ARKANSAS, Oct 11 (Future Headlines)- As the $60 billion acquisition of Pioneer Natural Resources by Exxon Mobil nears completion, the top executives at Pioneer are poised to receive substantial severance payouts. This includes the CEO, Scott Sheffield, who co-founded the shale producer over two decades ago. While many of Pioneer’s senior management team will likely lose their positions after the merger, the severance packages are substantial and have been augmented in 2023, sparking debate on executive compensation and its comparison to regular staff benefits.
The top five executives at Pioneer Natural Resources are set to share approximately $71 million in severance payouts, with CEO Scott Sheffield set to receive around $29 million. This sum represents three times his base salary and includes all pending equity awards for performance. Sheffield is one of the few Pioneer executives who will have a post-deal role, as he is expected to join Exxon’s board.
Such payouts, known as “golden parachutes,” are designed to incentivize management to facilitate the sale of the company, even if it means the termination of their own employment. These are common in corporate America and are intended to secure the commitment of top executives to transition the company. However, their size can sometimes stir controversy, especially if they are seen as more generous than benefits provided to regular employees facing similar job uncertainties.
In Pioneer’s case, changes to executive compensation packages were made in early 2023, enhancing the benefits provided to senior management. These changes included additional payments to match contributions toward retirement funds and extended healthcare coverage. This enhanced compensation package close to the sale announcement has drawn attention.
Pioneer Natural Resources stated in a letter to its staff that oilfield employees and most office workers will be offered roles within the combined company, demonstrating a commitment to ensuring a smooth transition for employees during the merger.
The severance payouts do not account for the Pioneer stock owned by management, which will be acquired as part of the Exxon deal. For instance, Scott Sheffield’s family trust owns stock worth around $104 million, while Richard Dealy, who was set to succeed Sheffield as CEO but will now head the transition team at Pioneer, has shares worth about $39 million.
Exxon’s acquisition of Pioneer will be financed using new Exxon shares, which will replace shares in Pioneer owned by management. The restrictions, if any, on when management can sell the Exxon stock they will ultimately own were unclear.
These change-in-control payouts have taken on added significance in the oil and gas sector. Unlike sectors such as technology, the industry sees fewer new companies created as questions about the lifespan of fossil fuels arise. Some in the industry, including investment firm Kimmeridge Energy Management, have argued for larger payouts to counteract management teams becoming entrenched due to limited opportunities outside their current roles.
In the case of smaller shale producer PDC Energy, which was sold to Chevron for $7.6 billion, CEO Bart Brookman received a payout worth approximately $46 million. Denbury, which agreed to a $4.9 billion sale to Exxon, is forecasted to pay its CEO Chris Kendall around 10 times his $6.8 million salary in severance, although this figure is influenced by a generous compensation scheme that Denbury offered following its emergence from bankruptcy in 2020.
Reporting by Moe Khaled; Editing by Sarah White