For their latest trek to Capitol Hill May 21 to absorb empty-headed insults from politicians, oil company executives merit little pity. They’re paid well for their work. On this point, the politicians left no room for doubt.
Patrick J. Leahy (D-Vt.), chairman of the Senate Judiciary Committee, unabashedly asked his five industry witnesses how much money they make. When ConocoPhillips Executive Vice-Pres. John E. Lowe, who was under oath, said he couldn’t respond precisely, Leahy blurted, “I wish I made enough money that I didn’t even have to know how much I make.” It was a moment made for television.
What’s illuminated
As usual at these appalling inquests, what the inquisitors illuminated most clearly was their own misapprehension. In an opening statement, Leahy asked the executives how they “justify exorbitant profits on the backs of middle class, hard-working families.” Richard J. Durbin (D-Ill.) said, “I think the president should be calling you all before his little meeting place, the White House, and talking about what you are doing to the American economy.” Dianne Feinstein (D-Calif.) scolded the executives because their companies make money and told them they “apparently have no ethical compass about the price of gasoline.”
And so it went, senators aggrandizing themselves with questions for which they wanted no answers, fuming about a world that doesn’t exist in which oil company executives set the price of gasoline and where profits attest to misbehavior. They’ll never learn. They refuse to learn. Ignorance serves them too well, even as it breeds policy errors damaging to their country.
In the oil industry, the temptation is strong to ignore these indignities as misguided wastes of time and money. The industry nevertheless must acknowledge the body blow it sustained in the exchange about compensation.
While the pay of top corporate executives is public knowledge, it’s not something Congress can or should want to do anything about. It is the business only of corporate owners, the shareholders. Within that group, regal pay for executives has become an issue—and not just in the oil and gas industry. Feeling the pressure, the Securities and Exchange Commission recently tightened disclosure requirements for the compensation of top executives.
Pay for US chief executives has in fact climbed beyond the cloud tops. The AFL-CIO cites a Corporate Library study showing that the chief executives of Standard & Poor’s 500 companies drew average total compensation last year of $14.2 million each. The median compensation for this group: $8.8 million. Most American workers can’t dream in amounts that high.
Oil executives don’t dominate the upper stratum of this aristocracy. In a ranking by the consulting firm Equilar Inc. published Apr. 6 in the New York Times, financial executives hold that distinction. But lavish executive pay is a bigger problem for oil companies than it is for others.
The Judiciary Committee hearing shows why. Calling attention to multimillion-dollar salaries of specific executives puts a face on popular assumptions about oil-company greed. Leahy knew this. It didn’t matter where the numbers he elicited ranked among high-level executives in other industries. Leahy wasn’t addressing high-level executives. He was addressing people with no prospects for million-dollar compensation packages, people hurt by and angry about high oil prices, people suspicious about large profit numbers, people who therefore derive visceral pleasure from hating oil companies.
Old melodrama
So the stage is set for an old melodrama. Congress will seek revenge on behalf of fabricated victims. It will impose a windfall profit tax, outlaw “price-gouging,” reimpose price controls, or simply keep blocking access by producers to promising federal land. It will, in the eyes of the vengeful, make oil companies pay for their greed. The costs, however, will fall on shareholders and energy consumers.
Lavish executive salaries don’t explain all or even most of the enmity toward oil companies. As easy targets, though, they aggravate the problem. To the extent of their contributions to wayward energy policy, they hurt people who don’t earn nearly as much. Leahy has made them an energy issue. Oil company executives and shareholders need to respond.