Transocean Ltd., owner of the Deepwater Horizon oil rig, awarded millions of dollars in bonuses to its executives after “the best year in safety performance in our company’s history,” according to an annual report and proxy statement released yesterday.
Eleven people were killed, including nine Transocean employees, in the April 20 explosion and collapse of the rig, which gushed crude oil into the Gulf of Mexico for 86 days.
“Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record as measured by our total recordable incident rate and total potential severity rate,” Transocean states in the filing. “As measured by these standards, we recorded the best year in safety performance in our Company’s history, which is a reflection on our commitment to achieving an incident free environment, all the time, everywhere.”
Transocean President and Chief Executive Officer Steven L. Newman received about $4.3 million in cash bonuses and stock and option awards. With other compensation — such as pension increases and cost of living, housing, and automobile allowances — Newman earned $6.6 million in 2010, almost $1 million more than in 2009.
His base salary, $900,000 in 2010, will increase 22 percent to $1.1 million in 2011.
Transocean built and staffed the Deepwater Horizon. It was leased by BP, which denied most executives bonuses in 2010. In justifying the bonuses, Transocean cites the increased burden on executives of responding to the spill:
Although in 2010 we made significant progress in achieving our strategic and operational objectives for the year, these developments were overshadowed by the April 20, 2010 fire and explosion onboard our semi-submersible drilling rig, the Deepwater Horizon, off the Louisiana coast that resulted in the deaths of 11 of our colleagues, including nine Transocean employees, and the uncontrolled flow of hydrocarbons from the well for an extended period (the ‘‘Macondo Incident’’). As a result, many of our senior executive officers… dedicated a significant portion of their time in 2010 following the Macondo Incident to responding to the needs of the victims’ families, coordinating the involvement of additional resources required to stem the flow of hydrocarbons, including drilling rigs and personnel to drill relief wells and other operations as requested by the Unified Area Command, cooperating with the numerous federal, state, and local reviews and investigations into the incident, overseeing our internal investigation of the incident, and managing other demands stemming from these activities, in addition to performing their normal responsibilities.
In the proxy, Transocean’s directors also ask shareholders to shelter “the Board of Directors and the executive management From liability for activities during fiscal year 2010.” The company is being sued by some shareholders for failing to monitor risk leading up to the spill.
Transocean contends it has no liability:
It remains our view that Transocean is contractually indemnified against all claims stemming from the environmental and economic impacts of the hydrocarbons spilled into the Gulf of Mexico from the Macondo well after the sinking of the Deepwater Horizon.”
At the other end of that contract, however, BP contends Transocean shares liability for the disaster.
The world’s largest builder and operator of oil rigs, Transocean was incorporated in the Cayman Islands but now keeps its executive offices in Vernier, Switzerland.
Transocean released its Annual Report and Proxy Statement middawy Friday, and the bonuses were first reported by Sheila McNulty of The Financial Times (paywall).