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Three of the people on Chevron’s board, Donald B. Rice, Robert J. Eaton and Charles R. Shoemate, retired at the company’s 2012 shareholder meeting this spring. All were more than 70 years old and had served for seven, 12 and 14 years respectively; while experience has its merits, long familiarity with management can interfere with a director’s ability to remain objective, so it will help to replace these men with people who have fresher perspectives.

Chevron said Oct. 3 that Dr. Gast will serve on its audit committee, a role that Mr. Shoemate had held the previous year. Her addition enables Chevron to benefit from having more sensitivity to the needs of female staff and clients, given that forty percent of the world’s largest publicly-traded companies have not appointed even one woman to their boards, according to our latest survey. Credit Suisse also published research this August finding that companies with market capitalization over $10 billion who had women on their boards outperformed those with all-male boards. Of course, women remain grossly under-represented among Chevron’s supervisors, with only two on its now twelve-person board, but at least the situation has improved.

Dr. Gast has experience that can clearly benefit an oil company. She was vice president for research, associate provost and Robert T. Haslam chair in chemical engineering at Massachusetts Institute of Technology from 2001 to 2006, and a professor of chemical engineering at Stanford University and the Stanford Synchrotron Radiation Laboratory from 1985 to 2001. As one of three science envoys named in 2010, Dr. Gast was tasked with traveling to the Caucasus and Central Asia in order to advise the White House, the Department of State, and the U.S. scientific community about ways to deepen existing ties and foster new relationships there.

That said, Dr. Gast has so many duties, she might find it challenging to pay close attention to Chevron. Not only has she been the president of Lehigh University since 2006, she also serves on the board of trustees of King Abdullah University of Science and Technology, the board of governors of The New York Academy of Sciences, the board of directors of Lehigh Valley Association of Independent Colleges, and the Patriot League council of presidents.

Chevron’s other new director elected in May, Charles W. “Wick” Moorman, also appears overboarded, as he is the chairman, CEO and president of the transportation company Norfolk Southern Corp. Not helping matters, he serves on the board of WHRO Public Broadcasting and the University of Virginia Medical Center operating board, along with being a trustee of the Chesapeake Bay Foundation, the Chrysler Museum of Art and the Nature Conservancy of Virginia.

Some might have other objections. Neither Moorman nor Dr. Gast is an independent director with experience in environmental matters relevant to hydrocarbon exploration and production, as a stockholder had requested at Chevron’s annual meeting this May. “A company’s inability to demonstrate that its environmental policies and practices are in line with internationally accepted standards can lead to difficulties in raising new capital and obtaining the necessary licenses from regulators,” the stockholder said, also noting earlier problems such as an Ecuadorian court judgment in February 2011 that found Chevron liable for $8.6 billion in damages arising from the contamination of Amazonian resources by Texaco between 1964 and 1992. Chevron’s board recommended that shareholders vote against the proposal, explaining that no director should have sole designated responsibilities for a specific matter. In addition, Chevron said its board already includes a number of independent directors whose professional activities have brought them experience with environmental matters relating to world trade, manufacturing, technology and public policy. Voting results indicate that 79% of shareholders agreed with the board.

While Chevron’s board continues to have room for improvement, the recent appointments are a step in the right direction. In another sign that Chevron’s management is doing a better job than some rivals, the company’s financial data give it an Accounting and Governance Risk (AGR ®) score of 40, indicating an average level of risk.

Region: North America

Country: United States

Sector: Energy

Industry: Integrated Oil / Gas

Market Cap:  $  232,381.0 mm (Large Cap)

ESG Rating: D

AGR Rating: Average (40)

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Unfeeling Company Layoff Word of the Week

Events Team Leader Mark Magee nominated this week’s winners in the Unfeeling Company Layoff Word of the Week competition, first in a March 21 release from HP, and again in a March 208-K from Anthera. And the winner is: headcount. We’ll split the prize money.

Hewlett-Packard (HPQ) on Tuesday said that it is combining its computer and printer units to free up more cash for innovation in the rapidly evolving technology market. HP will combine its Imaging and Printing Group and its Personal Systems Group (PSG) into an entity headed by Tom Bradley, who has been PSG executive vice president since 2005. HP declined to comment when asked whether the corporate reorganization would result in a cut in its work force. “We have no specific announcements about changes to headcount at this time,” an HP spokesman told AFP.

Anthera (ANTH) has taken immediate action to decrease operating expenses through a reduction or elimination of vendor activities and immediate headcount reductions. This will result in an elimination of approximately 45% of Anthera’s headcount.

And here’s the link to the Anthera 8-K. You know, though, reading through them again, Anthera’s has a little edge on the unfeelingness, so maybe we’ll give it gold and HP silver.

There are worse places to be detained, but bravo to Brazil for demanding accountability

Events Analyst Dovid Muyderman found this Brazilian assertiveness in an International Business Times report.

Authorities in Brazil have detained 17 high-ranking executives of U.S. oil producer Chevron Corp. (NYSE: CVX) and drilling company Transocean Ltd. (NYSE: RIG) after a judge refused to let them leave the South American country pending possible criminal charges.

Transocean, wait, I remember something about that name. Ah, yes, safety bonuses. I bet they wish they hadn’t given them up to charity last year, could’ve used the extra cash for, you know, expenses.

Loan = Gift in Corporatespeak

Compensation Analyst Ashley Kotzur found this table in Wells Fargo’s latest proxy statement. 2002? When they heck are they going to start paying these “loans” back?

We currently have interest-free loans outstanding under this Relocation Program to two of our executive officers. The following table provides information about these loans as of December 31, 2011:

For a bank that is heaving families out of homes they can no longer afford because their mortgage is too high to offer interest-free loans to senior managers and to allow them to remain unpaid for up to 10 years would seem to me hypocritical at best. Then again, it’s a good job they don’t run their mortgage business like that, hardly a recipe for nice profits, is it? What must shareholders think?

Our shares are worthless so we’re not going to make you own any

Compensation Analyst Manager Scott Patterson found this piece of total doublespeak from Central Pacific Financial Corp’s latest proxy statement. Basically the bank terminated its stock ownership guidelines.

On July 27, 2005, the Board adopted stock ownership guidelines applicable to all Directors and executive officers of the Company and the Bank, which were reviewed and amended on January 30, 2008 and April 28, 2010.  The purpose of the guidelines was to define meaningful ownership level expectations for these individuals to more closely align their interests with our shareholders.  Under the guidelines, Directors and certain executives of the Company and Bank were expected to own Common Stock with a value equal to a multiple of their annual retainer or base salary, as applicable, within a specified time period.  Although many of the Company’s Directors and executives had met or made significant progress towards the ownership goals, because the guidelines are defined in terms of share value, and not as a number of shares, meeting the guidelines given the decline in our stock price proved unworkable. As a result, on January 26, 2011, the Board terminated the stock ownership guidelines.  The Company remains committed to the principles from which these guidelines were formed and continues to expect Directors and executives to maintain a meaningful stock ownership in the Company.

As Scott says: Why they couldn’t adjust the guidelines to be a number of shares rather than a value is perplexing. Let me explain how they could have done that. Go back to 2005, when the shares were still worth something, figure out how many shares each of the executives and directors would have had to buy to have a 1 X salary/retainer ownership guideline (or whatever the multiple might be) and say that owning Y number of shares it the new guideline.

I mean, this doesn’t look good to shareholders, fellas, it just doesn’t look good.

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Today executives on Chevron’s securities analyst call about its fourth quarter 2011 earnings are sure to get some questions on the meaning of the term “notably higher.”  The company’s recent press release noted cryptically that “The company’s general guidance for the quarterly net after-tax charges related to corporate and other activities is between $250 million and $350 million.  Total net charges for the fourth quarter are expected to be notably higher than the general guidance range [emphasis added].”  Analysts will want to know whether this vague reference reflects Chevron’s putting aside reserves to cover the Ecuador environmental litigation-related costs, such as the bond to appeal to the Ecuador Supreme Court or a possible settlement of the $18 billion judgment just upheld by the court, and if not, how that will be accounted for.

Aguinda v. ChevronTexaco is one of the most complicated and drawn-out global lawsuits in history, seeking damages for the environmental and health impacts of oil extraction in Ecuador dating back to the 1960s. It’s the subject of a superb documentary called Crude from director Joe Berlinger and has been featured on 60 Minutes.  Chevron, the successor defendant following its purchase of Texaco, has filed a series of appeals but lost the latest round this month when an Ecuadorian court upheld the $18 billion judgment against the company. It was Chevron’s decision to have the case litigated in Ecuador instead of the United States.  Both sides have accused the other of corruption.

An independent report released last year criticized the financial, operational, and reputational risks of Chevron’s response to the suit. It will be dismissed by some because it was commissioned by Amazon Watch and Rainforest Action Network, who are frank about their own point of view. (Their website is called ChevronToxico: The Campaign for Justice in Ecuador.)   But the company has not successfully refuted the findings by Simon Billenness and Sanford Lewis that Chevron’s admissions about its liability risks in court documents were inconsistent with its financial reports and that its legal and public relations strategy poses an unacceptably high risk.  This week’s call is another opportunity to push the company to provide better information about what the impact of the judgment will be.

Three shareholder proposals filed by Chevron investors also reflect these concerns.  One calls for appointment of a director with environmental credentials.  Another calls for separating the chairman and CEO positions to provide independent oversight.  The third asks that shareholders be given the right to call a special meeting.  Sponsors of the proposals include the New York State pension fund, Amnesty International, and Zevin Asset Management.

Investors understand that this is a reputational issue with direct financial consequences.  A Huffington Post piece by Kerry Kennedy about her visit to the Ecuador site prompted comments from readers like these: “And to think I’ve been buying gas at Chevron lately! I hate reading stuff like this, it makes me sick for the future of our children & grandkids.” “Chevron: typical fossil fuel business culture. Their management is every bit as slimy, toxic, and destructive as their product.”  Companies need to consider that for consumers and investors the way they address environmental liabilities is a critical indicator of credibility and operational sustainability.

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Chevron (CVX), the successor defendant following its purchase of Texaco has filed a series of appeals but lost the latest round last week when an Ecuadorian court upheld an $18 billion judgment against the company. It was Chevron's decision to have the case litigated in Ecuador instead of the United States.  Both sides have accused the other of corruption. 

Pablo Fajardo, an Ecuador-based lawyer representing the 30,000 plaintiffs suing over environmental damage in the Amazon region, said: “It’s not going to be easy to enforce this judgment, but even if hell freezes over we’re going to do it.”

An independent report released last year criticized the financial, operational, and reputational risks of Chevron's response to the suit. It will be dismissed by some because it was commissioned by Amazon Watch and Rainforest Action Network, who are frank about their own point of view. (Their website is called ChevronToxico: The Campaign for Justice in Ecuador.)   But it is hard to dispute the findings by Simon Billenness and Sanford Lewis that the company's admissions about its liability risks in court documents are inconsistent with its financial reports and that its legal and public relations strategy poses an unacceptably high risk. It isn't only the "Chevron-Toxico" logo that is leaking toxic material.

Three shareholder proposals filed by Chevron investors reflect these concerns.

1. Environmental Director

This is a re-filing by New York State of last year's resolution with some updated language.  New York State is the lead.  Amnesty International USA and Zevin Asset Management are co-filers.

2. Independent Chair

This is a new resolution asking Chevron to separate the positions of CEO and Chair.  It uses standard language for a corporate governance resolution of this kind with added language on Ecuador.  The lead filer is the Unitarian Universalist Association Common Endowment Fund and Zevin is a co-filer.

3. Calling Special Meeting of Shareholders

Lead filed by Investor Voice, this resolution calls on the company to amend its bylaws to give shareholders new powers to call a special meeting.  It contains language on Ecuador and Burma.  Zevin co-filed as well.

Management of environmental risk — including the risk of litigation — is increasingly being seen as an essential element of investment risk and shareholders are increasingly recognizing the importance of initiatives to respond to poor management of that risk. 

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