The Top 10 Highest Paid CEO's of 2008

The Top 10 Highest Paid CEOs of 2008: Pay hits the gas pedal as the economy hits the brakes

#1: Blackstone Partnership Units, or 25 percent of the equity he was granted in 2007. Given that the other 75 Stephen Schwarzman, Chief Executive Officer percent of his $4.7 billion 2007 equity grant will and founder of Blackstone Group, L.P., was the vest in equal installments over the next four highest paid CEO in the United States in 2008, years, it is reasonably safe to assume that Mr. but he was hardly a blip on The Corporate Schwarzman will remain at the top of highest Library’s CEO pay radar in 2007. With a salary paid CEOs list, or close to it, for a few years to of $175,000 and total realized compensation of come. $354,482, Mr. Schwarzman certainly didn’t stack up against his financial services industry As a pre‐IPO owner, much of the equity counterparts in terms of realized compensation received by Mr. Schwarzman is a compensation. However, these pay figures redistribution of his initial investment in the represent only about a half year of earnings company. Gains on top of this investment are (and no equity) as The Blackstone Group only derived mainly from the performance of the completed its initial public offering in June firm’s investment funds. Further, these “carried 2007. Mr. Schwarzman’s interest” payments are largely deferred for Total Realized awards had no time to Company Name CEO Name Industry Compensation bear fruit. Blackstone Group L.P. Stephen A. Schwarzman Financial Services $702,440,573 (The) Computer In 2008, Mr. Schwarzman Oracle Corporation Lawrence J. Ellison $556,976,600 Software saw an increase in total Occidental Petroleum Petroleum & Coal Ray R. Irani $222,639,705 realized compensation of Corporation Extraction Petroleum Hess Corporation John B. Hess $159,566,940 more than 15 million Products Petroleum & Coal percent. In addition to all Ultra Petroleum Corp. Michael D. Watford $116,929,392 Extraction other compensation that Chesapeake Energy Petroleum & Coal Aubrey K. McClendon $114,286,867 rose from under Corporation Extraction Petroleum & Coal XTO Energy Inc. Bob R. Simpson $103,485,972 $200,000 to nearly $2.3 Extraction Petroleum & Coal million, there was also EOG Resources, Inc. Mark G. Papa $90,471,784 Extraction the vesting of Petroleum & Coal Nabors Industries Ltd. Eugene M. Isenberg $79,333,079 $699,792,941 worth of Services Blackstone Holdings Abercrombie & Fitch Co. Michael S. Jeffries Retail Apparel $71,795,744

© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com three years, are subject to a performance‐ options instead of equity that is more based clawback provision, and at least 25 performance‐restricted. Mr. Ellison also percent of the shares must be retained. The remains a well‐protected executive, with the entire compensation package, it should be company picking up the tab on $1.4 million in noted, was decided not by a compensation home security personnel costs (down from $1.7 committee but by Mr. Schwarzman himself, million the previous year). who under the NYSE listing standards for limited partnerships is permitted to determine #3: Occidental Petroleum both his own compensation and that of the Although the two top spots went to executives other named executive officers. in financial services and software, on the whole #2: Oracle the top ranks of CEO pay in 2008 can be summed up in a single word: petroleum. Seven The number two earner of 2008, Lawrence of the top ten highest paid CEOs are from the Ellison of Oracle Corporation, held the top spot oil industry. Occidental Petroleum Corporation in 2007, when he realized compensation of CEO Ray Irani, the third highest paid U.S. CEO, nearly $193 million. Mr. Ellison, who had been received total realized compensation of $222.6 Oracle’s CEO for the past 32 years, exercised million. Although he profited roughly $15 13.5 million stock options in 2007 for a profit of million less from the vesting of equity than in nearly $182 million; in 2008, he exceeded that the previous year, Dr. Irani exercised just over feat by exercising a remarkable 36 million three million stock options in 2008, profiting options for a profit of more than $543 million. more than $184 million. Earnings that high (As a comparison, the CEO who exercised the require careful tax and financial services next highest number of options in 2008 is #3‐ planning; in 2008, shareholders footed the bill ranked CEO Ray R. Irani of Occidental for $403,285 worth of such services for Dr. Petroleum Corporation, who exercised Irani. In addition, his employment agreement 3,006,424 options.) (amended in October 2008) stipulates that his annual cash bonus is to be “determined at the While Oracle’s stock price declined almost $5 reasonable discretion of the Board and its from $22.58 at the end of 2007 to $17.73 at the Compensation Committee.” In 2008, that close of 2008, Mr. Ellison’s total realized reasonable discretion awarded him $900,000, a compensation was still more than half a billion sum paid in part due to exceptional dollars. With stock option grants of this size, it’s performance in implementing a cost‐cutting easy for the sheer volume of the grants to initiative in anticipation of a “world‐wide recompense for the more than 20 percent economic deterioration.” All told, Dr. Irani has decline in stock price. In addition, Mr. Ellison received more than $4 million over the last still has approximately 33.4 million stock three years in discretionary bonuses that were options outstanding, including a grant of seven not justified in proxy statements by any million options (with a grant date value of more concrete performance metrics. than $71.3 million) from July 2007, since Oracle continues to use conventional time‐based stock

© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com In January 2009, Occidental Petroleum value of his accumulated benefits was more announced that its board approved a 'say on than $27 million at the end of 2008. pay' policy for shareholders, effective at the 2010 annual meeting. It will be interesting to #5: Ultra Petroleum Corp. see what messages investors send to the Number five‐ranked Michael D. Watford of company about its pay practices, and whether Ultra Petroleum Corp. earned just $600,000 in they remain the same going forward. base salary in 2008. Ninety‐seven percent of his #4: Hess Corporation 2008 total realized compensation of almost $117 million was in the form of profits made Hess Corporation’s John B. Hess, ranked #4 in from exercising more than two million stock CEO pay, was the only CEO in our coverage options. Mr. Watford’s option profits should universe other than Dr. Irani who realized more continue to increase in ensuing months; he has than $100 million in profit from stock options 500,000 options with a strike price of 25 cents and also earned more than $30 million from that are almost ten years old and set to expire vested stock. Between year‐end 2006 and year‐ in spring 2010 and another 500,000 options end 2008, Hess Corporation’s stock price first with a strike price of $1.49 that will expire the doubled, then fell almost to its previous levels year after. Option grants for Mr. Watford have (year‐end prices were $49.57, $100.86, and slowed over the last couple of years with the $53.64, at the ends of 2006, 2007, and 2008, integration of more restricted stock into the respectively). With a steady stream of equity compensation plan; however, he previously grants vesting during that time, including received 100,000 to 250,000 options annually hundreds of thousands of options with strike for about a decade and by the end of 2005, prices under $20, Mr. Hess not only stood to already owned in‐the‐money options worth gain greatly from strong increases in stock price more than $240 million. In addition, as of when the price of oil skyrocketed, but also to December 31, 2008, Mr. Watford held about 63 profit from even the most modest gains in stock percent of all common shares controlled by value. The 186,000 stock options granted to directors and officers. Mr. Hess in February 2008 increased his number of unexercised options to more than #6: Chesapeake Energy Corporation one million, and in March 2008, he was also Aubrey K. McClendon of Chesapeake Energy granted 124,000 shares of restricted stock Corporation, the sixth highest paid CEO in our worth almost $12 million. In the last two years sample, earned more than $114 million in alone, Mr. Hess gained more than $191 million realized compensation for 2008, including a from option exercises and vested stock. Mr. bonus just shy of $80 million. This was the Hess also received an 11 percent raise in his highest bonus received by any CEO in our base salary for 2008 and is the only CEO among coverage universe. Despite a 40 percent decline these seven petroleum industry heads to in stock price for 2008, the bonus was paid collect pension benefits from the company; the pursuant to the company’s Founder Well Participation Program, in which Mr. McClendon

© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com acts as a working‐interest owner in new natural #7: XTO Energy gas and oil wells explored by Chesapeake Energy. The bonus will most likely be invested In his final year as CEO of XTO Energy Inc., into the drilling program at Chesapeake. In number seven earner Bob R. Simpson received addition to the lucrative co‐founder side deal, slightly more than $1.6 million in base salary, Mr. McClendon also received plenty of which exceeds the salaries of all other company equity. His restricted stock profits petroleum executives in this top‐ten list. Mr. were more than $34.5 million in 2008, and he Simpson also received a discretionary bonus of received additional restricted stock grants $30 million in 2008, which follows similar worth almost $33 million. However, his recently discretionary bonuses of $35.5 million and $31 amended employment agreement actually million, respectively, over the prior two years. reduced his required equity ownership after a In awarding these bonuses, the company does forced liquidation of more than 30 million not rely on hard targets or long‐term company shares in order to satisfy margin calls. performance metrics vital to driving company The following is from an October 10, 2008 press growth. The company justifies them through release on Chesapeake Energy’s website: reflection on areas of success it sustained over the year, such as stock price and operating Mr. McClendon commented, "I am very results. In addition to the previously mentioned disappointed to have been required to $96.5 million in discretionary bonuses Mr. sell substantially all of my shares of Simpson has earned in the last three years, he Chesapeake. These involuntary and has made more than $133 million in stock unexpected sales were precipitated by option profits over that time, $68 million of it in the extraordinary circumstances of the 2008 alone. worldwide financial crisis. In no way do these sales reflect my view of the #8: EOG Resources company's financial position or my view of Chesapeake's future performance Eighth‐ranked CEO Mark G. Papa of EOG potential. I have been the company's Resources, Inc. earned slightly more in option largest individual shareholder for the profits than Mr. Simpson in 2008, about $69.6 past three years and frequently million, despite exercising more than one purchased additional shares of stock on million fewer options. This indicates that the margin as an expression of my complete stock price growth during the period – or the confidence in the value of the company's profit per share – was higher for EOG Resources strategy and assets. My confidence in than for industry peer XTO Energy, enabling Chesapeake remains undiminished, and I him to make more money on fewer stock look forward to rebuilding my ownership options. Like Mr. Simpson, there is also a position in the company in the months discretionary element to Mr. Papa’s pay, and years ahead.” though his was in the form of a discretionary pool of stock options and restricted stock instead of cash. His restricted stock awards

© 2009 The Corporate Library LLC (877) 479‐7500 www.thecorporatelibrary.com vested in the amount of more than $18 million excess of $28 million. His 2008 base salary also in 2008, resulting in total realized includes $50,000 in fees to serve as a director compensation in excess of $90 million. on the company’s board, the annual retainer typically bestowed upon non‐employee #9: Nabors Industries directors. Compensation in 2008 for the ninth highest #10: Abercrombie & Fitch paid CEO, Eugene M. Isenberg of Nabors Industries Ltd., is quite similar to that of Mr. Finally, the tenth highest paid CEO of 2008 was McClendon of Chesapeake Energy. Both chiefs the 17‐year veteran of Abercrombie & Fitch oversaw dramatic declines in stock price, with Co., Michael S. Jeffries. His total realized Nabors Industries down 56 percent from the compensation was almost $72 million, of which prior year and Chesapeake Energy about 40 86 percent was comprised of profits earned percent. Despite this fact, Mr. Isenberg and Mr. from the exercise of options and from the McClendon received by a significant margin the vesting of restricted stock. Some of the vested two highest bonuses of all the CEOs in this equity was replaced in the form of five separate group. Mr. Isenberg received a bonus just shy stock appreciation rights (SARs) grants in of $59 million, comprising 74 percent of his December 2008, constituting 40 percent of the more than $79 million in total realized four million SARs he was to receive upon compensation. Like Mr. McClendon’s, this entering into a new employment agreement bonus is derived from rather favorable with Abercrombie. Also part of the agreement provisions in Mr. Isenberg’s employment was a discretionary “stay bonus” of $6 million, agreement that have been in place since he awarded as a result of remaining in the joined Nabors Industries in 1987. His bonus company’s employ as Chairman and CEO formula, which awards him a percentage of through December 2008. The retention value of company cash flow, has resulted in the award is questionable given his already “approximately $625 million in aggregate strong equity ownership in Abercrombie plus bonuses” over the years, according to Nabors his new 2008 equity grants. In addition to a $6 Industries’ most recent proxy statement. The million “stay bonus” and base salary of $1.5 provisions of this contract were recently million, Mr. Jeffries also accrued more than $2 amended, but as an inducement to enter into million in perquisites for the year. These the amended document, the company is going included almost $1.3 million in personal aircraft to credit $600,000 to Mr. Isenberg’s deferred usage and associated tax gross‐ups, as well as compensation plan at the end of every quarter $382,687 in company contributions towards beginning in June 2009 regardless of company Mr. Jeffries’ retirement in the form of 401(k), performance. In addition to the bonus, the CEO nonqualified savings and supplemental realized profits just shy of $20 million from retirement plan payments. vested restricted stock and received two more restricted stock grants in February and December 2008, each with a grant date value in

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