The board of Occidental Petroleum Corp., Los Angeles, (NYSE: OXY) has approved significant changes to its executive long-term incentive compensation program that will substantially reduce the company's overall compensation levels to be more in line with its peers. The new program will neutralize the potential impact of commodity pricing and further align the interests of senior executives with those of Occidental shareholders.

The new program resulted from a comprehensive review of the company's compensation practices, which included consultations with independent compensation consultants and many productive discussions with a large number of Occidental stockholders and their representatives.

The new program applies to chairman and chief executive Dr. Ray R. Irani, president and chief operating officer Stephen I. Chazen and other senior Occidental executives.

The new executive long-term incentive compensation program utilizes a combination of long-term incentives, a substantial portion of which are performance-based Total Shareholder Return Incentives (TSRIs). The TSRIs are based on a sliding scale, measured against the relative performance of a 12-company industry peer group. For example, if Occidental performs in the bottom 25% of its peer group over a three-year period from the date of the award, Dr. Irani and Chazen will not receive any TSRI-related compensation. Based on grant date fair values, if the company ranks 6th among the 12-company peer group, their TSRIs will pay out at approximately $8 million and $6.4 million, respectively, which are substantially lower than in previous years.

Maximum payout for the TSRIs, which will also be substantially lower than in previous plans, will occur only if Occidental's cumulative three-year TSRI performance ranks first among its 12 peer companies and outperforms the S&P 500. The maximum TSRI-related payout for Dr. Irani and Chazen, if Occidental ranks first, would be $20 million and $16 million, respectively, as of the grant date.

The remaining portion of long-term incentives will be an allotment of tax-qualified Restricted Shares. These shares will have a minimum vesting period of three years and are valued as of the grant date at $5 million for Dr. Irani and $4 million for Chazen.

Secretary Spencer Abraham says "Throughout this process, our goal has been to redesign Occidental's compensation program to bring compensation in the ranges used by our peer companies, provide the proper incentives for our executives, reflect current best practices and address concerns raised by investors."