"2010 Safest Year In Company History" Says Transocean - Safety Bonuses Paid To Company Executives [UPDATE]

By Daniel Gilbert and Tennille Tracy Of THE WALL STREET JOURNAL

Transocean Ltd. (RIG, RIGN.VX) had its “best year in safety performance” despite the explosion of its Deepwater Horizon rig that left 11 dead and oil gushing into the Gulf of Mexico, the world’s largest offshore rig company said in a securities filing Friday.

“Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record,” Transocean stated in a filing on executive pay. Based on the total rate of incidents and their severity, “we recorded the best year in safety performance in our company’s history.”

Accordingly, Transocean’s executives received two-thirds of their target safety bonus. Safety accounts for 25% of the equation that determines the yearly cash bonuses, along with financial factors including new rig contracts.

The payout contrasts with that for fiscal 2009, when the company withheld all executive bonuses after incurring four fatalities that year “to underscore the company’s commitment to safety.”

A spokesman for Transocean said the proxy statements “do not and cannot adequately convey the extent to which everyone at Transocean is keeping the families of the men who lost their lives…in their thoughts and prayers.”

Nine of the 11 dead worked for Transocean.

Mark Lanier, a Houston plaintiffs attorney who is representing clients who have claims in the spill expressed his disgust with the bonuses. “Some things are just gross,” he said.

But Arleen Weise, who lost her son Adam in the Deepwater Horizon explosion, said she believed the company was “safety conscious” and it didn’t bother her that Transocean paid bonuses. “Transocean is still being good to us,” Weise said.

Federal investigators are still probing what caused the explosion of the Deepwater Horizon–which was leased and operated by BP Plc (BP, BP.LN)–and why a crucial piece of equipment failed to stop the flow of oil into the Gulf. Transocean has largely blamed BP, saying as the operator it had final responsibility for all decisions on the rig. BP, in turn, has said its contractors, including Transocean, made critical errors.

Also on Friday, Transocean remained at odds with federal regulators seeking to compel its employees to testify next week at a hearing into the causes of the oil spill.

The U.S. Interior Department and Coast Guard issued subpoenas to three Transocean employees more than two weeks ago.

The goal of the hearings is to examine the design and performance of the drilling rig’s blowout preventer, a mammoth set of valves that is the last line of defense against an oil spill.

Attorneys for two of the Transocean employees, both of whom were involved in the maintenance of the blowout preventer, said they advised their clients to ignore the subpoenas because the hearings had been conducted poorly. The attorneys also said the Interior Department’s subpoenas have geographic limits and so their clients, who live hundreds of miles away from the hearing location, are not required to attend.

The refusal of the Transocean employees to testify at the hearing has prompted a heated back-and-forth between the Interior Department and the drilling company.

In a letter Friday, Michael Bromwich, the head of the federal agency that regulates offshore drilling pressed Transocean Chief Executive Steven Newman to urge his employees to appear at the hearing, writing that it would be “unacceptable” for the employees not to testify.

Transocean has cooperated with the investigation, company spokesman Brian Kennedy said. “But our cooperation does not and will not include efforts to pressure employees into sacrificing their constitutional rights or their right to personal legal counsel.”

–Dionne Searcey contributed to this article.

UPDATE: Transocean Regrets ‘Insensitive’ Wording About Safety