Funds that own 1 percent of Occidental Petroleum Corp are targeting board seats at the fourth-largest U.S. oil company because of their concern about how it pays executives, one of the funds said on Monday.

A spokesman for the California State Teachers' Retirement System (Calstrs) said in an email that his fund and Relational Investors LLC aim to take at least four of the 13 board seats at the company's annual general meeting next year.

The move by the funds follows the rejection in May of Oxy's pay policy by a majority of its shareholders. Chief Executive Ray Irani, whose compensation grew 40 percent in 2009 to $31.4 million, responded to that vote by saying the board would study what changes may have to be made.

The Los Angeles-based company then said on Monday that those changes would be proposed in the coming months.

The board's new compensation committee chairman has been meeting with investors, and is expected in the next two months to make recommended changes that we believe are responsive to investors' sentiment as expressed in the vote, Occidental spokesman Richard Kline said.

The Calstrs spokesman, Ricardo Duran, declined to comment further. Relational, a $6 billion fund based in San Diego, California that owns 0.8 percent of Oxy, did not comment.

Relational's Ralph Whitworth is an activist investor with ample experience targeting directors' seats; he now sits on the Genzyme Corp board after threatening a battle with the biotechnology company, before finally settling.

A VERY GOOD DECADE

Irani's pay has garnered media attention over the years, and last week he made the Wall Street Journal's front page for earning $857 million in the past decade, making him third on the list of best-paid public company executives in that time.

The Journal reported earlier on Monday on the funds' plans to take the Occidental board seats. Unhappy over compensation practices, they sent a letter on Friday that also raised concerns about CEO succession plans now that Irani has reached the company's director retirement age of 75, the Journal said.

But earlier on Monday, Occidental moved toward succession planning by announcing that Stephen Chazen, its 63-year-old president and chief financial officer, would become chief operating officer and hand over his CFO role to James Lienert.

Shares of Occidental rose 2.9 percent to $80.19 on Monday as an upward spike in oil prices boosted the sector <.OIX>.

The funds' effort comes on the heels of a so-called shareholder derivative lawsuit filed last week over the pay issue. A shareholder is suing Oxy's executives and directors on behalf of the company itself over how its managers are paid.

The legal complaint, seeking damages and other relief on behalf of the company, said Occidental was one of only three companies to get less than majority stockholder support in the management-sponsored say on pay vote on 2009 compensation.

Irani, whose name is first among the defendants in the complaint filed in Los Angeles Superior Court, has run Oxy for 20 years, and helped transform the company. The share price has quintupled under his management.

The lawsuit was brought by a Vladimir Gusinsky on behalf of a trust in his name that has held an Oxy stake since January 1, 2008. The Gusinsky lawsuit also names Chazen and the general counsel, Donald de Brier, as well as the board members and the executive compensation consultant, Pearl Meyer & Partners.

The name Vladimir Gusinsky was attached to shareholder derivative lawsuits in New York and Texas, going back to 2006, that he brought against companies over their awards of stock options. A spokesman for his lawyers declined to comment.

The case is Gusinsky vs Irani, et al, and Occidental Petroleum Corporation, no: BC442658.

(Reporting by Braden Reddall; editing by Andre Grenon, Bernard Orr)

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