November 14, 2011
SEC Probes Nabors’s Executive Perks, Jets
– Broc Romanek, CompensationStandards.com
It’s uncommon for the SEC to go after perks in an enforcement action – so I thought it was worth repeating this WSJ article from Friday:
Nabors Industries Ltd., the oil-drilling contractor whose chairman is set to receive $100 million for relinquishing his chief-executive title, said Wednesday the Securities and Exchange Commission has opened an investigation into perks received by its executives, including personal flights on company jets.
The Securities and Exchange Commission has opened an investigation into perks received by Nabors Industries executives, including personal flights on company jets. The disclosure of the SEC inquiry came in a regulatory filing by Nabors, a Bermuda-registered company with operational headquarters in Houston. A Nabors spokesman didn’t respond to requests for comment. An SEC spokesman declined to comment on the investigation. The use of Nabors’s jets for potentially personal travel by executives was a focus of a broader June 17 page-one article in The Wall Street Journal on corporate jets that frequently travel to resort destinations.
Using Federal Aviation Administration flight records, the Journal reported that Nabors’s jets made frequent stops in Palm Beach, Fla., and Martha’s Vineyard, Mass., both spots where Nabors Chairman Eugene Isenberg has residences. The Journal estimated the flights cost a total of about $704,000, yet Nabors didn’t provide a dollar figure for the cost of aircraft perks for Mr. Isenberg in 2009 or 2010. In June, a Nabors spokesman said the company “complies with all IRS guidelines and SEC disclosure requirements with respect to the use of company aircraft by its executive officers.” Under SEC rules adopted in 2006, companies generally must annually disclose the cost of executives’ personal use of corporate planes if it exceeds either $25,000 or 10% of the cost of all perks.
The SEC has brought actions against companies for failing to disclose executive perks. In a civil action brought in January against a Kansas-based website-services firm, NIC Inc., the SEC said the company had failed to disclose executive perks, including payments for its former CEO to commute via private jets from the Wyoming ski lodge where he lived to NIC’s headquarters. NIC and three current and former executives paid a total of $2.8 million to settle, without admitting or denying the allegations.
Mr. Isenberg’s employment contract with Nabors, filed with the SEC in April 2009, entitles him to establish company-subsidized offices at or near his principal residence in Palm Beach, “and/or at any other residence maintained by him.” The contract also entitles him to perform his duties “from offices in or near his places of residence.” In the filing Wednesday, Nabors said the company was cooperating with an “informal inquiry” by the SEC “related to perquisites and personal benefits received by the officers and directors of Nabors, including their use of noncommercial aircraft.”
Late last month, Nabors announced it was promoting a lieutenant of Mr. Isenberg’s to the position of CEO, but Mr. Isenberg would remain as chairman. Even though he wasn’t leaving the company, the change triggered a clause in Mr. Isenberg’s contract that entitled him to a $100 million payout under various scenarios, including his removal as either CEO or chairman.