SandRidge's proxy lists Ward's compensation as “above the 90th percentile.”
SandRidge also compared itself to six large companies: Apache, Anadarko, Chesapeake Energy Corp., EOG Resources, Devon Energy Corp. and Noble Energy.
Those companies had a revenue range of $4.1 billion to $16.7 billion, with a median of $11 billion, nearly eight times larger than SandRidge.
The median CEO pay for the large companies was $15.2 million.
Greg Dewey, SandRidge's vice president of communications, said the company includes larger companies in its peer group because it competes against those companies for employees.
“Clearly our peer group has to include both inside and outside of downtown Oklahoma City,” he said. “We can't set anybody's compensation, including the executives, without thinking about who we're competing with. Recruiting the top talent requires being able to compete with the top talent around you.”
By more than $8 million in 2011, Ward was the highest-paid CEO at any of Oklahoma City's publicly traded energy firms.
To help establish proper benchmarks and set fair compensation, company boards often hire consultants like Houston-based Pearl Meyer and Partners.
Pearl Meyer Managing Director Ed McGaughey has not worked with SandRidge and said he cannot address the company specifically. But in general, he said it is important for companies to set proper benchmarks.
“The company's revenue should fall within the 25th and 75th percentile,” of those it compares itself with, he said.
There are some exceptions, such as a situation when a smaller company is a direct competitor with larger companies for employees.
“For some clients, their compensation peers are so much different that we need to regress the data,” McGaughey said. “But you can't benchmark against companies that are 20 times bigger.”
McGaughey also typically compares his exploration and production clients to a more comprehensive list of energy companies, which he breaks down by revenue level. Companies should fall within the 25th to 75th percentile of its revenue category, he said.
By those numbers, companies like SandRidge with revenues of $1 billion to $2 billion should have CEO total compensation of $2.5 million to $5.9 million annually.
“For small companies that have not been performing optimally, it's not good optics to pay out big bonuses or rewards of stock,” McGaughey said. “What's ‘big' depends on benchmarking.”
Two other SandRidge executives received more than Pearl Meyers' recommendations for CEOs.
James Bennett, SandRidge's executive vice president and chief financial officer, received $7.7 million in 2011, and president and chief operating officer Matthew Grubb was paid $6.8 million, according to regulatory filings.