up to $3.4 million and
stock grants of up to $5.1 million annually, based on how Nabors
stock performs compared with 13 other oil-industry companies.
By comparison, in 2011, Mr. Petrello received compensation
valued at $16 million, including a $13.6 million bonus under the
old formula. Nabors hasn't yet disclosed its 2012 compensation.
The CEO owned roughly 9.7 million shares of Nabors stock as of
April 2012, a stake that would be worth $160 million if he still
owns all the shares.
In both 2011 and 2012, Nabors investors voted a majority of
shares against the company's executive-compensation plan, under
nonbinding "say-on-pay" proposals. Shareholders last year also
voted in favor of nonbinding resolutions to restrict new severance
agreements and to give investors more leeway to nominate
directors.
"We're glad to see a step in the right direction, and we look
forward to seeing the detail," said Anne Simpson, director of
corporate governance for the California Public Employees Retirement
System, which sponsored last year's proposal to limit severance
agreements.
Ms. Simpson declined to comment on whether Calpers had submitted
shareholder proposals for this year's annual meeting, which hasn't
been scheduled yet, or whether it had discussed the contract
changes with Nabors.
A spokesman for New York City Comptroller John C. Liu, trustee
for pension funds that sponsored last year's director-nomination
proposal, said the office was reviewing Mr. Petrello's new
contract. But the spokesman said Mr. Liu still has "serious
concerns" about the accountability of Nabors's board. The spokesman
said Nabors is trying to block a second shareholder vote on a
similar proposal. A Nabors spokesman didn't return calls for
comment.
Nabors owns more than 1,000 onshore drilling rigs, which operate
around the world, as well as some 50 offshore rigs and an arm that
offers oil-field services, such as hydraulic fracturing. The
Houston company has shed some assets not considered core to its
business, such as oil fields in California, but has faced investor
calls to slim down further and invest in new, high-tech rigs used
in shale drilling.
--Ryan Dezember contributed to this article.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires