According to a review of regulatory filings and calculations, Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources is set to trigger $71 million in severance payouts to the top five executives at Pioneer.
The payouts, which were sweetened earlier this year, are known as “change-in-control” provisions and are designed to compensate executives for the loss of their jobs when a company is acquired.
Chief Executive Scott Sheffield is on track to receive the largest payout, at around $29 million. The company will pay out payouts ranging from $6 million to $11 million to the other four executives.
The payouts have come under scrutiny from some shareholders and activists, who argue that they are excessive and reward executives for failure. Pioneer’s stock price has underperformed the broader market in recent years.
Exxon has defended the payouts, saying that they are necessary to attract and retain top talent. The company has also said that the acquisition will create value for shareholders in the long run.
The payouts are the latest example of the growing trend of change-in-control provisions in the oil and gas industry. As the industry consolidates, executives are increasingly rewarding themselves handsomely for selling their companies.
What does this mean for investors?
Investors should be aware of the potential for executive windfalls when considering investing in companies that are likely to be acquired. These payouts can have a significant impact on a company’s bottom line.
Investors should also be critical of the rationale for change-in-control provisions. Are they really necessary to attract and retain top talent? Or are they simply a way for executives to line their own pockets?
What does this mean for consumers?
Executive windfalls can ultimately lead to higher prices for consumers. When companies spend more money on executive compensation, they have less money to invest in their businesses and keep costs down.
Consumers should also be aware of the potential for conflicts of interest when executives have a financial stake in selling their companies. For example, executives might be more likely to agree to a deal that is not in the best interests of shareholders if they know they are going to get a big payout.
Executive windfalls are a complex issue with no easy answers. Investors and consumers should be aware of the potential risks and benefits before making investment decisions.