DEF 14A of Phillips 66
Filed Apr 3, 2024 · FY20230001534701-24-000095
ELEMENTS OF THE 2023 EXECUTIVE COMPENSATION PROGRAM
| Key Elements of Pay | | Delivered via | Performance Drivers and Weightings | | CEO | Other NEOs(1) | | | | Base Salary | | Cash | •Annual fixed cash compensation to attract and retain NEOs | | | | | | | Annual Incentive | | Variable Cash Incentive Program (VCIP) | Operational Sustainability 50% | | | | | •Safety & Operating Excellence (25%) •Environment (15%) •High-Performing Organization (10%) | | | | | Financial Sustainability 50% | | | | | •Adjusted VCIP Controllable Costs(3) (10%) •Adjusted VCIP EBITDA(3) (40%) | | Long-Term Incentives | | Performance Share Program (PSP) 50% of LTI Target 3-year performance period | •Adjusted PSP ROCE(3) (50%) •Relative TSR (50%) | | | | | | | | | Stock Options(2) 25% of LTI Target 3-year ratable vesting period | •Long-term stock price appreciation | | | | Restricted Stock Units (RSUs) 25% of LTI Target 3-year cliff vesting | •Long-term stock price appreciation |
ELEMENTS OF THE 2023 EXECUTIVE COMPENSATION PROGRAM
(1)Excludes Mr. Garland as his compensation as Executive Chairman materially differs from the other NEOs. Mr. Garland's 2023 target compensation mix as Executive Chairman was 10% base salary, 16% annual incentive, and 74% long-term incentives. (2)Beginning in 2024, the HRCC eliminated stock options from the LTI program. See page 50 of this Proxy Statement for more information regarding executive compensation program changes in 2024. (3)See Appendix A for reconciliations to the nearest GAAP financial measures.
2023 Shareholder Engagement by the Numbers
2023 Shareholder Engagement by the Numbers
2023 Shareholder Engagement by the Numbers
| >45% of shares outstanding contacted | >40% of shares outstanding engaged | 25% of shares outstanding engaged with Lead Independent Director or the Chair of the HRCC |
2023 Shareholder Engagement by the Numbers
| We also engage with our shareholders by conducting periodic roadshows, participating at investor conferences, responding to individual investor inquiries and taking questions during our quarterly earnings calls and at our annual meetings of shareholders. |
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| 14 | Phillips 66 2024 Proxy Statement |
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| FORWARD-LOOKING STATEMENTS, WEBSITE REFERENCES AND LINKS |
2023 Shareholder Engagement by the Numbers
This Proxy Statement includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current facts made in this Proxy Statement are forward-looking, including statements regarding our sustainability plans and goals and statements about our future financial performance and business. Forward-looking statements may be identified by the use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “targets,” “estimates” or other words of similar meaning. Forward-looking statements are based on certain assumptions and expectations of future events which may not prove accurate or be realized, and involve risks and uncertainties, many of which are beyond Phillips 66’s control. Risks and uncertainties that could cause our actual results to differ significantly from management’s current expectations are described in our 2023 Annual Report on Form 10-K. In addition, our sustainability goals are aspirational and may change. Statements regarding our goals are not guarantees or promises of future performance. The inclusion of forward-looking and other sustainability-related statements in this Proxy Statement is not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the Securities and Exchange Commission ("SEC"). We undertake no duty to update any forward-looking statement that we may make, whether as a result of new information, future events or otherwise, except as may be required by applicable law. References in this Proxy Statement to materials available on our website, including website links, are for informational purposes only. The information available on our website or accessible through any website links included herein is not a part of, nor incorporated by reference into, this Proxy Statement.
2023 Shareholder Engagement by the Numbers
| Proxy Summary | 15 |
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| PROPOSAL 1 | Election of 4 Class III Directors to Hold Office until the 2027 Annual Meeting The Board recommends that you vote “FOR” the election of the four Class III director nominees. |
2023 Shareholder Engagement by the Numbers
| DIRECTOR NOMINEES |
2023 Shareholder Engagement by the Numbers
Our Board is currently composed of 14 members. Upon Greg Garland's retirement from the Board immediately prior to the Annual Meeting, the size of the Board will be automatically reduced to 13 directors. In accordance with our Certificate of Incorporation, as currently in effect, our Board is divided into three classes of directors. The Board has nominated Julie L. Bushman, Mark E. Lashier, Lisa A. Davis, and Douglas T. Terreson to stand for election as Class III directors for a three-year term that expires at the annual meeting of shareholders to be held in 2027 or until such director’s successor has been duly elected or appointed and qualified, or until their earlier resignation or removal. All of the nominees are currently serving as directors.
2023 Shareholder Engagement by the Numbers
| MAJORITY VOTE STANDARD & DIRECTOR RESIGNATION POLICY |
2023 Shareholder Engagement by the Numbers
Each nominee requires the affirmative vote of a majority of the votes cast in person or by proxy at the meeting. Each director nominee has consented to serving as a director if elected and the Board expects that the four nominees will be available to serve as directors. However, if a nominee is unavailable for election, proxy holders may vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected at the Annual Meeting. No family relationship exists among any of our directors, director nominees or executive officers. There is no arrangement between any director or director nominee and any other person pursuant to which he or she was, or is to be, selected as a director or director nominee. If an incumbent director fails to be re-elected by a majority of votes cast in an uncontested election, the director is required under our by-laws to promptly tender an offer of resignation to the Board. The N&GC will then make a recommendation to the Board about whether to accept or reject the tendered resignation or take other action. The Board will act on the tendered resignation offer taking into account the N&GC’s recommendation and publicly disclose its decision and rationale within 90 days from the date the election results are certified. The director who tenders his or her offer of resignation will not participate in the recommendation of the N&GC or the decision of the Board.
2023 Shareholder Engagement by the Numbers
| DIRECTOR EXPERIENCE, QUALIFICATIONS AND CORE SKILLS |
2023 Shareholder Engagement by the Numbers
Biographical information about each of the director nominees and continuing directors is set forth on the following pages. A matrix that provides a holistic overview of director demographics and core skills follows the director biographies on page 30.
2023 Shareholder Engagement by the Numbers
| | C-Suite | | Accounting/ Financial Reporting | | Risk Management | | International/ Global Business | | | Environmental | | Industry | | Information Technology | | Business Transformation | | | Investment Banking/Finance | | Public Policy & Government Affairs | | | | |
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| 16 | Phillips 66 2024 Proxy Statement |
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| CLASS III DIRECTOR NOMINEES STANDING FOR ELECTION |
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| Julie L. Bushman |
2023 Shareholder Engagement by the Numbers
| Former Executive Vice President of International Operations of 3M Independent: Yes Age: 63 Director since: 2020 Committees: A&FC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Ms. Bushman retired in 2020 after a 36-year career at 3M that included significant operations, management, and global business responsibilities •Throughout her career, she has been deeply involved in leading efforts focused on continuous improvement and business transformation within her areas of responsibility; her experience in leading global businesses included technology/new product development and commercialization •In her most recent role at 3M, she was responsible for managing operations in 70 countries, driving growth of 3M's diverse portfolio into a broad array of industries, which has been valuable in her oversight of Phillips 66’s diversified, integrated network of businesses •Ms. Bushman's experience overseeing 3M’s business transformation initiative included the deployment of a global ERP system and establishment of multiple global business centers to standardize and simplify the company's processes, which has positively contributed to Ms. Bushman's oversight of Phillips 66's own efforts in progressing its critical multi-year business transformation and cost-saving initiatives •Throughout Ms. Bushman's career, she has been deeply involved in human capital management and leadership development and planning initiatives and has been an active participant in employee engagement during her time on the Board •Ms. Bushman contributes to the Board’s active oversight of IT and cybersecurity matters, topics of increasing interest to our shareholders, from her substantial digital, software, and CIO leadership roles •She brings to the Board an informed, global perspective of corporate governance issues from her current and former service on other public company boards •Ms. Bushman's current service on the audit committees of other highly technical global organizations and experience at 3M has been particularly impactful in overseeing Phillips 66 from an accounting, finance, and risk management perspective | | | Career Highlights: 3M, a diversified technology company with operations in industrials and worker safety, among others •Executive Vice President of International Operations (2017 to 2020) •Senior Vice President of Business Transformation and Information Technology (2013 to 2017) •Previously held roles of increasing responsibility, including Executive Vice President of Safety and Graphics; Executive Vice President of Safety, Security and Protection Services; Division Vice President of Occupational Health and Environmental Safety; and Chief Information Officer Other Current Public Company Directorships: •Adient plc •Bio-Techne Corporation |
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| Proposal 1: Election of Directors | 17 |
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| Lisa A. Davis |
2023 Shareholder Engagement by the Numbers
| Former member of Managing Board of Siemens AG and Chief Executive Officer for Siemens Gas and Power Independent: Yes Age: 60 Director since: 2020 Committees: HRCC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Ms. Davis brings deep expertise in operations, international business, public policy and government affairs, and risk management developed in her 30 years of experience in the energy industry through roles at Exxon, Texaco, and Royal Dutch Shell •She has held significant operational and leadership positions encompassing many facets of the energy industry, including upstream production, project development, refining, marketing and sales, and downstream strategy, among others •Her experience spans all of Phillips 66’s businesses and assets, including Midstream, Chemicals, Refining, and Marketing and Specialties, providing the Board with critical insight into the Company's financial reporting and investment-related decisions from a holistic perspective •As an experienced director, she brings relevant outside perspectives on corporate governance issues to the Phillips 66 Board to guide our governance and oversight practices to continually evolve and remain at the forefront of our industry •Her current role on the board of C3.ai contributes to our Board’s understanding of how Phillips 66 can best leverage emerging technologies to generate meaningful operational efficiencies as part of its business transformation initiatives | | | Career Highlights: Siemens AG, a multinational organization with one of the largest industrial manufacturing operations globally •Managing Board Member of Siemens AG and Chief Executive Officer for Siemens Gas and Power, which included Power Generation, Power Services, Oil and Gas, Transmission and New Fuels (2014 to 2020) •Chair of Siemens Corporation USA (2014 to 2020) Royal Dutch Shell, a global group of energy and petrochemical companies •Executive Vice President of Downstream Strategy, Portfolio and Alternate Energy (2012 to 2014) •Previously held various Vice President roles overseeing Refining Operations, Supply Optimization, and Lubricants and Bulk Fuels Sales and Marketing (2000 to 2012) Other Current Public Company Directorships: •Air Products and Chemicals •Penske Automotive Group •C3.ai Prior Public Company Directorships (within past five years): •Kosmos Energy (2019 to 2022) •Siemens Gamesa Renewable Energy SA (2017 to 2020) |
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| 18 | Phillips 66 2024 Proxy Statement |
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| Mark E. Lashier |
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| President and Chief Executive Officer of Phillips 66 Independent: No Age: 62 Director since: 2022 Committees: Executive PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •As our current President and Chief Executive Officer, Mr. Lashier brings extensive knowledge of Phillips 66’s businesses and the broader industry to the Board •Throughout his more than 30-year career within our organization and our joint venture, Chevron Phillips Chemical Company (CPChem), Mr. Lashier has developed substantial executive leadership, financial reporting, strategic planning, risk management, and environmental and safety experience •He brings a deep understanding of our Chemicals business through his prior positions of increasing responsibility at CPChem, including as President and CEO •He has developed significant expertise in overseeing long-term capital-intensive project development from his efforts leading the team responsible for securing financing for major capital projects at CPChem •Additionally, through his work executing on major capital projects at CPChem, he gained critical experience in managing complex business transformation efforts requiring active relationship management across multiple stakeholders including internal subject matter experts, sponsors, and financiers •Through his international leadership assignments he has developed a deep knowledge of international business and public policy matters in regions that are important to our industry, including the Middle East and Asia | | | Career Highlights: Phillips 66 •President and Chief Executive Officer (since July 2022) •President and Chief Operating Officer (2021 to 2022) Chevron Phillips Chemical Company LLC, a petrochemical company jointly owned by Phillips 66 and Chevron Corporation •President and Chief Executive Officer (2017 to 2021) •Previously held roles of increasing responsibility, including Executive Vice President of Olefins and Polyolefins; Senior Vice President of Specialties, Aromatics and Styrenics; Vice President of Corporate Planning and Development; Project Director for Saudi Arabia; and Regional Manager in Asia |
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| Proposal 1: Election of Directors | 19 |
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| Douglas T. Terreson |
2023 Shareholder Engagement by the Numbers
| Former Head of Energy Research at Evercore ISI Independent: Yes Age: 62 Director since: 2021 Committees: HRCC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Mr. Terreson is a leading industry expert whose career has spanned a rare combination of operations, buy-side and sell-side roles •His depth of research into energy company capital management models and incentive compensation systems, which catalyzed significant shareholder value creation within the industry, has informed Phillips 66’s development of and progress toward achieving its strategic priorities and business transformation goals •He formerly served as Head of Global Energy at Evercore ISI, where he covered the Integrated Oil, Exploration and Production and Refining and Marketing sectors •During his tenure at Morgan Stanley, the firm advised on some of the largest mergers in the industry, including BP and Amoco, Chevron and Texaco, and Conoco and Phillips, providing the Board unparalleled global investment and transactional expertise •Also during his time at Morgan Stanley, he served as lead analyst on some of the largest energy IPOs ever in North America (Conoco), Europe (Statoil), and Asia (Sinopec) •During his career, he was named the #1 or #2 Integrated Oil analyst in the Institutional Investor poll a record twenty times •Earlier in his career, Mr. Terreson managed Putnam Investments’ energy mutual fund, which enables him to bring a differentiated investor perspective to the Board •Before entering the investment industry, he gained valuable industry operating and risk management experience as an engineer with Schlumberger on the U.S. Gulf Coast •As part of our HRCC, Mr. Terreson has been an active contributor to the ongoing evolution of our executive compensation program in response to feedback from our shareholders | | | Career Highlights: Evercore ISI, a premier global independent investment bank •Head of Global Energy (2009 to 2021) Morgan Stanley, a multinational investment bank and financial services firm •Head of Global Energy Group (1993 to 2008) Putnam Investments, a global money management firm •Principal, Portfolio Manager for Global Energy Fund (1991 to 1993) Schlumberger NV, an oilfield services company •Engineer (1984 to 1987) |
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| 20 | Phillips 66 2024 Proxy Statement |
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| CONTINUING DIRECTORS |
2023 Shareholder Engagement by the Numbers
| Gary K. Adams |
2023 Shareholder Engagement by the Numbers
| Former Chief Advisor - Chemicals for IHS Markit Independent: Yes Age: 73 Director since: 2016 Committees: HRCC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Mr. Adams brings over 40 years of operations and advisory experience within the global petrochemicals and plastics industries, along with broader industry experience contributing to the Board’s oversight of our businesses •He is internationally recognized for his depth of expertise and willingness to provide independent perspectives on complex industry dynamics to a range of stakeholders, including trade organizations, government, and private-sector audiences around the world •Throughout his time at Chemical Markets Associates Inc. (CMAI) and IHS Markit following their acquisition, he served as a trusted strategic advisor to the leadership teams of major chemicals corporations, providing guidance on complex financial and investment-related matters including competitive positioning, capital deployment, analytics, and syndicated finance •These leadership roles in an advisory capacity provide our Board critical insight into the market forces contributing to the Company’s performance and growth opportunities, including drivers for success across the energy value chain and the potential benefits of synergies obtained from combining strategic assets across our business lines •His responsibilities at CMAI included the successful development and execution of CMAI’s strategic plan and growth strategies, which has contributed to the Board’s understanding of how to navigate similar priorities across our organization •Earlier in his career, Mr. Adams spent 15 years in operational roles at Union Carbide, developing significant expertise within the chemicals supply chain which has been beneficial to the Board’s oversight of that aspect of our business •Having served on the boards of master limited partnerships within Phillips 66, Mr. Adams brings deep organizational expertise which has contributed to the Board’s oversight of firm-wide risk management •His prior service as a public company board member at Trecora Resources, culminating in a take-private transaction, provides our Board with greater insight into corporate governance best practices and the successful management of complex transactions while representing and advocating for shareholders’ interests | | | Career Highlights: IHS Markit, a global provider of next-generation information, analytics and solutions to customers in business, finance, and government •Chief Advisor - Chemicals (2011 to 2017) Chemical Markets Associates Inc. (CMAI), a specialized petrochemicals consulting firm •President, Chief Executive Officer and Chairman (1997 to 2011) Prior Public Company Directorships (within past five years): •Trecora Resources (2012 to 2022) |
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| Proposal 1: Election of Directors | 21 |
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| Gregory J. Hayes |
2023 Shareholder Engagement by the Numbers
| Chairman and Chief Executive Officer of RTX Corporation Independent: Yes Age: 63 Director since: 2022 Committees: HRCC N&GC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •As the Chairman and Chief Executive Officer of RTX Corporation, Mr. Hayes has been responsible for leading a renowned aerospace and defense company of 185,000 employees and $69 billion in annual revenue, providing our Board with valuable executive experience as well as knowledge of large and complex businesses undergoing transformative initiatives •From his long tenure at United Technologies Corporation and predecessor organizations, Mr. Hayes has developed significant expertise in leading and overseeing businesses operating in highly technical industries •Due to the nature of these roles at global aerospace and defense and related companies, Mr. Hayes has gained expertise in a wide range of government, regulatory, and public policy matters •Mr. Hayes has held senior leadership roles across finance, corporate strategy and business development, and has substantial experience in strategic planning, M&A, global operations, and risk management, which are critical to effective execution of Phillips 66’s strategic priorities •His track record of successfully managing complex businesses and talent development allows him to contribute to the Phillips 66 Board’s oversight of human capital and management succession planning initiatives during this critical time in the Company’s business transformation journey •He has developed valuable knowledge of best practices in corporate governance through his current and prior service on other major public company boards, and a deep understanding of cyclical, commodities-focused industries through his former service on the board of Nucor Corporation, the largest steel producer in the U.S. | | | Career Highlights: RTX Corporation (formerly Raytheon Technologies Corporation), the world’s largest aerospace and defense company •Chairman and Chief Executive Officer (since June 2021; planned retirement as CEO in May 2024 while staying on as Executive Chairman) •President, Chief Executive Officer and Director (April 2020 to June 2021) United Technologies Corporation, an American multinational conglomerate specializing in high technology products •Former Chairman and Chief Executive Officer (2016 to April 2020) Other Current Public Company Directorships: •RTX Corporation |
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| 22 | Phillips 66 2024 Proxy Statement |
2023 Shareholder Engagement by the Numbers
| Charles M. Holley |
2023 Shareholder Engagement by the Numbers
| Former Executive Vice President and Chief Financial Officer, Walmart Inc. Independent: Yes Age: 67 Director since: 2019 Committees: A&FC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •As Executive Vice President and Chief Financial Officer of Walmart Inc., one of the largest U.S. corporations, Mr. Holley gained senior leadership experience and led Walmart’s finance, risk management, strategic planning and capital markets efforts, which has been crucial to his role in oversight of Phillips 66’s strategic investments and risk management processes •In addition, he took an active role in Walmart's government relations and information technology teams while CFO, allowing him to contribute knowledge in those key oversight fields to Phillips 66's Board •He previously served in various accounting and finance roles at Walmart as well as Walmart International, where he helped lead Walmart’s expansion into international markets through a combination of greenfield investments, joint ventures and acquisitions, which enhances his knowledge and oversight capabilities of Phillips 66’s international operations and strategic initiatives and aids Phillips 66 in its ongoing transformation efforts •Mr. Holley's extensive background in accounting and financial planning is further strengthened by his tenure at Ernst & Young LLP and having recently served for three years as Independent Senior Advisor at Deloitte LLP, both of which are particularly valuable to our audit committee, and qualify Mr. Holley as an "audit committee financial expert" •In his role at Deloitte, he worked on the Global Chief Financial Officer program where he helped develop and mentor large-cap company CFOs and their staff, providing him with significant experience in human capital and management oversight as well as management succession planning processes •Mr. Holley's service as a public company board member provides our Board with greater insight into corporate governance best practices at other companies within technical, highly regulated industries | | | Career Highlights: Deloitte LLP, an industry leading audit, consulting, and tax advisory firm •Independent Senior Advisor, Chief Financial Officer Program (2016 to 2019) Walmart Inc., one of the world's largest multi-national retail corporations •Executive Vice President and Chief Financial Officer (2010 to 2015) Other Current Public Company Directorships: •Amgen •Carrier Global |
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| Proposal 1: Election of Directors | 23 |
2023 Shareholder Engagement by the Numbers
| John E. Lowe |
2023 Shareholder Engagement by the Numbers
| Former Senior Executive Advisor to Tudor, Pickering, Holt & Co. Independent: Yes Age: 65 Director since: 2012 Committees: A&FC (Chair) N&GC PPSC Executive Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Mr. Lowe’s 30-year career with ConocoPhillips and Phillips Petroleum Company included Executive Vice President roles overseeing exploration and production; commercial operations; and planning, strategy and corporate affairs which enhances his oversight of our Company •This experience has granted him extensive business transformation, financial, operational, risk management, government affairs, capital allocation, safety, and environmental experience and has enabled him to effectively serve across a range of our Board’s committees •Mr. Lowe brings a deep understanding of our industry to the Phillips 66 Board, gained from having served in various roles as an executive, strategic advisor, and board member for upstream, midstream and downstream energy companies •Subsequent to retiring from ConocoPhillips, Mr. Lowe served as a Senior Executive Advisor to Tudor, Pickering, Holt & Co. and shares his deep financial and investment expertise, as well as M&A experience, with the Phillips 66 Board •Mr. Lowe's history of service on other public company boards specifically within our industry enhances our Board's perspectives on emerging governance topics and issues facing public companies with similar opportunities and challenges to Phillips 66 | | | Career Highlights: Tudor, Pickering, Holt & Co., an energy investment banking and research firm •Senior Executive Advisor (2012 to 2022) ConocoPhillips, a global exploration and production company specializing in crude oil and natural gas •Assistant to the Chief Executive Officer (2008 to 2012) •Executive Vice President, Exploration and Production (2007 to 2008) •Executive Vice President, Commercial (2006 to 2007) •Executive Vice President, Planning, Strategy, and Corporate Affairs (2002 to 2006) Other Current Public Company Directorships: •TC Energy (Non-Executive Chairman) Prior Public Company Directorships (within past five years): •APA Corporation (2013 to 2022; Non-Executive Chairman 2015 to 2022) |
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| 24 | Phillips 66 2024 Proxy Statement |
2023 Shareholder Engagement by the Numbers
| Robert W. Pease |
2023 Shareholder Engagement by the Numbers
| Former Executive Vice President of Corporate Strategy & President of Downstream at Cenovus Energy Independent: Yes Age: 65 Director since: 2024 Committees: A&FC N&GC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Mr. Pease brings to the Board over 38 years of global industry expertise, along with considerable familiarity with Phillips 66’s businesses and assets from his time at Cenovus Energy, a partner in the Wood River and Borger refinery joint ventures •He has significant refinery operations experience, along with a deep understanding of U.S. and global commodity markets following significant roles in trading, risk management, regulatory compliance, and commercial marketing during his time at Shell and Cenovus Energy •In his prior roles, Mr. Pease was involved in optimizing refining assets and developing strategic decision modeling tools, which enhance the Board’s ability to oversee execution across Phillips 66’s strategic priorities •He has a strong track record of success in executing on complex business transformation efforts, including at Motiva, where he oversaw completion and integration of a major refinery expansion project, and developed and implemented a rapid distribution and marketing growth strategy, increasing branded, commercial and biofuels presence and generating increased profitability; and at Cenovus, where he led the early transformation of a Canadian upstream-focused oil and gas producer into a large, fully integrated oil company •His leadership roles have included oversight of critical financial reporting-related responsibilities, including engagement of external auditors and credit rating agencies, that are valuable to Phillips 66 and our A&FC •Mr. Pease’s prior involvement in public policy and government affairs, both in an operational capacity interacting with regulators and as a member of the Board of Governors of the Canadian Association of Petroleum Producers (CAPP) and a Board member of the American Fuels & Petrochemicals Manufacturers (AFPM), brings connectivity to emerging opportunities and risks facing our businesses •He has been an advocate for diversity, talent development, and employee-related initiatives throughout his career and has held active roles within Catalyst, a leading global non-profit for the advancement of women in business, and the United Way of Greater Houston, providing alignment with Phillips 66’s mission to provide energy and improve lives while living our values | | | Career Highlights: Cenovus Energy, a Canadian oil and natural gas company •Director of U.S. Operations (2017 to 2018) •President, Downstream, U.S. Operations (September 2017 to December 2017) •Executive Vice President of Corporate Strategy & President of Downstream (2015 to 2017) •Executive Vice President of Markets, Products & Transportation (2014 to 2015) Motiva Enterprises LLC, a downstream and midstream oil refining company •Chief Executive Officer and President (2008 to 2014) Shell plc, a multinational oil and gas company •President, Shell Trading (U.S.) Co. (2004 to 2008) •Vice President of Trading and Shipping Operations (2004 to 2008) |
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| Proposal 1: Election of Directors | 25 |
2023 Shareholder Engagement by the Numbers
| Denise L. Ramos |
2023 Shareholder Engagement by the Numbers
| Former Chief Executive Officer, President and Director, ITT Inc. Independent: Yes Age: 67 Director since: 2016 Committees: A&FC N&GC PPSC (Chair) Executive Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Ms. Ramos spent seven years as President and Chief Executive Officer of ITT Inc., a diversified manufacturer of engineered components and customized technology solutions for the transportation, industrial, and energy markets, where she developed skills in executive leadership, human capital, business transformation, innovation and technology that enable her to be an active contributor to a range of Phillips 66’s committees and oversight activities •Her experience running large multinational organizations greatly benefits Phillips 66’s Board in its oversight of management and corporate strategy •As a former Chief Financial Officer at ITT, Furniture Brands International, and the U.S. KFC division of Yum! Brands, she is a valuable resource to our Board and the A&FC on financial planning, accounting and risk management, particularly in matters relating to our consumer-facing Marketing and Specialties business •In addition, Ms. Ramos gained significant experience in the oil and gas industry through her more than 20 years in various finance positions at Atlantic Richfield Company, a former producer, refiner, and marketer of oil and gas •Through her public company board service, Ms. Ramos brings board-level insights to issues facing complex, regulated global public companies and specific oversight experience in finance, audit, corporate governance, public policy, and sustainability matters | | | Career Highlights: ITT Inc., a worldwide manufacturer of components for aerospace, transportation, energy, and industrial markets •Chief Executive Officer, President and director (2011 to 2018) •Chief Financial Officer (2007 to 2011) Furniture Brands International, a designer-led home furnishings company •Chief Financial Officer (2005 to 2007) Other Current Public Company Directorships: •Bank of America •RTX Corporation |
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| 26 | Phillips 66 2024 Proxy Statement |
2023 Shareholder Engagement by the Numbers
| Denise R. Singleton |
2023 Shareholder Engagement by the Numbers
| Executive Vice President, General Counsel, and Secretary of Westrock Company Independent: Yes Age: 61 Director since: 2021 Committees: A&FC PPSC Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Ms. Singleton’s professional experience in General Counsel positions at WestRock Company, IDEX Corporation, and SunCoke Energy, Inc. contributes valuable legal, corporate governance, risk management, safety and environmental expertise specifically within other highly technical industries to the Board of Phillips 66 •Ms. Singleton has a strong track record of developing and executing transactional and capital market strategies at both the enterprise and portfolio level of global businesses, including capital raising, conducting IPOs, M&A, asset recapitalizations, restructurings, asset divestitures, and rationalizations of footprint, which has been critical to the successful development and execution of Phillips 66’s strategic priorities •In her current role at WestRock, Ms. Singleton has spearheaded efforts related to technological innovation and automation for contract management and standardization, allowing for learnings that have contributed to oversight of Phillips 66’s own transformational initiatives •Also in her current role at WestRock, Ms. Singleton has been an active participant in the company’s shareholder engagement efforts and oversees the company’s strategies related to labor, collective bargaining, and government affairs •Ms. Singleton brings significant cybersecurity experience to the Phillips 66 Board following her oversight of the information security and cybersecurity functions at IDEX Corporation, as well as her current role as a member of the Cyber Emergency Response Team at WestRock •Ms. Singleton serves on the Board of Directors of 50/50 Women on BoardsTM, a global campaign committed to gender balance and diversity on corporate boards, and has been publicly recognized for her impact on boardroom practices and performance by publications such as Directors & Boards magazine, WomenInc. magazine, Savoy magazine and by the NACD, which selected her to the 2023 NACD Directorship 100TM | | | Career Highlights: WestRock Company, a leader in sustainable, fiber-based packaging solutions •Executive Vice President, General Counsel and Secretary (since March 2022) IDEX Corporation, a designer and manufacturer of specialty engineered products including fluidics and optics systems •Senior Vice President, General Counsel and Corporate Secretary (2015 to February 2022) SunCoke Energy, the largest independent producer of high-quality coke in the Americas •Senior Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer (2011 to 2015) Other Current Public Company Directorships: •Teledyne Technologies Incorporated |
2023 Shareholder Engagement by the Numbers
| Proposal 1: Election of Directors | 27 |
2023 Shareholder Engagement by the Numbers
| Glenn F. Tilton |
2023 Shareholder Engagement by the Numbers
| Lead Independent Director of Phillips 66 Former Chairman and Chief Executive Officer of UAL Corporation Independent: Yes Age: 75 Director since: 2012 Committees: HRCC N&GC (Chair) PPSC Executive Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Mr. Tilton’s service as Chairman and Chief Executive Officer of UAL Corporation, the parent company of United Airlines, as well as Chairman of the Midwest of JPMorgan Chase, has provided him with strong management experience overseeing complex multinational businesses operating in highly regulated industries as well as expertise in financial reporting, risk management, environmental issues, business transformations and capital markets, which assist in his oversight of Phillips 66’s management team and financial strategy •He also provides Phillips 66 with extensive experience in the energy industry following a career spanning more than 30 years with Texaco, including serving as Chairman and Chief Executive Officer •He has significant experience with public policy and government affairs through his service on numerous councils and associations including the Chicago Council on Global Affairs, the U.S. Department of Transportation's Future of Aviation Advisory Committee, President Obama’s White House Forum on Modernizing Government, and the President's Export Council; he has also served in Chair roles within the Airlines Trade Association and the Star Alliance •He has served as Phillips 66’s Lead Independent Director since 2016, where he fulfills an important leadership function in the boardroom and provides an independent voice to the Chief Executive Officer and Executive Chairman in key Board and Company decisions •Mr. Tilton has been a leading participant in conversations with Phillips 66’s shareholders in recent years, serving as a critical representative of our shareholders during discussions with the rest of the Board, and in turn representing the perspectives of the full Board in conversations with our shareholders •Mr. Tilton's current and past experiences in significant leadership roles at a variety of public company boards, including Lead Independent Director at AbbVie, Vice Chairman at Chevron, Chairman of United Continental Holdings following the merger between United and Continental Airlines, and a member of the Special Committee at TXU Corporation which negotiated the sale of the company as part of the then-largest leveraged buyout on record, provides him with deep knowledge of corporate governance and board oversight across a range of complex situations | | | Career Highlights: JPMorgan Chase, a leading global financial services firm •Chairman of the Midwest (2011 to 2014) UAL Corporation, an American commercial airline services company (parent company of United Airlines) •Chairman and Chief Executive Officer (2002 to 2010) Other Current Public Company Directorships: •AbbVie Inc. Prior Public Company Directorships (within past five years): •Abbott Laboratories (2007 to 2023) |
2023 Shareholder Engagement by the Numbers
| 28 | Phillips 66 2024 Proxy Statement |
2023 Shareholder Engagement by the Numbers
| Marna C. Whittington |
2023 Shareholder Engagement by the Numbers
| Former Chief Executive Officer of Allianz Global Investors Capital Independent: Yes Age: 76 Director since: 2012 Committees: HRCC (Chair) N&GC PPSC Executive Key Skills: | | | | Selected Skills and Experience Supporting Oversight of Phillips 66: •Dr. Whittington’s many years of leadership experience and expertise as a former senior executive in the investment management industry, including as Chief Executive Officer of Allianz Global Investors Capital, provides our Board with substantial experience in international business, financial reporting, risk management and investment banking matters •Dr. Whittington is able to bring an investor perspective to our Board, which assists us in financial, operational, and investment oversight which are key to supporting our strategic priorities and progress toward achieving them •She has previously engaged directly with our shareholders in governance and compensation-related conversations through her role as Chair of the HRCC and helped our Board demonstrate responsiveness to shareholder feedback through recent changes made to our executive compensation program •Additionally, within her role as Chair of the HRCC, she has helped Phillips 66 navigate our recent leadership transition from a management succession planning and executive compensation perspective at a critical time in the Company’s evolution •Her experience serving as a public company board member gives her valuable industry experience as well as knowledge across a range of corporate governance and oversight approaches | | | Career Highlights: Allianz Global Investors Capital, a global investment management firm •Chief Executive Officer (2002 to 2012) Morgan Stanley Investment Management, an American active investment management firm •Managing Director and Chief Operating Officer (1996 to 2001) Other Current Public Company Directorships: •Oaktree Capital Group LLC •Ocugen Inc. Prior Public Company Directorships (within past five years): •Macy’s Inc. (1993 to 2022) |
2023 Shareholder Engagement by the Numbers
| Proposal 1: Election of Directors | 29 |
2023 Shareholder Engagement by the Numbers
| DIRECTOR DEMOGRAPHICS, SKILLS AND EXPERIENCES MATRIX(1) |
2023 Shareholder Engagement by the Numbers
| | | | | | | | | | | | | | | | | CORE COMPETENCIES | | | | | | | | | | | | | | | | Other Public Company Boards: service on other boards enhances oversight capabilities by broadening knowledge, experience and perspectives on critical governance matters | 0 | 2 | 3 | 1 | 1 | 2 | 0 | 1 | 0 | 2 | 1 | 0 | 1 | 2 | | C-Suite: experience in top leadership roles provides valuable insights and practical understanding of public companies, and the methods to drive change and growth within our organization | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | ü | ü | | Accounting/Financial Reporting: provides knowledge necessary to evaluate company performance and effectively oversee financial reporting across our organization | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | Risk Management: experience in mitigating and managing risks allows for effective oversight of our enterprise risk management program | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | SKILLS ALIGNED WITH PHILLIPS 66’s STRATEGY | | | | | | | | | | | | | | | | International/Global Business: allows for strong understanding of the challenges facing a global organization | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | Environmental & Safety: experience overseeing environmental and safety risks and management of natural capital in alignment with our mission to provide energy and improve lives | | | | ü | | | ü | ü | ü | ü | ü | | ü | | | Industry: significant leadership or operational experience provides perspective on issues specific to our industry, business, operations, strategy and market dynamics | | | | | | | | | | | | | | | | Energy | ü | | ü | ü | | | ü | ü | ü | ü | | ü | ü | | | Refining | | | ü | ü | | | ü | ü | ü | ü | | | ü | | | Chemicals | ü | | | ü | | | ü | ü | | | | | ü | ü | | Midstream | ü | | | ü | | | ü | ü | ü | | | | ü | | | Information Technology: brings an understanding of data management, technology, and oversight of cybersecurity critical to the complex and dynamic environment in which our Company operates | | ü | | | ü | ü | | | | | ü | | | | | Business Transformation: experience developing and implementing strategy and growth initiatives supports the optimization of our cost and organizational structures to enhance the resilience of our business | | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | | Investment Banking/Finance: experience in financial management, M&A and other project financing, and investment strategies provides effective oversight of our capital structure and finance-related strategies | ü | | ü | ü | ü | ü | ü | ü | | ü | ü | ü | ü | ü | | Public Policy & Government Affairs: expertise in government, legal, regulatory, and public policy matters allows for effective oversight of the complex regulatory and political issues germane to our industry | | | ü | ü | ü | ü | ü | ü | ü | ü | ü | | ü | | | DEMOGRAPHICS | | | | | | | | | | | | | | | | Age | 73 | 63 | 60 | 66 | 63 | 67 | 62 | 65 | 65 | 67 | 61 | 62 | 75 | 76 | | Gender | M | F | F | M | M | M | M | M | M | F | F | M | M | F | | Racial/ethnic diversity | | | | | | | | | | | ü | | | | | Tenure: diversity of tenure provides a balance of new ideas and experience with Phillips 66's business and operations | 8 | 4 | 4 | 12 | 2 | 5 | 2 | 12 | 0 | 8 | 3 | 3 | 12 | 12 | | Independence: a substantial majority of independent directors promotes effective corporate governance and representation of our shareholders' interests | ü | ü | ü | | ü | ü | | ü | ü | ü | ü | ü | ü | ü |
2023 Shareholder Engagement by the Numbers
(1)As of April 3, 2024.
2023 Shareholder Engagement by the Numbers
| 30 | Phillips 66 2024 Proxy Statement |
2023 Shareholder Engagement by the Numbers
| BOARD COMPOSITION AND QUALIFICATIONS |
2023 Shareholder Engagement by the Numbers
The Board strives to maintain an appropriate balance of tenure, turnover, diversity, skills and experience. Our average director tenure is approximately 6 years, representing an appropriate balance of tenures. The average age of our directors is approximately 66. The N&GC and full Board seek to maintain a Board composed of directors possessing a broad and diverse set of experiences, qualifications, attributes and skills to provide effective oversight. When seeking new candidates, the Board seeks to consider a diverse pool of qualified candidates who could potentially serve as Board members. The Board views diversity in terms of skills, gender, age, race, ethnicity, background, professional experience and perspectives and assesses its effectiveness in this regard as part of the annual Board assessment. As the needs of the Company change, the Board revisits the skills and experiences it seeks in new members, taking into consideration gaps that may arise as a result of director retirements, as well as the evolving needs of the Company in terms of strategy and emerging opportunities and risks. The Board's Corporate Governance Guidelines do not impose director term limits or mandate a retirement age. The Board believes that directors may continue to provide meaningful, independent oversight and advice past an arbitrary age limit. A mandatory retirement age comes with the disadvantage of losing the contribution of directors who have developed significant knowledge of the Company’s business, strategy, risk profile, operations and financial position and who remain active and contributing members of the Board. The Board also determined that a mandatory retirement age may inhibit the Board’s ability to maintain a balanced mix of shorter- and longer-tenured directors, which is necessary for the Board to maintain a mix of fresh perspectives and a deep understanding of the Company's business. Maintaining a mix of shorter- and longer-tenured directors is particularly important in our industry, in light of the cyclical nature of many aspects of our operations, as well as the range of complex macroeconomic and geopolitical factors we face, which make our longer-tenured directors' depth of experience particularly valuable. The Corporate Governance Guidelines provide that any director whose principal outside responsibilities have changed since election to the Board should volunteer to resign to give the Board the opportunity to review the appropriateness of continued Board membership under the circumstances.
2023 Shareholder Engagement by the Numbers
| Commitment to Board Diversity The Board has committed to seeking women and underrepresented groups, as well as candidates with diverse backgrounds, skills and experiences, as part of the search process for new directors, and incorporated this commitment into its Corporate Governance Guidelines. |
IDENTIFICATION AND CONSIDERATION OF NEW NOMINEES
| Review of current skills to identify needs or gaps | The N&GC considers the Company’s current and long-term needs and strategic plans to determine the skills, experiences and characteristics that may enhance the Board's composition and effectiveness. This includes consideration from multiple perspectives including the needs of the overall Board as well as its committees. | | Identify a pool of director candidates | The N&GC identifies a pool of diverse candidates through a variety of methods, including third-party search firms, suggestions from shareholders, and the business and organizational contacts of directors and management. | | Evaluate the director candidates and assess their potential contributions | In evaluating potential candidates for nomination to the Board, the N&GC and the Board consider several factors: •all directors are expected to possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the Company’s shareholders; •candidates should possess skills and experience complementary to those of existing directors; and •all directors are expected to devote sufficient time and effort to their duties as a director. | | Recommend candidates to the Board | The N&GC recommends director candidates to the Board with the goal of creating a balance of knowledge, experience and diversity. |
Executive Sessions
| Director Compensation |
Executive Sessions
| NON-EMPLOYEE DIRECTOR COMPENSATION | | ADDITIONAL ANNUAL CASH COMPENSATION | | | | |
EQUITY COMPENSATION
EQUITY COMPENSATION In 2023, each non-employee director received a grant of RSUs with an aggregate value of $200,000 on the date of grant. Restrictions on the units issued to a non-employee director will lapse in the event of retirement, disability, death, or a change of control, unless the director has elected to receive the underlying shares after an earlier stated period of time. Directors forfeit the units if, prior to the lapse of restrictions, the Board finds sufficient cause for forfeiture (although no such finding can be made after a change in control). Before the restrictions lapse, directors cannot sell or otherwise transfer the units, but the units are credited with dividend equivalents in the form of additional RSUs. When restrictions lapse, directors will receive unrestricted shares of Company stock as settlement of the RSUs.
CASH COMPENSATION
| Director Compensation | 45 |
CASH COMPENSATION
The total annual cash compensation is payable in monthly cash installments. Directors may elect, on an annual basis, to receive all or part of their cash compensation in unrestricted stock or in RSUs (such unrestricted stock or RSUs are issued on the first business day of the month and valued using the average of the high and low prices of Phillips 66 common stock as reported on the NYSE on such date), or to have the amount credited to the director’s deferred compensation account as described below. The RSUs issued in lieu of cash compensation are subject to the same restrictions as the annual RSUs described above.
STOCK OWNERSHIP
| DIRECTOR COMPENSATION TABLE |
STOCK OWNERSHIP
| Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | All Other Compensation(3) ($) | Total ($) | | Gary K. Adams | 135,000 | 200,008 | 10,558 | 345,566 | | Julie L. Bushman | 135,000 | 200,008 | — | 335,008 | | Lisa A. Davis | 135,000 | 200,008 | 17,917 | 352,925 | | Gregory J. Hayes | 135,000 | 200,008 | 2,757 | 337,765 | | Charles M. Holley | 135,000 | 200,008 | — | 335,008 | | John E. Lowe | 150,000 | 200,008 | 15,000 | 365,008 | | Denise L. Ramos | 155,000 | 200,008 | 1,481 | 356,489 | | Denise R. Singleton | 135,000 | 200,008 | 15,560 | 350,568 | | Douglas T. Terreson | 135,000 | 200,008 | 21,970 | 356,978 | | Glenn F. Tilton | 205,000 | 200,008 | 42,366 | 447,374 | | Marna C. Whittington | 150,000 | 200,008 | 19,023 | 369,031 |
STOCK OWNERSHIP
| Director Compensation | 47 |
RESPONSIVENESS TO SHAREHOLDER FEEDBACK ON EXECUTIVE COMPENSATION
RESPONSIVENESS TO SHAREHOLDER FEEDBACK ON EXECUTIVE COMPENSATION Beginning in 2021, the HRCC implemented a series of compensation program changes to respond to shareholder feedback following extensive outreach in 2021 and 2022. Key changes included: •removing the positive individual performance modifier from the VCIP for all executive officers •capping the payout on the TSR portion of the PSP award at target if absolute TSR is negative •requiring performance above the 50th percentile relative to our peer group to achieve target payout of the TSR portion of the PSP award In addition, we enhanced our disclosures related to the selection of our metrics, goal-setting process, peer group selection, and performance achievement. We were pleased to see a positive reaction from our shareholders, reflected in the increasing support for our say-on-pay vote, which received 88% and 92% support in 2022 and 2023, respectively.
2024 Compensation Program Changes
2024 Compensation Program Changes We continue to evaluate our program in light of shareholder feedback and evolving best practices, and have made several changes for 2024 to align with the expectations of our shareholders and our pay-for-performance philosophy: •In setting the long-term incentive program for 2024, the HRCC: •eliminated stock options •increased the weighting of the PSPs from 50% to 70% of long-term incentives •increased the weighting of RSUs from 25% to 30% of long-term incentives
2024 Compensation Program Changes
| The changes to the 2024 long-term incentive program put greater emphasis on performance, improve alignment with the shareholder experience and promote better "line of sight" for our executives. |
Mr. Lashier – 2023 Annualized Target Direct Compensation of $16,160,000
Mr. Lashier – 2023 Annualized Target Direct Compensation of $16,160,000 •Increased base salary by $100,000, from $1,500,000 to $1,600,000, effective March 1, 2023 •Increased VCIP target from 150% to 160% of base salary, effective March 1, 2023 •Approved long-term incentive compensation target of $12,000,000, delivered 25% in stock options, 25% in restricted stock units and 50% in performance share units
Mr. Garland – 2023 Annualized Target Direct Compensation of $10,100,000. Unchanged from level and structure set when he assumed the role in 2022
Mr. Garland – 2023 Annualized Target Direct Compensation of $10,100,000. Unchanged from level and structure set when he assumed the role in 2022 •Maintained base salary of $1,000,000 •Maintained VCIP target at 160% of base salary •Maintained long-term incentive compensation target of $7,500,000, delivered 25% in stock options, 25% in restricted stock units and 50% in performance share units
COMPENSATION PROGRAMS ALIGNED WITH BEST PRACTICES
| We Do… | We Do Not… | | Target the majority of NEO compensation to be performance based and at risk Apply multiple performance metrics aligned with our corporate strategy Cap maximum payouts for VCIP and PSP Cap payout at 100% on the TSR portion of the PSP if absolute TSR is negative Require TSR performance above the 50th percentile relative to peer group to achieve target payout Employ a “double trigger” for change in control severance benefits and equity award acceleration Include absolute and relative metrics in our LTI programs Maintain robust stock ownership guidelines for executives — CEO and Executive Chairman 6x base salary; other NEOs 4x base salary Balance, monitor and manage compensation risk through regular assessments and robust clawback provisions, including a new SEC-compliant clawback policy Have extended vesting periods on stock awards, with a minimum one-year vesting period required for stock and stock option awards Maintain a fully independent compensation committee Retain an independent compensation consultant Hold an annual Say-on-Pay vote and consider shareholder feedback in the design of our compensation program | Provide excise tax gross-ups to our NEOs under our CICSP Reprice stock options without shareholder approval Price stock option exercise prices below grant date fair market value Allow share recycling for stock options under our equity plan Include evergreen provisions in our active equity plans Allow hedging or pledging of Company stock Pay dividends during the performance period on unearned PSPs Allow transfer of equity awards (except in the case of death) Provide separate supplemental executive retirement benefits for individual NEOs Maintain individual change-in-control agreements Have an employment agreement with the CEO Provide excessive perquisites Provide individual performance modifier for VCIP for our executive officers |
COMPENSATION PROGRAM MIX
COMPENSATION PROGRAM MIX The CEO’s target compensation mix is 90% at risk and 72% performance based. Based on its evaluation of performance, the HRCC has the authority to reduce or eliminate the performance-based payouts that may be awarded under the PSP and VCIP. Stock options can expire with zero value if the Company's stock price does not appreciate above the grant date price over the 10-year term of the options. RSUs may lose value depending on stock price performance. The average target mix for the other NEOs is 83% at risk and 66% performance-based. The charts below outline the relative size, in percentage terms, of each element of the 2023 annualized target compensation.
COMPENSATION PROGRAM MIX
| | | Key Elements of Pay | | | | | | | CEO | Other NEOs(1) | Delivered via | Performance Drivers and Weightings | | | | Base Salary | | Cash | •Annual fixed cash compensation to attract and retain NEOs | | | | | | | | | | | Annual Incentive | | Variable Cash Incentive Program (VCIP) | 50% Operational Sustainability | | | | | | | •Safety & Operating Excellence (25%) •Environment (15%) •High-Performing Organization (10%) | | | | | | | 50% Financial Sustainability | | | | | | | •Adjusted VICP Controllable Costs(3) (10%) •Adjusted VCIP EBITDA(3) (40%) | | | | Long-Term Incentives | | Performance Share Program (PSP) 50% of LTI Target 3-year performance period | •Adjusted PSP ROCE(3) (50%) •Relative TSR (50%) | | | | | | | | | | | | | Stock Options(2) 25% of LTI Target 3-year ratable vesting period | •Long-term stock price appreciation | | | | | | Restricted Stock Units (RSUs) 25% of LTI Target 3-year cliff vesting | •Long-term stock price appreciation |
COMPENSATION PROGRAM MIX
(1)Excludes Mr. Garland as his compensation as Executive Chairman materially differs from the other NEOs. Mr. Garland's 2023 target compensation mix as Executive Chairman was 10% base salary, 16% annual incentive, and 74% long-term incentives. (2)Beginning in 2024, the HRCC eliminated stock options from the LTI program. See page 50 of this Proxy Statement for more information regarding executive compensation program changes in 2024. (3)See Appendix A for reconciliations to the nearest GAAP financial measures.
2021-2023 PSP Payout
2021-2023 PSP Payout Our PSP awards directly link our performance on an absolute and relative basis to the experience of our shareholders. The 2021-2023 PSP results reflected the strong performance and recovery of our business after enduring a challenging economic environment early in the performance period. Ultimately, performance over the 2021-2023 PSP performance period resulted in a payout of 150% of target, as absolute Adjusted PSP ROCE performance was above maximum, and our relative TSR performance was above the 50th percentile relative to peers, resulting in a payout of 100% of target.
2021-2023 PSP Payout
| 2021 - 2023 PSP Metrics and Weightings | Performance Result | Weight | Payout | | Adjusted Return on Capital Employed (50% Weighting)(1) Adjusted PSP ROCE performance above maximum | Above Maximum | 50% | 200% | | Total Shareholder Return (50% Weighting) TSR performance at 54th percentile relative to peers | 7th out of 14 peers | 50% | 100% | | Total 2021 - 2023 PSP Payout | | | 150% |
2021-2023 PSP Payout
(1)See Appendix A for a reconciliation to the nearest GAAP financial measure.
2023 VCIP Payout
2023 VCIP Payout In 2023, we remained focused on our operational and financial performance while pursuing returns-focused lower-carbon projects aligned with our long-term strategy. Overall payout of the 2023 VCIP reflected our strong operational and financial performance across our established metrics. There is no individual performance modifier for executive officers under the 2023 VCIP. No additional compensation above the formulaic payout was awarded. Our financial and operational performance in 2023 resulted in a payout of 161% of target for our 2023 VCIP due to strong results across most metrics, particularly Safety & Operating Excellence and Adjusted VCIP EBITDA. Adjusted VCIP Controllable Costs was the only metric that was earned below target.
2023 VCIP Payout
| | Payout | | | | 2023 VCIP Metrics and Weightings | Threshold | Target 100% Payout | Maximum 200% Payout | | Operational Sustainability Metrics (50% Weighting) Safety & Operating Excellence (25%) Environment (15%) High-Performing Organization (10%) | | | | | Financial Sustainability Metrics (50% Weighting) Adjusted VCIP Controllable Costs (10%)(1) Adjusted VCIP EBITDA (40%)(1) | | | |
2023 VCIP Payout
(1)See Appendix A for a reconciliation to the nearest GAAP financial measures. For more details regarding the 2021-2023 PSP payout, see Performance Share Program 2021 - 2023 Payout on page 59, and for more details regarding the Company's performance relative to the 2023 VCIP performance metrics, see Variable Cash Incentive Program (VCIP) - 2023 Payout beginning on page 63.
2023 VCIP Payout
| 54 | Phillips 66 2024 Proxy Statement |
2023 VCIP Payout
| EXECUTIVE COMPENSATION PROGRAM DETAILS |
LONG-TERM INCENTIVES - 2023 PROGRAM DESIGN
LONG-TERM INCENTIVES - 2023 PROGRAM DESIGN
LONG-TERM INCENTIVES - 2023 PROGRAM DESIGN
| % OF TARGET COMPENSATION | | | CEO | Other NEOs |
LONG-TERM INCENTIVES - 2023 PROGRAM DESIGN
| | Performance Share Program (PSP) Each PSP has a three-year performance period, and therefore three overlapping PSPs are in progress at any given time. Programs in effect during 2023 were PSP 2021-2023, PSP 2022-2024, and PSP 2023-2025. The target number of shares is determined by dividing the target value by the average of the stock’s fair market value for the 20 trading days prior to the start of the performance period, less anticipated dividends during the performance period. The HRCC assesses the individual performance of each NEO and based on that assessment, may adjust an award by up to +/–30% of the target amount at grant. Performance adjustments to the number of target shares are applied at the beginning of the performance period, rather than the end, so that performance-adjusted compensation is subject to Company performance and market volatility throughout the performance period, aligning executive compensation with shareholder interests. •Target shares may be adjusted during the performance period for promotions that occur during the performance period. •Executives hired after the start of the performance period may receive prorated target shares in ongoing PSP cycles, at the discretion of the HRCC, so that their interests are immediately aligned with the Company’s long-term goals and shareholder interests. •Awards under the PSP programs are denominated in shares but are paid in cash using the average fair market value of a share of the Company's stock for the last 20 trading days of the performance period. | | | Stock Options Stock Options are viewed by the HRCC as inherently performance based, as the stock price must increase before the executive can realize any value. Stock options are typically granted in February each year. The number of stock options awarded is calculated based on the Black-Scholes-Merton model. The exercise price of stock options is set at 100% of the fair market value of our common stock on the date of grant. Stock options granted to our NEOs in February 2023 vest ratably over a three-year period, subject to continued service on the applicable vesting date, and have a ten-year term. Stock options do not have voting rights and are not entitled to receive dividends. The HRCC may adjust an award by up to +/–30% of the target amount at grant based on the individual performance of each NEO. | | | Restricted Stock Units (RSUs) The number of RSUs granted is determined based on the fair market value of Company stock on the date of grant. RSUs awarded to our NEOs in February 2023 cliff vest after three years, subject to continued service through the vesting date. RSUs do not carry voting rights but do earn dividend equivalents during the vesting period. RSUs are typically granted in February each year. The HRCC may adjust an award by up to +/–30% of the target amount at grant based on the individual performance of each NEO. |
LONG-TERM INCENTIVES - 2023 PROGRAM DESIGN
| Compensation Discussion and Analysis | 57 |
PERFORMANCE SHARE PROGRAM - METRICS AND TARGETS
PERFORMANCE SHARE PROGRAM - METRICS AND TARGETS
PERFORMANCE SHARE PROGRAM - METRICS AND TARGETS
| % OF TARGET COMPENSATION | | | | CEO | Other NEOs | The performance metrics used for the 2021-2023 PSP are non-GAAP absolute adjusted return on capital employed (Adjusted PSP ROCE) and relative total shareholder return (TSR) based on a 20-trading day average closing price. |
PERFORMANCE SHARE PROGRAM - METRICS AND TARGETS
| | Adjusted PSP ROCE The HRCC considers Adjusted PSP ROCE an important measure of Company growth, shareholder value creation and overall performance. | | | | Threshold | 3.4% Delivers sustaining capital and dividend payments over 3-year performance period | | | Target | 8.2% Delivers WACC +1.5% over 3-year performance period | | | Maximum | 9.7% Delivers WACC +3.0% over 3-year performance period | | | Aligned with peer practices, we have historically adjusted ROCE for “special items” that are not representative of our underlying operating performance. The HRCC carefully evaluates all such adjustments to understand the impacts the adjustment would have on compensation outcomes and how the item factored into the Company’s operating and financial outcomes. | | | | Relative TSR The HRCC recognizes that relative TSR is the most common performance metric for comparisons to peers. Our performance is assessed as compared to our Performance Peer Group and the S&P 100 Index. Starting with the 2019-2021 PSP program, we added a cap on the portion of the PSP earned based on relative TSR if absolute TSR is negative. Additionally, starting with the 2021-2023 PSP, the portion of the PSP earned based on relative TSR requires performance above the 50th percentile relative to the peer group to achieve a target payout. Payout for relative TSR performance is determined by the Company's percentile rank relative to its peers at the end of the three-year performance period. Payout at threshold (25% of target) requires a TSR ranking of 12 out of the 14 peers (15th percentile); payout at 100% of target requires a TSR ranking of 7 out of the 14 peers (54th percentile) and payout at maximum (200% of target) requires a TSR ranking of 1 or 2 out of the 14 peers (above 90th percentile). For performance between threshold, target and maximum achievement levels, the payout percentage is interpolated based on the Company's percentile ranking. | | | | Threshold | 15th percentile of Performance Peers (rank of 12 out of our 14 peers) | | | Target | 54th percentile of Performance Peers (rank of 7 out of 14 peers) | | | Maximum | 92nd percentile of Performance Peers (rank of 1 or 2 out of 14 peers) |
PERFORMANCE SHARE PROGRAM - METRICS AND TARGETS
| 58 | Phillips 66 2024 Proxy Statement |
PERFORMANCE SHARE PROGRAM – 2021 - 2023 PAYOUT
PERFORMANCE SHARE PROGRAM – 2021 - 2023 PAYOUT The HRCC considered the following results when approving the payout of the 2021-2023 PSP at 150% of target. The HRCC certified the results of the 2021-2023 PSP in February 2024, and payout of the award is described further below and in the footnotes to the Summary Compensation Table.
PERFORMANCE SHARE PROGRAM – 2021 - 2023 PAYOUT
| 2021 - 2023 PSP Metrics and Weightings | Performance Result | Weight | Payout | | Adjusted Return on Capital Employed (50% Weighting)(1) Adjusted PSP ROCE performance above maximum | Above Maximum | 50% | 200% | | Total Shareholder Return (50% Weighting) TSR performance at 54th percentile relative to peers | 7th out of 14 peers | 50% | 100% | | Total 2021 - 2023 PSP Payout | | | 150% |
PERFORMANCE SHARE PROGRAM – 2021 - 2023 PAYOUT
(1)See Appendix A for a reconciliation to the nearest GAAP financial measure.
PERFORMANCE SHARE PROGRAM – 2021 - 2023 PAYOUT
| | Adjusted PSP ROCE Performance | | | | | Metric | Threshold (3.4%) | | Target (8.2%) | Maximum (9.7%) | | Adjusted PSP ROCE | | | | |
Relative TSR Performance
Relative TSR Performance
RELATIVE TOTAL SHAREHOLDER RETURN
RELATIVE TOTAL SHAREHOLDER RETURN •Our TSR performance of 116.5% during the performance period was slightly above the median of our peers, and we ranked 7th out of 14 peers in the Performance Peer Group. This resulted in a payout of 100% of target for TSR performance component at the 54th percentile relative to peers. The Performance Peer Group (defined on page 68) includes 12 peer companies, the S&P 100 Index and Phillips 66.
RELATIVE TOTAL SHAREHOLDER RETURN
| LTI Developments in 2023: In 2023, we narrowed the potential adjustment for target PSP award grants based on individual performance from +/-50% to +/-30%, which aligns with our RSU and stock option grants | | New LTI Developments in 2024: Beginning in 2024, we eliminated stock options as a component of our LTI program and increased the weighting of PSPs from 50% to 70%, and RSUs from 25% to 30% of the LTI program This change in our LTI program provides better “line of sight” to executives and places greater focus on relative TSR and absolute ROCE performance |
LONG-TERM INCENTIVES
LONG-TERM INCENTIVES The HRCC considers individual performance when determining the target LTI to be granted to each of the NEOs. After considering individual achievements, the HRCC approved the following LTI target award values for the NEOs for 2023. These values may not match the accounting values presented in the Grants of Plan-Based Awards table.
LONG-TERM INCENTIVES
| Name | 2023-2025 PSP ($) | Stock Options ($) | RSUs ($) | Total Target(1) ($) | | Mark Lashier | 6,000,000 | 3,000,000 | 3,000,000 | 12,000,000 | | Greg Garland | 3,750,000 | 1,875,000 | 1,875,000 | 7,500,000 | | Kevin Mitchell | 2,433,110 | 1,216,555 | 1,216,555 | 4,866,220 | | Brian Mandell | 1,771,308 | 885,654 | 885,654 | 3,542,616 | | Tim Roberts | 2,030,888 | 1,015,444 | 1,015,444 | 4,061,776 |
LONG-TERM INCENTIVES
(1)2023 – 2025 PSP, stock options and RSU targets include individual performance adjustments for Mr. Mitchell (+10%), Mr. Mandell (+20%), and Mr. Roberts (+20%).
LONG-TERM INCENTIVES
| 60 | Phillips 66 2024 Proxy Statement |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – PROGRAM DESIGN
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – PROGRAM DESIGN
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – PROGRAM DESIGN
| % OF TARGET COMPENSATION | | | | CEO | Other NEOs | The VCIP, which is our annual incentive program, is designed to motivate and reward for exceptional operational and financial performance. The HRCC reviews and approves the performance goals annually to ensure these are rigorous and incorporate a mindset of continuous improvement. The performance measures are equally weighted between operational and financial goals as strong operational performance drives financial performance. |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – PROGRAM DESIGN
Eligible earnings, defined as base salary earned during the year, are multiplied by a VCIP target percentage that is based on each NEO’s salary grade level to derive the NEO’s target VCIP award. At the end of the performance period, the HRCC reviews the Company’s performance against established metrics to determine the payout percentage, which may range from 0% to 200% of target.
2023 Variable Cash Incentive Program – Payout Formula
2023 Variable Cash Incentive Program – Payout Formula
2023 Variable Cash Incentive Program – Payout Formula
| $ Eligible Earnings | × | % Target Percentage | × | % Payout Percentage | = | $ Total VCIP Payout |
2023 Variable Cash Incentive Program – Metrics and Weightings
2023 Variable Cash Incentive Program – Metrics and Weightings
2023 Variable Cash Incentive Program – Metrics and Weightings
| Compensation Discussion and Analysis | 61 |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
| Operational Sustainability (50%): Half of our VCIP is based on Operational performance because strong safety, reliability and operating excellence are fundamental to our success. It also rewards actions that maximize market opportunities, generate higher returns and create shareholder value. |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
| | Safety & Operating Excellence Safety is a core value at Phillips 66, and maintaining superior safety performance is critical to our success. For personal and process safety performance, we measure ourselves against the top performing companies in our industry. Generally, these companies fall within the top two quartiles of all companies reported. We then establish our threshold, target, and maximum goals based on the performance (25th, 50th, and 75th percentiles) of this group of companies. We also look at prior year results to inform our performance goals to ensure a focus on continuous improvement. For asset availability, for which comparative data is not available, we establish our threshold, target, and maximum goals based on our operating plan and historical performance with the goal of continuous improvement, incorporating the segments of our business and weighting them by their contribution to our adjusted EBITDA. | | | Environmental Environmental stewardship is a foundational pillar of our sustainability strategy. We set environmental targets based on our historical performance for Agency Reportable Environmental Events and Spill Volumes normalized for throughput. Targets are expected to become more challenging year-over-year to drive continuous performance improvement. Starting in 2021, we enhanced the environmental component of the VCIP to include two new metrics: Lower-Carbon Priorities and Greenhouse Gas Priorities. These metrics were incorporated to reward employees for their efforts to advance lower-carbon investments, optimization, and innovation as well as efforts to reduce manufacturing emissions intensity in furtherance of our GHG emissions intensity reduction targets. | | | High-Performing Organization Maintaining and enhancing a high-performing organization is critical to our success and is part of our human capital management strategy. Our employees promote our culture and are integral to achieving our strategic goals and maximizing long-term shareholder value. We measure our High-Performing Organization performance relative to the following: •Performance: empowering our workforce to deliver exceptional, sustainable results •Capability: enhancing the depth and breadth of the skills of our workforce •Culture: fostering behaviors that promote our unique culture through the principles of "Our Energy in Action" For each of these categories, we set predetermined objectives that are monitored throughout the year using a combination of quantitative and qualitative goals. |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
| 62 | Phillips 66 2024 Proxy Statement |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
| Financial Sustainability (50%): The other half of our VCIP is based on Financial performance to ensure our executives are motivated to effectively manage costs within their control and deliver financial results above our WACC. |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
| | Adjusted VCIP Controllable Costs For Adjusted VCIP Controllable Costs, we measure our effectiveness in managing costs and set our threshold, target, and maximum performance levels based on our annual budget. | | | | Threshold | $6.060 billion | | | Target | $5.772 billion | | | Maximum | $5.483 billion | | | The 2023 Adjusted VCIP Controllable Costs target excludes utilities and turnaround expenses, as well as other costs that are not within management's control, and includes cost reductions realized as part of our business transformation effort. | | | | Adjusted VCIP EBITDA Adjusted VCIP EBITDA measures our ability to create shareholder value. Our threshold is the Adjusted VCIP EBITDA required to cover our budgeted sustaining capital and annualized common stock dividend payment, and target and maximum are set at Adjusted VCIP EBITDA levels that equate to ROCE levels 1.5 and 3.0 percentage points above our WACC. | | | | Threshold | $4.102 billion | | | Target | Adjusted VCIP EBITDA equivalent to ROCE of WACC + 1.5 percentage points ($7.170 billion) | | | Maximum | Adjusted VCIP EBITDA equivalent to ROCE of WACC + 3.0 percentage points ($8.091 billion) |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – METRICS AND TARGETS(1)
(1)As a result of the integration of DCP's operations in 2023, our performance goals for the 2023 VCIP incorporate DCP.
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – 2023 PAYOUT
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – 2023 PAYOUT The Company's 2023 actual performance resulted in a payout of 161% of target.
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – 2023 PAYOUT
| | ($MM) | Weight | Threshold | | Target | | Maximum | | 2023 Actual | | Payout | | | Safety & Operating Excellence | | | | | | | | | | | | | Total Recordable Rate (TRR) | 7.5% | | 0.18 | | 0.16 | | 0.13 | | 0.12 | 150% | | | Process Safety Event Rate – Tier 1 & 2 | 7.5% | | 0.26 | | 0.21 | | 0.16 | | 0.18 | 160% | | | Asset Availability | 10% | | 94.6% | | 96.0% | | 97.4% | | 98.0% | 200% | | | Environment | | | | | | | | | | | | | Lower-Carbon / GHG Priorities | 10% | | - | | - | | - | | - | 100% | | | Environmental Performance | 5% | | 0.131 | | 0.114 | | 0.097 | | 0.083 | 200% | | | High-Performing Organization | 10% | | - | | - | | - | | - | 125% | | | Adjusted VCIP Controllable Costs(1) | 10% | | $6,060 | | $5,772 | | $5,483 | | $6,024 | 56% | | | Adjusted VCIP EBITDA(1) | 40% | | $4,102 | | $7,170 | | $8,091 | | $12,672 | 200% | | | | | | | | | | | TOTAL | | 161% |
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – 2023 PAYOUT
(1)See Appendix A for reconciliations to the nearest GAAP financial measure.
VARIABLE CASH INCENTIVE PROGRAM (VCIP) – 2023 PAYOUT
| Compensation Discussion and Analysis | 63 |
SAFETY & OPERATING EXCELLENCE
| | Payout | | | | Metric and Weighting | Threshold | Target | Maximum | | Safety & Operating Excellence (25%) | | | |
ENVIRONMENT
| | Payout | | | | Metric and Weighting | Threshold | Target | Maximum | | Environment (15%) | | | |
HIGH-PERFORMING ORGANIZATION
| | Payout | | | | Metric and Weighting | Threshold | Target | Maximum | | High-Performing Organization (10%) | | | |
ADJUSTED VCIP CONTROLLABLE COSTS
| | Payout | | | | Metric and Weighting | Threshold | Target 100% Payout | Maximum | | Adjusted VCIP Controllable Costs (10%) | | | |
ADJUSTED VCIP EBITDA
| | Payout | | | | Metric and Weighting | Threshold | Target 100% Payout | Maximum | | Adjusted VCIP EBITDA (40%) | | | |
ADJUSTED VCIP EBITDA
| Name | 2023 Eligible Earnings ($) | Target VCIP Percentage (%) | VCIP Payout Percentage (%) | Total Payout ($) | | | (a) | (b) | (c) | (d) = (a)*(b)*(c) | | Mark Lashier(1) | 1,583,333 | 158% | 161% | 4,036,181 | | Greg Garland | 1,000,000 | 160% | 161% | 2,576,000 | | Kevin Mitchell | 989,753 | 100% | 161% | 1,593,503 | | Brian Mandell | 850,802 | 90% | 161% | 1,232,812 | | Tim Roberts | 971,567 | 90% | 161% | 1,407,800 |
Compensation Determination Process
| | | | | | | | FEBRUARY •Approve VCIP and PSP payouts at the end of the performance periods •Approve VCIP and PSP performance goals for the upcoming performance periods •Review individual executive officer performance and compensation levels | | JULY •Review of compensation peer group proxies (disclosing previous compensation program) and trends •Review compensation and performance peer groups •Receive a VCIP and PSP performance update | | | | HRCC Oversight | | | | | | DECEMBER •Approve VCIP and LTI program design, award terms and conditions, and metrics and weightings for the following year •Review of VCIP and PSP performance goals for the following year •Approve executive salary structure (including LTI targets) for following year •Receive a VCIP and PSP performance update | | OCTOBER •Approve compensation and performance peer groups •Review of VCIP program design/terms & conditions, and metrics and weightings •Review of long-term incentive program design/terms & conditions •Review of PSP program design/terms & conditions, and metrics and weightings •Receive a VCIP and PSP performance update | | | | | | | |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT In 2023, the HRCC retained Mercer as its independent executive compensation consultant.
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
| Independent Compensation Consultant | Advises the HRCC on: •Compensation program design and processes relative to external corporate governance standards. •Appropriateness of our executive compensation program in comparison to those of our peers. •Effectiveness of the compensation program in accomplishing the objectives set by the HRCC. |
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
The HRCC evaluated whether Mercer’s work raised any conflict of interest in accordance with SEC guidelines and determined that no such conflict existed. In reviewing Mercer's independence, the HRCC considered fees paid by the Company to Mercer totaling $1.4 million during 2023 for services performed for the Company. These services can be broken down as 38% related to human resources consulting engagements, including fees paid to Mercer in its role as the independent compensation consultant for the HRCC, 37% related to administration of ongoing international benefit plans, 19% related to administration of pension liabilities in international locations that have been sold and 6% related to insurance and surety bonds.
ROLE OF OUR PEER COMPANIES
ROLE OF OUR PEER COMPANIES
Peer Group Selection & Rationale
Peer Group Selection & Rationale Due to the size and complexity of our Company and diversification of assets, the HRCC utilizes both (1) a compensation peer group and (2) a performance peer group. The HRCC thoughtfully selects the peers in each peer group, evaluates their inclusion on an annual basis, and makes adjustments as necessary. The HRCC uses the compensation peer group to evaluate and determine compensation levels for our NEOs, including base salary levels and targets for our annual bonus and LTI programs. The HRCC uses the performance peer group to evaluate our relative TSR performance under our PSP program. The criteria for selection of the companies in each peer group are explained on the following page.
Peer Group Selection & Rationale
| Compensation Discussion and Analysis | 67 |
Peer Group Selection & Rationale
| 2023 COMPENSATION PEER GROUP | 2021 - 2023 PERFORMANCE PEER GROUP | | Used to evaluate and determine compensation levels for our NEOs, including base salary levels and targets for our annual bonus and LTI programs | Used to evaluate our relative TSR performance for our 2021 – 2023 Performance Share Program | | Companies •3M Company •Archer-Daniels-Midland Company •ConocoPhillips Company •Deere & Company •Dow Inc. •Ford Motor Company •General Motors Company •Halliburton Company •Honeywell International Inc. •LyondellBasell Industries N.V. •Marathon Petroleum Corporation •Occidental Petroleum Corporation •The Williams Companies, Inc. •Valero Energy Corporation | Companies(1) Refining and Marketing •Delek US Holdings, Inc. •HF Sinclair Corporation •Marathon Petroleum Corporation •PBF Energy Inc. •Valero Energy Corporation Midstream •MPLX LP •ONEOK, Inc. •Targa Resources Corp. •The Williams Companies, Inc. Chemicals •Dow Inc. •LyondellBasell Industries N.V. •Westlake Corporation | | Criteria for Selection Our compensation peer group includes companies that are comparable to Phillips 66 based on three primary criteria — assets, market capitalization, and business operations. Revenue is an additional, secondary criterion. The compensation peer group primarily consists of large companies with which we compete for talent. While some of our compensation peers fall outside our direct industry, the HRCC believes their size, significant capital investments, and similarly complex international operations make them appropriate peers against which to benchmark our compensation levels and practices. At the time the compensation peer group was determined, Phillips 66 was at the 41st percentile in assets, 43rd percentile in market value, and 66th percentile in revenue. | Criteria for Selection To reflect our unique portfolio of assets, we include companies operating in each of our three major segments – Refining and Marketing, Midstream and Chemicals. The performance peer group is used in the PSP program to assess relative TSR performance. We believe that our performance peer group is representative of the companies that investors use for relative performance comparisons. In addition to our performance peer group, we include the S&P 100 Index in the assessment of our relative TSR performance. The HRCC believes the S&P 100 is an appropriate comparison as the index reflects companies with which we compete for capital in the broader market. | | Changes from 2022 to 2023 Compensation Peer Group To better position our peer group to accurately reflect businesses of our size, Chevron Corporation and Schlumberger Limited were replaced with 3M Company and Deere & Company in our compensation peer group. | Changes from 2020-2022 to 2021-2023 Performance Peer Group No changes were made to the 2021-2023 performance peer group from the peer group for the 2020-2022 performance period. (1) In September 2023, ONEOK, Inc. acquired Magellan Midstream Partners, L.P., resulting in the reduction of our performance peer group by one peer. |
Peer Group Selection & Rationale
| 68 | Phillips 66 2024 Proxy Statement |
Peer Group Selection & Rationale
| ADDITIONAL COMPENSATION PRACTICES |
Executive Severance and Change In Control Plans
Executive Severance and Change In Control Plans We do not maintain individual severance or change in control agreements with our executives. However, we maintain the Phillips 66 Executive Severance Plan (ESP) and the Phillips 66 Change in Control Severance Plan (CICSP) to accomplish several specific objectives, including: •Ensuring shareholder interests are protected during business transactions by providing benefits that promote senior management stability; •Providing and preserving an economic motivation for participating executives to consider a business combination that might result in an executive’s job loss; and •Competing effectively in attracting and retaining executives in an industry that features frequent acquisitions and divestitures. Executives may not receive benefits under both plans as a result of the same severance event. Among other benefits, the ESP provides a payment equal to one and one-half or two times the executive’s base salary, depending on the executive's salary grade level, and the executive’s current target annual bonus if he or she is involuntarily terminated without cause. The CICSP provides a payment equal to two or three times the sum of the executive’s base salary and the greater of his or her target bonus or average of the last two bonus payments, depending on salary grade level, and accelerated vesting of equity awards. The executive must be involuntarily terminated without cause in connection with a change in control or terminate employment for good reason within two years after the change in control to be eligible for a CICSP payment. We believe this “double trigger” requirement is in the best interest of shareholders and is considered a best practice. Details of potential payments under these plans are outlined in the Potential Payments Upon Termination or Change in Control section. These plans do not provide any excise tax gross-up protections.
COMPENSATION PROGRAMS ALIGNED WITH BEST PRACTICES
| We Do… | We Do Not… | | Target the majority of NEO compensation to be performance based and at risk Apply multiple performance metrics aligned with our corporate strategy Cap maximum payouts for VCIP and PSP Cap payout at 100% on the TSR portion of the PSP if absolute TSR is negative Require TSR performance above the 50th percentile relative to peer group to achieve target payout Employ a “double trigger” for change in control severance benefits and equity award acceleration Include absolute and relative metrics in our LTI programs Maintain robust stock ownership guidelines for executives — CEO and Executive Chairman 6x base salary; other NEOs 4x base salary Balance, monitor and manage compensation risk through regular assessments and robust clawback provisions, including a new SEC-compliant clawback policy Have extended vesting periods on stock awards, with a minimum one-year vesting period required for stock and stock option awards Maintain a fully independent compensation committee Retain an independent compensation consultant Hold an annual Say-on-Pay vote and consider shareholder feedback in the design of our compensation program | Provide excise tax gross-ups to our NEOs under our CICSP Reprice stock options without shareholder approval Price stock option exercise prices below grant date fair market value Allow share recycling for stock options under our equity plan Include evergreen provisions in our active equity plans Allow hedging or pledging of Company stock Pay dividends during the performance period on unearned PSPs Allow transfer of equity awards (except in the case of death) Provide separate supplemental executive retirement benefits for individual NEOs Maintain individual change-in-control agreements Have an employment agreement with the CEO Provide excessive perquisites Provide individual performance modifier for VCIP for our executive officers |
Human Resources and Compensation Committee
| SUMMARY COMPENSATION TABLE |
Human Resources and Compensation Committee
| Name, Position, Year | Salary(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) ($) | All Other Compensation(6) ($) | Total ($) | | Mark Lashier | | | | | | | | | President and Chief Executive Officer | | | | | | | | | 2023 | 1,583,333 | 9,620,568 | 3,000,816 | 4,036,181 | 413,305 | 755,058 | 19,409,262 | | 2022 | 1,314,667 | 9,260,117 | 1,976,406 | 2,837,051 | 231,983 | 668,646 | 16,288,870 | | 2021 | 825,000 | 6,830,884 | 1,513,217 | 1,406,625 | 71,546 | 230,816 | 10,878,088 | | Greg Garland | | | | | | | | | Executive Chairman | | | | | | | | | 2023 | 1,000,000 | 6,012,843 | 1,876,884 | 2,576,000 | — | 731,051 | 12,196,778 | | 2022 | 1,337,504 | 9,825,510 | 2,500,700 | 3,552,411 | — | 1,013,792 | 18,229,917 | | 2021 | 1,675,008 | 11,318,245 | 3,140,920 | 4,154,020 | — | 665,013 | 20,953,206 | | Kevin Mitchell | | | | | | | | | Executive Vice President and Chief Financial Officer | | | | | | | | | 2023 | 989,753 | 3,901,297 | 1,217,364 | 1,593,503 | 326,532 | 337,944 | 8,366,393 | | 2022 | 951,992 | 4,899,887 | 1,040,400 | 1,580,306 | 144,483 | 328,542 | 8,945,610 | | 2021 | 903,432 | 4,493,056 | 1,039,424 | 1,400,320 | 164,332 | 216,301 | 8,216,865 | | Brian Mandell(7) | | | | | | | | | Executive Vice President, Marketing & Commercial | | | | | | | | | 2023 | 850,802 | 2,840,101 | 887,604 | 1,232,812 | 1,412,212 | 291,960 | 7,515,491 | | 2022 | 808,375 | 3,183,449 | 676,600 | 1,207,712 | — | 266,584 | 6,142,720 | | Tim Roberts | | | | | | | | | Executive Vice President, Midstream & Chemicals | | | | | | | | | 2023 | 971,567 | 3,256,304 | 1,016,760 | 1,407,800 | 282,320 | 308,396 | 7,243,147 | | 2022 | 931,426 | 3,766,815 | 799,000 | 1,391,550 | 191,842 | 289,679 | 7,370,312 | | 2021 | 887,424 | 3,453,979 | 799,832 | 1,237,956 | 342,146 | 182,659 | 6,903,996 |
Human Resources and Compensation Committee
| GRANTS OF PLAN-BASED AWARDS |
Human Resources and Compensation Committee
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END |
Human Resources and Compensation Committee
| OPTION EXERCISES AND STOCK VESTED FOR 2023 |
Human Resources and Compensation Committee
| PENSION BENEFITS AS OF DECEMBER 31, 2023 |
Human Resources and Compensation Committee
Our defined benefit pension plan, the Phillips 66 Retirement Plan (the "Retirement Plan"), consists of multiple titles with different terms. NEOs are only eligible to participate in one title at any time but may have frozen benefits under one or more other titles.
Human Resources and Compensation Committee
| | Title I | Title II(1) | Title IV | | Current Eligibility | Mr. Garland | Mr. Lashier, Mr. Mitchell, Mr. Roberts | Mr. Mandell | | Normal Retirement | Age 65 | Age 65 | Age 65 | | Early Retirement(2) | Age 55 with five years of service or if laid off during or after the year in which the participant reaches age 50 | Executives may receive their vested benefit upon termination of employment at any age | Age 50 with ten years of service | | Benefit Calculation(2) | Calculated as the product of 1.6% times years of credited service multiplied by the final average eligible earnings | Based on monthly pay and interest credits to a nominal cash balance account created on the first day of the month after an executive’s hire date. Pay credits are equal to a percentage of total salary and annual bonus | Calculated as the product of 1.6% times years of credited service multiplied by the final average eligible earnings | | Final Average Earnings Calculation | Calculated using the three highest compensation years in the last ten calendar years before retirement plus the year of retirement | N/A | Calculated using the higher of the highest three years of compensation or the highest 36 months of compensation | | Eligible Pension Compensation(3) | Includes salary and annual bonus | Includes salary and annual bonus | Includes salary and annual bonus | | Benefit Vesting | All participants are vested in this title | Employees vest after three years of service | All participants are vested in this title | | Payment Types | Allows payments in the form of several annuity types or a single lump sum | | | | IRS limitations | Benefits under all Titles are limited by the IRC. In 2023, the compensation limit was $330,000. The IRC also limits the annual benefit available under these Titles expressed as an annuity. In 2023, that limit was $265,000 (reduced actuarially for ages below 62). | | |
Human Resources and Compensation Committee
(1)NEOs whose combined years of age and service total less than 44 receive a 6% pay credit, those with a total of 44 through 65 receive a 7% pay credit and those with a total of 66 or more receive a 9% pay credit. Interest credits are applied to the cash balance account each month. This credit is calculated by multiplying the value of the account by the interest credit rate, based on 30-year U.S. Treasury security rates adjusted quarterly. (2)An early benefit reduction is calculated on Title I by reducing the benefit 5% for each year before age 60 that benefits are paid. Title IV early benefit reduction is calculated by reducing the benefit by 5% per year for each year before age 57 that benefits are paid and 4% per year for benefits that are paid between ages 57 and 60. The benefit calculation for Titles I and IV is reduced by the product of 1.5% of the annual primary social security benefit multiplied by years of credited service, although a reduction limit of 50% of the primary Social Security benefit may apply. (3)Under Title I, if an executive receives layoff benefits, then the eligible compensation calculation also includes the annualized salary for the year of layoff (rather than the actual salary for that year) and years of service are increased by any period for which layoff benefits are calculated.
Human Resources and Compensation Committee
| 80 | Phillips 66 2024 Proxy Statement |
Human Resources and Compensation Committee
The following table lists the pension program participation and actuarial present value of each NEO’s defined benefit pension as of December 31, 2023.
Human Resources and Compensation Committee
| Name | Plan Name | Number of Years Credited Service(1) (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | | Mark Lashier | Retirement Plan - Title II | 34 | 84,377 | — | | | KESRP(2) | | 632,457 | — | | Greg Garland | Retirement Plan - Title I | 34 | 1,748,747 | — | | | KESRP(2) | | 39,141,219 | — | | Kevin Mitchell | Retirement Plan - Title II | 10 | 250,004 | — | | | KESRP(2) | | 1,328,218 | — | | Brian Mandell | Retirement Plan - Title IV | 33 | 1,893,047 | — | | | KESRP(2) | | 10,460,507 | — | | Tim Roberts | Retirement Plan - Title II | 31 | 224,471 | — | | | KESRP(2) | | 1,141,455 | — |
Human Resources and Compensation Committee
(1)Years of credited service include service recognized under the predecessor ConocoPhillips plans from which these plans were spun off effective May 1, 2012. Credited Service displays the number of years the NEO was in each applicable formula. Mr. Lashier’s and Mr. Roberts’ tenure with Phillips 66 is 3 years and 8 years, respectively. Their credited years of service calculations include 34 years and 31 years of prior service recognition, respectively. (2)The Phillips 66 Key Employee Supplemental Retirement Plan ("KESRP") restores Company-sponsored benefits capped under the qualified defined benefit pension plan due to IRC limits. All employees, including our NEOs, are eligible to participate in the KESRP.
Human Resources and Compensation Committee
| Understanding the Annual Change in Pension Value | | | No modifications to pension | •There were no modifications to our existing pension program in 2023 | | Change in value | •The value of traditional pension plans is particularly sensitive to interest rate movement, which is outside of the Company's control •While our short-term and long-term incentive programs are based entirely on performance, pension value is not performance based and does not reflect or reward Company performance | | Pension plan going forward | •The HRCC will continue to assess our pension program to ensure viability as an attraction and retention tool |
Human Resources and Compensation Committee
| Executive Compensation Tables | 81 |
Human Resources and Compensation Committee
| NONQUALIFIED DEFERRED COMPENSATION |
Human Resources and Compensation Committee
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
ESTIMATED POTENTIAL PAYMENTS
ESTIMATED POTENTIAL PAYMENTS The following table presents, for each of the NEOs, the estimated payments and benefits that would have been payable to each of the NEOs as of December 31, 2023, for each of the circumstances described below.
ESTIMATED POTENTIAL PAYMENTS
| | Executive Benefits and Payments Upon Termination | | | | | | Involuntary Not-For- Cause Termination (Not CIC) ($) | Involuntary or Good Reason Termination (CIC) ($) | Death ($) | Disability ($) | | Mark Lashier | | | | | | Severance Payment | 9,122,818 | 13,684,227 | — | — | | Accelerated Equity | — | — | 9,410,565 | 9,410,565 | | Life Insurance | — | — | 3,200,000 | — | | TOTAL | 9,122,818 | 13,684,227 | 12,610,565 | 9,410,565 | | Greg Garland | | | | | | Severance Payment | 7,666,888 | 18,259,978 | — | — | | Accelerated Equity | — | — | 7,307,659 | 7,307,659 | | Life Insurance | — | — | 2,000,000 | — | | TOTAL | 7,666,888 | 18,259,978 | 9,307,659 | 7,307,659 | | Kevin Mitchell | | | | | | Severance Payment | 4,383,216 | 8,059,674 | — | — | | Accelerated Equity | — | — | 3,889,853 | 3,889,853 | | Life Insurance | — | — | 1,990,727 | — | | TOTAL | 4,383,216 | 8,059,674 | 5,880,580 | 3,889,853 | | Brian Mandell | | | | | | Severance Payment | 4,108,395 | 7,210,693 | — | — | | Accelerated Equity | — | — | 2,712,995 | 2,712,995 | | Life Insurance | — | — | 1,713,905 | — | | TOTAL | 4,108,395 | 7,210,693 | 4,426,900 | 2,712,995 | | Tim Roberts | | | | | | Severance Payment | 4,093,320 | 7,444,082 | — | — | | Accelerated Equity | — | — | 3,146,755 | 3,146,755 | | Life Insurance | — | — | 1,955,670 | — | | TOTAL | 4,093,320 | 7,444,082 | 5,102,426 | 3,146,755 |
ESTIMATED POTENTIAL PAYMENTS
| Executive Compensation Tables | 85 |
ESTIMATED POTENTIAL PAYMENTS
| CEO Pay Ratio |
ESTIMATED POTENTIAL PAYMENTS
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the ratio of the annual total compensation, calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, of our median employee and the annual total compensation of our CEO, Mr. Lashier. For 2023, the annual total compensation of our CEO was 124 times that of the median of the annual total compensation of all employees, based on annual total compensation of $19,436,699 for the CEO and $156,695 for the median employee. This ratio is based on a December 1, 2023, employee population of 14,179, which, in accordance with SEC rules, excluded a total of 453 non-U.S. employees across Germany (296), Singapore (76), Austria (46), Canada (27), and China (8). The median employee was identified using annual base pay, annual bonus, and target LTI compensation using data as of November 30, 2023. The annual total compensation for our CEO includes both the amount reported in the “Total” column of the Summary Compensation Table of $19,409,262 and the estimated value of our CEO’s health and welfare benefits of $27,437. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
ESTIMATED POTENTIAL PAYMENTS
| 86 | Phillips 66 2024 Proxy Statement |
ESTIMATED POTENTIAL PAYMENTS
| Pay versus Performance |
ESTIMATED POTENTIAL PAYMENTS
We are required by SEC rules to disclose the following information regarding compensation paid to our NEOs. The amounts set forth below under the headings “Compensation Actually Paid” (“CAP”) have been calculated in a manner consistent with Item 402(v) of Regulation S-K. The methodology for calculating the CAP, including details regarding the amounts that were deducted from, and added to, the Summary Compensation Table totals to arrive at the values presented for CAP, are provided in the footnotes to the table.
ESTIMATED POTENTIAL PAYMENTS
| Year | Summary Compensation Table Total for First PEO(1) ($) | Summary Compensation Table Total for Second PEO(1) ($) | Compensation Actually Paid to First PEO(2) ($) | Compensation Actually Paid to Second PEO(2) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(3) ($) | Average Compensation Actually Paid to Non-PEO NEOs(2),(3) ($) | Value of Initial Fixed $100 Investment Based On: | | GAAP Net Income (Loss) ($ MM) | Annual Adjusted PSP ROCE(5) (%) | | | | | | | | | Total Shareholder Return(4) ($) | Peer Group Total Shareholder Return(4) ($) | | | | (a) | (b) | (b) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 19,409,262 | — | 34,732,785 | — | 8,830,452 | 18,432,934 | 145.45 | 170.71 | 7,239 | 16.9 | | 2022 | 18,229,917 | 16,288,870 | 36,488,607 | 24,349,594 | 7,564,734 | 12,019,418 | 108.84 | 140.02 | 11,391 | 24.5 | | 2021 | 20,953,206 | — | 21,535,633 | — | 8,163,303 | 7,817,258 | 72.45 | 106.53 | 1,594 | 8.5 | | 2020 | 24,989,374 | — | 2,700,837 | — | 6,290,976 | 2,618,978 | 66.45 | 78.79 | (3,714) | 0.8 |
ESTIMATED POTENTIAL PAYMENTS
(1)For 2023, the first Principal Executive Officer ("PEO") reflected in column (b) refers to Mr. Lashier. For 2022, 2021 and 2020, the first PEO reflected in column (b) refers to Mr. Garland, Chairman and CEO until June 30, 2022 and Executive Chairman beginning July 1, 2022. For 2022, the second PEO reflected in column (b) refers to Mr. Lashier, President and Chief Operating Officer until June 30, 2022, and President and CEO beginning July 1, 2022. (2)To calculate CAP, the following adjustments were made to Summary Compensation Table total compensation, in accordance with SEC rules:
ESTIMATED POTENTIAL PAYMENTS
| Compensation Actually Paid to PEO | 2023 (Mr. Lashier) | 2022 (Mr. Garland) | 2022 (Mr. Lashier) | 2021 (Mr. Garland) | 2020 (Mr. Garland) | | Summary Compensation Table Total | 19,409,262 | 18,229,917 | 16,288,870 | 20,953,206 | 24,989,374 | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | (12,621,384) | (12,326,210) | (11,236,523) | (14,459,165) | (12,588,803) | | Less, Change in Pension Value reported in Summary Compensation Table | (413,305) | — | (231,983) | — | (6,851,884) | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 17,061,827 | 15,794,483 | 14,260,576 | 14,662,552 | 9,514,060 | | Plus, fair value as of vesting date of equity awards granted and vested in the year(a) | 144,398 | 89,225 | 59,342 | 114,921 | 85,470 | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | 4,585,683 | 9,650,492 | 4,073,013 | 470,710 | (6,371,181) | | Plus (less), change in fair value from fiscal year end until the vesting date of equity awards granted in prior years that vested in the year | 6,087,396 | 3,803,161 | 910,182 | (1,835,338) | (7,136,027) | | Plus, the value of dividend equivalents or other earnings paid on equity awards in the year | 306,113 | 398,405 | 178,639 | 394,928 | 357,826 | | Plus, pension service cost for services rendered during the year | 172,796 | 849,133 | 47,478 | 1,233,818 | 702,002 | | Compensation Actually Paid to PEO | 34,732,785 | 36,488,607 | 24,349,594 | 21,535,633 | 2,700,837 |
ESTIMATED POTENTIAL PAYMENTS
(a)Represents value of RSUs withheld to satisfy Federal Insurance Contributions Act (FICA) tax obligations.
ESTIMATED POTENTIAL PAYMENTS
| Pay versus Performance | 87 |
ESTIMATED POTENTIAL PAYMENTS
| Average Compensation Actually Paid to Non-PEO NEOs | 2023 | 2022 | 2021 | 2020 | | Summary Compensation Table Total | 8,830,452 | 7,564,734 | 8,163,303 | 6,290,976 | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | (5,252,289) | (5,081,089) | (5,575,650) | (3,332,826) | | Less, Change in Pension Value reported in Summary Compensation Table | (505,266) | (84,081) | (196,955) | (765,023) | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 7,100,280 | 6,388,526 | 5,407,971 | 2,531,727 | | Plus, fair value as of vesting date of equity awards granted and vested in the year(a) | 60,090 | 26,925 | 38,733 | 16,332 | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | 3,078,890 | 2,188,370 | 102,802 | (1,578,875) | | Plus (less), change in fair value from fiscal year end until the vesting date of equity awards granted in prior years that vested in the year | 4,626,026 | 735,558 | (359,892) | (821,489) | | Plus, the value of dividend equivalents or other earnings paid on equity awards in the year | 197,181 | 135,895 | 150,681 | 133,668 | | Plus, pension service cost for services rendered during the year | 297,571 | 144,581 | 86,265 | 144,488 | | Compensation Actually Paid to Non-PEO NEOs | 18,432,934 | 12,019,418 | 7,817,258 | 2,618,978 |
ESTIMATED POTENTIAL PAYMENTS
(a)Represents value of RSUs withheld to satisfy FICA tax obligations. (3)The Non-PEO NEOs reflected in columns (d) and (e) represent the following individuals: For 2023, Mr. Garland, Mr. Mitchell, Mr. Mandell, and Mr. Roberts, for 2022, Mr. Mitchell, Ms. Allen Sutherland, Mr. Mandell, and Mr. Roberts; for 2021, Mr. Lashier, Mr. Mitchell, Mr. Roberts, and Mr. Herman; and for 2020, Mr. Mitchell, Mr. Roberts, Mr. Herman, and Ms. Johnson. (4)The Peer Group TSR in column (g) represents the weighted average market capitalization of our peer group used for purposes of Item 201(e) of Regulation S-K, which are: Delek US Holdings, Inc.; HF Sinclair Corporation; Marathon Petroleum Corporation; PBF Energy Inc.; Valero Energy Corporation; CVR Energy Inc.; Dow Inc.; Westlake Chemical Corporation; LyondellBasell Industries N.V; ONEOK, Inc.; Targa Resources Corp.; and The Williams Companies, Inc. (5)See Appendix A for a reconciliation of Adjusted PSP ROCE to the nearest GAAP financial measure.
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE The charts that follow depict the relationship of "compensation actually paid" ("CAP") to our PEOs and other NEOs to (i) the TSR of the Company and its peer group (as described in Footnote 4 above), (ii) the Company's net income, and (iii) the Company's annual Adjusted PSP ROCE. Pursuant to Item 402(v) of Regulation S-K, CAP reflects adjustments to the fair value of equity awards during the years presented. Changes in our stock price and the projected and actual achievement of our performance goals greatly impact the total CAP reported for each year presented. For example, our annual TSR performance of -37%, 3%, 44% and 33% for 2020, 2021, 2022 and 2023 respectively, contributed to significant changes in CAP values reported for each year.
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
| 88 | Phillips 66 2024 Proxy Statement |
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
| CAP versus Total Shareholder Return |
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
The chart below shows the alignment between the PEO and other NEOs’ CAP amounts and the Company’s cumulative TSR since 2020. This is primarily due to the Company’s use of equity incentives, which are tied directly to stock price performance and the Company’s financial performance.
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
| CAP versus Net Income (Loss) |
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
As shown in the chart below, the Company’s net income has significantly increased since 2020 primarily as a result of improved market conditions and strong operating results. In 2020, the pandemic challenged our operational and financial environment and we reported a net loss of approximately $3.7 billion. In 2021, 2022 and 2023, we realized strong performance and reported net income of approximately $1.6 billion, $11.4 billion and $7.2 billion respectively. The recovery has positively impacted our stock price and therefore the PEO and other NEOs’ CAP amounts increased in 2021, 2022 and 2023 as equity incentives are sensitive to changes in stock price which normally reflects the financial performance of the Company.
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
| Pay versus Performance | 89 |
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
| CAP versus Annual Adjusted PSP ROCE |
RELATIONSHIP BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
The chart below shows the correlation between annual Adjusted PSP ROCE and CAP. Because CAP values both vested and outstanding equity using either the value of the award as of the vesting date or the change in value of the award with respect to the prior year end, we consider annual Adjusted PSP ROCE a better measure to show the correlation of company performance to CAP rather than the three-year performance period average Adjusted PSP ROCE we use to determine final payout of our PSP.