Nabors Industries Ltd. (NBR)’s Absurd Defense of Its Compensation

The study offers a good explanation for why companies offering these perks might have other governance problems. It states that “personal jet use, like all executive perquisites, tells you something critical about the relationship between the board of directors and the CEO. That relationship, of course, is at the very heart of what makes good—or bad—governance. If a board can’t say ‘no’ to a CEO’s request that the company pay for his or her vacation, or taxes, or tax advice (to list just a few examples), that board may not be exercising very strong oversight of CEO performance.”

I’m concerned this may be what’s happening at Nabors.

The Foolish takeaway
While I think shareholders are right not to trust Nabors Industries Ltd. (NYSE:NBR)’s board to create reasonable compensation plans that are adequately connected with performance, to me the ultimate conclusion is that it’s not worth owning the stock. If investors can’t trust Nabors’ board to make decisions that are in the best interests of shareholders, and can’t trust its top executives to refrain from looting the company or to manage it effectively, then the stock isn’t worth owning.

The article Nabors’ Absurd Defense of Its Compensation originally appeared on Fool.com and is written by M. Joy Hayes, Ph.D.

Motley Fool contributor M. Joy Hayes, Ph.D. is the principal at ethics consulting firm Courageous Ethics. She has no position in any stocks mentioned. Follow @JoyofEthics on Twitter. The Motley Fool owns shares of General Electric Company (NYSE:GE), International Business Machines., and Raytheon Company (NYSE:RTN).

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