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

Breastfeeding linked to lower risk of postnatal depression
London, Aug 22 (IANS) A new study involving 10,000 mothers has shown that women who breastfed their babies were at significantly lower risk of postnatal depression than those who did not.
 
 
Pakistan media flays India for axing talks
Islamabad, Aug 22 (IANS) Two Pakistani newspapers Friday denounced India's decision to call off talks between their foreign secretaries, saying it had dealt "a serious blow" to the bilateral peace process.
 
 
Novel way to monitor drone's parametres
New York, Aug 22 (IANS) Drones are the future of home delivery and surveillance but to achieve this consistently, they will have to tackle high winds and other uncertainties like depletion of fuel.
 
 
Moon soil charged by electric spark?
Washington, Aug 22 (IANS) High-energy particles from solar storms may have electrically charged the soil in the moon's frigid polar regions, altering its properties, a study suggests.
 
 
 

Latest from the Network

Britney Spears 'fed up' of father's control
Los Angeles, Aug 22 (IANS) Singer Britney Spears is allegedly "fed up" of her father Jamie Spears controlling her finances. The 32-year-old's personal and professional affairs have been controlled by Jamie and Andrew...
Read more on Celebrity Balla
 
Taylor Swift 'horrified' to see John Mayer
Los Angeles, Aug 22 (IANS) Country musicianTaylor Swift was shocked to see her former boyfriend John Mayer at the same restaurant. The duo split in 2010 following a brief romance and the 24-year-old apparently didn't...
Read more on Celebrity Balla
 
Breastfeeding linked to lower risk of postnatal depression
London, Aug 22 (IANS) A new study involving 10,000 mothers has shown that women who breastfed their babies were at significantly lower risk of postnatal depression than those who did not. The study, by researchers in...
Read more on Apple Balla
 
Pakistan media flays India for axing talks
Islamabad, Aug 22 (IANS) Two Pakistani newspapers Friday denounced India's decision to call off talks between their foreign secretaries, saying it had dealt "a serious blow" to the bilateral peace process. "The...
Read more on Ad Balla
 
Amy Winehouse sculpture to be unveiled in London
London, Aug 22 (IANS) A sculpture to commemorate Amy Winehouse is to be unveiled at Camden market in north London, near the singer's last home. The memorial, which has been designed by Scott Eaton, will be a life-...
Read more on Celebrity Balla
 
Mariah Carey 'heartbroken' by split from husband?
Los Angeles, Aug 22 (IANS) Singer Mariah Carey is said to be "heartbroken" by her split from husband Nick Cannon. Cannon, the host of "America's Got Talent" has confirmed he and Carey have been living apart "for a few...
Read more on Celebrity Balla
 
Novel way to monitor drone's parametres
New York, Aug 22 (IANS) Drones are the future of home delivery and surveillance but to achieve this consistently, they will have to tackle high winds and other uncertainties like depletion of fuel. Now, researchers at...
Read more on Apple Balla
 
Justin Bieber pays $10,000 bill for pet monkey
Los Angeles, Aug 22 (IANS) Singer Justin Bieber has finally paid over $10,000 to cover the cost of caring for the pet monkey he abandoned in Germany last year. Bieber landed in trouble with authorities in Germany in...
Read more on Celebrity Balla
 
Lahiri looking forward to European Masters
Bern, Aug 22 (IANS) India's Anirban Lahiri could strengthen his position on the Asian Tour Order of Merit when the Omega European Masters returns to the scenic Crans-sur-Sierre Golf Club from Sep 4-7. The Omega...
Read more on Sport Balla
 
Moon soil charged by electric spark?
Washington, Aug 22 (IANS) High-energy particles from solar storms may have electrically charged the soil in the moon's frigid polar regions, altering its properties, a study suggests. This could change our...
Read more on Apple Balla