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Nabors Industries’ Bizarre Exec Comp Ploy: Wouldn’t He Work for Nothing?

If we dialed up the leading executive search firms, it’s doubtful any top headhunters would tell us they’d love to pluck Anthony Petrello out of his post as chief executive of Nabors Industries (NBR) for a CEO’s job elsewhere.

In other words, the market price for Petrello’s services, we’re guessing, is far, far below the crazy pay he’s been enjoying at Nabors, an oil-drilling firm known for overpaying its CEOs. Petrello and his predecessor Eugene Isenberg somehow latched into contracts guaranteeing them a percentage of cash flow over a threshold amount.

Isenberg, as the Wall Street Journal notes today, gave up a $100 million payment as he was leaving the company, in the face of criticism of his long-standing and huge compensation packages.

Ending the percentage-of-cash-flow deal for Petrello, the Nabors board has agreed to pay him $60 million to give up the arrangement. Going forward, Petrello will have to persuade himself to get out of bed and go to the office for the measly sum of about $10 million a year in cash and stock, it seems. Although one suspects there are goodies lurking in the fine print.

The Isenberg-Petrello team would hardly seem deserving of such largesse:

NBR Chart

NBR data by YCharts

Who, you may wonder, is overseeing compensation at Nabors. Well, as of last year’s proxy filing, the chair of the Nabors board’s compensation committee was one John Lombardi, at the time president of the Louisiana State University System and a one-time history professor. He was fired last year from the state post. Nice work, professor. Oh, Lombardi’s board work at Nabors paid him $437,920 in cash and stock in 2011, darned near as much as he made running the university system: $550,000 salary, $36,000 housing allowance and $15,000 for a car.

Proxies are typically full of rationalizations for executive compensation, all manner of smart paragraphs about aligning management’s interests with shareholders, attracting and retaining talented people and so forth. What the Pablum fails to recognize is that many CEOs have limited job prospects beyond their current employer and that, once a CEO has amassed a large ownership stake in a company, say $100 million of stock for the sake of argument, he’d likely work for free to protect his net worth. Yes, companies have these CEOs by the, uh, pinstripes, but uniformly fail to act on the leverage. At least that’s the position taken here. Petrello has Nabors stock worth more than $100 million, the Journal reported.

In fact, as YCharts has written before, many of the well-taken-care-of managers are ever-more highly paid and they collect new rounds of options and/or stock on the mistaken theory that new incentives are required to keep them. A list of some such well-fed CEOs is here. One of those who, for fiscal year reasons, failed to make that list, Marc Benioff of Salesforce (CRM), is lauded here.

Petrello practiced law at a big law firm until joining Nabors as an executive and understudy to Isenberg in 1991. Maybe he does have enormous earning potential elsewhere. But before handing him so much money, perhaps the Nabors board should have looked into that.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com.

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