Forty-nine percent of CFOs at U.S. oil and gas exploration and production companies say their companies’ executive compensation programs are now more closely tired to performance than they were before new proxy disclosure rules became effective, according to a survey by BDO Seidman.
Forty-four percent say they employ greater discipline in setting executive compensation opportunities since the rules were published. Sixty-eight percent of CFOs do not expect a “say on pay” proposal from shareholders of their companies in the next year.
Nevertheless, shareholders will have a microscope on executive pay in 2009, and companies that have not developed and communicated transparent programs that link compensation to performance will be feeling increased pressure to implement best practices,” said Lance Froelich, a Senior Director in the National Energy Industry Practice at BDO Seidman, LLP and Regional Practice Leader for the firm’s Compensation and Human Capital Consulting.
The survey also asked CFOs about their views on the U.S. Securities and Exchange Commission’s proposed changes to modernize oil and gas reserve reporting requirements. They found that while 58 percent said the proposed rules will provide investors with better information, roughly 54 percent believe the time required to comply with those proposed rules will be substantial or unreasonable.
Other findings include:
- IFRS Adoption: Still Distant for Most Companies. Only 13 percent of respondents expect to be early adopters of International Financial Reporting Standards (IFRS). A little more than one-third (35%) think that oil and gas companies reporting financial results using IFRS have a competitive advantage over U.S. companies filing under Generally Accepted Accounting Principles.
- FAS 141R Implementation will be Moderately to Highly Difficult. Energy companies must implement Financial Accounting Standard No. 141R for any acquisitions effective as of December 15, 2008. A majority (57%) of respondents believe implementation will be moderately to highly difficult.
- Small Ceiling on Employee Pay Increases. Nearly half of energy CFO respondents (46%) are budgeting salary increases of less than three percent for employees in 2009. A little over one-quarter (26%) are planning increases of three to four percent, and 17 percent are planning increases of four to five percent. Few (11%) are planning increases of five percent or more.