Shareholders Voted Them Off the Board, But the Board Said No

(Bloomberg) -- Jim Crane, the businessman and former pitcher who owns the Houston Astros baseball team, was voted off of Nabors Industries Ltd.’s board by shareholders. But the board will keep him anyway, and that’s not the first time the shale-rig provider ignored investors.

Crane, whose resignation was rejected by the board last week, had been voted down before, in 2017, and remained a director regardless. So has John Yearwood, who has failed to win over investors at least five times and is currently lead director. Mike Linn, who has been voted off twice in the last four years, still holds his seat. John Kotts and Howard Wolf, who is no longer on the board, also overstayed their welcome.

“They are in a rarefied company,” Marc Goldstein, head of U.S. research at the proxy advisory firm Institutional Shareholder Services, said Monday in a phone interview. “Repeated failure of directors to get majority support is extremely rare, and most companies in that situation would want to get out of that rut and get back on shareholders’ good side.”

One of the most notorious cases of a rejected executive staying on the board was SeaWorld Entertainment Inc.’s former chairman, David D’Alessandro, whose resignation was turned down in 2017 despite his failure to win enough shareholder backing.

Nabors, owner of the world’s biggest fleet of land-drilling rigs, has been under attack for overpaying its executives while its shares have tanked as oil-service providers struggle to recover from a downturn that started in 2014.

The company had a market value of as much as $14 billion in 2008. On Monday, the shares dropped 4.6% to $2.10 in New York, valuing Nabors at $762 million. They declined further in after-hours trading, to $2, after the company reported second-quarter operating revenue that was lower than analysts had estimated.

The company said it has yet to benefit from higher demand for international rigs and said activity outside the U.S. and Canada should remain flat in the third quarter.

Messages left with a representative for Crane weren’t immediately returned. Nabors didn’t immediately return phone and e-mail messages seeking comment.

Nabors, in a filing late Friday, said that even though Crane failed to win a majority of votes for his re-election last month, his resignation was declined because of the company’s “improved safety record during Mr. Crane’s leadership of the Board’s Technology and Safety Committee, his well-known success in business, his relationships with senior energy industry executives as well as his significant expertise in global logistics.”

The board will remove Crane from its compensation committee, though. Crane, who is also chairman of the power utility Champion Energy Services LLC, founded Houston-based Crane Worldwide Logistics more than a decade ago.

He is also chairman and CEO of Crane Capital Group Inc., an investment company that indirectly owns a majority stake in several companies that do business with Nabors, including logistics and electricity, according to federal filings. Nabors has paid nearly $60 million from 2016 through 2018 for those services, Nabors said in its annual report.

Chief Executive Officer Anthony Petrello, who has been among the highest-paid executives in the oil industry, agreed to take a pay cut this year, forfeiting $4 million in restricted stock in exchange for a symbolic award worth $1,500. The salary for Petrello, who took over as CEO in October 2011, is also dropping 10% this year to $1.58 million.

While it’s incorporated in Bermuda, Nabors operational headquarters is in Houston.

ISS will be taking a close look at Nabors outreach to shareholders before its next proxy statement is released, Goldstein said.

“If an activist comes along, you’ve just handed them a huge issue,” Goldstein said. “It looks pretty clearly compensation-related, and we would expect there to be changes to the comp program, especially given that Nabors has had such persistent problems on that front.”

To contact the reporters on this story: Carlos Caminada in Calgary at ccaminada1@bloomberg.net;David Wethe in Houston at dwethe@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, ;Andrew Monahan at amonahan@bloomberg.net, Carlos Caminada, Reg Gale

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