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Certainly, the biggest story to emerge to date from this year’s Proxy Season – the time when most public companies hold their annual meeting, is Jamie Dimon’s victory allowing him to continue to hold on as both CEO and chair of the board at J.P. Morgan.  To no one’s surprise, the story captured headlines all across the country and the world.  After all, JP Morgan is the nation’s largest bank (and the world’s second largest), with assets of nearly $3 trillion.  This, coupled with the fact that Dimon is one of the most iconic personalities, not just on Wall Street but in financial markets all around the world, makes it easy to see why this story received so much attention.

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But in terms of its potential impact on public company corporate governance, Dimon’s victory will pale in comparison to the recent events at Occidental Petroleum (NYSE: OXY).  The energy company’s investors took an unprecedented stand against its board of directors in the name of corporate governance best practices, and won.

Occidental has a long and storied history as an oil and gas exploration and production company.  The Los Angeles-based company was founded in 1920.  Beginning in the 1960’s Occidental expanded internationally and also entered the chemical manufacturing business.  In 1990, however, a new era began for Occidental as Dr. Ray Irani became Chairman and CEO.  A dynamic leader, Irani grew Occidental to become the fourth largest U.S. based oil company.  By 2010, he had increased the company’s net income to $4.53 billion (a jump of more than 55% during his tenure).  In 2000, Occidental’s stock market value was $9 billion.  Today it is $74 billion.

Along with Irani’s success came intense scrutiny.  In 2006, Occidental disclosed that Irani’s compensation that year totaled $460 million in shares and salary.  Shareholder pressure over the issue eventually forced Irani to step-down as CEO in May of 2011.  He was replaced by Occidental’s President, Steve Chazen, a 17 year veteran of the company.  Irani, however, maintained his position as chairman – much to the chagrin of shareholders and regulators alike.

The issue of what to do with Irani finally came to a head this proxy season.  It began when influential investor advisory firm Institutional Shareholder Services (ISS), recommended that Occidental’s shareholders take the following actions: vote to remove Irani as chair; vote against the company’s executive compensation practices; and vote against lead independent director Aziz Syriani.  Board members responded by setting-out out on a “Shareholder Tour” in an effort to circle the wagons before the Annual Meeting.  Although he had only been at the helm for 2 years, the board felt that removing Chazen was a necessary solution.  The board also pressed the shareholders to keep Irani and Syriani on the board.

The Shareholder Tour did not illicit the response that the board anticipated.  Major investors balked at the idea of removing Chazen.  The move seemed premature given his relatively short tenure as chief executive.

It was at this point that the board appears to have stepped back and re-evaluated its position.  It could have, like many public company boards, pressed forward with its agenda and tried to muster the support necessary to gain shareholder approval.  Instead, however, in a stunning announcement nearly a week before the annual meeting, the board reversed course and heeded the advice of its investors.  It announced that Chazen would remain as CEO through the end of 2014 and that it would adopt several measures aimed at bringing the company’s compensation practices in line with corporate governance best practices.  In addition, the board addressed the issue of Irani by adopting rules precluding former chief executive officers from serving on the board.  Thus, Irani was effectively removed from the board.  Syriani, feeling the pressure, then resigned at the annual meeting.

The irony of the Occidental story is not lost on the corporate governance analysts and observers who have closely monitored the company over the past several months.   Occidental, a stalwart of the fossil fuel industry, serving as a beacon of light and source of inspiration for public companies mired in the “old way of running things”.  Compare this with JP Morgan’s decision to retain the role of CEO and Chair in Dimon, despite the fact that corporate governance experts such as Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance, advocate for the aplitting of the positions.  Elson asks: “Why should the person being monitored chair the group monitoring them?”

Advancement in corporate governance necessitates that public companies emulate the example of Occidental from this proxy season, not JP Morgan.

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