The rising wave of shareholder activism has claimed another corporate chieftain: Ray Irani, the executive chairman of Occidental Petroleum Corp. (OXY) and one of the most highly paid executives of the last decade.
Mr. Irani, who spent three decades at Occidental, will leave his post at the helm of the board, the company said in a statement released after its shareholder meeting Friday. The 78-year-old, who was forced to step aside as CEO two years ago over his outsized pay, recently angered shareholders by trying to oust the oil-and-gas company's current chief executive.
Occidental said in a regulatory filing Friday that eight of the 10 board members up for re-election won the approval of a majority of shareholders. The list didn't include Mr. Irani. The filing said that independent director Aziz Syriani, who was close to the chairman and also sought re-election, had resigned on Thursday.
In a follow-up statement, Occidental said one of the re-elected board members, Edward Djerejian, would assume the role of independent chairman. He is a former U.S. ambassador to Syria and Israel. Former Energy Secretary Spencer Abraham will become vice chairman, the company said.
Under Mr. Irani's leadership, Los Angeles-based Occidental grew into the fourth-largest U.S. oil-and-gas company by market value. As executive chairman, he retained considerable clout within the company. But it all came to an end after weeks of growing shareholder discontent over Mr. Irani's effort to remove CEO Steve Chazen earlier this year and the board's handling of succession planning for the CEO post.
Mr. Irani's defeat "is a pretty amazing thing. It happens very rarely, particularly for a company of this size and reputation," said Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware's business school.
"It shows how far shareholder activism has come," added Mr. Elson, who is a board member at HealthSouth Corp. "The day of the management-dominated corporation may be on its way out, replaced by a much more balanced approach" that also reflects investor views, he said.
Mr. Irani's ouster comes in the wake of several successful coups led by activist shareholders and backed by investment advisory firms. A long-simmering rebellion at Chesapeake Energy Corp. (CHK) led to the departure in April of co-founder and longtime CEO Aubrey McClendon, and dissident investors shook up SandRidge Energy Inc.'s board in March.
At Occidental's Friday meeting in the Los Angeles area, Mr. Chazen, the CEO, spent several minutes eulogizing Mr. Irani as a photo of the two men together was projected on the screen, said shareholder John Chevedden, who attended the meeting.
"He talked about [Irani's] knowledge of global politics, how they'd have disagreements but the next day call each other to say the other was right," Mr. Chevedden said.
Now Mr. Chazen, who is slated to retire in late 2014, has the freedom to continue to pursue cost-cutting measures and perhaps a restructuring of the business, such as selling off assets, said Guy Baber, vice president of equity research at Houston-based investment bank Simmons & Co.
"His departure signifies the end an era for Oxy," Mr. Baber said.
Mr. Irani joined Occidental in 1983 as chairman and CEO of its chemicals business. He took on those roles for the entire company in 1990, succeeding legendary Occidental founder and philanthropist Armand Hammer upon his death.
Mr. Irani has long been among the highest paid executives. He realized more than $1.1 billion in compensation from Occidental since 1994, according to calculations by The Wall Street Journal and Kevin Murphy of the University of Southern California. The total includes salaries, bonuses, perks and realized gains on both restricted stock and stock options. A 2010 analysis by the Journal and Mr. Murphy found that Mr. Irani was the third-highest paid CEO of the prior decade.
He was scheduled to the retire at the end of 2014, a departure imposed on him two years ago when investors unhappy with his oversized compensation forced him from the CEO post and replaced him with longtime heir-apparent Mr. Chazen.
The latest developments at Occidental don't ensure Mr. Chazen smooth sailing, however. "This is not a vote of confidence in Chazen," Mr. Elson suggested. But the CEO does get "some breathing room to attempt to improve his relationships with his investors," said Mr. Elson, adding that "you're going to see some rather significant changes in management" as Mr. Chazen tries "to find common ground with investors."
The company's performance has lagged under Mr. Chazen's leadership as efforts to increase oil and gas production ran into problems with cost overruns. Despite those challenges, a Feb. 14 announcement by the company that it would begin searching for a new CEO struck many analysts and investors as unexpected and unnecessary.
In March, The Wall Street Journal reported that the surprise announcement was preceded by Mr. Irani's trying to replace Mr. Chazen with a former company executive. Two Occidental investors, First Pacific Advisors LLC and Matrix Asset Advisors Inc., then said in open letters that they were troubled by the report and supported keeping Mr. Chazen.
Advisory firms Institutional Shareholder Services and Glass, Lewis & Co. recommended votes against Mr. Irani and against the company's pay plans ahead of the shareholder meeting.
That prompted the Occidental board to make a highly unusual move earlier this week, saying that Mr. Chazen would stay on through 2014, that CEO and board pay would be cut and that former company CEOs would be prohibited from serving as chairman. At the same time, the company said Mr. Irani would be replaced by an independent board member sometime in the future.
It is rare for chairmen to lose their jobs. Hewlett-Packard Co. Chairman Ray Lane was narrowly re-elected earlier this year with 58.9% of the vote, but he chose to give up the title, though not his board seat, soon after. In 2009, Bank of America Corp. Chairman and CEO Ken Lewis was effectively voted out of the chairmanship when investors voted to separate the two roles. He stepped down as CEO later that year.
Mr. Irani will remain a large shareholder at Occidental. He currently holds about 8.1 million shares worth $639 million, more than 1% of the shares outstanding of the company, putting him in the top 15 of shareholders. That stake could grow depending on what kind of a parting package he receives.
According to the company's most recent proxy statement, if Mr. Irani had retired from the company at the end of last year he could have received a package worth more than $20 million. This includes more than $15 million in company shares tied to his long-term incentive pay package, $5.7 million in life insurance coverage, ongoing medical and dental coverage for his wife and him, about $2.2 million annually to cover security services, tax preparation and financial planning services, club dues and travel benefits, and $800,000 for unused vacation time.
--Scott Thurm contributed to this article.
Copyright (c) 2013 Dow Jones & Company, Inc.
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