Does Cheniere Energy's CEO Really Deserve $142 Million Annual Pay?

Apr 29 2014, 4:18pm CDT | by

Charif Souki, CEO of Cheniere Energy, received total compensation of $142 million in 2013. This appears to place him atop the leader board of CEOs of all U.S.-based publicly traded companies.

According to the company’s proxy filing, released yesterday, Souki’s pay included a base salary of $800,000, a $3.7 million cash bonus and $133 million in stock awards. That’s a big improvement over 2012, when he scored $57.5 million, including $49 million in stock. All told, he owns 6.6 million shares of Cheniere (2.80%) worth $370 million.

In comparison, Exxon Mobil CEO Rex Tillerson made $28 million, while John Watson of Chevron did $24 million.

Cheniere (as I wrote about in this Forbes Magazine feature last year) is the company furthest along in building the multi-billion-dollar plants required to chill natural gas into condensed LNG for export around the globe. Its initial plants at Sabine Pass on the Gulf Coast are more than halfway complete, and first shipments could possibly occur as early as the end of 2015.

So is Souki’s pay outrageous, or justified?

Definitely the latter. To understand why, start by looking at how shares in Cheniere, ExxonMobil and Chevron have performed in recent years. Go back to August 2008, the bottom of the market. Since then, shares in Cheniere Energy are up nearly 1,800%. Chevron has advanced 54%. While Exxon is up just 25%.

By that measure, Souki absolutely deserves his pay — years ago Cheniere’s board created an incentive package and tied most of his stock awards to project completion milestones; if he hadn’t executed, he wouldn’t have gotten paid.

Back in 2008 Cheniere was a zombie company. Souki, a decade ago, had bet that the U.S. would soon run short on natural gas. So in its first iteration Cheniere figured out how to cite and build big terminals to receive imports of LNG. Souki even convinced companies like Chevron and Total to pay tens of millions a year to reserve capacity. (See my 2005 Forbes Magazine story “First Mover.”) When the shale boom hit and gas supplies flooded the U.S., Cheniere was left with some giant empty tanks.

But Souki was determined that Cheniere’s LNG holding tanks and brand new terminals. So in the past few years this former investment banker has raised about $8 billion to turn his lemons into lemonade and reposition Sabine Pass as an export terminal. He’s already signed up companies like Korea Gas, BG Group, Total and Centrica to long-term “take-or-pay” contracts that will generate about $3 billion a year in fee revenue for Cheniere for the next 20 years.

Now there’s been a handful of other LNG export projects approved by the feds and dozens more that have been proposed. But the reality is that very few of these will ever be built. LNG exporters will be happy to buy American gas as long as it’s cheap, but the more demand there is for gas (for power generation, transportation, manufacturing, LNG, etc), the higher the price will go, eroding the economics of shipping American gas to the other side of the world. In this business, first mover advantage matters a lot.

Souki bet collosally wrong the first time. But he salvaged that bet, becoming first in line to export American gas. By seizing opportunity and executing, he is building what will be an almost unique asset, one with guaranteed cashflow for a generation to come.

Souki and his small group of executives and dealmakers have made more than $12 billion for shareholders in recent years. Granted, Exxon and Chevron have generated significantly more shareholder value than that in the same time period, but Tillerson and Watson sit atop a much broader base of assets and opportunities and are backed by a much deeper bench of strong players.

So don’t begrudge the man his payday.

The World's Biggest Oil Companies

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

OPEC decides against oil production cut despite price slump
Viena, Nov 28 (IANS) The ministers of the Organization of Petroleum Exporting Countries(OPEC) decided here Thursday to maintain its output level despite crude oil price fell to a four-year low level.
 
 
18th Saarc Summit concludes with one pact, several understandings
Kathmandu, Nov 27 (IANS) The 18th South Asian Association for Regional Cooperation (Saarc) Summit concluded in Kathmandu Thursday with the adoption of a 36-point Kathmandu Declaration.
 
 
British supermarkets sold contaminated chicken
London, Nov 27 (IANS) Eight of the every 10 fresh chickens bought from British supermarkets this summer were contaminated with the potentially lethal food-poisoning bug campylobacter, the food watchdog has said.
 
 
SJVNL signs pact with Nepal for hydro-power plant
Kathmandu, Nov 27 (IANS) Indian public sector company Satluj Jal Vidyut Nigam Ltd. (SJVNL) has signed a project development agreement with the Nepal government for executing the 900 MW Arun-III Hydro Electric Project in eastern Nepal, officials said Thursday.
 
 
 

Latest from the Network

OPEC decides against oil production cut despite price slump
Viena, Nov 28 (IANS) The ministers of the Organization of Petroleum Exporting Countries(OPEC) decided here Thursday to maintain its output level despite crude oil price fell to a four-year low level. The decision to...
Read more on Business Balla
 
12 killed in bus accident in Egypt
Cairo, Nov 28 (IANS) At least 12 people were killed and three others injured Thursday as a passenger bus overturned into a canal in Egypt's Beni Sweif province, around 120 km south of the capital Cairo, media reported...
Read more on Politics Balla
 
Explosions, gun fire rock Kabul diplomatic enclave
Kabul, Nov 27 (IANS) Two explosions followed by gunfire rocked the diplomatic enclave here Thursday night, a security officer said. The area of the blast is close to the Tajikistan embassy. The incident occurred in...
Read more on Politics Balla
 
Saarc leaders' wives ladies go sight-seeing at Bhaktapur
Kathmandu, Nov 27 (IANS) While the Saarc leaders conferred on regional matters at the tourist resort of Dhulikhel, their wives drove to the World Heritage Site of Bhaktapur to enjoy the sights of the ancient city. The...
Read more on Politics Balla
 
Maria Shriver 'disgusted' by Miley Cyrus's party
Patrick Schwarzenegger's mother was ''disgusted'' by Miley Cyrus's birthday celebrations. Maria Shriver - who, along with Arnold Schwarzenegger, are the parents of the 21-year-old actor - is reportedly ''very worried''...
Read more on Celebrity Balla
 
Kim Kardashian and Kanye West planning nude photoshoot together?
Kim Kardashian West and Kanye West want to do a nude photoshoot together. The couple are reportedly keen to pose naked alongside each other, after the 34-year-old 'Keeping Up With The Kardashians' star recently stripped...
Read more on Celebrity Balla
 
Robert Pattinson put on diet by FKA twigs
FKA twigs has put Robert Pattinson on a diet. The 'Two Weeks' hitmaker - who has been dating the 'Twilight' star since summer - is reportedly so unimpressed with her boyfriend's poor fitness levels that she decided to...
Read more on Celebrity Balla
 
Cate Blanchett 'proud' of Emma Watson
Cate Blanchett is proud of Emma Watson. The 'Blue Jasmine' star has praised the 'Harry Potter' actress for her speech on gender equality for the United Nations (UN) in September this year. Speaking to Porter magazine,...
Read more on Celebrity Balla