Case | HBS Case Collection | February 1998

Lyondell Petrochemical Company

by Jay W. Lorsch and Daniel P. Erikson

Abstract

In August 1994, Lyondell Petrochemical Co.'s corporate parent and largest single shareholder effectively shed its stock, resulting in the resignation of 5 of its 11 directors. The remaining outside directors immediately acted to overhaul the executive compensation plan used to pay the CEO and other top officers. This case examines the role played by the compensation committee of the board of directors in this initiative. Also addresses several important aspects of the compensation process, including the role played by outside consultants, appropriate ways of measuring performance, and the motivational impact of pay plans on management.

Keywords: Corporate Governance; Governing and Advisory Boards; Executive Compensation; Design; Business or Company Management; Management Teams; Mining Industry;

Citation:

Lorsch, Jay W., and Daniel P. Erikson. "Lyondell Petrochemical Company." Harvard Business School Case 498-028, February 1998.