Essay Grade

Recently retired John Watson of the oil giant Chevron Corp. topped the list of highestpaid energy bosses in the S&P 500, taking home more in 2017 than his counterpart
at Exxon Mobil Corp.
Mr. Watson, 61, received $24.8 million in 2017, compared with the $17.5 million that
first-year Exxon chief Darren Woods was paid last year, according to a Wall Street
Journal analysis of pay data from MyLogIQ LLC. Mr. Woods took over on Jan. 1 after
Rex Tillersonleft Exxon to join the Trump administration.
It was the first time since Mr. Watson took over as CEO in 2010 that he outearned
Exxon’s leader. Before Mr. Watson’s tenure, Chevron’s CEO sometimes out-earned
Exxon’s, even though Exxon is larger in terms of revenue and market capitalization.
After 37 years at Chevron, Mr. Watson retired and was replaced as CEO in February by
Michael Wirth, who oversaw the company’s network of refining and pipeline assets.
The majority of Mr. Watson’s pay was linked to performance, a Chevron spokesman
said. “Moreover, during John’s tenure, Chevron’s stock outperformed its peer companies
by a wide margin.” In 2016, only 54 percent of stockholders supported Mr. Watson’s pay,
but 93 percent of stockholders supported it in 2017 after his compensation was changed
to be more tied to stock awards and to rely less on option awards, according to regulatory
filings. His total compensation in 2017 was about the same as it was in 2016.
Chevron posted a shareholder return of 10.6% for 2017, compared with the median -3.3%
for the S&P 500 energy sector. Exxon’s shareholder return was -3.8% last year. Total
return reflects share price appreciation and dividends.
The median pay for an energy sector CEO in the S&P 500 was $12.7 million last year,
according to the Journal analysis.
Four of the eight highest-paid CEOs of the 28 companies in the S&P 500 energy sector
ran refining and marketing companies. Topping that group was Greg Garland, CEO
of Phillips 66 , who received $23.7 million last year. Phillips 66 posted a 20.9%
shareholder return in 2017.
Despite surging crude oil prices, nine of the 13 exploration and production companies in
the group had negative shareholder returns. Those 13 companies had a median CEO
compensation of $12.2 million.
The Journal analysis encompassed S&P 500 energy companies and excluded CEOs who
changed jobs during the year or served less than a full year. See the full list here:
Highest-Paid Energy Sector CEOs
CEO
COMPANY
TOTAL PAY
SHAREHOLDER RETURN
Watson, John
Chevron
$24,781,568
10.6%
Garland, Greg
Phillips 66
$23,650,896
20.9%
Miller, Jeffrey
Halliburton
$23,078,364
-8.3%
Gorder, Joseph
Valero Energy
$22,532,260
40.0%
Lance, Ryan
ConocoPhilips
$21,848,930
12.0%
Kibsgaard, Paal
Schlumberger
$20,759,340
-17.5%
Goff, Gregory
Andeavor
$19,924,675
34.0%
Heminger, Gary
Marathon Petroleum
$19,670,807
34.8%
Woods, Darren
Exxon Mobil
$17,466,133
-3.8%
Walker, R
Anadarko Petroleum
$16,959,896
-22.8%
Hess, John
Hess
$14,571,906
-22.1%
Christmann, John
Apache
$14,433,373
-32.1%
Hager, David
Devon Energy
$13,448,976
-8.8%
Pferdehirt, Douglas
TechnipFMC
$12,688,100
Williams, Clay
National Oilwell Varco
$12,685,758
-3.3%
Hollub, Vicki
Occidental Petroleum
$12,675,860
8.4%
Dinges, Dan
Cabot Oil
$12,401,033
23.3%
Leach, Timothy
Concho Resources
$12,238,764
13.3%
Boothby, Lee
Newfield Exploration
$12,095,580
-22.1%
Stover, David
Noble Energy
$11,262,048
-22.3%
Jorden, Thomas
Cimarex
$11,054,129
-10.0%
CEO
COMPANY
TOTAL PAY
SHAREHOLDER RETURN
Dove, Timothy
Pioneer Natural Resources
$10,934,244
-4.0%
Armstrong, Alan
Williams Cos
$10,620,236
1.9%
Thomas, William
EOG Resources
$10,559,647
7.5%
Tillman, Lee
Marathon Oil
$10,115,664
-0.7%
Lindsay, John
Helmerich & Payne
$6,230,952
-18.7%
Spencer, Terry
Oneok
$5,608,945
-2.1%
Kean, Steven
Kinder Morgan
$382,026
-10.6%
SHOW ING 1 TO 2 8 OF 2 8 ROWS5 0 ROWS PER PAG E
12 Industry groups defined by Standard & Poor’s. Shareholder return reflects 1-year total shareholder
return through the month-end closest to each company’s fiscal-year end.
MyLogIQ LLC (pay); Institutional Shareholder Services (performance)
Atha Corporation
Executive Department Management Sheet
Atha Corporation owner Mary Atha has declared a goal of doubling the company’s current $5 million in
sales in the next year. Atha markets its product, unique lighting products (wall, pendant, floor, table, and
nightlights) made of 50% recycled materials, through as series of regional distributors and directly
online. It is currently the end of the third quarter and you have three months to complete your planning
and execute your strategy in order to have your functional areas up to speed. There is no time to waste in
meeting the goal. Plans have to be developed, current employees retained, and new employees hired.
Company communications must be clear and concise and the management cycle followed throughout
the process.
You will serve as the department manager for two functional areas. One is the human resources
department; the second is your choice of one of the three other areas: accounting and finance, marketing
and sales, or operations and production.
Ms. Atha has assigned specific goals to the vice president of your functional area. The vice president has
determined what your department needs to do to help the entire functional area succeed. Those goals are
in alignment with the overall company goal of doubling sales. Your responsibility is to break those goals
into activities and tasks for your department. You have one or more supervisors in your department.
Each supervisor has several employees to lead and control. Each individual must know what they are to
do, how or why to do it, what the quality and performance standard is, and how well they are doing. It is
your responsibility to align the work of your group with the company goal. You will provide them with
the information they need and ensure that the work is completed on time and meets performance and
quality standard.
Functional Area Background
Plan: You have been assigned additional employees and possibly new assets in order to meet your
goals. You must determine what skills, strengths, and talents they must have. How will you retain and
motivate your existing employees and attract, hire, train, and retain new ones with the help of human
resources? How will you break down your functional goals into departmental activities? How will you
measure success? What is the frequency of your activities?
Organize: You have the old department organization chart. Create a new functional area organization
chart showing how you will allocate your employees efficiently in order to achieve your department
goals. Create five interview questions for each of your two functional areas that will help to identify the
strengths of potential employees for the other functional area for which you are responsible. The
company has made a decision not to hire based on industry experience alone. Can you identify nontraditional industries or positions whose skills can be effectively transferred to Atha?
Lead: You will decipher and summarize a corporate memo intended to communicate the company goals
to employees. Your memo will give your employees a clear idea of what the company goal is. You will
clearly describe what the department needs to do in order to contribute to those goals, what they need to
do by area, how or why they need to do it, what the desired level of performance looks like, and the
measurement and reporting standard.
Control: What are the purpose statements for both of your functional areas? What are the performance
standards? How will you measure and report the performance and quality standards?
Additional Resources Available to each Department Manager
Additional resources were allocated to each manager. Below is a list of resources for each department.
Include this information in your planning, organizing, leading and control functions.
Accounting and finance: Three additional employees, one of whom is a financial analyst, have been
approved for your department. You have as much technical budget as reasonably needed to support a
world-class computer system.
Sales and Marketing: You can hire seven new employees. Position them in your department as
necessary to meet the company goals.
Human resources: You will be helping department managers to hire a total of 30 new employees for
the company. Executive management has authorized you to hire two new human resource generalists for
your department. They will begin by assisting in the screening, interviewing, and hiring of new
employees. Be sure to discuss how their role will transition once new employees have been hired and
trained.
Operations and production: In order to double your sales, you must first increase your production
capacity. Therefore, the company will add a third shift to maximize the production capacity of the
existing production line. You will need to hire 18 new employees to fully staff the three shifts. Further
consideration is under review to purchase of a second production line.
Resources
Current number of
employees
Total employees
needed
Employees to hire
Supervisor tenure
Existing
organizational chart
Accounting and
Finance
8
Functional Area
Sales and
Human Resources
Marketing
12
4
Operations and
Production
34
11
19
6
52
3
New
Yes
7
New
Yes
2
10 years
Yes
18
New
Yes

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