DEF 14A of Plains All American Pipeline LP
Filed Apr 12, 2024 · FY20230001104659-24-046387
PROPOSAL 1 — ELECTION OF CLASS III DIRECTORS
PROPOSAL 1 — ELECTION OF CLASS III DIRECTORS THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF GREG ARMSTRONG, JOHN RAYMOND AND BOBBY SHACKOULS TO SERVE AS A CLASS III DIRECTOR ON OUR GENERAL PARTNER’S BOARD OF DIRECTORS UNTIL THE 2027 ANNUAL MEETING.
Class III Directors Standing for Election at the 2024 PAA and PAGP Annual Meetings
Class III Directors Standing for Election at the 2024 PAA and PAGP Annual Meetings The Board has nominated Messrs. Armstrong, Raymond and Shackouls, current Class III directors, for election at the 2024 PAA and PAGP Annual Meetings. Mr. Temple, a current Class III director, is not standing for re-election at the 2024 PAA and PAGP Annual Meetings. Each nominee has consented to serve if elected and, if elected, will serve until the 2027 annual meeting, subject to their earlier resignation, death or removal. If any of the nominees becomes unavailable to serve as a director prior to the 2024 PAA and PAGP Annual Meetings, the Board may designate a substitute nominee, or the Board may decide to reduce the size of the Board. In the case of a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by the Board.
Class III Directors Standing for Election at the 2024 PAA and PAGP Annual Meetings
| GREG L. ARMSTRONG Not Independent PAGP/PAA Director since 1998 Former Chairman and CEO Committees: None | Greg L. Armstrong, age 65, has served as a director of PAGP GP since 2013. He has also served as Senior Advisor to the CEO since January 1, 2020. Mr. Armstrong served as Chairman of the Board of PAGP GP from July 2013 through December 31, 2019 and as Chief Executive Officer of PAGP GP from July 2013 until his retirement from such position in October 2018. He also served as Chief Executive Officer of GP LLC from PAA’s formation in 1998 until his retirement from that position in October 2018. He served as a director of PAA’s general partner or former general partner from PAA’s formation until November 2016 when the Board of PAGP GP assumed responsibility for PAA in addition to PAGP and Plains AAP. In addition, he was President, Chief Executive Officer and director of Plains Resources Inc. from 1992 to May 2001 and served in various roles of increasing responsibility from 1981 to 1992. Mr. Armstrong served as a director of the Federal Reserve Bank of Dallas from 2015 to 2021, retiring as Chair at the end of 2021. Mr. Armstrong also serves as a director of the Memorial Hermann Health System and NOV, Inc. Mr. Armstrong is also a member of the advisory board of the Maguire Energy Institute at the Cox School of Business at Southern Methodist University, the Baker Institute and Veriten, and is a past Chairman of the National Petroleum Council. Mr. Armstrong’s experience with PAA since its formation, including as former Chairman and CEO, and his long-time involvement in the energy industry, provide the Board with invaluable insight and perspective. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/ Technical • Industry Experience • International | | JOHN T. RAYMOND Independent PAGP/PAA Director since 2010 Committees: Compensation (chair) | John T. Raymond, age 53, has served as a director of PAGP GP since October 2013. He served as a director of PAA’s general partner from December 2010 until November 2016. Mr. Raymond is the founder and majority owner of EMG, which is the management company for a series of specialized private equity funds. EMG was founded in 2006 and focuses on investing across various facets of the global natural resource industry including the upstream and midstream segments of the energy complex. As of September 30, 2023, EMG had approximately $14 billion of assets under management and approximately $12 billion in commitments have been allocated across the energy sector since inception. From 1998 until founding EMG, Mr. Raymond held various executive leadership positions with several energy companies, including Plains Resources Inc. (the publicly traded predecessor company to Vulcan Energy), Plains Exploration and Production Company, Kinder Morgan, | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/ Technical • Industry Experience • Private Equity |
Class III Directors Standing for Election at the 2024 PAA and PAGP Annual Meetings
| | Inc. and Ocean Energy, Inc. From 1992 to 1998, he was a Vice President with Howard Weil Labouisse Friedrichs, Inc. Mr. Raymond has been a direct or indirect owner of PAA’s general partner since 2001 and served on the board of PAA’s general partner from 2001 to 2005. He serves on numerous other private company boards and currently serves on the board of NGL Energy Holdings LLC, the general partner of NGL Energy Partners, L.P., and ESM Acquisition Corp. Mr. Raymond is also co-founder and portfolio manager of EMG Advisors. Mr. Raymond received a BSM degree from the A.B. Freeman School of Business at Tulane University with dual concentrations in finance and accounting and currently sits on the board of the Business School Council. He also serves as a director on the board of the American Heart Association, as a member of the MD Anderson Cancer Center Board of Visitors and is a member of YPO. The Board has determined that Mr. Raymond is “independent” under applicable Nasdaq and SEC rules. We believe that Mr. Raymond’s experience with investment in and management of a variety of upstream and midstream assets and operations provides a valuable resource to the Board. | • International • Energy Evolution | | BOBBY S. SHACKOULS Lead Director Independent PAGP/PAA Director since 2010 Committees: Governance (chair) Compensation | Bobby S. Shackouls, age 73, has served as a director of PAGP GP since January 2014 and as Lead Director since January 2020. Mr. Shackouls served as Chairman of Burlington Resources Inc. from 1997 until its acquisition by ConocoPhillips in 2006, and continued to serve on the ConocoPhillips Board of Directors until his retirement in May 2011. Prior thereto, Mr. Shackouls served as President and Chief Executive Officer of Meridian Oil, Inc., a wholly owned subsidiary of Burlington Resources, from 1994 to 1995, and as President and Chief Executive Officer of Burlington Resources from 1995 until 2006. Mr. Shackouls served as a director of The Kroger Co. from 1999 until January 2021, as a director of Oasis Petroleum from 2012 until November 2020, and as a director of Quintana Energy Services from January 2019 until July 2020. He served as a director and member of the audit committee of PNGS GP LLC, the general partner of PAA Natural Gas Storage, L.P., from April 2010 through December 2013. The Board has determined that Mr. Shackouls is “independent” under applicable Nasdaq and SEC rules. We believe that Mr. Shackouls’ extensive experience within the energy industry offers valuable perspective and, in tandem with his long history of leadership as the CEO of a public company, make him highly qualified to serve as a member of the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/ Technical • Industry Experience • International |
Other Directors (Directors with terms expiring after the 2024 PAA and PAGP Annual Meetings)
| WILLIE CHIANG Not Independent PAGP/PAA Director since 2017 Chairman and CEO Committees: None | Willie Chiang, age 63, has served as a director of PAGP GP since February 2017, as Chief Executive Officer of PAGP GP and GP LLC since October 2018 and as Chairman of the Board since January 2020. He served as Executive Vice President and Chief Operating Officer of PAGP GP and GP LLC from January 2018 until October 2018. He also served as Executive Vice President and Chief Operating Officer (U.S.) of PAGP GP and GP LLC from August 2015 through December 2017. Prior to joining Plains, Mr. Chiang served as Executive Vice President — Operations for Occidental Petroleum Corporation from 2012 until 2015. From 1996 until 2012, he served in various positions at ConocoPhillips, including most recently as Senior Vice President — Refining, Marketing, Transportation and Commercial. He previously served on the boards of DCP Midstream and Chevron Phillips Chemical. He serves as chair of the United Way of Greater Houston and is on the board of Performing Arts Houston. Mr. Chiang is a member of the Energy Advisory Council of the Federal Reserve Bank of Dallas and is also involved in a number of industry organizations including the American Petroleum Institute (API), American Fuel & Petrochemical Manufacturers (AFPM) and National Petroleum Council. He received a BS in Mechanical Engineering from South Dakota School of Mines and Technology and completed the Advanced Management Program at the University of Pennsylvania. Mr. Chiang’s role as CEO and his broad experience in the energy industry, together with his leadership capabilities and strategic focus, make him highly qualified to serve on the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/Technical • Industry Experience • Diversity • International • Energy Evolution | | ELLEN R. DESANCTIS Independent PAGP/PAA Director since 2022 Committees: Audit HSES | Ellen R. DeSanctis, age 67, has served as a director of PAGP GP since August 2022. She recently served as Senior Vice President of Corporate Relations for ConocoPhillips, where she worked from 2012 until her retirement in 2022. In that capacity, she was responsible for investor relations, corporate communications and charitable programs. Prior to ConocoPhillips, Ms. DeSanctis had responsibility for similar functions, as well as strategic planning roles, for a number of upstream energy companies, including Petrohawk Energy Corporation, Rosetta Resources, Burlington Resources, Vastar Resources and ARCO. Ms. DeSanctis spent her early career as an engineer for Shell Oil Company. Ms. DeSanctis serves on the board of SilverBow Resources, Inc. She also serves as a member of the board of directors of St. Agnes Academy in Houston and served as past chair of the Girl Scouts of San Jacinto Council. Ms. DeSanctis holds a BA in Geological and Geophysical Sciences from Princeton University and an MBA from UCLA. The Board has determined that Ms. DeSanctis is “independent” under applicable Nasdaq and SEC rules. Ms. DeSanctis’s diverse, strategic and stakeholder-focused background brings a valuable perspective to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/Technical • Industry Experience • Diversity • International |
Other Directors (Directors with terms expiring after the 2024 PAA and PAGP Annual Meetings)
| ALEXANDRA D. PRUNER Independent PAGP/PAA Director since 2018 Committees: Audit Governance | Alexandra D. Pruner, age 62, has served as a director of PAGP GP since December 2018. Ms. Pruner has served as a Senior Advisor of Perella Weinberg Partners (“PWP”), a global independent advisory firm providing strategic and financial advice and asset-management services, and its energy division, Tudor, Pickering, Holt & Co., since December 2018. She previously served as Partner and Chief Financial Officer of PWP from December 2016 through November 2018. She served as CFO and a member of the Management Committee at Tudor, Pickering, Holt & Co. from the firm’s founding in 2007 until its combination with PWP in 2016. Ms. Pruner served as a director and member of the audit committee of Anadarko Petroleum Corporation from December 2018 until August 2019. She has also served as a director of NRG Energy, Inc. since October 2019, as chair of the board of Malta Inc. since April 2022, and as a director of Encino Acquisition Partners, LLC since November 2019 and as chair of the board since December 2021. She is the founder and a board member of Women’s Global Leadership Conference in Energy & Technology, is an Emeritus Director of the Amegy Bank Development Board, and is Chair of Brown University’s President’s Advisory Council on the Economics Department. She also serves on the Board of the Houston Zoo and the Texas Medical Center, among other volunteer efforts. Ms. Pruner holds a BA in Economics from Brown University. The Board has determined that Ms. Pruner is “independent” under applicable Nasdaq and SEC rules and qualifies as an “Audit Committee Financial Expert.” Ms. Pruner’s extensive experience in the energy industry from a variety of perspectives, along with her strong finance and investment banking background, make her uniquely qualified to serve on the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Industry Experience • Diversity • International • Cybersecurity/IT • Energy Evolution | | LAWRENCE M. ZIEMBA Independent PAGP/PAA Director since 2020 Committees: Audit HSES (chair) | Lawrence M. Ziemba, age 68, has served as a director of PAGP GP since January 2020. Mr. Ziemba served as Executive Vice President, Refining, and on the executive committee of Phillips 66 from May 2012 until his retirement in December 2017. From 2001 to May 2012, he served in various downstream positions with ConocoPhillips, including President, Global Refining, and chairman of WRB LLC, a downstream joint venture with Cenovus, a Canadian oil producer. He also held various positions of increasing responsibility with Tosco/Unocal from 1977 to 2001. He has held a number of industry leadership positions, including with API and AFPM. Mr. Ziemba has served on the board of directors of PBF Energy since 2023. From 2020 through 2022 he served as a director of PBF Logistics GP LLC. He also served on the board of trustees of Duchesne Academy in Houston. Mr. Ziemba received a BS in mechanical engineering from the University of Illinois — Champaign and an MBA from the University of Chicago. The Board has determined that Mr. Ziemba is “independent” under applicable Nasdaq and SEC rules. We believe that his operations, technical and project management expertise, coupled with his business sense and understanding of strategic positioning in the energy space, adds a diverse operating and downstream perspective to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/Technical • Industry Experience • International • Cybersecurity/IT • Energy Evolution |
Other Directors (Directors with terms expiring after the 2024 PAA and PAGP Annual Meetings)
| VICTOR BURK Independent PAGP/PAA Director since 2010 Committees: Audit (chair) | Victor Burk, age 74, has served as a director of PAGP GP since January 2014. He is a Senior Advisor for Alvarez and Marsal, a privately owned professional services firm, where he served as Managing Director from April 2009 through December 2022. From 2005 to 2009, Mr. Burk was the global energy practice leader for Spencer Stuart, a privately owned executive recruiting firm. Prior to joining Spencer Stuart, Mr. Burk served as managing partner of Deloitte & Touche’s global oil and natural gas group from 2002 to 2005. He began his professional career in 1972 with Arthur Andersen and served as managing partner of Arthur Andersen’s global oil and natural gas group from 1989 until 2002. Mr. Burk served on the board of directors and audit committee of EV Energy Partners, L.P. from September 2006 until June 2018. Mr. Burk served as a director and as chair of the audit committee of PNGS GP LLC, the general partner of PAA Natural Gas Storage, L.P., from April 2010 through December 2013. Mr. Burk also serves as a board member of the Sam Houston Area Council of the Boy Scouts of America. He received a BBA in Accounting from Stephen F. Austin State University, graduating with highest honors. The Board has determined that Mr. Burk is “independent” under applicable Nasdaq and SEC rules and qualifies as an “Audit Committee Financial Expert.” We believe that Mr. Burk’s background, spanning over 30 years of extensive public accounting and consulting experience in the energy industry, coupled with his demonstrated leadership abilities, bring valuable experience and insight to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Industry Experience • International | | KEVIN S. MCCARTHY Independent PAGP/PAA Director since 2020 Committees: Governance HSES | Kevin S. McCarthy, age 64, has served as a director of PAGP GP since October 2020. He served as Vice Chairman at Kayne Anderson from 2019 to 2023. During his 19-year tenure at Kayne Anderson, he co-founded the firm’s energy infrastructure securities activities, and served as CEO and Chairman of the Board of Directors for Kayne Anderson’s closed-end funds. Prior to joining Kayne Anderson in 2004, Mr. McCarthy was global head of energy investment banking at UBS Securities LLC and held similar positions at PaineWebber Incorporated and Dean Witter Reynolds. Mr. McCarthy serves as a director of Kinetik Holdings Inc. and Chord Energy Corporation, and previously served as a director of Whiting Petroleum Corporation (Chairman), Altus Midstream Company, Range Resources Corporation, ONEOK, Inc., Emerge Energy Services LP and K-Sea Transportation Partners L.P. He also sits on the board of directors of the Gladney Fund, a Fort Worth based adoption agency. Mr. McCarthy earned a BA in economics and geology from Amherst College and an MBA in Finance from the Wharton School at the University of Pennsylvania. The Board has determined that Mr. McCarthy is “independent” under applicable Nasdaq and SEC rules. Mr. McCarthy’s extensive investment management background and involvement in the energy sector, along with the breadth and depth of his market and industry knowledge, brings substantial experience, insight and skill to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Industry Experience • Private Equity |
Other Directors (Directors with terms expiring after the 2024 PAA and PAGP Annual Meetings)
| HARRY N. PEFANIS Not Independent PAGP/PAA Director since 2017 President Committees: None | Harry N. Pefanis, age 66, has served as a director of PAGP GP since February 2017 and as President of PAGP GP and GP LLC since March 2021. He previously served as President and Chief Commercial Officer of PAGP GP and GP LLC from January 2018 until March 2021. He served as President and Chief Operating Officer of GP LLC from PAA’s formation in 1998 through December 2017, and as President and Chief Operating Officer of PAGP GP from July 2013 through December 2017. He was also a director of PAA’s former general partner. In addition, he was Executive Vice President — Midstream of Plains Resources from May 1998 to May 2001. He previously served Plains Resources as: Senior Vice President from February 1996 until May 1998; Vice President — Products Marketing from 1988 to February 1996; Manager of Products Marketing from 1987 to 1988; and Special Assistant for Corporate Planning from 1983 to 1987. Mr. Pefanis was also President of several former midstream subsidiaries of Plains Resources prior to PAA’s formation. Mr. Pefanis served as a director of Oasis Midstream Partners, L.P. from July 2018 until February 2022. He is also a director of the Memorial Hermann Foundation and a trustee of the University of Oklahoma Foundation. Mr. Pefanis’s involvement with PAA since its formation and his considerable operational, commercial, accounting and financial experience brings important and valuable skills to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Operations/ Engineering/ Construction/ Technical • Industry Experience • International | | GARY R. PETERSEN Independent PAGP/PAA Director since 2001 Committees: Compensation Governance | Gary R. Petersen, age 77, has served as a director of PAGP GP since November 2016. He served as a director of PAA’s general partner from June 2001 until November 2016. Mr. Petersen is a Managing Partner of EnCap, an investment management firm which he co-founded in 1988. He also served as a director of EV Energy Partners, L.P. from September 2006 until June 2018. He had previously served as Senior Vice President and Manager of the Corporate Finance Division of the Energy Banking Group for RepublicBank Corporation. Prior to his position at RepublicBank, he was Executive Vice President and a member of the Board of Directors of Nicklos Oil & Gas Company from 1979 to 1984. He served from 1970 to 1971 in the U.S. Army as a First Lieutenant in the Finance Corps and as an Army Officer in the Army Security Agency. He is a member of the Independent Petroleum Association of America, the Houston Producers Forum and the Petroleum Club of Houston. Mr. Petersen is a director of the Memorial Hermann Health System and the Houston Museum of Natural Science. He also sits on the board of trustees of The Council on Recovery. Mr. Petersen holds BBA and MBA degrees in finance from Texas Tech University. The Board has determined that Mr. Petersen is “independent” under applicable Nasdaq and SEC rules. Mr. Petersen has been involved in the energy sector for over 35 years, garnering extensive knowledge of the energy sectors’ various cycles, as well as the current market and industry knowledge that comes with management of approximately $18 billion of energy-related investments. In tandem with the leadership qualities evidenced by his executive background, we believe that Mr. Petersen brings numerous valuable attributes to the Board. | Board Qualifications: • Public Company Experience • Finance/Accounting • Business Development/ Strategy/Commercial • Legal/Governance/ Government Relations • Industry Experience • Private Equity • International |
Executive Compensation General Philosophy and Approach
| What We Do | What We Don’t Do | | ✓ We emphasize pay for performance ✓ Over 80% of target NEO compensation is variable and/or at risk ✓ Our annual bonus program is 100% performance based with payout based on a formulaic framework ✓ 50% of NEO long-term equity incentives are performance based, requiring performance over a multi-year period ✓ Compensation program design mitigates against excessive risk taking ✓ Independent compensation consultant ✓ Regular investor engagement on compensation and other matters ✓ Equity Ownership Guidelines for executive officers and directors ✓ Clawback Policy that applies to incentive-based and other compensation | No guaranteed bonuses No excise tax gross ups Directors and officers are prohibited from hedging or pledging company securities Our equity plan prohibits backdating or repricing of options No significant perquisites for our executive officers No single-trigger change in control protections in our long-term incentive plan grants |
Majority of NEO Pay At-Risk and Performance-Based
Majority of NEO Pay At-Risk and Performance-Based * The “Other NEOs” graphic excludes Mr. Pefanis. Mr. Pefanis is a co-founder and substantial equity owner and for the last several years has requested to not participate in the long-term incentive program, which results in an at-risk compensation percentage for Mr. Pefanis of 67%. At-risk compensation is typically tied to the achievement of one or more performance metrics that measure value creation over both the near and longer term, as well as service period requirements. The primary short-term financial metrics are annual earnings and cash flow levels as represented by Adjusted EBITDA1 attributable to PAA and distributable cash flow (“DCF”) per common unit equivalent (“CUE”). The primary long-term performance measures included in our equity incentive grants are DCF per CUE over a 3-year period (with a leverage modifier) and relative TSR over a 3-year period. We believe our short- and long-term performance metrics are consistent with our overall financial strategy of maintaining financial flexibility and generating attractive unitholder returns. Earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to canceled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains or losses on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability. We believe our pay-for-performance approach aligns the interests of our executive officers with the interests of our equity holders. We also believe that our pay-for-performance approach helps us achieve the overall objectives of our executive compensation program, which are to: attract and retain individuals with the background and skills necessary to successfully execute our business model in a demanding environment; • pay for performance by tying a majority of NEO pay (58% for the CEO and 55% on average for the other NEOs) to achievement of specific near-term and long-term goals that drive long-term growth in unitholder value; and • directly align our NEOs with our unitholders through the use of equity incentives and encouragement of long-term unit ownership.
Compensation Elements and Objectives
| What We Pay | Why We Pay It | Key Features | | Base Salary | Attract and retain high-performing executives by providing a secure and appropriate level of base pay | • Foundational element of our compensation program; short-term and long-term incentive compensation components are based on a percentage of base salary • Subject to adjustment periodically based in part on competitive market data • Smallest component of NEO compensation | | Annual Cash Incentive Awards | Motivate and reward near-term performance and retention | • 100% performance based • Encourages achievement of objective and transparent annual business, ESG and individual goals established at beginning of year • Payout based on formulaic framework | | Long-Term Equity Incentive Awards | Motivate and reward long-term performance and retention and create additional alignment with investors | • Long-term equity incentives are 50% performance-based and 50% time-based • Performance-based awards earned based upon performance over cumulative three-year period • Performance metrics include relative TSR with negative TSR modifier, and DCF/CUE with leverage modifier (potential downward adjustment only) • Distribution Equivalent Rights (“DERs”) associated with long-term equity awards provide additional potential motivation and alignment with other equity holders |
2023 Independent Benchmark Study of Executive Compensation
2023 Independent Benchmark Study of Executive Compensation With respect to our 2023 executive compensation program, our Compensation Committee engaged Meridian to provide independent counsel, including a benchmarking review of our executive officer compensation. In connection with its engagement of Meridian, the Compensation Committee evaluated and confirmed Meridian’s independence relative to existing PAA or PAGP relationships or potential conflicts, in line with Nasdaq requirements. Business consolidation and unique operating models create some challenges in identifying directly comparable peer companies. Accordingly, we take a broad view of comparability to include organizations that are similar to ours and that we believe we compete with for attracting and retaining executive talent. Our primary compensation benchmarking peer group for 2023 included 11 companies across a wide range of revenues, asset values and enterprise values that are primarily engaged in the midstream business in the United States (the entities in the benchmarking peer group are listed in the table below). Meridian utilized publicly available information to analyze compensation practices of the companies in the benchmarking peer group, including how pay is divided among long-term incentives, annual incentives and base pay. Meridian also compared the amount and structure of compensation for our executive officers to the benchmarking peer group. Meridian’s benchmark study was presented to the Compensation Committee in November 2023. To provide a broader context to the Compensation Committee, Meridian also provided the Committee with relevant data from six additional midstream companies, nine upstream companies (used exclusively for pay mix comparison purposes), and relevant survey data (used as a secondary reference for additional context); however, the benchmarking peer group listed in the table below served as the primary source of external comparative information. Meridian’s benchmark study presented to the Compensation Committee in November 2023 included the following summary findings: • Total target compensation for all NEOs on average falls within the middle range of our peers; and • Total target compensation for the CEO ranks below the median relative to peers. For a portion (25%) of the long-term incentive awards granted to our executive officers in 2023, we included relative TSR as a performance metric for the three-year performance period ending June 30, 2026. The entities in our 2023 compensation benchmarking peer group and the entities and indices in our TSR Comparator Peer Group for the 2023 long-term incentive awards include the following:
2023 Independent Benchmark Study of Executive Compensation
| Entity/Index Name (Ticker) | 2023 Compensation Benchmarking Peer Group | 2023 TSR Comparator Peer Group | | Energy Transfer LP (ET) | | | | Enterprise Products Partners LP (EPD) | | | | Kinder Morgan Inc. (KMI) | | | | The Williams Companies Inc. (WMB) | | | | MPLX LP (MPLX) | | | | ONEOK Inc. (OKE) | | | | Targa Resources Corp. (TRGP) | | | | Western Midstream Partners LP (WES) | | | | EnLink Midstream LLC (ENLC) | | | | Magellan Midstream Partners LP (MMP) | | | | Equitrans Midstream Corporation (ETRN) | | | | Crestwood Equity Partners LP (CEQP) | | | | Genesis Energy LP (GEL) | | | | NuStar Energy LP (NS) | | | | S&P 500 Index (SPX) | | | | Alerian Midstream Energy Index (AMNA) | | |
Additional Information Regarding Compensation Practices and Processes
Additional Information Regarding Compensation Practices and Processes Set forth below is additional information regarding our compensation practices and processes as they relate to the elements of our compensation program: Base Salary. Historically, we have not made regular annual adjustments to the base salaries of our Named Executive Officers. We have made salary adjustments periodically in connection with promotions, the assumption of increased responsibilities or to address changes in competitive market data. Base salaries were not adjusted in 2023. Annual Cash Incentive Awards. Annual cash incentive awards (or bonuses) are determined within a formulaic framework that includes an annual bonus target for each Named Executive Officer, expressed as a percentage of base salary, and the determination of an actual payout as a percentage of such target amount based on company performance relative to specific goals, and individual contributions. Annual company goals typically include financial, safety, environmental and other specified goals, and each goal, as well as the individual performance component, is assigned a weighting or percentage share of the total payout opportunity. Annual goals and objectives, as well as weightings and potential payout ranges (expressed as a percentage of target) are established at the beginning of each year and are discussed and reviewed with the Board in conjunction with the review and approval of our annual plan. Payout percentages relative to achievement of specified goals may range from 0 – 200% of an individual’s target opportunity. The final amounts that are paid may be adjusted by the Compensation Committee and the Board based on factors it deems relevant. Such adjustments may be positive or negative depending on the circumstances.
2023 Annual Bonus Formula
2023 Annual Bonus Formula At the end of each year, the CEO assesses the Company’s performance relative to goals and objectives established at the beginning of the year. The CEO’s written analysis of our performance examines accomplishments and shortfalls relative to established goals and objectives and also assesses overall performance against opportunities and challenges, taking into account controllable and non-controllable factors encountered during the year. The CEO also assesses the individual performance and contributions of each NEO (other than himself) towards the satisfaction of the various goals and objectives established at the beginning of the year. The CEO submits his report and the supporting detail to the Compensation Committee and Board for review and comment. Based on the conclusions set forth in the annual performance assessment, the CEO submits to the Compensation Committee the results of the formulaic bonus calculations, along with any recommendations for adjustments, for all Named Executive Officers other than himself. In connection with his assessment of Company and individual performance, the CEO also considers various factors, including: • whether or not we achieved the goals established for the year and any notable shortfalls relative to expectations; • the level of difficulty associated with achieving such objectives based on the opportunities and challenges encountered during the year; • current year operating and financial performance relative to both public guidance and prior year’s performance; • significant transactions or accomplishments for the period not included in the goals for the year; • our relative prospects at the end of the year with respect to future growth and performance; and • our equity price performance and returns during the year and our positioning at the end of the year with respect to our targeted leverage metrics and credit profile. The Compensation Committee may adjust the CEO’s recommendations upward or downward in its discretion. The Compensation Committee’s recommendations are then submitted to the Board for final review and approval. As noted above, the CEO does not make a recommendation with respect to his own bonus. The Compensation Committee assesses the CEO’s performance and contributions toward meeting the goals and objectives established at the beginning of the year, and then recommends to the Board a total bonus payout for the CEO that it believes to be commensurate with such performance and contributions. Long-Term Incentive Awards. We use performance and time-based phantom unit grants issued under our Long-Term Incentive Plans to incentivize and retain our executive officers and encourage and reward timely achievement of targeted metrics designed to align the long-term interests of the Named Executive Officers with those of our unitholders.
2023 Annual LTIP Award; Determination of Units for Annual Grants
2023 Annual LTIP Award; Determination of Units for Annual Grants NEOs are eligible to receive an annual grant of phantom units based on a formula tied to salary and PAA’s unit price. The size of the annual grant for a specified individual is based on a designated target percentage of their base salary that takes into account their expected contribution in respect of longer term performance objectives. Annual equity grants typically require minimum service periods of three years in order to encourage long-term retention. A phantom unit grant provides the holder with the right to receive, upon the satisfaction of vesting criteria specified in the grant, a PAA common unit (or cash equivalent). We do not use options as a form of incentive compensation. Terms of phantom unit grants may vary, but generally phantom units vest upon the later of achievement of designated performance thresholds and continued employment for a full three-year period. Phantom unit grants for the Named Executive Officers typically include DERs, and for awards granted in 2023, DERs on the performance-based portion of such awards accrue from the grant date and will be payable only if and to the extent the underlying phantom units vest at the end of the three-year performance period. DERs on the time-based portion of such awards accrue for the first year following the grant date, with such accrued amount being paid out on the first anniversary of the grant date, and then are paid on a quarterly basis thereafter. 2023 Performance Overview and Specific Application of Compensation Elements in 2023 At the beginning of 2023, we established key quantitative financial, safety and environmental objectives, along with several qualitative goals. These objectives and goals are summarized in the table below.
2023 Annual LTIP Award; Determination of Units for Annual Grants
| 2023 Performance Objectives and Results (all figures rounded) | | | | Quantitative Goals | | | | Metrics | 2023 Goals | 2023 Results | | Adjusted EBITDA attributable to PAA(1) | $2.50 billion | $2.71 billion | | Implied DCF per common unit and CUE(1) | $2.33 | $2.46 | | Safety and Environmental | • Total Recordable Injury Rate:0.25 • Federally Reportable Releases: 10 | • Total Recordable Injury Rate: 0.31 • Federally Reportable Releases: 19 |
2023 Annual LTIP Award; Determination of Units for Annual Grants
| Qualitative Goals | | • Financial: strengthen financial positioning and flexibility; achieve a leverage ratio of ~3.5x or lower by year end; deliver $579 million of Adjusted Free Cash Flow after Distributions; and increase returns of free cash flow after distributions to unitholders. • Investment: maintain capital discipline by completing our capital program and maintaining prudent risk adjusted return hurdles for projects under development; advance key projects, including emerging energy opportunities, that will support future growth and returns; and optimize existing assets. • Operations and Management: advance and complete key programs and initiatives, including efforts designed to improve the efficiency and scalability of our operations and accounting processes and information systems; progress sustainability goals; and advance key initiatives related to talent development/management, diversity and inclusion, succession planning, employee wellness and performance management. | | (1) Adjusted EBITDA attributable to PAA and Implied DCF are non-GAAP financial measures. Information regarding these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, is included under the caption “Non-GAAP Financial Measures” beginning on page 73 of PAA’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC. |
2023 Annual LTIP Award; Determination of Units for Annual Grants
Set forth below are some highlights regarding our 2023 performance relative to our goals and objectives for the year: • With respect to Adjusted EBITDA attributable to PAA, we exceeded our goal by 8% driven primarily by volume growth, higher commodity prices and operating performance. • In addition to the results set forth in the table above, we also reported Adjusted Free Cash Flow after Distributions of approximately $809 million (vs. our goal for the year of $579 million). • We reduced our debt by approximately $700 million and returned approximately $750 million to common equity holders via distributions. We exited the year with a leverage ratio of 3.1x and approximately $2.6 billion of committed liquidity. Despite a strong multi-year improvement trend, we did not achieve our annual goals regarding safety and environmental metrics. We experienced 19 federally reportable releases (“FRR”) versus a target of 10 and we had a total recordable injury rate (“TRIR”) of 0.31 versus a target of 0.25. However, excluding non-preventable injuries, the TRIR for 2023 would have been 0.23, or slightly below the target of 0.25. In addition, injury severity and lost workdays were reduced relative to 2022 levels. In developing his annual bonus compensation recommendations, our CEO primarily considered the quantitative factors and context described above. Other factors noted by our CEO as being relevant to his assessment of our 2023 performance included the following: We enhanced our existing assets through the completion of three bolt-on acquisitions; • We added additional dedicated acres to the POP JV and extended contracts; • We continued to advance several debottlenecking projects at our NGL facilities designed to improve efficiencies; • We completed the sale of our minority interest in the Keyera Ft. Sask JV and a portion of our owned rail car fleet; • We captured efficiency improvements at our Empress straddle plants; • We delivered our capital program on time and within budget; and • We advanced several emerging energy projects and continued to make meaningful progress on our efforts to improve effectiveness and efficiency in a variety of areas, including employee development and succession planning, internal systems and processes, safety, integrity, environmental stewardship and sustainability. 2023 Compensation Elements For 2023, the elements of compensation were applied as described below. Base Salary. There were no adjustments to the base salaries of our Named Executive Officers in 2023. The 2023 annual base salaries for our NEOs were as follows:
2023 Annual LTIP Award; Determination of Units for Annual Grants
| Named Executive Officer | Annual Base Salary | | Willie Chiang | $800,000 | | Harry Pefanis | $600,000 | | Al Swanson | $550,000 | | Richard McGee | $550,000 | | Chris Chandler | $600,000 | | Jeremy Goebel | $600,000 |
2023 Annual LTIP Award; Determination of Units for Annual Grants
Annual Cash Incentive Awards. There were no adjustments to the annual bonus targets for our Named Executive Officers in 2023. The 2023 annual bonus targets for our NEOs, expressed as a percentage of base salary, were as follows:
2023 Annual LTIP Award; Determination of Units for Annual Grants
| Named Executive Officer | Annual Bonus Target (as a Percentage of Base Salary) | | Willie Chiang | 250% | | Harry Pefanis | 200% | | Al Swanson | 150% | | Richard McGee | 150% | | Chris Chandler | 150% | | Jeremy Goebel | 150% |
2023 Annual LTIP Award; Determination of Units for Annual Grants
The goals (and weightings) for 2023 cash incentive awards established at the beginning of the year were company performance (60% overall weighting allocated among Adjusted EBITDA attributable to PAA (40%), DCF per common unit and CUE (40%) and safety/environmental (20%)) and individual performance (40% weighting). The minimum and maximum payout levels of 0% and 200%, respectively, for Adjusted EBITDA attributable to PAA and DCF per common unit and CUE were set at 92.5% and 110%, respectively, of the applicable target with linear interpolation between those points. The minimum and maximum payout levels of 0% and 200%, respectively, for safety (TRIR) and environmental (FRR) metrics were set at a range of between 0.28 (min) to 0.22 (max) for TRIR and a range of between 13 (min) and 7 (max) for FRR, in both cases with linear interpolation between those points. Individual performance metric payouts were determined by the Compensation Committee based on its assessment of individual contributions towards our 2023 goals and objectives. Company Performance (60% weight) The tables below reflect the weighting, payout range and actual results for each company performance metric. Individual performance scores and payout calculations are set forth below under “— Individual Performance.”
Company Performance Payout Thresholds & Ranges: (interpolate between points)
Company Performance Payout Thresholds & Ranges: (interpolate between points)
Company Performance Payout Thresholds & Ranges: (interpolate between points)
| (60% weighting) | Threshold | Target | Max | 2023 Formulaic Payout Calculation | | Adjusted EBITDA attributable to PAA/DCF (% Target) | 92.50% | 100% | 110% | | | Safety (TRIR) | 0.28 | 0.25 | 0.22 | | | Environmental (FRR) | 13 | 10 | 7 | | | Payout | 0% | 100% | 200% | |
Company Performance Payout Thresholds & Ranges: (interpolate between points)
| Company Performance Metrics | Weight | Threshold | Target | Max | Result | Payout % | Wgtd % | | Adjusted EBITDA attributable to PAA(1) | 40% | $2,313 | $2,500 | $2,750 | $2,684 | 174% | 70% | | Implied DCF/Common Unit and CUE(1) | 40% | $2.16 | $2.33 | $2.56 | $2.43 | 141% | 56% | | Safety (TRIR)(2) | 10% | 0.28 | 0.25 | 0.22 | 0.31 | 50% | 5% | | Environmental (FRR) | 10% | 13 | 10 | 7 | 19 | 0 | 0% | | Company Performance Subtotal | | | | | | | 131% |
Company Performance Payout Thresholds & Ranges: (interpolate between points)
(1) For purposes of the 2023 annual bonus calculation, Adjusted EBITDA and DCF/CUE were adjusted downward to $2.684 billion and $2.43, respectively, to remove the impact of unplanned interest income. (2) The Committee approved a 50% discretionary payout for the TRIR metric given that 2023 TRIR would have been 0.23 (same level as 2022) if non-preventable incidents were excluded and that injury severity/lost workdays were down relative to 2022. Individual Performance (40% weight) As noted above, individual performance accounts for 40% of the annual bonus opportunity for our Named Executive Officers. Each officer’s individual contributions toward satisfaction of company goals and objectives is evaluated and payouts may range from 0-200% of target. During 2023, the executive leadership team executed well in an uncertain and volatile environment allowing Plains to successfully capture multiple upsides in the business and deliver results that exceeded plan. The individual payout scores for our NEOs for 2023 are set forth in the table below and take these factors into account, together with the specific items described for each NEO in the table.
Company Performance Payout Thresholds & Ranges: (interpolate between points)
| Name | Individual Performance Highlights | Payout Score | | Willie Chiang | • Overall leadership, culture and tone setting • Investor and rating agency engagement/messaging, capital allocation, ESG/sustainability • Led strategic positioning for 2024+ • Ongoing Board initiatives, leadership development/succession | 175% | | Harry Pefanis | • Significant role in key strategic decisions/initiatives • Leadership of long-term efficiency initiative • Mentored/developed key individuals and provided strategic/tactical advice on commercial matters • Strategic positioning for 2024+ • Develop/maintain/enhance major commercial relationships | 100%* | | Al Swanson | • Finance group leadership in volatile environment • Driver of organizational focus on maximizing free cash flow and maintaining capital discipline, financial flexibility and ample committed liquidity • Key role in developing financial strategy for 2024+ • Key role in driving updated capital allocation framework/leverage targets • Facilitated effort to improve credit ratings | 160% | | Richard McGee | • Legal/Land and HR group oversight/leadership during very active year • Leadership/oversight of legal efforts in support of key acquisition, divestiture, JV and other transactions and key commercial arrangements • Oversight of effort to manage/mitigate Line 901 and other litigation exposure and advance positioning for resolution • Key role in investor engagement effort and various Board/governance/HR/ compensation initiatives | 160% | | Chris Chandler | • Drive operating excellence and continued multi-year trend of HSE and reliability improvements • Operational reliability and successful capital program to capture Permian growth • Record operations personal and process safety performance • Strong NGL operations performance to capture NGL production and border flows in Canada • Optimization of Empress complex to improve margin, efficiency and yield • Operations integration of three Permian acquisitions • Development and sanctioning of PFS Phase 1 Project • Timely completion of Plains executed scope of Wink to Webster project | 175% | | Jeremy Goebel | • Overall commercial organization leadership • Led key commercial strategies that drove financial overperformance vs. plan • Solid execution enabled capture of unforecasted market opportunities • Led key business development initiatives • OMOG, LM and Southern Delaware transactions • $310 million in divestitures (KFS and railcar sales) • Commercial contracting in support of Ft. Sask debottleneck/expansion • Increased Permian dedicated acreage by ~150,000 acres • Significant additional volume capture (Permian and elsewhere) • Drove NGL strategy/execution (including IPL/Co-ed restructuring) • Oversight of emerging energy effort • Significant role in attractive positioning of business for 2024+ | 175% |
Company Performance Payout Thresholds & Ranges: (interpolate between points)
Mr. Pefanis requested a 100% cap/limit for his individual payout score. After applying the individual performance scores set forth in the table above ranging from 100% to 175%, the total formulaic bonus payout calculation for our NEOs ranged from 119% to 149%, as set forth in the table below.
Company Performance Payout Thresholds & Ranges: (interpolate between points)
| Named Executive Officer | 2023 Target Bonus Amount | Company Results | | | Individual Results | | | Percent of Target Bonus Earned | 2023 Actual Bonus Amount(1) | | | | Company Score | Weight | | Individual Score | Weight | | | | | Willie Chiang | $2,000,000 | 131%x | 60% | + | 175%x | 40% | = | 149% | $2,975,000 | | Harry Pefanis | $1,200,000 | 131%x | 60% | + | 100%x | 40% | = | 119% | $1,425,000 | | Al Swanson | $825,000 | 131%x | 60% | + | 160%x | 40% | = | 143% | $1,180,000 | | Richard McGee | $825,000 | 131%x | 60% | + | 160%x | 40% | = | 143% | $1,180,000 | | Chris Chandler | $900,000 | 131%x | 60% | + | 175%x | 40% | = | 149% | $1,340,000 | | Jeremy Goebel | $900,000 | 131%x | 60% | + | 175%x | 40% | = | 149% | $1,340,000 |
Company Performance Payout Thresholds & Ranges: (interpolate between points)
(1) Final amounts were rounded up to the nearest multiple of $5,000. Long-Term Incentive Awards. The annual LTIP targets for the Named Executive Officers, expressed as a percentage of base salary, and the value of the 2023 annual LTIP awards to the Named Executive Officers are set forth in the table below:
Company Performance Payout Thresholds & Ranges: (interpolate between points)
| Named Executive Officer | Annual LTIP Award Target Value (as a percentage of base salary) | 2023 Annual LTIP Award Value | 2023 Annual Phantom Units Granted(1) | Time-Based Phantom Units (50%) | Performance- Based Phantom Units (50%) | | Willie Chiang | 600% | $4,800,000 | 324,100 | 162,050 | 162,050 | | Harry Pefanis | 500% | n/a(2) | n/a(2) | n/a(2) | n/a(2) | | Al Swanson | 275% | $1,513,000 | 102,150 | 51,075 | 51,075 | | Richard McGee | 275% | $1,513,000 | 102,150 | 51,075 | 51,075 | | Chris Chandler | 325% | $1,950,000 | 131,650 | 65,825 | 65,825 | | Jeremy Goebel | 325% | $1,950,000 | 131,650 | 65,825 | 65,825 |
Company Performance Payout Thresholds & Ranges: (interpolate between points)
(1) Based on a volume weighted average price per unit for the 10-trading day period beginning five days before and ending five days after the ex-dividend date for the August 2023 distribution ($14.81). (2) Annual LTIP grants were not awarded to Mr. Pefanis as he requested to not participate in the 2023 long-term incentive program. The 2023 time-based phantom units will vest (become payable 1-for-1 in PAA common units) on the August 2026 distribution date. The performance-based phantom units will potentially vest on the August 2026 distribution date at a scaled payout range of between 0% to 200% based on: (i) 50% Relative TSR with Negative TSR Modifier: PAA’s TSR measured over the three-year period ending June 30, 2026 compared to the TSR of the TSR Comparator Peer Group identified on page 31 (if PAA’s relative TSR results in a payout of over 100%, but actual TSR is negative, the payout on this portion of the award will be reduced by 25 gross percentage points, but not below 100%); and (ii) 50% DCF per CUE with Leverage Modifier: PAA achieving cumulative DCF per CUE of $7.45 over the three-year period ending June 30, 2026 (payout may be decreased by 25 basis points if PAA’s leverage ratio as of June 30, 2026 is higher than the leverage ratio that equals the upper end of our then applicable guidance range). DERs associated with the time-based phantom units will accrue for the first year and such accrued amount will be paid in cash in a lump sum on the August 2024 distribution date; beginning in November 2024, DERs on such time-based phantom units will be paid quarterly until the associated phantom units vest. DERs associated with the performance-based phantom units will accrue during the three-year performance period and be paid in cash in a lump sum on the August 2026 distribution date with respect to the number of such phantom units, if any, that vest on such date. See the “Grants of Plan Based Awards Table” below for additional information regarding the 2023 annual grants.
Relation of Compensation Policies and Practices to Risk Management
Relation of Compensation Policies and Practices to Risk Management Our compensation policies and practices are designed to provide rewards for short-term and long-term performance, both on an individual basis and at the entity level. In general, optimal financial and operational performance, particularly in a competitive business, requires some degree of risk-taking. Accordingly, the use of compensation as an incentive for performance can foster the potential for management and others to take unnecessary or excessive risks to reach targeted performance thresholds. For us, such risks would primarily attach to certain commercial merchant activities as well as to the execution of investment capital projects and acquisitions and the realization of associated returns. From a risk management perspective, our policy is to conduct our commercial activities within pre-defined risk parameters that are closely monitored and are structured in a manner intended to control and minimize the potential for unwarranted risk-taking. We also routinely monitor and measure the execution and performance of investment capital projects and acquisitions relative to expectations. Our compensation arrangements contain a number of design elements that serve to minimize the incentive for unwarranted risk-taking to achieve short-term, unsustainable results, including splitting the awards into a number of tranches and delaying the vesting date for various tranches, in addition to subjecting such awards to forfeiture for terminations related to violations of our risk management policies and practices or of our Code of Business Conduct. In addition, the vesting criteria for long-term incentive awards are typically based on the passage of time and performance thresholds associated with achieving specified long-term financial goals. Also, the fact that we utilize a variety of metrics in connection with our incentive arrangements (both short and long term), including a leverage modifier in the case of our long-term incentive plan grants, provides a structural mitigant against excessive risk taking to achieve performance targets. In combination with our risk-management practices and the processes employed by the Compensation Committee and the Board, we believe there is an adequate level of oversight with respect to the degree of risk being taken by management to achieve short- and long-term performance goals and we believe that risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on us.
Summary Compensation Table
Summary Compensation Table The following table sets forth certain compensation information for our Named Executive Officers. As a result of his request to not participate in the 2023 long-term incentive program, Mr. Pefanis is not one of our three most highly compensated executive officers for 2023, but he has been included as a Named Executive Officer given the significance of his role as President of Plains.
Summary Compensation Table
| Name and Current Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | | Willie Chiang | 2023 | 800,000 | 3,658,279 | 2,975,000 | 20,640 | 7,453,919 | | Chairman and Chief Executive Officer | 2022 | 750,000 | 3,927,000 | 3,600,000 | 19,140 | 8,296,140 | | | 2021 | 600,000 | 2,053,850 | 1,720,000 | 18,360 | 4,392,210 | | Harry Pefanis | 2023 | 600,000 | — | 1,425,000 | 20,640 | 2,045,640 | | President | 2022 | 550,000 | — | 2,105,000 | 19,140 | 2,674,140 | | | 2021 | 400,000 | — | 1,150,000 | 18,360 | 1,568,360 | | Al Swanson | 2023 | 550,000 | 1,153,018 | 1,180,000 | 20,640 | 2,903,658 | | Executive Vice President and Chief Financial Officer | 2022 | 512,500 | 1,237,005 | 1,450,000 | 19,140 | 3,218,645 | | | 2021 | 400,000 | 821,267 | 980,000 | 18,360 | 2,219,627 | | Richard McGee | 2023 | 550,000 | 1,153,018 | 1,180,000 | 20,640 | 2,903,658 | | Executive Vice President, General Counsel and Secretary | 2022 | 512,500 | 1,237,005 | 1,515,000 | 19,140 | 3,283,645 | | | 2021 | 400,000 | 821,267 | 1,050,000 | 18,360 | 2,289,627 | | Chris Chandler | 2023 | 600,000 | 1,485,999 | 1,340,000 | 20,640 | 3,446,639 | | Executive Vice President and Chief Operating Officer | 2022 | 550,000 | 4,081,569 | 1,730,000 | 19,140 | 6,380,709 | | | 2021 | 400,000 | 821,267 | 1,010,000 | 18,360 | 2,249,627 | | Jeremy Goebel | 2023 | 600,000 | 1,485,999 | 1,340,000 | 20,640 | 3,446,639 | | Executive Vice President and Chief Commercial Officer | 2022 | 550,000 | 4,081,569 | 1,730,000 | 19,140 | 6,380,709 | | | 2021 | 400,000 | 821,267 | 1,170,000 | 18,360 | 2,409,627 |
Summary Compensation Table
(1) Grant date fair values are presented for (i) phantom unit grants awarded to Messrs. Chiang, Swanson, McGee, Chandler and Goebel in August 2021, 2022 and 2023, and (ii) a portion of phantom unit grants awarded to Messrs. Chandler and Goebel in November 2019, which were amended in February 2022. Dollar amounts in the table represent the aggregate fair value of phantom units awarded based on the probable outcome of underlying performance conditions pursuant to FASB ASC Topic 718. See Note 17 to our Consolidated Financial Statements included in our 2023 Annual Report for further discussion regarding the calculation of grant date fair values. For phantom unit grants awarded to Messrs. Chandler and Goebel in November 2019, 50% were deemed probable of vesting on the grant date. The probability-based fair value of the phantom unit grants awarded in November 2019 was $3,901,500; the maximum fair value of phantom unit grants awarded in November 2019, assuming that the highest level of performance conditions will be met, was $6,865,000 for each of Messrs. Chandler and Goebel. The November 2019 phantom unit grants were amended in February 2022 to replace the original DCF/CUE metric in the performance-based portion of the award with a relative TSR metric. As a result of the amendment, 100% of the grants were deemed probable of vesting on the amendment date. The amounts presented for each of Messrs. Chandler and Goebel for 2022 include aggregate incremental fair value of $2,486,671 resulting from the amendment of the performance-based portion of the November 2019 awards. The incremental fair value represents the net increase in fair value of the amended awards relative to the fair value on the original grant date. For phantom unit grants awarded in August 2021, 75% were deemed probable of vesting on the grant date. The maximum fair value of phantom unit grants awarded in August 2021, assuming that the highest level of performance conditions will be met, was $2,738,466 for Mr. Chiang and $1,095,022 for each of Messrs. Swanson, McGee, Chandler and Goebel. For phantom unit grants awarded in August 2022, 75% were deemed probable of vesting on the grant date. The maximum fair value of phantom unit grants awarded in August 2022, assuming that the highest level of performance conditions will be met, was $7,854,000 for Mr. Chiang, $2,474,010 for each of Messrs. Swanson and McGee, and $3,189,795 for each of Messrs. Chandler and Goebel. For phantom unit grants awarded in August 2023, 75% were deemed probable of vesting on the grant date. The maximum fair value of phantom unit grants awarded in August 2023, assuming that the highest level of performance conditions will be met, was $4,877,705 for Mr. Chiang, $1,537,358 for each of Messrs. Swanson and McGee, and $1,981,333 for each of Messrs. Chandler and Goebel. As referenced previously, Mr. Pefanis is a co-founder and substantial equity owner and for the last several years, despite being eligible for equity awards, has requested to not participate in the long-term incentive program. (2) Amounts in this column for 2023 were rounded up to the nearest $5,000. See “2023 Compensation Elements — Annual Cash Incentive Awards” above for additional information. GP LLC matches 100% of employees’ contributions to its 401(k) plan in cash, subject to certain limitations in the plan. All Other Compensation for 2023 includes $19,800 in matching contributions for each of the Named Executive Officers. The remaining amount represents premium payments on behalf of such Named Executive Officer for group term life insurance.
Grants of Plan-Based Awards Table
Grants of Plan-Based Awards Table The following table sets forth summary information regarding all grants of plan-based awards made to our Named Executive Officers during the fiscal year ended December 31, 2023:
Grants of Plan-Based Awards Table
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | Grant Date Fair Value Of Stock and Option Awards ($)(3) | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Willie Chiang | 2/16/23 | — | 2,000,000 | 4,000,000 | — | — | — | — | — | | | 8/17/23 | — | — | — | — | 162,050 | 324,100 | 162,050 | 3,658,279 | | Harry Pefanis | 2/16/23 | — | 1,200,000 | 2,400,000 | — | — | — | — | — | | Al Swanson | 2/16/23 | — | 825,000 | 1,650,000 | — | — | — | — | — | | | 8/17/23 | — | — | — | — | 51,075 | 102,150 | 51,075 | 1,153,018 | | Richard McGee | 2/16/23 | — | 825,000 | 1,650,000 | — | — | — | — | — | | | 8/17/23 | — | — | — | — | 51,075 | 102,150 | 51,075 | 1,153,018 | | Chris Chandler | 2/16/23 | — | 900,000 | 1,800,000 | — | — | — | — | — | | | 8/17/23 | — | — | — | — | 65,825 | 131,650 | 65,825 | 1,485,999 | | Jeremy Goebel | 2/16/23 | — | 900,000 | 1,800,000 | — | — | — | — | — | | | 8/17/23 | — | — | — | — | 65,825 | 131,650 | 65,825 | 1,485,999 |
Grants of Plan-Based Awards Table
(1) Represents performance-based phantom units granted in August 2023. These phantom units will potentially vest on the August 2026 distribution date at a scaled payout range of between 0% and 200% based on: (i) with respect to 50% of the performance-based award, PAA’s TSR over the three-year period ending June 30, 2026 relative to the TSR of the TSR Comparator Peer Group described on page 31 (payout may be reduced if absolute TSR is negative); and (ii) with respect to the other 50% of the performance-based award, PAA achieving cumulative DCF per CUE of $7.45 over the three-year period ending June 30, 2026 (payout may be decreased by 25 basis points if PAA’s leverage ratio as of June 30, 2026 is greater than the upper end of our guidance range). DERs associated with these performance-based awards will accrue during the three-year performance period and be paid in cash in a lump sum on the August 2026 distribution date with respect to the number of such phantom units, if any, that vest on such date. (2) Represents time-based phantom units granted in August 2023. These phantom units will vest on the August 2026 distribution date. DERs associated with these time-based awards will accrue for the first year and such accrued amount will be paid in cash in a lump sum on the August 2024 distribution date; beginning in November 2024, DERs on such time-based portion will be paid quarterly until the associated phantom units vest. Represents the aggregate grant date fair values of phantom units granted in August 2023 based on the probable outcome of underlying performance conditions pursuant to FASB ASC Topic 718. For phantom unit grants awarded in August 2023, 75% were deemed probable of vesting on the grant date. The maximum fair value of phantom unit grants awarded in August 2023, assuming that the highest level of performance conditions will be met, was $4,877,705 for Mr. Chiang, $1,537,358 for each of Messrs. Swanson and McGee, and $1,981,333 for each of Messrs. Chandler and Goebel.
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth certain information regarding outstanding equity awards as in effect at December 31, 2023 with respect to our Named Executive Officers:
Outstanding Equity Awards at Fiscal Year-End
| Name | Unit Awards | | | | | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Willie Chiang | — | — | 500,000(2) | 7,575,000 | | | — | — | 62,870(3) | 952,481 | | | 150,300(5) | 2,277,045 | 150,300(6) | 2,277,045 | | | 220,000(7) | 3,333,000 | 220,000(8) | 3,333,000 | | | 162,050(9) | 2,455,058 | 162,050(10) | 2,455,058 | | Harry Pefanis | — | — | — | — | | Al Swanson | — | — | 25,150(3) | 381,023 | | | 60,100(5) | 910,515 | 60,100(6) | 910,515 | | | 69,300(7) | 1,049,895 | 69,300(8) | 1,049,895 | | | 51,075(9) | 773,786 | 51,075(10) | 773,786 | | Richard McGee | — | — | 25,150(3) | 381,023 | | | 60,100(5) | 910,515 | 60,100(6) | 910,515 | | | 69,300(7) | 1,049,895 | 69,300(8) | 1,049,895 | | | 51,075(9) | 773,786 | 51,075(10) | 773,786 | | Chris Chandler | — | — | 25,150(3) | 381,023 | | | 250,000(4) | 3,787,500 | 250,000(4) | 3,787,500 | | | 60,100(5) | 910,515 | 60,100(6) | 910,515 | | | 89,350(7) | 1,353,653 | 89,350(8) | 1,353,653 | | | 65,825(9) | 997,249 | 65,825(10) | 997,249 | | Jeremy Goebel | — | — | 25,150(3) | 381,023 | | | 250,000(4) | 3,787,500 | 250,000(4) | 3,787,500 | | | 60,100(5) | 910,515 | 60,100(6) | 910,515 | | | 89,350(7) | 1,353,653 | 89,350(8) | 1,353,653 | | | 65,825(9) | 997,249 | 65,825(10) | 997,249 |
Outstanding Equity Awards at Fiscal Year-End
Market value of phantom units reported in these columns is calculated by multiplying the closing market price ($15.15) of PAA’s common units on December 29, 2023 (the last trading day of the fiscal year) by the number of units. No discount is applied for remaining performance threshold or service period requirements. Represents phantom units granted to Mr. Chiang in August 2018. These phantom units, which were granted in connection with Mr. Chiang’s promotion to CEO, will vest as follows: (i) 25% will vest upon the later of October 1, 2023 and the first distribution date on which PAA will have generated DCF per common unit of at least $3.00 on a trailing four quarter basis, and (ii) 75% will vest upon the later of October 1, 2023 and the first distribution date on which PAA will have generated DCF per common unit of at least $3.50 on a trailing four quarter basis, in both cases with the initial performance-related measurement period beginning on or after January 1, 2021. Upon vesting, the phantom units are payable on a one-for-one basis in PAA common units. Any phantom units or DERs that have not vested by October 1, 2025 will expire at that time. The phantom units have associated DERs that have vested or will vest as follows: (i) one-third vested on the May 2019 distribution date as a result of PAA generating DCF per common unit of at least $2.50 on a trailing four quarter basis, (ii) one-third will vest on the first distribution date on which PAA generates DCF per common unit of at least $2.60 on a trailing four quarter basis, and (iii) one-third will vest on the first distribution date on which PAA generates DCF per common unit of at least $2.80 on a trailing four quarter basis; provided that in the case of the performance thresholds described in clauses (ii) and (iii) immediately preceding, the applicable trailing four quarter period must begin on or after January 1, 2020. (3) Represents 50% of phantom units granted in August 2019 that will vest on the first distribution date following PAA’s achievement of DCF per common unit of at least $2.65 on a trailing four quarter basis. The applicable trailing four quarter period for determining whether the requisite DCF per common unit has been achieved for vesting of such phantom units may not begin until after December 31, 2020. The associated DERs will vest on the first distribution date following January 1, 2021 on which PAA achieves DCF per common unit of at least $2.50 on a trailing four quarter basis. Any phantom units and associated DERs that have not vested by the August 2024 distribution date will expire at that time. (4) Represents the applicable portion of one-time special retention phantom unit awards granted in November 2019. The original terms of these phantom units provided that they would vest (i) 50% on the August 2026 distribution date, (ii) 25% on the later of the August 2026 distribution date and the first distribution date following PAA’s achievement of DCF per common unit and CUE of at least $2.80 on a trailing four quarter basis, and (iii) 25% on the later of the August 2026 distribution date and the first distribution date following PAA’s achievement of DCF per common unit and CUE of at least $3.15 on a trailing four quarter basis. Vesting of a portion of the associated DERs was also tied to PAA’s achievement of specified DCF per common unit and CUE levels. The vesting terms with respect to the performance-based portion of these phantom units (50% of the amount awarded) were amended in February 2022. As amended, the November 2019 phantom unit awards will vest as follows: (i) 50% will vest on the August 2026 distribution date (this is unchanged from the original terms), and (ii) up to 50% will potentially vest at a scaled payout range of between 0% and 100% based on the TSR ranking of PAA relative to a designated comparator group as measured over a four and one-half year period beginning on January 1, 2022 and ending on June 30, 2026. The unvested DERs associated with the November 2019 phantom unit awards that were originally tied to achievement of DCF/CUE targets were also amended such that they began accruing on January 1, 2022 and will be paid in cash in a lump sum on the August 2026 distribution date with respect to the number of phantom units, if any, that vest on such date. (5) Represents time-based phantom units granted in August 2021 that will vest on the August 2024 distribution date. The associated DERs accrued for the first year and such accrued amount was paid in cash in a lump sum on the August 2022 distribution date; beginning in November 2022, the associated DERs began being paid quarterly in cash on each distribution payment date. Represents the target number of performance-based phantom units granted in August 2021 that will potentially vest on the August 2024 distribution date at a scaled payout range of between 0% and 200% based on: (i) with respect to 50% of the performance-based award, PAA’s TSR over the three-year period ending June 30, 2024 compared to the TSR of the TSR Comparator Peer Group (payout may be reduced if absolute TSR is negative); and (ii) with respect to the other 50% of the performance-based award, PAA achieving cumulative DCF per CUE of $6.00 over the three-year period ending June 30, 2024 (payout may be decreased or increased by 50 gross percentage points (but not above 200%) based on PAA’s leverage ratio as of June 30, 2024 compared to the target leverage ratio set forth in PAA’s multi-year plan as of August 2021). As of December 31, 2023, the estimated payout percentage for the TSR portion of these performance-based phantom units was approximately 157% and the estimated payout percentage for the DCF/CUE portion was approximately 200%. DERs will accrue during the three-year performance period and be paid in cash in a lump sum on the August 2024 distribution date with respect to the number of phantom units, if any, that vest on such date. Any phantom units and associated DERs that have not vested by the August 2024 distribution date will expire at that time. Represents time-based phantom units granted in August 2022 that will vest on the August 2025 distribution date. The associated DERs accrued for the first year and such accrued amount was paid in cash in a lump sum on the August 2023 distribution date; beginning in November 2023, the associated DERs began being paid quarterly in cash on each distribution payment date. (8) Represents the target number of performance-based phantom units granted in August 2022 that will potentially vest on the August 2025 distribution date at a scaled payout range of between 0% and 200% based on: (i) with respect to 50% of the performance-based award, PAA’s TSR over the three-year period ending June 30, 2025 compared to the TSR of the TSR Comparator Peer Group (payout may be reduced if absolute TSR is negative); and (ii) with respect to the other 50% of the performance-based award, PAA achieving cumulative DCF per CUE of $7.05 over the three-year period ending June 30, 2025 (payout may be decreased by 25 basis points if PAA’s leverage ratio as of June 30, 2025 is greater than 3.5x). DERs will accrue during the three-year performance period and be paid in cash in a lump sum on the August 2025 distribution date with respect to the number of phantom units, if any, that vest on such date. Any phantom units and associated DERs that have not vested by the August 2025 distribution date will expire at that time. (9) Represents time-based phantom units granted in August 2023 that will vest on the August 2026 distribution date. The associated DERs will accrue for the first year and such accrued amount will be paid in cash in a lump sum on the August 2024 distribution date; beginning in November 2024, the associated DERs will be paid quarterly in cash on each distribution payment date.
Outstanding Equity Awards at Fiscal Year-End
Represents the target number of performance-based phantom units granted in August 2023 that will potentially vest on the August 2026 distribution date at a scaled payout range of between 0% and 200% based on: (i) with respect to 50% of the performance-based award, PAA’s TSR over the three-year period ending June 30, 2026 compared to the TSR of the TSR Comparator Peer Group (payout may be reduced if absolute TSR is negative); and (ii) with respect to the other 50% of the performance-based award, PAA achieving cumulative DCF per CUE of $7.45 over the three-year period ending June 30, 2026 (payout may be decreased by 25 basis points if PAA’s leverage ratio as of June 30, 2026 is greater than the upper end of our guidance range). DERs will accrue during the three-year performance period and be paid in cash in a lump sum on the August 2026 distribution date with respect to the number of phantom units, if any, that vest on such date. Any phantom units and associated DERs that have not vested by the August 2026 distribution date will expire at that time.
Option Exercises and Units Vested
Option Exercises and Units Vested We have never issued options under our long-term incentive plan; all of the grants awarded under our long-term incentive plan have been phantom unit grants. The following table sets forth certain information regarding the vesting of phantom units during the fiscal year ended December 31, 2023 with respect to our Named Executive Officers.
Option Exercises and Units Vested
| Name | Unit Awards | | | | Number of Units Acquired on Vesting (#)(1) | Value Realized on Vesting ($) | | Willie Chiang | 430,103(2) | 6,559,071(3) | | Harry Pefanis | — | — | | Al Swanson | 172,046(2) | 2,623,702(3) | | Richard McGee | 172,046(2) | 2,623,702(3) | | Chris Chandler | 172,046(2) | 2,623,702(3) | | Jeremy Goebel | 172,046(2) | 2,623,702(3) | | | 30,000 | 352,800(4) |
Option Exercises and Units Vested
(1) Represents the gross number of phantom units that vested during the year ended December 31, 2023. The actual number of units delivered was net of income tax withholding. (2) Represents phantom units originally granted in August 2020 that vested in August 2023. Pursuant to the terms of the 2020 grants, (i) 50% of the phantom units were time based with vesting to occur in August 2023, and (ii) 50% of the phantom units were performance based with potential vesting to occur in August 2023 at a scaled payout range of between 0% and 200% based on: (A) with respect to 50% of the performance-based portion, PAA’s TSR over the three year period ending June 30, 2023 compared to the TSR of the applicable TSR peer group and (B) with respect to the other 50% of the performance-based portion, PAA achieving a cumulative adjusted DCF per CUE target of $5.90 over the three-year period ending June 30, 2023. With respect to the performance-based portion of the 2020 grants, the final payout percentage for the TSR portion was 75% (based on a TSR ranking of 11 out of 17) and the final payout percentage for the DCF/ CUE portion was 182.6% (based on achieving cumulative DCF/CUE of $6.51). Taking all vesting criteria (50% time, 25% TSR and 25% DCF/CUE) into account, the 2020 grants paid out at 114.4% of target. (3) Consistent with the terms of the applicable Long-Term Incentive Plan, the value realized upon vesting is computed by multiplying the closing market price ($15.25) of PAA’s common units on August 11, 2023 (the trading date immediately preceding the vesting date) by the number of units that vested. (4) Consistent with the terms of the applicable Long-Term Incentive Plan, the value realized upon vesting is computed by multiplying the closing market price ($11.76) of PAA’s common units on December 30, 2022 (the trading date immediately preceding the vesting date) by the number of units that vested.
Pension Benefits
Pension Benefits GP LLC sponsors a 401(k) plan that is available to all U.S. employees. We do not maintain any pension or defined benefit programs in which any of our employees, including the Named Executive Officers, participate.
Nonqualified Deferred Compensation and Other Nonqualified Deferred Compensation Plans
Nonqualified Deferred Compensation and Other Nonqualified Deferred Compensation Plans We do not maintain any nonqualified deferred compensation plans or programs in which any of our employees, including our Named Executive Officers, participate.
Potential Payments upon Termination or Change-in-Control
Potential Payments upon Termination or Change-in-Control The following table sets forth potential amounts payable to the Named Executive Officers upon termination of employment under various circumstances, and as if terminated on December 31, 2023.
Potential Payments upon Termination or Change-in-Control
| | By Reason of Death ($) | By Reason of Disability ($) | By Company without Cause ($) | By Executive with Good Reason ($) | In Connection with a Change In Control ($) | | Willie Chiang(7) | | | | | | | Equity Compensation | 19,747,571(1) | 19,747,571(1) | 15,158,624(2) | — | 24,657,686(3) | | Total | 19,747,571 | 19,747,571 | 15,158,624 | — | 24,657,686 | | Harry Pefanis(7) | | | | | | | Salary and Bonus | 5,410,000(4) | 5,410,000(4) | 5,410,000(4) | 5,410,000(4) | 8,115,000(5) | | Health Benefits | — | 38,595(6) | 38,595(6) | 38,595(6) | 38,595(6) | | Total | 5,410,000 | 5,448,595 | 5,448,595 | 5,448,595 | 8,153,595 | | Al Swanson(7) | | | | | | | Equity Compensation | 4,301,843(1) | 4,301,843(1) | 2,774,512(2) | — | 5,849,415(3) | | Total | 4,301,843 | 4,301,843 | 2,774,512 | — | 5,849,415 | | Richard McGee(7) | | | | | | | Equity Compensation | 4,301,843(1) | 4,301,843(1) | 2,774,512(2) | — | 5,849,415(3) | | Total | 4,301,843 | 4,301,843 | 2,774,512 | — | 5,849,415 | | Chris Chandler(7) | | | | | | | Equity Compensation | 12,484,358(1) | 12,484,358(1) | 9,111,663(2) | — | 14,478,855(3) | | Total | 12,484,358 | 12,484,358 | 9,111,663 | — | 14,478,855 | | Jeremy Goebel(7) | | | | | | | Equity Compensation | 12,484,358(1) | 12,484,358(1) | 9,111,663(2) | — | 14,478,855(3) | | Total | 12,484,358 | 12,484,358 | 9,111,663 | — | 14,478,855 |
Potential Payments upon Termination or Change-in-Control
(1) The letter evidencing the August 2018 phantom unit grant to Mr. Chiang provides that in the event of his death or disability after the second anniversary of the date of the applicable grant, all of his then outstanding phantom units awarded under such grants will be deemed nonforfeitable and will vest on the next following distribution date (and any associated DERs shall not be forfeited but shall vest, be payable and expire according to the terms of the applicable phantom unit grant letter). The letters evidencing the August 2019, August 2021, August 2022 and August 2023 phantom unit grants awarded to Messrs. Chiang, Swanson, McGee, Chandler and Goebel provide that in the event of their death or disability after the first anniversary of the date of the applicable grant, all of their then outstanding phantom units awarded under such grants will be deemed nonforfeitable and will vest on the next following distribution date (and any associated DERs shall not be forfeited but shall vest, be payable and expire according to the terms of the applicable phantom unit grant letter). The letters evidencing the November 2019 phantom unit grants awarded to Messrs. Chandler and Goebel, as amended, provide that in the event of their death or disability after the second anniversary of the date of grant, all of their then outstanding phantom units awarded under such grants and associated DERs will be deemed nonforfeitable and will vest on the next distribution date (assuming a TSR payout percentage of 100% with respect to the performance-based portion of the award). For these purposes, “disability” means a physical or mental infirmity that impairs the ability substantially to perform duties for a period of eighteen (18) months or that the general partner otherwise determines constitutes a disability. Assuming death or disability occurred on December 31, 2023, (i) all of the phantom units and associated DERs held by Messrs. Chiang, Swanson, McGee, Chandler and Goebel pursuant to their August 2019, August 2021 and August 2022 grant letters; all of the phantom units and associated DERs held by Mr. Chiang pursuant to his August 2018 grant letter; and all of the phantom units and associated DERs held by Messrs. Chandler and Goebel pursuant to their November 2019 grant letters would have become nonforfeitable as of such date and would have vested on the February 2024 distribution date, and (ii) all of the phantom units and associated DERs held by Messrs. Chiang, Swanson, McGee, Chandler and Goebel pursuant to their August 2023 grant letters would have been forfeited. The dollar value given is based on the market value of PAA’s common units on December 29, 2023 ($15.15 per unit). (2) Other than as described below, pursuant to the grant letters for the currently outstanding phantom unit grants awarded to the NEOs, if GP LLC terminated their employment other than for cause (as defined in footnote 3 below), all of their unvested phantom units awarded under such grants and associated DERs shall be deemed nonforfeitable on the date of such termination and shall vest on the next following distribution date. The phantom units granted to Messrs. Chandler and Goebel in November 2019, as amended, provide that if their employment is terminated other than for cause (as defined in footnote 3 below), a portion of the unvested phantom units will be deemed nonforfeitable and will vest on the next following distribution date, with the size of the portion starting at 40% for a termination prior to November 21, 2022, and increasing by 20% per year thereafter such that 100% of the unvested phantom units would be deemed nonforfeitable following a termination other than for cause on or after November 21, 2024. The phantom units granted to Messrs. Chiang, Swanson, McGee, Chandler and Goebel in August 2021, August 2022 and August 2023 provide that if their employment is terminated other than for cause prior to the first anniversary of the applicable date of grant, all of their unvested phantom units will be forfeited as of the date of such termination. If such termination occurs after the first anniversary of the applicable date of grant, a pro rata portion of the unvested phantom units (based on the portion of the three-year vesting period that has elapsed since the grant date and assuming a payout at target for any performance-based phantom units) will be deemed nonforfeitable and will vest on the next following distribution date. Mr. Chiang’s August 2018 phantom unit grant provides that if his employment is terminated other than for cause (as defined in footnote 3 below) a portion of the unvested phantom units will be deemed nonforfeitable and will vest on the next following distribution date, with the size of the portion starting at 20% for a termination prior to October 1, 2019, and increasing to 40% for a termination other than for cause between October 1, 2019 and October 1, 2020, 60% for a termination other than for cause between October 1, 2020 and October 1, 2021 and 100% for a termination other than for cause on or after October 1, 2021. Assuming our Named Executive Officers were terminated without cause on December 31, 2023, (i) all of the phantom units covered by the August 2019 phantom unit grants held by Messrs. Chiang, Swanson, McGee, Chandler and Goebel; approximately 79% of the phantom units covered by the August 2021 phantom unit grants held by Messrs. Chiang, Swanson, McGee, Chandler and Goebel; approximately 46% of the phantom units covered by the August 2022 phantom unit grants held by Messrs. Chiang, Swanson, McGee, Chandler and Goebel; 80% of the phantom units covered by the November 2019 phantom unit grants held by Messrs. Chandler and Goebel; and 100% of the phantom units covered by the August 2018 phantom unit grant held by Mr. Chiang would have become nonforfeitable as of such date and would have vested on the February 2024 distribution date, and (ii) all remaining phantom units held by our Named Executive Officers would have been forfeited. The dollar value given is based on the market value of PAA’s common units on December 29, 2023 ($15.15 per unit). The letters evidencing phantom unit grants awarded to the Named Executive Officers provide that in the event of a change in status (as defined below), all of the then outstanding phantom units awarded under such grants and associated DERs will be deemed nonforfeitable, and such phantom units will vest in full (i.e., the phantom units will become payable in the form of one common unit per phantom unit) upon the next following distribution date. Assuming that a change in status occurred on December 31, 2023, all outstanding phantom units awarded under such grants and the associated DERs would have become nonforfeitable as of such date and would have vested on the February 2024 distribution date. The dollar value given is based on the market value of PAA’s common units on December 29, 2023 ($15.15 per unit). The phrase “change in status” means, with respect to a Named Executive Officer, (A) during the period (“protected period”) beginning two and a half months prior to and ending one year following a change of control (as defined below), the termination of employment by GP LLC other than a termination for cause (as defined below), (B) during the protected period, the termination of employment by the Named Executive Officer due to the occurrence, without the Named Executive Officer’s written consent, of (i) any material diminution in the Named Executive Officer’s authority, duties or responsibilities, (ii) any material reduction in the Named Executive Officer’s base salary or (iii) any other action or inaction that would constitute a material breach of the applicable grant letter by GP LLC, or (C) the termination of employment as a result of retirement on terms and timing that are approved by the CEO (or the Board in the case of the CEO).
Potential Payments upon Termination or Change-in-Control
The phrase “change of control” is defined in the outstanding phantom unit grants awarded in 2018, 2019, 2021, 2022 and 2023 to mean, and is deemed to have occurred upon the occurrence of, one or more of the following events: (i) any Person (other than PAGP and any affiliate of PAGP that is controlled by PAGP) becomes the beneficial owner, directly or indirectly (in one transaction or a series of related transactions and whether by merger or otherwise), of 50% or more of the membership interest in PAGP GP; (ii) any Person (other than PAGP GP, PAGP or any affiliate of PAGP that is controlled by PAGP) acquires (in one transaction or a series of related transactions and whether by merger or otherwise) direct or indirect control of the general partner interest of PAGP; (iii) PAGP ceases to retain direct or indirect control (in one transaction or a series of related transactions and whether by merger or otherwise) of the general partner of PAA; or (iv) the consummation of a reorganization, merger or consolidation with, or any direct or indirect sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of PAA to, one or more Persons (other than PAGP or any affiliates of PAGP that are controlled by PAGP). As used in this definition, “Person” shall include any “partnership, limited partnership, syndicate or other group” constituting a “person” within the meaning of such terms pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). “Cause” is defined in the 2018, 2019, 2021, 2022 and 2023 phantom unit grant agreements as (i) failure to perform the duties and responsibilities of a position at an acceptable level as reasonably determined in good faith by the CEO of GP LLC (or by the Board in the case of the CEO), (ii) the conviction of or guilty plea to the committing of an act or acts constituting a felony under the laws of the United States or any state thereof (or Canada or any province thereof) or any misdemeanor involving moral turpitude, or (iii) violation of GP LLC’s Code of Business Conduct (unless waived in accordance with the terms thereof), in the case of clauses (i) and (iii) with the specific failure or violation described in writing. (4) Mr. Pefanis’ employment agreement provides that if (i) his employment is terminated as a result of his death, (ii) he terminates his employment (a) because of a disability (as defined in Section 409A of the Code) or (b) for good reason (as defined below), or (iii) GP LLC terminates his employment without cause (as defined below), he is entitled to a lump-sum amount equal to the product of (1) the sum of his (a) highest annual base salary paid prior to his date of termination and (b) highest annual bonus paid or payable for any of the three years prior to the date of termination, and (2) the lesser of (i) two or (ii) the number of days remaining in the term of his employment agreement divided by 360. The amount provided in the table assumes a termination date of December 31, 2023 with two years remaining on the term of his agreement, and also assumes a highest annual base salary of $600,000 and highest annual bonus of $2,105,000. Mr. Pefanis’ employment agreement defines “cause” as (i) willfully engaging in gross misconduct, or (ii) conviction of a felony involving moral turpitude. Notwithstanding, no act, or failure to act, on his part is “willful” unless done, or omitted to be done, not in good faith and without reasonable belief that such act or omission was in the best interest of GP LLC or otherwise likely to result in no material injury to GP LLC. However, Mr. Pefanis will not be deemed to have been terminated for cause unless and until there is delivered to him a copy of a resolution of the Board at a meeting held for that purpose (after reasonable notice and an opportunity to be heard), finding that Mr. Pefanis was guilty of the conduct described above, and specifying the basis for that finding. If Mr. Pefanis were terminated for cause, GP LLC would be obligated to pay base salary through the date of termination, with no other payment obligations triggered by the termination under the employment agreement or other employment arrangement. Mr. Pefanis’ employment agreement defines “good reason” as the occurrence of any of the following circumstances: (i) removal by GP LLC from, or failure to re-elect him to, the position to which Mr. Pefanis was appointed pursuant to his employment agreement, except in connection with his termination for cause (as defined above); (ii) (a) a reduction in his rate of base salary (other than in connection with across-the-board salary reductions for all executive officers of GP LLC) to an amount which is less than 85% of his current base salary, (b) a material reduction in his fringe benefits, or (c) any other material failure by GP LLC to comply with its obligations under the employment agreement to pay his annual salary and bonus, reimburse his business expenses, provide for his participation in certain employee benefit plans and arrangements, furnish him with suitable office space and support staff, or allow him no less than 15 business days of paid vacation annually; or (ii) the failure of GP LLC to obtain the express assumption of the employment agreement by a successor entity (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of GP LLC. (5) Pursuant to his employment agreement, if Mr. Pefanis terminates his employment with GP LLC within three months of a Change in Control (as defined below), he is entitled to a lump-sum payment in an amount equal to the product of (i) three and (ii) the sum of (a) his highest annual base salary previously paid to him and (b) his highest annual bonus paid or payable for any of the three years prior to the date of such termination. The amount provided in the table assumes a Change in Control and termination date of December 31, 2023, and also assumes a highest annual base salary of $600,000 and highest annual bonus of $2,105,000.
Potential Payments upon Termination or Change-in-Control
In conjunction with events occurring in 2005, 2010 and 2013, Mr. Pefanis executed various agreements waiving his right to terminate his employment and receive separation benefits under his employment agreement. In connection with such waivers, the definition of “Change in Control” in Mr. Pefanis’ employment agreement was modified to mean, and will be deemed to occur upon, one or more of the following events: (i) any person (other than PAGP or its wholly owned subsidiaries), including any partnership, limited partnership, syndicate or other group deemed a “person” for purposes of Section 13(d) or 14(d) of the Exchange Act becomes the beneficial owner, directly or indirectly, of 50% or more of the membership interest in GP LLC or 50% or more of the outstanding limited partnership interest of PAGP; (ii) any person (other than PAGP or its wholly owned subsidiaries), including any partnership, limited partnership, syndicate or other group deemed a “person” for purposes of Section 13(d) or 14(d) of the Exchange Act, becomes the beneficial owner, directly or indirectly, of 50% or more of the membership interest in PAGP GP; (iii) PAGP ceases to beneficially own, directly or indirectly, more than 50% of the membership interest in GP LLC; (iv) the “Owner Affiliates”, as defined in the 2013 waiver agreement, cease to beneficially own, directly or indirectly, more than 50% of the membership interest in PAGP GP; or (v) there has been a direct or indirect transfer, sale, exchange or other disposition in a single transaction or series of transactions (whether by merger or otherwise) of all or substantially all of the assets of PAGP or PAA to one or more persons who are not affiliates of PAGP (“third party” or “parties”), other than a transaction in which the Owner Affiliates continue to beneficially own, directly or indirectly, more than 50% of the issued and outstanding voting securities of such third party or parties immediately following such transaction. Pursuant to his employment agreement, if Mr. Pefanis is terminated other than (i) for cause (as defined in footnote 4 above), (ii) by reason of death or (iii) by resignation (unless such resignation is due to a disability or for good reason (each as defined in footnote 4 above)), then he is entitled to continue to participate, for a period which is the lesser of two years from the date of termination or the remaining term of the employment agreement, in such health and accident plans or arrangements as are made available by GP LLC to its executive officers generally. The amounts provided in the table assume a termination date of December 31, 2023 with two years remaining on the term of his agreement. If Messrs. Chiang, Pefanis, Swanson, McGee, Chandler or Goebel were terminated for cause, GP LLC would be obligated to pay base salary through the date of termination, with no other payment obligation triggered by the termination under any employment arrangement.
Pay Ratio Disclosure
Pay Ratio Disclosure As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Willie Chiang, our CEO during 2023: • The annual total compensation for Mr. Chiang for 2023 was $7,453,919. • The annual total compensation for the median employee for 2023 was $125,389. • The ratio of Mr. Chiang’s pay to the pay of our median employee for 2023 was approximately 59.45 to 1. PAA’s median employee was identified as of December 31, 2023 using the following methodology: • A list was prepared of all individuals, excluding the CEO, who were employed by PAA on December 31, 2023. We included all U.S. and Canadian employees. • Basic wage data for each U.S. employee was extracted from Form W-2 information provided to the Internal Revenue Service for calendar year 2023. Basic wage data for each Canadian employee was extracted from Form T4 information provided to the Canada Revenue Agency for calendar year 2023 and converted to U.S. dollars. This information was then sorted and the median employee was identified. The median employee’s annual total compensation for 2023 was determined using the same methodology we used for determining the annual total compensation for the Named Executive Officers as set forth in the 2023 Summary Compensation Table.
Pay Versus Performance
Pay Versus Performance As required by Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (“CAP”) and PAA’s financial performance for the periods presented. The CAP dollar amounts shown in the table below have been calculated in accordance with SEC rules; however, meaningful amounts included as CAP (e.g., approximately one-third of CAP for our PEO in 2023) do not represent compensation actually paid or earned during the applicable years. This is due to the fact that CAP includes the value of outstanding equity awards that could potentially vest in future years (“potentially realizable future value”) in addition to base salary, bonus, the value of equity awards that vested during the year and DERs (“realized value”). With respect to our principal executive officer (“PEO”) for 2023, ~71% of the ~$16.4 million of CAP (or ~$11.7 million) represents the “realized value” of amounts actually paid to or earned by our PEO and ~29% (or ~$4.7 million) represents “future potentially realizable value” of outstanding equity awards. With respect to our other NEOs (“Non-PEO NEOs”) for 2023, ~71% of the ~$6.5 million of average CAP (or ~$4.6 million) represents the “realized value” of amounts actually paid to or earned by our Non-PEO NEOs and ~29% (or ~$1.9 million) represents “future potentially realizable value” of outstanding equity awards. Tabular Disclosure of Compensation Actually Paid versus Performance The following table discloses information on CAP to our PEO and, on average, to our Non-PEO NEOs during the specified years alongside TSR, net income, and the Company-selected measure of Adjusted EBITDA Attributable to PAA. Adjusted EBITDA Attributable to PAA was identified by the Company as the most important financial performance measure used to link CAP to Company performance.
Pay Versus Performance
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(1) | Average Compensation Actually Paid to Non- PEO NEOs(2) | Value of Initial Fixed $100 Investment Based On: | | Net Income/ (Loss) | Adjusted EBITDA Attributable to PAA | | | | | | | Company TSR(3) | Peer Group TSR(3) | | | | 2023 | $7,453,919 | $16,427,772 | $2,949,247 | $6,454,569 | $113.53 | $147.00 | $1.50 billion | $2.71 billion | | 2022 | $8,296,140 | $14,459,710 | $4,387,570 | $8,142,198 | $81.51 | $128.92 | $1.23 billion | $2.51 billion | | 2021 | $4,392,210 | $4,792,883 | $2,147,374 | $2,385,698 | $60.08 | $106.08 | $648 million | $2.20 billion | | 2020 | $4,290,241 | $2,401,749 | $1,957,177 | $429,822 | $49.18 | $76.64 | $(2.58 billion) | $2.55 billion |
Pay Versus Performance
(1) For each of the years presented, our PEO is Willie Chiang and our Non-PEO NEOs are Harry Pefanis, Al Swanson, Richard McGee, Chris Chandler and Jeremy Goebel. (2) The dollar amounts shown in these columns reflect CAP as calculated in accordance with SEC rules. As required, the dollar amounts include (among other items) values for unvested equity compensation that may or may not be realized in future periods, and as such, the dollar amounts shown do not necessarily represent the actual amount of compensation earned or paid during the applicable years. (3) TSR figures assume an initial investment of $100 in PAA on December 31, 2019. The peer group referenced for purposes of the TSR comparison is the group of companies included in the Alerian Midstream Energy Index, which is the same index used for purposes of Item 201(e) of Regulation S-K. The adjustments made to the Summary Compensation Table (“SCT”) amounts to determine CAP are shown in the tables below: PEO — Reconciliation of SCT Total to CAP Total(a)
Pay Versus Performance
| Year | SCT Total | | Grant Date Fair Value of Awards Granted During the Year | | Fair Value of Equity Calculated Using SEC Methodology | | CAP Total | | 2023 | $7,453,919 | — | $3,658,279 | + | $12,632,132 | = | $16,427,772 |
Pay Versus Performance
(a) As shown in the table, the CAP total represents the SCT total for the covered fiscal year, but adjusted as required by SEC rules to replace the grant date fair value of awards granted during the covered fiscal year with the fair value of current and prior year equity awards that were outstanding at the end of the current fiscal year or that vested or were forfeited during the covered fiscal year. Our NEOs do not participate in a defined benefit plan; therefore, no adjustment for pension benefits is included. The calculation of the fair value of equity for the PEO for the covered fiscal year is shown in the following table: PEO — CAP Fair Value of Equity Calculation(a)
Pay Versus Performance
| Year | YE Fair Value of Current Year Awards Outstanding at YE | | Change in Fair Value as of YE for Prior Year Awards Outstanding at YE | | Change in Fair Value as of Vesting Date for Prior Year Awards that Vested During the Year | | Fair Value of DERs Paid During the Year | | Fair Value of Equity for CAP Purposes | | 2023 | $3,510,732 | + | $6,016,326 | + | $1,718,016 | + | $1,387,058 | = | $12,632,132 |
Pay Versus Performance
(a) We did not issue any equity awards during the covered fiscal year that vested in the year of grant. Additionally, no equity awards granted in any prior fiscal year failed to meet applicable vesting conditions or were forfeited during the covered fiscal year. Non-PEO NEOs (Average) — Reconciliation of SCT Total to CAP Total(a)
Pay Versus Performance
| Year | SCT Total | | Grant Date Fair Value of Awards Granted During the Year | | Fair Value of Equity Calculated Using SEC Methodology | | CAP Total | | 2023 | $2,949,247 | — | $1,055,607 | + | $4,560,929 | = | $6,454,569 |
Pay Versus Performance
(a) The CAP total figures were calculated using the same methodology described in footnote (a) to the “PEO — Reconciliation of SCT Total to CAP Total” table shown above. The calculation of the fair value of equity for the Non-PEO NEOs for the covered fiscal year is shown in the following table: Non-PEO NEOs (Average) — CAP Fair Value of Equity Calculation(a)
Pay Versus Performance
| Year | YE Fair Value of Current Year Awards Outstanding at YE | | Change in Fair Value as of YE for Prior Year Awards Outstanding at YE | | Change in Fair Value as of Vesting Date for Prior Year Awards that Vested During the Year | | Fair Value of DERs Paid During the Year | | Fair Value of Equity for CAP Purposes | | 2023 | $1,013,032 | + | $2,491,868 | + | $549,783 | + | $506,246 | = | $4,560,929 |
Pay Versus Performance
We did not issue any equity awards during the covered fiscal year that vested in the year of grant. Additionally, no equity awards granted in any prior fiscal year failed to meet applicable vesting conditions or were forfeited during the covered fiscal year. Tabular Disclosure of Most Important Measures Linking Compensation Actually Paid During 2023 to Company Performance The following were the most important financial and non-financial performance measures, as determined by the Company, that link 2023 CAP to the Company’s performance for the most recently completed fiscal year (unranked):
Pay Versus Performance
| Most Important Performance Measures | | Adjusted EBITDA Attributable to PAA | | DCF per CUE | | TSR | | TRIR | | FRR |
Pay Versus Performance
For further information regarding these performance measures and their function in our executive compensation program, please see “Compensation Discussion and Analysis” beginning on page 26. Disclosure of the Relationship Between Compensation Actually Paid and Financial Performance Measures The graphs below describe the relationship between CAP (as calculated above) and our financial and stock performance for the indicated years. In addition, the first table below compares our cumulative TSR to peer group TSR for the indicated years.
Compensation of Directors
Compensation of Directors The following table sets forth a summary of the compensation paid to each person who served as a director of PAGP GP in 2023 (other than Messrs. Chiang and Pefanis who were not compensated as directors and whose compensation is set forth in the Summary Compensation Table above):
Compensation of Directors
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) | Total ($) | | Greg L. Armstrong(2) | 250,000 | — | 15,840 | 265,840 | | Victor Burk | 145,000 | 125,500 | — | 270,500 | | Ellen R. DeSanctis | 130,000 | 125,500 | — | 255,500 | | Kevin S. McCarthy | 115,000 | 125,500 | — | 240,500 | | Gary R. Petersen | 115,000 | 125,500 | — | 240,500 | | Alexandra D. Pruner | 130,000 | 125,500 | — | 255,500 | | John T. Raymond | 130,000 | 125,500 | — | 255,500 | | Bobby S. Shackouls | 165,000 | 125,500 | — | 290,500 | | Christopher M. Temple | 115,000 | 125,500 | — | 240,500 | | Lawrence M. Ziemba | 145,000 | 125,500 | — | 270,500 |
Compensation of Directors
The dollar value of long-term incentive awards granted during 2023 is based on the grant date fair value computed in accordance with FASB ASC Topic 718. See Note 17 to our Consolidated Financial Statements included in our 2023 Annual Report for additional discussion regarding the calculation of grant date fair values. In August 2023, each of Messrs. Burk, McCarthy, Petersen, Raymond, Shackouls, Temple and Ziemba, Ms. DeSanctis and Ms. Pruner received an annual long-term incentive award for 8,050 PAGP phantom Class A shares. See “— Long-Term Equity Awards” below for further information regarding long-term incentive awards granted to our non-employee directors. The aggregate number of outstanding long-term incentive awards held by our non-employee directors as of December 31, 2023 were as follows:
Compensation of Directors
| | Number of LTIP Awards Held as of December 31, 2023 | | | Director Name: | PAGP Phantom Class A Shares (#) | Vesting Date | | Burk | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | DeSanctis | 8,050 | August 2024 | | Total | 8,050 | | | McCarthy | 8,050 | August 2024 | | | 10,622 | August 2024 | | | 11,900 | August 2025 | | Total | 30,572 | | | Petersen | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | Pruner | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | Raymond | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | Shackouls | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | Temple | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | | | Ziemba | 8,050 | August 2024 | | | 15,290 | August 2024 | | | 11,900 | August 2025 | | Total | 35,240 | |
Compensation of Directors
Mr. Armstrong served as Senior Advisor to the CEO during 2023 and received a salary of $250,000 and other compensation of $15,840 (comprising 401(k) plan matching contributions and premium payments for group term life insurance) for his services as an employee and as a director. Pursuant to his employment agreement, Mr. Armstrong will continue to serve as a director and will also serve as Senior Advisor to the CEO until the date of the 2024 annual meeting and he will receive an annual salary of $250,000 for these services. Mr. Armstrong does not hold any LTIP awards. Cash Retainers and Expense Reimbursement During 2023, our non-employee directors received an annual retainer fee of $115,000. In addition to their annual retainer, each committee chairman (other than the Audit Committee chairman) received an additional retainer of $15,000, the Audit Committee chairman received an additional retainer of $30,000, each other member of the Audit Committee received an additional retainer of $15,000, and the Lead Director received an additional retainer of $35,000. Non-employee directors are reimbursed for reasonable travel, lodging and other out-of-pocket expenses related to meeting attendance or otherwise related to service on the Board (including, without limitation, reimbursement for continuing education expenses). Long-Term Equity Awards Our non-employee directors receive annual LTIP awards as part of their compensation. In 2023, such LTIP awards consisted of PAGP phantom Class A shares having a market value on the date of grant equal to approximately $125,000 (based on a volume weighted average price for the 10-trading day period beginning five days before and ending five days after the ex-dividend date immediately preceding the date of grant). The annual LTIP awards granted in 2023 will vest (become payable in PAGP Class A shares on a one-for-one basis) on the August 2024 distribution date and include associated DERs. Outstanding director LTIP awards granted prior to 2022 will vest four years after the date of grant. All director LTIP awards vest in full upon the next following distribution date after the death or disability (as determined in good faith by the Board) of the director. The awards also vest in full if a director (i) retires (no longer with full-time employment and no longer serving as an officer or director of any public company) or (ii) is removed from the Board or is not re-elected to the Board, unless such removal is for “Cause,” as defined in the PAGP GP LLC Agreement.