DEF 14A of Conocophillips

Filed Apr 1, 2019 · FY20180001206774-19-001161

Open on EDGAR

Director Nominees
Director Nominees The Board recommends a vote FOR each of the 11 nominees listed below. All of the nominees are currently serving as directors. All directors, other than the CEO, are independent.
Director Nominees
| | | | | | Director Since | Committee Memberships* | | | | | | | Nominees | | Principal Occupation | Age | | EC | AFC | HRCC | DAC | PPC | | | | Charles E. Bunch | Former Chairman and Chief Executive Officer, PPG Industries, Inc. | 69 | 2014 | | | | | | | | | Caroline Maury Devine | Former President and Managing Director of a Norwegian affiliate of ExxonMobil | 68 | 2017 | | | | | | | | | John V. Faraci | Former Chairman and Chief Executive Officer, International Paper Company | 69 | 2015 | | | | | | | | | Jody Freeman | Archibald Cox Professor of Law, Harvard Law School | 55 | 2012 | | | | | | | | | Gay Huey Evans OBE | Member of Her Majesty’s Treasury Board, Sub-Committee and Nominations Committee | 64 | 2013 | | | | | | | | | Jeffrey A. Joerres | Former Executive Chairman and Chief Executive Officer, ManpowerGroup Inc. | 59 | 2018 | | | | | | | | | Ryan M. Lance | Chairman and Chief Executive Officer, ConocoPhillips | 56 | 2012 | | | | | | | | | Admiral William H. McRaven | Retired U.S. Navy Four-Star Admiral (SEAL) | 63 | 2018 | | | | | | | | | Sharmila Mulligan | Founder and Chief Executive Officer, ClearStory Data Inc. | 53 | 2017 | | | | | | | | | Arjun N. Murti | Senior Advisor, Warburg Pincus | 50 | 2015 | | | | | | | | | Robert A. Niblock Lead Director* | Former Chairman, President, and Chief Executive Officer, Lowe’s Companies, Inc. | 56 | 2010 | | | | | |
Director Nominees
| * Effective as of May 13, 2019 | | Executive Committee (“EC”) | | Audit and Finance Committee (“AFC”) | | Human Resources and Compensation Committee (“HRCC”) | | | | Committee on Directors’ Affairs (“DAC”) | | Public Policy Committee (“PPC”) | | Red indicates Chair |
2018 COMPENSATION PROGRAM STRUCTURE
| 2018 Element of Pay | Overview | Key Benchmarks/Performance Measures | | Annual Salary | Fixed cash compensation to attract and retain executives and balance at-risk compensation Range: Salary grade minimum / maximum | >Benchmarked to compensation reference group median; adjusted for experience, responsibility, performance, and potential | | Variable Cash Incentive Program (“VCIP”) | Variable annual cash compensation to motivate and reward executives for achieving annual goals and strategic milestones that are critical to our strategic priorities Range: 0% - 200% of target for corporate performance, plus/minus individual adjustments | >Health, Safety, and Environmental (20%) >Operational (20%) >Financial — Relative Adjusted ROCE/CROCE (20%) >Strategic Milestones (20%) >Relative TSR (20%) >Measured over a one-year performance period and aligned with our strategic priorities | | Long-Term Incentive Program (“LTIP”) | | | | | Variable long-term equity-based compensation to motivate and reward executives for achieving multi-year strategic priorities Granted at beginning of three-year performance period with final cash payout following the conclusion of the performance period based on HRCC assessment of progress toward pre-established corporate performance metrics and stock price on the settlement date Range: 0% - 200% of target, inclusive of corporate performance adjustments | >Relative TSR (50%)(2) >Financial – Relative Adjusted ROCE/CROCE (30%)(2) >Strategic Objectives (20%)(2) >Measured over a three-year performance period and aligned with our strategic priorities >Stock price | | | | | | | Long-term equity-based compensation designed to encourage executive retention while incentivizing absolute performance that is aligned with stockholder interests Annual award settles in cash on 3rd anniversary of grant date based on the stock price on the settlement date Range: 0% - 100% of target | >Stock price >Vest in three years |
2018 COMPENSATION PROGRAM STRUCTURE
| (1) Effective with equity grants in 2018, the HRCC approved replacing stock options with three-year, time-vested restricted stock units at a weight of 35% and increasing the weighting of performance shares to 65%. | | (2) Effective with performance share programs commencing in 2019, the HRCC approved adjusting the PSP measures by eliminating the Strategic Objectives performance measure and increasing the weighting of relative TSR from 50% to 60% and Financial – Relative Adjusted ROCE/CROCE from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now be determined solely on a formulaic basis. |
COMPENSATION AND GOVERNANCE PRACTICES
| | Pay for Performance: We align executive compensation with corporate and individual performance on both a short-term and long-term basis. The majority of our target total direct compensation for employees who are a senior vice president or higher, executives who report directly to the CEO, or any other employee considered an officer under Section 16(b) of the Securities Exchange Act of 1934 (“Senior Officers”) is variable incentive compensation. Actual total direct compensation varies based on the extent of achievement of, among other things, safety, operational, and financial performance, and strategic goals, as well as stock performance and individual performance. | | | Stock Ownership Guidelines: Our Stock Ownership Guidelines require executives to own stock or have an interest in restricted stock units valued at a multiple of base salary, ranging from 1.8 times salary for lower level executives to six times salary for the CEO. Each director is expected to own stock in the amount of the aggregate annual equity grants he or she received during his or her first five years on the Board. All of our Named Executive Officers and current directors meet or exceed these requirements. | | | Mitigation of Risk: Our compensation plans have provisions designed to mitigate undue risk, including caps on the maximum level of payouts, clawback provisions, varied performance measurement periods, and multiple performance metrics. In addition, the Board, the HRCC, and management perform an annual risk assessment to identify potential undue risk created by our incentive plans. | | | Clawback Policy: Executives’ incentive compensation is subject to a clawback that applies in the event of certain financial restatements. This is in addition to provisions contained in our award documents that, if an executive engages in any activity we determine is detrimental to ConocoPhillips, permit us to suspend the right to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted. | | | Independent Compensation Consultant: The HRCC retained Frederic W. Cook & Co., Inc. (“FW Cook”) to serve as its independent executive compensation consultant. During 2018, FW Cook provided no other services to ConocoPhillips. | | | Double Trigger: Beginning with option awards granted in 2014, performance share programs beginning in 2014, and awards under the new Executive Restricted Stock Unit Program, equity awards do not vest in the event of a change in control unless there is also a qualifying termination of employment. | | | Limited Payouts: In 2014, the HRCC formalized our existing practice of capping annual and long-term incentive payouts at 250% and 200% of the initial award, respectively. In 2015, the HRCC formalized our existing practice of making no upward individual performance adjustments for stock options, capping the award at 100% of target for programs beginning in 2016. At the outset of the new Executive Restricted Stock Unit Program in 2018, the HRCC formalized the practice of making no upward individual adjustments for those awards, capping the award at 100% of target. |
COMPENSATION AND GOVERNANCE PRACTICES
| | No Excise Tax Gross Ups for Future Change in Control Plan Participants: In 2012, we eliminated excise tax gross ups for future participants in our Change in Control Severance Plan. | | | No Current Payment of Dividend Equivalents on Unvested Long-Term Incentives: Dividend equivalents on unvested restricted stock units awarded under the PSP are only paid out to the extent that the underlying award is ultimately earned. | | | No Repricing of Underwater Stock Options: Our plans do not permit us to reprice, exchange, or buy out underwater options without stockholder approval. | | | No Pledging, Hedging, Short Sales, or Derivative Transactions: Company policies prohibit our directors and executives from pledging, hedging, or trading in derivatives of ConocoPhillips stock. | | | No Employment Agreements for Our Named Executive Officers: All compensation for our Named Executive Officers is established by the HRCC. |
BOARD RESPONSIVENESS
| As part of our continued commitment to constructive engagement with our stockholders, we devote a meaningful amount of time to discussing the views voiced by our stockholders and share such input with our Board and its committees, where applicable, for their consideration. Our dialogue has led to the following changes: | | | > | Continued to evolve our stockholder engagement process to better connect with and understand the views of our stockholders | | > | Provided additional disclosures regarding our commitment to culture and human capital management (see pages 23-24) | | > | Increased transparency around targets and results for our annual and long-term incentive programs (see pages 67-74) | | > | Expanded our compensation peer selection to include broader general industry companies that are more comparable in terms of size and scale, as well as other energy companies (see pages 60-62) | | > | Replaced stock options with time-vested restricted stock units to balance risk, retention, and dilution | | > | Increased the weighting of performance shares from 60 percent to 65 percent, eliminated stock options, and assigned a weight of 35 percent to the time-vested restricted stock units | | > | Effective with performance share programs commencing in 2019, eliminated the Strategic Objectives performance measure from the Performance Share Program and increased the weighting of relative TSR from 50% to 60% and relative Financial metrics (Adjusted ROCE/CROCE) from 30% to 40% | | > | Published our climate change report, Managing Climate-Related Risks | | > | Joined the Climate Leadership Council to participate in constructive public policy dialogue |
COMPENSATION PROGRAMS
COMPENSATION PROGRAMS The Human Resources and Compensation Committee oversees many of our employee compensation programs. Our compensation programs are competitive with local markets and are generally comprised of a base pay rate, the annual Variable Cash Incentive Program, and for eligible employees, the Restricted Stock Unit Program. From the CEO to the front-line worker, every employee participates in our annual incentive program, which aligns employee compensation with ConocoPhillips’ success on critical performance metrics and also recognizes individual performance. Our Restricted Stock Unit Program is designed to attract and retain employees, reward performance, and align employee interest with stockholders by encouraging stock ownership. Compensation programs for our top executives are described beginning on page 48.
Non-Employee Director Compensation
Non-Employee Director Compensation Our non-employee director compensation program consists primarily of an equity component and a cash component.
OBJECTIVES AND PRINCIPLES
OBJECTIVES AND PRINCIPLES The Board’s goal in designing director compensation is to provide a competitive package that will enable us to attract and retain highly-skilled individuals with relevant experience to oversee ConocoPhillips’ strategic direction. Our compensation program also reflects the time and talent required to serve on the board of a complex, multinational corporation. The Board seeks to provide sufficient flexibility in the form of compensation to meet directors’ varying needs while ensuring that a substantial portion of compensation is linked to the long-term success of ConocoPhillips. Compensation for non-employee directors is reviewed annually by the Committee on Directors’ Affairs and set upon approval by the Board. Compensation for non-employee directors has remained unchanged since 2013. At that time, the Board approved the current levels of compensation after a recommendation from the Committee on Directors’ Affairs, which had undertaken a review with an independent compensation consultant. In 2016, 2017, and 2018, the Committee on Directors’ Affairs met with a second independent compensation consultant to review the non-employee director compensation program and to determine whether to recommend any changes to that program. These reviews included comparisons of director compensation levels with, and examined trends in director compensation at, the prior compensation peer group and the Fortune 50 – 150 companies. See “Process for Determining Executive Compensation — Peers and Benchmarking” beginning on page 60. In connection with these reviews, the consultant noted that our director compensation program was within the limits set out in the stockholder-approved 2014 Omnibus Stock and Performance Incentive Plan under which director awards are made. All three years, the Board agreed with the recommendation of the Committee on Directors’ Affairs that no change in director compensation was warranted.
EQUITY COMPENSATION
EQUITY COMPENSATION Non-employee directors receive an annual grant of restricted stock units with an aggregate value of $220,000 on the date of grant. The restricted stock units are fully vested at grant and are credited with dividend equivalents in the form of additional restricted stock units, but they cannot be sold or otherwise transferred. Prior to each annual grant, a director may elect the schedule on which the restrictions will lapse. When restrictions lapse, a director will receive unrestricted shares of ConocoPhillips stock in exchange for his or her restricted stock units. Regardless of the schedule a director elects, all restrictions on a director’s restricted stock units will lapse in the event of the director’s retirement, disability, or death, or upon a change in control of ConocoPhillips, unless the director has elected to defer receipt of the shares until a later date. Directors forfeit the units if, before restrictions lapse (and prior to any change in control), the Board finds sufficient cause for forfeiture. Restricted stock units granted to directors who are not residents of the United States may have modified terms in accordance with applicable laws and tax rules. Thus, the restricted stock units granted to Mr. Auchinleck, who served as a director until his retirement in May 2018, and Mr. Norvik, who is expected to serve as a director until his retirement effective May 14, 2019, have slightly different terms responsive to the tax laws of their home countries (Canada and Norway, respectively); the most notable difference is that the restrictions lapse only in the event of retirement, death, or loss of position, including upon a change in control.
CASH COMPENSATION
This cash compensation is payable in monthly installments. Each director may elect, on an annual basis, to receive all or part of his or her cash compensation in unrestricted stock or in restricted stock units or to have the amount credited to a deferred compensation account. Any such unrestricted stock or restricted stock units will be issued on the last business day of each month and valued using the average of the high and the low market prices of ConocoPhillips common stock on such date. The restricted stock units issued in lieu of cash compensation are subject to the same restrictions as the annual restricted stock units described under “Equity Compensation” on page 28. The Board has approved modifications of the compensation for directors who are taxed under the laws of other countries. Canadian directors (Mr. Auchinleck, who served as a director until his retirement in May 2018) may elect to receive cash compensation either in cash or in restricted stock units; Norwegian directors (currently, Mr. Norvik, who is expected to serve as a director until his retirement effective May 14, 2019) receive compensation that would otherwise have been received as cash only as restricted stock units. Restricted stock units issued to Canadian and Norwegian directors are subject to the same restrictions as the annual restricted stock unit grants described under “Equity Compensation” on page 28.
OTHER COMPENSATION
OTHER COMPENSATION We provide transportation or reimburse the cost of transportation when a director travels on ConocoPhillips business, including to attend meetings of the Board or a committee. Spouses and other guests of directors occasionally attend certain meetings at the request of the Board. The Board believes this creates a collegial environment that enhances the effectiveness of the Board. If spouses or other guests are invited to attend meetings, ConocoPhillips reimburses directors for the out-of-pocket cost of the additional travel and related incidental expenses. Any such reimbursement is treated by the Internal Revenue Service as taxable income to the applicable director. Directors do not receive gross-ups to compensate for the resulting income taxes. Each director is expected to own ConocoPhillips stock in the amount of the aggregate annual equity grants received during his or her first five years on the Board. Directors are expected to reach this level of target ownership within five years of joining the Board. Actual shares of stock, restricted stock, or restricted stock units, including deferred stock units, may be counted in satisfying the stock ownership guidelines. The holdings of each of our directors currently meet or exceed these guidelines.
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2)(3) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation on Earnings | All Other Compensation(4) | Total | | R.L. Armitage (retired)(5) | $52,083 | $220,008 | $— | $— | $— | $7,100 | $279,191 | | R.H. Auchinleck (retired)(6) | 69,927 | 220,008 | — | — | — | 19,328 | 309,263 | | C.E. Bunch | 128,958 | 220,008 | — | — | — | 10,000 | 358,966 | | C.M. Devine | 130,000 | 220,008 | — | — | — | 10,000 | 360,008 | | J.V. Faraci | 147,771 | 220,008 | — | — | — | 10,000 | 377,779 | | J. Freeman | 128,333 | 220,008 | — | — | — | — | 348,341 | | G. Huey Evans | 130,000 | 220,008 | — | — | — | — | 350,008 | | J.A. Joerres | 65,174 | — | — | — | — | — | 65,174 | | W.H. McRaven | 33,125 | — | — | — | — | — | 33,125 | | S. Mulligan | 131,667 | 220,008 | — | — | — | — | 351,675 | | A.N. Murti | 130,000 | 220,008 | — | — | — | — | 350,008 | | R.A. Niblock | 140,455 | 220,008 | — | — | — | 10,000 | 370,463 | | H.J. Norvik | 156,155 | 220,008 | — | — | — | — | 376,163 |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| (1) Reflects 2018 annual cash compensation of $115,000 payable to each non-employee director. In 2018, non-employee directors serving in specified committee positions also received the following additional cash compensation: |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| > | Lead Director—$35,000 | | > | Chair of the Audit and Finance Committee—$25,000 | | > | Chair of the Human Resources and Compensation Committee—$20,000 | | > | Chair of any other committee—$10,000 | | > | All other Audit and Finance Committee members—$10,000 | | > | All other Human Resources and Compensation Committee members—$7,500 | | > | All other committee members—$5,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| Amounts shown include prorated amounts attributable to committee reassignments, which may occur during the year. Amounts shown in the Fees Earned or Paid in Cash column include any amounts that were voluntarily deferred to the Director Deferral Plan, received in ConocoPhillips common stock, or received in restricted stock units. Messrs. Auchinleck, Faraci, Joerres, Niblock, and Norvik received 100% of their cash compensation in restricted stock units in 2018, with an aggregate grant date fair value as shown in the table. All other directors received their cash compensation in cash or deferred such amounts into the Director Deferral Plan. | | (2) Amounts represent the aggregate grant date fair value of stock awards granted under our non-employee director compensation program. On January 16, 2018, each non-employee director received a 2018 annual grant of restricted stock units with an aggregate value of $220,000 based on the average of the high and low price for our common stock, as reported on the NYSE, on the grant date. These grants are made in whole shares, with fractional share amounts rounded up, resulting in a grant of shares with a value of $220,008 to each person who was a director on January 16, 2018. | | (3) The following table reflects, for each director, the aggregate number of stock awards outstanding as of December 31, 2018: |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| Name | Number of Deferred Shares or Units of Stock | | R.L. Armitage (retired) | — | | R.H. Auchinleck (retired) | — | | C.E. Bunch | 18,212 | | C.M. Devine | 3,763 | | J.V. Faraci | 23,565 | | J. Freeman | 21,740 | | G. Huey Evans | 21,976 | | J.A. Joerres | 932 | | W.H. McRaven | — | | S. Mulligan | 3,763 | | A.N. Murti | 26,302 | | R.A. Niblock | 50,206 | | H.J. Norvik | 77,371 |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
The following table lists delivery of director stock awards in 2018:
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| Name | Number of Shares Acquired on Award Delivery | Value Realized Upon Award Delivery | | R.L. Armitage (retired) | 44,152 | $2,910,575 | | R.H. Auchinleck (retired) | 125,929 | 8,560,474 | | C.E. Bunch | — | — | | C.M. Devine | — | — | | J.V. Faraci | — | — | | J. Freeman | 3,716 | 242,255 | | G. Huey Evans | — | — | | J.A. Joerres | — | — | | W.H. McRaven | — | — | | S. Mulligan | — | — | | A.N. Murti | — | — | | R.A. Niblock | — | — | | H.J. Norvik | — | — |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| (4) The following table reflects, for each director, the items contained in All Other Compensation. None of the directors, other than Mr. Auchinleck as described below, had aggregate personal benefits or perquisites of $10,000 or more in value. |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| Name | Tax Reimbursement Gross-Up(a) | Retirement Gift Presentation(b) | Matching Gift Amounts(c) | Total | | R.L. Armitage (retired) | $— | $— | $7,100 | $7,100 | | R.H. Auchinleck (retired) | 7,497 | 11,831 | — | 19,328 | | C.E. Bunch | — | — | 10,000 | 10,000 | | C.M. Devine | — | — | 10,000 | 10,000 | | J.V. Faraci | — | — | 10,000 | 10,000 | | J. Freeman | — | — | — | — | | G. Huey Evans | — | — | — | — | | J.A. Joerres | — | — | — | — | | W.H. McRaven | — | — | — | — | | S. Mulligan | — | — | — | — | | A.N. Murti | — | — | — | — | | R.A. Niblock | — | — | 10,000 | 10,000 | | H.J. Norvik | — | — | — | — |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| (a) The amounts shown are for payments by ConocoPhillips relating to certain taxes incurred by the director for imputed income. These occurred when a retirement presentation was made to Mr. Auchinleck upon his retirement from the Board. ConocoPhillips has a practice of making gift presentations to its retiring directors, especially those of long service. The fair value of the retirement presentation was imputed to Mr. Auchinleck’s income. In such circumstances, if a director is imputed income in accordance with applicable tax laws, ConocoPhillips generally will reimburse the director for the resulting increased tax costs. All such tax reimbursements have been included above, regardless of whether the corresponding perquisite or personal benefit is required to be reported pursuant to SEC rules and regulations. | | (b) The amounts shown are the fair value for a retirement presentation and costs for Mr. Auchinleck’s spouse to travel to attend his retirement event. ConocoPhillips has a practice of making gift presentations to its retiring directors, especially those of long service. | | (c) ConocoPhillips maintains a Matching Gift Program under which we match certain gifts by directors to charities and educational institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries. For active directors, the program matches up to $10,000 in each program year. Administration of the program can cause us to pay more than $10,000 in a single fiscal year due to a lag in processing claims. The amounts shown are for the actual payments by ConocoPhillips in 2018. Mr. Lance is eligible for the Matching Gift Program as an executive rather than as a director. Information on the value of matching gifts for Mr. Lance is provided in the Summary Compensation Table on page 79 and the notes to that table. | | (5) Mr. Armitage retired from the Board effective May 15, 2018. The amounts in the table above include his prorated compensation reflecting the portion of 2018 that he served as a director. | | (6) Mr. Auchinleck retired from the Board effective May 15, 2018. The amounts in the table above include his prorated compensation reflecting the portion of 2018 that he served as a director. |
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
| | | What am I Voting On? | | You are voting on a proposal to elect the 11 nominees named in this Proxy Statement to one-year terms as ConocoPhillips directors. WHAT IS THE MAKEUP OF THE BOARD OF DIRECTORS AND HOW OFTEN ARE THE MEMBERS ELECTED? Our Board currently has 12 members. The size of the Board is expected to be reduced to 11 members when Mr. Norvik retires at the Annual Meeting. Directors are elected at the annual stockholder meeting each year. Any vacancy on the Board created between annual stockholder meetings (if, for example, a current director resigns or the size of the Board is increased) may be filled by a majority vote of the remaining directors then in office. Any director appointed to fill a vacancy would hold office until the next election. Under our Corporate Governance Guidelines, directors generally may not stand for re-election after they reach the age of 72. WHAT IF A NOMINEE IS UNABLE OR UNWILLING TO SERVE? All director nominees have consented to serve. However, should a director become unable or unwilling to serve before the date of the Annual Meeting and the Board does not elect to reduce the size of the Board, shares represented by proxies may be voted for a substitute nominated by the Board. HOW ARE DIRECTORS COMPENSATED? Please see our discussion of non-employee director compensation beginning on page 28. HOW ARE NOMINEES SELECTED? The Committee on Directors’ Affairs regularly evaluates the size and composition of the Board and continually assesses whether the composition appropriately relates to ConocoPhillips’ strategic needs, which change as the business environment evolves. We seek director candidates who possess the highest personal and professional ethics, integrity, and values and who are committed to representing the long-term interests of all ConocoPhillips’ stakeholders. The chart below shows our process for identifying and integrating new directors. |
WHAT IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF THE VOTES CAST?
WHAT IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF THE VOTES CAST? If a nominee who is serving as a director is not elected at the Annual Meeting and no one else is elected in place of that director, then, under Delaware law, the director continues to serve on the Board as a “holdover director.” However, under our By-Laws, a holdover director is required to tender a resignation to the Board. The Committee on Directors’ Affairs then would consider the resignation and recommend to the Board whether to accept or reject it or whether some other action should be taken. The Board would then make a decision, without participation by the holdover director. The Board is required to disclose publicly (by a news release, filing with the SEC, or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind that decision within 90 days from the date the election results are certified.
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
WHO ARE THIS YEAR’S DIRECTOR NOMINEES? The following 11 directors are standing for election to hold office until the 2020 Annual Meeting of Stockholders. Each of the director nominees is a current director. Committee membership is effective as of May 13, 2019.
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 69 Director Since: May 2014 ConocoPhillips Committees: Human Resources and Compensation Committee (Chair) Committee on Directors’ Affairs Executive Committee Other current U.S. public company directorships: >PNC Financial Services Group >Marathon Petroleum Corporation >Mondelēz International, Inc. | Charles E. Bunch Former Chairman and Chief Executive Officer, PPG Industries, Inc. Mr. Bunch served as Chairman and Chief Executive Officer of PPG Industries, Inc. from July 2005 to August 2015 and Executive Chairman from September 2015 to September 2016. He was President and Chief Operating Officer of PPG from July 2002 until he was elected President and Chief Executive Officer in March 2005 and Chairman and Chief Executive Officer in July 2005. Before becoming President and Chief Operating Officer, he was Executive Vice President of PPG from 2000 to 2002 and Senior Vice President, Strategic Planning and Corporate Services of PPG from 1997 to 2000. Mr. Bunch was with PPG for more than 35 years prior to his retirement, holding positions in finance and planning, marketing, and general management in the United States and Europe. He currently serves on the boards of PNC Financial Services Group, Marathon Petroleum Corporation, and Mondelẽz International, Inc. He previously served as a director of H.J. Heinz Company; as chairman of the Federal Reserve Bank of Cleveland, the National Association of Manufacturers, and the American Coatings Association; and as a member of the University of Pittsburgh’s board of trustees. Skills and Qualifications: The Board values Mr. Bunch’s experience as a director and CEO in a highly-regulated industry, as well as his management and finance experience. Additionally, Mr. Bunch has a strong background in management development and compensation. His international business experience with global issues facing a large, multinational public company enables him to provide the Board with valuable operational and financial expertise. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 68 Director Since: October 2017 ConocoPhillips Committees: Committee on Directors’ Affairs Public Policy Committee Other current U.S. public company directorships: >John Bean Technologies Corporation >Valeo | Caroline Maury Devine Former President and Managing Director of a Norwegian affiliate of ExxonMobil Ms. Devine served as President and Managing Director of a Norwegian affiliate of ExxonMobil from 1996 to 2000 and, since 1988, held various corporate positions responsible for shareholder relations and governance issues, as well as international government relations with an emphasis on Vietnam, Indonesia, Nigeria, and Russia. Ms. Devine previously served the U.S. government for 15 years in positions on the White House Domestic Policy Staff, in the U.S. Embassy in Paris, and in the Drug Enforcement Administration. She is currently a member of the Council on Foreign Relations. In addition to current positions on the boards of JBT Corporation and Valeo and on the Nominating Committee of Petroleum Geo-Services ASA, Ms. Devine previously served on the boards of Det Norske Veritas, FMC Technologies, Inc., and Technip. She is a former Fellow at Harvard University’s Belfer Center for Science and International Affairs. Skills and Qualifications: Ms. Devine’s broad range of expertise in international affairs within the industry, as well as her government experience and service on other public company boards, are very valuable. Her senior officer experience demonstrates an understanding of organizations and the ability to deliver results. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 69 Director Since: January 2015 ConocoPhillips Committees: Audit and Finance Committee (Chair) Human Resources and Compensation Committee Executive Committee Other current U.S. public company directorships: >PPG Industries, Inc. >United Technologies Corporation | John V. Faraci Former Chairman and Chief Executive Officer, International Paper Company Mr. Faraci served as Chairman and Chief Executive Officer of International Paper Co. from 2003 until his retirement in 2014. He spent his career of more than 40 years at International Paper, also serving as the company’s Chief Financial Officer and in various other financial, planning and management positions. Mr. Faraci serves on the board of directors for PPG Industries, Inc. and United Technologies Corporation. He is a trustee of the American Enterprise Institute, Denison University, and the National Fish and Wildlife Foundation and is a member of the RBC Capital Markets Advisory Council. Skills and Qualifications: The Board values Mr. Faraci’s experience as a director and CEO. His international business experience at a large public company enables him to provide the Board with valuable operational and financial expertise and an informed management perspective on global business issues. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 55 Director Since: July 2012 ConocoPhillips Committees: Committee on Directors’ Affairs Public Policy Committee (Chair) Executive Committee | Jody Freeman Archibald Cox Professor of Law, Harvard Law School Ms. Freeman is the Archibald Cox Professor of Law at Harvard Law School and founding director of the Harvard Law School Environmental and Energy Law Program. Ms. Freeman formerly served as Counselor for Energy and Climate Change in the White House from 2009 to 2010 and as an independent consultant to the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling in 2010. Ms. Freeman has served as a member of the Administrative Conference of the United States and is a Fellow of the American College of Environmental Lawyers. Before joining the Harvard faculty in 2005, she was a professor of Law at UCLA Law School from 1995 to 2005. Skills and Qualifications: Ms. Freeman’s expertise in environmental law and policy and her unique experiences in shaping federal environmental and energy policy, especially in matters critical to ConocoPhillips’ operations, enable her to provide valuable insight into our policies and practices. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 64 Director Since: March 2013 ConocoPhillips Committees: Audit and Finance Committee Public Policy Committee | Gay Huey Evans OBE Member of Her Majesty’s Treasury Board, Sub-Committee and Nominations Committee Ms. Huey Evans currently serves as a member of Her Majesty’s Treasury Board, Sub-Committee, and Nominations Committee and is also a non-executive director of Standard Chartered PLC and Itau BBA International Limited. She also currently serves as Deputy Chairman of The Financial Reporting Council, where she is a member of the Nomination Committee; Trustee of the Beacon Awards, which celebrate British philanthropy; and a Trustee of Wellbeing of Women, where she is Chair of the Investment Committee. She was Vice Chairman, Investment Banking and Investment Management at Barclays Capital from 2008 to 2010. She was previously head of governance of Citi Alternative Investments (EMEA) from 2007 to 2008 and President of Tribeca Global Management (Europe) Ltd. from 2005 to 2007, both part of Citigroup. From 1998 to 2005, she was director of the markets division and head of the capital markets sector at the U.K. Financial Services Authority. She previously held various senior management positions with Bankers Trust Company in New York and London. Ms. Huey Evans previously served on the boards of Aviva plc, The London Stock Exchange Group plc., and Falcon Private Wealth Ltd. Skills and Qualifications: Ms. Huey Evans’ in-depth knowledge of, and insight into, global capital markets from her extensive experience in the financial services industry brings valuable expertise to ConocoPhillips’ businesses. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 59 Director Since: July 2018 ConocoPhillips Committees: Audit and Finance Committee Committee on Directors’ Affairs Other current U.S. public company directorships: >The Western Union Company >Artisan Partners Asset Management Inc. | Jeffrey A. Joerres Former Executive Chairman and Chief Executive Officer, ManpowerGroup Inc. Mr. Joerres served as Chief Executive Officer of ManpowerGroup Inc. from 1999 to 2014, as Chairman of the Board from 2001 to 2014, and as Executive Chairman from May 2014 to December 2015. Mr. Joerres joined ManpowerGroup in 1993 and served as Vice President of Marketing and Senior Vice President of European Operations and Marketing and Major Account Development. He currently serves on the boards of The Western Union Company and Artisan Partners Asset Management Inc. He previously served as a director of Johnson Controls International plc and Artisan Funds, Inc. Additionally, Mr. Joerres is on the board of the Green Bay Packers, Boys and Girls Clubs of Milwaukee, BMO Harris Bradley Center, and Kohler Co. He is a minority owner in the Milwaukee Bucks. Mr. Joerres is a former director and Chairman of the Federal Reserve Bank of Chicago. Skills and Qualifications: Mr. Joerres’s extensive global leadership and human capital management experience and substantial involvement on both public and private boards enable him to provide guidance to the Board with respect to ConocoPhillips’ people and operations. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 56 Director Since: April 2012 ConocoPhillips Committees: Executive Committee (Chair) | Ryan M. Lance Chairman and Chief Executive Officer, ConocoPhillips Mr. Lance was appointed Chairman and Chief Executive Officer in May 2012, having previously served as Senior Vice President, Exploration and Production—International since May 2009. Prior to that he served as President, Exploration and Production—Asia, Africa, Middle East and Russia/ Caspian since April 2009. Mr. Lance previously served as President, Exploration and Production—Europe, Asia, Africa and the Middle East from September 2007 to April 2009. From February 2007 to September 2007, he served as Senior Vice President, Technology, and, prior to that, Mr. Lance served as Senior Vice President, Technology and Major Projects beginning in 2006. He served as President, Downstream Strategy, Integration and Specialty Businesses from 2005 to 2006. Skills and Qualifications: Mr. Lance’s service as Chairman and Chief Executive Officer of ConocoPhillips makes him well qualified to serve both as a director and Chairman of the Board. Mr. Lance’s extensive experience in the industry as an executive in our exploration and production businesses, and as the global representative of ConocoPhillips, make his service as a director invaluable. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 63 Director Since: October 2018 ConocoPhillips Committees: Audit and Finance Committee Human Resources and Compensation Committee | Admiral William H. McRaven Retired U.S. Navy Four-Star Admiral (SEAL) Admiral William H. McRaven is a retired U.S. Navy Four-Star Admiral (SEAL) and the former Chancellor of the University of Texas System. During his time in the military, he commanded special operations forces at every level, eventually taking charge of all U.S. Special Operations. His military career included combat during Desert Storm and both the Iraq and Afghanistan wars. As the Chancellor of the University of Texas System from January 2014 until May 2018, he led one of the nation’s largest and most respected systems of higher education, with over 230,000 students and 100,000 faculty, staff, and healthcare professionals. Admiral McRaven is a recognized national authority on U.S. foreign policy and has advised Presidents George W. Bush and Barack Obama and other U.S. leaders on defense issues. He currently serves on the Council on Foreign Relations and the National Football Foundation. Skills and Qualifications: Admiral McRaven’s international, logistical, and administrative experience brings valuable expertise on global business issues and government relations to the Board. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 53 Director Since: July 2017 ConocoPhillips Committees: Audit and Finance Committee Human Resources and Compensation Committee | Sharmila Mulligan Founder and Chief Executive Officer, ClearStory Data Inc. Ms. Mulligan is the Founder and Chief Executive Officer of ClearStory Data Inc., a modern data analytics company enabling business-oriented insights from disparate data. Ms. Mulligan has served as ClearStory’s Chief Executive Officer since inception in September 2011. From 2009 to 2011, Ms. Mulligan served as Executive Vice President for Aster Data Systems, Inc. until its acquisition by Teradata Corporation. Prior to Aster Data, Ms. Mulligan was a Vice President of Software Solutions for HP Inc. Prior to HP, Ms. Mulligan was Executive Vice President of Products and Marketing at Opsware Inc. from 2002 until its eventual acquisition by HP in 2007. Prior to Opsware Inc., Ms. Mulligan led Product Management and held Vice President positions at Netscape Communications, Microsoft, and General Magic. Ms. Mulligan is on the board of Lattice Engines, Inc. and an advisor to, and investor in, numerous enterprise software and consumer technology companies. Skills and Qualifications: Ms. Mulligan’s experience in cloud computing, scalable data analytics, and a broad range of big data technologies plus Internet of Things and Artificial Intelligence innovation adds exceptional value to the Board. Her experience as a CEO enables her to provide the Board with beneficial strategic leadership qualities. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 50 Director Since: January 2015 ConocoPhillips Committees: Human Resources and Compensation Committee Public Policy Committee | Arjun N. Murti Senior Advisor, Warburg Pincus Mr. Murti is Senior Advisor at Warburg Pincus. He previously served as a Partner at Goldman Sachs from 2006 to 2014. Prior to becoming Partner, he served as Managing Director from 2003 to 2006 and as Vice President from 1999 to 2003. During his time at Goldman Sachs, Mr. Murti worked as a sell-side equity research analyst covering the energy sector. He was co-director of equity research for the Americas from 2011 to 2014. Previously, Mr. Murti held equity analyst positions at JP Morgan Investment Management from 1995 to 1999 and at Petrie Parkman from 1992 to 1995. Skills and Qualifications: Mr. Murti brings to the Board a deep understanding of financial oversight and accountability with his experience as a Partner at Goldman Sachs. He has spent more than 25 years in the financial services industry with an extensive focus, both domestic and global, on the energy industry. This experience provides the Board valuable insight into financial management and analysis. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| Age: 56 Director Since: February 2010 ConocoPhillips Committees: Committee on Directors’ Affairs (Chair) Public Policy Committee Executive Committee | Robert A. Niblock, Lead Director (Effective as of May 13, 2019) Former Chairman, President, and Chief Executive Officer, Lowe’s Companies, Inc. Mr. Niblock served as Chairman of the Board and Chief Executive Officer of Lowe’s Companies, Inc. from January 2005 until July 2018 and as President of Lowe’s from 2011 until July 2018, after having served in that role from 2003 to 2006. Mr. Niblock became a member of the board of directors of Lowe’s when he was named Chairman- and CEO-elect in 2004. Mr. Niblock joined Lowe’s in 1993, and, during his career with the company, he also served as Vice President and Treasurer, Senior Vice President, and Executive Vice President and CFO. Before joining Lowe’s, Mr. Niblock had a nine-year career with accounting firm Ernst & Young. Mr. Niblock served as a member of the board of directors of the Retail Industry Leaders Association from 2003 until 2018 and served as its Secretary from 2012 until 2018. He previously served as its chairman in 2008 and 2009 and as vice chairman in 2006 and 2007. Skills and Qualifications: The Board values his experience as a CEO and in financial reporting matters. Mr. Niblock’s experience as a CEO of a large public company allows him to provide the Board with valuable operational and financial expertise. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
| FOR | The Board recommends you vote FOR each nominee standing for election as director. |
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
Audit and Finance Committee Report The Audit and Finance Committee (the “Audit Committee”) assists the Board in fulfilling its responsibility to provide independent, objective oversight for ConocoPhillips’ financial reporting functions and internal control systems. The Audit Committee currently consists of seven non-employee directors. The Board has determined that each member of the Audit Committee satisfies the requirements of the NYSE as to independence and financial literacy. The Board has determined that at least one member, John V. Faraci, is an audit committee financial expert as defined by the SEC. The responsibilities of the Audit Committee are set forth in the written charter adopted by the Board and last amended on December 7, 2018. The charter is available on our website at www.conocophillips.com under “Investors > Corporate Governance.” The Audit Committee’s responsibilities include: >Discussing with management, the independent auditors, and the internal auditor the integrity of ConocoPhillips’ accounting policies, internal controls, financial statements, financial reporting practices, and select financial matters, including capital structure, complex financial transactions, financial risk management, retirement plans, and tax planning; >Reviewing significant corporate risk exposures and steps management has taken to monitor, control, and report such exposures; >Reviewing the qualifications, independence, and performance of the independent auditors and the qualifications and performance of ConocoPhillips’ internal auditors; >Reviewing ConocoPhillips’ overall direction and compliance with legal and regulatory requirements and internal policies; and >Maintaining open and direct lines of communication with the Board and management, our Compliance and Ethics Office, the internal auditors, and the independent auditors. Management is responsible for preparing ConocoPhillips’ financial statements in accordance with generally accepted accounting principles, or GAAP, and for developing, maintaining, and evaluating our internal controls over financial reporting and other control systems. The independent registered public accountant is responsible for auditing the annual financial statements prepared by management, assessing the internal control over financial reporting, and expressing an opinion with respect to each. One of the Audit Committee’s primary responsibilities is to assist the Board in its oversight of the integrity of ConocoPhillips’ financial statements. The following report summarizes certain of the Audit Committee’s activities in this regard for 2018. Review with Management. The Audit Committee reviewed and discussed with management the audited consolidated financial statements included in ConocoPhillips’ Annual Report on Form 10-K for the year ended December 31, 2018, which included a discussion of the quality—not just the acceptability—of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures. The Audit Committee also discussed management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018, included in the financial statements. Discussions with Internal Audit. The Audit Committee reviewed ConocoPhillips’ internal audit plan and discussed the results of internal audit activity throughout the year. ConocoPhillips’ General Auditor met with the Audit Committee at every in-person meeting in 2018 and was available to meet without management present at each of these meetings. Audit and Finance Committee Report Discussions with the Independent Registered Public Accounting Firm. The Audit Committee met throughout the year with Ernst & Young LLP (“EY”), ConocoPhillips’ independent registered public accounting firm, including meeting with EY at each in-person meeting; EY was also available to meet without management present at each of these meetings. The Audit Committee has discussed with EY the matters required to be discussed by standards of the Public Company Accounting Oversight Board, or PCAOB. The Audit Committee has received the written disclosures and the letter from EY required by PCAOB rules and has discussed with EY its independence from ConocoPhillips. In addition, the Audit Committee considered the non-audit services EY provides to ConocoPhillips and concluded that EY’s independence has been maintained. Recommendation to the ConocoPhillips Board of Directors. Based on its review and discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in ConocoPhillips’ Annual Report on Form 10-K for the year ended December 31, 2018.
2018 COMPENSATION PROGRAM STRUCTURE
| 2018 Element of Pay | Overview | Key Benchmarks/Performance Measures | | Annual Salary | Fixed cash compensation to attract and retain executives and balance at-risk compensation Range: Salary grade minimum / maximum | >Benchmarked to compensation reference group median; adjusted for experience, responsibility, performance, and potential | | Variable Cash Incentive Program (“VCIP”) | Variable annual cash compensation to motivate and reward executives for achieving annual goals and strategic milestones that are critical to our strategic priorities Range: 0% - 200% of target for corporate performance, plus/minus individual adjustments | >Health, Safety, and Environmental (20%) >Operational (20%) >Financial — Relative Adjusted ROCE/CROCE (20%) >Strategic Milestones (20%) >Relative TSR (20%) >Measured over a one-year performance period and aligned with our strategic priorities | | Long-Term Incentive Program (“LTIP”) | | | | | Variable long-term equity-based compensation to motivate and reward executives for achieving multi-year strategic priorities Granted at beginning of three-year performance period with final cash payout following the conclusion of the performance period based on HRCC assessment of progress toward pre-established corporate performance metrics and stock price on the settlement date Range: 0% - 200% of target, inclusive of corporate performance adjustments | >Relative TSR (50%)(2) >Financial – Relative Adjusted ROCE/CROCE (30%)(2) >Strategic Objectives (20%)(2) >Measured over a three-year performance period and aligned with our strategic priorities >Stock price | | | | | | | Long-term equity-based compensation designed to encourage executive retention while incentivizing absolute performance that is aligned with stockholder interests Annual award settles in cash on 3rd anniversary of grant date based on the stock price on the settlement date Range: 0% - 100% of target | >Stock price >Vest in three years |
2018 COMPENSATION PROGRAM STRUCTURE
| (1) Effective with equity grants in 2018, the HRCC approved replacing stock options with three-year, time-vested restricted stock units at a weight of 35% and increasing the weighting of performance shares to 65%. | | (2) Effective with performance share programs commencing in 2019, the HRCC approved adjusting the PSP measures by eliminating the Strategic Objectives performance measure and increasing the weighting of relative TSR from 50% to 60% and Financial – Relative Adjusted ROCE/CROCE from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now be determined solely on a formulaic basis. |
Changes for 2018 and 2019
Changes for 2018 and 2019 Our pay programs continually evolve to incorporate stockholder feedback, market best practices, and performance and retention considerations. Additionally, we strive to continue to clarify and simplify our compensation-related disclosure while providing thorough and meaningful details of our process. We have made the following changes to our pay programs and disclosure: 2018 Changes: >Increased transparency around targets and results for our annual and long-term incentive programs (see pages 67-74) >Expanded our compensation peer selection to include broader general industry companies that are more comparable in terms of size and scale, as well as other energy companies. The 2018 compensation reference group provided the HRCC with more statistically robust market pay data (see pages 60-62) >Replaced stock options with time-vested restricted stock units to balance risk, retention, and dilution >Increased the weighting of performance shares from 60 percent to 65 percent and assigned a weight of 35 percent to the time-vested restricted stock units 2019 Changes: >Effective with performance share programs commencing in 2019, eliminated the Strategic Objectives performance measure from PSP and increased the weighting of relative TSR from 50% to 60% and relative Financial metrics (Adjusted ROCE/CROCE) from 30% to 40% This change eliminates discretion for determining payouts under the LTIP, which will now be determined solely on a formulaic basis.
PAY FOR PERFORMANCE
| Salary | + | VCIP | + | Performance Shares | + | Executive Restricted Stock Units | = | Target Value | | | | Annual Incentive | | Long-term Incentives | | | | |
BASE SALARY
BASE SALARY Base salary is a central component of compensation for all of our salaried employees. Management, with the assistance of Mercer, its outside compensation consultant, thoroughly examines the scope and complexity of jobs throughout ConocoPhillips and benchmarks the competitive compensation practices for such jobs. As a result of this work, management has developed a compensation structure that assigns all positions specific salary grades. For our executives, the base salary midpoint increases as the salary grade increases, but at a lesser rate than increases in overall target incentive compensation percentages. The result is a higher percentage of at-risk compensation as an executive’s salary grade rises. Base salary is important to give employees financial stability for personal planning purposes. There are also motivational and reward aspects to base salary, as base salary can be changed to account for considerations such as assigned roles, responsibilities and duties, experience, individual performance, and time in position. We set base salaries to be competitive within our compensation reference group and Fortune 50-150 Industrials, taking into account responsibilities and duties, individual performance, and time in position. See “Process for Determining Executive Compensation—Peers and Benchmarking” beginning on page 60 for a discussion of our position benchmarking exercise.
Annual Incentive
Annual Incentive All of our employees throughout the world—not only our executives—participate in our annual incentive program, called the Variable Cash Incentive Program (“VCIP”). It is our primary vehicle for recognizing company, business unit, and individual performance for the prior year. We believe that having an annual “at risk” compensation element gives all employees a financial stake in the achievement of our business objectives and motivates them to use their best efforts to ensure the achievement of those objectives. We also believe that all participating employees can have the opportunity to establish and achieve their specified goals within one year. The base VCIP award is weighted equally for corporate and business unit performance for most employees, but the Executive Leadership Team, which includes the NEOs, only participates in the corporate performance component. See “Process for Determining Executive Compensation—Performance Criteria” beginning on page 63 for details regarding performance criteria. The HRCC has discretion to adjust base awards up or down depending on individual performance. For all NEOs other than the CEO, this decision is based on the input of the CEO, and, for the CEO, this is based on the HRCC’s evaluation of the CEO, conducted jointly with the Lead Director.
Long-Term Incentives
Long-Term Incentives Historically, our primary long-term incentive compensation programs for executives were the Performance Share Program (“PSP”) and the Stock Option Program. In 2017, in response to stockholder feedback and consistent with market trends, the HRCC approved replacing stock options with three-year, time-vested restricted stock units under the Executive Restricted Stock Unit Program effective with equity grants made in 2018. In addition, the HRCC increased the weighting of the long-term incentive award in the form of performance-based restricted stock units under the PSP from 60 percent to 65 percent and assigned a weight of 35 percent to the Executive Restricted Stock Unit Program. Approximately 55 of our current employees participate in these programs.
Performance Share Program
Performance Share Program The PSP rewards executives based on ConocoPhillips’ performance over a three-year period. Each year, the HRCC establishes performance metrics and targets for a new three-year performance period. Thus, performance results in any given year are considered in three overlapping performance periods. Use of a multi-year performance period helps to focus management on longer-term results. PSP award targets are set in shares at the beginning of the performance period, and actual cash payouts based on the HRCC’s evaluation of performance are calculated using our stock price after the conclusion of the three-year program. Thus, the value of the performance shares is tied to stock price performance throughout the performance period. Targets for participants whose salary grades are changed during a performance period are prorated. Changes in salary not accompanied by a change in salary grade do not affect the existing targets. At the end of the performance period, the final award may not exceed 200% of the initial award. The final award is determined by the HRCC following several detailed reviews of company performance. Final awards are based on the HRCC’s evaluation of ConocoPhillips’ performance relative to the pre-established performance metrics and targets (discussed under “Process for Determining Executive Compensation—Performance Criteria”). The HRCC reviews and determines compensation for the CEO and considers input from the CEO with respect to the other NEOs. In December 2018, the HRCC approved additional changes to the PSP. Effective with performance share programs commencing in 2019, the Strategic Objectives performance measure will be eliminated from PSP and the weighting of relative TSR will increase from 50% to 60% and relative Financial metrics (Adjusted ROCE/CROCE) from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now be determined solely on a formulaic basis.
Executive Restricted Stock Unit Program
Executive Restricted Stock Unit Program Effective in 2018, in response to stockholder feedback and consistent with market trends, the HRCC implemented the Executive Restricted Stock Unit Program. Like the PSP and Stock Option Program, the Executive Restricted Stock Unit Program is designed to reward our executive officers for long-term share performance and encourage executive retention while incentivizing absolute performance that is aligned with stockholder interest. The units vest three years following the date of grant, which is competitive with industry peers, and are settled in cash. The combination of the PSP and the Executive Restricted Stock Unit Program, along with our Stock Ownership Guidelines described under “Executive Compensation Governance—Alignment of Interests—Stock Ownership and Holding Requirements” on page 76, provides a comprehensive package of long-term compensation incentives for our executives that align their interests with those of our long-term stockholders.
Stock Option Program
Stock Option Program In December 2017, the HRCC approved replacing stock options with time-vested restricted stock units effective with equity grants made in 2018. The practice under the Stock Option Program was to set option exercise prices no lower than the fair market value of ConocoPhillips stock at the time of the grant. Because an option’s value is derived solely from an increase in our stock price, options only reward recipients if the value of our stock appreciates. Options granted in 2016 and 2017 have three-year vesting provisions and are exercisable for a period of ten years following the grant date in order to incentivize our executives to increase ConocoPhillips’ stock price over the long term.
Off-Cycle Awards
Off-Cycle Awards ConocoPhillips may make awards outside the PSP or the Executive Restricted Stock Unit Program. Currently, off-cycle awards are generally granted to certain incoming executives for one or more of the following reasons: (1) to induce an executive to join ConocoPhillips (occasionally replacing compensation the executive will lose by leaving the prior employer); (2) to induce an executive of an acquired company to remain with ConocoPhillips for a certain period of time following the acquisition; or (3) to provide a pro rata equity award to an executive who joins ConocoPhillips during an ongoing performance period that the executive is ineligible to participate in under the standard PSP or Executive Restricted Stock Unit Program provisions. In these cases, the HRCC has sometimes approved a shorter period for restrictions on transfers of restricted stock units than those issued under the PSP or Executive Restricted Stock Unit Program. Any off-cycle awards to Senior Officers must be approved by the HRCC.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
| July | | | >First Performance Review >Independent third-party benchmarks CEO pay and reviews market trends | |
HUMAN RESOURCES AND COMPENSATION COMMITTEE
| | | January-March | | >Third and fourth performance reviews >Independent third-party review of peer target compensation and payouts >Approve incentive payouts >Approve performance targets and target compensation |
COMPENSATION CONSULTANTS
COMPENSATION CONSULTANTS The HRCC has the sole authority to retain and terminate a compensation consultant to assist in the evaluation of the compensation of the CEO and the Senior Officers and has sole authority to approve such consultant’s fees and other retention terms. Similarly, the HRCC has authority to retain, terminate, and obtain advice and assistance from external legal, accounting, or other advisors and consultants. The HRCC retained FW Cook to serve as its independent executive compensation consultant in 2018. The HRCC has adopted specific guidelines for its outside compensation consultants, which (1) require that work done by such consultants other than at the direction of the HRCC be approved in advance by the HRCC; (2) require the HRCC to conduct a review to determine if it is advisable to replace the independent consultant after a period of five years; and (3) prohibit ConocoPhillips from employing any individual who worked on our account for a period of one year after that individual leaves the employ of the independent consultant. FW Cook has provided an annual attestation of its compliance with our guidelines. Separately, management retained Mercer to, among other things, assist it in compiling compensation data, conducting analyses, providing consulting services, and supplementing internal resources for market analysis. The HRCC considered whether any conflict of interest exists with either FW Cook or Mercer in light of SEC rules. The HRCC assessed the following factors relating to each consultant in its evaluation: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the HRCC; (5) any ConocoPhillips stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Both FW Cook and Mercer provided the HRCC with appropriate assurances addressing such factors. Based on this information, the HRCC concluded that the work of the consultants did not raise any conflict of interest. The HRCC also took into consideration all factors relevant to FW Cook’s independence from management, including those specified in Section 303A.05(c) of the NYSE Listing Manual, and determined that FW Cook is independent and performs no other services for ConocoPhillips.
PEERS AND BENCHMARKING
PEERS AND BENCHMARKING We compete for the best talent with our industry peers and with the broader market. Accordingly, the HRCC regularly reviews the market data, pay practices, and compensation ranges among both energy industry peers and general industry companies to ensure that we continue to offer competitive executive pay programs. Our peer groups are reviewed regularly by the HRCC and updated as appropriate. To properly benchmark compensation and measure performance, ConocoPhillips has two peer groups, a compensation reference group and a performance peer group. We source peer company data from compensation consultant surveys and public disclosures.
Prior Compensation Peer Group and Methodology
Prior Compensation Peer Group and Methodology As the world’s largest independent E&P company based on production and proved reserves, we are uniquely positioned between the larger integrated companies and the smaller independent E&P companies in terms of size and scope. The HRCC’s approach to setting target compensation since the spinoff in 2012 was to consider the average of the median target compensation of the integrated companies (BP, Chevron, ExxonMobil, Shell) and the independent companies (Anadarko, Apache, Devon, Marathon Oil, Occidental) in our prior compensation peer group. Averaging the medians was done to recognize ConocoPhillips’ relative positioning between the integrateds and independents. The HRCC also validated the outcome with the Fortune 50-150 Industrials median. Mr. Lance has had the same target compensation since 2013, which the HRCC arrived at for that year based on the average of the medians methodology. In recent years, the HRCC noticed significant volatility in the compensation peer group data as turnover of incumbent CEOs occurred. Given the challenges with a relatively small compensation peer group consisting of only nine oil and gas peers, in 2018, the HRCC worked with its independent consultant, FW Cook, to develop a broader compensation reference group that would serve as the source for market comparisons for CEO compensation, expanding our prior compensation peer group and replacing our average of the medians methodology.
New Compensation Reference Group and Methodology
| The data is used to assess the competitive market value for executive jobs, assess pay practices, validate targets for pay programs, test the compensation strategy, observe trends, and provide a general competitive foundation for decision making. Our compensation reference group had 2017 annual revenues ranging from $4.3 billion to $238.8 billion and median revenues of $31.3 billion (for 2017, we had revenues of $29.8 billion) and year-end 2017 market cap ranging from $14.3 billion to $375.3 billion and median market cap of $58.5 billion (for 2017, we had a market cap of $65.6 billion). Mercer gathers and performs an analysis of market data for each NEO, comparing each of their individual components of compensation, as well as total compensation, to that of the compensation reference group. This competitive analysis consists of comparing the market data of each of the pay elements and total compensation at the 25th, 50th, and 75th percentiles of the compensation reference group to compensation for each of our NEOs. Total compensation for each NEO is structured to target market competitive pay levels at approximately the 50th percentile in base salary and short- and long-term incentive opportunities, taking into account responsibilities and duties, experience, individual performance, and time in | The chart below shows ConocoPhillips' percentile rank versus the compensation reference group for revenue and year-end market cap for 2017. |
New Compensation Reference Group and Methodology
| position. The HRCC’s independent consultant, FW Cook, reviews and independently advises on the conclusions reached as a result of this benchmarking. In reviewing 2018 target compensation for the CEO, the HRCC considered the median target compensation of the new compensation reference group, which was approximately $16 million. Based on these factors, the HRCC made no changes to the CEO’s 2018 target compensation. Measuring Performance—Performance Peer Group Performance peers are those companies in our industry that we believe we can best measure performance by comparing financial and business objectives and opportunities. The HRCC believes our performance is best measured against both large independent E&P companies with diverse portfolios and the largest publicly-held, international, integrated oil and gas companies that we compete against in our business operations. Therefore, for our performance-based programs, the HRCC assessed our actual performance for a given period in comparison to the performance peer group. | The chart below shows ConocoPhillips' percentile rank versus the compensation reference group for target total direct compensation (TDC) and year-end market cap for 2017. |
New Compensation Reference Group and Methodology
| Performance Peer Group | | | | >Anadarko Petroleum Corporation >Apache Corporation >BP plc >Chevron Corporation | >Devon Energy Corporation >Exxon Mobil Corporation >Marathon Oil Corporation | >Occidental Petroleum Corporation >Royal Dutch Shell plc >Total SA |
DEVELOPING PERFORMANCE MEASURES
DEVELOPING PERFORMANCE MEASURES We believe our performance measures appropriately reflect the performance of ConocoPhillips consistent with our strategy as an independent E&P company. Specifically, the HRCC has approved a balance of metrics, some that measure performance relative to our peer group and some that measure progress in executing our strategic milestones and objectives. We have selected multiple metrics, as described herein, because we believe no single metric is sufficient to capture the performance we are seeking to drive. Moreover, reliance on any metric in isolation is unlikely to promote the well-rounded executive performance necessary to enable us to achieve long-term success. It is for this reason that metrics are assessed in tandem, rather than each with a separate weighting and threshold. The HRCC reassesses performance metrics periodically to confirm that they remain appropriate.
Relative Total Shareholder Return (VCIP and PSP)
Relative Total Shareholder Return (VCIP and PSP) We believe our Operational and Financial measures and Strategic Milestones and Objectives have a strong, positive correlation to TSR in our sector. Thus, as we pursue these measures, we expect to achieve superior returns to stockholders; TSR is the best overall indicator of our success. By integrating compensation metrics with strategic priorities, we believe we are strongly aligned with stockholder interests across time periods and through cycles. We believe it is important to include TSR in both VCIP and PSP because it is the most tangible, visible measure of the value we have created for stockholders during the relevant period. However, TSR has a stronger weighting in the PSP to more closely align with stockholder performance benchmarks and to discourage short-term actions over long-term value creation. TSR represents the percentage change in stock price from the beginning to the end of a stated period, plus the percentage impact from common stock dividends paid during the stated period assuming dividends are reinvested into the stock. Consistent with market practice, we calculate TSR for compensation purposes based on a 20-trading day simple average prior to the beginning of a period and a 20-trading day simple average prior to the end of the stated period. We measure TSR relative to our performance peer group to mitigate the influence of sector-wide factors, such as commodity price volatility, on our stock price.
PERFORMANCE-BASED PROGRAMS
| Relative Ranking | 1st - 2nd | 3rd | 4th | 5th | 6th | 7th | 8th | 9th | 10th - 11th | | Payout | 200% | 175% | 150% | 125% | 100% | 75% | 50% | 25% | 0% |
Annual Incentive—Variable Cash Incentive Program (VCIP)
Annual Incentive—Variable Cash Incentive Program (VCIP) All of our employees are eligible for VCIP. The VCIP payout for our Executive Leadership Team, including the NEOs, is calculated using the following formula. The HRCC has the sole authority to determine the corporate performance payout based on its assessment of our performance against our metrics.
Annual Incentive—Variable Cash Incentive Program (VCIP)
| Eligible EarningsX | Target Percentage for the Salary GradeX | Corporate Performance Payout | ± | Any Individual Performance Adjustment |
Annual Incentive—Variable Cash Incentive Program (VCIP)
| Note: | VCIP awards for all other employees are based on a combination of corporate performance and business unit performance. |
2018 Results
| Metric Category | Category Weighting | Metric | VCIP Target | VCIP Results & Performance Summary | Payout | Weighted Payout | | HSE | | Total Recordable Rate (“TRR”) (relative) | Top-quartile performance and industry leader | Maintained lowest workforce TRR on record; achieved top-quartile safety performance and recognized as HSE industry leader | 90% | 18% | | | | Process Safety Events (“PSE”) | Continuous Improvement | Seventeen serious incidents (compared to four in 2017) and four Tier 1 PSEs (compared to one in 2017) | | | | Operational(1) | | Production (MBOED) | 1,215 | Exceptional operating performance producing 1,240 MBOED; exceeded target by ~2% despite significant production outage in Malaysia | 145% | 29% | | | | Capital ($B) | $5.5 | Capital managed to $6.1B, ~11% above target, driven primarily by operated-by-other activity, inflationary forces, and additional scope in the Lower 48 | | | | | | Operating and Overhead Costs ($B) | $5.7 | Managed operating and overhead costs to $5.6B despite the additional cost associated with increased production | | | | | | Operational Milestones | See Operational Milestones discussed on page 69. | Strong development and major projects milestones performance; strong exploration milestones performance; 100% of milestones achieved | | | | Financial(2) | | Adjusted ROCE (absolute improvement relative to peers) | Outperform peers | 2nd in peer group (200% per matrix) | 188% | 38% | | | | Adjusted CROCE (absolute improvement relative to peers) | Outperform peers | 3rd in peer group (175% per matrix) | | | | Strategic Milestones(3) The Strategic Milestones are aligned with the strategic priorities set out at the November 2017 Analyst & Investor Meeting. | | Return of CFO to Stockholders | 20-30% | Stockholder distributions exceeded target; distributed ~35% of CFO to stockholders by increasing dividend by 15% and expanding buybacks from $1.5B to $3B | 170% | 34% | | | | Year-end Debt | $17.5B | Debt reduction exceeded target - achieved $15B by year-end, 18 months ahead of schedule; acceleration strengthened our position to deliver improved cash and financial returns at lower crude prices | | | | | | Production/Year-end Debt Adjusted Share CAGR | >10% | Delivered underlying production growth of 18% on a per debt-adjusted share basis, significantly exceeding target; our acceleration of debt repayment and higher buybacks helped deliver this exceptional outcome | | | | TSR | | Total shareholder return (relative to peers) | Outperform peers | 1st in peer group (200% per matrix) with absolute TSR of +22% based on 20-day average methodology; significantly outperformed all peers and the S&P 500 index | 200% | 40% | | | | | | Total Payout | | 159% |
VCIP Individual Performance Adjustments
| | 2018 Eligible Earnings | Target VCIP | Corporate Payout | Individual Performance Adjustment(1) | Total Payout | | R.M. Lance | $1,700,000 | 160% | 159% | 20% | $4,868,800 | | D.E. Wallette, Jr. | 985,444 | 100% | 159% | 20% | 1,763,945 | | M.J. Fox | 1,241,000 | 115% | 159% | 20% | 2,554,599 | | A.J. Hirshberg(2) | 1,205,600 | 115% | 159% | 10% | 2,343,084 | | K.B. Rose(3) | 241,938 | 89% | 159% | — | 342,366 | | J.L. Carrig (retired)(3) | 570,024 | 89% | 159% | — | 806,641 |
Long-Term Incentive: Performance Share Program (PSP)
Long-Term Incentive: Performance Share Program (PSP) The PSP is designed to motivate senior leadership worldwide to execute their duties in a way that not only achieves ConocoPhillips’ approved strategy but also closely aligns senior leadership with long-term stockholder interests. Approximately 55 of our current employees participate in the PSP.
Strategic Objectives
| Metric Category(1) | Category Weighting | Metric | PSP Results & Performance Summary | Payout | Weighted Payout | | TSR | | Total shareholder return (relative to peers) | 3rd in peer group (175% per matrix) for 2016-2018 based on 20-day average methodology; outperformed three-year peer average | 175% | 88% | | Financial(2) | | Adjusted ROCE (absolute improvement relative to peers) | 1st in peer group (200% per matrix) | 200% | 60% | | | | Adjusted CROCE (absolute improvement relative to peers) | 2nd in peer group (200% per matrix) | | | | Strategic Objectives(3) | | Reset the strategy and position for long-term success | Gained support and approval to execute the disciplined, returns-focused strategy launched in late 2016; optimized the portfolio with strategic asset sales with ~$17.5B of completed transactions versus originally stated $5-8B program; reduced debt by $10B, achieving $15B target 18 months ahead of plan; flat A-rated by all credit agencies; exceeded original targets on stockholder distributions; ended 2018 with cash of $6.4B | 170% | 34% | | | | Reduce cost of supply and advance strategy for organic resource development and exploration | Reduced average cost of supply within plan from ~$45/BBL to ~$30/BBL and achieved sustaining price <$40/BBL; advanced organic resource and exploration strategy to deliver material, low cost of supply projects since inception of new exploration strategy in 2016 | | | | | | Controllable Cost/BOE (improvement relative to peers) | Reduced cost/BOE by >30%, achieving second best unit cost improvement amongst peers | | | | | | | Total Payout | | 182% |
Strategic Objectives
| (1) Effective with performance share programs commencing in 2019, the HRCC eliminated the Strategic Objectives performance measure from PSP and increased the weighting of relative TSR from 50% to 60% and relative Financial metrics (Adjusted ROCE/CROCE) from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now be determined solely on a formulaic basis. | | (2) Adjustments for material, nonrecurring special items (e.g., gains on dispositions, impairments) are made to company results to determine adjusted ROCE/CROCE, and we also use disclosed material adjustments made by peers when measuring relative results for these metrics. Adjusted earnings (loss) in the adjusted ROCE/CROCE calculations is a non-GAAP financial measure. A reconciliation to GAAP and a discussion of the usefulness and purpose of adjusted earnings (loss) can be found on Appendix A. | | (3) Ending cash includes cash, cash equivalents, and restricted cash totaling $6.2B and short-term investments of $0.2B. Cost of supply is the West Texas Intermediate equivalent price that generates a 10 percent return on a point forward and fully-burdened basis. Controllable Costs includes production and operating expenses; selling, general, and administrative expenses; and controllable exploration general and administrative expenses, geological and geophysical, and lease rental and other expenses, adjusted to remove the impact of special items that are unusual or nonrecurring. |
Long-Term Incentive: Executive Restricted Stock Unit Program
Long-Term Incentive: Executive Restricted Stock Unit Program In December 2017, in response to stockholder feedback and consistent with market trends, the HRCC approved replacing stock options with three-year, time-vested restricted stock units effective with equity grants made in 2018. All 2018 awards under the Executive Restricted Stock Unit Program were made at target. Approximately 55 of our current employees participate in this program.
OTHER COMPENSATION AND PERSONAL BENEFITS
| > | Voluntary Deferred Compensation Plans—The purpose of our voluntary nonqualified deferred compensation plans is to allow executives to defer a portion of their salary and incentive compensation so that such amounts are not immediately taxable. | | > | Make-Up Plans—The purpose of our nonqualified defined contribution make-up plans is to provide benefits that an executive would otherwise lose due to limitations imposed by the Internal Revenue Code on high-income participants in qualified plans. |
SEVERANCE PLANS AND CHANGES IN CONTROL
SEVERANCE PLANS AND CHANGES IN CONTROL We maintain plans to address severance of our executives in certain circumstances as described under Executive Severance and Changes in Control beginning on page 93. Plans of this nature are common within the industry; our plans are designed to aid ConocoPhillips in attracting and retaining executives. Under each of our severance and change-in-control severance plans, the executive must terminate from service with ConocoPhillips in order to receive severance pay. Executives who began participation in the change-in-control severance plan after the spinoff of Phillips 66 in 2012 are not eligible for excise tax gross-ups under the plan. Executives who had been participants in the plan prior to the spinoff may receive excise tax gross-ups. The HRCC chose to grandfather the gross-up provision for certain participants because, in the event of a change in control, the provisions of our performance share program prior to the spinoff left those participants with the potential of a large excise tax. The HRCC determined it would be unfair should this burden suddenly be shifted to the participants. The post-spinoff design of the PSP reduced the potential tax impact to participants. In 2013, the HRCC amended the change-in-control severance plan to limit single trigger vesting of equity awards to awards not assumed by an acquirer and for program periods that began prior to 2014. Awards assumed by an acquirer made with regard to later program periods under the PSP, Executive Restricted Stock Unit Program, or the Stock Option Program will only vest upon the occurrence of both a change-in-control event and termination of employment of the employee (usually called a “double trigger”).
CLAWBACK POLICY
CLAWBACK POLICY The HRCC has approved a clawback policy providing that ConocoPhillips will recoup any incentive compensation (cash or equity) paid or payable to any executive to the extent such recoupment is required or contemplated by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley Act, or any other applicable law or listing standards. This clawback policy allows the Board to recoup compensation paid in the event of certain business circumstances, including a financial restatement. The policy operates in addition to provisions already contained in our award documents supporting grants under the PSP, the Executive Restricted Stock Unit Program, the Stock Option Program, and other compensation programs using company equity. Those documents permit the Board to suspend rights to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine is detrimental to ConocoPhillips, including acts of misconduct (such as embezzlement, fraud, theft, or disclosure of confidential information) or other acts that harm our business, reputation, or employees, as well as misconduct that results in ConocoPhillips having to prepare an accounting restatement. If the SEC adopts final rules regarding clawback requirements under the Dodd-Frank Act, we will review our policies and plans and, if necessary, amend them to comply with the new mandates. To date, no NEOs have been subject to any clawbacks.
EQUITY GRANT PRACTICES
EQUITY GRANT PRACTICES When the HRCC awards Performance Share Units, Executive Restricted Stock Units, options, or other equity grants to the NEOs, the fair market value of the units or the exercise price of the options or other equity is determined based on an average of the stock’s high and low prices on the date of grant (or the preceding business day, if the markets are closed on the date of grant). Since 2016, to determine the target number of awards, we use an average of the closing prices on the ten trading days preceding the date of grant. Grants of Performance Share Units, Executive Restricted Stock Units, and option grants are generally made at the HRCC’s February meeting (the date of which is determined at least a year in advance) or, in the case of new hires, on the date of commencement of employment or the date of HRCC approval, whichever is later.
Summary Compensation Table
Summary Compensation Table The Summary Compensation Table below reflects amounts earned with respect to 2018 and, with regard to non-equity incentive plan compensation, for the performance period ending in 2018. The table does not include the cost of benefits that are generally available to our U.S.-based salaried employees, such as our medical, dental, vision, life, and accident plans, disability, and health savings and flexible spending account arrangements. All of our Named Executive Officers are U.S.-based salaried employees.
Summary Compensation Table
| Name and Principal Position | Year | Salary(1) | Bonus(2) | Stock Awards(3) | Option Awards(4) | Non-Equity Incentive Plan Compensation(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(6) | All Other Compensation(7) | Total | | R.M. Lance Chairman and CEO | 2018 | $1,700,000 | $ — | $11,006,296 | $— | $4,868,800 | $5,458,358 | $372,816 | $23,406,270 | | | 2017 | 1,700,000 | — | 6,993,660 | 4,652,424 | 4,596,800 | 3,578,653 | 327,393 | 21,848,930 | | | 2016 | 1,700,000 | — | 6,607,217 | 4,419,261 | 2,638,400 | 3,601,723 | 245,437 | 19,212,038 | | D.E. Wallette, Jr.(8) Executive Vice President and CFO | 2018 | 985,444 | — | 3,563,725 | — | 1,763,945 | 3,849,980 | 109,403 | 10,272,497 | | | 2017 | 961,400 | — | 2,264,449 | 1,506,438 | 1,720,906 | 2,935,282 | 109,606 | 9,498,081 | | | 2016 | 939,550 | — | 1,944,837 | 1,301,146 | 911,364 | 2,248,397 | 61,530 | 7,406,824 | | M.J. Fox(8) Executive Vice President and COO | 2018 | 1,241,000 | — | 5,189,837 | — | 2,554,599 | 258,291 | 150,731 | 9,394,458 | | | 2017 | 1,241,000 | — | 3,297,776 | 2,194,020 | 2,625,956 | 438,163 | 149,519 | 9,946,434 | | | 2016 | 1,241,000 | — | 3,115,552 | 2,083,774 | 1,384,336 | 414,358 | 91,371 | 8,330,391 | | A.J. Hirshberg(8) Executive Vice President, Production, Drilling & Projects | 2018 | 1,205,600 | — | 5,041,839 | — | 2,343,084 | 4,223,201 | 156,827 | 12,970,551 | | | 2017 | 1,205,600 | — | 3,203,706 | 2,131,596 | 2,481,728 | 439,221 | 170,957 | 9,632,808 | | | 2016 | 1,178,200 | — | 2,751,504 | 1,840,685 | 1,314,282 | 2,262,525 | 121,457 | 9,468,653 | | K.B. Rose Senior Vice President, Legal, General Counsel, & Corporate Secretary | 2018 | 241,938 | 200,000 | 3,583,832 | — | 342,366 | 12,849 | 26,031 | 4,407,016 | | | 2017 | — | — | — | — | — | — | — | — | | | 2016 | — | — | — | — | — | — | — | — | | J.L. Carrig (retired)(9) Senior Vice President, Legal, General Counsel, & Corporate Secretary | 2018 | 672,333 | — | 2,383,843 | — | 806,641 | —(10) | 3,281,368 | 7,144,185 | | | 2017 | 760,032 | — | 1,514,732 | 1,007,964 | 1,143,164 | 163,710 | 96,278 | 4,685,880 | | | 2016 | 760,032 | — | 1,431,038 | 957,264 | 656,136 | 165,708 | 70,372 | 4,040,550 |
Summary Compensation Table
| (1) Includes any amounts that were voluntarily deferred under the Key Employee Deferred Compensation Plan. The amount presented for Ms. Carrig includes a payment under the standard vacation policy of ConocoPhillips for pay in lieu of vacation in connection with her retirement effective October 1, 2018. | | (2) Amounts shown represent a payment made in cash as an inducement in connection with the hiring of Ms. Rose. Our primary short-term incentive compensation arrangement for salaried employees (the Variable Cash Incentive Program or “VCIP”) has performance measures established by the HRCC, and communicated to employees, including the Named Executive Officers, at a time when the outcome of the performance is substantially uncertain, with regard to the 2018 performance period. The HRCC must determine the level of achievement with regard to such performance measures before there is any payout to Named Executive Officers. Because of this process, amounts paid under the VCIP are shown in the Non-Equity Incentive Plan Compensation column of the table, rather than the Bonus column. |
Summary Compensation Table
| (3) Amounts shown represent the aggregate grant date fair value of awards made under the Performance Share Program (“PSP”) during each of the years indicated and under the Executive Restricted Stock Unit Program in 2018, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2018 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. A detailed breakdown of 2018 awards in the Stock Awards column of the Summary Compensation Table is below: |
Summary Compensation Table
| Grants made in 2018 Name | PSP | | Executive Restricted Stock Unit Program | | Other Stock Awards (#) | | | | | Shares (#) | Value | Shares (#) | Value | | Value | Total Value | | R.M. Lance | 134,286 | $7,154,087 | 72,308 | $3,852,209 | — | $— | $11,006,296 | | D.E. Wallette, Jr. | 43,480 | 2,316,397 | 23,413 | 1,247,328 | — | — | 3,563,725 | | M.J. Fox | 63,320 | 3,373,373 | 34,096 | 1,816,464 | — | — | 5,189,837 | | A.J. Hirshberg | 61,514 | 3,277,158 | 33,124 | 1,764,681 | — | — | 5,041,839 | | K.B. Rose | 35,835 | 2,783,827 | 6,311 | 493,725 | 3,915 | 306,280 | 3,583,832 | | J.L. Carrig (retired) | 29,084 | 1,549,450 | 15,662 | 834,393 | — | — | 2,383,843 |
Summary Compensation Table
| No off-cycle awards were granted to any of the Named Executive Officers during 2016 or 2017. The amounts shown for awards from the PSP relate to the respective three-year performance periods that began in each of the years presented. Performance periods under the PSP generally are three years. As a new performance period has begun each year since the program commenced, there are three overlapping performance periods ongoing at any time. The amounts shown for 2016 include the full initial target for PSP XIV for the January 2016—December 2018 performance period, as well as any incremental targets set during 2016 with regard to any ongoing performance period as a result of promotions (of which there were none in 2016). The amounts shown for 2017 include the full target for PSP 17 for the January 2017—December 2019 performance period, as well as any incremental targets set during 2017 with regard to any ongoing performance period as a result of promotions (of which there were none in 2017). The amounts shown for 2018 include the full initial target for PSP 18 for the January 2018—December 2020 performance period, as well as any incremental targets set during 2018 with regard to any ongoing performance period as a result of promotions (of which there were none in 2018). For Ms. Rose, the amounts shown also include pro-rata grants for her hire in September 2018 for participation in the PSP and Executive Restricted Stock Unit Program. Amounts shown represent the grant date fair value at target level under the PSP as determined pursuant to FASB ASC Topic 718. Amounts are shown at target for each year since it is most probable at the setting of the target for the applicable performance periods that targets will be achieved. If payout was made at maximum levels for company performance and excluding any individual adjustments, the amounts shown would double from the targets shown, although the value of the actual payout would be dependent upon the stock price at the time of the payout. If payout was made at minimum levels, the amounts would be reduced to zero. No adjustment is made to the target shown for prior years based upon any change in probability after the target is set. Changes to targets resulting from promotion or demotion of a Named Executive Officer are shown as awards in the year of the promotion or demotion, even though the awards may relate to a program period that began in an earlier year. The grant date fair values of the target awards for PSP XIV (January 2016-December 2018) appear in the table in 2016. Actual payouts with regard to the targets for PSP XIV were approved by the HRCC at its February 2019 meeting. Pursuant to that approval, payouts were made in February 2019 (with values shown at fair market value on the date of settlement) to the Named Executive Officers as follows: Mr. Lance, 398,693 units valued at $27,747,039; Mr. Wallette, 117,355 units valued at $8,167,321; Mr. Fox, 187,999 units valued at $13,083,790; Mr. Hirshberg, 166,031 units valued at $11,554,927; and Ms. Carrig, 79,155 units valued at $5,508,792. Ms. Rose did not participate in PSP XIV and received no payout with regard to that performance period. These amounts do not appear in the Summary Compensation Table. Under the terms and conditions of the awards, participants were able to make elections prior to the beginning of the performance period to defer all or a portion of the award value into the Key Employee Deferred Compensation Plan. Mr. Lance deferred 20% of the value equal to $5,549,408. See also the section on Nonqualified Deferred Compensation beginning on page 91 for further information. For programs beginning in 2012 and later, settlement will be made in cash rather than unrestricted shares. For target awards for program periods beginning in 2013 and later, the escrow period ends shortly after the end of the performance period, except that in the cases of termination due to death, layoff, or retirement, or after disability or a change in control, the escrow period ends upon the occurrence of the exceptional termination event although the timing of settlement remains unchanged. For programs beginning prior to 2013, the employee may have elected, prior to the beginning of the performance period, to defer the lapsing of restrictions until after separation. For programs beginning in 2013 and later, the employee may elect, prior to the beginning of the performance period, to have some or all of the settlement value deferred into the Key Employee Deferred Compensation Plan. | | (4) Amounts represent the dollar amount recognized as the aggregate grant date fair value as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2018 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. All such options were awarded under the Stock Option Program. Options awarded to Named Executive Officers under the Stock Option Program generally vest in three equal annual installments beginning on the first anniversary of the date of grant and expire ten years after the date of grant. However, if a Named Executive Officer has attained the early retirement age of 55 with five years of service, the value of the options granted is expensed in the year of grant or over the number of months until the executive attains age 55 with five years of service. Option awards were made in February of each year at a regularly-scheduled meeting of the HRCC. Occasionally, option awards were also made at other times, such as when an individual commences employment. In determining the number of shares to be subject to these option grants, the HRCC used a Black-Scholes-Merton-based methodology to value the options. In 2017, the HRCC approved the discontinuation of the Stock Option Program for 2018 and later years. No stock option grants were made to Named Executive Officers in 2018. | | (5) Includes amounts paid under the VCIP and VCIP amounts that were voluntarily deferred to the Key Employee Deferred Compensation Plan. See the section on Nonqualified Deferred Compensation beginning on page 91 for further information. See also note 2 above. | | (6) Amounts represent the actuarial increase in the present value of the Named Executive Officer’s benefits under all pension plans maintained by ConocoPhillips determined using interest rate, discount rate, and mortality rate assumptions consistent with those used in ConocoPhillips’ financial statements. Interest rate assumption changes have a significant impact on the pension values, with periods of lower interest rates having the effect |
Summary Compensation Table
| of increasing the actuarial values reported and vice versa. The discount rate assumptions and discount periods from the assumed retirement age to current age used in determining the present value may also have a significant impact on the pension values, with lower discount rates having the effect of increased actuarial values reported and vice versa, and shorter discount periods having the effect of increased actuarial values reported and vice versa. The years of service credited and increases to compensation are also factors in the benefit accrual. Each additional year of service credit and pay increases will generally result in an increase in the actuarial values reported. This applies to each of the Named Executive Officers other than Mr. Fox, Ms. Rose, and Ms. Carrig, who are not in a final average earnings title of ConocoPhillips’ U.S. pension plans. See Pension Benefits beginning on page 87 of this Proxy Statement for further information. | | (7) As discussed in “Compensation Discussion and Analysis” beginning on page 48 of this Proxy Statement, ConocoPhillips provides its executives with a number of compensation and benefit arrangements. The table below reflects amounts earned in 2018 under those arrangements. We have excluded the cost of benefits that are generally available to our U.S.-based salaried employees, such as our medical, dental, vision, life, and accident plans, disability, and health savings and flexible spending account arrangements. All of our Named Executive Officers are U.S.-based salaried employees. All Other Compensation includes the following amounts, which were determined using actual cost paid by ConocoPhillips unless otherwise noted: |
Summary Compensation Table
| Name | Personal Use of Company Aircraft(a) | Home Security and Other Security Related Costs(b) | Executive Group Life Insurance Premiums(c) | Tax Reimbursement Gross-Up(d) | Meeting Presentations & Meeting Travel Reimbursement(e) | Post-Employment Payments(f) | Matching Gift Program(g) | Matching Contributions Under the Tax-Qualified Savings Plans(h) | Company Contributions to Non-Qualified Defined Contribution Plans(i) | | R.M. Lance | $161,110 | $— | $12,689 | $23,591 | $5,426 | $— | $— | $27,500 | $142,500 | | D.E. Wallette, Jr. | — | — | 7,356 | 3,102 | 401 | — | — | 27,500 | 71,044 | | M.J. Fox | — | — | 9,263 | 14,256 | 112 | — | 3,000 | 27,500 | 96,600 | | A.J. Hirshberg | — | — | 8,999 | 22,220 | 5,048 | — | — | 27,500 | 93,060 | | K.B. Rose | — | — | 1,829 | 8 | — | — | — | 24,194 | — | | J.L. Carrig (retired) | — | — | 4,255 | 13,091 | 5,746 | 3,191,274 | 10,000 | 27,500 | 29,502 |
Summary Compensation Table
| (a) ConocoPhillips’ Comprehensive Security Program requires that the CEO, Mr. Lance, fly on company aircraft unless the Global Security Department determines that other arrangements represent an acceptable risk. Amounts represent the approximate incremental cost to ConocoPhillips for personal use of the aircraft, including travel for any family member or personal guest. Approximate incremental cost has been determined by calculating the variable costs for each aircraft during the year, dividing that amount by the total number of miles flown by that aircraft, and multiplying the result by the miles flown for personal use during the year. However, where there were identifiable costs related to a particular trip—such as airport landing fees or food and lodging for aircraft personnel who remained at the location of the personal trip—those amounts are separately determined and included in the table above. The amounts shown include incremental costs associated with flights to the hangar or other locations without passengers (commonly referred to as “deadhead” flights) arising from the non-business use of the aircraft by a Named Executive Officer. | | (b) The use of a home security system is required as part of ConocoPhillips’ Comprehensive Security Program for certain executives and employees, including the Named Executive Officers, based on risk assessments made by our Global Security Department. Amounts shown represent the approximate incremental cost to ConocoPhillips for the installation and maintenance of the home security systems with features required by our security program in excess of the cost of a “standard” system typical for homes in the neighborhoods where the Named Executive Officers reside. Each Named Executive Officer pays the cost of the “standard” system personally. In addition, amounts shown reflect other security costs, primarily related to transportation and protection services provided under our Comprehensive Security Program if a risk assessment indicated that enhanced procedures were warranted when an executive attended certain public events. | | (c) The amounts shown reflect the incremental cost of premiums paid by ConocoPhillips for executive group life insurance (coverage equal to two times annual salary) versus the cost of basic life insurance provided to non-executive employees (coverage equal to annual salary). In addition, certain employees, including the Named Executive Officers, are eligible to purchase group variable universal life insurance policies at no incremental cost to ConocoPhillips. | | (d) The amounts shown are for payments by ConocoPhillips relating to certain taxes incurred by the employee. These taxes arise primarily when ConocoPhillips requests family members or other guests to accompany the employee to a function, and, as a result, the employee is deemed to make a personal use of company assets (for example, when a spouse accompanies an employee on a company aircraft). ConocoPhillips believes such expenses are appropriately characterized as a business expense, and, if the employee has imputed income in accordance with the applicable tax laws, ConocoPhillips will generally reimburse any increased tax costs. | | (e) The amounts in this column represent the cost of presentations made to employees and their spouses at company meetings and reimbursements for the cost of spousal attendance at such meetings. | | (f) Ms. Carrig retired effective October 1, 2018. The amounts presented for her reflect post-employment payments made to her under the ConocoPhillips Executive Severance Plan. Not reflected in the Summary Compensation Table but included in the Payments During Last Fiscal Year column of the Pension Benefits table are pension benefits to which Ms. Carrig was entitled as part of the provisions of the ConocoPhillips Retirement Plan. Also see note 6 of the Pension Benefits table on page 90. | | (g) ConocoPhillips maintains a Matching Gift Program, under which certain gifts by employees to qualified educational or charitable institutions are matched. For executives, the program matches up to $10,000 with regard to each program year. Administration of the program can cause us to pay more than the limit in a single fiscal year due to a lag in processing claims. The amounts shown are for the actual payments by ConocoPhillips during the year. | | (h) Under the terms of its tax-qualified defined contribution plans, ConocoPhillips makes matching contributions and allocations to the accounts of its eligible employees, including the Named Executive Officers. | | (i) Under the terms of its nonqualified defined contribution plans, ConocoPhillips makes contributions to the accounts of its eligible employees, including the Named Executive Officers. See the narrative, table, and notes to the Nonqualified Deferred Compensation section beginning on page 91 for further information. |
Summary Compensation Table
| (8) The following changes to ConocoPhillips executive leadership team were effective January 1, 2019: on October 31, 2018, Alan J. Hirshberg announced his decision to retire as Executive Vice President, Production, Drilling and Projects of ConocoPhillips and remained in his position as Executive Vice President, Production, Drilling and Projects until January 1, 2019; Matthew J. Fox became Executive Vice President and Chief Operating Officer; and Donald E. Wallette, Jr. became Executive Vice President and Chief Financial Officer. | | (9) Ms. Carrig retired effective October 1, 2018. | | With regard to the retirement of Ms. Carrig, awards under the VCIP and PSP (respectively reflected in the Non-Equity Incentive Plan Compensation and Stock Awards columns above) are usually reduced to reflect service for less than the full time of the relevant performance period, subject to the discretion of the HRCC to set actual payout. For PSP, except in cases of death, disability or demotion, if the employee has participated for less than a year in a program period, awards related to that program period are forfeited. The amounts shown for VCIP in the Non-Equity Incentive Plan Compensation column above reflect actual amounts paid for the applicable time. The amounts included for PSP in the Stock Awards column above reflect the gross targets set for awards for 2018, 2017, and 2016. For the performance period beginning in 2016, the amount actually paid out in accordance with the decision of the HRCC at its February 2019 meeting, reflecting reductions for service of less than the full time of the performance period, was $5,508,792. For 2017, relating to the performance period beginning in 2017, the amounts shown reflect the gross target amount prior to any such reductions, although it is expected that the HRCC will reduce the payout to be determined at its February 2020 meeting to account for service in only 21 full months during the three-year performance period. Due to her retirement less than one year after the beginning of the performance period that began in 2018, Ms. Carrig forfeited the target award for PSP 18 relating to the performance period beginning in 2018 shown in the Table above for 2018, and her target for that award was reduced to zero. The amounts included for Executive Restricted Stock Units in the Stock Awards column above reflect the gross target set for the award in 2018. Per the terms in the award in cases where retirement occurs 6 months from grant date, the employee retains the award. Due to her retirement greater than 6 months after the grant date, Ms. Carrig retained her 2018 Executive Restricted Stock Unit grant. | | For options reflected in the Option Awards column, except in cases of death or disability, per the terms of the award, if the employee retires prior to the date six months from the grant date, the option award will be forfeited. If the employee retires after a date that is six months from the grant date, the option award is retained. Due to Ms. Carrig’s retirement more than six months from the last grant of option awards, she retained the stock option awards in the table. The original vesting schedule continues to apply and the term remains ten years from the original grant date. | | (10) In accordance with SEC rules prohibiting issuers from reporting a negative value in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, Ms. Carrig’s total compensation excludes the negative values as a result of the distribution payment of her pension benefit as shown in the Pension Benefits table on page 90. |
Grants of Plan-Based Awards Table
Grants of Plan-Based Awards Table The Grants of Plan-Based Awards Table shows participation by the Named Executive Officers in the incentive compensation arrangements described below. The columns under the heading Estimated Future Payouts Under Non-Equity Incentive Plan Awards show information regarding VCIP. The amounts shown in the table are those applicable to the 2018 program year, using a minimum of zero and a maximum of 250 percent of VCIP target for each participant; the amounts shown do not represent actual payouts for that program year. Actual payouts for the 2018 program year were made in February 2019 and are shown in the Summary Compensation Table on page 79 under the Non-Equity Incentive Plan Compensation column. Awards are eligible to be voluntarily deferred. The columns under the heading Estimated Future Payouts Under Equity Incentive Plan Awards show information regarding PSP. The amounts shown in the table are those set for 2018 compensation tied to the 2018 through 2020 program period and do not represent actual payouts for that program year. Awards are eligible to be voluntarily deferred. The All Other Stock Awards column reflects awards granted under the Executive Restricted Stock Unit Program or, in the case of Ms. Rose, made as an off-cycle make-up award. The Executive Restricted Stock Unit Program awards shown were granted on the same day the target was approved, vest at the end of a three-year period, and accrue dividend equivalents that are reinvested in further restricted stock units and paid upon the applicable vesting of the underlying award. Awards are eligible to be voluntarily deferred. For the 2018 program year under the Executive Restricted Stock Unit Program, the HRCC set the targets and granted awards at the regularly scheduled February 2018 meeting of the HRCC. The off-cycle award shown was granted in connection with the hiring of Ms. Rose. The off-cycle make-up award shown was granted on the date of the HRCC meeting immediately following Ms. Rose’s hire, vests three years from the grant date, and pays dividend equivalents in cash at the same time and at the same rate as dividends are paid on ConocoPhillips common stock. This make-up award was eligible to be voluntarily deferred.
Grants of Plan-Based Awards Table
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Options Awards Average Price ($Sh) | Exercise or Base Price of Options Awards Closing Price ($Sh) | Grant Date Fair Value of Stock and Options Awards(5) | | Name | Grant Date(1) | Threshold | Target | Maximum | Threshold (#) | Target (#) | Maximum (#) | | | | | | | R.M. Lance | | $— | $2,720,000 | $6,800,000 | — | — | — | — | — | $— | $— | $— | | | 2/13/2018 | — | — | — | — | 134,286 | 268,572 | — | — | — | — | 7,154,087 | | | 2/13/2018 | — | — | — | — | — | — | 72,308 | — | — | — | 3,852,209 | | D.E. Wallette, Jr. | | — | 985,444 | 2,463,610 | — | — | — | — | — | — | — | — | | | 2/13/2018 | — | — | — | — | 43,480 | 86,960 | — | — | — | — | 2,316,397 | | | 2/13/2018 | — | — | — | — | — | — | 23,413 | — | — | — | 1,247,328 | | M.J. Fox | | — | 1,427,150 | 3,567,875 | — | — | — | — | — | — | — | — | | | 2/13/2018 | — | — | — | — | 63,320 | 126,640 | — | — | — | — | 3,373,373 | | | 2/13/2018 | — | — | — | — | — | — | 34,096 | — | — | — | 1,816,464 | | A.J. Hirshberg | | — | 1,386,440 | 3,466,100 | — | — | — | — | — | — | — | — | | | 2/13/2018 | — | — | — | — | 61,514 | 123,028 | — | — | — | | 3,277,158 | | | 2/13/2018 | — | — | — | — | — | — | 33,124 | — | — | — | 1,764,681 | | K.B. Rose | | — | 215,324 | 538,310 | — | — | — | — | — | — | — | — | | | 10/4/2018 | — | — | — | — | 13,959 | 27,918 | — | — | — | — | 1,072,413 | | | 10/4/2018 | — | — | — | — | 21,876 | 43,752 | — | — | — | — | 1,711,414 | | | 10/4/2018 | — | — | — | — | — | — | 6,311 | — | — | — | 493,725 | | | 10/4/2018 | — | — | — | — | — | — | 3,915 | — | — | — | 306,280 | | J.L. Carrig (retired)(6) | | — | 676,428 | 1,691,070 | — | — | — | — | — | — | — | — | | | 2/13/2018 | — | — | — | — | 29,084 | 58,168 | — | — | — | — | 1,549,450 | | | 2/13/2018 | — | — | — | — | — | — | 15,662 | — | — | — | 834,393 |
Grants of Plan-Based Awards Table
| (1) The grant date shown is the date on which the HRCC approved the target awards or, in the case of prorated promotional awards under the PSP, the effective date of the promotion or, in the case of Ms. Rose, on the date of the HRCC meeting immediately following Ms. Rose’s hire. There were no promotional awards in 2018. | | (2) Threshold and maximum awards are based on the program provisions under VCIP. Actual awards earned can range from zero to 200 percent of the target awards for corporate performance, with a further possible adjustment of up to 50 percent of the target awards for individual performance. Amounts reflect estimated cash payouts under VCIP after the close of the performance period. The estimated amounts are calculated based on the applicable annual target and base salary for each Named Executive Officer in effect for the 2018 performance period, including any salary increases during the year. While the program terms would also automatically adjust for salary decreases, these are not reflected in the table above. If threshold levels of performance are not met, then the payout can be zero. The HRCC also retains the authority to make awards under VCIP at its discretion. Actual payouts under VCIP for 2018 are based on actual base salaries earned in 2018 and are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 79. | | (3) Threshold and maximum awards under the PSP are based on the program provisions. Actual awards earned under the PSP can range from zero to 200 percent of the initial awards. | | (4) This reflects awards for the Executive Restricted Stock Unit Program with the exception of one award for Ms. Rose for 3,915 units that was a make-up award granted as an inducement for her to join ConocoPhillips in 2018. Executive Restricted Stock Unit awards can only be adjusted downward. | | (5) For equity incentive plan awards, these amounts represent the grant date fair value at target level under PSP as determined pursuant to FASB ASC Topic 718 and reflected in the Stock Awards column in the Summary Compensation Table on page 79. Actual value realized upon vesting of the PSP or Executive Restricted Stock Unit awards or, in the case of Ms. Rose, off-cycle make-up awards depends on market prices at the time of settlement for such awards. See the “Employee Benefit Plans” section of Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2018 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. | | (6) Ms. Carrig retired effective October 1, 2018. | | With regard to the retirement of Ms. Carrig, awards under VCIP, the PSP, and the Executive Restricted Stock Unit Program (the target award levels of which are reflected in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards and Estimated Future Payouts Under Equity Incentive Plan Awards columns) are usually reduced to reflect service for less than the full time of the relevant performance period, subject to the discretion of the HRCC to set actual payout. For VCIP, the estimated amounts are calculated based on the applicable annual target and base salary for Ms. Carrig in effect for the 2018 performance period without regard to the reduction due to her retirement. The actual payout for VCIP for Ms. Carrig for the 2018 program year is shown in the Summary Compensation Table on page 79. For the PSP, except in cases of death, disability, or demotion, if the employee has participated for less than a year in a program period, awards related to that program period are forfeited. The PSP amounts shown above reflect the gross amount prior to any such reductions. Due to her retirement less than one year after the beginning of the performance period, Ms. Carrig forfeited the target awards for PSP for the 2018 through 2020 performance period shown in the table above, and her target for that award was reduced to zero, as discussed in note 9 to the Summary Compensation Table. In addition, Ms. Carrig’s targets for the PSP relating to the performance periods beginning in 2016 and 2017 were reduced to reflect service of less than the full time of the respective performance periods. | | For Executive Restricted Stock Units (2018 grant of which is included in the Estimated Future Payouts Under Equity Incentive Plan Awards column) in cases where retirement occurs 6 months or more from the grant date, the employee retains the award. Because Ms. Carrig retired more than 6 months from the grant date, she retained her 2018 Executive Restricted Stock Unit grant. |
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The Outstanding Equity Awards at Fiscal Year End table is used to show equity awards measured in ConocoPhillips stock held by the Named Executive Officers. The following table reflects outstanding stock option awards and unvested and unearned stock awards (both time-based and performance contingent) as of December 31, 2018 assuming a market value of $62.35 per share (the closing stock price of the company’s common stock on December 31, 2018).
Outstanding Equity Awards at Fiscal Year End
| Option Awards(1) | | | | | | Stock Awards(5) | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable(2) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price | 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 | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(12) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested | | R.M. Lance | 87,174 | — | — | $53.4700 | 02/10/2021 | — | $— | — | $— | | | 105,098 | — | — | 54.8000 | 02/09/2022 | — | — | — | — | | | 584,900 | — | — | 58.0775 | 02/05/2023 | — | — | — | — | | | 569,400 | — | — | 65.4630 | 02/18/2024 | — | — | — | — | | | 607,000 | — | — | 69.2450 | 02/17/2025 | — | — | — | — | | | 546,600 | 273,300(3) | — | 33.1250 | 02/16/2026 | — | — | — | — | | | 168,933 | 337,867(4) | — | 49.7550 | 02/14/2027 | — | — | — | — | | | — | — | — | — | — | 760,844(6) | 47,438,653 | 286,642 | 17,872,140 | | D.E. Wallette, Jr. | 34,407 | — | — | 53.4700 | 02/10/2021 | — | — | — | — | | | 42,322 | — | — | 54.8000 | 02/09/2022 | — | — | — | — | | | 128,500 | — | — | 58.0775 | 02/05/2023 | — | — | — | — | | | 167,600 | — | — | 65.4630 | 02/18/2024 | — | — | — | — | | | 178,700 | — | — | 69.2450 | 02/17/2025 | — | — | — | — | | | 160,933 | 80,467(3) | — | 33.1250 | 02/16/2026 | — | — | — | — | | | 54,700 | 109,400(4) | — | 49.7550 | 02/14/2027 | — | — | — | — | | | — | — | — | — | — | 195,988(7) | 12,219,841 | 92,811 | 5,786,753 | | M.J. Fox | 21,783 | — | — | 54.8000 | 02/09/2022 | — | — | — | — | | | 162,134 | — | — | 58.0775 | 02/05/2023 | — | — | — | — | | | 268,500 | — | — | 65.4630 | 02/18/2024 | — | — | — | — | | | 286,200 | — | — | 69.2450 | 02/17/2025 | — | — | — | — | | | 257,733 | 128,867(3) | — | 33.1250 | 02/16/2026 | — | — | — | — | | | 79,666 | 159,334(4) | — | 49.7550 | 02/14/2027 | | | | | | | — | — | — | — | — | 260,476(8) | 16,240,674 | 135,162 | 8,427,332 | | A.J. Hirshberg | 87,174 | — | | 53.4700 | 02/10/2021 | — | — | — | — | | | 105,098 | — | — | 54.8000 | 02/09/2022 | — | — | — | — | | | 174,200 | — | — | 58.0775 | 02/05/2023 | — | — | — | — | | | 198,300 | — | — | 65.4630 | 02/18/2024 | — | — | — | — | | | 252,800 | — | — | 69.2450 | 02/17/2025 | — | — | — | — | | | 227,666 | 113,834(3) | — | 33.1250 | 02/16/2026 | — | — | — | — | | | 77,400 | 154,800(4) | — | 49.7550 | 02/14/2027 | | | | | | | — | — | — | — | — | 225,646(9) | 14,068,999 | 131,306 | 8,186,954 | | K.B. Rose | — | — | — | — | — | 10,254(10) | 639,345 | 35,933 | 2,240,393 | | J.L. Carrig (retired) | 75,768 | — | — | 54.8000 | 02/09/2022 | — | — | — | — | | | 97,900 | — | — | 58.0775 | 02/05/2023 | — | — | — | — | | | 116,400 | — | — | 65.4630 | 02/18/2024 | — | — | — | — | | | 131,500 | — | — | 69.2450 | 02/17/2025 | — | — | — | — | | | 118,400 | 59,200(3) | — | 33.1250 | 02/16/2026 | — | — | — | — | | | 36,600 | 73,200(4) | | 49.7550 | 02/14/2027 | | | | | | | — | — | — | — | — | 145,780(11) | 9,089,394 | 18,946 | 1,181,283 |
Outstanding Equity Awards at Fiscal Year End
| (1) All options shown in the table have a maximum term for exercise of ten years from the grant date. Under certain circumstances, the terms for exercise may be shorter, and, in certain circumstances, the options may be forfeited and cancelled. All awards shown in the table have associated restrictions on transferability. | | (2) The options shown in this column vested and became exercisable in 2018 or prior years (although under certain termination circumstances, the options may still be forfeited). Options become exercisable in one-third increments on the first, second, and third anniversaries of the grant date. | | (3) Represents the final one-third vesting of the February 16, 2016 grant, which became exercisable on February 16, 2019. |
Outstanding Equity Awards at Fiscal Year End
| (4) Represents two-thirds vesting of the February 14, 2017 grant, half of which became exercisable on February 14, 2019 and the remainder of which will become exercisable on February 14, 2020. | | (5) Stock awards made to the Named Executive Officers in 2018 include: (a) long-term incentive awards payout under the PSP; (b) long-term time-vested awards under the Executive Restricted Stock Unit Program; (c) in the case of Ms. Rose, an off-cycle make-up award; or (d) pursuant to elections made by a Named Executive Officer to receive cash compensation in the form of restricted stock units. Stock awards shown in the columns entitled Number of Shares or Units of Stock That Have Not Vested and Market Value of Shares or Units of Stock That Have Not Vested continue to have restrictions upon transferability. Stock awards shown reflect the closing price of ConocoPhillips common stock ($62.35), as reported on the NYSE, on December 31, 2018, the last trading day of 2018. | | Amounts above include PSP awards for the performance period that ended in December 2018 (PSP XIV), shown at target. At its February 14, 2019, meeting, the HRCC approved final payout levels for the Named Executive Officers with regard to that performance period, as follows: Mr. Lance, 398,693 units; Mr. Wallette, 117,355 units; Mr. Fox, 187,999 units; Mr. Hirshberg, 166,031 units; and Ms. Carrig, 79,155 units; see note 3 of the Summary Compensation Table. Ms. Rose was not eligible for an award under PSP XIV. Under the PSP, stock awards are made in the form of restricted stock units or restricted stock, the former having been used in the most recent awards. The terms and conditions of both are substantially the same, requiring restriction on transferability until separation from employment, although for performance periods beginning after 2008 and before 2013, restrictions will lapse five years from the anniversary of the grant date unless the employee has elected prior to the beginning of the performance period to defer the lapsing of such restrictions until separation from employment. For performance periods beginning after 2012, restrictions will lapse three years after the grant and will be settled in cash. Except in cases where the five-year provision applies, forfeiture is expected to occur if the separation is not the result of death, disability, layoff, retirement after the executive has reached the age of 55 with five years of service, or after a change in control, although the HRCC has the authority to waive forfeiture. Restricted stock awards have voting rights and pay dividends. Restricted stock unit awards have no voting rights. Restricted stock units granted under PSP prior to 2018 pay dividend equivalents, but no dividend equivalents are paid or accrued for awards made under the PSP until after the applicable performance period has ended. Restricted stock units granted under PSP in 2018 and later accrue dividend equivalents that, during the performance period, are reinvested in further restricted stock units. Dividend equivalents, if any, on restricted stock units held are paid in cash or credited to each officer’s account in the form of additional stock units. Neither pays dividends or dividend equivalents at preferential rates. Restricted stock held by the Named Executive Officers prior to November 17, 2001, was converted to restricted stock units prior to the completion of the merger of Conoco Inc. and Phillips Petroleum Company, with the original restrictions still in place. Awards for ongoing performance periods under the PSP (PSP 17 (January 2017 - December 2019) and PSP 18 (January 2018 - December 2020)) are shown at target levels in the columns entitled Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested and Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested. There is no assurance that these awards will be granted at, below, or above target after the end of the relevant performance periods, as the determination of whether to make an actual grant and the amount of any actual grant for Named Executive Officers is within the discretion of the HRCC. Until an actual grant is made, these target awards have no voting rights and pay no dividends or dividend equivalents. | | Amounts above also include Executive Restricted Stock Unit Program awards granted in February 2018. Under the Executive Restricted Stock Unit Program, stock awards are made in the form of restricted stock units. The terms and conditions of those units require restriction on transferability, which lapse three years from the anniversary of the grant date. Forfeiture is expected to occur at separation from service if the separation is not the result of death, disability, layoff, retirement after the executive has reached the age of 55 with five years of service, or after a change in control, although the HRCC has the authority to waive forfeiture. Upon lapse of restrictions, settlement is made in cash, although the executive has the ability to elect to defer the value into an account in the Key Employee Deferred Compensation Plan. Restricted stock unit awards have no voting rights. Dividend equivalents, if any, on restricted stock units held are reinvested in further restricted stock units. Dividend equivalents are paid at the same rate as dividends for each quarter, not at a preferential rate. Awards under the Executive Restricted Stock Unit Program are shown in the columns entitled Number of Shares or Units of Stock That Have Not Vested. | | Amounts above also include, in the case of Ms. Rose, an award of restricted stock units made at the beginning of employment with the Company as an off-cycle make-up award for which restrictions lapse three years from the grant date and which pays dividend equivalents in cash at the same time and at the same rate as dividends are paid on Company common stock. | | Amounts presented in Number of Shares or Units of Stock That Have Not Vested and Market Value of Shares or Units of Stock That Have Not Vested represent restricted stock and restricted stock unit awards granted with respect to prior periods. The plans and programs under which such grants were made provide that awards made in the form of restricted stock and restricted stock units be held in such form until the recipient retires (with respect to awards made before 2009) or the earlier of eight years or retirement (with respect to awards made from 2009 through 2012), with the possible election to hold until retirement, or three years (with regard to awards made in 2013 or later), with payouts for the last to be made in cash (unless voluntarily deferred to an account in the Key Employee Deferred Compensation Plan). If such awards immediately vested upon completion of the relevant performance period as is more typical for restricted stock programs, the amounts reflected in this column would be zero for awards made in years prior to 2012. | | (6) Includes 7,456 restricted shares for LTIP VIII—PSP I initial payout, for which restrictions lapse at retirement; 4,668 restricted stock units for LTIP VIII—LTIP IX, for which restrictions lapse at retirement; 106,204 restricted stock units related to grants for PSP I final payout—PSP VI, for which restrictions lapse following separation from service; 39,850 restricted stock units related to grants for PSP VIII, for which restrictions lapse five years from grant date; 31,939 restricted stock units related to grants for PSP VIII Tail; Mr. Lance elected to defer lapsing of restrictions for PSP VIII and PSP VIII Tail until separation of service, 117,833 restricted stock units related to grants for PSP IX Tail, and 162,965 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; 70,867 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that will be settled in cash; and 219,062 restricted stock units related to grants for the PSP XIV target award. The actual payouts with regard to the targets for PSP XIV were approved by the HRCC at its February 2019 meeting, and, pursuant to that decision, Mr. Lance received a payout of 398,693 units. Restrictions on the PSP XIV award lapsed on February 19, 2019, and the award settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. For certain awards, Mr. Lance has voluntarily elected to defer the lapsing of restrictions until separation from service, and those awards continue to appear in the table. Subsequent elections may also impact the final timing of the payout of these awards. Restrictions lapsed on 117,833 restricted stock units related to PSP IX Tail on February 18, 2019. |
Outstanding Equity Awards at Fiscal Year End
| (7) Includes 31,099 restricted stock units related to grants for PSP I final payout—PSP VI, for which restrictions lapse following separation from service; 6,133 restricted stock units related to grants for PSP IX, for which restrictions lapse five years from grant date; 27,552 restricted stock units related to grants for PSP IX Tail; and 43,777 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; 22,946 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that will be settled in cash and 64,481 restricted stock units related to grants for the PSP XIV target award. The actual payouts with regard to the targets for the PSP XIV award were approved by the HRCC at its February 2019 meeting, and, pursuant to that decision, Mr. Wallette received a payout of 117,355 units. Restrictions on the PSP XIV award lapsed on February 19, 2019, and the award settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Subsequent elections may also impact the final timing of the payout of these awards. Restrictions lapsed on 27,552 restricted stock units related to PSP IX Tail on February 18, 2019; however, Mr. Wallette elected to defer the lapsing of restrictions on this award until after his separation from service. For certain other awards, Mr. Wallette has voluntarily elected to defer the lapsing of restrictions until separation from service. Subsequent elections may also impact the final timing of the payout of these awards. | | (8) Includes 49,591 restricted stock units related to grants for PSP IX Tail; 74,172 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; 33,417 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that will be settled in cash; and 103,296 restricted stock units related to grants for the PSP XIV target award. The actual payouts with regard to the targets for PSP XIV were approved by the HRCC at its February 2019 meeting, and, pursuant to that decision, Mr. Fox received 187,999 units. Restrictions on the PSP XIV award lapsed on February 19, 2019, and the award settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Restrictions lapsed on 49,591 restricted stock units related to PSP IX Tail on February 18, 2019. | | (9) Includes 38,322 restricted stock units related to grants for PSP IX Tail; 63,634 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; 32,464 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that will be settled in cash; and 91,226 restricted stock units related to grants for the PSP XIV target award. The actual payouts with regard to the targets for PSP XIV were approved by the HRCC at its February 2019 meeting, and pursuant to that decision, Mr. Hirshberg received 166,031 units. Restrictions on the PSP XIV award lapsed on February 19, 2019, and the award settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Subsequent elections may also impact the final timing of the payout of these awards. Restrictions lapsed on 38,322 restricted stock units related to PSP IX Tail on February 18, 2019. | | (10) Includes 6,339 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from the program grant date and will be settled in cash, and a make-up grant of 3,915 restricted stock units as an inducement to join ConocoPhillips, for which restrictions lapse three years from the grant date and that will be settled in cash. | | (11) Includes 34,242 restricted stock units related to PSP III through VI, for which restrictions will lapse six months after separation from service and will be settled in shares; 19,773 restricted stock units related to grants for PSP IX Tail, for which restrictions lapsed on February 18, 2019 and settled in cash; 32,924 restricted stock units related to grants for PSP X, for which restrictions lapse six months following separation from service and that will be settled in cash; 15,349 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse six months after separation from service and will be settled in cash; and 43,492 restricted stock units related to grants for the PSP XIV target award. The actual payouts with regard to the targets for PSP XIV were approved by the HRCC at its February 2019 meeting, and, pursuant to that decision, Ms. Carrig received 79,155 units. Restrictions on the PSP XIV award lapsed on February 19, 2019, and the award settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Subsequent elections may also impact the final timing of the payout of these awards. Due to her retirement less than one year after the beginning of the performance period, Ms. Carrig forfeited the target awards for PSP for the 2018 through 2020 performance period. Her target for that award was reduced to zero, as discussed in note 9 to the Summary Compensation Table. In addition, Ms. Carrig’s targets for PSP relating to the performance periods beginning in 2016 and 2017 were reduced to reflect service of less than the full time of the respective performance periods. | | For Executive Restricted Stock Units (2018 grant of which is included in the Estimated Future Payouts Under Equity Incentive Plan Awards columns of the Grants of Plan-Based Awards Table), in cases where retirement occurs six months from grant date, the employee retains the award. Because Ms. Carrig retired more than six months after the grant date, Ms. Carrig retained her 2018 Executive Restricted Stock Unit grant. | | (12) Reflects potential stock awards under ongoing performance periods for the PSP for the performance periods beginning January 2017 (Mr. Lance, 149,954 target units; Mr. Wallette, 48,553 target units; Mr. Fox, 70,709 target units; Mr. Hirshberg, 68,692 target units; Ms. Rose, 13,959 target units; and Ms. Carrig, 18,946 target units) and January 2018 (Mr. Lance, 136,688 target units; Mr. Wallette, 44,258 target units; Mr. Fox, 64,453 target units; Mr. Hirshberg, 62,614 target units; Ms. Rose, 21,974 target units; and Ms. Carrig, zero target units reflecting the forfeiture of target units as described in note 11 above). There is no assurance that these awards will be granted at, below, or above target after the end of the relevant performance periods because determination of whether to make an actual grant to, and the amount of any actual grant for, Named Executive Officers is within the discretion of the HRCC. |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The Option Exercises and Stock Vested table is used to show equity awards measured in ConocoPhillips stock where there was an option exercised by, or a stock award that vested to, a Named Executive Officer during 2018.
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards(1) | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized upon Exercise | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting | | R.M. Lance | 160,064 | $5,766,360 | 66,310(2) | $3,686,526 | | D.E. Wallette, Jr. | 59,432 | 2,141,265 | 25,735(3) | 1,431,495 | | M.J. Fox | — | — | 41,941(3) | 2,332,681 | | A.J. Hirshberg | — | — | 37,871(3) | 2,108,472 | | K.B. Rose | — | — | — | — | | J.L. Carrig (retired) | 187,646 | 5,372,763 | 19,527(3) | 1,086,411 |
Option Exercises and Stock Vested
| (1) Includes restricted stock units for the Executive Restricted Stock Unit Program award in 2018 for which restrictions were lapsed in order to satisfy required tax withholding. | | (2) Includes restricted stock units for PSP XIII, for which restrictions lapsed on the third anniversary of the grant date. PSP XIII was settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Mr. Lance elected to continue to hold the restricted stock units for PSP VIII Tail. Also includes restricted stock and restricted stock units for LTIP VIII and LTIP IX with regard to which the HRCC approved the cancellation of shares and 1,334 units in favor of the creation of an account with a similar value in the Key Employee Deferred Compensation Plan. See note 2 to the Nonqualified Deferred Compensation table on page 92. | | (3) Includes restricted stock units for PSP VIII Tail for which restrictions lapsed on the fifth anniversary of the grant date of the final approved award and PSP XIII, for which restrictions lapsed on the third anniversary of the grant date. PSP XIII was settled in cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. |
Pension Benefits
Pension Benefits ConocoPhillips maintains several defined benefit plans for eligible employees. With regard to U.S.-based salaried employees, the defined benefit plan that is qualified under the Internal Revenue Code is the ConocoPhillips Retirement Plan (“CPRP”). Effective January 1, 2019, the CPRP was closed to new hires and rehires who will instead receive an enhanced benefit under the ConocoPhillips Savings Plan. The CPRP is a non-contributory plan that is funded through a trust. The CPRP consists of eight titles, each one corresponding to a different pension formula and having numerous other differences in terms and conditions. Employees are eligible for current participation in only one title (although an employee may also have a frozen benefit under one or more other titles), and eligibility is based on heritage company and date of hire. Of the Named Executive Officers, Messrs. Lance and Wallette (having been employees of Phillips Petroleum Company) are eligible for, and vested in, benefits under Title I of the CPRP, and Messrs. Fox and Hirshberg are eligible for, and vested in, benefits under Title II. Prior to her retirement, Ms. Carrig was eligible for, and vested in, benefits under Title II. Ms. Rose is eligible for, but has not yet completed the required three years of service to vest in, benefits under Title II. Under Title I, employees become vested in the benefits after five years of service. Under Title II, employees become vested in their benefits after three years of service. Titles I and II allow the employee to elect the form of benefit payment from among several annuity types or a single sum payment option, but all of the options are actuarially equivalent. Title I provides a final average earnings type of pension benefit for eligible employees payable at normal or early retirement. Under Title I, normal retirement occurs upon termination on or after age 65; early retirement can occur at age 55 with five years of service (or if laid off during or after the year in which the participant reaches age 50). Under Title I, early retirement benefits are reduced by five percent per year for each year before age 60 that benefits are paid, but for benefits that commence at or after age 60, the benefit is unreduced. Messrs. Lance and Wallette were eligible for early retirement at the end of 2018 under the terms of Title I. Retirement benefits under Title I are calculated as the product of 1.6 percent times years of credited service multiplied by the final annual eligible average compensation. Final annual eligible average compensation is calculated using the three highest consecutive years in the last ten calendar years before retirement plus the year of retirement. Such benefits are reduced by the product of 1.5 percent of the annual primary Social Security benefit multiplied by years of credited service, although a maximum reduction limit of 50 percent may apply in certain cases. The formula below illustrates how the retirement benefits are calculated. For purposes of the formula, “pension compensation” denotes the final annual eligible average compensation described above.
Pension Benefits
| [ | 1.6%X | Pension CompensationX | Years of Credited Service | ] | – | [ | 1.5%X | Annual Primary SS BenefitX | Years of Credited Service | ] |
Pension Benefits
Eligible pension compensation generally includes salary and annual incentive compensation. However, under Title I, if an eligible employee receives layoff benefits from ConocoPhillips, eligible pension compensation includes the annualized salary for the year of layoff, rather than actual salary, and years of credited service are increased by any period for which layoff benefits are calculated. Furthermore, foreign service as an employee of Phillips Petroleum Company through 1991 is counted as time and a quarter when determining the service element in the benefit formula under Title I. Among the Named Executive Officers, only Mr. Wallette had any time credited for such foreign service. (The notes to the table on page 90 provide further detail on that credited service.) Benefits under Title II are based on monthly pay and interest credits to a cash balance account created on the first day of the month after a participant’s hire date. Pay credits are equal to a percentage of total salary and annual incentive compensation. Participants whose combined age and years of service total less than 44 receive a six percent pay credit, those whose combined age and years of service total 44 through 65 receive a seven percent pay credit, and those whose combined age and years of service total 66 or more receive a nine percent pay credit. Normal retirement age is 65, but participants may receive their vested benefit upon termination of employment at any age. Mr. Fox and Ms. Carrig were eligible for the nine percent pay credit, while Mr. Hirshberg and Ms. Rose were eligible for the seven percent pay credit. Eligible pension compensation under Titles I and II is limited in accordance with the Internal Revenue Code. In 2018, that limit was $275,000. The Internal Revenue Code also limits the annual benefit (expressed as an annuity) available under Titles I and II. In 2018, that limit was $220,000 (reduced actuarially for ages below 62). In addition to participation in the U.S.-based plans as described above, Mr. Fox is a participant in the ConocoPhillips UK Pension Plan (the “UK Plan”), a defined benefit pension plan that is funded through a trust, with regard to the time he was on the U.K. payroll. The UK Plan is a U.K. registered plan with Her Majesty’s Revenue and Customs. The UK Plan consists of two sections: the ConocoPhillips section and the Heritage Conoco section. The ConocoPhillips section is contributory. The Heritage Conoco section is non-contributory. Mr. Fox is vested in, and will be eligible for, a benefit as a deferred vested participant in the Heritage Conoco section. Mr. Fox is retirement eligible, having reached age 55. The UK Plan provides a final average earnings type of pension benefit for eligible employees payable at normal pension age or early retirement upon approval by the Principal Employer of the UK Plan. Under the provisions of the UK Plan, a member is entitled to receive their full benefits upon attainment of normal pension age (60 in the case of a Heritage Conoco member) subsequent to termination. Early retirement may occur after termination after reaching age 55, but results in reduced benefits for each year prior to age 60 that benefits are paid. In general, retirement benefits are calculated as the product of 1.75 percent times years of credited service times final pensionable salary. Final pensionable salary is generally basic annual salary plus pensionable allowances earned in the 12 months before active membership in the UK Plan ceased. The UK Plan allows participants to choose between taking a full annuity or a tax-free cash lump sum of up to 25 percent of the value of the benefit and a reduced annuity. Both choices are actuarially equivalent, and the lump sum is capped at 25 percent of the lifetime allowance. As a registered pension plan, there is an annual limit on the amount of pension savings that benefit from tax relief (the “Annual Allowance”). Since Mr. Fox is a deferred member of the plan and his pension does not increase during any pension input by more than the relevant percentage, he did not have any pension savings subject to the Annual Allowance. In addition, a lifetime allowance is imposed. The standard lifetime allowance for the current tax year is £1.03 million, although a participant may apply for fixed or individual protection at a higher level under certain circumstances. If the total value of U.K.-registered pension benefits exceeds a participant’s lifetime allowance, legislation dictates the excess will incur a tax penalty at the time of distribution. ConocoPhillips also maintains several nonqualified pension plans. These are funded through our general assets, although we also maintain trusts of the type generally known as “rabbi trusts” that may be used to pay benefits under the nonqualified pension plans. The trusts and the funds held in them are assets of ConocoPhillips. In the event of bankruptcy, participants would be unsecured general creditors. The plan available to the Named Executive Officers is the ConocoPhillips Key Employee Supplemental Retirement Plan (“KESRP”). This plan is designed to replace benefits that would otherwise not be received due to limitations contained in the Internal Revenue Code that apply to qualified plans. The two such limitations that most frequently impact the benefits to employees are the limit on compensation that can be taken into account in determining benefit accruals and the maximum annual pension benefit. In 2018, the former limit was set at $275,000, while the latter was set at $220,000. The KESRP determines a benefit without regard to such limits, and then reduces that benefit by the amount of benefit payable from the related qualified plan (in this case, the CPRP). Thus, in operation the combined benefits payable from the related plans for an eligible employee equal the benefit that would have been paid if there had been no limitations imposed by the Internal Revenue Code. For participants in Title I of the CPRP for the KESRP final annual eligible average compensation is calculated using the three highest annual amounts for salary and VCIP in the last ten calendar years before retirement plus the year of retirement. Benefits under the KESRP are generally paid in a single sum at the later of age 55 or six months after retirement. When payments do not begin until after retirement, interest at then current six-month Treasury-bill rates, under most circumstances, will be credited on the delayed benefits. Distribution may also be made upon a determination of death or disability. Certain foreign service as an employee of Phillips Petroleum Company is counted as time and a quarter when determining the service element in the benefit formula under the KESRP. Among the Named Executive Officers, only Mr. Wallette had any time credited for such foreign service. (The notes to the table on page 90 provide further detail on that credited service.) Each of the Named Executive Officers is eligible for, and is vested in, the KESRP (other than Ms. Rose, who is eligible for, but not yet vested in, the KESRP).
Pension Benefits
Mr. Lance was an employee of ARCO Alaska, which was acquired by Phillips Petroleum Company in 2000. A special provision applies in calculating pension benefits for such employees under Title I. First, we calculate a benefit under the Title I formula using service with both ARCO and ConocoPhillips, subtracting from the result the value of the benefit under the ARCO plan through the time of the acquisition (for which the BP Retirement Accumulation Plan remains liable, after the acquisition of ARCO by BP and certain plan mergers). Next, we calculate a benefit under the Title I formula using only service with ConocoPhillips. We compare the results of the two methods, and the employee receives the larger benefit. For Mr. Lance, that calculation currently provides a larger benefit under the first method. The table reflects that benefit, showing only the value payable from the plan of ConocoPhillips, not from the BP Retirement Accumulation Plan. Mr. Fox was previously an employee of Conoco (U.K.) Limited, which merged with a Phillips subsidiary in 2002, at the merger of Conoco Inc. and Phillips Petroleum Company. In 2003, Mr. Fox transferred from the U.K. payroll to the U.S. payroll and thus earned a deferred vested pension benefit in the ConocoPhillips UK Pension Plan. As an employee on the U.S. payroll, Mr. Fox became a participant in CPRP Title II. The time served as a participant in the UK Plan is taken into account when determining his Title II benefit in the CPRP and his KESRP benefit. Furthermore, Mr. Fox left ConocoPhillips in 2010 and returned in 2012. Mr. Fox is not credited with any service during the period he was employed elsewhere. However, pursuant to the terms of the KESRP, his benefit earned prior to his separation from service in 2010 was previously distributed. Mr. Hirshberg was previously an employee of Exxon Mobil Corporation. In connection with his hiring by ConocoPhillips, Mr. Hirshberg became entitled to a benefit under the KESRP equal to the benefit calculated under the KESRP for a participant in Title I of the CPRP, reduced by actual benefits payable from the CPRP or other ConocoPhillips plans and by estimated benefits payable from the plans of ExxonMobil. Mr. Hirshberg is vested in the benefit payable under the KESRP. The table reflects that benefit, showing only the values payable from the plans of ConocoPhillips, not from the plans of ExxonMobil. Except where otherwise noted, assumptions used in calculating the present value of accumulated benefits in the table are found in Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2018 Annual Report on Form 10-K.
Pension Benefits
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) | Payments During Last Fiscal Year | | R.M. Lance | Title I - ConocoPhillips Retirement Plan | 35 | $1,267,692 | $— | | | ConocoPhillips Key Employee Supplemental Retirement Plan | 35 | 36,798,839 | — | | D.E. Wallette, Jr.(2) | Title I - ConocoPhillips Retirement Plan | 38 | 2,303,173 | — | | | ConocoPhillips Key Employee Supplemental Retirement Plan | 38 | 18,441,132 | — | | M.J. Fox(3) | Title II - ConocoPhillips Retirement Plan | 33 | 406,894 | — | | | ConocoPhillips UK Pension Plan | 20 | 1,292,024 | — | | | ConocoPhillips Key Employee Supplemental Retirement Plan | 33 | 1,653,387 | — | | A.J. Hirshberg(4) | Title II - ConocoPhillips Retirement Plan | 8 | 174,453 | — | | | ConocoPhillips Key Employee Supplemental Retirement Plan | 36 | 19,151,386 | — | | K.B. Rose(5) | Title II - ConocoPhillips Retirement Plan | <1 | 12,849 | — | | | ConocoPhillips Key Employee Supplemental Retirement Plan | <1 | — | — | | J.L. Carrig (retired)(6) | Title II - ConocoPhillips Retirement Plan | 12 | — | 294,589 | | | ConocoPhillips Key Employee Supplemental Retirement Plan | 12 | 1,081,356 | — |
Pension Benefits
| (1) The eligible pension compensation, as defined on pages 87-89, used to calculate the present value of the accumulated benefit for U.S. plans in this column as of December 31, 2018, for each Named Executive Officer is: Mr. Lance, $5,961,369; Mr. Wallette, $2,323,668; Mr. Fox, $3,866,956; Mr. Hirshberg, $3,098,499; Ms. Rose, $183,750; and Ms. Carrig, $1,713,188. Mr. Fox’s UK pension benefit and eligible pension compensation of $105,915 was converted to U.S. dollars at an exchange rate per British Pound Sterling of $1.2759 as of December 31, 2018. | | (2) Includes additional credited service for Mr. Wallette of 7.25 months related to foreign service prior to 1992, when the credit was discontinued. | | (3) Mr. Fox became an employee of ConocoPhillips on January 1, 2012. Prior to joining ConocoPhillips, Mr. Fox was an employee of Nexen Inc. None of the benefits earned by Mr. Fox as an employee of Nexen are included in the table. The service credited to Mr. Fox does not include his time of service with Nexen. However, prior to his service at Nexen, Mr. Fox was an employee of ConocoPhillips and ConocoPhillips UK. Mr. Fox’s service shown in the table includes that prior service with ConocoPhillips, in accordance with the standard terms and conditions of the applicable plans. Under Title II, and related provisions in the KESRP, Mr. Fox received pay credits equal to nine percent of his pension compensation in 2018, since his combined age and years of service exceed 65. See the narrative above for a discussion of this feature. For these purposes, years of service would include total years of service with ConocoPhillips, which, in Mr. Fox’s case, are 33. | | (4) Mr. Hirshberg became an employee of ConocoPhillips on October 6, 2010. Prior to joining ConocoPhillips, Mr. Hirshberg was employed by ExxonMobil and participated in its defined benefit plans. None of the benefits earned by Mr. Hirshberg as an employee of ExxonMobil are included in the table. The service credited to Mr. Hirshberg does not include his time of service with ExxonMobil with regard to calculation of his benefit under Title II, but, pursuant to the offer letter and resolutions approved by the HRCC in connection with his hire, service credited to Mr. Hirshberg with regard to calculation of his benefit under the KESRP as a deemed Title I participant does include his time of service with ExxonMobil. This is reflected in the table by showing different service crediting periods for Mr. Hirshberg with regard to each of the plans. In determining his benefit in accordance with Title II, the service crediting period for Title II is also included in the service crediting period for the KESRP. Under Title II, and related provisions in the KESRP, Mr. Hirshberg received pay credits equal to seven percent of his pension compensation in 2018, since his combined age and years of service was 65. See the narrative above for a discussion of this feature. For these purposes, years of service would include total years of service with ConocoPhillips, which, in Mr. Hirshberg’s case, are eight. For purposes of determining his benefit in the KESRP as a deemed Title I participant, years of service would include both his total years of service with ExxonMobil and ConocoPhillips, which in Mr. Hirshberg’s case, are 36. | | (5) Ms. Rose became an employee of ConocoPhillips on September 4, 2018. Under Title II, and related provisions in the KESRP, Ms. Rose received pay credits equal to seven percent of her pension compensation in 2018, since her combined age and years of service was 52. See the narrative above for a discussion of this feature. For these purposes, years of service would include total years of service with ConocoPhillips, which, in Ms. Rose’s case, are less than one. | | (6) Ms. Carrig became an employee of ConocoPhillips on August 1, 2006. Under Title II, and related provisions in the KESRP, Ms. Carrig received pay credits equal to nine percent of her pension compensation in 2018, since her combined age and years of service exceed 65. See the narrative above for a discussion of this feature. For these purposes, years of service would include total years of service with ConocoPhillips, which, in Ms. Carrig’s case, are twelve. Ms. Carrig retired effective October 1, 2018 and received a lump-sum distribution of her qualified Title II benefit. Ms. Carrig will receive a lump sum distribution of her nonqualified KESRP benefit six months following her separation from service. |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation ConocoPhillips maintains several nonqualified deferred compensation plans for its eligible employees in addition to the plans discussed in the Pension Benefits section beginning on page 87. Those available to the Named Executive Officers are briefly described below. The Key Employee Deferred Compensation Plan of ConocoPhillips (“KEDCP”) is a nonqualified deferral plan that permits certain key employees voluntarily to defer salary and VCIP (or other similar annual incentive compensation program payments that would otherwise be received in subsequent years). Amounts payable from the PSP for performance periods ending in 2015 or later also may be deferred to the KEDCP. Beginning in 2018, amounts payable from the Executive Restricted Stock Unit Program also may be deferred to the KEDCP. The KEDCP permits eligible employees to defer compensation of up to 100 percent of PSP, VCIP, and Executive Restricted Stock Units and up to 50 percent of salary. Each of the Named Executive Officers is eligible to participate in, and is fully vested in, the KEDCP. Under the KEDCP, for amounts deferred and vested after December 31, 2004, the default distribution option is to receive a lump sum to be paid at least six months after separation from service. Participants may elect to defer payments from one to five years after separation from service, and to receive annual, semiannual, or quarterly payments for a period of up to 15 years. For elections that set a date certain for payment, the distribution will begin in the calendar quarter following the date requested and will be paid out on the distribution schedule elected by the participant. For amounts deferred prior to January 1, 2005, a one-time revision of the ten annual installment payments schedule is allowed from 365 days to no later than 90 days prior to retirement at age 55 or above or within 30 days after being notified of layoff in the calendar year in which the employee is age 50 or above. Participants may receive distributions in one to 15 annual installments, two to 30 semi-annual installments, or four to 60 quarterly installments. The Defined Contribution Make-Up Plan of ConocoPhillips (“DCMP”) is a nonqualified restoration plan under which ConocoPhillips makes employer contributions that cannot be made in the qualified ConocoPhillips Savings Plan—a defined contribution plan of the type often referred to as a 401(k) plan—due to certain voluntary reductions of salary under the KEDCP or due to limitations imposed by the Internal Revenue Code. For 2018, the Internal Revenue Code limited the amount of compensation that could be taken into account in determining a benefit under the ConocoPhillips Savings Plan to $275,000. Employees make no contributions to the DCMP. Each of the Named Executive Officers is eligible to participate in, and is fully vested in, the DCMP. Under the DCMP, amounts vested after December 31, 2004, will be distributed as a lump sum six months after separation from service, or, at a participant’s election, in one to 15 annual installments, two to 30 semi-annual installments, or four to 60 quarterly installments, beginning no earlier than one year after separation from service. For amounts vested prior to January 1, 2005, participants may, from 365 days to no later than 90 days prior to termination or within 30 days after being notified of layoff in the calendar year in which the employee is age 50 or above, indicate a preference to defer the value into an account under the KEDCP. Each participant directs investments of the individual accounts set up for that participant under either the KEDCP or the DCMP. Participants may make changes in the investments as often as daily. All ConocoPhillips defined contribution nonqualified deferred compensation plans allow investment of deferred amounts in a broad range of mutual funds or other market-based investments, including ConocoPhillips stock. As market-based investments, none of these provide above-market return. Since each executive participating in each plan chooses the investment vehicle or vehicles and may change allocations, the return on the investment will depend on how well the underlying investment fund performs during the period the executive chose it as an investment vehicle. The aggregate performance of each such investment is reflected in the Nonqualified Deferred Compensation Table under the column Aggregate Earnings in Last Fiscal Year. Benefits due under each of the plans discussed above are paid from ConocoPhillips’ general assets, although we also maintain trusts of the type generally known as “rabbi trusts” that may be used to pay benefits under the plans. The trusts and the funds held in them are assets of ConocoPhillips. In the event of bankruptcy, participants would be unsecured general creditors.
Nonqualified Deferred Compensation
| Name | Applicable Plan(1) | Beginning Balance | Executive Contributions in Last FY(2) | Registrant Contributions in Last FY(3) | Aggregate Earnings in Last FY(4) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE(5) | | R.M. Lance | Defined Contribution Make-Up Plan of ConocoPhillips | $1,547,772 | $— | $142,500 | $82,981 | $— | $1,773,253 | | | Key Employee Deferred Compensation Plan of ConocoPhillips | 4,780,654 | 182,807 | — | 33,335 | — | 4,996,796 | | D.E. Wallette, Jr. | Defined Contribution Make-Up Plan of ConocoPhillips | 568,852 | — | 71,044 | (31,542) | — | 608,354 | | | Key Employee Deferred Compensation Plan of ConocoPhillips | 10,070,564 | 2,640,804 | — | (752,885) | — | 11,958,483 | | M.J. Fox | Defined Contribution Make-Up Plan of ConocoPhillips | 546,734 | — | 96,600 | 15,334 | — | 658,668 | | | Key Employee Deferred Compensation Plan of ConocoPhillips | — | — | — | — | — | — | | A.J. Hirshberg | Defined Contribution Make-Up Plan of ConocoPhillips | 594,197 | — | 93,060 | 23,641 | — | 710,898 | | | Key Employee Deferred Compensation Plan of ConocoPhillips | — | — | — | — | — | — | | K.B. Rose | Defined Contribution Make-Up Plan of ConocoPhillips | — | — | — | — | — | — | | | Key Employee Deferred Compensation Plan of ConocoPhillips | — | — | — | — | — | — | | J.L. Carrig (retired) | Defined Contribution Make-Up Plan of ConocoPhillips | 628,108 | — | 29,502 | (8,497) | — | 649,113 | | | Key Employee Deferred Compensation Plan of ConocoPhillips | 3,796,219 | 2,108,139 | — | (427,111) | — | 5,477,247 |
Nonqualified Deferred Compensation
| (1) Our primary defined contribution deferred compensation programs for executives (KEDCP and DCMP) make a variety of investments available to participants. As of December 31, 2018, there were a total of 95 investment options, 35 of which were the same as those available in ConocoPhillips’ primary tax-qualified defined contribution plan for employees (the ConocoPhillips Savings Plan, a 401(k) plan) and 60 of which were other mutual fund options approved by an administrator designated by the relevant plan. | | (2) Reflects deferrals by the Named Executive Officer under the KEDCP in 2018. For Mr. Lance, this column reflects $182,807 in a deferred LTIP VIII and IX payout covering the performance periods of 2000 through 2002 and 2002 through 2004 respectively. For Mr. Wallette, this column reflects $1,669,059 in 2017 VCIP deferred (included in the 2017 Non-Equity Incentive Plan Compensation column of the Summary Compensation Table), and $971,745 in a deferred PSP XIII payout covering performance period 2015 through 2017. For Ms. Carrig, this column reflects $285,012 in 2018 salary deferred (included in the 2018 Salary column of the Summary Compensation Table), $1,108,723 in 2017 VCIP deferred (included in the 2017 Non-Equity Incentive Plan Compensation column of the Summary Compensation Table), and $714,404 in a deferred PSP XIII payout covering performance period 2015 through 2017. | | (3) Reflects contributions by ConocoPhillips under the DCMP relating to wages earned in 2018 (included in the All Other Compensation column of the Summary Compensation Table on page 79 for 2018). Of this amount, the following amounts were contributed in January 2019, relating to company contributions on 2018 service: for Mr. Lance, $34,000; for Mr. Wallette, $20,190; for Mr. Fox, $24,820; for Mr. Hirshberg; $24,112; and for Ms. Carrig, $4,201. In addition to the amounts shown relating to 2018, contributions by ConocoPhillips under the DCMP in earlier years (included in the All Other Compensation column of the Summary Compensation Table for those respective years) were as follows: in 2017 for Mr. Lance, $128,700; for Mr. Wallette, $62,226; for Mr. Fox, $87,390; for Mr. Hirshberg, $84,204; and for Ms. Carrig, $44,103; in 2016, for Mr. Lance, $86,100; for Mr. Wallette, $40,473; for Mr. Fox, $58,560; for Mr. Hirshberg, $54,792; and for Ms. Carrig, $29,702. |
Nonqualified Deferred Compensation
| (4) None of these earnings are included in the Summary Compensation Table for 2018. Aggregate earnings reflect the net impact of investment gains and losses and, consequently, may be a negative amount. | | (5) Reflects contributions by our Named Executive Officers, contributions by ConocoPhillips, and earnings on balances prior to 2018; plus, contributions by our Named Executive Officers, contributions by ConocoPhillips, and earnings for 2018, less any distributions (shown in the appropriate columns of this table, with amounts that are included in the Summary Compensation Table for 2018 shown in notes 2, 3 and 4 above). This also includes contributions by ConocoPhillips made in January 2019, allocated to 2018. See note 3 above. |
QUANTIFICATION OF SEVERANCE PAYMENTS
| Executive Benefits and Payments Upon Termination | Involuntary Not-for-Cause Termination (Not CIC) | Involuntary or Good Reason Termination (CIC) | Death | Disability | | R.M. Lance* | | | | | | Base Salary | $3,400,000 | $5,100,000 | $— | $— | | Short-term Incentive | 5,440,000 | 10,852,801 | — | — | | Variable Cash Incentive Program | — | — | — | — | | January 2016 - December 2018 (performance period) | — | — | — | — | | January 2017 - December 2019 (performance period) | — | 3,116,565 | — | — | | January 2018 - December 2020 (performance period) | — | 5,681,672 | — | — | | Other Restricted Stock/Units | — | — | — | — | | Stock Options/SARs: | | | | | | Unvested and Accelerated | — | — | — | — | | Incremental Pension | 2,408,498 | 3,346,959 | — | — | | Post-employment Health & Welfare | 88,634 | 132,952 | — | — | | Life Insurance | — | — | 3,400,100 | — | | 280G Tax Gross-up | — | 11,143,944 | — | — | | | $11,337,132 | $39,374,893 | $3,400,100 | $— |
QUANTIFICATION OF SEVERANCE PAYMENTS
| Executive Benefits and Payments Upon Termination | Involuntary Not-for-Cause Termination (Not CIC) | Involuntary or Good Reason Termination (CIC) | Death | Disability | | D.E. Wallette, Jr.* | | | | | | Base Salary | $2,018,976 | $3,028,464 | $— | $— | | Short-term Incentive | 2,018,976 | 3,948,405 | — | — | | Variable Cash Incentive Program | — | — | — | — | | January 2016 - December 2018 (performance period) | — | — | — | — | | January 2017 - December 2019 (performance period) | — | 1,009,072 | — | — | | January 2018 - December 2020 (performance period) | — | 1,839,670 | — | — | | Other Restricted Stock/Units | — | — | — | — | | Stock Options/SARs: | | | | | | Unvested and Accelerated | — | — | — | — | | Incremental Pension | 707,292 | 707,292 | — | — | | Post-employment Health & Welfare | 77,058 | 115,586 | — | — | | Life Insurance | — | — | 2,019,000 | — | | 280G Tax Gross-up | — | 4,236,229 | — | — | | | $4,822,302 | $14,884,718 | $2,019,000 | $— |
QUANTIFICATION OF SEVERANCE PAYMENTS
| Executive Benefits and Payments Upon Termination | Involuntary Not-for-Cause Termination (Not CIC) | Involuntary or Good Reason Termination (CIC) | Death | Disability | | M.J. Fox* | | | | | | Base Salary | $2,482,000 | $3,723,000 | $— | $— | | Short-term Incentive | 2,854,300 | 6,015,438 | — | — | | Variable Cash Incentive Program | — | — | — | — | | January 2016 - December 2018 (performance period) | — | — | — | — | | January 2017 - December 2019 (performance period) | — | 1,469,590 | — | — | | January 2018 - December 2020 (performance period) | — | 2,679,063 | — | — | | Other Restricted Stock/Units | — | — | — | — | | Stock Options/SARs: | | | | | | Unvested and Accelerated | — | — | — | — | | Incremental Pension | 428,644 | 627,109 | — | — | | Post-employment Health & Welfare | 62,103 | 105,575 | — | — | | Life Insurance | — | — | 2,482,100 | — | | 280G Tax Gross-up | — | 5,451,073 | — | — | | | $5,827,047 | $20,070,848 | $2,482,100 | $— | | Executive Benefits and Payments Upon Termination | Involuntary Not-for-Cause Termination (Not CIC) | Involuntary or Good Reason Termination (CIC) | Death | Disability | | A.J. Hirshberg* | | | | | | Base Salary | $2,411,200 | $3,616,800 | $— | $— | | Short-term Incentive | 2,772,880 | 5,694,015 | — | — | | Variable Cash Incentive Program | — | — | — | — | | January 2016 - December 2018 (performance period) | — | — | — | — | | January 2017 - December 2019 (performance period) | — | 1,427,628 | — | — | | January 2018 - December 2020 (performance period) | — | 2,602,650 | — | — | | Other Restricted Stock/Units | — | — | — | — | | Stock Options/SARs: | | | | | | Unvested and Accelerated | — | — | — | — | | Incremental Pension | 1,098,983 | 886,496 | — | — | | Post-employment Health & Welfare | 259,181 | 392,062 | — | — | | Life Insurance | — | — | 2,411,300 | — | | 280G Tax Gross-up | — | 5,378,591 | — | — | | | $6,542,244 | $19,998,242 | $2,411,300 | $— | | Executive Benefits and Payments Upon Termination | Involuntary Not-for-Cause Termination (Not CIC) | Involuntary or Good Reason Termination (CIC) | Death | Disability | | K.B. Rose* | | | | | | Base Salary | $1,470,000 | $2,205,000 | $— | $— | | Short-term Incentive | 1,308,300 | 1,962,450 | — | — | | Variable Cash Incentive Program | 215,324 | 215,324 | 215,324 | 215,324 | | January 2016 - December 2018 (performance period) | — | — | — | — | | January 2017 - December 2019 (performance period) | — | 870,344 | 217,602 | 217,602 | | January 2018 - December 2020 (performance period) | — | 1,370,050 | 195,712 | 195,712 | | Other Restricted Stock/Units | 244,100 | 639,345 | 639,345 | 639,345 | | Stock Options/SARs: | | | | | | Unvested and Accelerated | — | — | — | — | | Incremental Pension | 155,870 | 242,529 | — | — | | Post-employment Health & Welfare | 109,554 | 165,930 | — | — | | Life Insurance | — | — | 1,470,000 | — | | 280G Tax Gross-up | — | — | — | — | | | $3,503,148 | $7,670,972 | $2,737,983 | $1,267,983 |

DEF 14A of Conocophillips

Director Nominees

Director Nominees

Director Nominees

2018 COMPENSATION PROGRAM STRUCTURE

2018 COMPENSATION PROGRAM STRUCTURE

COMPENSATION AND GOVERNANCE PRACTICES

COMPENSATION AND GOVERNANCE PRACTICES

BOARD RESPONSIVENESS

COMPENSATION PROGRAMS

Non-Employee Director Compensation

OBJECTIVES AND PRINCIPLES

EQUITY COMPENSATION

CASH COMPENSATION

OTHER COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

NON-EMPLOYEE DIRECTOR COMPENSATION TABLE

WHAT IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF THE VOTES CAST?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

WHO ARE THIS YEAR’S DIRECTOR NOMINEES?

2018 COMPENSATION PROGRAM STRUCTURE

2018 COMPENSATION PROGRAM STRUCTURE

Changes for 2018 and 2019

PAY FOR PERFORMANCE

BASE SALARY

Annual Incentive

Long-Term Incentives

Performance Share Program

Executive Restricted Stock Unit Program

Stock Option Program

Off-Cycle Awards

HUMAN RESOURCES AND COMPENSATION COMMITTEE

HUMAN RESOURCES AND COMPENSATION COMMITTEE

COMPENSATION CONSULTANTS

PEERS AND BENCHMARKING

Prior Compensation Peer Group and Methodology

New Compensation Reference Group and Methodology

New Compensation Reference Group and Methodology

New Compensation Reference Group and Methodology

DEVELOPING PERFORMANCE MEASURES

Relative Total Shareholder Return (VCIP and PSP)

PERFORMANCE-BASED PROGRAMS

Annual Incentive—Variable Cash Incentive Program (VCIP)

Annual Incentive—Variable Cash Incentive Program (VCIP)

Annual Incentive—Variable Cash Incentive Program (VCIP)

2018 Results

VCIP Individual Performance Adjustments

Long-Term Incentive: Performance Share Program (PSP)

Strategic Objectives

Strategic Objectives

Long-Term Incentive: Executive Restricted Stock Unit Program

OTHER COMPENSATION AND PERSONAL BENEFITS

SEVERANCE PLANS AND CHANGES IN CONTROL

CLAWBACK POLICY

EQUITY GRANT PRACTICES

Summary Compensation Table

Summary Compensation Table

Summary Compensation Table