How much money did you make last year?
According to 2017 filings, Ryan Lance the CEO of ConocoPhillips, made nearly $20,000,000 USD.
In 2015, the year ConocoPhillips laid off hundreds of employees in Calgary, Ryan Lance made approximately $21,000,000 USD.
Hardly seems fair does it?
Odds are that you probably know someone who lost their job at ConocoPhillips and is still recovering from the financial and psychological implications.
For example, it is not uncommon to hear stories of highly skilled and educated workers with years of experience being forced to settle for low paying jobs as cab drivers or cashiers.
Unless you know someone in the oil patch, regardless of how talented, educated or qualified you are, it is nearly impossible for many laid off workers to find employment.
While it is true that top corporate talent should be rewarded, it seems illogical and even immoral for such large compensation packages to be rewarded when hundreds of workers are losing their jobs and the means to support their families.
Along with mass layoffs, the shareholders of these same companies have suffered similar results with cratering share prices erasing billions of dollars in value.
For example in February 2016, ConocoPhillips cut its dividend by two thirds to 25 cents a share as the share price slid from a high of nearly $90 in 2014 to a low of approximately $30 per share.
Taken over an even longer time frame of ten years, an investor who had invested $1 in ConocoPhillips stock in late January 2008 at around $60 per share would have lost approximately 10% of its value as the share price continues to hover in the $50 range as of writing.
In 2008, by choosing to invest your hard earned money in ConocoPhillips stock, prior to one of longest bull markets in recent history, you would have actually lost money!
That fact is even more jarring when compared to how well the standard benchmark S & P 500 index performed in the last ten years.
From 2008 to 2018, the S & P 500 marched steadily upwards compounding at a rate (inflation adjusted with dividends reinvested) of ~8% for a total return of over ~113%.
The question then, is why, in the face of mass layoffs and catastrophic shareholder value destruction, does a CEO of a publicly traded company such as ConocoPhillips deserve $20,000,000 USD in compensation? How does this individual even deserve his job?
A little closer to home, in 2016, the CEO of Cenovus Energy Inc., Brian Ferguson, made approximately $8,000,000. That payday came as he prepped his company for the acquisition of ConocoPhillips Canada’s deep basin assets for nearly $18,000,000,000.
And what may you ask came of that grand shuffle of capital?
The Cenovus stock price collapsed and Brian Ferguson lost his job as the market and Cenovus board of directors looked for someone to lay the blame on.
Much like ConocoPhillips, the shareholders of Cenovus Energy did not fair much better as the share price fell from a high of $30 per share in 2014 to as low as ~$9 in recent months.
Taken over the same roughly 10 year time frame, the same negative return occurred as the 2009 Cenovus share price of roughly $20(post Encana spin-off) is a far cry from the current share price today.
And what of the employees of ConocoPhillips who were shuffled over to their new parent company Cenovus?
Cenovus proceeded to layoff hundreds of unwanted employees who no longer had a place in the larger organization as many of the assets purchased overlapped already staffed positions.
So, while employees and shareholders of ConocoPhillips and Cenovus either lost their jobs or savings (most likely both), executives of these companies earned millions of dollars.
Not exactly fair is it?
But the share price is a direct correlation to the collapse in oil prices you might say.
It’s not really the high paid executives fault!
They have zero control over commodity prices such as oil and gas!
While this may be true, it hardly seems fair or logical to layoff hundreds of employees while the boss takes home millions of dollars.
So to the Brian Ferguson’s and Ryan Lance’s of the world, here’s a suggestion: Why not trim your compensation packages and use that money to spare at least a few of your employee’s livelihoods!
Then, when energy prices improve again (as any commodity will), you won’t have to re-hire the same positions you callously eliminated not long ago, and further waste company resources by re-training and educating workers.
It must be noted however, that not all energy companies have treated shareholders and employees poorly.
For example, Canadian Natural Resources Limited (CNRL) has been one of a few energy companies that managed to keep its staff levels consistent while providing a reasonable return to shareholders.
During the 2014 oil price collapse, CNRL was able to maintain or even expand its workforce as it took advantage of the low price environment to buy assets such as the Shell Athabasca oil sands package for $7,500,000,000.
Additionally, taken over a 5 and 10 year time frame, shareholders of CNRL have seen a consistent increase in its dividend; 27% and 85%, respectively.
Combined with three stock splits and a consistent share price, CNRL shareholders have been rewarded with a reasonable rate of return, and maintained purchasing power (inflation adjusted).
All told, aside from companies like CNRL, it seems the wool has been pulled over many an energy investor’s eye as executives of some companies continue to pay themselves extravagant compensation packages, treat their workers poorly and somehow maintain their jobs.
Hopefully the public will begin to wake up and realize that their money is better off invested elsewhere. At least they’ll know they are getting treated fairly.