Description of the 10 highest paid CEOs of 2009. Figures and explanations of compensation packages

1.
The Top 10 Highest Paid CEOs of 2008: Pay hits the gas pedal as the
economy hits the brakes
#1: Blackstone Partnership Units, or 25 percent of the equity
he was granted in 2007. Given that the other 75
Stephen Schwarzman, Chief Executive Officer percent of his $4.7 billion 2007 equity grant will
and founder of Blackstone Group, L.P., was the vest in equal installments over the next four
highest paid CEO in the United States in 2008, years, it is reasonably safe to assume that Mr.
but he was hardly a blip on The Corporate Schwarzman will remain at the top of highest
Library’s CEO pay radar in 2007. With a salary paid CEOs list, or close to it, for a few years to
of $175,000 and total realized compensation of come.
$354,482, Mr. Schwarzman certainly didn’t
stack up against his financial services industry As a pre‐IPO owner, much of the equity
counterparts in terms of realized compensation received by Mr. Schwarzman is a
compensation. However, these pay figures redistribution of his initial investment in the
represent only about a half year of earnings company. Gains on top of this investment are
(and no equity) as The Blackstone Group only derived mainly from the performance of the
completed its initial public offering in June firm’s investment funds. Further, these “carried
2007. Mr. Schwarzman’s interest” payments are largely deferred for
awards had no time to Total Realized
Company Name CEO Name Industry
Compensation
bear fruit. Blackstone Group L.P.
Stephen A. Schwarzman Financial Services $702,440,573
(The)
In 2008, Mr. Schwarzman Oracle Corporation Lawrence J. Ellison
Computer
$556,976,600
Software
saw an increase in total Occidental Petroleum Petroleum & Coal
Ray R. Irani $222,639,705
realized compensation of Corporation Extraction
Petroleum
more than 200,000 Hess Corporation John B. Hess
Products
$159,566,940
percent. In addition to all Ultra Petroleum Corp. Michael D. Watford
Petroleum & Coal
$116,929,392
Extraction
other compensation that Chesapeake Energy Petroleum & Coal
Aubrey K. McClendon $114,286,867
rose from under Corporation Extraction
Petroleum & Coal
$200,000 to nearly $2.3 XTO Energy Inc. Bob R. Simpson
Extraction
$103,485,972
million, there was also EOG Resources, Inc. Mark G. Papa
Petroleum & Coal
$90,471,784
Extraction
the vesting of Petroleum & Coal
Nabors Industries Ltd. Eugene M. Isenberg $79,333,079
$699,792,941 worth of Services
Abercrombie & Fitch Co. Michael S. Jeffries Retail Apparel $71,795,744
Blackstone Holdings
© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com

2. three years, are subject to a performance‐ options outstanding, including a grant of seven
based clawback provision, and at least 25 million options (with a grant date value of more
percent of the shares must be retained. The than $71.3 million) from July 2007, since Oracle
entire compensation package, it should be continues to use conventional time‐based stock
noted, was decided not by a compensation options instead of equity that is more
committee but by Mr. Schwarzman himself, performance‐restricted. Mr. Ellison also
who under the NYSE listing standards for remains a well‐protected executive, with the
limited partnerships is permitted to determine company picking up the tab on $1.4 million in
both his own compensation and that of the home security personnel costs (down from $1.7
other named executive officers. Mr. million the previous year).
Schwarzman’s compensation arrangements are
discussed in greater detail in Paul Hodgson’s #3: Occidental Petroleum
blog post: http://blog.thecorporatelibrary.com/
Although the two top spots went to executives
/blog/stephen‐schwarzman/.
in financial services and software, on the whole
#2: Oracle the top ranks of CEO pay in 2008 can be
summed up in a single word: petroleum. Seven
The number two earner of 2008, Lawrence of the top ten highest paid CEOs are from the
Ellison of Oracle Corporation, held the top spot oil industry. Occidental Petroleum Corporation
in 2007, when he realized compensation of CEO Ray Irani, the third highest paid U.S. CEO,
nearly $193 million. Mr. Ellison, who had been received total realized compensation of $222.6
Oracle’s CEO for the past 32 years, exercised million. Although he profited roughly $15
13.5 million stock options in 2007 for a profit of million less from the vesting of equity than in
nearly $182 million; in 2008, he exceeded that the previous year, Dr. Irani exercised just over
feat by exercising a remarkable 36 million three million stock options in 2008, profiting
options for a profit of more than $543 million. more than $184 million. Earnings that high
(As a comparison, the CEO who exercised the require careful tax and financial services
next highest number of options in 2008 is #3‐ planning; in 2008, shareholders footed the bill
ranked CEO Ray R. Irani of Occidental for $403,285 worth of such services for Dr.
Petroleum Corporation, who exercised Irani. In addition, his employment agreement
3,006,424 options.) (amended in October 2008) stipulates that his
annual cash bonus is to be “determined at the
While Oracle’s stock price declined almost $5
reasonable discretion of the Board and its
from $22.58 at the end of 2007 to $17.73 at the
Compensation Committee.” In 2008, that
close of 2008, Mr. Ellison’s total realized
reasonable discretion awarded him $900,000, a
compensation was still more than half a billion
sum paid in part due to exceptional
dollars. With stock option grants of this size, it’s
performance in implementing a cost‐cutting
easy for the sheer volume of the grants to
initiative in anticipation of a “world‐wide
recompense for the more than 20 percent
economic deterioration.” All told, Dr. Irani has
decline in stock price. In addition, Mr. Ellison
received more than $4 million over the last
still has approximately 33.4 million stock
© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com

3. three years in discretionary bonuses that were these seven petroleum industry heads to
not justified in proxy statements by any collect pension benefits from the company; the
concrete performance metrics. value of his accumulated benefits was more
than $27 million at the end of 2008.
In January 2009, Occidental Petroleum
announced that its board approved a 'say on #5: Ultra Petroleum Corp.
pay' policy for shareholders, effective at the
2010 annual meeting. It will be interesting to Number five‐ranked Michael D. Watford of
see what messages investors send to the Ultra Petroleum Corp. earned just $600,000 in
company about its pay practices, and whether base salary in 2008. Ninety‐seven percent of his
they remain the same going forward. 2008 total realized compensation of almost
$117 million was in the form of profits made
#4: Hess Corporation from exercising more than two million stock
options. Mr. Watford’s option profits should
Hess Corporation’s John B. Hess, ranked #4 in
continue to increase in ensuing months; he has
CEO pay, was the only CEO in our coverage
500,000 options with a strike price of 25 cents
universe other than Dr. Irani who realized more
that are almost ten years old and set to expire
than $100 million in profit from stock options
in spring 2010 and another 500,000 options
and also earned more than $30 million from
with a strike price of $1.49 that will expire the
vested stock. Between year‐end 2006 and year‐
year after. Option grants for Mr. Watford have
end 2008, Hess Corporation’s stock price first
slowed over the last couple of years with the
doubled, then fell almost to its previous levels
integration of more restricted stock into the
(year‐end prices were $49.57, $100.86, and
compensation plan; however, he previously
$53.64, at the ends of 2006, 2007, and 2008,
received 100,000 to 250,000 options annually
respectively). With a steady stream of equity
for about a decade and by the end of 2005,
grants vesting during that time, including
already owned in‐the‐money options worth
hundreds of thousands of options with strike
more than $240 million. In addition, as of
prices under $20, Mr. Hess not only stood to
December 31, 2008, Mr. Watford held about 63
gain greatly from strong increases in stock price
percent of all common shares controlled by
when the price of oil skyrocketed, but also to
directors and officers.
profit from even the most modest gains in stock
value. The 186,000 stock options granted to #6: Chesapeake Energy Corporation
Mr. Hess in February 2008 increased his
number of unexercised options to more than Aubrey K. McClendon of Chesapeake Energy
one million, and in March 2008, he was also Corporation, the sixth highest paid CEO in our
granted 124,000 shares of restricted stock sample, earned more than $114 million in
worth almost $12 million. In the last two years realized compensation for 2008, including a
alone, Mr. Hess gained more than $191 million bonus just shy of $80 million. This was the
from option exercises and vested stock. Mr. highest bonus received by any CEO in our
Hess also received an 11 percent raise in his coverage universe. Despite a 40 percent decline
base salary for 2008 and is the only CEO among in stock price for 2008, the bonus was paid
© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com

4. pursuant to the company’s Founder Well #7: XTO Energy
Participation Program, in which Mr. McClendon
acts as a working‐interest owner in new natural In his final year as CEO of XTO Energy Inc.,
gas and oil wells explored by Chesapeake number seven earner Bob R. Simpson received
Energy. The bonus will most likely be invested slightly more than $1.6 million in base salary,
into the drilling program at Chesapeake. In which exceeds the salaries of all other
addition to the lucrative co‐founder side deal, petroleum executives in this top‐ten list. Mr.
Mr. McClendon also received plenty of Simpson also received a discretionary bonus of
company equity. His restricted stock profits $30 million in 2008, which follows similar
were more than $34.5 million in 2008, and he discretionary bonuses of $35.5 million and $31
received additional restricted stock grants million, respectively, over the prior two years.
worth almost $33 million. However, his recently In awarding these bonuses, the company does
amended employment agreement actually not rely on hard targets or long‐term
reduced his required equity ownership after a performance metrics vital to driving company
forced liquidation of more than 30 million growth. The company justifies them through
company shares in order to satisfy margin calls. reflection on areas of success it sustained over
The following is from an October 10, 2008 press the year, such as stock price and operating
release on Chesapeake Energy’s website: results. In addition to the previously mentioned
$96.5 million in discretionary bonuses Mr.
Mr. McClendon commented, "I am very Simpson has earned in the last three years, he
disappointed to have been required to has made more than $133 million in stock
sell substantially all of my shares of option profits over that time, $68 million of it in
Chesapeake. These involuntary and 2008 alone.
unexpected sales were precipitated by
the extraordinary circumstances of the #8: EOG Resources
worldwide financial crisis. In no way do
these sales reflect my view of the Eighth‐ranked CEO Mark G. Papa of EOG
company's financial position or my view Resources, Inc. earned slightly more in option
of Chesapeake's future performance profits than Mr. Simpson in 2008, about $69.6
potential. I have been the company's million, despite exercising more than one
largest individual shareholder for the million fewer options. This indicates that the
past three years and frequently stock price growth during the period – or the
purchased additional shares of stock on profit per share – was higher for EOG Resources
margin as an expression of my complete than for industry peer XTO Energy, enabling
confidence in the value of the company's him to make more money on fewer stock
strategy and assets. My confidence in options. Like Mr. Simpson, there is also a
Chesapeake remains undiminished, and I discretionary element to Mr. Papa’s pay,
look forward to rebuilding my ownership though his was in the form of a discretionary
position in the company in the months pool of stock options and restricted stock
and years ahead.” instead of cash. His restricted stock awards
© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com

5. vested in the amount of more than $18 million excess of $28 million. His 2008 base salary also
in 2008, resulting in total realized includes $50,000 in fees to serve as a director
compensation in excess of $90 million. on the company’s board, the annual retainer
typically bestowed upon non‐employee
#9: Nabors Industries directors.
Compensation in 2008 for the ninth highest #10: Abercrombie & Fitch
paid CEO, Eugene M. Isenberg of Nabors
Industries Ltd., is quite similar to that of Mr. Finally, the tenth highest paid CEO of 2008 was
McClendon of Chesapeake Energy. Both chiefs the 17‐year veteran of Abercrombie & Fitch
oversaw dramatic declines in stock price, with Co., Michael S. Jeffries. His total realized
Nabors Industries down 56 percent from the compensation was almost $72 million, of which
prior year and Chesapeake Energy about 40 86 percent was comprised of profits earned
percent. Despite this fact, Mr. Isenberg and Mr. from the exercise of options and from the
McClendon received by a significant margin the vesting of restricted stock. Some of the vested
two highest bonuses of all the CEOs in this equity was replaced in the form of five separate
group. Mr. Isenberg received a bonus just shy stock appreciation rights (SARs) grants in
of $59 million, comprising 74 percent of his December 2008, constituting 40 percent of the
more than $79 million in total realized four million SARs he was to receive upon
compensation. Like Mr. McClendon’s, this entering into a new employment agreement
bonus is derived from rather favorable with Abercrombie. Also part of the agreement
provisions in Mr. Isenberg’s employment was a discretionary “stay bonus” of $6 million,
agreement that have been in place since he awarded as a result of remaining in the
joined Nabors Industries in 1987. His bonus company’s employ as Chairman and CEO
formula, which awards him a percentage of through December 2008. The retention value of
company cash flow, has resulted in the award is questionable given his already
“approximately $625 million in aggregate strong equity ownership in Abercrombie plus
bonuses” over the years, according to Nabors his new 2008 equity grants. In addition to a $6
Industries’ most recent proxy statement. The million “stay bonus” and base salary of $1.5
provisions of this contract were recently million, Mr. Jeffries also accrued more than $2
amended, but as an inducement to enter into million in perquisites for the year. These
the amended document, the company is going included almost $1.3 million in personal aircraft
to credit $600,000 to Mr. Isenberg’s deferred usage and associated tax gross‐ups, as well as
compensation plan at the end of every quarter $382,687 in company contributions towards
beginning in June 2009 regardless of company Mr. Jeffries’ retirement in the form of 401(k),
performance. In addition to the bonus, the CEO nonqualified savings and supplemental
realized profits just shy of $20 million from retirement plan payments.
vested restricted stock and received two more
restricted stock grants in February and
December 2008, each with a grant date value in
© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com

6. About The Corporate Library
For ten years, The Corporate Library has been the trusted, independent resource to help
investors minimize risks related to corporate governance practices. Our analysis is the most
reliable in the industry: not only has the link between our governance risk ratings and
investment returns been independently back-tested and verified, but our ratings proved
effective in predicting the largest failures of 2008. And it’s no wonder, because The Corporate
Library’s leadership team and founders are some of the foremost thought-leaders in the
corporate governance space. Our analysis is also impartial, because we do not enter into
ratings improvement consulting relationships with rated corporations. Simply put, our clients
have access to the most reliable, authoritative, unconflicted corporate governance research
and risk analytics available, built on one of the deepest governance data sets in the
industry. Contact us at info@thecorporatelibrary.com or toll-free (877) 479-7500 for more
information on how we can help you improve portfolio performance and minimize risk
associated with corporate governance factors.
More Corporate Governance and Executive Compensation Resources
• Subscribe to The Corporate Library Blog.
• Stay current with free email alerts about new published research,
including free reports and commentary.
• Follow The Corporate Library on Twitter and share your thoughts with
us and other leaders in the corporate governance space.
• Browse our online store for in-depth research on governance and pay
trends, environmental and governance risk research on individual
companies and more.
• Request a free trial of The Corporate Library’s corporate governance
research and risk analytics tools.
For more information:
(877) 479-7500 inside the United States
(207) 874-6921 outside the United States
www.thecorporatelibrary.com
© 2009 The Corporate Library LLC