Two Funds Launch Fight for Board Seats at Occidental

The shareholders are unhappy over compensation practices that have made Chief Executive Ray Irani, who also serves as company chairman, one of the highest paid CEOs in the U.S. The investors also fault Occidental for failing to announce a CEO succession plan, even though Mr. Irani, 75 years old, already exceeds the company's director retirement age of 75. The board granted waivers for Mr. Irani and two other current directors at the 2010 annual meeting in May, according to an Occidental spokesman.

A spokesman didn't have any immediate comment Monday, saying he had just learned about the letter. Earlier Monday, the Los Angeles-based oil-and-gas company announced the promotion of Chief Financial Officer Stephen I. Chazen to chief operating officer. Mr. Chazen will continue to hold the president's post.

Ralph Whitworth, a principal at Relational, said in an interview Monday that he intends to join the proxy fight slate, but said remaining candidates haven't been chosen yet. Mr. Irani and fellow directors come up for re-election annually.

In 2009, Mr. Irani was awarded total direct compensation of $52.2 million—tops among 200 big-company CEOs in The Wall Street Journal's annual pay survey.

A subsequent analysis conducted by the Journal found Mr. Irani landed third place on a list of best-paid executives of public companies during the past decade. He received $857 million over the period.

The study included salaries, bonuses, perks and realized gains on both restricted stock and stock options.

As of Friday's close, Occidental's stock was up 657% in the past 10 years, compared with a rise of 93% for the AMEX Oil Index over the same period.

An Occidental spokesman has previously said company directors believe in "excellent pay for excellent performance.'' Most of Mr. Irani's pay is tied to Occidental's operating results and share price, the spokesman said, and all of his stock and option awards are now linked either to operating results or share price.

In May, Occidental shareholders opposed the company's executive-pay practices in a nonbinding vote, the first "say-on-pay" vote for the company. Investors who campaigned against Occidental's pay plans said Mr. Irani was paid roughly three times as much as other oil-company executives. They contend the board sets his pay too high and his performance targets too low.

The July 30 letter from Relational, a San Diego money manager, and CalSTRS, one of the nation's largest public-employee pension funds, contains similar sentiments.

Relational and CalSTRS officials have met with Occidental directors three times in the past year. The latest session occurred in July, but Mr. Irani "hasn't attended any of them,'' Mr. Whitworth recalled during the interview.

"All appearances indicate that the board is dominated by the CEO and a few long-serving directors," Mr. Whitworth said. Mr. Irani has led Occidental since 1990.

In their letter, the investors argued that the board's failure to implement a CEO succession plan hurts morale and professional development of senior management.

The dissatisfied investors also aren't satisfied with the change in Mr. Chazen's titles. "He's already been running the company,'' Mr. Whitworth observed. Naming him chief operating officer "is purely cosmetic.''

Occidental hasn't had an operating chief in years. James M. Lienert will succeed Mr. Chazen as financial chief on Aug. 15, leaving his current position as executive vice president of finance and planning.

Write to Joann S. Lublin at joann.lublin@wsj.com