Annual Meeting April 4

While Schlumberger CEO Olivier Le Peuch’s total disclosed compensation of $5,650,804 is less than many S&P 500 companies, shareholders are likely to object to compensation changes made during the pandemic.

The largest component of Le Peuch’s compensation was the annual payment of $2,251,200, which was achieved as the result of changes in compensation made in July 2020. In an 8-K filed on July 24, the company announced that their Compensation Committee made changed “in response to the effects of the COVID-19 pandemic and other factors negatively impacting the Company’s industry, and in order to motivate the officers to achieve aggressive performance targets in the second half of 2020.”

The Compensation Committee replaced its previously approved adjusted EPS performance metric with a 2020 adjusted EBITDA metric. This new metric ended up paying out at 162% of target.

The Committee also “modified the minimum threshold cash flow generation target that it had previously approved as part of the Plan, to align with the Company’s new cash dividend and its revised 2020 outlook, as well as market expectations for cash flow generation.” That component paid at 94% of target. The minimum cash flow generation target had been lowered from $2.52 billion to $1.73 billion, a decrease of 32%.

As is too often the case, the use of the term modification here meant a lowering of the goals. Such changes reinforce the fact that too often “pay for performance”, as practiced, is more a means of creating windfalls than it is of truly aligning executives’ interests with those of shareholders.

I have written before about pay at Schlumberger in 2019 and 2018.