Steve Toon, formerly Editor-in-Chief of Oil and Gas Investor, wrote an article about executive compensation and incentives in the oil and gas industry. As noted in the article, “E&P executives find themselves under fire for pocketing large bonus payouts in recent years while shareholder equity values tanked, but blame it on a broken incentive model. Now, the rules are being rewritten for how executives are rewarded.” Investor expectations changed from production growth to cash flow and returns. In parallel, investors and other stakeholders increasingly demand transparency and action when it comes to Environmental, Social, and Governance (ESG) performance. These pressures have forced an evolution of executive compensation models. Al Carnrite weighs in on the topic here.
As an aside, Mr. Toon passed away unexpectedly in 2021. His talent, contributions to the industry, and kindness to those who knew him will be missed tremendously.