Submitted by: Submitted by bensunude
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Words: 624
Pages: 3
Category: Business and Industry
Date Submitted: 05/21/2016 09:07 AM
EXECUTIVE COMPENSATION AT NABORS INDUSTRIES: TOO MUCH, TOO LITTLE,
OR JUST RIGHT?
PROBLEM
Eugene Isenberg, the CEO of Nabors Industries from 1987 to 2011, was included in the list of
the executives who received the most profits from stock options between 1992 and 2005,
published in an article by the Wall Street Journal in December, 2006. He was listed 8th at $685
million. The spotlight on Mr. Isenberg from that article as well as the perennial controversy over
executive pay led to the question and the problem in this memo: Was the CEO compensation at
Nabors Industries appropriate?
CONCLUSION
The CEO compensation at Nabors Industries was appropriate
SUPPORT
Based on facts from the case, the CEO compensation was appropriate for the following reasons:
i. Isenberg was credited with much of the success of the company which had been operating in
bankruptcy before he joined in 1987. From a regional player, Nabors grew into one of the
world’s largest contract oil and gas drillers, with yearly revenue of $3.6 billion. Also, its stock
has risen at a “lush” 21.7% compound annual rate since early 1987.
ii. Most of Isenberg’s compensation came from stock options he accepted in place of cash
bonuses earned under his employment contract.
iii. The terms of Isenberg’s contract was designed to provide him with the incentives to turn
around the company. His annual cash bonus was set to be payable only in excess of a hurdle rate.
The CEO also took a direct ownership stake in the company in addition to the options granted
him. These incentives motivated him to succeed in turning around the company.
iv. Isenberg masterminded the restructuring of the company’s balance sheet, which was carried
out by swapping existing debt for equity thereby relieving the company of its interest payment
obligations. The new-found strength of Nabors balance sheet put the company at a strategic
advantage and enabled it to buy out several competitors at depressed prices thereby...