DEF 14A of Valero Energy Corp/TX, Mar 21, 2018

DEF 14A of Valero Energy Corp/TX

Filed Mar 21, 2018 · FY20170001193125-18-090034

Open on EDGAR

  1. Selection of Director Nominees

    Selection of Director Nominees The Nominating/Governance and Public Policy Committee solicits recommendations for Board candidates from a number of sources, including our directors, our officers, individuals personally known to our Board members, and third-party research. In addition, the Committee will consider candidates submitted by stockholders when submitted in accordance with the procedures described in this proxy statement under the caption “Miscellaneous—Stockholder Communications, Nominations, and Proposals.” The Committee will consider all candidates identified through the processes described above and will evaluate each of them on the same basis. The level of consideration the Committee will extend to a stockholder’s candidate will be commensurate with the quality and quantity of information about the candidate that the nominating stockholder makes available to the Committee. Proxy Access. Our amended and restated bylaws permit a stockholder, or a group of up to 20 stockholders, that has owned at least three percent of our outstanding Common Stock for at least three years to nominate and include in our proxy statement candidates for our Board, subject to certain requirements. Each stockholder, or group of stockholders, may nominate candidates for director, up to a limit of the greater of two or 20 percent of the number of directors on the Board. Any nominee must meet the qualification standards listed in our bylaws. The procedures for nominating a candidate pursuant to our proxy access provisions are described in this proxy statement under the caption “Miscellaneous—Stockholder Communications, Nominations, and Proposals.” EVALUATION OF DIRECTOR CANDIDATES The Nominating/Governance and Public Policy Committee is charged with (i) assessing the skills and characteristics that candidates for election to the Board should possess and (ii) determining the composition of the Board as a whole. The assessments include consideration of:

  2. Selection of Director Nominees

    | • | applicable independence standards; |

  3. Selection of Director Nominees

    | • | skills and experience necessary for service on the Board’s committees; and |

  4. Selection of Director Nominees

    | • | skills and expertise to serve the needs of the Board as a whole. |

  5. Selection of Director Nominees

    | 2018 PROXY STATEMENT | 5 |

  6. Selection of Director Nominees

    Each candidate must meet certain minimum qualifications, including:

  7. Selection of Director Nominees

    | • | independence of thought and judgment; |

  8. Selection of Director Nominees

    | • | the ability to dedicate sufficient time, energy, and attention to the performance of duties, taking into consideration the candidate’s service on other public company boards; and |

  9. Selection of Director Nominees

    | • | skills and expertise complementary to those of the existing Board members; in this regard, the Board will consider its need for operational, managerial, financial, governmental affairs, technology, human resources, or other expertise. |

  10. Selection of Director Nominees

    The Committee also considers:

  11. Selection of Director Nominees

    | • | diversity concepts such as race, gender, national origin, age, and geography; |

  12. Selection of Director Nominees

    | • | the ability of a prospective candidate to work with the then-existing interpersonal dynamics of the Board; and |

  13. Selection of Director Nominees

    | • | the candidate’s ability to contribute to the collaborative culture among Board members. |

  14. Selection of Director Nominees

    Based on this initial evaluation, the Committee will determine whether to interview a proposed candidate and, if warranted, will recommend that one or more of its members, other members of the Board, and/or senior officers, as appropriate, interview the candidate. Following this process, the Committee ultimately determines its list of nominees and recommends the list to the full Board for consideration and approval.

  15. Information Concerning Nominees and Directors

    Information Concerning Nominees and Directors Each of the following is a nominee for election as a director at the Annual Meeting. There is no family relationship among any of the executive officers or nominees for director. There is no arrangement or understanding between any director or any other person pursuant to which the director was or is to be selected a director or nominee. Susan Kaufman Purcell, who currently serves as director, will retire from the Board on the date of the Annual Meeting.

  16. Information Concerning Nominees and Directors

    | Directors | Director Since | Age as of 12/31/2017 | | Joseph W. Gorder, Chairman of the Board, President, and Chief Executive Officer | 2014 | 60 | | H. Paulett Eberhart | 2016 | 64 | | Kimberly S. Greene | 2016 | 51 | | Deborah P. Majoras | 2012 | 54 | | Donald L. Nickles | 2005 | 69 | | Philip J. Pfeiffer | 2012 | 70 | | Robert A. Profusek | 2005 | 67 | | Stephen M. Waters | 2008 | 71 | | Randall J. Weisenburger | 2011 | 59 | | Rayford Wilkins, Jr. | 2011 | 66 |

  17. Information Concerning Nominees and Directors

    | 2018 PROXY STATEMENT | 9 |

  18. Information Concerning Nominees and Directors

    For information regarding the nominees’ Common Stock holdings, compensation, and other arrangements, see “Information Regarding the Board of Directors,” “Beneficial Ownership of Valero Securities,” “Compensation Discussion and Analysis,” and “Compensation of Directors” elsewhere in this proxy statement. Nominees.

  19. Information Concerning Nominees and Directors

    | Age: 60 Director Since: 2014 Chairman | JOSEPH W. GORDER Biographical Information Mr. Gorder is Valero’s Chairman of the Board, President, and Chief Executive Officer. He was first elected to the Board in February 2014. He became Valero’s Chief Executive Officer on May 1, 2014, and Chairman of the Board on December 31, 2014. Previously he served as Valero’s President and Chief Operating Officer since November 2012. Prior to that, Mr. Gorder was Executive Vice President and Chief Commercial Officer beginning in January 2011, and led Valero’s European operations from its London office. Beginning in December 2005, he was Executive Vice President–Marketing and Supply. Mr. Gorder has held several positions with Valero and Ultramar Diamond Shamrock Corporation (UDS) with responsibilities for corporate development and marketing. Mr. Gorder is also Chief Executive Officer and Chairman of the Board of Valero Energy Partners GP LLC, the general partner of Valero Energy Partners LP (NYSE: VLP), a midstream logistics master limited partnership formed by Valero in 2013. He also serves on the board of directors of Anadarko Petroleum Corporation (NYSE: APC). Qualifications: Mr. Gorder’s pertinent experience, qualifications, attributes, and skills include his multiple years of experience in the refining industry during his years of service with UDS and Valero. |

  20. Information Concerning Nominees and Directors

    | Age: 64 Director Since: 2016 Committee: Audit | H. PAULETT EBERHART Biographical Information Ms. Eberhart is Chairman and Chief Executive Officer of HMS Ventures, a privately held business involved with technology services and the acquisition and management of real estate. From January 2011 through March 2014, she served as President and Chief Executive Officer of CDI Corp. (NYSE: CDI), a provider of engineering and information technology outsourcing and professional staffing services. She served as a consultant to CDI from April 2014 through December 2014. Ms. Eberhart also served as Chairman and Chief Executive Officer of HMS Ventures from January 2009 until January 2011. She served as President and Chief Executive Officer of Invensys Process Systems, Inc. (Invensys), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (EDS), an information technology and business process outsourcing company, and held roles of increasing responsibility, including senior level financial and operating roles. From 2003 until March 2004, Ms. Eberhart was President of Americas of EDS, and from 2002 to 2003 she served as President of Solutions Consulting at EDS. Ms. Eberhart is a Certified Public Accountant and serves as a director of Anadarko Petroleum Corporation (NYSE: APC) and LPL Financial Holdings Inc. (NASDAQ: LPLA). In the past five years she also served on the boards of CDI, Cameron International Corporation (NYSE: CAM), Ciber, Inc. (NYSE: CBR), and Advanced Micro Devices, Inc. (NASDAQ: AMD). Qualifications: Ms. Eberhart’s pertinent experience, qualifications, attributes, and skills include executive management and leadership skills attained as a CEO of public and private companies, expertise and experience in information technology, and financial literacy and expertise attained in her service as a financial executive and Certified Public Accountant. |

  21. Information Concerning Nominees and Directors

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  22. Information Concerning Nominees and Directors

    | Age: 51 Director Since: 2016 Committee: Nom/Gov | KIMBERLY S. GREENE Biographical Information Ms. Greene is Executive Vice President and Chief Operating Officer of the Southern Company (NYSE: SO), a position she has held since March 2014. Prior to that, she was President and Chief Executive Officer of Southern Company Services, Inc. Prior to rejoining Southern Company in April 2013, she was Executive Vice President and Chief Generation Officer of Tennessee Valley Authority (TVA). While at TVA, she served as Chief Financial Officer, Executive Vice President of financial services and Chief Risk Officer, as well as Group President for strategy and external relations. Ms. Greene began her career at Southern Company in 1991 and held positions of increasing responsibility in the areas of engineering, strategy, finance, and wholesale marketing, including Senior Vice President and Treasurer of Southern Company Services, Inc. from 2004 to 2007. Qualifications: Ms. Greene’s pertinent experience, qualifications, attributes, and skills include executive managerial experience she has attained serving as an executive officer of other public and private companies, regulatory knowledge and expertise attained through her positions of responsibility in highly regulated industries, and financial literacy and expertise attained in her service as a financial executive. |

  23. Information Concerning Nominees and Directors

    | Age: 54 Director Since: 2012 Committee: Nom/Gov (Chair) | DEBORAH P. MAJORAS Biographical Information Ms. Majoras has been Chief Legal Officer and Secretary of The Procter & Gamble Company (P&G) (NYSE: PG) since 2010. She joined P&G in 2008 as Senior Vice President and General Counsel. Previously she served as Chair of the Federal Trade Commission from 2004 until 2008. From 2001 to 2004, Ms. Majoras was Deputy Assistant Attorney General in the U.S. Department of Justice, Antitrust Division. Ms. Majoras joined the law firm of Jones Day in 1991, and became a partner in 1999. Ms. Majoras serves on the boards of The Christ Hospital Health Network, the Cincinnati Legal Aid Society, Westminster College, and the Leadership Council on Legal Diversity. Qualifications: Ms. Majoras’s pertinent experience, qualifications, attributes, and skills include regulatory knowledge and expertise attained through her positions with the federal government; expertise in legal matters, leadership, and management skills attained while acting as an officer of a major U.S. publicly traded corporation and a partner with Jones Day; and leadership and management skills attained while serving as director or trustee of numerous non-profit organizations and a member of Valero’s Board since 2012. |

  24. Information Concerning Nominees and Directors

    | Age: 69 Director Since: 2005 Committee: Nom/Gov | DONALD L. NICKLES Biographical Information Senator Nickles retired as U.S. Senator from Oklahoma in 2005 after serving in the U.S. Senate for 24 years. He had also served in the Oklahoma State Senate for two years. During his tenure as a U.S. Senator, he was Assistant Republican Leader for six years, Chairman of the Republican Senatorial Committee, and Chairman of the Republican Policy Committee. He served as Chairman of the Budget Committee and as a member of the Finance and Energy and Natural Resources Committees. In 2005, he formed and is the Chairman and Chief Executive Officer of The Nickles Group, a Washington-based consulting and business venture firm. Senator Nickles also serves on the Board of Trustees of Washington Mutual Investors Fund (AWSHX). Qualifications: His pertinent experience, qualifications, attributes, and skills include extensive political, legislative and regulatory knowledge and expertise attained through his years of service as a U.S. Senator; the experience attained through his service on the boards of other public companies; the knowledge and experience he has attained from serving as founder and chief executive officer of a consulting and business venture firm; and the knowledge and experience he has attained through his service on Valero’s Board. |

  25. Information Concerning Nominees and Directors

    | 2018 PROXY STATEMENT | 11 |

  26. Information Concerning Nominees and Directors

    | Age: 70 Director Since: 2012 Committee: Compensation | PHILIP J. PFEIFFER Biographical Information Mr. Pfeiffer is Of Counsel in the San Antonio office of Norton Rose Fulbright LLP, where he was Partner-in-Charge for 25 years and led the office’s labor and employment practice. Through his 45+ years with the firm, Mr. Pfeiffer assisted employers in traditional management–union matters, complex civil rights matters, employment discrimination cases, affirmative action compliance, employment torts, alternative dispute resolution, employment contracts, and ERISA litigation. He is a director and past Chair of the Board of Southwest Research Institute, a non-profit contract research corporation based in San Antonio, Texas. He serves or has served on the boards of many other non-profit organizations including the United Way of San Antonio and Bexar County, St. Mary’s University, San Antonio Medical Foundation, Texas Research and Technology Foundation, The Children’s Hospital of San Antonio Foundation, Alamo Area Council of Boy Scouts, and the Cancer Therapy and Research Center. Qualifications: Mr. Pfeiffer’s pertinent experience, qualifications, attributes, and skills include expertise in legal matters, including labor and employment issues, leadership and management skills attained while acting as Partner-in-Charge of a law office, and serving as chairman, director, or trustee of numerous non-profit organizations and his service on Valero’s Board. |

  27. Information Concerning Nominees and Directors

    | Age: 67 Director Since: 2005 Lead Director Committee: Compensation | ROBERT A. PROFUSEK Biographical Information Mr. Profusek is a partner of the Jones Day law firm where he chairs the firm’s global mergers and acquisitions practice. His law practice focuses on mergers, acquisitions, takeovers, restructurings, and corporate governance matters. Mr. Profusek is also the lead independent director of CTS Corporation (NYSE: CTS). He served as a director of the managing general partner of Valero L.P. (now known as NuStar Energy L.P.) from 2001–2005. Qualifications: Mr. Profusek’s pertinent experience, qualifications, attributes, and skills include: expertise in legal matters, including corporate governance; capital markets expertise attained through his extensive experience in mergers and acquisitions and financing activities; managerial experience attained through his leadership roles with Jones Day; the knowledge and experience he has attained through his service as a director of other NYSE-listed companies; and the knowledge and experience he has attained through his service on Valero’s Board. |

  28. Information Concerning Nominees and Directors

    | Age: 71 Director Since: 2008 Committee: Audit | STEPHEN M. WATERS Biographical Information Mr. Waters has been the managing partner of Compass Partners Advisers LLP (Compass Partners) and its predecessor partnerships since 1996 and was the Chief Executive of Compass Partners European Equity Fund from 2005 to 2013. From 1988 to 1996, he served in several capacities at Morgan Stanley, including Co-Head of the Mergers and Acquisitions department from 1990 to 1992, Co-Chief Executive Officer of Morgan Stanley Europe from 1992 to 1996, and as a member of its worldwide Firm Operating Committee from 1992 to 1996. From 1974 to 1988, he was with Lehman Brothers, co-founding the Mergers and Acquisitions department in 1977, becoming a partner in 1980, and serving as Co-Head of the Mergers and Acquisitions department from 1985 to 1988. Mr. Waters is also Chairman of Boston Private Financial Holdings, Inc. (NASDAQ: BPFH). Qualifications: His pertinent experience, qualifications, attributes, and skills include: financial literacy and expertise, capital markets expertise, and managerial experience gained through his mergers and acquisitions experience and leadership roles with investment banking firms; and the knowledge and experience he has attained through his service on Valero’s Board and on other public company boards. |

  29. Information Concerning Nominees and Directors

    | 12 | |

  30. Information Concerning Nominees and Directors

    | Age: 59 Director Since: 2011 Committee: Audit (Chair) | RANDALL J. WEISENBURGER Biographical Information Mr. Weisenburger is the managing member of Mile26 Capital, LLC, a hedge fund based in Greenwich, Connecticut. He served as Executive Vice President and Chief Financial Officer of Omnicom Group Inc. (NYSE: OMC) from 1998 until September 2014. Prior to joining Omnicom, he was a founding member of Wasserstein Perella and a former member of First Boston Corporation. At Wasserstein Perella, Mr. Weisenburger specialized in private equity investing and leveraged acquisitions, and in 1993, he became President and CEO of the firm’s private equity subsidiary. His other corporate board service includes Carnival Corporation and Carnival plc (NYSE: CCL) and Acosta Sales and Marketing (privately held). He is a member of the Board of Overseers for the Wharton School of Business at the University of Pennsylvania. Qualifications: His pertinent experience, qualifications, attributes, and skills include financial literacy and expertise, capital markets expertise, managerial experience he has attained serving as an executive officer of other public companies, and the experience he has attained from service on Valero’s Board and on other public company boards. |

  31. Information Concerning Nominees and Directors

    | Age: 66 Director Since: 2011 Committee: Compensation (Chair) | RAYFORD WILKINS, JR. Biographical Information Mr. Wilkins previously served as CEO of Diversified Businesses of AT&T Inc. (NYSE: T), where he was responsible for international investments, AT&T Interactive, AT&T Advertising Solutions, customer information services, and the consumer wireless initiative in India. He retired from AT&T at the end of March 2012. Mr. Wilkins held several other leadership positions at AT&T and its predecessor companies, including Group President and CEO of SBC Enterprise Business Services and President and CEO of SBC Pacific Bell. He also serves on the boards of Morgan Stanley (NYSE: MS) and Caterpillar Inc. (NYSE: CAT), and the Advisory Council of the McCombs School of Business at the University of Texas at Austin. Qualifications: His pertinent experience, qualifications, attributes, and skills include managerial experience he has attained serving as an executive officer of other public companies, international business acumen he has attained from his responsibilities as executive officer and director for international business concerns, and the experience he has attained from service on Valero’s Board and on other public company boards. |

  32. Information Concerning Nominees and Directors

    | 2018 PROXY STATEMENT | 13 |

  33. Information Concerning Nominees and Directors

    IDENTIFICATION OF EXECUTIVE OFFICERS The following are Valero’s executive officers (for purposes of Rule 3b-7 under the Securities Exchange Act of 1934). As used in this proxy statement, our “named executive officers” are the five persons listed in the Summary Compensation Table. There is no arrangement or understanding between any executive officer listed below or any other person under which the executive officer was or is to be selected as an officer.

  34. Information Concerning Nominees and Directors

    | | Officer Since | Age as of 12/31/2017 | | Joseph W. Gorder, President and Chief Executive Officer | 2003 | 60 | | Jay D. Browning, Executive Vice President and General Counsel | 1997 | 59 | | Michael S. Ciskowski, Executive Vice President and Chief Financial Officer | 1998 | 60 | | R. Lane Riggs, Executive Vice President and Chief Operating Officer | 2011 | 52 | | Gary K. Simmons, Senior Vice President–Supply, International Operations and Systems Optimization | 2011 | 53 |

  35. Information Concerning Nominees and Directors

    Mr. Gorder. Mr. Gorder’s biographical information is stated above under the caption “Information Concerning Nominees and Directors—Nominees.” Mr. Browning was elected Executive Vice President and General Counsel effective May 1, 2014. He was elected Senior Vice President and General Counsel in November 2012. He previously served as Senior Vice President–Corporate Law and Secretary from 2006 to 2012. Mr. Browning was elected Vice President of Valero in 2002, and was first elected as Secretary in 1997. He also serves as Executive Vice President and General Counsel of Valero Energy Partners GP LLC. Mr. Ciskowski has served as Executive Vice President and Chief Financial Officer of Valero since August 2003. Before that, he served as Executive Vice President–Corporate Development since April 2003, and Senior Vice President in charge of business and corporate development since 2001. Mr. Riggs was elected Executive Vice President and Chief Operating Officer effective January 1, 2018. Prior to that, he served as Executive Vice President–Refining Operations and Engineering since 2014, and Senior Vice President–Refining Operations since 2011. His previous positions included Senior Vice President–Crude, Feedstock Supply & Trading and Vice President–Refinery Planning & Economics for Valero’s refining division. Mr. Riggs also serves on the board of directors of Valero Energy Partners GP LLC. Mr. Simmons was elected Senior Vice President–Supply, International Operations and Systems Optimization effective May 1, 2014. He previously served as Vice President–Crude and Feedstock Supply and Trading from 2012 to 2014, and Vice President–Supply Chain Optimization from 2011 to 2012. Mr. Simmons joined Valero in 1987 as a process engineer and has since held many leadership positions including Vice President and General Manager of Valero’s Ardmore and St. Charles refineries. Mr. Ciskowski has elected to retire from his position as Executive Vice President and Chief Executive Officer effective May 3, 2018. The Board has elected Donna M. Titzman as Executive Vice President and Chief Financial Officer to succeed Mr. Ciskowski effective May 3, 2018. Ms. Titzman, age 54, has 32 years of experience with Valero. Since 2013, she has served as Senior Vice President and Treasurer where she has responsibility for banking, cash management, customer credit, investment management, and risk management. She joined Valero in 1986 and held various leadership positions before being elected Treasurer in 1998, and Vice President and Treasurer in 2001. Ms. Titzman also serves as Director, Senior Vice President, Chief Financial Officer and Treasurer of Valero Energy Partners GP LLC. Ms. Titzman is a Certified Public Accountant.

  36. Information Concerning Nominees and Directors

    | 14 | |

  37. Information Concerning Nominees and Directors

    BENEFICIAL OWNERSHIP OF VALERO SECURITIES SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS This table lists the beneficial ownership of our Common Stock as of February 1, 2018, by each nominee for director, each current director, each executive officer named in the Summary Compensation Table, and all current directors and executive officers of Valero as a group. No executive officer, director, or nominee for director owns any class of equity securities of Valero other than Common Stock. None of the shares listed below are pledged as security. The address for each person is One Valero Way, San Antonio, Texas 78249.

  38. Information Concerning Nominees and Directors

    | Name of Beneficial Owner | Shares Held (1) | Shares Under Options (2) | Total Shares | Percent of Class | | Jay D. Browning | 218,512 | 34,766 | 253,278 | * | | Michael S. Ciskowski | 215,955 | 150,260 | 366,215 | * | | H. Paulett Eberhart | 4,795 | — | 4,795 | * | | Joseph W. Gorder | 442,639 | 246,790 | 689,429 | * | | Kimberly S. Greene | 4,795 | — | 4,795 | * | | Deborah P. Majoras | 20,364 | — | 20,364 | * | | Donald L. Nickles | 26,849 | — | 26,849 | * | | Philip J. Pfeiffer | 21,207 | — | 21,207 | * | | Robert A. Profusek | 38,680 | — | 38,680 | * | | Susan Kaufman Purcell | 9,866 | — | 9,866 | * | | R. Lane Riggs | 146,820 | 2,667 | 149,487 | * | | Gary K. Simmons | 119,859 | 1,750 | 121,609 | * | | Stephen M. Waters | 9,464 | — | 9,464 | * | | Randall J. Weisenburger | 29,799 | — | 29,799 | * | | Rayford Wilkins, Jr. | 31,409 | — | 31,409 | * | | Directors and current executive officers as a group (15 persons) | 1,341,013 | 436,233 | 1,777,246 | * |

  39. Information Concerning Nominees and Directors

    | Indicates that the percentage of beneficial ownership does not exceed 1% of the class.* |

  40. Information Concerning Nominees and Directors

    | Includes shares allocated under the Thrift Plan and shares of restricted stock. For Mr. Browning, the balance shown also includes shares held by his spouse. For Mr. Ciskowski, the balance shown also includes shares held by an entity that he controls. The balance shown for Mr. Waters does not include 2,940 shares held in a trust for which his spouse serves as trustee (Mr. Waters disclaims beneficial ownership of those shares).(1) |

  41. Information Concerning Nominees and Directors

    | Represents shares of Common Stock that may be acquired under outstanding stock options currently exercisable and that are exercisable within 60 days from February 1, 2018. Shares subject to options may not be voted unless the options are exercised.(2) |

  42. Information Concerning Nominees and Directors

    | 2018 PROXY STATEMENT | 15 |

  43. Company Performance

    | Primarily composed of downstream oil and gas peers, as described in the “Benchmarking Data” section of this document.(3) |

  44. Alignment of Executive Pay to Company Performance

    | | Balance compensation over short- and long-term | | | Facilitate retention of top executive talent |

  45. Alignment of Executive Pay to Company Performance

    | Element | Form | | Key Characteristics | | Base Salary | Cash | • | Takes into consideration scope and complexity of the role, peer market data, experience of the incumbent, and individual performance | | | | • | Aligned with competitive practices in order to support recruitment and retention of top talent | | Annual Bonus Plan | Performance-Based Cash | • | Variable component of annual pay focused on achievement of short-term annual financial, operational and strategic objectives that are critical drivers for safe and reliable operations, returns to stockholders, and the disciplined use of capital | | Long-term Incentive Program | Performance Shares (50%) | • | Measures relative Total Shareholder Return (TSR) against nine-company Performance Peer group across a three-year period | | | | • | Incentivizes shareholder returns | | | | • | Value delivered is driven by performance relative to relevant peers in industry | | | Restricted Stock (50%) | • | Vests 1/3 per year over three years | | | | • | Value delivered is driven by absolute performance of company stock | | | | • | Aids in retention of critical talent |

  46. Alignment of Executive Pay to Company Performance

    | Base salary plus target bonus plus target long-term incentives value.* |

  47. Alignment of Executive Pay to Company Performance

    | 1 | Compensation Comparator Group of 11 peers as described in the “Benchmarking Data” section of this document. |

  48. Alignment of Executive Pay to Company Performance

    | 2 | Represents “realizable” pay as reported in company annual proxies and includes: salaries; annual bonuses earned; long-term incentive awards that have vested or been exercised; the increase/decrease in long-term incentive awards that are still outstanding; and one-off payments like severance to outgoing executives and sign-on awards for incoming executives. |

  49. Adoption of Compensation Governance Best Practices

    | • | Incentive compensation (annual bonus and long-term incentives) represents the majority (ranging from 70 percent to 88 percent) of the targeted direct compensation of our named executive officers. |

  50. Adoption of Compensation Governance Best Practices

    | • | We target 50 percent of the long-term incentive value granted to our named executive officers to be awarded in the form of performance shares tied to relative TSR performance. |

  51. Adoption of Compensation Governance Best Practices

    | • | We use multiple performance metrics to motivate achievements that complement one another and that contribute to the long-term creation of stockholder value. |

  52. Adoption of Compensation Governance Best Practices

    | • | Incentives are balanced between absolute performance goals (rewarding the achievement of pre-established goals) and relative measures (linking the incentives to surpassing the performance of our peers). |

  53. Adoption of Compensation Governance Best Practices

    | • | We have maximum payout ceilings on both our annual bonus opportunities and our performance shares. |

  54. Adoption of Compensation Governance Best Practices

    | • | Valero’s revenues and market capitalization are within a reasonable range of the median revenues and market capitalization of the peer group of companies within our industry against which we benchmark our executives’ pay, reflecting that we make pay comparisons in a size-appropriate fashion. |

  55. Adoption of Compensation Governance Best Practices

    | • | We benchmark against the median pay levels of the peer group for each of base pay, annual bonus, and long-term incentives. |

  56. Adoption of Compensation Governance Best Practices

    | • | We have eliminated all change-in-control gross ups for potential parachute excise taxes and maintain a policy against the implementation of change-in-control arrangements that contain gross-ups. |

  57. Adoption of Compensation Governance Best Practices

    | • | We have a policy stipulating that grants of performance shares contain terms and conditions for vesting in a change-of-control context such that performance shares will vest on a partial, pro rata basis following termination of employment (rather than vesting automatically in full upon the change of control). |

  58. Adoption of Compensation Governance Best Practices

    | • | Our long-term incentive program mandates that stock options cannot be re-priced without stockholder approval. |

  59. Adoption of Compensation Governance Best Practices

    | • | Our Compensation Committee retains the services of an independent executive compensation consultant that provides services directly to the Committee. |

  60. Adoption of Compensation Governance Best Practices

    | • | Our Board has approved a limitation on the amount of equity compensation that may be paid to our non-employee directors in any year. |

  61. Administration of Executive Compensation Programs

    Administration of Executive Compensation Programs Our executive compensation programs are administered by our Board’s Compensation Committee. The Committee is composed of three independent directors from our Board. They do not participate in our executive compensation programs. Policies adopted by the Committee are implemented by our compensation and benefits staff. In 2017, the Committee retained Exequity LLP as an independent compensation consultant for executive and director compensation matters. The nature and scope of the consultant’s services are described above under the caption, “Compensation Consultant Disclosures.” BENCHMARKING DATA The Compensation Committee uses peer group compensation data to assess benchmarks of base salary, annual incentive compensation, and long-term incentive compensation. The Committee uses the Compensation Comparator Group (further described below) to benchmark compensation for our named executive officers. This reference is sometimes referred to in this proxy statement as “compensation survey data” or “competitive survey data.”

  62. Compensation Comparator Group

    Compensation Comparator Group The Compensation Comparator Group comprises the following companies that engage in U.S. domestic oil and gas operations:

  63. Compensation Comparator Group

    | Andeavor | Marathon Oil Corporation | | BP p.l.c. | Marathon Petroleum Corporation | | Chevron Corporation | Murphy Oil Corporation | | Exxon Mobil Corporation | Phillips 66 | | Hess Corporation | Royal Dutch Shell plc | | HollyFrontier Corporation | |

  64. Compensation Comparator Group

    We believe that the Compensation Comparator Group is relevant to our business because we compete with the member companies for talent at every level from entry-level employees to senior executives. We believe that our pay comparisons are size-appropriate because the median revenues and market capitalization of the Compensation Comparator Group are both within a reasonable range of Valero’s revenues and market capitalization and in 2017, both were below. Our understanding of this group’s compensation programs and levels is vitally important in order to remain competitive in the market for employee talent. We believe that given Valero’s size and complexity, our employees at all levels would be qualified candidates for similar jobs at any of the companies included in this group. Our compensation and benefits staff, under supervision of the Compensation Committee, develops recommendations for base salary, bonuses, and other compensation arrangements using the compensation survey data with assistance from Exequity. Our use of the data is consistent with our philosophy of providing executive compensation and benefits that are competitive with companies that we compete with for executive talent. In addition, the competitive compensation survey data and analyses assist the Compensation Committee in assessing our pay levels and targets relative to companies in the Compensation Comparator Group. See “Elements of Executive Compensation—Benchmarking Competitive Pay Levels” below.

  65. Performance Peer Group

    Performance Peer Group We also use a peer group for purposes of determining the relative performance of Valero’s total stockholder return (TSR). We use this relative TSR metric in our performance shares incentive program. For the 2017 performance peer group, companies were selected based on their engagement in U.S. domestic refining and marketing operations. Our use of different peer groups for compensation and performance is based on the following. While job candidacy can transcend company size, we believe that when measuring business performance, companies with a similar business model should be included. But we also recognize that comparing the performance of Valero’s generally non-integrated operations with those of upstream and integrated oil companies can result in anomalies due to the mismatch in how similar industry-specific events can impact companies with these varying business models. In addition, there are relatively few companies in our business against which clear comparisons can be drawn, rendering a peer group composition more challenging than in most industries.

  66. Performance Peer Group

    | 2018 PROXY STATEMENT | 27 |

  67. Performance Peer Group

    In November 2017, the Compensation Committee established a peer group for TSR measurement applicable to the 2017 awards of performance shares (with TSR measurement periods ending in 2018). Removed from the peer group for 2017 were Alon USA Energy, Inc., which was acquired in 2017 by Delek US Holdings, and Western Refining Inc., which was acquired in 2017 by Andeavor (formerly known as Tesoro Corporation). Valero is included in this peer group when results are calculated. In addition to Valero, the peer group for the 2017 award is composed of the following entities.

  68. Performance Peer Group

    | Andeavor | Marathon Petroleum Corporation | | BP p.l.c. | PBF Energy Inc. | | CVR Energy Inc. | Phillips 66 | | Delek US Holdings | Royal Dutch Shell plc | | HollyFrontier Corporation | |

  69. Performance Peer Group

    PROCESS AND TIMING OF COMPENSATION DECISIONS The Compensation Committee reviews and approves all compensation targets and payments for the named executive officers each year in conjunction with Valero’s annual strategic planning meeting (October or November). The Chief Executive Officer evaluates the performance of the other executive officers and develops individual recommendations based upon the competitive survey data. The Chief Executive Officer and the Committee may make adjustments to the recommended compensation based upon an assessment of an individual’s performance and contributions to the Company. The compensation for the Chief Executive Officer is reviewed by the Compensation Committee and recommended to the Board’s independent directors for approval. This assessment is based on the competitive survey data and other factors described in this Compensation Discussion and Analysis, and adjustments may be made based upon the independent directors’ evaluation of the Chief Executive Officer’s performance and contributions. We evaluate the total compensation opportunity offered to each executive officer at least once annually. The Compensation Committee establishes the target levels of annual incentive and long-term incentive compensation for the current fiscal year based upon its review of competitive market data provided by Exequity. The Compensation Committee also reviews competitive market data for annual salary rates for executive officer positions for the next fiscal year and recommends new salary rates to become effective the next fiscal year. The Compensation Committee may, however, review salaries or grant long-term incentive awards at other times during the year because of new appointments or promotions. Our Compensation Committee does not time the grants of long-term incentive awards around Valero’s release of undisclosed material information.

  70. Elements of Executive Compensation

    | • | to provide compensation payouts that are tied to the performance of internal and external metrics both on a relative and absolute basis; |

  71. Elements of Executive Compensation

    | • | Valero’s attainment of key financial performance measures; |

  72. Elements of Executive Compensation

    | • | long-term stock price performance; and |

  73. Elements of Executive Compensation

    The following charts summarize the relative target values of base salary and incentive compensation for 2017 for our named executive officers. When setting executive compensation, the Compensation Committee considers the amount and form of compensation payable to an executive officer. The Committee seeks to achieve an appropriate balance between immediate cash rewards for the achievement of company and personal objectives and long-term incentives that align the interests of our officers with those of our stockholders. The size of each element is based on the assessment of competitive market practices as well as company and individual performance. The Compensation Committee analyzes total direct compensation from a market competitive perspective, and then evaluates each component relative to its market reference. The Committee believes that making a significant portion of an executive officer’s incentive compensation contingent on long-term stock price performance more closely aligns the executive officer’s interests with those of our stockholders. Because we place a large amount of total direct compensation at risk in the form of variable pay (annual bonus and long-term incentives), the Committee generally does not adjust current compensation based upon realized gains or losses from prior incentive awards or current stock holdings. For example, we normally will not change the size of a target long-term incentive grant in a particular year solely because of Valero’s stock price performance during the immediately preceding years. The Compensation Committee recognizes that the refining and marketing industry is volatile and strives to maintain a measure of predictability consistent with a substantial reliance on variable compensation structures in furtherance of a fundamental pay-for-performance philosophy. INDIVIDUAL PERFORMANCE AND PERSONAL OBJECTIVES The Compensation Committee evaluates the individual performance of, and performance objectives for, our named executive officers. Performance and compensation for our Chief Executive Officer are reviewed and approved by the Board’s independent directors with recommendations from the Compensation Committee. For officers other than the Chief Executive Officer, individual performance and compensation are evaluated by the Compensation Committee with recommendations from our Chief Executive Officer. Individual performance and objectives are specific to each officer position. Criteria used to measure an individual’s performance may include assessment of objective criteria (e.g., execution of projects within budget parameters, improving an operating unit’s profitability, or timely completing an acquisition or divestiture) as well as qualitative factors such as the executive’s ability to lead, ability to communicate, and successful adherence to Valero’s stated values (i.e., commitment to safety, commitment to the environment, commitment to our communities, commitment to our employees, and commitment to our stakeholders). There are no specific weights assigned to these various elements of performance.

  74. Elements of Executive Compensation

    BASE SALARIES Base salaries for our named executive officers are approved by the Compensation Committee after taking into consideration median practices for comparable roles among the peer companies. The Compensation Committee also considers the recommendations of the Chief Executive Officer for officers other than the Chief Executive Officer. The base salary and all other compensation of the Chief Executive Officer are reviewed and approved by the independent directors of the Board. Base salaries are reviewed annually and may be adjusted to reflect promotions, the assignment of additional responsibilities, individual performance, or the performance of Valero. Salaries are also periodically adjusted to remain competitive with companies within the compensation survey data. An executive’s compensation typically increases in relation to his or her responsibilities within Valero. ANNUAL INCENTIVE BONUS The annual incentive bonus for our named executive officers has two primary components. First, a maximum bonus pool is funded through determination of Valero’s achievement of quantitative financial performance measures. Second, a target bonus is determined for each executive based on the results of additional financial, operational, and strategic performance measures. The performance measures associated with these two components, along with consideration of the named executive officer’s individual performance, are used to determine the annual incentive bonus payout for each of the named executive officers. To fund the annual incentive bonus pool for our named executive officers, the Compensation Committee sets quantitative company performance measures during the first quarter of the year. Valero’s performance is measured against these metrics to establish the maximum bonus amounts that can be paid under our program. In 2017, the Committee established measures that correspond to two of our business priorities: Adjusted Net Cash Provided by Operating Activities (“ANC”) and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). These measures establish the maximum level of funding for the bonus program. The program is funded at an amount equal to the greater of (i) ANC multiplied by 0.80 percent, or (ii) EBITDA multiplied by 0.65 percent. The maximum bonus that can be paid to a named executive officer is based on the funding results of ANC or EBITDA. Once the maximum pool is calculated, the funded pool is allocated to each executive officer using the following percentages: 50 percent for the Chief Executive Officer (the highest paid officer), 20 percent for the second highest paid officer, and 10 percent each for the third, fourth, and fifth highest paid officers. After these maximum funded amounts are calculated, the Compensation Committee considers the following to determine bonuses for each officer (at amounts that may not exceed the funded levels):

  75. Elements of Executive Compensation

    | • | the position of the named executive officer, which is used to determine a targeted percentage of base salary that may be awarded as incentive bonus; |

  76. Elements of Executive Compensation

    | • | pre-established performance objectives that include a quantitative financial performance goal (Financial Performance Goal), operational performance goals (Operational Performance Goals), and qualitative goals and objectives including the effective use of capital (Strategic Company Performance Goals) for the completed fiscal year; and |

  77. Operational Performance Goals

    Operational Performance Goals The Operational Performance Goals considered for our annual incentive bonuses, as established and approved by the Compensation Committee in the first quarter of the performance year, are measured against:

  78. Operational Performance Goals

    | • | Valero’s achievements in the areas of health, safety, and environmental; |

  79. Operational Performance Goals

    | • | Valero’s achievements in improving refining competitiveness through improved mechanical availability; and |

  80. Operational Performance Goals

    | • | Valero’s achievements in cost management and expense control. |

  81. Operational Performance Goals

    We believe that these measures appropriately reflect key business objectives of Valero. After completion of the fiscal year, each of the Operational Performance Goals is measured against Valero’s actual performance in these areas and the minimum, target, and maximum levels established by the Compensation Committee. Valero’s performance score for 2017 for this category was 84.77 percent (versus a target score of 40.00 percent) and reflects best-ever performance in the health, safety, and environmental, and the mechanical availability measures. For additional details on Valero’s 2017 performance versus targeted amounts for our Operational Performance Goals, see the “Annual Incentive Bonus Performance Goals” table that follows in this section.

  82. Strategic Company Performance Goals

    Strategic Company Performance Goals Valero’s Strategic Company Performance Goals were established in the first quarter of the 2017 performance year by the Chief Executive Officer. Included in these goals for 2017 was a qualitative capital-based performance measure assessed by the Compensation Committee through return on capital employed. After completion of the fiscal year, the Strategic Company Performance Goals were evaluated as a whole. Significant achievements in this area for 2017 included: (i) the creation of long-term stockholder value and the return of cash to stockholders through a quarterly cash dividend increase from $0.60 per share to $0.70 per share and $1.37 billion of common stock repurchases; (ii) the return of 74% of adjusted net cash provided by operating activities to stockholders through dividends and stock buybacks, exceeding management’s 40% payout goal; (iii) the successful sale of $508 million of midstream assets to Valero Energy Partners LP; and (iv) the successful execution of Valero’s capital expenditures plan which totaled $2.4 billion for 2017. Valero’s performance score for 2017 for this category was 20.00 percent (versus a target score of 20.00 percent).

  83. Strategic Company Performance Goals

    | 32 | |

  84. Valero’s Achievement of Performance Goals for 2017

    Valero’s Achievement of Performance Goals for 2017 The following table details the performance targets and final results of Valero’s achievements in 2017 for each of the sub-components of the bonus program’s Financial Performance Goal, Operational Performance Goals, and Strategic Goals.

  85. Valero’s Achievement of Performance Goals for 2017

    | Annual Incentive Bonus Performance Goals & Achievement | | | | | | | | | | Component | Weighting | Minimum | Target | Maximum | Achieved in 2017 | Bonus Percent Earned (1) | | Financial Performance Goal | | | | | | | | | I. | EPS,adjusted ($/share) | 40.00% | $1.04 | $4.15 | $8.30 | $4.96 | 53.76% | | Operational | | | | | | | | | II. | Health,Safety, and Environmental (2) | 13.33% | | | | | 29.76% | | III. | MechanicalAvailability (3) | 13.33% | 95.6 | 96.2 to 96.4 | 97.6 | 97.3 | 25.00% | | IV. | CostManagement and Expense Control ($ in millions) | 13.34% | $15.0 | $60.0 | $120.0 | $129.9 | 30.01% | | | subtotal | 40.00% | | | | subtotal | 84.77% | | Strategic | | | | | | | | | V. | CompanyGoals and Objectives (4) | 20.00% | | | | | 20.00% | | Total | | 100.00% | | | | | 158.53% |

  86. Valero’s Achievement of Performance Goals for 2017

    Footnotes:

  87. Valero’s Achievement of Performance Goals for 2017

    | Represents performance achieved in 2017 and component percent weighting.(1) |

  88. Valero’s Achievement of Performance Goals for 2017

    | Consists of 16 separately weighted health, safety, and environmental metrics across three business units. Performance “achieved” was at 99.2% of maximum.(2) |

  89. Valero’s Achievement of Performance Goals for 2017

    | Using the Mechanical Availability scoring from the industry-standard Solomon Associates survey in which “Target” represents performance between the 50th and 62nd percentiles.(3) |

  90. Valero’s Achievement of Performance Goals for 2017

    | As established by the Compensation Committee in consultation with the CEO, and includes a qualitative assessment of use of capital. Performance “achieved” was at maximum.(4) |

  91. Valero’s Achievement of Performance Goals for 2017

    As a result of Valero’s 2017 EBITDA performance, the maximum bonus pool was fully funded. The final 2017 bonus amounts paid to our named executive officers were determined as a function of: (i) Valero’s performance and maximum bonus pool funding based on EBITDA performance, (ii) Valero’s performance as measured against the financial, operational, and strategic performance goals, and (iii) the Committee’s assessment of the named executive officers’ individual performance in 2017. The following table summarizes the 2017 bonus amounts paid to our named executive officers:

  92. Valero’s Achievement of Performance Goals for 2017

    | | Gorder | Ciskowski | Riggs | Browning | Simmons | | Base Salary (1) | $1,585,000 | $930,000 | $700,000 | $620,000 | $600,000 | | Bonus Target Percentage (2) | 150% | 110% | 80% | 80% | 65% | | Bonus Target Amount (3) | $2,377,500 | $1,023,000 | $560,000 | $496,000 | $390,000 | | Bonus Percentage Achieved (4) | 158.53% | 158.53% | 158.53% | 158.53% | 158.53% | | Earned Target Incentive Bonus (5) | $3,769,051 | $1,621,762 | $887,768 | $786,309 | $618,267 | | Bonus Amount Paid (6) | $3,800,000 | $1,625,000 | $925,000 | $790,000 | $620,000 |

  93. Valero’s Achievement of Performance Goals for 2017

    Footnotes:

  94. Valero’s Achievement of Performance Goals for 2017

    | Base salary is the officer’s base salary at December 31, 2017.(1) |

  95. Valero’s Achievement of Performance Goals for 2017

    | Bonus target as a percentage of base salary.(2) |

  96. Valero’s Achievement of Performance Goals for 2017

    | Determined by multiplying “Bonus target percentage” times “Base salary.”(3) |

  97. Valero’s Achievement of Performance Goals for 2017

    | 2018 PROXY STATEMENT | 33 |

  98. Valero’s Achievement of Performance Goals for 2017

    Footnotes (cont.):

  99. Valero’s Achievement of Performance Goals for 2017

    | Valero’s performance score for “Bonus percentage achieved” was 158.53% based on results of the Annual Incentive Bonus Performance Goals detailed in the previous table.(4) |

  100. Valero’s Achievement of Performance Goals for 2017

    | Determined by multiplying “Bonus target amount” times “Bonus percentage achieved.”(5) |

  101. Valero’s Achievement of Performance Goals for 2017

    | As disclosed in the Summary Compensation Table. The actual amount paid was determined based on: (i) Valero’s performance and maximum bonus pool funding using EBITDA, (ii) Valero’s performance as measured against financial, operational, and strategic goals, and (iii) the Committee’s assessment of the named executive officers’ individual performance in 2017. (Based on superior EBITDA results, the maximum bonus funding is significantly greater than the final earned amounts, so the final bonus awards represent the application of the Compensation Committee’s downward discretion from the maximum bonus funding.)(6) |

  102. Valero’s Achievement of Performance Goals for 2017

    LONG-TERM INCENTIVE AWARDS We provide stock-based, long-term compensation to our executive officers through our stockholder-approved equity plan. The plan provides for a variety of stock and stock-based awards, including restricted stock which vests over a period determined by the Compensation Committee, and performance shares that vest (become non-forfeitable) upon Valero’s achievement of an objective performance goal. For 2017, the mix of long-term incentives awarded to our named executive officers was split evenly, on a share value basis, between grants of restricted stock and awards of performance shares. We believe that these awards create a powerful link between the creation of stockholder value and executive pay delivered. In addition, we believe that the balance between absolute performance alignment through restricted shares, and the relative performance objectives underscored by the relative TSR performance shares, is appropriate. In order for executives to fully realize their targeted opportunities, Valero must both perform well and beat the stock price performance of companies in the Performance Peer Group listed above under the caption “Administration of Executive Compensation Programs—Benchmarking Data—Performance Peer Group.” For each officer, a target amount of long-term incentives is established and is expressed as a percentage of base salary. In establishing award sizes, the Compensation Committee makes primary reference to median peer company grant levels and makes individualized determinations of award sizes based on additional factors such as: each executive’s experience and contribution to company success, internal parity, and management succession. In addition, an executive’s targeted award may be adjusted based upon the Compensation Committee’s determination of the officer’s individual performance, which (for officers other than the Chief Executive Officer) takes into consideration the recommendation of the Chief Executive Officer.

  103. Performance Shares

    Performance Shares For 2017, performance share targets represent 50 percent of each executive officer’s long-term incentive target on a share value basis. Performance shares are payable in shares of Common Stock on the vesting dates of the performance shares. Shares of Common Stock are earned with respect to vesting performance shares only upon Valero’s achievement of TSR objectives (measured in relation to the TSR of our peers). Shares not earned in a given performance period expire and are forfeited. Performance shares are also subject to potential forfeiture if an executive terminates his or her employment prior to vesting. The performance shares awarded in 2017 are subject to vesting in three increments, based upon our TSR compared to our peer group during one-year, two-year, and three-year performance periods. Performance periods measure TSR based on the average closing stock prices for the 30 days of December 2 to December 31 at the beginning and end of the performance periods, including dividends. At the end of each performance period, our TSR for the period is compared to the TSR of our peer group. Consistent with typical relative TSR design conventions, shares of Common Stock are awarded based on Valero’s TSR performance versus the peers’ TSR as shown in the table below.

  104. Performance Shares

    | Percentile TSR Rank (1) | % of Performance Shares Awarded as Common Shares | | 1st or 2nd Position | 200% | | 50th Percentile | 100% | | Last or 2nd-to-Last Position | 0% |

  105. Performance Shares

    | TSR performance ranking between the 2nd and 2nd-to-last positions generate payouts determined by straight-line interpolation unless ranking of 50th percentile is achieved, which pays out at 100%.(1) |

  106. Performance Shares

    Additional shares of Common Stock may be earned based on the accumulated value of dividends paid on Valero’s Common Stock during the pertinent performance period. The amount of accumulated dividends is multiplied by the earned percentage payout (if any)

  107. Performance Shares

    | 34 | |

  108. Performance Shares

    for the performance shares, and the product is divided by the fair market value of the Common Stock on the performance shares’ vesting date. The resulting amount is paid in a whole number of shares of Common Stock. The value of the dividends credited to the outstanding performance shares is paid to participants only to the extent that the underlying performance shares earn shares of Common Stock, based on Valero’s TSR performance, and is paid (in shares of Common Stock) only when the underlying performance shares vest. Upon vesting, Executive officers can designate up to 50% of the after-tax vested shares of Common Stock to be delivered in cash. If a cash payment is elected, the total number of after-tax shares to be delivered is multiplied by the fair market value of the Common Stock on the performance shares’ vesting date, and the product is multiplied by the cash payment election percentage designated by the award recipient. The resulting amount is paid in cash, with the remainder paid in shares of Common Stock.

  109. Restricted Stock

    Restricted Stock Restricted stock targets represent the remaining 50 percent of each executive officer’s long-term incentive target on a share value basis. Restricted stock is subject to forfeiture if an executive terminates his or her employment prior to vesting (other than upon retirement and other than following a permitted voluntary termination following a change in control). Dividends are paid on shares of restricted stock as and when dividends are declared and paid on Valero’s outstanding common stock. We believe that our mix of long-term incentives provides an appropriate balance between the pay-for-performance attributes of performance shares and the equity alignment and retentive qualities of restricted shares. This mix also generally aligns with market practices, and thus supports recruitment and retention of top-quality executive talent. The Compensation Committee considers and grants long-term incentive awards to our officers and certain other employees annually, typically during the fourth quarter in conjunction with the last regularly scheduled meeting of the Compensation Committee for the year. The performance shares and restricted stock components of our executive officers’ 2017 long-term incentive awards were granted in November 2017. PERQUISITES AND OTHER BENEFITS Consistent with our goal of providing compensation and benefits that are aligned with market practices among our peers, officers are eligible to receive reimbursement for club dues, personal excess liability insurance, federal income tax preparation, and an annual health examination. We do not provide executive officers with automobiles or automobile allowances or supplemental executive medical coverage. We provide other benefits, including medical, life, dental, and disability insurance in line with competitive market conditions. Our named executive officers are eligible for the same benefit plans provided to our other employees, including our Thrift Plan and insurance and supplemental plans chosen and paid for by employees who desire additional coverage. Consistent with typical practices among our peers, executive officers and other employees whose compensation exceeds certain limits are eligible to participate in non-qualified excess benefit programs whereby those individuals can choose to make larger contributions than allowed under the qualified plan rules and receive correspondingly higher benefits. These plans are described below. POST-EMPLOYMENT BENEFITS

  110. Nonqualified Deferred Compensation Plans

    Nonqualified Deferred Compensation Plans Deferred Compensation Plan. Our named executive officers are eligible to participate in our Deferred Compensation Plan (“DC Plan”). The DC Plan is offered to align with competitive practices among our peers, and thereby support recruitment and retention of executive talent. The DC Plan permits eligible employees to defer a portion of their salary and/or bonus until separation (i.e., retirement or termination of employment). Under the DC Plan, each year eligible employees are permitted to elect to defer up to 30 percent of their

  111. Nonqualified Deferred Compensation Plans

    | 2018 PROXY STATEMENT | 35 |

  112. Nonqualified Deferred Compensation Plans

    salary and/or 50 percent of their cash bonuses to be earned for services performed during the following year. We have not made discretionary contributions to participants’ accounts, and currently we have no plans to do so. All amounts credited under the DC Plan (other than discretionary credits) are immediately 100 percent vested. Any discretionary credits, if ever granted, will vest in accordance with the vesting schedule determined at the time of the grant of discretionary credits. Participant accounts are credited with earnings (or losses) based on investment fund choices made by the participants among available funds selected by Valero’s Benefits Plans Administrative Committee. Excess Thrift Plan. Our Excess Thrift Plan provides benefits to participants in our Thrift Plan whose annual additions to the Thrift Plan are subject to the limitations on annual additions as provided under Section 415 of the Internal Revenue Code, and/or who are constrained from making maximum contributions under the Thrift Plan by Section 401(a)(17) of the Internal Revenue Code, which limits the amount of an employee’s annual compensation which may be taken into account under that plan. Two separate components comprise the Excess Thrift Plan: (i) an “excess benefit plan” as defined under Section 3(36) of ERISA; and (ii) a plan that is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Additional information about these plans and contributions made by Valero and each of our named executive officers under non-qualified defined contribution and other deferred compensation plans are presented in this proxy statement under the caption “Executive Compensation—Nonqualified Deferred Compensation.”

  113. Change of Control Severance Arrangements

    Change of Control Severance Arrangements We have change of control severance agreements with each of our named executive officers. The agreements are intended to assure the continued objectivity and availability of the officers in the event of any merger or acquisition that would likely threaten the job security of many top executives. These arrangements are also intended to maintain executive focus and productivity in a period of uncertainty. If a change of control occurs during the term of an agreement, the agreement becomes operative for a fixed three-year period. The agreements provide generally that the officers’ terms and conditions of employment will not be adversely changed during the three-year period after a change of control. For information regarding payments that may be made under these agreements, see the disclosures in this proxy statement under the caption “Executive Compensation—Potential Payments upon Termination or Change of Control.”

  114. Compensation-Related Policies

    Compensation-Related Policies POLICY ON VESTING OF PERFORMANCE SHARES UPON CHANGE OF CONTROL OF VALERO Our Board has adopted a policy regarding the vesting of performance shares upon a change of control of Valero. The policy provides that performance shares granted to participants in Valero’s equity incentive plans will not vest automatically upon the date of a change of control (as defined in the applicable plan) of Valero. The policy further provides that in making awards of performance shares to participants, the Compensation Committee may provide in the award agreement with the participant that if a participant’s employment with Valero is terminated following a change of control, any unvested performance shares held by the participant will vest on a partial, pro rata basis on the date of the participant’s termination of employment, with such qualifications for an award as the Committee may determine. The policy is available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. EXECUTIVE COMPENSATION CLAWBACK POLICY Under our executive compensation clawback policy, in the event of a material restatement of Valero’s financial results, the Board, or the appropriate committee thereof, will review all bonuses and other incentive and equity compensation awarded to our executive officers. The policy provides that if the bonuses and other incentive and equity compensation would have been lower had they been calculated based on such restated results, the Board (or committee), will, to the extent permitted by governing law and as appropriate under the circumstances, seek to recover for the benefit of Valero all or a portion of the specified compensation awarded to executive officers whose fraud or misconduct caused or partially caused such restatement, as determined by the Board (or committee). In determining whether to seek recovery, the policy states that the Board (or committee) shall take into account such considerations as it deems appropriate, including governing law and whether the assertion of a claim may prejudice the interests of Valero in any related proceeding or investigation. The policy is available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. COMPENSATION CONSULTANT DISCLOSURE POLICY Per the terms of our compensation consultant disclosure policy, Valero will make certain disclosures pertaining to compensation consultants in our proxy statements for annual meetings of stockholders. For any compensation consultant retained by the Compensation Committee to provide compensation advice with respect to the compensation disclosed in the Summary Compensation Table in the proxy statement, we will disclose (i) the total fees paid annually to the consultant for compensation-related services and non-compensation-related services, (ii) a description of any non-compensation-related services provided by the consultant, and (iii) any services that the consultant has provided to senior executives of Valero and the nature of those services. The policy is available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. STOCK OWNERSHIP GUIDELINES AND PROHIBITION AGAINST HEDGING AND PLEDGING We have adopted stock ownership guidelines applicable to our officers and non-employee directors. The guidelines require that non-employee directors acquire and hold during their service shares of Common Stock equal in value to at least five times their annual cash retainer. Our officers are required to meet the applicable guidelines stated below.

  115. Compensation-Related Policies

    Officers and non-employee directors have five years after becoming subject to the guidelines to meet the requisite ownership threshold and, once attained, are expected to continuously own sufficient shares to meet that threshold. Our directors, officers, and employees may not purchase, sell, or write calls, puts, or other options or derivative instruments on shares of Common Stock, and our directors and officers are prohibited from pledging shares of Common Stock as collateral or security for indebtedness. Compliance with the guidelines is monitored by the Compensation Committee. The full text of our guidelines is included in our Corporate Governance Guidelines (as Article IX), available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. INSIDER TRADING AND SPECULATION IN VALERO STOCK Our officers, directors, and employees are prohibited from purchasing or selling Valero securities while in possession of material, nonpublic information, or otherwise using such information for their personal benefit or in any manner that would violate applicable laws and regulations. In addition, our policies prohibit our employees from speculating in our stock, which includes short selling (profiting if the market price of our stock decreases), buying or selling publicly traded options (including writing covered calls), hedging, or any other type of derivative arrangement that has a similar economic effect.

  116. Compensation-Related Policies

    | • | assistance with selecting peer and comparator companies for benchmarking executive pay and monitoring Valero’s performance; |

  117. Compensation-Related Policies

    | • | assessment of competitive pay for our executives, with separate analyses of base salary, annual incentive, and long-term incentive compensation; |

  118. Compensation-Related Policies

    | • | assessment of, and recommendations for, our annual incentive bonus program; |

  119. Compensation-Related Policies

    | • | assessment of, and recommendation of enhancements to, our long-term incentive program strategy, including (i) the design of an appropriate mix of equity incentive vehicles, (ii) determination of performance measures and measurement techniques, and (iii) determination of competitive equity grant guidelines consistent with our overall pay philosophy; |

  120. Compensation-Related Policies

    | • | assessment of competitive pay for our directors; and |

  121. Compensation-Related Policies

    | Securities available for future issuance under these plans can be issued in various forms, including restricted stock and stock options.(1) |

  122. Summary Compensation Table

    Summary Compensation Table This table summarizes the compensation paid to our named executive officers for fiscal years 2017, 2016, and 2015. The elements of compensation listed in the table are described in the Compensation Discussion and Analysis section of this proxy statement and in the table’s footnotes.

  123. Summary Compensation Table

    | Principal Position (1) | Year | Salary ($) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | | Joseph W. Gorder, Chairman of the Board, President, and CEO | 2017 | 1,585,000 | 12,734,060 | — | 3,800,000 | 4,269,202 | 143,998 | 22,532,260 | | | 2016 | 1,450,000 | 10,610,898 | — | 2,925,000 | 3,334,310 | 132,410 | 18,452,618 | | | 2015 | 1,300,000 | 8,870,341 | — | 3,900,000 | 3,252,393 | 212,411 | 17,535,145 | | Michael S. Ciskowski, EVP and CFO | 2017 | 930,000 | 4,687,459 | — | 1,625,000 | 3,118,093 | 87,568 | 10,448,120 | | | 2016 | 890,000 | 4,057,373 | — | 1,320,000 | 1,855,463 | 91,783 | 8,214,619 | | | 2015 | 845,000 | 3,809,824 | — | 1,859,000 | 1,551,671 | 83,683 | 8,149,178 | | R. Lane Riggs, EVP and COO | 2017 | 700,000 | 2,710,576 | — | 925,000 | 1,743,387 | 96,683 | 6,175,646 | | | 2016 | 640,000 | 2,191,016 | — | 725,000 | 1,206,237 | 73,248 | 4,835,501 | | | 2015 | 600,000 | 1,661,614 | — | 960,000 | 1,046,542 | 69,005 | 4,337,161 | | Jay D. Browning, EVP and General Counsel | 2017 | 620,000 | 2,039,272 | — | 790,000 | 1,436,316 | 86,737 | 4,972,325 | | | 2016 | 595,000 | 1,773,224 | — | 640,000 | 973,148 | 71,101 | 4,052,473 | | | 2015 | 575,000 | 1,591,603 | — | 920,000 | 1,012,273 | 66,816 | 4,165,692 | | Gary K. Simmons, SVP–Supply, Int’l Ops. & Systems Optimization | 2017 | 600,000 | 1,398,749 | — | 620,000 | 1,345,120 | 88,961 | 4,052,830 | | | 2016 | 565,000 | 1,203,887 | — | 500,000 | 876,063 | 57,980 | 3,202,930 | | | (8) | | | | | | | |

  124. Summary Compensation Table

    Footnotes to Summary Compensation Table:

  125. Summary Compensation Table

    | The persons listed in this table are referred to in this proxy statement as our “named executive officers.”(1) |

  126. Summary Compensation Table

    | The amount shown is the “grant date fair value” of stock awards (restricted stock and performance shares) computed under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation–Stock Compensation (FASB ASC Topic 718). Under FASB ASC Topic 718, the grant date fair values that we must disclose for our performance share awards include the values of certain tranches of unvested performance shares that were awarded in years prior to the fiscal year shown in the table. The computations of grant date fair values for performance shares are more fully described in footnote (5) to the Grants of Plan-Based Awards table in this proxy statement.(2) |

  127. Summary Compensation Table

    | The dollar values included in the “Stock Awards” column include the following components: |

  128. Summary Compensation Table

    | | Gorder | Ciskowski | Riggs | Browning | Simmons | | Restricted Stock | 5,704,000 | 2,042,400 | 1,251,200 | 884,800 | 611,200 | | Performance Shares | 7,030,060 | 2,645,059 | 1,459,376 | 1,154,472 | 787,549 | | Total (in dollars) | 12,734,060 | 4,687,459 | 2,710,576 | 2,039,272 | 1,398,749 |

  129. Summary Compensation Table

    | Additional information about the restricted stock and performance shares granted in 2017 is disclosed in the Grants of Plan-Based Awards table in this proxy statement. Additional information about the restricted stock awards is disclosed in Note 13 (“Stock-Based Compensation”) of Notes to Consolidated Financial Statements in Valero’s Annual Report on Form 10-K for the year ended December 31, 2017.(3) |

  130. Summary Compensation Table

    | 2018 PROXY STATEMENT | 41 |

  131. Summary Compensation Table

    Footnotes to Summary Compensation Table (cont.):

  132. Summary Compensation Table

    | Stock options were not granted to our named executive officers in 2017, 2016, or 2015.(4) |

  133. Summary Compensation Table

    | Represents amounts earned under our annual incentive bonus plan, as described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Bonus.”(5) |

  134. Summary Compensation Table

    | This column represents the sum of the change in pension value and non-qualified deferred compensation earnings for each of the named executive officers. See the Pension Benefits table for the present value assumptions used for these calculations. The amount of above-market or preferential earnings on non-tax-qualified deferred compensation included in the amounts presented above is zero.(6) |

  135. Summary Compensation Table

    | Amounts listed as “All Other Compensation” for 2017 are composed of the following items (perquisites and other personal benefits in excess of $25,000 are separately quantified).(7) |

  136. Summary Compensation Table

    | For Mr. Gorder: Valero contributions to the officer’s Thrift Plan account, Valero contributions to the officer’s Excess Thrift Plan account ($92,052), home security monitoring, reimbursement of club membership dues, Valero provided dollars for the purchase of health and welfare benefits, imputed income for tax return preparation fees. |

  137. Summary Compensation Table

    | For Mr. Ciskowski: Valero contributions to the officer’s Thrift Plan account, Valero contributions to the officer’s Excess Thrift Plan account ($46,200), home security monitoring, Valero provided dollars for the purchase of health and welfare benefits, imputed income for tax return preparation fees. |

  138. Summary Compensation Table

    | For Mr. Riggs: Valero contributions to the officer’s Thrift Plan account, Valero contributions to the officer’s Excess Thrift Plan account ($30,100), home security monitoring, reimbursement of club membership dues, Valero provided dollars for the purchase of health and welfare benefits ($27,241), imputed income for tax return preparation fees. |

  139. Summary Compensation Table

    | For Mr. Browning: Valero contributions to the officer’s Thrift Plan account, Valero contributions to the officer’s Excess Thrift Plan account, home security monitoring, reimbursement of club membership dues, Valero provided dollars for the purchase of health and welfare benefits ($28,885), imputed income for tax return preparation fees. |

  140. Summary Compensation Table

    | For Mr. Simmons: Valero contributions to the officer’s Thrift Plan account, Valero contributions to the officer’s Excess Thrift Plan account, reimbursement of club membership dues, Valero provided dollars for the purchase of health and welfare benefits ($27,241), imputed income for tax return preparation fees. |

  141. Summary Compensation Table

    | Mr. Simmons was not a named executive officer for 2015.(8) |

  142. Summary Compensation Table

    | 42 | |

  143. Grants of Plan-Based Awards

    Grants of Plan-Based Awards The following table describes plan-based awards for our named executive officers in 2017.

  144. Grants of Plan-Based Awards

    | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | Grant Date Fair Value of Stock and Option Awards ($) (1) | | Name | Grant Date | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | Joseph W. Gorder | n/a | (2) | — | 2,377,500 | 18,150,000 | | | | | | | 11/01/2017 | (3) | | | | n/a | 71,300 | n/a | 5,704,000 | | | n/a | (4) | | | | | 71,300 | | | | | 11/01/2017 | (5) | | | | | 23,767 | 47,534 | 2,157,331 | | | 11/01/2017 | (5) | | | | | 27,473 | 54,946 | 2,720,376 | | | 11/01/2017 | (5) | | | | | 19,590 | 39,180 | 2,152,353 | | Michael S. Ciskowski | n/a | (2) | — | 1,023,000 | 7,260,000 | | | | | | | 11/01/2017 | (3) | | | | n/a | 25,530 | n/a | 2,042,400 | | | n/a | (4) | | | | | 25,530 | | | | | 11/01/2017 | (5) | | | | | 8,510 | 17,020 | 772,453 | | | 11/01/2017 | (5) | | | | | 10,290 | 20,580 | 1,018,916 | | | 11/01/2017 | (5) | | | | | 7,770 | 15,540 | 853,690 | | R. Lane Riggs | n/a | (2) | — | 560,000 | 3,630,000 | | | | | | | 11/01/2017 | (3) | | | | n/a | 15,640 | n/a | 1,251,200 | | | n/a | (4) | | | | | 15,640 | | | | | 11/01/2017 | (5) | | | | | 5,214 | 10,428 | 473,275 | | | 11/01/2017 | (5) | | | | | 5,983 | 11,966 | 592,437 | | | 11/01/2017 | (5) | | | | | 3,583 | 7,166 | 393,664 | | Jay D. Browning | n/a | (2) | — | 496,000 | 3,630,000 | | | | | | | 11/01/2017 | (3) | | | | n/a | 11,060 | n/a | 884,800 | | | n/a | (4) | | | | | 11,060 | | | | | 11/01/2017 | (5) | | | | | 3,687 | 7,374 | 334,669 | | | 11/01/2017 | (5) | | | | | 4,470 | 8,940 | 442,619 | | | 11/01/2017 | (5) | | | | | 3,433 | 6,866 | 377,184 | | Gary K. Simmons | n/a | (2) | — | 390,000 | 3,630,000 | | | | | | | 11/01/2017 | (3) | | | | n/a | 7,640 | n/a | 611,200 | | | n/a | (4) | | | | | 7,640 | | | | | 11/01/2017 | (5) | | | | | 2,547 | 5,094 | 231,191 | | | 11/01/2017 | (5) | | | | | 3,030 | 6,060 | 300,031 | | | 11/01/2017 | (5) | | | | | 2,333 | 4,666 | 256,327 |

  145. Grants of Plan-Based Awards

    Footnotes to Grants of Plan-Based Awards table:

  146. Grants of Plan-Based Awards

    | The reported grant date fair value of stock awards was determined in compliance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. Stock options were not granted to our named executive officers in 2017.(1) |

  147. Grants of Plan-Based Awards

    | Represents potential awards under our annual incentive bonus program for named executive officers (NEOs). Actual amounts earned by our NEOs for 2017 are reported in the Summary Compensation Table under the column “Non-Equity Incentive Plan Compensation.” The “target” amounts listed in the Grants of Plan-Based Awards table are computed by multiplying base salary by 150%, 110%, 80%, 80%, and 65%, for Mr. Gorder, Mr. Ciskowski, Mr. Riggs, Mr. Browning, and Mr. Simmons, respectively.(2) |

  148. Grants of Plan-Based Awards

    | (footnote | (2) continues on the following page) |

  149. Grants of Plan-Based Awards

    | 2018 PROXY STATEMENT | 43 |

  150. Grants of Plan-Based Awards

    Footnotes to Grants of Plan-Based Awards table (cont.): footnote (2) continued

  151. Grants of Plan-Based Awards

    | The amounts listed as “maximum” are determined by multiplying the maximum funded bonus pool amount under the program (as a result of Valero’s ANC or EBITDA performance for the year, i.e., $36.3 million for 2017) by 50%, 20%, 10%, 10%, and 10% for Mr. Gorder, Mr. Ciskowski, Mr. Riggs, Mr. Browning, and Mr. Simmons, respectively, subject to a maximum of $20 million for any officer. Our annual incentive bonus program for named executive officers is described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Bonus.” |

  152. Grants of Plan-Based Awards

    | Represents an award of restricted stock granted Nov. 1, 2017. The shares are scheduled to vest (become nonforfeitable) annually in equal one-third increments. Dividends on the restricted shares are paid as and when dividends are declared and paid on our Common Stock. Restricted stock awards are more fully described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Restricted Stock.” For each NEO, the dollar amount stated in the column “Grant Date Fair Value of Stock and Option Awards” is included within the amount listed in the “Stock Awards” column of the Summary Compensation Table and in footnote (2) to the Summary Compensation Table.(3) |

  153. Grants of Plan-Based Awards

    | Represents the number of performance shares awarded under our 2011 Omnibus Stock Incentive Plan to our NEOs on Nov. 1, 2017 under our long-term incentive awards program described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Performance Shares.” Per the awards’ terms, on a normal vesting date officers can earn, in shares of Common Stock, from 0% to 200% of the number of performance shares that are vesting, based upon Valero’s achievement of objective performance measures during the performance periods prescribed by our Compensation Committee. The performance shares are scheduled to vest annually in one-third increments (tranches) in January 2019, January 2020, and January 2021, with any resulting payout at those times conditioned upon Valero’s performance during the pertinent performance periods. Only the first tranche of these performance shares is deemed to have a “grant date” in 2017, as explained in footnote (5) below. Our disclosures referenced by footnote (4) are for information purposes only, and tie to the disclosures made by our NEOs in 2017 on Forms 4 in compliance with Section 16 of the Exchange Act. Our disclosures in footnote (5) below are intended to comply with the requirements of Item 402 of Regulation S-K with respect to “grants” of performance shares.(4) |

  154. Grants of Plan-Based Awards

    | Item 402(d)(2)(viii) of Regulation S-K requires us to disclose the “grant date fair value” of equity awards “computed in accordance with FASB ASC Topic 718” (Topic 718). Our performance shares are awarded in three tranches, with the tranches having measurement periods (the performance period) of differing lengths. The first tranche of an award has a performance period of 12 months, the second tranche of an award has a performance period of 24 months, and the third tranche of an award has a performance period of 36 months.(5) |

  155. Grants of Plan-Based Awards

    | The amounts referenced by footnote (5) in the Grants of Plan-Based Awards table represent three tranches from three separate award years—namely, the first tranche of performance shares awarded in 2017 (awarded on Nov. 1, 2017), the second tranche of performance shares awarded in 2016 (awarded on Nov. 2, 2016), and the third tranche of performance shares awarded in 2015 (awarded on Nov. 4, 2015). Under Topic 718, each of these tranches is deemed to be a separate “grant” for fair value purposes, and each is deemed to have a “grant date” in 2017, that is, Nov. 1, 2017, the date when the Compensation Committee established the peer group of companies for these tranches. The dollar amounts included in the table represent the grant date fair values from the three tranches that are deemed to have a grant date in 2017. |

  156. Grants of Plan-Based Awards

    | For each NEO, the sum of the dollar amounts stated in the Grants of Plan-Based Awards table’s column entitled “Grant Date Fair Value of Stock and Option Awards” is also included in the Summary Compensation Table, first, within the amount listed in the “Stock Awards” column of the Summary Compensation Table, and second, in footnote (2) to the Summary Compensation Table. The grant date fair values for the performance shares included in the Grants of Plan-Based Awards table are summarized in the table that follows. |

  157. Grants of Plan-Based Awards

    | | performance shares deemed (under Topic 718) to have a grant date in 2017 | | grant date fair value ($) | highest possible performance ($) | | Gorder | 1st tranche of 2017 award | 23,767 | 2,157,331 | 4,314,661 | | | 2nd tranche of 2016 award | 27,473 | 2,720,376 | 5,440,753 | | | 3rd tranche of 2015 award | 19,590 | 2,152,353 | 4,304,707 | | | total 2017 grant date fair value | | 7,030,060 | 14,060,121 | | Ciskowski | 1st tranche of 2017 award | 8,510 | 772,453 | 1,544,905 | | | 2nd tranche of 2016 award | 10,290 | 1,018,916 | 2,037,832 | | | 3rd tranche of 2015 award | 7,770 | 853,690 | 1,707,380 | | | total 2017 grant date fair value | | 2,645,059 | 5,290,117 | | Riggs | 1st tranche of 2017 award | 5,214 | 473,275 | 946,550 | | | 2nd tranche of 2016 award | 5,983 | 592,437 | 1,184,873 | | | 3rd tranche of 2015 award | 3,583 | 393,664 | 787,328 | | | total 2017 grant date fair value | | 1,459,376 | 2,918,751 | | Browning | 1st tranche of 2017 award | 3,687 | 334,669 | 669,338 | | | 2nd tranche of 2016 award | 4,470 | 442,619 | 885,239 | | | 3rd tranche of 2015 award | 3,433 | 377,184 | 754,367 | | | total 2017 grant date fair value | | 1,154,472 | 2,308,944 |

  158. Grants of Plan-Based Awards

    (footnote (5) continues on the following page)

  159. Grants of Plan-Based Awards

    | 44 | |

  160. Grants of Plan-Based Awards

    Footnotes to Grants of Plan-Based Awards table (cont.): footnote (5) continued

  161. Grants of Plan-Based Awards

    | | performance shares deemed (under Topic 718) to have a grant date in 2017 | | grant date fair value ($) | highest possible performance ($) | | Simmons | 1st tranche of 2017 award | 2,547 | 231,191 | 462,382 | | | 2nd tranche of 2016 award | 3,030 | 300,031 | 600,061 | | | 3rd tranche of 2015 award | 2,333 | 256,327 | 512,653 | | | total 2017 grant date fair value | | 787,549 | 1,575,096 |

  162. Grants of Plan-Based Awards

    | 2017 Award. For performance shares awarded on Nov. 1, 2017, the grant date (per Topic 718) for the first tranche is deemed to have occurred in 2017. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 112.47% with a fair value per share of $90.77. The grant date (per Topic 718) for the second tranche of the performance shares awarded in 2017 is expected to occur in the fourth quarter of 2018, depending on actions to be taken by our Compensation Committee. Similarly, the grant date for the third tranche is expected to occur in the fourth quarter of 2019, depending on actions to be taken by our Compensation Committee. The fair values of the second and third tranches will be determined on their respective Topic 718 grant dates. |

  163. Grants of Plan-Based Awards

    | 2016 Award. For performance shares awarded on Nov. 2, 2016, the grant date (per Topic 718) for the second tranche is deemed to have occurred in 2017. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 122.68% and fair value per share of $99.02. The grant date (per Topic 718) for the third tranche of performance shares awarded in 2016 is expected to occur in the fourth quarter of 2018, depending on actions to be taken by our Compensation Committee. The fair value of the third tranche will be determined on its Topic 718 grant date. |

  164. Grants of Plan-Based Awards

    | 2015 Award. For performance shares awarded on Nov. 4, 2015, the grant date (per Topic 718) for the third tranche is deemed to have occurred in 2017. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 136.13% and fair value per share of $109.87. |

  165. Grants of Plan-Based Awards

    | All Awards. For all awards, the “highest possible performance” values assume achievement of the highest level of possible performance conditions per SEC Regulation S-K, Instruction 3 to Item 402(c)(2)(v). |

  166. Grants of Plan-Based Awards

    | 2018 PROXY STATEMENT | 45 |

  167. Outstanding Equity Awards at December 31, 2017

    Outstanding Equity Awards at December 31, 2017 This table describes unexercised stock options, unvested shares of restricted stock, and unvested performance shares held by our named executive officers as of Dec. 31, 2017.

  168. Outstanding Equity Awards at December 31, 2017

    | | Option Awards | | | | Stock Awards | | | | | | | | | | Restricted Stock | | Performance Shares | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($)(1) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | Joseph W. Gorder | 85,493 | — | 18.145 | 10/15/2019 | 11,372(3) | 1,045,201 | 17,523(6) | 3,221,078 | | | 21,400 | — | 17.743 | 11/17/2020 | 31,897(4) | 2,931,653 | 39,180(7) | 4,681,344 | | | 26,750 | — | 24.582 | 10/28/2021 | 41,389(5) | 3,804,063 | 82,420(8) | 9,090,303 | | | 37,567 | — | 27.318 | 11/09/2022 | | | 71,300(9) | 6,553,183 | | | 31,770 | — | 39.665 | 11/08/2023 | | | | | | | 43,810 | — | 48.565 | 10/23/2024 | | | | | | Michael S. Ciskowski | 251,530 | — | 18.145 | 10/15/2019 | 4,511(3) | 414,606 | 6,930(6) | 1,273,873 | | | 32,100 | — | 17.743 | 11/17/2020 | 11,947(4) | 1,098,049 | 15,540(7) | 1,856,766 | | | 44,940 | — | 24.582 | 10/28/2021 | 14,820(5) | 1,362,106 | 30,870(8) | 3,404,714 | | | 32,570 | — | 27.318 | 11/09/2022 | | | 25,530(9) | 2,346,462 | | | 23,330 | — | 39.665 | 11/08/2023 | | | | | | | 17,320 | — | 48.565 | 10/23/2024 | | | | | | R. Lane Riggs | 2,667 | — | 48.565 | 10/23/2024 | 3,584(3) | 329,405 | 3,333(6) | 612,672 | | | | | | | 11,967(4) | 1,099,887 | 7,166(7) | 856,215 | | | | | | | 15,640(5) | 1,437,472 | 17,950(8) | 1,979,778 | | | | | | | | | 15,640(9) | 1,437,472 | | Jay D. Browning | 3,922 | — | 17.743 | 11/17/2020 | 1,994(3) | 183,269 | 3,056(6) | 561,754 | | | 7,846 | — | 24.582 | 10/28/2021 | 5,190(4) | 477,013 | 6,866(7) | 820,370 | | | 8,378 | — | 27.318 | 11/09/2022 | 6,420(5) | 590,062 | 13,410(8) | 1,479,016 | | | 6,980 | — | 39.665 | 11/08/2023 | | | 11,060(9) | 1,016,525 | | | 7,640 | — | 48.565 | 10/23/2024 | | | | | | Gary K. Simmons | 1,750 | — | 48.565 | 10/23/2024 | 2,334(3) | 214,518 | 2,083(6) | 382,897 | | | | | | | 6,060(4) | 556,975 | 4,666(7) | 557,508 | | | | | | | 7,640(5) | 702,192 | 9,090(8) | 1,002,554 | | | | | | | | | 7,640(9) | 702,192 |

  169. Outstanding Equity Awards at December 31, 2017

    | 46 | |

  170. Outstanding Equity Awards at December 31, 2017

    Footnotes to Outstanding Equity Awards table:

  171. Outstanding Equity Awards at December 31, 2017

    | Our equity plans provide that the exercise price for all stock options must not be less than the mean of our Common Stock’s high and low NYSE reported sales price per share on the date of grant.(1) |

  172. Outstanding Equity Awards at December 31, 2017

    | The assumed market values were determined using the closing market price of our Common Stock on Dec. 29, 2017 ($91.91 per share). For a further discussion of the vesting of performance share awards (as noted in the following footnotes), see “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Performance Shares.” For performance shares that vested in January 2018, the payout value used for this column was their actual performance share vesting percentage on Jan. 23, 2018 (i.e., 200% for the tranche of performance shares awarded in 2014, 160% for the tranche of performance shares awarded in 2015, and 160% for the tranche of performance shares awarded in 2016).(2) |

  173. Outstanding Equity Awards at December 31, 2017

    | The unvested portion of this award is scheduled to vest on Nov. 4, 2018.(3) |

  174. Outstanding Equity Awards at December 31, 2017

    | The unvested portion of this award is scheduled to vest in equal installments on Nov. 2, 2018 and Nov. 2, 2019.(4) |

  175. Outstanding Equity Awards at December 31, 2017

    | The unvested portion of this award is scheduled to vest in equal installments on Nov. 1, 2018; Nov. 1, 2019; and Nov. 1, 2020.(5) |

  176. Outstanding Equity Awards at December 31, 2017

    | These performance shares vested on Jan. 23, 2018 at 200% of target. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents the market value of 200% (the actual payout amount) of the performance shares at the closing price of our Common Stock on Dec. 29, 2017 ($91.91 per share).(6) |

  177. Outstanding Equity Awards at December 31, 2017

    | One-half of these performance shares vested on Jan. 23, 2018 at 160% of target; the other one-half is scheduled to vest in January 2019. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents, for the performance shares that vested in January 2018, the market value of 160% (the actual payout amount) of the closing price of our Common Stock on Dec. 29, 2017, and for the remaining one-half, the market value of 100% (assumed) of the closing price of our Common Stock on Dec. 29, 2017.(7) |

  178. Outstanding Equity Awards at December 31, 2017

    | One-third of these performance shares vested on Jan. 23, 2018 at 160% of target; an additional one-third is scheduled to vest in January 2019, and the final one-third is scheduled to vest in January 2020. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents, for the performance shares that vested in January 2018, the market value of 160% (the actual payout amount) of the closing price of our Common Stock on Dec. 29, 2017, and for the remaining two-thirds, the market value of 100% (assumed) of the closing price of our Common Stock on Dec. 29, 2017.(8) |

  179. Outstanding Equity Awards at December 31, 2017

    | These performance shares are scheduled to vest in one-third increments in each of January 2019, January 2020, and January 2021. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents the market value of 100% (assumed) of the performance shares at the closing price of our Common Stock on Dec. 29, 2017.(9) |

  180. Outstanding Equity Awards at December 31, 2017

    | 2018 PROXY STATEMENT | 47 |

  181. Option Exercises and Stock Vested

    Option Exercises and Stock Vested The following table provides information regarding (i) stock option exercises by our named executive officers, and (ii) the vesting of restricted stock and performance shares held by our named executive officers during 2017 on an aggregated basis.

  182. Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards (1) | | | Name | No. of Shares Acquired on Exercise (#)(2) | Value Realized on Exercise ($)(3) | No. of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(4) | | Joseph W. Gorder | — | — | | | | (5) | | | 49,275 | 3,836,602 | | (6) | | | 93,009 | 6,310,196 | | Michael S. Ciskowski | — | — | | | | (5) | | | 16,517 | 1,320,485 | | (6) | | | 45,432 | 3,082,334 | | R. Lane Riggs | 31,522 | 1,029,572 | | | | (5) | | | 16,278 | 1,273,995 | | (6) | | | 17,942 | 1,217,275 | | Jay D. Browning | — | — | | | | (5) | | | 8,102 | 634,410 | | (6) | | | 17,404 | 1,180,774 | | Gary K. Simmons | — | — | | | | (5) | | | 9,342 | 733,621 | | (6) | | | 12,129 | 822,892 |

  183. Option Exercises and Stock Vested

    Footnotes to Option Exercises and Stock Vested table:

  184. Option Exercises and Stock Vested

    | Represents shares of Common Stock from the vesting of restricted stock and performance shares in 2017.(1) |

  185. Option Exercises and Stock Vested

    | Represents the gross number of shares received by the named executive officer before deducting any shares withheld from (i) an option’s exercise to pay the exercise price and/or tax obligation, or (ii) the vesting of restricted stock or performance shares to pay the resulting tax obligation.(2) |

  186. Option Exercises and Stock Vested

    | The reported value is determined by multiplying (i) the number of option shares, times (ii) the difference between the market price of the Common Stock on the date of exercise and the exercise price of the stock option. The value is stated before payment of applicable taxes.(3) |

  187. Option Exercises and Stock Vested

    | The reported value is determined by multiplying number of vested shares by the market value of the shares on the vesting date. The value is stated before payment of applicable taxes.(4) |

  188. Option Exercises and Stock Vested

    | Represents number of shares of Common Stock and value related to vesting of restricted stock.(5) |

  189. Option Exercises and Stock Vested

    | Represents number of shares of Common Stock and value related to vesting of performance shares.(6) |

  190. Option Exercises and Stock Vested

    | 48 | |

  191. Post-Employment Compensation

    Post-Employment Compensation PENSION BENEFITS The following table describes the accumulated benefits of our named executive officers under Valero’s tax-qualified defined benefit plan and supplemental retirement plans during 2017.

  192. Post-Employment Compensation

    | Name | Plan Name | No. of Years Credited Service (#) (1) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | | Joseph W. Gorder (2) | Pension Plan | 27.17 | 1,041,378 | — | | | Excess Pension Plan | 15.67 | 6,412,564 | — | | | SERP | 15.67 | 11,058,919 | — | | Michael S. Ciskowski | Pension Plan | 32.25 | 1,600,677 | — | | | Excess Pension Plan | 32.25 | 11,403,623 | — | | | SERP | 32.25 | 5,680,988 | — | | R. Lane Riggs | Pension Plan | 28.92 | 1,096,543 | — | | | Excess Pension Plan | 28.92 | 2,885,788 | — | | | SERP | 28.92 | 3,681,268 | — | | Jay D. Browning | Pension Plan | 24.29 | 1,164,759 | — | | | Excess Pension Plan | 24.29 | 3,165,800 | — | | | SERP | 24.29 | 3,230,276 | — | | Gary K. Simmons | Pension Plan | 30.52 | 1,214,338 | — | | | Excess Pension Plan | 30.52 | 2,678,890 | — | | | SERP | 30.52 | 2,659,763 | — |

  193. Post-Employment Compensation

    Footnotes to Pension Benefits table:

  194. Post-Employment Compensation

    | The years of credited service for each of our NEOs include three years of service in our plans’ “Cash Balance Provision,” which commenced on Jan. 1, 2015. The remainder of the NEOs’ years of service is in the “Formula Provision” of our plans. The Formula Provision and the Cash Balance Provision are described in the narrative disclosures that follow this table.(1) |

  195. Post-Employment Compensation

    | The 27.17 years of service stated for Mr. Gorder for the Pension Plan represent the sum of his participation in (a) the Valero Pension Plan since 2002 (15.67 years), and (b) the qualified pension plan of UDS (11.5 years). In 2001, Mr. Gorder received a lump sum settlement relating to prior years of service. The Pension Plan amount stated above reflects the effect of offsetting Mr. Gorder’s accrued benefit under the Valero Pension Plan by the value of his lump sum settlement in 2001. In addition, Mr. Gorder has approximately three years of service in a pension plan sponsored by an entity unaffiliated with Valero or UDS that was spun-off from a predecessor of UDS. The 15.67 years of service stated for Mr. Gorder for the Excess Pension Plan and SERP represent his participation since the date of his commencement of employment with Valero.(2) |

  196. Post-Employment Compensation

    The present values stated above were calculated using the same interest rate and mortality table we use for our financial reporting. Present values at Dec. 31, 2017 were determined using plan-specific discount rates (3.71% for Pension Plan, 3.39% for Excess Pension Plan, 3.37% for SERP) and the plans’ earliest unreduced retirement age (i.e., age 62). The present values reflect postretirement mortality rates based on the RP2006 generational mortality table projected using scale MP2017. No decrements were included for pre-retirement termination, mortality, or disability. When applicable, lump sums were determined based on a 3.71 percent interest rate and the mortality table prescribed by the IRS in Notice 2017-60 for distributions in 2018. Pension Plan. Under our Pension Plan, an eligible employee who is at least 55 years old may elect to retire prior to the normal retirement age of 65, provided the employee has completed as least five years of vesting service. Under the plan’s early retirement provisions, an employee may elect to commence a benefit upon retirement or delay payments to a later date. Pension payments from the Formula Provision (defined below) that begin after age 55 and before age 62 are reduced by four percent for each full year between the benefit start date and the employee’s 62nd birthday. The four-percent reduction is prorated for a partial year. The formula used to calculate the benefit and the optional forms of payment are otherwise the same as for normal retirement. Messrs. Gorder, Ciskowski, and Browning are eligible for early retirement benefits.

  197. Post-Employment Compensation

    | 2018 PROXY STATEMENT | 49 |

  198. Post-Employment Compensation

    For employees hired prior to Jan. 1, 2010, the Pension Plan (supplemented, as necessary, by the Excess Pension Plan) provides a monthly pension at normal retirement equal to 1.6 percent of the participant’s average monthly compensation (based upon earnings during the three consecutive calendar years during the last 10 years of the participant’s credited service affording the highest such average) times the participant’s years of credited service. This is known as the “Formula Provision.” Each of our named executive officers was hired prior to Jan. 1, 2010. For employees hired on or after Jan. 1, 2010, the Pension Plan (supplemented, as necessary, by the Excess Pension Plan) is a cash balance benefit that provides a monthly pension at normal retirement based on annual employer contributions that are based on years of service, eligible compensation, and pay credits. This is known as the “Cash Balance Provision.” After a one-year waiting period, pay credits are retroactive to the participant’s date of hire and are based on years of service and eligible compensation.

  199. Post-Employment Compensation

    | points (age and vesting service) | annual pay credit percentage | | under 35 | 6.0% of eligible pay | | 35–49 | 7.5% of eligible pay | | 50–64 | 9.0% of eligible pay | | 65–79 | 10.5% of eligible pay | | 80+ | 12.0% of eligible pay |

  200. Post-Employment Compensation

    In addition to pay credits, participants will also be eligible for monthly interest credits based on the 10-Year U.S. treasury note rate with a minimum of 3 percent. In 2013, we began to implement changes to certain of our U.S. qualified pension plans that cover the majority of our U.S. employees. Benefits under our primary pension plan changed from a final average pay formula (the Formula Provision) to the Cash Balance Provision with staged effective dates from July 1, 2013 through Jan. 1, 2015, depending on the age and service of the affected employees. All final average pay benefits under the Formula Provision were frozen as of Dec. 31, 2014. On Jan. 1, 2015, participants formerly under the Formula Provision in the Pension Plan transitioned to the Cash Balance Provision, with all future Pension Plan benefits to be earned under the new cash balance formula. Excess Pension Plan. Our Excess Pension Plan provides benefits to those employees whose pension benefits under our defined benefit Pension Plan are subject to limitations under the Internal Revenue Code, or are otherwise indirectly constrained by the Code from realizing the maximum benefit available to them under the terms of Pension Plan. The Excess Pension Plan is designed as an “excess benefit plan” as defined under §3(36) of ERISA, for those benefits provided in excess of section 415 of the Code. The Excess Pension Plan is not intended to be either a qualified plan under the provisions of Section 401(a) of the Code, or a funded plan subject to the funding requirements of ERISA. Subject to other terms of the Excess Pension Plan, the benefit payable under the plan in the Formula Provision is generally an amount equal to “x” minus “y”, where “x” is equal to 1.6 percent of a participant’s final average monthly earnings (as determined under the Excess Pension Plan) multiplied by the participant’s number of years of credited service, and “y” is equal to the participant’s benefit that is payable under the Pension Plan. The benefit payable under the Excess Pension Plan in the Cash Balance Provision is generally an amount equal to “x” minus “y”, where “x” is equal to the accumulated account balance that the participant would be entitled to receive without regard to the limitations, and “y” is equal to the participant’s accumulated account balance that is payable under the Pension Plan. The Excess Pension Plan benefit is made in a lump sum. A participant’s benefits under the Excess Pension Plan will vest concurrently with the vesting of the participant’s benefits under the Pension Plan. SERP. Our Supplemental Executive Retirement Plan (SERP) provides an additional benefit equal to 0.35 percent times the product of the participant’s years of credited service (maximum 35 years) multiplied by the excess of the participant’s average monthly compensation over the lesser of 1.25 times the monthly average (without indexing) of the social security wage bases for the 35-year period ending with the year the participant attains social security retirement age, or the monthly average of the social security wage base in effect for the year that the participant retires. The participant’s most highly compensated consecutive 36 months of service are considered. The SERP benefit payment is made in a lump sum. A participant in the SERP will vest in the SERP benefit when he or she reaches age 55 (and has completed at least five years of credited service). An executive will become a participant in the SERP as of the date he or she is selected and named in the minutes of the Compensation Committee for inclusion as a participant in the SERP. Generally, an employee participates in either the Excess Pension Plan or the SERP. Compensation for purposes of the Pension Plan, Excess Pension Plan, and SERP includes salary and bonus. No extra years of credited service have been granted to any of our named executive officers.

  201. Post-Employment Compensation

    | 50 | |

  202. Nonqualified Deferred Compensation

    Nonqualified Deferred Compensation The following table describes contributions by Valero and each named executive officer under our non-qualified defined contribution and other deferred compensation plans during 2017. The table also presents each named executive officer’s earnings, withdrawals (if any), and year-end balances in these plans.

  203. Nonqualified Deferred Compensation

    | | | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) (1) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | | Joseph W. Gorder | Excess Thrift Plan | — | 92,052 | — | — | 1,101,834 | | Michael S. Ciskowski | Deferred Compensation Plan | — | — | 73,049 | — | 418,544 | | | Excess Thrift Plan | — | 46,200 | — | — | 1,980,379 | | R. Lane Riggs | Excess Thrift Plan | — | 30,100 | — | — | 298,129 | | | UDS Non-qualified 401(k) Plan (2) | — | — | 1,854 | — | 44,050 | | Jay D. Browning | Excess Thrift Plan | — | 24,500 | — | — | 519,937 | | Gary K. Simmons | Excess Thrift Plan | — | 23,100 | — | — | 234,633 | | | UDS Non-qualified 401(k) Plan (2) | — | — | 13,479 | — | 104,156 |

  204. Nonqualified Deferred Compensation

    Footnotes to Nonqualified Deferred Compensation table:

  205. Nonqualified Deferred Compensation

    | All of the amounts included in this column are also included within the amounts reported as “All Other Compensation” for 2017 in the Summary Compensation Table.(1) |

  206. Nonqualified Deferred Compensation

    | Valero assumed the UDS Non-qualified 401(k) Plan when Valero acquired UDS in 2001. This plan is frozen.(2) |

  207. Nonqualified Deferred Compensation

    Our Deferred Compensation Plan and Excess Thrift Plan are described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Post-Employment Benefits.” The following terms also apply to these plans. Under the Deferred Compensation Plan (DC Plan), participants may elect when and over what period of time their deferrals will be distributed based on plan provisions. Participants may elect to have their accounts distributed in a lump sum on a specified date, at least three-to-five years after the year of the deferral election. Participants may, at the time of their deferral elections, choose to have their accounts distributed as soon as reasonably practical following retirement or other termination, or on the first day of January following the date of retirement or termination. Participants may also elect to have their accounts distributed in one lump-sum payment or in two- to 15-year installments upon retirement. Upon a participant’s death, the participant’s beneficiary will receive the participant’s DC Plan balance in one lump-sum payment within 90 days following the participant’s death. Upon a change in control of Valero, all DC Plan accounts are immediately vested in full, and distributions are thereafter made in accordance with the plan’s normal distribution provisions. The Excess Thrift Plan provides benefits to participants of our qualified thrift plan whose accounts would not otherwise be credited with company matching contributions due to certain IRS limits on contributions and/or compensation. The Excess Thrift Plan is neither a qualified plan for federal tax purposes nor a funded plan subject to ERISA. Two separate components comprise the Excess Thrift Plan: (i) an “excess benefit plan” as defined under Section 3(36) of ERISA; and (ii) a plan that is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

  208. Nonqualified Deferred Compensation

    | 2018 PROXY STATEMENT | 51 |

  209. Potential Payments Upon Termination or Change of Control

    Potential Payments Upon Termination or Change of Control CHANGE OF CONTROL SEVERANCE AGREEMENTS Our named executive officers have change of control severance agreements with Valero. The agreements seek to assure the continued availability of the officers in the event of a change of control of Valero. When a change of control occurs, the agreements become operative for a fixed three-year period. The agreements provide that the officers’ terms of employment will not be changed materially during the three years following a change of control. Each agreement subjects the officer to certain obligations of confidentiality, both during the term and after termination, for information relating to Valero that the officer acquired during his employment. The footnotes to the tables that accompany these disclosures further describe the terms and conditions of the agreements. When determining the amounts and benefits payable under the agreements, the Compensation Committee and Valero sought to secure compensation that is competitive in our market to recruit and retain executive talent. Consideration was given to the principal economic terms found in change of control severance agreements of other publicly traded companies. POLICY FEATURES Our Board has adopted a policy regarding the vesting of performance shares in a change-of-control context. The policy provides that performance shares will not vest automatically upon the date of a change of control of Valero. Instead, the performance share agreements contain a double trigger feature, so that accelerated vesting of performance shares will not occur until the officer’s employment is terminated following a change of control. At that time, any unvested performance shares held by the officer will vest on a partial, pro rata basis, commensurate with the officer’s months of service during the applicable performance period. Our change of control severance agreements do not contain tax gross-up benefits. All agreements were amended in January 2013 to eliminate the gross-up benefit that formerly entitled the officers to receive a payment to make them whole for any excise tax on excess parachute payments imposed under Section 4999 of the Internal Revenue Code. Valero has adopted a policy that this benefit may not be included in any future change of control agreements. TERMS AND CONDITIONS For purposes of the agreements, “change of control” means any of the following (subject to additional particulars as stated in the agreements):

  210. Potential Payments Upon Termination or Change of Control

    | • | the acquisition by an individual, entity, or group of beneficial ownership of 20 percent or more of our outstanding Common Stock; |

  211. Potential Payments Upon Termination or Change of Control

    | • | the ouster from the Board of a majority of the incumbent directors; |

  212. Potential Payments Upon Termination or Change of Control

    | • | consummation of a business combination (e.g., merger, share exchange). |

  213. Potential Payments Upon Termination or Change of Control

    In the agreements, “cause” is defined to mean, generally, the willful and continued failure of the officer to perform substantially the officer’s duties, or illegal or gross misconduct by the officer that is materially and demonstrably injurious to Valero. “Good reason” is defined to mean, generally:

  214. Potential Payments Upon Termination or Change of Control

    | • | a diminution in the executive officer’s position, authority, duties and responsibilities; |

  215. Potential Payments Upon Termination or Change of Control

    | • | relocation of the executive (or increased travel requirements); or |

  216. Potential Payments Upon Termination or Change of Control

    | • | failure of Valero’s successor to assume and perform under the agreement. |

  217. Potential Payments Upon Termination or Change of Control

    The following tables disclose potential payments (calculated per SEC regulations) to our named executive officers in connection with a change of control of Valero. If an officer’s employment is terminated for “cause,” the officer will not receive any benefits or compensation other than accrued salary or vacation pay that was unpaid as of the date of termination; therefore, there is no presentation of termination for “cause” in the following tables. Values in the tables assume that a change of control occurred on Dec. 31, 2017, and that the officer’s employment was terminated on that date.

  218. Potential Payments Upon Termination or Change of Control

    | 52 | |

  219. Potential Payments Under Change of Control Severance Agreements

    Potential Payments Under Change of Control Severance Agreements

  220. Potential Payments Under Change of Control Severance Agreements

    | A. | Termination of Employment (i) by the Company other than for “Cause” |

  221. or (ii) by the Executive for “Good Reason” (1) ($)

    | (iii) | the actuarial present value of the pension benefits (qualified and nonqualified) Messrs. Gorder and Ciskowski would have received for an additional three years of service (two years of service for Mr. Browning) (Messrs. Riggs and Simmons do not participate in this element of compensation); and |

  222. or (ii) by the Executive for “Good Reason” (1) ($)

    | | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | H. Paulett Eberhart | 130,000 | 175,035 | 305,035 | | Joseph W. Gorder | — | — | (2) | | Kimberly S. Greene | 130,000 | 175,035 | 305,035 | | Deborah P. Majoras | 150,000 | 175,035 | 325,035 | | Donald L. Nickles | 130,000 | 175,035 | 305,035 | | Philip J. Pfeiffer | 130,000 | 175,035 | 305,035 | | Robert A. Profusek | 160,000 | 175,035 | 335,035 | | Susan Kaufman Purcell | 130,000 | 175,035 | 305,035 | | Stephen M. Waters | 130,000 | 175,035 | 305,035 | | Randall J. Weisenburger | 150,000 | 175,035 | 325,035 | | Rayford Wilkins, Jr. | 150,000 | 175,035 | 325,035 |

  223. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION compensation program and the programs of our peers, the Board approved an increase in the annual cash retainer paid to our non-employee directors (from $120,000 per year to $130,000 per year). At that time, the Board also approved an increase in the value of the directors’ annual equity grant from $170,000 to $175,000, and an increase in the Lead Director’s annual cash retainer from $25,000 to $30,000. The changes were approved to more closely align our program with that of our peers. The increases were effective Jan. 1, 2017. On Feb. 25, 2016, the Board approved a limitation on the amount of equity compensation that may be paid to our non-employee directors in any year. The limitation was implemented via an amendment to our 2011 Omnibus Stock Incentive Plan. The limitation provides that a non-employee director may not receive in any calendar year awards payable in shares of Common Stock that have a fair market value greater than $500,000 in the aggregate. We selected $500,000 as the amount of the limitation because we believe that it places a meaningful limit on awards to our non-employee directors. While the amount of equity compensation awarded to our non-employee directors in recent years has been considerably lower than this limit, we believe that setting a limitation at this level provides us with a reasonable degree of flexibility to make adjustments that we may in the future deem appropriate or necessary for our compensation program to remain competitive in the market.

  224. DIRECTOR COMPENSATION

    | 56 | |

  225. DIRECTOR COMPENSATION

    PAY RATIO DISCLOSURE The following disclosure is required by Item 402(u) of SEC Regulation S-K. The median of the annual total compensation of all employees of Valero, except our CEO, for 2017 was $192,837, and the annual total compensation of our CEO, Mr. Gorder, for 2017 was $22,532,260 (as disclosed in the Summary Compensation Table). As a result, our CEO’s 2017 annual total compensation was 117 times that of the median annual total compensation of all employees of Valero. To determine the median of the annual total compensation of all employees as of Dec. 31, 2017, we first identified the median employee using the sum of base pay, annual bonus, and the grant date fair value of long-term incentive awards. Once the median employee was identified, we then determined that median employee’s annual total compensation using the Summary Compensation Table methodology set out in Item 402(c)(2)(x) of SEC Regulation S-K.

  226. DIRECTOR COMPENSATION

    | | Median Employee to CEO Pay Ratio | | | | Median Employee ($) | CEO ($) | | Salary | 94,256 | 1,585,000 | | Stock Awards | — | 12,734,060 | | Non-Equity Incentive Plan Compensation | 10,660 | 3,800,000 | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | 54,935 | 4,269,202 | | All Other Compensation | 32,986 | 143,998 | | Total Compensation | 192,837 | 22,532,260 | | Median Employee to CEO Pay Ratio | 1:117 | |

  227. DIRECTOR COMPENSATION

    | 2018 PROXY STATEMENT | 57 |

  228. DIRECTOR COMPENSATION

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS