Oil Industry Culture – Difficult, Unless You’re The CEO
2015 was a rough year for the oil industry. The giant drop in oil prices – from $108 to $37 in just 18 months – is taking its toll on American producers. Many face big debts. The U.S. oil industry shed over 100,000 jobs in 2015. The U.S. oil supply is expected to decline in 2016 but not enough to balance out the market.
OPEC, the biggest player in the oil market, is refusing to cut production to lift the prices. The Saudi-led cartel is trying to squeeze out higher-cost producers in the U.S. and elsewhere.
A new rivalry has emerged within OPEC as Iran gears up for its return to the top ranks of global oil producers. Sanctions have long reined in Iran's oil production and exports, and the country is eager to ramp up its output. It is planning to increase production by as much as 1.5 million barrels a day in 2016.
Clearly, these factors create a difficult environment for anyone working in the industry, unless you’re the CEO of Schlumberger.
Schlumberger is a company that provides tools and services for oil and gas companies that operates in more than 85 countries. In 2015, Schlumberger cut 25,000 jobs – 20% of its workforce. Its revenue was down 27%. Profits were down a whopping 41%. Shares fell 18%. Clearly a difficult year. One might think that everyone in the company should share in its financial difficulty, right? Or at least the executive team that is leading the organization, beginning with the CEO, should be held to account, correct? Apparently, that is not the culture in the oil industry.
The CEO of Schlumberger is Paal Kibsgaard. While the company he led was in free fall in 2015, he received a total compensation package of $18.3 million – down slightly from his $18.5 million in 2014 – the drop came primarily from the poor performance of his pension plan. His base salary and stack were actually up from 2014. The cash he took home increased by 12% to $5.2 million.
Sadly, this is just one example of many that can be shared to illustrate the challenges of building a culture around classic capitalism. When the shareholder is the only important member of the organization – everyone else is a widget and is seen as interchangeable and expendable. When a company builds a culture around social capitalism, one that balances the needs of all of its constituencies or stakeholders (i.e., business partners, suppliers, employees, customers, and shareholders), then everyone shares when the company experiences both profits and losses.
Keep cultivating your culture!
