Markets

The Ultimate Retirement Package: $360M for a So-So Performance

By Kirsten Korosec

Updated on: August 5, 2011 / 6:35 PM EDT / MoneyWatch

James Mulva, the CEO of ConocoPhillips who plans to dismantle the company that he helped become the third-largest oil operation in the U.S., received nearly $18 million in compensation last year. That reward -- which wasn't exactly warranted -- is nothing compared to what Mulva stands to earn when he retires early next year. Add everything together from his pension and stocks to his deferred compensation account and Mulva is entitled to more than $360 million, according to the number crunchers over at Footnoted.org.

That sum, which doesn't count his unvested restricted shares, could rise if ConocoPhillips' split produces the same stock price spike that occurred when Marathon Oil spun off its refining division. Marathon Oil's stock price rose 33 percent between the time the company announced its plans in mid-January to the deal's completion July 1.

Here's how it breaks down, courtesy of Footnoted's digging into Conoco's recent proxy:

7.5 million in stock options (88 percent are exercisable) = $255 million
Pension = $62 million
Deferred-compensation account = $45.6 million

That comes to $362.6 million. Plus, Mulva has 3 million shares of unvested restricted stock, which would be worth some $217 million at current prices.

What did Mulva do to deserve such a generous retirement package?

Created the third-largest U.S. oil company that began with a $25 billion merger in 2002;
Despite the merger and a series of acquisitions, Conoco's production of 1.7 million barrels a day is dwarfed by its competitors, BP, Chevron (CVX), Exxon (XOM) and Shell (RDS).
Took a $34 billion writedown in 2008 related to its ill-timed acquisition of Burlington Resources and a reduction in the value of its 20 percent stake in Russian oil giant Lukoil;

Supporters of Mulva might try to defend the CEO's retirement package by pointing to the company's stock performance, which rose nearly 40 percent last year. But Conoco's performance isn't the result of executive business savvy. It's more to do with short-term schemes than management prowess or rising crude prices.

As Loren Steffy of the Houston Chronicle noted, Conoco has aggressively cut spending as part of its two-year plan to sell off $10 billion worth of assets which included chopping 4 percent of its workforce. The company simultaneously launched a $5 billion share buyback program, a strategy that helps support the stock price and augment earnings per share. It's announced plans to spend another $10 billion buying back shares on the open market.

Mulva's strategy, if you can call it that, is hardly worth such a hefty reward. He has provided little in the way of how the company will grow. (One bright spot: Mulva has at least picked assets to sell that weren't part of its core business) and instead has punted that important plan to whomever takes over the reins at Conoco.

Photo from Flickr user Refracted Moments, CC 2.0
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