UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
(Amendment No. )
Filed by the Registrantþ
Filed by a Party other than the Registranto¨
Check the appropriate box:
¨ | Preliminary Proxy Statement |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material |
Anadarko Petroleum Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i) |
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: | ||
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
TO OUR STOCKHOLDERS:
The 20112014 Annual Meeting of Stockholders of Anadarko Petroleum Corporation will be held at The Woodlands Waterway MarriottHyatt Market Street Hotel, and Convention Center, 1601 Lake Robbins9595 Six Pines Drive, Suite 1100, The Woodlands, Texas, 77380 on Tuesday, May 17, 2011,13, 2014, at 8:00 a.m. (Central Daylight Time).
The attached Notice of Annual Meeting of Stockholders and proxy statement provide information concerning the matters to be considered at the Annual Meeting. The Annual Meeting will cover only the business contained in the proxy statement and will not include a management presentation.
We also providingprovide access to our proxy materials over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (Notice) instead of a paper copy of this proxy statement, a proxy card and our 20102013 annual report. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how to request a paper copy of our proxy materials. All stockholders who do not receive a Notice should receive a paper copy of the proxy materials by mail. We believe that the Notice process will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you, and will conserve natural resources.
Your vote is important and we encourage you to vote even if you are unable to attend the Annual Meeting. You may vote by Internet or by telephone using the instructions on the Notice, or, if you received a paper copy of the proxy card, by signing and returning it in the postage pre-paid envelope provided.provided for your convenience. You may also attend and vote at the Annual Meeting.
Very truly yours,
R. A. WALKER
Chairman of the Board, President
and
1201 Lake Robbins Drive
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Anadarko Petroleum Corporation will be held at The Woodlands Waterway MarriottHyatt Market Street Hotel, and Convention Center, 1601 Lake Robbins9595 Six Pines Drive, Suite 1100, The Woodlands, Texas, 77380 on Tuesday, May 17, 2011,13, 2014, at 8:00 a.m. (Central Daylight Time) to consider the following proposals:
(1) | elect nine directors; |
(2) | ratify the appointment of KPMG LLP as the Company’s independent auditor for 2014; |
(3) | an advisory vote to approve the Company’s named executive officer compensation; |
(4) | if presented, vote on the stockholder proposals set forth on pages 80 through 85 in the accompanying proxy statement; and |
(5) | transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. |
If you are a holder of record holder of common stock at the close of business on March 22, 2011,18, 2014, the record date, then you are entitled to receive notice of and to vote at the Annual Meeting.
Please take the time to vote by following the Internet or telephone voting instructions provided. If you received a paper copy of the proxy card, you may also vote by completing and mailing the proxy card in the postage-prepaid envelope provided for your convenience. You may also attend and vote at the Annual Meeting.You may revoke your proxy at any time before the vote is taken by following the instructions in this proxy statement.
As a stockholder, your vote is very important and the Company’s Board of Directors strongly encourages you to exercise your right to vote.
BY ORDER OF THE BOARD OF DIRECTORS
Amanda M. McMillian
Vice President, Deputy General Counsel, and
Corporate Secretary and Chief Compliance Officer
March 25, 2011
The Woodlands, Texas
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to be Held on May 17, 2011:
13, 2014:
The Proxy Statement and Annual Report for 20102013 are available athttp:
https://bnymellon.mobular.net/bnymellon/apc
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ITEM 2 — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITOR | |||||
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ITEM 3 — ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION | 78 | ||||
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ITEM 4 — STOCKHOLDER PROPOSAL — REPORT ON POLITICAL CONTRIBUTIONS | 80 | ||||
ITEM 5 — STOCKHOLDER PROPOSAL — REPORT ON CLIMATE CHANGE RISK | 83 |
1201 Lake Robbins Drive
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 17, 2011
We are furnishing you this proxy statement in connection with the solicitation of proxies by our Board of Directors (Board) to be voted at the 20112014 Annual Meeting of Stockholders (Annual Meeting) of Anadarko Petroleum Corporation, (Annual Meeting), a Delaware corporation, sometimes referred to herein as the Company, Anadarko, our, us, we or we.like terms. The Annual Meeting will be held on Tuesday, May 17, 201113, 2014, at 8:00 a.m. (Central Daylight Time). The proxy materials, including this proxy statement, proxy card or voting instructions and our 20102013 annual report, are being distributed and made available on or about April 1, 2011.
We provide access to our proxy materials to our stockholders on the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (Notice) will be mailed to most of our stockholders on or about April 1, 2011.March 28, 2014. Stockholders will have the ability to access the proxy materials on a web sitethe website referred to in the Notice or request a printed set of the proxy materials to be sent to them by following the instructions in the Notice.
The Notice also provides instructions on how to inform us whether to send future proxy materials to you electronically bye-mail or in printed form by mail. If you choose to receive future proxy materials bye-mail, you will receive ane-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials bye-mail or printed form will remain in effect until you terminate it.
Choosing to receive future proxy materials bye-mail will allow us to provide you with the information you need in a timeliermore timely manner, save us the cost of printing and mailing documents to you, and conserve natural resources.
Where and when is the Annual Meeting?
The Annual Meeting will be held at The Woodlands Waterway MarriottHyatt Market Street Hotel, and Convention Center, 1601 Lake Robbins9595 Six Pines Drive, Suite 1100, The Woodlands, Texas, 77380, on Tuesday, May 17, 2011,13, 2014, at 8:00 a.m. (Central Daylight Time).
Who may vote?
You may vote if you were thea holder of record holder of Anadarko common stock as of the close of business on March 22, 2011,18, 2014, the record date for the Annual Meeting. Each share of Anadarko
common stock is entitled to one vote at the Annual Meeting. On the record date, there were 503,145,133512,076,629 shares of common stock outstanding and entitled to vote at the Annual Meeting.
Yes. Attendance is limited to stockholders of record as of the record date for the Annual Meeting.Meeting, Company employees, and certain guests invited by the Company. Admission will be on a first-come, first-served basis. You may
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General Information
be asked to present valid picture identification, such as a driver’s license or passport. If your shares of common stock isare held in the name of a bank, broker, or other holder of record and you plan to attend the Annual Meeting, you must present proof of your ownership, of Company stock, such as a current bank or brokerage account statement reflecting ownership as of the record date for the Annual Meeting, to be admitted. Cameras, recording devices, cell phones and other electronic devices cannot be used during the Annual Meeting.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
We are providing access to our proxy materials over the Internet. As a result, we have sent to most of our stockholders a Notice instead of a paper copy of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy. In addition, stockholders may request to receive future proxy materials in printed form by mail or electronically bye-mail. A stockholder’s election to receive proxy materials by mail ore-mail will remain in effect until the stockholder terminates it.
Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
We are providing certain stockholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs incurred by Anadarko in mailing proxy materials, you can consent to receive all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When
prompted, indicate that you agree to receive or access stockholder communications electronically in the future.
Can I vote my stock by filling out and returning the Notice?
No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card, or by submitting a ballot in person at the Annual Meeting.
How can I access the proxy materials over the Internet?
Your Notice or proxy card will contain instructions on how to view our proxy materials for the Annual Meeting on the Internet. Our proxy materials are also available athttp: https://bnymellon.mobular.net/bnymellon/apc.
What am I voting on?
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Proposal |
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Election of Directors | FOR EACH DIRECTOR NOMINEE | |||
Management Proposals | ||||
Ratification of KPMG LLP as | FOR | |||
Advisory Vote to Approve | FOR | |||
Stockholder Proposals | ||||
Provide a Report | ||||
Provide a Report Regarding Climate Change Risk |
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General Information
What is the effect of an “advisory” vote?
Because your votesvote with respect to approval of our NEOnamed executive officer (NEO) compensation and the frequency of futureis advisory, votes on the approval of our NEO compensation are advisory, theyit will not be binding upon the Board. However, our Compensation and Benefits Committee (Compensation Committee) and the Board will takecarefully consider the outcomesoutcome of the votes into accountvote when consideringreviewing future executive compensation arrangements offor our NEOs and when determining the frequency of future advisory votes on the approval of NEO compensation that the Board will adopt, respectively.
Why should I vote?
Your vote is very important regardless of the amount of stock you hold. The Board strongly encourages you to exercise your right to vote as a stockholder of the Company.
How do I vote?
You may vote by any of the following four methods:
(i)Internet. Vote on the Internet at http://www.proxyvote.com. This website also allows electronic proxy voting using smartphones, tablets and other web-connected mobile devices (additional charges may apply pursuant to your service provider plan). Simply follow the instructions on the Notice, or if you received a proxy card by mail, follow the instructions on the proxy card and you can confirm that your vote has been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials. Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Daylight Time) on May 12, 2014.
(ii)Telephone. Vote by telephone by following the instructions on the Notice or, if you received a proxy card, by following the instructions on the proxy card. Easy-to-follow voice prompts allow you to vote your stock and confirm that
your vote has been properly recorded. Telephone voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Daylight Time) on May 12, 2014.
(iii)Mail. If you received a proxy card by mail, vote by mail by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided. If you vote by mail and your proxy card is returned unsigned, then your vote cannot be counted. If you vote by mail and the returned proxy card is signed without indicating how you want to vote, then your proxy will be voted as recommended by the Board. If mailed, your completed and signed proxy card must be received by May 12, 2014.
(iv)Meeting. You may attend and vote at the Annual Meeting.
The Board recommends that you vote using one of the first three methods discussed above, as it is not practical for most stockholders to attend and vote at the Annual Meeting. Using one of the first three methods discussed above to vote will not limit your right to vote at the Annual Meeting if you later decide to attend in person. If your stock is held in street name (for example, held in the name of a bank, broker, or other holder of record), you must obtain a proxy executed in your favor from your bank, broker or other holder of record to be able to attend and vote at the Annual Meeting.
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No.
If I vote by mail, telephone or Internet, may I still attend the Annual Meeting?
Yes.
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General Information
Can I change my vote?
Yes. You may revoke your proxy at any time before the voting polls are closed at the Annual Meeting, by the following methods:
If you are a street name stockholder (for example, if your shares are held in the name of a bank, broker, or other holder of record) and you vote by proxy, you may later revoke your proxy by informing the holder of record in accordance with that entity’s procedures.
How many votes must be present to hold the Annual Meeting?
Your stock is counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our Annual Meeting, holders of a majority of our common stock entitled to vote must be present in person or by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted as present for purposes of determining a quorum.
What is a broker non-vote?
The New York Stock Exchange (NYSE) permits brokers to vote their customers’ stock held in street name on routine matters when the brokers have not received voting instructions from their customers. The NYSE does not, however, allow brokers to vote their customers’ stock held in
street name on non-routine matters unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called broker non-votes.
What routine matters will be voted on at the Annual Meeting?
The ratification of the independent auditor is the only routine matter on which brokers may vote in their discretion on behalf of customers who have not provided voting instructions.
What non-routine matters will be voted on at the Annual Meeting?
The election of directors, anthe advisory vote on our NEO compensation, an advisory vote on the frequency of future advisory votes onto approve our NEO compensation and the stockholder proposals, if presented, are non-routine matters on which brokers are not allowed to vote unless they have received voting instructions from their customers. Due to recent rule changes by the NYSE, your broker will no longer be allowed to vote your shares on any of these non-routine matters without your specific instructions.
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(i)Election of Directors.The election of each director requires the affirmative vote of a majority of the votes cast for such director. Under our By-Laws, a majority of votes are cast for the election of a director if the number of votes cast “for” the director exceeds the number of votes cast “against” the director. For this purpose, abstentions and broker non-votes are not counted as a vote cast either “for” or “against” the director.
(ii)Independent Auditor.The ratification of the independent auditor requires the affirmative vote of a majority of the stock entitled to vote and present in person or by proxy at the Annual Meeting. Abstentions and broker non-votes will have the same effect as votes cast “against” the proposal.
(iii)NEO Compensation.Our NEO compensation will be considered approved by
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our stockholders in an advisory manner upon the affirmative vote of a majority of the stock entitled to vote and present in person or by proxy at the Annual Meeting. For this purpose, abstentions will have the same effect as votes cast “against” the proposal. Broker non-votes are not counted as a vote cast either “for” or “against” the proposal.
(iv)Stockholder Proposals.The approval of the stockholder proposals, if presented, requires the affirmative vote of a majority of the stock entitled to vote and present in person or by proxy at the Annual Meeting. For this purpose, abstentions will have the same effect as votes cast “against” the proposals. Broker non-votes are not counted as a vote cast either “for” or “against” the proposals.
Could other matters be decided at the Annual Meeting?
We are not aware of any matters that will be considered at the Annual Meeting other than those set forth in this proxy statement. However, if any other matters arise at the Annual Meeting, the persons named in your proxy will vote in accordance with their best judgment.
Where can I find the voting results of the Annual Meeting?
We will announce the preliminary voting results at the Annual Meeting and disclose the final voting results in a current report onForm 8-K filed with the SECU.S. Securities and Exchange Commission (SEC) within four business days of the date of the Annual Meeting unless only preliminary voting results are available at that time. To the extent necessary, we will file an amended report onForm 8-K to disclose the final voting results within four business days after the final voting results are known. Additionally, we will file an amended report onForm 8-K no later than 150 calendar days after the Annual Meeting, but in no event later than October 4, 2011, disclosing the frequency of future advisory votes on our NEO compensation adopted by the Board. You may access or obtain a copy of these and other reports free of charge on the Company’s web sitewebsite athttp://www.anadarko.com, or by contacting our investor relations department at investor@anadarko.com. Also, thisthe referenced Form 8-K, any amendments thereto and other
reports filed by the Company with the SEC are available to you over the Internet at the SEC’s web sitewebsite athttp://www.sec.gov.
How can I view the stockholder list?
A complete list of stockholders of record entitled to vote at the Annual Meeting will be available for viewing during ordinary business hours for a period of ten days before the Annual Meeting at our offices at 1201 Lake Robbins Drive, The Woodlands, Texas 77380-1046.
77380-1046.
We do. In addition to sending you these materials or otherwise providing you access to these materials, some of our directors and officers as well as management and non-management employees may contact you
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Who will tabulate and certify the vote?
Broadridge Financial Solutions, Inc., an independent third party, will tabulate and certify the vote, and will have a representative to act as the independent inspector of elections for the Annual Meeting.
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General Information
If I want to submit a stockholder proposal or nominate a director for the 20122015 Annual Meeting, when is that proposal or nomination due?
If you are an eligible stockholder and want to submit a proposal for possible inclusion in the proxy statement relating to the 20122015 Annual Meeting, your proposal must be delivered to the attention of our Corporate Secretary and must be received at our principal office, 1201 Lake Robbins Drive, The Woodlands, Texas77380-1046, offices no later than December 3, 2011.November 28, 2014. We will only consider proposals that meet the requirements of the applicable rules of the SEC and our By-Laws. Similarly, if
If I want to nominate a director for the 2015 Annual Meeting, when is that nomination due?
If you wishare an eligible stockholder and want to nominate an individual for election to our Board, our By-Laws provide that you must provide your nomination in writing to our Corporate Secretary (at the same address noted above) no later than the close of business on February 17, 201212, 2015, and no earlier than the close of business on January 18, 2012.
How can I obtain a copy of the Annual Report onForm 10-K?
Stockholders may request a free copy of our Annual Report onForm 10-K by submitting such request to Investor Relations, Anadarko Petroleum Corporation, 1201 Lake Robbins Drive, The Woodlands,P.O. Box 1330, Houston, Texas77380-1046 77251-1330. Stockholders may also submit such request via e-mail at investor@anadarko.com or viaby calling
e-mail(855) 820-6605. at investor@anadarko.com. Alternatively, stockholders can access our Annual Report onForm 10-K on Anadarko’s web sitewebsite athttp://www.anadarko.com. Also, our Annual Report onForm 10-K and other reports filed by the Company with the SEC are available to you over the Internet at the SEC’s web sitewebsite athttp://www.sec.gov.
Will I get more than one copy of the proxy statement, annual report or Notice if there are multiple stockholders at my address?
In some cases, only one copy of this proxy statement, annual report or Notice is being delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders. We will deliver promptly, upon a written or oral request, a separate copy of this proxy statement, annual report or Notice to a stockholder at a shared address to which a single copy of the document was delivered. Stockholders sharing an address may also submit requests for delivery of a single copy of the proxy statement, annual report or Notice, but in such event will still receive separate proxies for each account. To request separate or single delivery of these materials now or in the future, a stockholder may submit a written request to the Corporate Secretary, Anadarko Petroleum Corporation, 1201 Lake Robbins Drive, The Woodlands, Texas77380-1046 or a stockholder may make a request by calling the Corporate Secretary at(832) 636-1000, or by contacting our transfer agent, BNY Mellon Shareowner Services, at BNY Mellon Shareowner Services,Computershare, P.O. Box 358016, Pittsburgh, PA15252-8016.
630170, College Station, TX 77842-3170.
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Anadarko Board for election purposes, in 2009, we amended our Restated Certificate of Incorporation to declassify our Board. These changes to our Restated Certificate of Incorporation provide that the directors to be elected at the 2011 Annual Meeting will be elected to serve a one-year term and all directors will be elected annually beginning at the 2012 Annual Meeting.
ITEM 1 — ELECTION OF DIRECTORS
Our Restated Certificate of Incorporation also provides that all directors are to be elected annually and that any director or(or the entire BoardBoard) may be removed with or without cause at and after the 2012 Annual Meeting. Prior to that time, directors may be removed only for cause.
At the 20112014 Annual Meeting, the terms of sixour eleven incumbent directors will expire. Those sixNine of those incumbent directors have been nominated to stand for election and, if elected at this Annual Meeting, will hold office until the expiration in 2015 of each of their one-year terms in 2012. In addition, General Chilton has been nominated for election at thisterms. As of the Annual Meeting, and if elected, will hold office until the expiration of his one-year term in 2012. If General Chilton is elected, the number of directors shall be increaseddecreased from nineeleven to ten.
The Board is not aware of any reason why the director nominees would not be able to serve as directors of the Company. However, if a nominee is unavailable for election, then the proxies will be voted for the election of another nominee proposed by the Board or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting. The Board is not aware of any reason why the director nominees would not be able to serve as directors of the Company.
Our By-Laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast “for” a nominee’s election must exceed the number of votes cast “against” such nominee’s election in order for him or her to be elected to the Board. In addition, each incumbent nominee is required to provide an irrevocable letter of resignation that states that he or she will resign if that director does not receive the required majority vote. If a director failswere to fail to receive a majority of votes cast and the Board acceptswere to accept the resignation tendered, then that director would cease to be a director of Anadarko. Each of the sixnine incumbent director nominees named below has submitted an irrevocable letter of resignation that becomes effective if he or she does not receive a majority of the votes cast for his or her election and the Board decides to accept such resignation. If General Chilton does not receive a majority of the votes cast for his election, he will not be elected to the Board.
As discussed in more detail on page 1718 of this proxy statement, the Board considers several qualifications, characteristics and other factors when evaluating individual directors, as well as the composition of the Board as a whole. As part of this process, the Board and its Governance and Risk Committee (formerly the Nominating and Corporate Governance CommitteeCommittee) review the particular experiences, qualifications, attributes orand skills that caused the NominatingGovernance and Corporate GovernanceRisk Committee and the Board to determine that the person should serve as a director of the Company. The biographies of each of the nominees and continuing directors beginning on the next pagebelow contain information regarding the person’s experience and director positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative proceedings, ifto the extent applicable. They also highlight the particular experiences, qualifications, attributes or skills that caused the NominatingGovernance and Corporate GovernanceRisk Committee and the Board to conclude that the person should be nominated to serve as a director of the Company.
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.
Nominees for Director Nominated this Year by the Board of Directors for Terms Expiring in 20122015
ANTHONY R. CHASE | |||||||
Mr. | |||||||
Mr. Chase’s unique experience as a successful and widely respected business leader, entrepreneur and legal scholar provides invaluable perspective to the Board. In addition, he has significant experience with strategic transactions and mergers and acquisitions. |
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Director Since: February 2014 Independent Current Directorships: Sarepta Therapeutics, Inc. | ||||
KEVIN P. CHILTON | ||||
General Chilton, 59, retired as Commander of the United States Strategic Command, Offutt Air Force Base, Nebraska, in February 2011, where he was responsible for the plans and operations for all U.S. forces conducting strategic deterrence and Department of Defense space and cyberspace operations. General Chilton served in the General Chilton’s service as Deputy Program Manager of Operations, International Space Program and Director of Politico-Military Affairs,Asia-Pacific and Middle East, Joint Staff, the Pentagon, provides him with an invaluable blend of political, legislative, international and regulatory knowledge and experience. He also gained valuable managerial, financial and executive experience with his involvement in preparing the |
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Director Since: May 2011 Independent Current Directorships: Level 3 Communications, Inc. Orbital Sciences Corporation |
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.
Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2015
H. PAULETT EBERHART | ||||
Ms. Eberhart, 60, has been | ||||
Fluor Corporation. Ms. Eberhart brings a wealth of accounting and financial experience to the Board, as well as managerial, manufacturing and global experience, through her numerous years of service as an executive officer for |
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Director Since: August 2004 Independent Current Directorships: Advanced Micro Cameron International CDI Corp. | |||||||
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.
PETER J. FLUOR | ||||
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Mr. Fluor, 66, has been Chairman and Chief Executive Officer of Texas Crude Energy, Inc., a private, independent oil and gas exploration company located in Houston, Texas, since 1990. He has been employed by Texas Crude Energy, Inc. since 1972 and took over the responsibilities of President in 1980. Mr. Fluor serves as lead director of Fluor Mr. Fluor brings |
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Director Since: August 2007 Independent Current Directorships: Fluor Corporation Cameron International | |||||||
RICHARD L. GEORGE | |||||||
Mr. George, 63, was appointed independent Chairman of Mr. George’s extensive leadership roles and career experiences in the global energy industry field provide invaluable insight to the Board and strategically assist Anadarko as it pursues its expanding business opportunities. |
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Director Since: May 2012 Independent Current Directorships: Penn West Petroleum Ltd. Royal Bank of Canada | |||||||
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.
Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2015
CHARLES W. GOODYEAR | ||||
Mr. Goodyear, 56, was appointed non-executive Chairman of the Board of Metallum Holding 1 B.V., a non-ferrous metals recycling and processing company headquartered in the Netherlands, in January 2014. From February 2009 until his retirement in August 2009, Mr. Goodyear was the Chief Executive designate of Temasek Holdings (Pte) LTD, an Asian investment company wholly owned by the Singapore Ministry of Finance. From 1999 to January 2008, Mr. Goodyear served in numerous leadership roles at BHP Billiton, the world’s largest diversified natural resource company, including as its Chief Executive Officer from 2003 to 2007 after having served as its Chief Development Officer and Chief Financial Officer since 1999. Mr. Goodyear has a lengthy record of public company executive leadership roles in the natural resource industry on a worldwide level as well as significant finance, investment banking and merger and acquisition experience. Mr. Goodyear’s career experiences enable him to provide invaluable insight to the Board and enhance its ability to direct a sustainable and growing enterprise. |
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Director Since: March 2012 Independent | ||||
JOHN R. GORDON | ||||
Mr. Gordon, 65, is Senior Managing Director of Deltec Asset Management LLC, a registered investment firm located in New York, New York. He was President of Deltec Securities Corporation from 1988 until it was converted into Deltec Asset Management LLC. Prior to joining Deltec Asset Management LLC, Mr. Gordon was a managing director of Kidder, Peabody & Co., where he spent 12 years in the firm’s corporate finance department. Mr. Gordon’s role as Senior Managing Director of Deltec Asset Management LLC since 1988 provides him with significant finance and banking experience (including in the energy industry) as well as considerable managerial expertise. He also has significant involvement in various civic and charitable organizations. |
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Director Since: April 1988 Independent |
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.
Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2015
ERIC D. MULLINS | ||||
Mr. Mullins, 51, has served as the Co-Chief Executive Officer and Chairman of the Board of Directors of LRE GP, LLC, the general partner of LRR Energy, L.P., a company which Mr. Mullins’s career experiences and knowledge in financing and strategic mergers and acquisitions for exploration and production companies greatly assists and enhances the Board’s ability to direct a sustainable and growing enterprise. |
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Director Since: May 2012 Independent Current Directorships: LRE GP, LLC | ||||
R. A. WALKER | ||||
Mr. Walker, 57, was named Chairman of the Board of the Company in May 2013, in addition to the role of Chief Executive Officer and director, both of which he assumed in May 2012, and the role of President, which he assumed in February 2010. He previously served as Chief Operating Officer from March 2009 until his appointment as Chief Executive Officer. He served as Senior Vice President, Mr. Walker has more than 30 years of experience in the energy industry, with a focus on exploration and |
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Director Since: May 2012 Not Independent - Current Directorships: BOK Financial Corporation CenterPoint Energy, Inc. | ||||
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Our Board recognizes that excellence in corporate governance is essential in carrying out our responsibilities to our stakeholders, including our stockholders, employees, customers, communities, and creditors, as well as to the environment. Our Corporate Governance Guidelines, By-Laws, Code of Business Conduct and Ethics, Code of Ethics for Seniorthe Chief Executive Officer, Chief Financial Officers,Officer and Chief Accounting Officer, and written charters for the Audit Committee, the Compensation and Benefits Committee, (Compensation Committee), and the NominatingGovernance and Corporate GovernanceRisk Committee, all as amended from time to time, can be found on the Company’s web sitewebsite athttp://www.anadarko.com/About/Pages/Governance.aspx. These documents provide the framework for our corporate governance. Any of these documents will be furnished in print free of charge to any stockholder who requests one or more of them. You can submit such a request to the Corporate Secretary. Furthermore, we have implemented the majority voting standard for directors in uncontested director elections, including the election of our directorsSecretary at the Annual Meeting, and will have completely declassified our Board by the 2012 Annual Meeting of Stockholders.
Under the Company’s Corporate Governance Guidelines, directors are expected to attend regularly scheduled Board of Director meetings and meetings of committees on which they serve, as well as the Annual Meeting of Stockholders.
BOARD LEADERSHIP STRUCTURE
Mr. Walker was elected Chairman of the Board, (Chairman)effective following the Company’s 2013 Annual Meeting. Mr. Walker, as the Company’s Chief Executive Officer (CEO), and works in concert with the rest of our majority-independent Board and the independent Lead Director, Mr. Gordon, to oversee the execution of the Company’s strategy.
• | Promotes Unified Approach on Corporate Strategy Development and Execution— Maintaining a combined role enables the Company’s CEO to act as a bridge between management and the Board, helping both to act with a common purpose. This also fosters consensus building and | ||
• | Requires that CEO Recognize Importance of Good Corporate Governance— Maintaining a combined position requires that the CEO’s responsibilities include a mastery of good corporate governance, a focus on broad stakeholder interests, and an open channel of communication, | ||
• | Provides Clear Lines of Accountability— A combined position has the practical effect of simplifying the accountability of the executive management team, thereby reducing potential confusion and fractured leadership that could result from reporting to two individuals as opposed to one; and |
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• | Provides Clear Roadmap for Stockholder/Stakeholder Communications— A combined position provides the Company’s stakeholders the opportunity to deal with one versus several points of overall authority, which we believe results in more efficient and effective communications with stakeholders. |
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Corporate Governance
Role of Lead Director. Consistent with industry best practices, the Board has a strong and active Lead Director whose duties and responsibilities ensure the Company maintains a corporate-governance structure with appropriate independence and balance. Our independent Lead Director’s duties are already closely aligned with the role of an independent, non-executive chairman. As Lead Director elected exclusively by the independent directors, Mr. Gordon’s role is to assist the Chairman and the remainder of the Board in assuring effective corporate governance in managing the affairs of the Board and the Company. Mr. Gordon serves as a liaison between the Chairman and the independent directors and works with ourthe Chairman to approve all meeting agendas, andagendas. He presides at (i) executive sessions of the non-employee directors, which are held in conjunction with each regularly scheduled quarterly meeting of the Board, (ii) executive sessions of the independent directors, which are held at least once a year, and (iii) at any other meetings as requesteddetermined by the directors.Lead Director. Mr. Gordon also approves information sent to the Board and approves meeting schedules to assure there is sufficient time for discussion of all agenda items. In addition, as Lead Director, Mr. Gordon has authority to call special meetings of the Board and is also a member of the Board’s Executive Committee, providing additional representation for the independent directors in anyall actions considered by the Executive Committee between Board meetings.
THE BOARD’S ROLE IN RISK OVERSIGHT
The Board’s role in the identification, assessment, oversight and management of potential risks that could affect the Company’s ability to achieve its strategic, operational and financial objectives consists of (i) reviewing and discussing the Company’s risk framework and risk management policies, (ii) facilitating appropriate coordination among the Board’s committees with respect to oversight of risk management by delegating oversight of the Company’s enterprise risk management program to the Governance and Risk Committee, the risk assessment framework and risk management policies, including the framework with respect to significant financial and compensation risksrisk exposures, to the Audit Committee, and compensation risk to the Compensation Committee, respectively, and (iii) periodically meeting with members of management, including members of the Company’s internal standing Risk Council, to identify, review and assess the Company’s major risk exposures and steps taken to monitor, mitigate report and respond toreport such exposures.
Board Committees. The AuditGovernance and Risk Committee is responsible for oversight of the Company’s significant financial risk exposures and periodically reviews and discusses with members of management those financial risk exposures and the steps being taken to identify, monitor and mitigate such exposures. With the assistance of the Compensation Committee’s independent executive compensation consultant, the Compensation Committee is responsible for the oversight of the annual internal risk assessment of the Company’s compensation programs.
Internal Risk Council. In order to facilitate oversight of potential risk exposures to the Company that have not been specifically delegated to any Board committee, the Board periodically meets with members of the Company’s internal Risk Council to review and assess the Company’s risk-management processrisk management processes and to discuss significant risk exposures. Members of senior management comprise the Company’s internal Risk Council and provide periodic reports to the CEO, the AuditGovernance and Risk Committee and the full Board regarding the Company’s risk profile and risk managementrisk-management strategies. In addition, the Company’s internal audit function regularly provides additional perspective and insight to the Board regarding potential risks facing the Company.
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Compensation Committee Risk AssessmentCorporate Governance
COMPENSATION COMMITTEE RISK ASSESSMENT
The Compensation Committee reviewed an internala comprehensive compensation risk assessment conducted independently by Frederic W. Cook & Co., Inc. (FWC), the Compensation Committee’s executive compensation consultant. The assessment focused on the design and application of the Company’s executive and non-executive compensation programs and whether such programs encourage excessive risk taking by executive officers and other employees. Based on the outcomes of such assessment. Based on suchthis assessment and the Compensation Committee’s review, the Compensation Committee believes that the Company’s compensation programs (i) do not motivate our executivesexecutive officers or our non-executive employees to take excessive risks, (ii) are well designed to encourage behaviors aligned with stockholders’ bestthe long-term interests of stockholders and (iii) are not reasonably likely to have a material adverse effect on the Company. Anadarko’s compensation programs are designed to support and reward appropriate risk taking and include the following:
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COMMITTEES OF THE BOARD
The Board has four standing committees: (i) the Audit Committee, (ii) the Compensation Committee, (iii) the NominatingGovernance and Corporate GovernanceRisk Committee, and (iv) the Executive Committee. For each of the current committees of the Board, the table below shows the current membership, the principal functions and the number of meetings held in 2010:
Name, Members and Meetings | Principal Functions | ||||||||||
| |||||||||||
Charles W. Goodyear Paula R. | Reynolds Meetings in 2013: 8 | • | Discusses the integrity of the Company’s accounting policies, internal controls, financial reporting practices and the financial statements with management, the independent auditor and internal audit. | ||||||||
• | Reviews and discusses with management the Company’s risk assessment framework and risk management policies, including the framework with respect to significant financial risk | ||||||||||
• | Monitors the qualifications, independence and performance of the Company’s internal audit function and independent auditor, and meets periodically with management, internal audit and the independent auditor in separate executive sessions. | ||||||||||
• | Establishes and maintains procedures for the submission, receipt, retention and treatment of complaints and concerns received by the Company regarding accounting, internal controls or auditing matters, including those |
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Corporate Governance
Name, Members and Meetings | Principal Functions | ||||||||||
AUDIT COMMITTEE (Continued) | • | Monitors compliance with legal and regulatory requirements and the business practices and ethical standards of the Company. | |||||||||
• | Approves the appointment, compensation, retention and oversight of the work of the Company’s independent auditor and establishes guidelines for the retention of the independent auditor for any permissible services. | ||||||||||
• | |||||||||||
Prepares the Audit Committee report, which is on page | 28. | ||||||||||
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COMPENSATION AND
COMMITTEE(3)Peter J. Fluor (Chair) Richard L. George John R. Gordon | Meetings in 2013: 7 | • | |||||||
Approves and evaluates the Company’s director and officer compensation plans, policies and programs. | |||||||||
• | Conducts an annual review and evaluation of the CEO’s performance in light of the Company’s goals and objectives. | ||||||||
• | Retains, and is directly responsible for the oversight of, compensation or other consultants to assist in the evaluation of director or executive compensation and otherwise to aid the Compensation Committee in meeting its responsibilities. For additional information on the role of compensation consultants, please see | 30. | |||||||
• | Annually reviews the Company’s | Company. | |||||||
• | Periodically reviews and discusses with its independent compensation consultants and senior management | ||||||||
• | Reviews the Compensation Discussion and Analysis, disclosures for advisory votes by stockholders on executive compensation, including frequency of such votes, and other relevant disclosures made in the proxy statement. | ||||||||
• | Produces an annual Compensation Committee report, which is on page | 29. | |||||||
GOVERNANCE AND RISK COMMITTEE(4) H. Paulett Eberhart (Chair) Anthony R. Chase Preston M. Geren | III Meetings in 2013: 4 | • | Recommends nominees for director to the full Board and ensures such nominees possess the director qualifications set forth in the Company’s Corporate Governance Guidelines. | ||||||
• | Reviews the qualifications of existing Board members before they are nominated for re-election to the Board. | ||||||||
• | Recommends members of the Board for committee membership. | ||||||||
• | Proposes Corporate Governance Guidelines for the Company and reviews them annually. | ||||||||
• | Oversees the Company’s compliance structure and programs. |
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Corporate Governance
Name, Members and Meetings | Principal Functions | ||||||||
GOVERNANCE AND RISK COMMITTEE (Continued) | • | Develops and oversees an evaluation process for the Board and its committees. | |||||||
• | Oversees the emergency and expected CEO succession plans. | ||||||||
• | Reviews and approves | ||||||||
• | Reviews and investigates | ||||||||
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• | Reviews and discusses with management the Company’s significant risk exposures and the steps management has taken to identify, monitor and mitigate such exposures. | ||||||
• | Oversees the work of the Company’s independent reserve engineering consultant. | ||||||
• | Oversees the Anadarko Petroleum Corporation Political and Public Engagement Policy and the Company’s political activity, including annually reviewing the Company’s political contributions and trade association payments. | ||||||
• | Reviews and discusses with management the Company’s environmental, health and safety programs. | ||||||
EXECUTIVE COMMITTEE R. A. Walker (Chair) H. Paulett Eberhart Peter J. Fluor John R. Gordon Eric D. Mullins Meetings in 2013: 0 | • | Acts with the power and authority of the Board, in accordance with the Company’s By-Laws, in the management of the business and affairs of the Company while the Board is not in session. | |||||
• | Approves specific terms of financing or other transactions that have previously been approved by the Board. | ||||||
(1) | None of the Audit Committee members serve on the audit committee of more than two other public companies. |
(2) | The Board has determined that Mr. Mullins qualifies as an “audit committee financial expert” under the rules of the SEC based upon his education and employment experience as more fully detailed in Mr. Mullins’s biography set forth above. The Board has also determined that Mr. Mullins, as well as each member of the Audit Committee, is independent, as independence for audit committee members is defined in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (Exchange Act), and under the standards set forth by the NYSE. |
(3) | The Board has determined that each member of the Compensation Committee is (i) independent under the standards set forth by the NYSE governing Compensation Committee membership; (ii) a “non-employee director” under Rule 16b-3 of the Exchange Act; and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (IRC). |
(4) | The Board has determined that each member of the Governance and Risk Committee is independent under the standards set forth by the NYSE governing Board membership. |
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Board of DirectorsCorporate Governance
BOARD OF DIRECTORS
Director Independence
In accordance with NYSE rules, the Sarbanes-Oxley Act of 2002, the Securities Exchange Act, of 1934, as amended (Exchange Act), and the rules and regulations adopted thereunder, and the Company’s Corporate Governance Guidelines, the Board must affirmatively determine the independence of each director and director nominee in accordance with the Company’s director independence standards, which are contained in the Company’s Corporate Governance Guidelines found on the Company’s web sitewebsite athttp://www.anadarko.com/About/Pages/Governance.aspx.
Based on the standards contained in our Corporate Governance Guidelines, and the recommendation by the NominatingGovernance and Corporate GovernanceRisk Committee, the Board has determined that each of the following non-employee director nominees areis independent and havehas no material relationship with the Company that could impair such nominee’s independence:
• Anthony R. Chase | • Richard L. George | |||||
• Kevin P. Chilton | • Charles W. Goodyear | |||||
• H. Paulett Eberhart | • John R. Gordon | |||||
• Peter J. Fluor | • | |||||
Mr. HackettWalker is not independent because he is the Chairman, President and CEO of the Company; and (b) Mr. Allison is not independent because he had been an executive officer of Anadarko for many years and, as part of his retirement package, the Company continues to provide him use of the Company’s aircraft, office space, secretarial assistance and a monitored residential security system during his lifetime.
For information regarding our policy on Transactions with Related Persons, please see page 6975 of this proxy statement.
Selection of Directors
The Company’s Corporate Governance Guidelines require that with respect to Board vacancies, the NominatingGovernance and Corporate GovernanceRisk Committee (or a subcommittee thereof) (a): (i) identify the personal characteristics needed in a director nominee so that the Board as a whole will possess such qualifications as more fully identified below; (b)(ii) compile, through such means as the NominatingGovernance and Corporate GovernanceRisk Committee considers appropriate, a list of potential director nominees thought to possess the individual qualifications identified in the Corporate Governance Guidelines, as well as any additional specific qualifications the Board deems appropriate at the time; (c)(iii) engage an outside consultant, as necessary, to assist in the
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Corporate Governance
As stated in our Corporate Governance Guidelines, one of the core competencies our Board has identified in assessing the qualifications of the Board as a whole is a diversity of experience, professional expertise, perspective and age. The Board recognizes that such diversity is an important factor in board composition and the NominatingGovernance and Corporate GovernanceRisk Committee ensures that such diversity considerations are discussed in connection with each candidate for director. For the past several years, our Board has reviewed on at least an annual basis a director skillset chart set forth below that identifies characteristics that the Board believes contribute to an effective and well-functioning board and that the Board as a whole should possesspossess. The factors the Board considers include the following:
• | oil and gas service company expertise | |||||
• | international business experience | ||
• | government relations experience | ||
• | marketing/commodity risk management experience | ||
• | manufacturing/operations experience | ||
• | civic/charitable experience |
The NominatingGovernance and Corporate GovernanceRisk Committee considers these and other factors and the extent to which such skillsets can be represented when evaluating potential candidates for the Board. Together, this diversity of skillsets, experiences and personal backgrounds allows our directors to provide the diversity of thought that is critical to the Board’s decision-making and oversight process. Based upon the joint recommendation of an incumbent non-employee director and the Chairman of the Board, the Nominating and Corporate Governance Committee considered one or more of the foregoing factors in its (and the Board’s) consideration and nomination of General Chilton for election at the Annual Meeting.
Annual Evaluations
The Board and each of the independent committees have conducted self-evaluations related to their performance in 2010.2013. The performance evaluations were supervised by the NominatingGovernance and Corporate GovernanceRisk Committee and the results were discussed by the applicable committee and the Board. The Board and each committee have implemented any necessary changes as a result of these evaluations.
Communication with the Directors of the Company
The Board welcomes questions or comments about the Company and its operations. Interested parties may contactwho wish to communicate with the Board, including the Lead Director, the non-employee or independent directors, or any individual director, may contact the Chairperson of the Governance and Risk Committee at nominating_governance@apcdirector.comgovernanceriskchair@anadarko.com or at Anadarko Petroleum Corporation, Attn: Corporate Secretary, 1201 Lake Robbins Drive, The Woodlands, Texas,77380-1046. Any If requested, any questions or comments will be kept confidential to the extent reasonably possible,possible. Depending on the subject matter, the Chairperson of the Governance and Risk Committee, with the assistance of the Corporate Secretary, will:
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Corporate Governance
These procedures may change from time to time, and you are encouraged to visit our web sitewebsite for the most current means of contacting our directors. If you wish to request copies of any of our governance documents, please see page 13 of this proxy statement for instructions on how to obtain them.
Stockholder Participation in the Selection of Director Nominees
During the past year, no stockholder submitted names to the Governance and Corporate GovernanceRisk Committee did not receive any names of individuals suggested for nomination to the Company’s Board by stockholders duringpursuant to the past year. However,procedures discussed below. For nomination at the 2015 Annual Meeting, the Board will consider individuals identified by stockholders on the same basis as nominees identified from other sources. To nominate a director for the 2015 Annual Meeting, a stockholder must follow the procedures described in the Company’s By-
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Corporate Governance
– | any agreement, arrangement or understanding as to how such person, if elected as a director of the Company, will act or vote on any issue or question that has not been disclosed to the Company; | ||
– | any voting commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Company, with such person’s fiduciary duties under applicable law; | ||
– | any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been |
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In addition, the nominee must be in compliance, if elected as a director of the Company, and agree to continue to comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Company.
Directors’ Continuing Education
The Company’s Director Education Policy encourages all members of the Board to attend director education programs appropriate to their individual backgrounds to stay abreast of developments in corporate governance and “best practices”best practices relevant to their contribution to the Board as well as their responsibilities in their specific committee assignments. The Director Education Policy provides that the Company will reimburse directors for all costs associated with attending any director education program.
Compensation and Benefits Committee Interlocks and Insider Participation
The Compensation Committee is made up of three independent directors, Messrs. Fluor, Geren and Gordon.directors. None of our executive officers currently serve, or in the past year have served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee.
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Corporate Governance
Director Compensation
Non-employee directors receive a combination of cash and stock-based compensation designed to attract and retain qualified candidates to serve on the Board. Mr. HackettWalker does not receive any compensation for his service as a director. In setting non-employee director compensation, the Board considers the significant amount of time that non-employee directors spend in fulfilling their duties to the Company and its stockholders as well as the skill level required by the Company’s Board members. The Compensation Committee is responsible for determining the type and amount of compensation for non-employee directors. TheTo assist in the 2013 annual review of director compensation, the Compensation Committee directly retained Hewitt Associates LLCFWC as its outside independent compensation consultant to assist in the 2010 annual review of director compensation by providingprovide benchmark compensation data and recommendations for compensation program design.
Retainer and Meeting Fees. The following is a schedule of current annual retainers and meeting fees for non-employee directors in effect during 20102013 and payable on a quarterly basis:
Type of Fee | Amount | |||
Annual Board Retainer | $ | 50,000 | ||
Additional Annual Retainer to Chairperson of Audit Committee | $ | 25,000 | ||
Additional Annual Retainer to Chairperson of Compensation Committee and of Nominating and Corporate Governance Committee | $ | 15,000 | ||
Additional Annual Retainer for Board Member Serving as Lead Director | $ | 25,000 | ||
Additional Annual Retainer to Audit Committee Members | $ | 6,000 | ||
Additional Annual Retainer for Other Committee Members | $ | 3,000 | ||
Fee for each Board Meeting Attended (plus expenses related to attendance) | $ | 2,000 | ||
Fee for each Board Committee Meeting Attended (plus expenses related to attendance) | $ | 2,000 |
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Type of Fee | Amount($) | ||||
Annual Board Retainer | 70,000 | ||||
Additional Annual Retainer to Chairperson of Audit Committee and of Compensation Committee | 25,000 | ||||
Additional Annual Retainer to Chairperson of Governance and Risk Committee | 15,000 | ||||
Additional Annual Retainer to Lead Director(1) | 35,000 | ||||
Additional Annual Retainer to Audit Committee and Compensation Committee Members | 6,000 | ||||
Additional Annual Retainer for Governance and Risk Committee Members | 3,000 | ||||
Fee for each Board Meeting Attended (plus expenses related to attendance) | 2,000 | ||||
Fee for each Board Committee Meeting Attended (plus expenses related to attendance) | 2,000 | ||||
Additional Fee for Non-Employee Director Residing Outside North America to Attend Each | 4,000 |
(1) | Effective July 1, 2013, the Annual Retainer for the Lead Director was increased from $25,000 to $35,000 to reflect the enhanced duties of the Lead Director role discussed on page 14. |
Deferred Compensation Plan for Non-employee Directors. Non-employee directors are eligible to participate in the Company’s Deferred Compensation Plan. The Deferred Compensation Plan allows non-employee directors to defer receipt of up to 100% of their retainers and meeting fees, and to allocate the deferred amounts among a group of notional accounts that mirror the gainsand/or losses of various investment funds, including common stock of the Company. The interest rate earned on the deferred amounts is not above-market or preferential. In general, deferred amounts are distributed to the participant upon leaving the Board or at a specific date as elected by the participant. Mr.Messrs. Fluor and Geren and Ms. Reynolds are the only directors who elected to defer compensation during 2010.
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Corporate Governance
Stock Plan for Non-employee Directors. Stock-based awards made to non-employee directors are made pursuant to the Anadarko Petroleum Corporation 2008 Director Compensation Plan. In addition to the retainer and meeting fee compensation, non-employee directors receive annual equity grants. Equity grants to non-employee directors are automatically awarded each year on the date of the Company’s annual meeting of stockholders. For 2013, each non-employee director received an annual equity grant with a value targeted at approximately $250,000. For U.S. and Canadian-resident non-employee directors, 100% of the value was delivered in deferred shares. Non-employee directors may elect to receive these shares on a specific date, but not earlier than one year from the date of grant, or when they leave the Board. For non-employee directors residing in the United Kingdom, 100% of the value was delivered in restricted shares, which vest on the fifth anniversary of the date of grant.
Stock Ownership Guidelines for Non-employee Directors. Non-employee directors are required to hold stock with a value equivalent to seven times the annual Board retainer and have three years from the date of their initial election to the Board to comply with the guidelines. All non-employee directors, other than Mr. Chase, who joined the Board in 2014, currently exceed the Company’s stock ownership guidelines.
Other Compensation. Non-employee directors are covered under the Company’s Accidental Death & Dismemberment Plan and the Company pays the annual premium for such coverage on behalf of each non-employee director. The Company also provides each non-employee director with Personal Excess Liability coverage and pays the annual premium on their behalf. The Company maintains an Aid to Education Program under which certain gifts by employees, officers, non-employee directors and retired employees to qualified institutions of learning are matched on atwo-to-one basis. The maximum contribution matched per donor, per calendar year is $2,500, resulting in a maximum Company yearly match of $5,000.
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Corporate Governance
The following table sets forth information concerning total non-employee director compensation earned during the Director Compensation Table for 2010DIRECTOR COMPENSATION TABLE FOR 201320102013 fiscal year by each non-employeeincumbent director who served on the Board in 2013, other than Mr. Walker, who does not receive any compensation for his service as a director: Change in Pension Value and Non-qualified Non-Equity Deferred Fees Earned or Stock Option Incentive Plan Compensation All Other Paid in Cash Awards Awards Compensation Earnings Compensation Total ($) ($)(1) ($)(2) ($) ($) ($)(3) ($) Robert J. Allison, Jr.(4) 72,000 225,021 0 0 0 4,055 301,076 John R. Butler, Jr.(5) 105,000 225,021 0 0 0 4,055 334,076 Luke R. Corbett 62,000 225,021 0 0 0 4,055 291,076 H. Paulett Eberhart 138,000 225,021 0 0 0 4,055 367,076 Peter J. Fluor(6) 119,000 225,021 0 0 0 4,055 348,076 Preston M. Geren III 117,000 225,021 0 0 0 4,055 346,076 John R. Gordon 129,000 225,021 0 0 0 4,055 358,076 Paula Rosput Reynolds(7) 107,000 225,021 0 0 0 4,055 336,076
Name | Fees Earned or Paid in Cash($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- qualified Deferred Compensation Earnings($) | All Other Compensation ($)(3) | Total($) | ||||||||||||||||||||||||||||
Kevin P. Chilton | 116,558 | 250,065 | 0 | 0 | 0 | 4,381 | 371,004 | ||||||||||||||||||||||||||||
Luke R. Corbett(4) | 97,000 | 250,065 | 0 | 0 | 0 | 4,381 | 351,446 | ||||||||||||||||||||||||||||
H. Paulett Eberhart | 139,640 | 250,065 | 0 | 0 | 0 | 4,381 | 394,086 | ||||||||||||||||||||||||||||
Peter J. Fluor(5) | 141,558 | 250,065 | 0 | 0 | 0 | 4,381 | 396,004 | ||||||||||||||||||||||||||||
Richard L. George(6) | 116,558 | 250,065 | 0 | 0 | 0 | 4,381 | 371,004 | ||||||||||||||||||||||||||||
Preston M. Geren III(4)(5) | 128,903 | 250,065 | 0 | 0 | 0 | 4,381 | 383,349 | ||||||||||||||||||||||||||||
Charles W. Goodyear | 126,558 | 250,065 | 0 | 0 | 0 | 4,381 | 381,004 | ||||||||||||||||||||||||||||
John R. Gordon | 146,558 | 250,065 | 0 | 0 | 0 | 4,381 | 401,004 | ||||||||||||||||||||||||||||
Eric D. Mullins | 122,245 | 250,065 | 0 | 0 | 0 | 4,381 | 376,691 | ||||||||||||||||||||||||||||
Paula R. Reynolds(4)(5) | 116,558 | 250,065 | 0 | 0 | 0 | 4,381 | 371,004 |
(1) | ||
(2) | The non-employee directors did not receive any stock option awards in | |
(3) | The amounts in this column include annual premiums paid by the Company for each director’s benefit in the amount of | |
(4) | ||
(5) | ||
Ms. Reynolds deferred |
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(6) | Mr. George elected to receive all of his fees in common stock. |
Grant Date Fair | ||||||||||||
Value of Stock | ||||||||||||
Grant | Deferred | Awards | ||||||||||
Directors | Date | Stock (#) | ($)(1) | |||||||||
All Non-Employee Directors | May 18 | 3,877 | 225,021 |
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The information provided below summarizes the beneficial ownership of our NEOs, each of our directors and director nominees, all of our directors, director nominees and executive officers as a group, and owners of more than five percent of our outstanding common stock. “Beneficial ownership” generally includes those shares of common stock held by someone who has investmentand/or voting authority of such shares or has the right to acquire such common stock within 60 days. The ownership includes common stock that is held directly and also stock held indirectly through a relationship, a position as a trustee, or under a contract or understanding.
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth the number and percentage of Anadarko common stock beneficially owned by our NEOs, each of our directors and director nominees, and all of our executive officers, directors and director nominees as a group as of March 5, 2011:
Amount and Nature of Beneficial Ownership | ||||||||||||||||
Number of Shares | Stock | |||||||||||||||
of Common Stock | Acquirable | Total | ||||||||||||||
Beneficially | Within | Beneficial | Percent | |||||||||||||
Name of Beneficial Owner | Owned(1)(2) | 60 Days | Ownership | of Class | ||||||||||||
James T. Hackett | 319,111 | 506,600 | 825,711 | * | ||||||||||||
Robert G. Gwin | 12,327 | 243,367 | 255,694 | * | ||||||||||||
R. A. Walker | 87,025 | 368,568 | 455,593 | * | ||||||||||||
Charles A. Meloy | 56,662 | 136,634 | 193,296 | * | ||||||||||||
Robert P. Daniels(3) | 36,159 | 66,595 | 102,754 | * | ||||||||||||
Robert J. Allison, Jr. | 286,025 | 32,100 | 318,125 | * | ||||||||||||
John R. Butler, Jr. | 82,002 | 37,100 | 119,102 | * | ||||||||||||
Kevin P. Chilton | 0 | 0 | 0 | * | ||||||||||||
Luke R. Corbett | 11,677 | 27,100 | 38,777 | * | ||||||||||||
H. Paulett Eberhart | 15,677 | 24,600 | 40,277 | * | ||||||||||||
Peter J. Fluor | 14,348 | 5,650 | 19,998 | * | ||||||||||||
Preston M. Geren III | 9,987 | 13,900 | 23,887 | * | ||||||||||||
John R. Gordon | 184,513 | 62,100 | 246,613 | * | ||||||||||||
Paula Rosput Reynolds | 14,999 | 5,650 | 20,649 | * | ||||||||||||
All directors, director nominees and executive officers as a group (16 persons) | 1,236,679 | 1,808,440 | 3,045,119 | * |
Amount and Nature of Beneficial Ownership | ||||||||||||||||||||
Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned(1)(2) | Stock Acquirable Within 60 Days | Total Beneficial Ownership(3)(4) | Percent of Class | ||||||||||||||||
R. A. Walker(5) | 194,639 | 535,078 | 729,717 | * | ||||||||||||||||
Robert G. Gwin | 61,257 | 345,202 | 406,459 | * | ||||||||||||||||
Charles A. Meloy | 107,802 | 198,594 | 306,396 | * | ||||||||||||||||
Robert P. Daniels(6) | 86,976 | 215,824 | 302,800 | * | ||||||||||||||||
Robert K. Reeves(7) | 156,456 | 288,378 | 444,834 | * | ||||||||||||||||
Anthony R. Chase | 765 | 0 | 765 | * | ||||||||||||||||
Kevin P. Chilton | 10,030 | 0 | 10,030 | * | ||||||||||||||||
H. Paulett Eberhart | 25,707 | 0 | 25,707 | * | ||||||||||||||||
Peter J. Fluor | 32,089 | 5,650 | 37,739 | * | ||||||||||||||||
Richard L. George | 17,339 | 0 | 17,339 | * | ||||||||||||||||
Preston M. Geren III | 25,158 | 8,900 | 34,058 | * | ||||||||||||||||
Charles W. Goodyear | 17,313 | 0 | 17,313 | * | ||||||||||||||||
John R. Gordon | 164,543 | 32,100 | 196,643 | * | ||||||||||||||||
Eric D. Mullins | 6,584 | 0 | 6,584 | * | ||||||||||||||||
Paula R. Reynolds | 30,333 | 5,650 | 35,983 | * | ||||||||||||||||
All directors, director nominees and executive officers as a group (17 persons) | 1,001,196 | 1,750,581 | 2,751,777 | * |
* | Less than one percent. | |
(1) |
25 |
Security Ownership of Certain
Beneficial Owners and Management
(2) |
24
(3) | In addition to the Anadarko common stock reported in the table, as of December 1, 2013, the directors and executive officers beneficially owned common units of Western Gas Partners, LP (WES) as follows: Mr. Walker, 6,900; Mr. Gwin, 10,000; Mr. Meloy, 3,000; Mr. Daniels, 5,150; Mr. Reeves, 9,000; Ms. Eberhart, 1,000; and Ms. Reynolds, 19,758. The Company owns a majority interest in WES indirectly through its wholly-owned subsidiaries. As of December 31, 2013, there were 117,322,812 common units of WES outstanding. |
(4) | In addition to the Anadarko common stock reported in the table, as of December |
(5) | Includes 108,000 share of common stock held by a limited liability company (LLC) of which Mr. Walker exercises investment control. The membership interests in the LLC are held by Mr. Walker, his wife and family trusts of which he is the trustee. |
(6) | Includes 63,766 shares of |
(7) | Includes 95,000 shares of |
CERTAIN BENEFICIAL OWNERS
The following table shows the beneficial owners of more than five percent of the Company’s common stock as of December 31, 20102013, based on information available as of February 14, 2011:
Amount and Nature | ||||||||||
of Beneficial | Percent of | |||||||||
Title of Class | Name and Address of Beneficial Owner | Ownership | Class | |||||||
Common Stock | BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 35,797,946 | (1) | 7.22 | % | |||||
Common Stock | Wellington Management Company, LLP 280 Congress Street Boston, MA 02210 | 27,552,569 | (2) | 5.56 | % | |||||
Common Stock | FMR LLC 82 Devonshire Street Boston, MA 02109 | 27,253,435 | (3) | 5.49 | % |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||||||
Common Stock | BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 40,059,983(1) | 8.00% | |||||||||
Common Stock | The Vanguard Group 100 Vanguard Blvd. Malvem, PA 19355 | 25,647,988(2) | 5.09% |
(1) | Based upon its Schedule 13G/A filed February | |
(2) | Based upon its Schedule 13G filed February |
26 |
Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that all reporting obligations of the Company’s officers, directors andSECTIONSection 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficialten percent10% of a registered class of the Company’s equity securities, to file with the SEC and any exchange or other system on which such securities are traded or quoted, initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities. Officers, directors andgreater-than-ten-percent more than 10% stockholders are required by the SEC’s regulations to furnish the Company and any exchange or other system on which such securities are traded or quoted with copies of all Section 16(a) forms they filed with the SEC.greater-than-ten-percent more than 10% stockholders under Section 16(a) were satisfied during the year ended December 31, 2010.25
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The following report of the Audit Committee of the Company, dated February 25, 2014, shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The Audit Committee of the Board is responsible for independent, objective oversight of the Company’s accounting functions and internal controls over financial reporting. The Audit Committee is composed of threefour directors, each of whom is independent as defined by the NYSE listing standards. The Audit Committee operates under a written charter approved by the Board of Directors, which is available on the Company’s web site athttp://www.anadarko.com/About/Pages/Governance.aspx.
Management is responsible for the Company’s internal controls over financial reporting. The independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards in the United States of America and issuing a report thereon. The independent auditor is also responsible for performing independent audits of the Company’s internal controls over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes.
KPMG LLP served as the Company’s independent auditor during 20102013 and was appointed by the Audit Committee to serve in that capacity for 20112014 (and we are seeking ratification by the Company’s stockholders at this Annual Meeting of such appointment). KPMG LLP has served as the Company’s independent auditor since its initial public offering in 1986.
In connection with these responsibilities, the Audit Committee met with management and the independent auditor to review and discuss the December 31, 20102013 audited consolidated financial statements and matters related to Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee also discussed with the independent auditor the matters required by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.
The Audit Committee also received written disclosures and the letter from the independent auditor required by Public Company Accounting Oversight Board Rule 3526 regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditor that firm’s independence.
Based upon the Audit Committee’s review and discussions with management and the independent auditor referred to above, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 20102013 filed with the SEC.
THE AUDIT COMMITTEE
Eric D. Mullins, Chairperson
Kevin P. Chilton
Charles W. Goodyear
Paula R. Butler, Jr.Paula Rosput Reynolds
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Compensation and Benefits Committee Report on
The Compensation Committee, the members of which are listed below, is responsible for establishing and administering the executive compensation programs of the Company. The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION AND BENEFITS COMMITTEE
Peter J. Fluor, Chairman
Richard L. George
John R. Gordon
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29 |
Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
• | executive summary; |
• | our pay-for-performance philosophy and practices; |
• | how we make compensation decisions; |
• | elements of our compensation program; and |
• | analysis of 2013 compensation actions. |
EXECUTIVE SUMMARY
The Compensation Committee believes that Anadarko achieved exceptional operational and financial performance in 2013, as it has done over the last several years. This performance has not, however, been reflected in our stock performance, which we believe is largely as a result of uncertainty related to the Tronox Adversary Proceeding (described below). Our delivery of executive compensation for 2013 reflects these factors — while payouts under the Annual Incentive Plan were above target, reflecting strong annual performance, the value of long-term equity awards (representing more than 75% of target total compensation) decreased as a result of lower stock price performance.
Operational and Financial Performance. Anadarko is among the world’s largest independent exploration and production companies, with approximately 2.8 billion barrels of oil equivalent of proved reserves at December 31, 2013. Our asset portfolio is aimed at delivering long-term value to stockholders by combining a large inventory of development opportunities in the U.S. onshore with high-potential worldwide offshore exploration and development activities.
The Company’s 2013 performance continued the trend over the last several years of delivering consistent high-quality additions of proved reserves, increasing year-over-year margins, increasing year-over-year sales volumes, and allocating capital efficiently, all while maintaining a strong safety record. Achieving these key business objectives is fundamental to delivering superior returns for our stakeholders over time. Specific achievements included:
• | Continued Volumes Growth. The Company achieved record sales volumes in 2013, representing a 7% year-over-year increase of daily sales volumes. |
• | Continued Reserve Growth. The Company added over 500 million barrels of proved reserves replacing 194% of its production in 2013 before the effects of price revisions, at very competitive costs. Year-end proved reserves were approximately 2.8 billion BOE, representing a 9% increase over 2012. |
• | Sustained Exploration Success. The Company continued its exploration success with an industry-leading deepwater exploration/appraisal success rate of approximately 67% in 2013, which provides resources and optionality for strategically managing the Company’s portfolio. |
• | Active Portfolio Management. The Company continued to demonstrate its focus on and commitment to active portfolio management, including a property exchange in the Wattenberg field and an acquisition of additional working interests in the Moxa area of Wyoming. The Company also announced approximately $4.5 billion of asset monetization transactions during the year through carried-interest arrangements, divestitures and exploration farm-outs, which accelerate value, reduce execution risk and enhance returns without leveraging the balance sheet. |
• | Advancement of Mega-Projects. The Company achieved first production from all three facilities at the El Merk complex in Algeria, successfully sanctioned the TEN (Tweneboa, Enyenra, and |
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Compensation Discussion and Analysis
Ntomme) complex offshore Ghana and the Heidelberg project in the deepwater Gulf of Mexico, and successfully installed the Lucius spar on location in the Gulf of Mexico. |
• | ||
Exceptional Safety Performance. The Company’s safety performance in 2013 was the best in the Company’s history. This record performance demonstrates the Company’s safety-oriented culture and continuing commitment to safety across the organization. |
• | Doubled Quarterly Dividend. In August 2013, the |
In addition to these achievements, during 2013 Anadarko was once again recognized by various independent organizations for the Company’s leadership, innovation and environmental stewardship in its operating areas. For example, based on our ability to find, develop and produce onshore resources Wood Mackenzie identified Anadarko in a December 2013 study as the top company in our industry for creating value from U.S. onshore resources. Additionally, we received the 2013 Platts Global Energy Award for E&P Leadership, the Oil Council’s Large Cap Company of the Year and the Colorado Oil & Gas Conservation Commission’s Technology Application/Community Relations/Local Government Coordination Award. For a full list of Anadarko’s awards and recognitions see http://www.anadarko.com/Responsibility/Pages/AwardsRecogniton.aspx.
Stock Price Performance. Our relative total stockholder return (TSR) for 2013 does not reflect the Company’s exceptional operational and financial performance. We believe this apparent disconnect is largely due to the ongoing litigation relating to the Tronox Adversary Proceeding, including the issuance of a Memorandum of Opinion, After Trial in December 2013 by the U.S. Bankruptcy Court for the Southern District of New York in which the court found Kerr-McGee Corporation, a subsidiary acquired by the Company in 2006, liable for fraudulent transfer in connection with a 2002 internal corporate restructuring of Kerr-McGee and the 2005 initial public offering of Tronox Incorporated, a subsidiary of Kerr-McGee. For additional information regarding the nature and status of the Tronox Adversary Proceeding, seeNote 17 — Contingencies—Tronox Litigation in the Notes to Consolidated Financial Statements under Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. While the Company’s TSR performance relative to our peers ranked in the top quartile for the three-year periods ending in 2011 and 2010, we believe uncertainty related to the Tronox Adversary Proceeding has adversely affected the Company’s stock price performance for both of the three-year periods ending in 2012 and 2013. For 2010-2012, TSR performance relative to our peers was in the third quartile and for 2011-2013 performance was in the fourth quartile.
Impact of 2013 Company Performance on Executive Compensation
We have structured our cash and equity-based compensation program to position more than 85% of our executive officers’ target total compensation opportunity in at-risk compensation components tied to the achievement of short- and long-term performance criteria aligned with our business objectives. Long-term incentives combine performance units, stock options and restricted stock units to provide a compensation opportunity aligned with the Company’s long-term stock performance, delivered through awards that are performance-based in absolute and relative terms, while also encouraging retention.
31 |
Executive SummaryCompensation Discussion and Analysis
The Company’s excellent operational and financial performance was able to achieve or to exceed each of its key operational objectives for 2010 during a year that presented unprecedented challengesreflected in above target payouts under the AIP:
The Company’s lagging stock price performance in 2013, however, resulted in below target payouts for the Company, its employeesperformance units payable for the performance periods 2011-2013 and its stakeholders. This performance, which continues to generate competitive returns and advance our longer-term growth objectives, was driven by several factors, including the following:
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Compensation Discussion and Analysis
Furthermore, the lagging 2013 stock price performance has negatively impacted the current value of executive long-term incentive awards. The following chart illustrates that as of December 31, 2013, the intrinsic value of the CEO’s 2013 long-term incentive awards (as defined below) is 75% less than the original grant date values and a revised year-end fair market valuation of the awards is 30% less than the original grant date values:
2013 CEO Long-Term Incentive Awards(1) |
Award Type | Grant Date | Grant Date Fair Market Values($)(2) | 12/31/2013 Intrinsic Values($)(3) | 12/31/2013 Fair Market Values($)(4) | ||||||||||||
Stock Options | 11/6/2013 | 3,848,495 | 0 | 3,019,648 | ||||||||||||
Restricted Stock Units | 11/6/2013 | 2,755,539 | 2,375,237 | 2,375,237 | ||||||||||||
Performance Units(1) | 11/5/2012 | 2,775,473 | 0 | 1,183,364 | ||||||||||||
Total |
| 9,379,507 | 2,375,237 | 6,578,249 | ||||||||||||
% Decrease from Grant Date Value | -75% | -30% |
(1) | The above table reflects values for the |
(2) | Grant date fair market values reflect the accounting grant date fair value of awards as reported in the applicable Summary Compensation Table. |
(3) | Intrinsic values reflect the value of the equity awards on December 31, 2013 based on the Company’s closing stock price of $79.32. The stock options, with an exercise price of $92.02, are currently underwater and based on our 2013 TSR performance the performance units are currently tracking a zero percent payout. |
(4) | The December 31, 2013 fair market values include: (i) a revised Black-Scholes valuation for the stock options assuming the year-end stock price of $79.32 and a shorter expected term; and (ii) a revised Monte Carlo valuation for the performance units which takes into account our 2013 TSR performance relative to our peers. These revised values are provided to reflect the fact that, while the stock options and performance units currently have an intrinsic value of $0, assuming sufficient absolute stock price improvement and improvement in relative TSR, there remains a payout opportunity under the awards. |
In addition to the Company’s performance, the Committee’s compensation decisions for 2013, summarized below, were influenced by the following:
CEO Compensation. In connection with Mr. Walker’s appointment to CEO in May 2012, the Committee positioned his targeted annual total direct compensation opportunity at the median of the survey data, which represented a 22% decrease relative to his predecessor in 2011. In November 2013, based on a recommendation from Mr. Walker in light of the lack of clarity at the time with regard to the Tronox Adversary Proceeding, the Committee determined not to adjust Mr. Walker’s targeted annual total direct compensation opportunity for 2013.
33 | ||||
Compensation Discussion and Analysis
As CEO, Mr. Walker’s compensation is higher than the Company achieved these results while spending approximately $200 million less capital than originally projectedcompensation of the other NEOs. This difference in compensation is supported by the industry peer group benchmark data, which is substantially higher for the year. Anadarko was also recognizedCEO role than for the other NEO positions, and is indicative of the greater responsibility the CEO position entails for the strategic direction, financial condition, operating results and reputation of the Company.
Other NEO Compensation. In November 2013, the Committee approved salary increases for the other NEOs ranging from 4.9% to 16.7%. The base salary increase for Mr. Gwin represents his first increase since November 2010 and the base salary increases for Messrs. Meloy, Daniels and Reeves represent their first increases since November 2011. No changes were made to the NEO bonus targets for 2014. The annual equity awards made to the other NEOs in November 2013 reflect approximately 12% increases over their prior year awards. These compensation actions were determined based on the Committee’s consideration of each NEO’s contribution, individually and collectively as an executive team, to the successful execution of the Company’s strategic goals for the year; the importance of retaining and motivating the executive team for the execution of the Company’s long-term strategy, particularly in light of the departure of a senior executive officer to a peer company during the year; Peer Proxy Data (as defined on page 37); and internal equity factors. These actions position the aggregate total target direct compensation of our NEOs at approximately the 75th percentile of the Peer Proxy Data, which is similarly aligned with severalthe Company’s total assets and market capitalization positioning against the industry peer group as discussed on page 37.
A detailed description of our executive compensation program and the compensation decisions made by the Committee for 2013 are reported on the pages that follow.
Continued Engagement with Stockholders
Our stockholders’ views on corporate governance and executive compensation are important to us, and we value the feedback and insights that we receive from our stockholders through ongoing dialogue. Since our 2013 Annual Meeting, we have continued to engage in periodic dialogue with stockholders and have solicited feedback from stockholders representing approximately 48% of the Company’s outstanding common stock.
At our 2013 Annual Meeting, more than 85% of our stockholders who voted on the proposal voted in support of our executive compensation program. We believe our stockholders’ strong support reaffirmed the design and structure of our compensation program. While the feedback we receive from our stockholders varies depending upon investment goals and strategies, our stockholders have consistently emphasized that executive compensation should be closely aligned with long-term performance results. Following discussions with stockholders, the Committee took the following actions:
34 | ||
Compensation Discussion and Analysis
OUR PAY-FOR-PERFORMANCE PHILOSOPHY AND PRACTICES
The main objective of all of the Company’s awards and recognitions can be found under the “Corporate Responsibility” section of our website at www.anadarko.com.)
28
29
What We Do
Require a Majority of Pay To Be At-Risk — More than 85% of our executive officer’s target total compensation opportunity is at-risk, including our annual target bonuses and annual long-term incentive awards. A smaller portion is represented by base salary, or fixed, compensation. |
Maintain a |
30
total compensation opportunities should be reflective of each executive officer’s role, skills, experience level and individual | ||
that our |
Require Robust Stock Ownership — To align executive and stockholder interests, we require stock ownership levels equal to 6 times base salary for the CEO and 3 times base salary for the other executive officers, with holding requirements under certain circumstances. |
Maintain Equity Grant Administration Procedures — The Committee has established Equity Grant Administrative Procedures to maintain the integrity of the Company’s process for granting equity awards and to ensure that such awards are consistent with legal, regulatory and accounting requirements. |
Provide for Double-Trigger Equity Acceleration Upon a Change of Control — Under the 2012 Omnibus Incentive Compensation Plan (2012 Omnibus Plan), accelerated vesting of equity awards due to a change of control will only occur upon the executive officer’s termination without cause or for good reason during the applicable protection period following such change of control. |
Provide for Clawback Provisions — Each award under the 2008 Omnibus Incentive Compensation Plan (2008 Omnibus Plan) and the 2012 Omnibus Plan may be subject to forfeiture or repayment if the Company is required to prepare an accounting restatement as a result of material noncompliance with applicable rules. |
Structure Incentive Compensation To Be Deductible — Performance units, stock options, restricted stock units, and cash awards granted under our 2012 Omnibus Plan are intended to be fully deductible by the Company by satisfying the performance-based requirements of IRC Section 162(m). Under the 2012 Omnibus Plan, the Committee is prohibited from taking any action that would cause awards intended to qualify as performance-based to fail to satisfy the IRC Section 162(m) requirements. |
35 |
PayingCompensation Discussion and Analysis
What We Don’t Do
No Employment Contracts — We do not have an employment contract with any executive officer. |
No Tax Gross-Ups on Perquisites — We do not provide tax gross-ups on executive perquisites, except where such gross-ups are considered a normal benefit under the Company’s standard relocation program available to all employees. |
No Permitted Short Sales or Derivative Transactions in Company Stock— We prohibit all non-employee directors, officers and other employees of the Company from engaging in any short-term, speculative securities transactions related to the Company, including engaging in short sales, buying or selling put or call options, and trading in options of the Company. |
No New Excise Tax Gross-ups — In February 2011 we eliminated the excise tax gross-up provision in key employee change-of-control contracts executed with newly appointed and/or newly hired executive officers who are not otherwise subject to any existing agreements and replaced it with a best-of-net provision (as described on page 53). The CEO’s Severance Agreement includes a best-of-net provision. |
No Payment of Current Dividends or Dividend Equivalents on Unvested Awards — Beginning in May 2012, dividend equivalents on restricted stock unit awards granted to executive officers must be reinvested in shares of the Company’s common stock and will be paid upon the applicable vesting of the underlying award (rather than paid in cash on a current basis). |
No Repricing — The 2008 and 2012 Omnibus Plans expressly prohibit repricing of stock options and stock appreciation rights, unless approved by stockholders. |
No Hedging or Pledging — We prohibit directors, officers and other employees from entering into equity derivative or other financial instruments that would have the effect of limiting downward market risk of owning the Company’s securities (including equity securities received as part of the Company’s compensation program). We also prohibit directors and executive officers from purchasing Company securities on margin and pledging such securities as security for loans (including holding Company securities in a margin account). |
HOW WE MAKE COMPENSATION DECISIONS
The Committee has overall responsibility for Performance
31
32
Fiscal Year Ended December 31 | 2007 | 2008 | 2009 | 2010 | ||||||||||||
Anadarko Petroleum Corporation | $ | 100.00 | $ | 59.08 | $ | 96.41 | $ | 118.37 | ||||||||
S&P 500 Index | 100.00 | 63.00 | 79.67 | 91.67 | ||||||||||||
Industry Peer 50th Percentile | 100.00 | 61.36 | 86.23 | 97.58 | ||||||||||||
Industry Peer 75th Percentile | 100.00 | 74.56 | 97.89 | 112.09 |
33
Compensation Consultant. The Compensation Committee utilizeshas retained Frederic W. Cook & Co., Inc. (FWC) as an independent consultant to provide advice on executive compensation consultantmatters. The decision to review executive compensationengage FWC was made by the Committee and benefit programs. Initially, in 2010, the Compensation Committee directly retained Hewitt Associates LLC, or Hewitt, as its outside independent compensation consultant. On October 1, 2010, the Compensation Committee then retained Meridian Compensation Partners, LLC, or Meridian, as its outside independent executive compensation consultant upon Meridian’s separation from Hewitt. In these engagements, the consultants reportedFWC reports directly and exclusively to the Compensation Committee; however, at the Compensation Committee’s direction, the consultants workedconsultant works directly with management to review or prepare materials for the Compensation Committee’s consideration. TheWhile engaged as the Committee’s consultant, engaged at
36 |
Compensation Discussion and Analysis
FWC did not perform any services for the timeCompany outside the scope of its arrangement with the Committee. During 2013, the Committee reviewed FWC’s independence and determined that there were no conflicts of interest as a result of the applicable meeting attended eachCommittee’s engagement of the nine Compensation Committee meetings in 2010.FWC. The Compensation Committee did not engage any consultant other than Hewitt or MeridianFWC during 20102013 to provide executive compensation consulting services. The Compensation Committee’s engagement of its compensation consultant included the following services:
34
2010 | ||||
Executive Compensation Consulting Fees | $ | 339,445 | ||
Non-Executive Compensation Consulting Fees | 689,901 | |||
Total | $ | 1,029,346 | ||
Benchmarking Peers. Each year, FWC conducts an independent review of the services provided by Hewitt when engaging them as its independent consultant in 2010.
• Apache Corporation | • Devon Energy Corporation | • | ||
• Chesapeake Energy Corporation | • EOG Resources, Inc. | • | ||
• Chevron Corporation | • Hess Corporation | • | ||
• ConocoPhillips | • Marathon Oil Corporation | • |
Within the oil and gas industry, there are a very limited number of companies that closely resemble us in size, scope and nature of business operations. Our industry peer group contains companies in our industry that are both larger and smallervary in size and scope and that may operate in related business segments in the industry in whichthese respects because we have no operations, such as refining. We compete with these companies for talent and believe the selected companies are currently the most appropriate with respect to executive compensation benchmarking. The differences and similarities between us and the companies in our industry peer group are taken into consideration when referencing benchmarks for executive compensation decisions.
Benchmarking Data. To assist in reviewing the design and structure of our executive compensation program, FWC provides the Committee with an independent assessment of the compensation programs and practices of the companies in our industry peer group. This comprehensive analysis includes both third-party survey data and supplemental compensation data that is obtained from the latest peer proxy statements and updated, as applicable, with recent public filings for company-by-company detail on peer NEO positions (Peer Proxy Data).
37 |
Compensation Discussion and Analysis
Historically, the primary focus of the Committee has been on third-party survey data that provides aggregated data by functional position. Due to organizational differences in executive leadership structures and business strategies across our peers, it has become increasingly difficult to benchmark comparable executive leadership positions for many of our NEOs. As a result, the Committee placed more emphasis on the Peer Proxy Data in making compensation decisions for 2013 because this data provides greater transparency and insight into the comparability of our NEOs and executive leadership structure relative to the NEOs and executive leadership structure of our peers. The Peer Proxy Data includes individual incumbent data for each company in our industry peer group and illustrates the differences in job scope, incumbent tenure and overall experience level of peer NEOs compared to our NEOs. In assessing the Peer Proxy Data, the Committee reviewed data summarized by functional positions, by order of pay (i.e., second highest paid, third highest paid, etc.), and aggregated by the total direct compensation opportunity of the NEOs collectively as a management team at each peer company. Evaluating the total direct compensation opportunity for each peer company’s management team as a whole allows the Committee to consider how each peer company structures the compensation opportunity for their management team regardless of individual functional responsibilities. This approach recognizes the differences in executive leadership structures and business strategies across our peers. When reviewing benchmarking data, the Committee reviews 25th, 50th, and 75th percentile data; however, the Committee does not target a specific percentile of the benchmark data and in making officer compensation decisions takes into account other considerations as noted below.
Role of CEOand/or Other Executive Officers in Determining Executive Compensation. Our CEO, Mr. Hackett, provides recommendations to The Committee, after reviewing the Compensation Committee for each element of compensation for each of the NEOsinformation provided by FWC and considering other than himself. In forming his recommendations, he may seek input from other senior officers about the employees who report to each of them. The Compensation Committee,factors and with input from its consultant,FWC, determines each element of compensation for Mr. Hackett and, with input from its consultant and Mr. Hackett, determinesour CEO. When making determinations about each element of compensation for the other NEOs. Atexecutive officers, the CompensationCommittee also considers recommendations from our CEO. Additionally, at the Committee’s
35
Other Important Considerations. In addition to the above resources, the Compensation Committee strongly considers other factors when making compensation decisions, such as individual experience, individual performance, internal pay equity, developmentand/or and succession status, and other individual or organizational circumstances. With respect to equity-based awards, the Compensation Committee also considers the costexpense of such awards, the impact on dilution, and the relative value of each element comprising total target executive compensation.
Tally Sheets.2010 The Committee uses tally sheets in its annual executive compensation review to enhance the analytical data used by the Committee to evaluate our executive officer compensation and to provide the Committee with a consolidated source for viewing the aggregate value of all elements of executive compensation. The Committee does not assign a specific weighting to the tally sheets in their overall decision-making process, but uses them to gain additional perspective and as a reference in the decision-making process.
38 |
Compensation ActionsDiscussion and Analysis
ELEMENTS OF OUR COMPENSATION PROGRAM
Our executive compensation program includes direct and indirect compensation elements. We believe that a majority of an executive officer’s total compensation opportunity should be performance-based; however, we do not have a specified formula that dictates the overall weighting of each element. The Committee determines total compensation opportunity based on a review of competitive compensation data, including both survey and Peer Proxy Data, consistency with our compensation philosophy, and its judgment as a committee. In doing so, the Committee considers any specific circumstances related to the Company and/or the executive officer.
As illustrated in the charts below, 79% of the current CEO and 75%, on average, of target total compensation for the other NEOs is provided through equity-based incentives that are dependent upon long-term corporate performance and stock-price appreciation. Any value ultimately realized for these long-term equity-based awards is directly tied to Anadarko’s absolute and relative stock-price performance.
The charts above are based on the following: current base salaries, as discussed on page 41; target bonus opportunities approved by the Committee in 2013 for 2014, as discussed on page 42; and the estimated grant date value for the 2013 annual equity awards, as discussed on page 48.
39 |
Compensation Discussion and Analysis
Direct Compensation Elements
The direct compensation elements are outlined in the table below. The indirect compensation elements are outlined in a table on page 49.
40 |
Compensation Discussion and Analysis
ANALYSIS OF 2013 COMPENSATION ACTIONS
The following is a discussion of each compensation element and the specific actions taken by the Compensation Committee in 20102013 related to each element.of our direct compensation elements. Each of these elementselement is reviewed on an annual basis, and may be reviewedannually, as well as at the time of a promotion, other change in responsibilities, other significant corporate events or a material change in market conditions. The same design principles and factors are applied in a consistent manner to all NEOs. Material differences in the amount of compensation awarded to each of the NEOs generally reflect the differences in the individual responsibility and experience of each officer and the differences in the amounts of compensation paid to officers in comparable positions in our industry peer group. For example, our CEO’s compensation is higher than the compensation of the other NEOs. This difference in compensation reflects that our industry peer group benchmark data is substantially higher for the CEO role than for the other NEO positions, reflecting the higher degree of responsibility and scrutiny the CEO position entails for the image, strategic direction, financial condition, and operating results of the Company.
Salary as of | Salary Effective | |||||||||||
Name | January 1, 2010 | November 2010 | Increase% | |||||||||
Mr. Hackett | $ | 1,567,500 | $ | 1,567,500 | 0.0 | % | ||||||
Mr. Gwin | $ | 650,000 | $ | 715,000 | 10.0 | % | ||||||
Mr. Walker | $ | 700,000 | $ | 735,000 | 5.0 | % | ||||||
Mr. Meloy | $ | 575,000 | $ | 575,000 | 0.0 | % | ||||||
Mr. Daniels | $ | 575,000 | $ | 575,000 | 0.0 | % |
36
The table below reflects the base salaries for the NEOs that were approved by the Committee in 2013:
Name | Salary as of January 1, 2013($) | Salary as of November 10, 2013($) | Increase% | ||||||||||||
Mr. Walker | 1,300,000 | 1,300,000 | 0% | ||||||||||||
Mr. Gwin | 715,000 | 750,000 | 4.9% | ||||||||||||
Mr. Meloy | 600,000 | 700,000 | 16.7% | ||||||||||||
Mr. Daniels | 600,000 | 700,000 | 16.7% | ||||||||||||
Mr. Reeves | 650,000 | 700,000 | 7.7% |
Mr. Walker’s base salary has not been increased since his appointment to CEO in May 2012. The base salary increase for Mr. Gwin represents his first increase since November 2010 and the base salary increases for Messrs. Meloy, Daniels and Reeves represent their first increases since November 2011. See page 34 for additional discussion regarding the Committee’s decision to increase certain of our NEO’s base compensation in 2013.
Performance-Based Annual Cash Incentives (Bonuses)
Our executive officers participate in the Annual Incentive Program (AIP), which is part of our 2012 Omnibus Plan that was approved by our stockholders in May 2012. Our AIP is designed to reward our executives for effectively managing the Company’s investment dollars in the safe and efficient growth of sales volumes, reserves and cash flows by focusing on the following performance criteria:
• Reserve Additions | • EBITDAX/BOE | |
• Sales Volumes | • Total Recordable Incident Rate | |
• Capital Expenditures |
Capital expenditure and cash flow margin targets are incorporated in the incentive compensation program to incentivize financial discipline and cost management. We believe these five metrics together provide the best, most direct means of aligning the actions of our executive officers and employees in the short term to position their target opportunities above the 75th percentilecompany to deliver superior total stockholder returns over the long term.
In February 2013, the Committee established a baseline AIP performance hurdle for the NEOs of $3.1 billion of Cash Flow from Operating Activities (Net cash provided by (used in) operating activities) as calculated in the Consolidated Statements of Cash Flows, but excluding the effect of any significant (i.e., $100 million or greater) legal settlements/satisfaction of judgments (as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources of Cash — Operating Activities) for the fiscal year as published in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. If this performance hurdle was not achieved, the NEOs subject to Section 162(m) of the benchmark data.IRC would earn no AIP bonuses for the year under the 2012 Omnibus Plan. If the performance hurdle was met, the bonus
41 |
Compensation Discussion and Analysis
pool would be funded at the maximum bonus opportunity level for each NEO. The Committee may apply negative discretion in determining actual awards, taking into consideration our actual performance against corporate annual performance goals, each individual officer’s performance and contributions, and other factors. The Committee does not have the discretion to increase bonuses above funded amounts. The AIP bonus pool was fully funded for the 2013 performance year because the Company exceeded the established performance hurdle.
If the initial performance hurdle is met, the Committee uses the following formula as a guideline for determining individual bonus payments:
Individual base salary earnings for the year | X | Individual target bonus opportunity (equal to a % of base salary) | X | AIP performance score % | +/- | Individual performance adjustments (if any) | = | Actual bonus earned |
Individual Target Bonus Opportunities. Individual target bonus opportunities are set as a percentage of base salary. Executive officers may earn from 0% up to 200% of their individual bonus target. The bonus targets for 2010the NEOs for 2013 are shown in the table below. As part ofFollowing its annual review of executive compensation in 2010,November 2013, the Compensation Committee made no changes to the NEOs’NEO bonus targets for 2011.
Minimum | Target | Maximum | ||||||||||
Payout as a | Payout as a | Payout as a | ||||||||||
Name | % of Salary | % of Salary | % of Salary | |||||||||
Mr. Hackett | 0 | % | 130 | % | 260 | % | ||||||
Mr. Gwin | 0 | % | 95 | % | 190 | % | ||||||
Mr. Walker | 0 | % | 100 | % | 200 | % | ||||||
Mr. Meloy | 0 | % | 95 | % | 190 | % | ||||||
Mr. Daniels | 0 | % | 95 | % | 190 | % |
37
Name | Minimum Payout as a % of Salary | Target Payout as a % of Salary | Maximum Payout as a % of Salary | ||||||||||||
Mr. Walker | 0% | 130% | 260% | ||||||||||||
Mr. Gwin | 0% | 95% | 190% | ||||||||||||
Mr. Meloy | 0% | 95% | 190% | ||||||||||||
Mr. Daniels | 0% | 95% | 190% | ||||||||||||
Mr. Reeves | 0% | 95% | 190% |
42 |
Compensation Discussion and Analysis
AIP Performance Score. In determining the The Company’s AIP performance score underfor 2013 was based on the Company’s AIPachievement of targeted levels of performance for 2010, the Compensation Committee approved the following internal operational, financial and safety measures and weightings:
Performance Goals | Purpose | |
Operational: • Reserve Additions • Sales Volumes | The primary business objectives for an exploration and production company are to find reserves at a competitive cost while generating economic value for its stockholders and | |
Financial(1): • Capital Expenditures • EBITDAX/BOE | ||
Safety: • Total Recordable Incident Rate | ||
(1) |
43 |
Compensation Discussion and Analysis
As illustrated in the charts below, the Committee establishes increasingly challenging annual operational performance goals under our AIP to generate competitive returns and measuringadvance our longer-term growth objectives, without compromising the Company’ssafety of our employees. For 2013 the Committee again increased the targeted goals for reserve additions, sales volumes and safety performance against those(as compared to the targets established for 2012) and the Company outperformed each goal with record-setting operational results and a continued commitment to safety.
(1) | U.S. Oil and Natural Gas Industry averages for 2011 and 2012 as published in the American Petroleum Institute Workplace Injuries and Illnesses Safety (WIIS) Report for 2003 - 2012. The 2013 data is not yet available. |
For 2013 the Company also outperformed the targeted financial goals established by the Compensation Committee may use its discretion in determining the extent to which such goals or results properly reflect the Company’s achievement of overall business objectives, including any material changesfor Capital Expenditures and EBITDAX/BOE (as reflected in the Company’s operations or business objectives duringtable below), which demonstrates our continued commitment to financial discipline by spending efficiently and maximizing margins. Because the coursetargeted performance levels for Capital Expenditures and EBITDAX/BOE may fluctuate each year based on the oil and gas operating budget approved by the Board of a givenDirectors and the commodity price environment in which we operate, historical performance charts are not helpful for these two performance goals. The Committee believes that the targets established for all of the AIP performance goals are challenging and appropriately require the executive officers to strive for strong performance on key metrics that will result in long-term stockholder value creation.
44 |
Compensation Discussion and Analysis
The relative weighting and the 2013 performance targets were established by the Committee at the beginning of the year. The table below reflects the 2010 target and the 20102013 performance results against each of these specified targets. Each performance goal is capped at 275% and the target for each measure under the AIP:
Relative | AIP | AIP | ||||||||||||||
Weighting | AIP Target | Performance | Performance | |||||||||||||
2010 AIP Performance Goals | Factor | Performance | Results(1) | Score | ||||||||||||
Reserve Additions (before price revisions and divestitures), MMBOE | 25% | 310 | 329 | 33% | ||||||||||||
Production Volumes, MMBOE | 25% | 231 | 235 | 35% | ||||||||||||
Capital Expenditures, $MM | 20% | $ | 5,600 | $ | 5,238 | 29% | ||||||||||
EBITDAX/BOE, $ | 20% | $ | 25.88 | $ | 28.43 | 25% | ||||||||||
Total Recordable Incident Rate (Safety) | 10% | 0.70 | 0.69 | 11% | ||||||||||||
Sub-total | 100% | 133% | ||||||||||||||
Cash Cost Management Factor(2) | £10% Multiplier | $ | 9.30 | $ | 8.40 | x1.10 | ||||||||||
Total | 146% |
2013 AIP Performance Goals | Relative | AIP Target Performance | AIP Performance Results(1) | AIP | ||||||||||
Reserve Additions (before price revisions and divestitures), MMBOE | 25% | 454 | 514.3 | 52% | ||||||||||
Sales Volumes, MMBOE | 25% | 281 | 284.2 | 39% | ||||||||||
Capital Expenditures, $MM | 20% | 7,700 | 6,954 | 33% | ||||||||||
EBITDAX/BOE($) | 20% | 31.80 | 34.79 | 26% | ||||||||||
Total Recordable Incident Rate (Safety) | 10% | 0.49 | 0.28 | 23% | ||||||||||
|
| |||||||||||||
Total | 100% | 173% |
(1) | The | |
Individual Performance Adjustments. In determining an NEO’s bonus payment, the Compensation The Committee may make an adjustment to an executive officer’s bonus payment based on individual performance. This adjustment allows the
38
Actual Bonuses Earned for 2010.2013. The AIP awards earned for 2010 and paid to each of2013 for the NEOs are shown in the table below and are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
Base Salary | Target Bonus | AIP | Individual | |||||||||||||||||||||||||||||||||||||
Earnings for | as% of Base | Performance | Performance | Actual Bonus | Actual Bonus | |||||||||||||||||||||||||||||||||||
Name | 2010 | Salary | Score | Adjustments | Award ($) | Award (%) | ||||||||||||||||||||||||||||||||||
Mr. Hackett | $ | 1,567,500 | X | 130 | % | X | 146 | % | + | $ | 0 | = | $ | 2,975,115 | 146 | % | ||||||||||||||||||||||||
Mr. Gwin | $ | 657,500 | X | 95 | % | X | 146 | % | + | $ | 181,141 | = | $ | 1,093,094 | 175 | % | ||||||||||||||||||||||||
Mr. Walker | $ | 704,039 | X | 100 | % | X | 146 | % | + | $ | 0 | = | $ | 1,027,896 | 146 | % | ||||||||||||||||||||||||
Mr. Meloy | $ | 575,000 | X | 95 | % | X | 146 | % | + | $ | 158,412 | = | $ | 955,937 | 175 | % | ||||||||||||||||||||||||
Mr. Daniels | $ | 575,000 | X | 95 | % | X | 146 | % | + | $ | 158,412 | = | $ | 955,937 | 175 | % |
Name | Base Salary Earnings for 2013($) | Target Bonus as % of Base Salary | AIP Performance Score | Individual Performance Adjustments | Actual Bonus Award ($) | ||||||||||||||||||||||||||||||||||||||||
Mr. Walker | 1,300,000 | X | 130% | X | 173% | + | 0 | = | 2,923,700 | ||||||||||||||||||||||||||||||||||||
Mr. Gwin | 719,038 | X | 95% | X | 173% | + | 0 | = | 1,181,740 | ||||||||||||||||||||||||||||||||||||
Mr. Meloy | 611,539 | X | 95% | X | 173% | + | 0 | = | 1,005,064 | ||||||||||||||||||||||||||||||||||||
Mr. Daniels | 611,539 | X | 95% | X | 173% | + | 0 | = | 1,005,064 | ||||||||||||||||||||||||||||||||||||
Mr. Reeves | 655,769 | X | 95% | X | 173% | + | 0 | = | 1,077,757 |
45 |
Compensation Discussion and Analysis
Equity Compensation
Our equity-based long-term incentive program is designed to reward our executive officers for sustained long-term share performance. This program represents 75% or more of target total compensation opportunity and includes a combination of equity-based awards under(performance units, stock options and restricted stock units) that are performance-based in absolute and relative terms. Pursuant to our Omnibus Plan. AnnualEquity Grant Administration Procedures established by the Committee, annual equity-based awards for NEOsexecutive officers are typically made at the regularly scheduled Committee meeting of the Compensation Committee each
39
Our annual awards are determined based on a targeted dollar value and consist of a combination of stock options, time-based restricted stock units and performance unit awards.value. The 20102013 targeted equity award value (calculated using Meridian’s proprietary incentive valuation models) was allocated 40% in performance units, 35% in non-qualified stock options, 35%and 25% in restricted stock units, and 25% in performance units. This allocation provides a combination of equity-based awards that is performance-based in absolute and relative terms, while also encouraging retention. In addition,For additional details on the useterms of performance unitthese awards and restricted stock units enables us to better manage our potential stock dilution.see page 59.
Performance Units. With respect to the restricted stockperformance units, the Compensation Committee establishes an objectivehas established TSR as the performance criteria for each calendar year that must be achieved before the restricted stock units are awarded to executives the following year. The restricted stock unit awards made in November 2010 were based on the Company’s achievement of the 2009 performance criteria ($1.6 billion of cash flow from continuing operations for fiscal year 2009).
40
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||
Payout as% of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% | ||||||||||||||||||||||||
The industry peer group for our most recent awards granted in 2013 is listed below:
• Apache Corporation | • EOG Resources, Inc. | • | ||
• Chevron Corporation | • Hess Corporation | • | ||
• ConocoPhillips | • Marathon Oil Corporation | • | ||
• Devon Energy Corporation | • |
If any of these peer companies undergoes a change in corporate capitalization or a corporate transaction (including, but not limited to, a going-private transaction, bankruptcy, liquidation, merger consolidation, etc.)or consolidation) during the performance period, the Compensation Committee shall undertake an evaluation to determine whether such peer company will be replaced. The Compensation Committee has pre-approved Murphy Oil Corporation, Nexen, Inc., and Chesapeake Energy Corporation and Talisman Energy as replacement companies (in that order).
46 |
Compensation Discussion and Analysis
The following table reflects the payout scale for the annual performance unit program:
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||
Payout as % of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% |
Below is an example of how the performance unit payout scale works, assuming an executive officer received a target award of 20,000 performance units.
Total Target | |||||||||||||||
Performance Period | Target Performance Units for Each Performance Period | Relative TSR | |||||||||||||
the Performance Period | % | ||||||||||||||
Number of | |||||||||||||||
Performance | Earned(1) | Timing of Payout | |||||||||||||
20,000 | |||||||||||||||
50% tied to a two-year performance period | 10,000 (20,000 x 50%) | 3rd | 164% | 16,400 units (10,000 x 164%) | Paid after end of two-year performance period | ||||||||||
50% tied to a three-year performance period | 10,000 (20,000 x 50%) | 10th | 0% | 0 units (10,000 x 0%) | No payout after end ofthree-year performance period | ||||||||||
(1) | Each performance unit earned |
Stock Options. Stock options vest pro-rata annually over three years, beginning with the first anniversary of the date of grant, and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders.
Restricted Stock Units. With respect to the restricted stock units, the Committee establishes objective performance criteria for each calendar year that must be achieved before any restricted stock units are awarded to executive officers the following year. If the performance criteria are achieved, the Committee may make awards of restricted stock units to the executive officers. The restricted stock units awarded vest pro-rata annually over three years, beginning with the first anniversary of the grant date. All of the restricted stock unit awards made in November 2013 were made after the Company’s achievement of the 2012 performance criterion, which was to obtain $2.5 billion in Cash Flows from Operating Activities (Net cash provided by (used in) operating activities), as calculated in the Consolidated Statements of Cash Flows for the fiscal year as published in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
47 |
Compensation Discussion and Analysis
Equity Awards Made During 20102013
On November 9, 2010,6, 2013, the Compensation Committee approved the following annual long-term incentive awards.awards under our 2012 Omnibus Plan for the NEOs. These awards, as well as a description of the methodology for calculating the grant date fair value, are included in the Grants of Plan-Based Awards Table on page 54.
Number of | Target Number | |||||||||||
Number of | Restricted Stock | of Performance | ||||||||||
Name | Stock Options | Units | Units | |||||||||
Mr. Hackett | 188,044 | 79,571 | 56,837 | |||||||||
Mr. Gwin | 54,256 | 22,959 | 16,399 | |||||||||
Mr. Walker | 85,189 | 36,048 | 25,749 | |||||||||
Mr. Meloy | 48,586 | 20,560 | 14,686 | |||||||||
Mr. Daniels | 48,586 | 20,560 | 14,686 |
41
Total LTI Grant Date Value($) | Performance Units (40%) | Stock Options (35%) | Restricted Stock Units (25%) | ||||||||||||||||||||||||||||||||
Name | Target # of Units | Grant Date Value($) | # of Stock Options | Grant Date Value($) | # of Units | Grant Date Value($) | |||||||||||||||||||||||||||||
Mr. Walker | 11,039,373 | 43,997 | 4,435,339 | 148,378 | 3,848,495 | 29,945 | 2,755,539 | ||||||||||||||||||||||||||||
Mr. Gwin | 4,406,940 | 17,564 | 1,770,627 | 59,232 | 1,536,306 | 11,954 | 1,100,007 | ||||||||||||||||||||||||||||
Mr. Meloy | 4,507,133 | 17,963 | 1,810,852 | 60,579 | 1,571,244 | 12,226 | 1,125,037 | ||||||||||||||||||||||||||||
Mr. Daniels | 4,507,133 | 17,963 | 1,810,852 | 60,579 | 1,571,244 | 12,226 | 1,125,037 | ||||||||||||||||||||||||||||
Mr. Reeves | 3,449,489 | 13,748 | 1,385,936 | 46,363 | 1,202,522 | 9,357 | 861,031 |
In February 2011,January 2014, the Compensation Committee certified the performance results for the 20072010 and 20082011 annual performance unit awards withfor the three-year and two-year performance periods, respectively, that ended December 31, 2010.2013. Under the provisions of these awards, the targeted performance units were subject to our relative TSR performance against athe defined TSR peer group.group discussed under the Equity Compensation section on page 46. However, Plains Exploration & Production Company, which was included in the TSR peer group at the time the awards were granted, was acquired in May 2013 and the Committee replaced it with Murphy Oil Company. TSR performance is based on the difference between (1) the average closing stock price for the 30 trading days preceding the beginning of the performance period, and (2) the average closing stock price for the last 30 trading days of the performance period, plus dividends paid for the performance period, and further adjusted for any other distributions or stock splits, where applicable.
For the three-year performance period beginning January 1, 2008 and endingperiods ended December 31, 2013, the performance results and Anadarko’s ranking, as highlighted, were as follows:
2010 the Company’s TSR performance ranked sixth relativeAnnual Award — Three-Year Performance Period (January 1, 2011 to the defined peer group. The defined TSR peer group for the three-year performance period included: Apache Corporation; ConocoPhillips; Devon Energy Corporation; EnCana Corporation; EOG Resources, Inc.; Hess Corporation; Marathon Oil Corporation; Noble Energy, Inc.; Occidental Petroleum Corporation; Pioneer Natural Resources Company and Talisman Energy, Inc. This ranking resulted in a 110% payout as a percent of target.
APC | ||||||||||||||||||||||||||||||||||||
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||
TSR | 79.9% | 34.7% | 16.2% | 14.1% | 13.7% | 13.3% | 7.2% | –8.1% | –12.7% | –13.9% | –14.5% | –34.6% | ||||||||||||||||||||||||
Payout as % of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% | ||||||||||||||||||||||||
42
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | APC 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||
TSR | 118.4% | 82.9% | 78.5% | 69.5% | 59.1% | 53.5% | 26.8% | 13.6% | 12.4% | 8.5% | -14.4% | -20.3% | ||||||||||||||||||||||||||||||||||||||||||||||||
Payout as % of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||||||||||||
2011 Annual Award — Two-Year Performance Period (January 1, 2012 to December 31, 2013) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | APC 9 | 10 | 11 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||
TSR | 106.3% | 69.2% | 51.9% | 47.5% | 43.9% | 42.2% | 36.3% | 27.7% | 11.8% | 6.6% | -0.3% | -2.3% | ||||||||||||||||||||||||||||||||||||||||||||||||
Payout as % of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% |
48 |
Compensation Discussion and Plains Exploration & Production Company. This ranking resulted in a 182% payout as a percent of target.
APC | ||||||||||||||||||||||||||||||||||||
Final TSR Ranking | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||
TSR | 380.1% | 86.4% | 83.1% | 80.0% | 61.6% | 56.8% | 50.3% | 44.4% | 36.8% | 28.7% | 24.4% | 11.9% | ||||||||||||||||||||||||
Payout as % of Target | 200% | 182% | 164% | 146% | 128% | 110% | 92% | 72% | 54% | 0% | 0% | 0% | ||||||||||||||||||||||||
The following tables listtable lists the number of performance units awarded at minimum, target, and maximum levels and the actual number of performance units earned by the NEOs under the provisions of these awards for the three-year and two-year performance periods that ended December 31, 2010:
2007 Annual Award | ||||||||||||||||
Actual # | ||||||||||||||||
Minimum # | Target # | Maximum # | Performance Units | |||||||||||||
Name | Performance Units | Performance Units | Performance Units | Earned | ||||||||||||
Mr. Hackett | 0 | 43,750 | 87,500 | 48,125 | ||||||||||||
Mr. Gwin | 0 | 3,800 | 7,600 | 4,180 | ||||||||||||
Mr. Walker | 0 | 10,900 | 21,800 | 11,990 | ||||||||||||
Mr. Meloy | 0 | 6,100 | 12,200 | 6,710 | ||||||||||||
Mr. Daniels | 0 | 7,050 | 14,100 | 7,755 |
2008 Annual Award | ||||||||||||||||
Actual # | ||||||||||||||||
Minimum # | Target # | Maximum # | Performance Units | |||||||||||||
Name | Performance Units | Performance Units | Performance Units | Earned | ||||||||||||
Mr. Hackett | 0 | 70,300 | 140,600 | 127,946 | ||||||||||||
Mr. Gwin | 0 | 9,650 | 19,300 | 17,563 | ||||||||||||
Mr. Walker | 0 | 22,500 | 45,000 | 40,950 | ||||||||||||
Mr. Meloy | 0 | 9,800 | 19,600 | 17,836 | ||||||||||||
Mr. Daniels | 0 | 11,750 | 23,500 | 21,385 |
2010 Annual Performance Unit Award | 2011 Annual Performance Unit Award | ||||||||||||||||||||||||||||||||||||||||||||
Name | Minimum # Units | Target # Units | Maximum # Units | Actual # Units Earned | Minimum # Units | Target # Units | Maximum # Units | Actual # Units Earned | |||||||||||||||||||||||||||||||||||||
Mr. Walker | 0 | 12,875 | 25,750 | 11,845 | 0 | 8,178 | 16,356 | 4,416 | |||||||||||||||||||||||||||||||||||||
Mr. Gwin | 0 | 8,200 | 16,400 | 7,544 | 0 | 4,902 | 9,804 | 2,647 | |||||||||||||||||||||||||||||||||||||
Mr. Meloy | 0 | 7,343 | 14,686 | 6,756 | 0 | 5,032 | 10,064 | 2,717 | |||||||||||||||||||||||||||||||||||||
Mr. Daniels | 0 | 7,343 | 14,686 | 6,756 | 0 | 5,032 | 10,064 | 2,717 | |||||||||||||||||||||||||||||||||||||
Mr. Reeves | 0 | 6,418 | 12,836 | 5,905 | 0 | 3,837 | 7,674 | 2,072 |
Indirect Compensation Elements
As identified in the table below, the Company provides certain benefits and perquisites (considered indirect compensation elements) that are considered typical within our industry and necessary to attract and retain executive talent. The value of each element of indirect compensation is generally structured to be competitive within our industry.
Indirect Compensation Element | Primary Purpose | |||
Retirement Benefits | • • | Attracts talented executive officers and rewards them for extended service Offers secure and tax-advantaged vehicles for executive officers to save effectively for retirement | ||
Other Benefits (for example, health care, paid time off, disability and life insurance) and Perquisites | • • | Enhances executive welfare and financial security Provides a competitive package to attract and retain executive talent, but does not constitute a significant part of an executive officer’s compensation | ||
Severance Benefits | • • | Attracts and helps retain executives in a volatile and consolidating industry Provides transitional income following an executive’s involuntary termination of employment |
Retirement Benefits
Our executive officers participate in the following retirement and related plans:
Anadarko Employee Savings Plans. The Anadarko Employee Savings Plan or 401(k) Plan,(401(k) Plan) is a tax-qualified retirement savings plan that allows participating United StatesU.S. employees to contribute up to 30% of eligible compensation, on a before-tax basis or on an after-tax basis (via a Roth or traditional after-tax contribution), into their 401(k) Plan accounts. Eligible compensation for NEOs includes base salary and AIP bonus payments. Under the 401(k) Plan, we match an amount equal to one dollar for each dollar contributed by participants up to six percent of their total eligible compensation. This planThe 401(k) Plan is subject to applicable Internal Revenue Service, or IRS,IRC limitations regarding contributions under this plan.participant and Company contributions. Due to IRSIRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor a non-qualified Savings Restoration Plan. The Savings Restoration Plan accrues a benefit substantially equal to the amount
49 |
Compensation Discussion and Analysis
excess, if any, of Company matching and Personal Wealth Account (PWA) contributions that in the absence of any IRS limitations, would have been allocated to an employee’sa participant’s 401(k) Plan account aseach year without regard to the IRC limitation over amounts that were, in fact, allocated to a matching contribution underparticipant’s account. For additional details on the 401(k) Plan. The Savings Restoration Plan permits participants to allocate the matching contributions among a group of notional accounts that mirror the gainsand/or losses of various investment funds provided in the 401(k) Plan (but excluding the Company stock fund). Notional earnings are credited to their account based on the market rate of return provided by the investment funds.
43
Pension Plans. Anadarko provides funded, tax-qualified retirement benefits for all United StatesU.S. employees. Due to IRSIRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor non-qualified restoration plans that cover the NEOsexecutive officers and certain other employees. The pension plans do not require contributions by employeesparticipants and an employeea participant becomes vested in his or her benefit at the completion of three years of service as defined in the pension plans. CompensationEligible compensation covered by the pension plans for the participants includes base salary and AIP bonus payments.
Messrs. HackettWalker and WalkerReeves each have certain supplemental retirement benefits under our non-qualified Retirement Restoration Plan. The Retirement Restoration Plan provides that Mr. Hackett will receive aprovide for special service credit to be applied towards his eligibility for our retiree medical and dental benefit programs. This benefit will accrue in a manner similar to the special pension crediting in Mr. Hackett’s employment agreement, which was provided to account for certain retirement benefits from his prior employer that were foregone when he was hired by Anadarko in 2003. The plan also provides for a one-time service creditcredits of eight years to Mr. Walkerand five years, respectively, if he remainsthey each remain employed by us until the age of 55. ThisMessrs. Walker and Reeves vested in these benefits in 2012. The service credit will becredits are considered applicable service towards our retirement benefit programs, including pension and retiree medical and dental benefits. These supplemental retirement benefits were provided to Mr.Messrs. Walker and Reeves in 2007 to recognize that he was athey were mid-career hirehires that we would like to retain for the remainder of his career.their careers. Providing himthem additional service credits recognizes a portion of histheir prior industry experience and service years which directly benefit us and our stockholders. The accrued benefits related to these special pension credits are discussed in the Pension Benefits Table on page 60. The Compensation Committee does not intend to grant any additional pension credits to our executive officers at this time.
The details of Mr. Meloy’s 2006 Retention Agreement, including the accrued benefits for each of the NEOs, including the benefits related to any special service credits are discussed further in the Pension Benefits Table on page 60.
Other Benefits
We provide other benefits such as medical, dental, and vision insurance, flexible spending and health savings accounts, paid time off, payments for certain relocation costs, disability coverage and life insurance to each NEO.executive officer. These benefits are also provided to all other eligible United States basedU.S.-based employees. Certain employees, including the NEOsexecutive officers, are eligible for participation in the Company’s Management Life Insurance Plan, which provides an additional life insurance benefit of two times base salary.
44
50 |
Compensation Discussion and Analysis
Perquisites
We provide a limited number of perquisites to the NEOs.executive officers. These perquisites are assessed annually by the Compensation Committee as part of the total competitive reviewreview. The expenses related to the perquisites are imputed and includeconsidered taxable income to the following:
Mr. Hackett’s existing home security system. Pursuant to our security policy, we also require Mr. HackettWalker has a personal usage limit allowing him to use ourCompany aircraft for a limited amount of personal use as well as business travel. Any timetravel and, to the extent his usage exceeds such amount, requiring him to reimburse the Company pursuant to a time-sharing agreement. The prior year’s aggregate incremental direct operating costs for each aircraft is used to calculate the value of personal usage. Mr. Hackett uses our aircraft forWalker is allowed up to $250,000 of personal use, although it is understood that he engages in business activities while in flight, compensation is imputed to Mr. Hackett for that use and for any passengers that accompany Mr. Hackett in accordance with the Internal Revenue Code of 1986, as amended, or the IRC. Personal use includes his participation on outside boards, which directly and indirectly benefits Anadarko.
The valuesincremental costs of the various perquisites provided are included in the “All Other Compensation” column of the Summary Compensation Table on page 52. Individual perquisite values (or the incremental cost of a perquisite, as applicable) are disclosed57 and in the All Other Compensation Table and supporting footnotes following the Summary Compensation Table on page 53. We do not provide any tax58.
gross-ups on these perquisites.
Post-termination andchange-of-control severance benefits are typical within our industry and theindustry. The Company currently provides the severance benefits described below to its NEOs. We believe theseexecutive officers. These plans are an essential component of our executive compensation program and are necessary to attract and retain executive talent in a highly competitive market, provide continuity of management in the event of an actual or threatenedchange-of-control change of control and provide executive officers with the security to make decisions that are in the best long-term interest of the stockholders. On a periodic basis, the Compensation Committee, in consultation
45
Officer Severance Plan. Our NEOsexecutive officers are eligible for benefits under the Officer Severance Plan. Benefits provided under this plan may vary depending upon the executive officer’s level within the organization and years of service with us and are made at the discretion of the Compensation Committee. Executive officers receiving benefits under the Officer Severance Plan are required to execute an agreement releasing us from any and all claims from any and all kinds of actions arising from the executive officer’s employment with us or the termination of such employment.
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Compensation Committee;Discussion and (2) the post-termination financial planning benefits. As a result, theAnalysis
The typical severance benefits that may be provided for our executive officers following the occurrence of such an involuntary termination event include:(as described on page 69) include the following:
Key EmployeeChange-of-Control Contracts. We have entered into key employeechange-of-control contracts with all of our executive officers, including the NEOs, with the exception of Mr. HackettWalker, whosechange-of-control severance benefits are included in his employment agreement,Severance Agreement, which was effective as of November 2009 and is described on page 48. These key employeechange-of-control54. contracts have an initial three-year term that is automatically extended for one year upon each anniversary, unless either party provides notice not to extend.
If we experience achange-of-control change of control (as defined on page 63)69) during the term of the executive officer’s contract, then the contract becomes operative for a fixed three-yearspecified protection period. These contracts generally provide that the executive officer’s terms of employment (including position, work location, compensation and benefits) will not be adversely changed during the three-year period after achange-of-control.protection period. If we (or any successor in interest) terminate the executive officer’s employment (other than for cause (as defined on page 63)69), death or disability), the executive officer terminates for Good Reasongood reason (as defined on page 63)70) during such three-yearprotection period, or upon certain terminations prior to achange-of-control change of control or in connection with or in anticipation of achange-of-control, change of control, the NEOexecutive officer is generally entitled to receive certain payments and benefits. In 2013, no payments were paid under the following payment and benefits:
52 |
46
Compensation Discussion and Analysis
In February 2011, the Committee approved changes to the contracts that reduced the level of post-change-of-control severance benefits under the Key Employee Change-of-Control Contracts, on a prospective basis, for newly appointed and newly hired executive officers who are not otherwise subject to an existing agreement. The table below summarizes the general provisions of the contracts (our current NEOs have contracts that were entered into prior to February 2011).
Key Employee Change-of-Control Contracts Entered Into Prior to February 2011 | Key Employee Change-of-Control Contracts Entered Into Post-February 2011 | |||||
• | Initial three-year term automatically extended each year unless either party provides notice not to extend | • | Initial three-year term automatically extended each year unless either party provides notice not to extend | |||
• | Modified single-trigger provision(1) | • | Double-trigger provision(2) | |||
• | Three-year protection period | • | Two-year protection period | |||
• | 2.9 times | |||||
• | 2.9 times base salary plus AIP bonus (based on highest AIP bonus paid over last three years) | |||||
• | Up to three additional years of | • | Up to three additional years of matching contributions | |||
• | ||||||
• | Up to three additional years of age and service credits under the Company’s retirement and pension plans | |||||
• | Three years continuation of medical, dental, and life insurance benefits | • | Three years continuation of medical, dental, and life insurance benefits | |||
• | Three years of financial planning benefits | • | No continuation of financial planning benefits | |||
• | Excise tax gross-up(3) | • | Best-of-net tax provision (i.e., no tax gross-up by the Company)(4) | |||
• | Outplacement services up to a maximum of $30,000 | • | Outplacement services up to a maximum of $30,000 | |||
• | Officer is subject to a confidentiality provision | • | Officer is subject to a confidentiality provision |
(1) | A good reason provision allowing an executive officer to terminate for any reason during the 30-day period immediately following the first anniversary of a change of control and receive severance benefits. |
(2) | Severance payments are made only in the event of both a change of control and the |
(3) | The executive officer will be entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under IRC Section 4999. |
(4) | Requires the Company to either (1) reduce the amount of certain severance benefits otherwise payable so that such severance benefits will not be subject to the tax imposed by IRC Section 4999, or alternatively (2) pay the full amount of severance benefits to the executive officer |
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change-of-control contracts provide for a continuation of various medical, dental, disabilityCompensation Discussion and life insurance benefits and financial counseling for a period of up to three years. The contracts also provide for outplacement services and the payment of all legal fees and expenses incurred by the executive officer in enforcing any right or benefit provided by thechange-of-controlAnalysis contract. The executive will also be entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under IRC Section 4999. The Company does not pay the executive’s normal income taxes.
As a condition to receipt ofchange-of-control severance benefits, the executive officer must remain employed by us and provide services commensurate with his or her position until the executive officer is terminated pursuant to the provisions of the contract. The executive officer must also agree to retain in confidence any and all confidential information known to him or her concerning us and our business so long as the information is not otherwise publicly disclosed. In 2010, no amounts
Change of Control — Treatment of Outstanding Unvested Equity Awards. The treatment of unvested outstanding equity awards upon a change of control of Anadarko is prescribed by the applicable plan document under which the awards were paidgranted. The Company’s 2008 Omnibus Plan, which governs awards made prior to May 15, 2012, included a single-trigger provision for the accelerated vesting of equity awards upon a change of control. All outstanding awards to the NEOs under thechange-of-control contracts.
47
AGREEMENTS WITH EXECUTIVE OFFICERS
Employment AgreementsMr. Walker — Severance Agreement
At the time the Board announced Mr. Walker’s appointment to President and CEO in 2012, the Committee determined that Mr. Walker’s employment should be continued on an at-will basis. On February 16, 2012, the Company and Mr. Walker entered into an employment agreement witha Severance Agreement to combine and restructure certain severance benefits previously provided to him under the Officer Severance Plan and through his key employee change-of-control contract. Effective May 15, 2012, Mr. HackettWalker was no longer eligible to receive benefits under the Officer Severance Plan and a retention agreement with Mr. Meloy. Both agreements are discussed below.
Severance Benefits Outside of a | ||||
• | Prorated annual bonus based on actual performance for the year of termination | |||
• | Two times the sum of his annual base salary and annual target bonus for the year of termination | |||
• | Up to six months continued participation in the Company’s medical and dental care plans at active employee rates and reimbursement for the cost of up to 18 additional months of COBRA continuation coverage |
54 |
Compensation Discussion and Analysis
Change-of-Control Severance Benefits | ||
• | Double-trigger provision (requiring both a | |
• | Three-year protection period following Change of Control | |
• | 2.5 times salary plus the higher of target bonus for the year of termination or | |
• | Up to three additional years of matching contributions into the Savings Restoration Plan | |
• | ||
• | Three years continuation of medical, dental, and life insurance benefits | |
• | ||
• | Outplacement services up to a maximum of $30,000 | |
• | Subject to a confidentiality provision |
The above scenarios are discussed in more detail beginning on page 63. We will provide agross-up payment to Mr. Hackett to the extent any of the above payments become subject to the federal excise tax relating to excess parachute payments. Pre-change-of-control severance benefits are conditioned upon the execution of a mutual release between us and Mr. Hackett.
48
STOCK OWNERSHIP GUIDELINES
We have maintained stock ownership guidelines for executive officers since 1993 with the goal of promoting equity ownership and aligning our executive officers’ interests with those of our stockholders. Generally, theseThese guidelines must be met within three years after becoming subject to them. Currently, all of our executive officers either meet or exceed their specified guidelines. The ownership guidelines are currently established at the following minimum levels:
Position | Guideline | Ownership Status as of 12/31/ | |||||||||
Chief Executive Officer | 6 x base salary | Exceeds | |||||||||
Executive Vice Presidents | 3 x base salary | Exceeds | |||||||||
Senior Vice Presidents | 2.5 x base salary | Exceeds | |||||||||
Vice Presidents | 2 x base salary | Exceeds |
(1) | ||
Currently, all of |
The Compensation Committee reviews the stock ownership levels annually. During 2013, Messrs. Gwin, Meloy, Daniels and Reeves were promoted from Senior Vice Presidents to Executive Vice Presidents and their stock ownership requirements were subsequently increased to three times base salary. In determining stock ownership levels, we include shares of common stock held directly by the executive officer (including shares beneficially owned in a trust, by a limited liability company or partnership, and by a spouse and/or minor children, unless the non-management director or officer expressly disclaims beneficial ownership of such shares); shares of common stock held indirectly through the Anadarko Employee Savings Plan; deferred share balances resulting from an investment in the Company Stock Fund as defined in the Anadarko Petroleum Corporation Deferred Compensation Plan provided such balance is payable in shares; unvested restricted stock, and unvested restricted stock units,units. For those executive officers of Anadarko who are also officers of WES and/or WGP, any WES and/or WGP equity they own is also included in the calculation to determine their compliance. Outstanding
55 |
Compensation Discussion and the target number of outstanding Analysis
performance units that are structured to pay in shares of
49
REGULATORY REQUIREMENTS
Together with the Compensation Committee, wethe Company carefully reviewreviews and taketakes into account current tax, accounting and securities regulations as they relate to the design of our compensation programs and related decisions.
IRC Section 162(m) limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation is “performance-based”performance-based as defined under federal tax laws. Stock options, performance units and cash awards granted under our 2008 and 2012 Omnibus PlanPlans and our 1999 Stock Incentive Plan are intended to satisfy the performance-based requirements and, as such, are designed to be fully deductible. InSince 2008, the Compensation Committee has approved aan annual program intended to qualify our restricted stock awards (including restricted shares and restricted stock units), beginning with the 2009 grants, as performance-based compensation under IRC Section 162(m). The Compensation Committee reviews and considers the deductibility of our executive compensation programs; however, the Compensation Committee believes it is important to provide compensation that is not fully deductible when necessary to retain and motivate certain executive officers and when it is in the best interest of the Company and our stockholders. For these reasons, Mr. HackettWalker receives a base salary above $1 million, and therefore the portion of base salary in excess of $1 million is not deductible. In addition, during 2010, Mr. Meloy received a one-time cash retention payment of $5 million pursuant to the 2010 Retention Agreement, which is not considered performance-based compensation under IRC Section 162(m). All other awards made during 2010 were designed to be performance-based under IRC Section 162(m).
Awards of performance units, stock options, performance units, restricted shares and restricted stock units under our 2012 Omnibus Plan, 2008 Omnibus Plan and 1999 Stock Incentive Plan are accounted for under FASB ASC Topic 718.
The benefits payable under non-qualified plans for our executive officers and directors are unsecured obligations to pay. TheseAssets to pay these benefits may be securedheld under the Company’s Benefits Trust, which areis subject to the claims of the general creditors of the Company.
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51
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The following table summarizes the compensation for the fiscal years ended December 31, EXECUTIVESUMMARY COMPENSATION TABLESummary Compensation Table2010, 2009,2013, 2012, and 20082011 for our CEO, our Chief Financial Officer (CFO) and our three highest paid executive officers other than our CEO and CFO: Change in Pension Value and Non-Qualified Non-Equity Deferred Stock Option Incentive Plan Compensation All Other Name and Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total Year ($) ($) ($)(1) ($)(1) ($)(2) ($)(3) ($)(4) ($) James T. Hackett(5) 2010 1,567,500 0 9,246,818 4,257,091 2,975,115 5,530,662 751,524 24,328,710 Chairman and Chief 2009 1,567,500 0 12,158,360 5,293,585 3,749,460 3,956,376 741,496 27,466,777 Executive Officer 2008 1,510,385 0 9,572,026 7,121,658 3,416,491 1,643,878 571,276 23,835,714 Robert G. Gwin(6) 2010 657,500 0 2,667,995 1,228,291 1,093,094 468,084 156,650 6,271,614 Senior Vice President, 2009 569,231 0 3,952,953 2,168,884 995,015 232,669 132,190 8,050,942 Finance and Chief
Financial Officer R. A. Walker(7) 2010 704,039 0 4,189,092 1,928,577 1,027,896 1,541,374 253,540 9,644,518 President and Chief 2009 685,192 0 4,478,274 1,947,589 1,260,754 1,305,419 200,287 9,877,515 Operating Officer 2008 655,000 0 3,064,814 2,276,392 1,139,700 328,684 180,995 7,645,585 Charles A. Meloy 2010 575,000 5,000,000 (8) 2,389,254 1,099,929 955,937 3,307,281 129,251 13,456,652 Senior Vice President, 2009 575,000 0 4,853,076 870,656 1,005,100 5,455,686 (9) 134,802 12,894,320 Worldwide Operations 2008 553,846 575,000 (10) 1,335,616 989,465 915,508 3,740,448 (9) 106,832 8,216,715 Robert P. Daniels(11) 2010 575,000 0 3,389,266 1,099,929 955,937 2,007,439 134,735 8,162,306 Senior Vice President, 2009 575,000 0 4,853,076 870,656 1,005,100 1,529,833 122,461 8,956,126 Worldwide Exploration
Name and Principal Position | Year | Salary ($) | Bonus ($) �� | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||||||||||||||||||||||
R. A. Walker(5) Chairman, President | 2013 | 1,300,000 | 0 | 7,190,878 | 3,848,495 | 2,923,700 | 1,154,412 | 501,944 | 16,919,429 | |||||||||||||||||||||||||||||||||||||||||
2012 | 1,105,769 | 0 | 8,578,095 | 5,694,735 | 2,248,890 | 1,545,387 | 492,009 | 19,664,885 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 742,500 | 0 | 3,892,653 | 2,647,467 | 1,128,600 | 1,105,184 | 290,270 | 9,806,674 | ||||||||||||||||||||||||||||||||||||||||||
Robert G. Gwin Executive Vice President, | 2013 | 719,038 | 0 | 2,870,634 | 1,536,306 | 1,181,740 | — | (6) | 236,592 | 6,544,310 | ||||||||||||||||||||||||||||||||||||||||
2012 | 715,000 | 0 | 2,361,475 | 1,566,974 | 0 | 840,846 | 188,380 | 5,672,675 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 715,000 | 0 | 2,333,484 | 1,586,972 | 1,032,460 | 637,703 | 146,829 | 6,452,448 | ||||||||||||||||||||||||||||||||||||||||||
Charles A. Meloy Executive Vice President, | 2013 | 611,539 | 0 | 2,935,889 | 1,571,244 | 1,005,064 | — | (6) | 232,411 | 6,356,147 | ||||||||||||||||||||||||||||||||||||||||
2012 | 600,000 | 0 | 2,424,231 | 1,608,632 | 974,700 | 1,729,903 | 173,034 | 7,510,500 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 577,885 | 0 | 2,395,464 | 1,629,204 | 834,465 | 2,253,427 | 148,653 | 7,839,098 | ||||||||||||||||||||||||||||||||||||||||||
Robert P. Daniels Executive Vice President, | 2013 | 611,539 | 0 | 2,935,889 | 1,571,244 | 1,005,064 | — | (6) | 173,942 | 6,297,678 | ||||||||||||||||||||||||||||||||||||||||
2012 | 600,000 | 0 | 2,424,231 | 1,608,632 | 974,700 | 1,425,005 | 113,439 | 7,146,007 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 577,885 | 0 | 2,395,464 | 1,629,204 | 834,465 | 1,330,904 | 121,801 | 6,889,723 | ||||||||||||||||||||||||||||||||||||||||||
Robert K. Reeves Executive Vice President, | 2013 | 655,769 | 0 | 2,246,967 | 1,202,522 | 1,077,757 | — | (6) | 174,495 | 5,357,510 | ||||||||||||||||||||||||||||||||||||||||
2012 | 650,000 | 0 | 1,848,466 | 1,226,577 | 1,000,350 | 992,888 | 109,674 | 5,827,955 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 621,869 | 0 | 2,826,579 | 1,242,190 | 850,717 | 872,784 | 121,759 | 6,535,898 | ||||||||||||||||||||||||||||||||||||||||||
(1) | The amounts included in these columns represent the aggregate grant date fair value of the awards made to NEOs in | |
(2) | The amounts in this column reflect the incentive cash bonus awards for | |
(3) | The amounts in this column reflect the actuarial increase, if any, in the present value of |
57 |
Executive Compensation
entitled to receive because such amounts are not vested. The Company’s Deferred Compensation Plan does not provide for above-market or preferential earnings so no such amounts are included. | |
(4) | The amounts shown in this column | |
(5) | ||
(6) | ||
52
The following table describes each component of the “All Other Compensation” column for the fiscal year ended December 31, 20102013 in the Summary Compensation Table:
Payments by | ||||||||||||||||||||||||||||||||
the Company to | ||||||||||||||||||||||||||||||||
Employee | ||||||||||||||||||||||||||||||||
401(k) Plan | ||||||||||||||||||||||||||||||||
Personal | and Savings | Club | Financial/ | Excess | ||||||||||||||||||||||||||||
Use of | Restoration | Membership | Tax/Estate | Liability | Tax | |||||||||||||||||||||||||||
Aircraft | Plan | Dues | Planning | Insurance | Benefit | Other | Total | |||||||||||||||||||||||||
Name | ($)(1) | ($) | ($)(2) | ($) | ($) | ($) | ($)(3) | ($) | ||||||||||||||||||||||||
James T. Hackett(4) | 421,841 | 319,018 | 830 | 0 | 1,400 | 0 | 8,435 | 751,524 | ||||||||||||||||||||||||
Robert G. Gwin | 29,457 | 99,151 | 13,952 | 12,690 | 1,400 | 0 | 0 | 156,650 | ||||||||||||||||||||||||
R. A. Walker | 131,455 | 117,887 | 2,798 | 0 | 1,400 | 0 | 0 | 253,540 | ||||||||||||||||||||||||
Charles A. Meloy | 6,471 | 94,806 | 13,884 | 12,690 | 1,400 | 0 | 0 | 129,251 | ||||||||||||||||||||||||
Robert P. Daniels | 14,321 | 94,806 | 11,518 | 12,690 | 1,400 | 0 | 0 | 134,735 | ||||||||||||||||||||||||
Name | Personal Use of Aircraft ($)(1) | Payments by the Company to Employee 401(k) Plan and Savings Restoration Plan ($) | Club Membership Dues ($)(2) | Financial/ Tax/Estate Planning ($) | Excess Liability Insurance ($) | Tax Benefit ($) | Totals ($) | ||||||||||||||||||||||||||||
R. A. Walker(3) | 247,600 | 212,933 | 37,488 | 2,166 | 1,757 | 0 | 501,944 | ||||||||||||||||||||||||||||
Robert G. Gwin | 150,013 | 43,142 | 27,415 | 14,265 | 1,757 | 0 | 236,592 | ||||||||||||||||||||||||||||
Charles A. Meloy | 47,588 | 158,624 | 10,177 | 14,265 | 1,757 | 0 | 232,411 | ||||||||||||||||||||||||||||
Robert P. Daniels | 37,542 | 95,174 | 25,204 | 14,265 | 1,757 | 0 | 173,942 | ||||||||||||||||||||||||||||
Robert K. Reeves | 34,070 | 99,367 | 8,936 | 30,365 | 1,757 | 0 | 174,495 |
(1) | The amount reported above reflects the value of personal aircraft use for 2013. The value of personal aircraft use is based on the Company’s aggregate incremental direct operating costs, including cost of fuel, maintenance, landing and ramp fees, and other miscellaneous trip-related variable costs. Because the Company’s aircraft are used predominantly for business purposes, fixed costs, which do not change based on use of the aircraft, are excluded. The value of travel to board meetings for companies other than Anadarko or its affiliates and civic organizations for which the NEOs serve as directors is considered personal use and is included in the amount reported above. Compensation is imputed for personal use of our aircraft by the NEOs and their guests. | |
(2) | The | |
(3) | ||
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All other | ||||||||||||||||||||||||||||||||||||||||||||
All Other | Option | |||||||||||||||||||||||||||||||||||||||||||
Stock | Awards: | Grant Date | ||||||||||||||||||||||||||||||||||||||||||
Awards: | Number of | Exercise or | Fair Value | |||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- | Estimated Future Payouts Under | Number of | Securities | Base Price | of Stock | |||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan Awards(1) | Equity Incentive Plan Awards(2) | Shares of | Underlying | of Option | and Option | |||||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | Stock or | Options | Awards | Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | ($) | ($) | ($) | (#) | (#) | (#) | Units (#)(3) | (#)(4) | ($/Sh) | ($)(5) | |||||||||||||||||||||||||||||||||
James T. Hackett | 0 | 2,037,750 | 4,075,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | — | 188,044 | 63.34 | 4,257,091 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 79,571 | — | — | 5,040,027 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | 15,346 | 56,837 | 113,674 | — | — | — | 4,206,791 | ||||||||||||||||||||||||||||||||||
Robert G. Gwin | 0 | 624,625 | 1,249,250 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | — | 54,256 | 63.34 | 1,228,291 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 22,959 | — | — | 1,454,223 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | 4,428 | 16,399 | 32,798 | — | — | — | 1,213,772 | ||||||||||||||||||||||||||||||||||
R. A. Walker | 0 | 704,039 | 1,408,078 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | — | 85,189 | 63.34 | 1,928,577 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 36,048 | — | — | 2,283,280 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | 6,952 | 25,749 | 51,498 | — | — | — | 1,905,812 | ||||||||||||||||||||||||||||||||||
Charles A. Meloy | 0 | 546,250 | 1,092,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | — | 48,586 | 63.34 | 1,099,929 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 20,560 | — | — | 1,302,270 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | 3,965 | 14,686 | 29,372 | — | — | — | 1,086,984 | ||||||||||||||||||||||||||||||||||
Robert P. Daniels | 0 | 546,250 | 1,092,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | — | 48,586 | 63.34 | 1,099,929 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 20,560 | — | — | 1,302,270 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | 3,965 | 14,686 | 29,372 | — | — | — | 1,086,984 | ||||||||||||||||||||||||||||||||||
11/9/2010 | — | — | — | — | — | — | 15,788 | — | — | 1,000,012 | ||||||||||||||||||||||||||||||||||
Non-equity incentive plan awards. Values disclosed reflect the estimated cash payouts under the Company’s AIP, as discussed on page 41, based on actual salaries earned in 2013. If threshold levels of performance are not met, the payout can be zero. If maximum levels of performance are achieved, the payout can be 200% of each NEO’s target. The amounts actually paid to the NEOs for 2013 are disclosed in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.
58 |
Executive Compensation
Equity incentive plan awards. Awards reported reflect performance units, as discussed on page 46, which are denominated as an equivalent of one share of our stock and, if earned, are paid in cash. Executive officers may earn from 0% to 200% of the targeted award based on the Company’s relative TSR performance against a specified peer group over a designated performance period. The threshold value reported represents the lowest earned amount, other than zero, based on a defined payout scale. Fifty percent of the award is tied to a two-year performance period and the remaining fifty percent is tied to a three-year performance period. Executive officers do not have voting rights with respect to performance units, and unless after a change of control the award has been converted into restricted stock units of the surviving company, no dividend equivalents are paid on the awards.
Stock awards. Awards reported reflect restricted stock unit awards that vest pro-rata annually over three years, beginning with the first anniversary of the grant date. Dividend equivalents are reinvested in shares of the Company’s common stock and paid upon the applicable vesting of the underlying award. Awards are eligible to be voluntarily deferred.
Stock option awards. Stock options vest pro-rata annually over three years, beginning with the first anniversary of the date of grant and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||
R. A. Walker | 0 | 1,690,000 | 3,380,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | — | 148,378 | 92.02 | 3,848,495 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | 29,945 | — | — | 2,755,539 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | 11,879 | 43,997 | 87,994 | — | — | — | 4,435,339 | |||||||||||||||||||||||||||||||||||||||||||||
Robert G. Gwin | 0 | 683,087 | 1,366,174 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | — | 59,232 | 92.02 | 1,536,306 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | 11,954 | — | — | 1,100,007 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | 4,742 | 17,564 | 35,128 | — | — | — | 1,770,627 | |||||||||||||||||||||||||||||||||||||||||||||
Charles A. Meloy | 0 | 580,962 | 1,161,924 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | — | 60,579 | 92.02 | 1,571,244 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | 12,226 | — | — | 1,125,037 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | 4,850 | 17,963 | 35,926 | — | — | — | 1,810,852 | |||||||||||||||||||||||||||||||||||||||||||||
Robert P. Daniels | 0 | 580,962 | 1,161,924 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | — | 60,579 | 92.02 | 1,571,244 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | 12,226 | — | — | 1,125,037 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | 4,850 | 17,963 | 35,926 | — | — | — | 1,810,852 | |||||||||||||||||||||||||||||||||||||||||||||
Robert K. Reeves | 0 | 622,981 | 1,245,962 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | — | 46,363 | 92.02 | 1,202,522 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | — | — | — | 9,357 | — | — | 861,031 | |||||||||||||||||||||||||||||||||||||||||||||
11/6/2013 | — | — | — | 3,712 | 13,748 | 27,496 | — | — | — | 1,385,936 |
(1) | ||
54
59 |
Executive Compensation
The following table reflects outstanding stock option awards Outstanding Equity Awards at Fiscal Year-End 2010OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2013classified as exercisable and unexercisable as of December 31, 2010 for each of the NEOs. The table also reflects unvested and unearned stock awards (both time-based and performance-contingent) as of December 31, 2013, assuming a market value of $76.16$79.32 a share (the closing stock price of the Company’s stock on December 31, 2010)2013). Stock Awards(2)(3) Equity Incentive Plan Awards Performance Units Market or Restricted Stock/Units Payout Market Value of Value of Number of Unearned Number of Shares or Unearned Shares, Shares or Units of Shares, Units or Option Awards(1) Units of Stock Units or Other Number of Securities Option Option Stock That That Have Other Rights Rights Underlying Unexercised Options Exercise Expiration Have Not Not Vested That Have That Have Exercisable (#) Unexercisable (#) Price ($) Date Vested (#) ($) Not Vested (#) Not Vested ($) James T. Hackett 250,000 0 59.8700 11/6/2014 31,000 2,360,960 48,125 3,665,200 190,733 190,733 35.1800 11/4/2015 59,533 4,534,033 255,892 19,488,735 65,867 131,733 65.4400 11/10/2016 79,571 6,060,127 47,952 3,652,024 0 188,044 63.3400 11/9/2017 56,837 4,328,706 Robert G. Gwin 27,000 0 50.6900 1/16/2013 4,266 324,899 4,180 318,349 19,100 0 48.6900 12/4/2013 19,933 1,518,097 35,126 2,675,196 41,000 0 40.5100 1/10/2014 14,266 1,086,499 11,448 871,880 21,700 0 59.8700 11/6/2014 22,959 1,748,577 16,399 1,248,948 14,867 7,433 64.6900 3/12/2015 6,667 (5) 333,350 (5) 52,400 26,200 35.1800 11/4/2015 22,067 44,133 34.9500 3/1/2016 15,734 31,466 65.4400 11/10/2016 0 54,256 63.3400 11/9/2017 13,333 (4) 6,667 (4) 50.0000 4/2/2018 R. A. Walker 50,000 0 45.8000 9/6/2012 9,933 756,497 11,990 913,158 22,800 0 43.5550 11/15/2012 21,933 1,670,417 81,900 6,237,504 46,400 0 48.6900 12/4/2013 36,048 2,745,416 17,658 1,344,833 41,000 0 48.9000 1/10/2014 25,749 1,961,044 62,200 0 59.8700 11/6/2014 121,934 60,966 35.1800 11/4/2015 24,234 48,466 65.4400 11/10/2016 0 85,189 63.3400 11/9/2017 Charles A. Meloy 38,200 0 48.6900 12/4/2013 4,333 330,001 6,710 511,034 34,600 0 59.8700 11/6/2014 38,970 2,967,955 35,672 2,716,780 53,000 26,500 35.1800 11/4/2015 20,560 1,565,850 15,336 1,167,990 10,834 21,666 65.4400 11/10/2016 14,686 1,118,486 0 48,586 63.3400 11/9/2017 Robert P. Daniels 9,300 0 33.3650 11/16/2011 5,166 393,443 7,755 590,621 8,900 0 43.5550 11/15/2012 38,970 2,967,955 42,770 3,257,363 19,100 0 48.6900 12/4/2013 20,560 1,565,850 15,336 1,167,990 40,100 0 59.8700 11/6/2014 15,788 1,202,414 14,686 1,118,486 63,600 31,800 35.1800 11/4/2015 10,834 21,666 65.4400 11/10/2016 0 48,586 63.3400 11/9/2017
55
Option Awards(1) | Stock Awards(2)(3) | |||||||||||||||||||||||||||||||
Equity Incentive Plan Awards | ||||||||||||||||||||||||||||||||
Restricted Stock/Units | Performance Units | |||||||||||||||||||||||||||||||
Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($) | |||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options | Option Exercise Price($) | Option Expiration Date | ||||||||||||||||||||||||||||||
Name | Exercisable(#) | Unexercisable(#) | ||||||||||||||||||||||||||||||
R. A. Walker | 62,200 | 0 | 59.87 | 11/6/2014 | 9,033 | 716,498 | 11,845 | 939,545 | ||||||||||||||||||||||||
182,900 | 0 | 35.18 | 11/4/2015 | 11,541 | 915,432 | 8,832 | 700,554 | |||||||||||||||||||||||||
72,700 | 0 | 65.44 | 11/10/2016 | 36,576 | 2,901,208 | 5,674 | 450,062 | |||||||||||||||||||||||||
85,189 | 0 | 63.34 | 11/9/2017 | 30,013 | 2,380,631 | 18,541 | 1,470,672 | |||||||||||||||||||||||||
58,051 | 29,025 | 83.95 | 11/8/2018 | 43,997 | 3,489,842 | |||||||||||||||||||||||||||
17,504 | 35,007 | 66.38 | 5/15/2019 | |||||||||||||||||||||||||||||
56,534 | 113,066 | 70.70 | 11/5/2019 | |||||||||||||||||||||||||||||
0 | 148,378 | 92.02 | 11/6/2020 | |||||||||||||||||||||||||||||
Robert G. Gwin | 21,700 | 0 | 59.87 | 11/6/2014 | 5,415 | 429,518 | 7,544 | 598,390 | ||||||||||||||||||||||||
22,300 | 0 | 64.69 | 3/12/2015 | 13,036 | 1,034,016 | 5,295 | 419,999 | |||||||||||||||||||||||||
78,600 | 0 | 35.18 | 11/4/2015 | 11,981 | 950,333 | 6,608 | 524,147 | |||||||||||||||||||||||||
66,200 | 0 | 34.95 | 3/1/2016 | 17,564 | 1,393,176 | |||||||||||||||||||||||||||
47,200 | 0 | 65.44 | 11/10/2016 | |||||||||||||||||||||||||||||
54,256 | 0 | 63.34 | 11/9/2017 | |||||||||||||||||||||||||||||
34,797 | 17,399 | 83.95 | 11/8/2018 | |||||||||||||||||||||||||||||
20,149 | 40,298 | 70.70 | 11/5/2019 | |||||||||||||||||||||||||||||
0 | 59,232 | 92.02 | 11/6/2020 | |||||||||||||||||||||||||||||
Charles A. Meloy | 34,600 | 0 | 59.87 | 11/6/2014 | 5,559 | 440,940 | 6,756 | 535,886 | ||||||||||||||||||||||||
26,500 | 0 | 35.18 | 11/4/2015 | 13,382 | 1,061,460 | 5,435 | 431,104 | |||||||||||||||||||||||||
32,500 | 0 | 65.44 | 11/10/2016 | 12,254 | 971,987 | 6,784 | 538,107 | |||||||||||||||||||||||||
48,586 | 0 | 63.34 | 11/9/2017 | 17,963 | 1,424,825 | |||||||||||||||||||||||||||
35,723 | 17,862 | 83.95 | 11/8/2018 | |||||||||||||||||||||||||||||
20,685 | 41,369 | 70.70 | 11/5/2019 | |||||||||||||||||||||||||||||
0 | 60,579 | 92.02 | 11/6/2020 | |||||||||||||||||||||||||||||
Robert P. Daniels | 40,100 | 0 | 59.87 | 11/6/2014 | 5,559 | 440,940 | 6,756 | 535,886 | ||||||||||||||||||||||||
95,400 | 0 | 35.18 | 11/4/2015 | 13,382 | 1,061,460 | 5,435 | 431,104 | |||||||||||||||||||||||||
32,500 | 0 | 65.44 | 11/10/2016 | 12,254 | 971,987 | 6,784 | 538,107 | |||||||||||||||||||||||||
48,586 | 0 | 63.34 | 11/9/2017 | 17,963 | 1,424,825 | |||||||||||||||||||||||||||
35,723 | 17,862 | 83.95 | 11/8/2018 | |||||||||||||||||||||||||||||
20,685 | 41,369 | 70.70 | 11/5/2019 | |||||||||||||||||||||||||||||
0 | 60,579 | 92.02 | 11/6/2020 | |||||||||||||||||||||||||||||
Robert K. Reeves | 50,900 | 0 | 59.87 | 11/6/2014 | 4,239 | 336,237 | 5,905 | 468,385 | ||||||||||||||||||||||||
115,300 | 0 | 35.18 | 11/4/2015 | 3,971 | 314,980 | 4,145 | 328,781 | |||||||||||||||||||||||||
36,700 | 0 | 65.44 | 11/10/2016 | 10,204 | 809,381 | 5,173 | 410,322 | |||||||||||||||||||||||||
42,469 | 0 | 63.34 | 11/9/2017 | 9,378 | 743,863 | 13,748 | 1,090,491 | |||||||||||||||||||||||||
27,237 | 13,619 | 83.95 | 11/8/2018 | |||||||||||||||||||||||||||||
15,772 | 31,544 | 70.70 | 11/5/2019 | |||||||||||||||||||||||||||||
0 | 46,363 | 92.02 | 11/6/2020 |
60 |
Executive Compensation
(1) | The table below shows the vesting dates for the respective unexercisable stock options listed in the above Outstanding Equity Awards Table: |
Vesting Date | Mr. Walker | Mr. Gwin | Mr. Meloy | Mr. Daniels | Mr. Reeves | ||||||||||||||||||||
5/15/2014 | 17,503 | — | — | — | — | ||||||||||||||||||||
11/5/2014 | 56,533 | 20,149 | 20,684 | 20,684 | 15,772 | ||||||||||||||||||||
11/6/2014 | 49,460 | 19,744 | 20,193 | 20,193 | 15,455 | ||||||||||||||||||||
11/8/2014 | 29,025 | 17,399 | 17,862 | 17,862 | 13,619 | ||||||||||||||||||||
5/15/2015 | 17,504 | — | — | — | — | ||||||||||||||||||||
11/5/2015 | 56,533 | 20,149 | 20,685 | 20,685 | 15,772 | ||||||||||||||||||||
11/6/2015 | 49,459 | 19,744 | 20,193 | 20,193 | 15,454 | ||||||||||||||||||||
11/6/2016 | 49,459 | 19,744 | 20,193 | 20,193 | 15,454 |
Vesting Date | Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | |||||||||||||||
3/1/2011 | — | 22,066 | — | — | — | |||||||||||||||
3/12/2011 | — | 7,433 | — | — | — | |||||||||||||||
11/4/2011 | 190,733 | 26,200 | 60,966 | 26,500 | 31,800 | |||||||||||||||
11/9/2011 | 62,682 | 18,086 | 28,397 | 16,196 | 16,196 | |||||||||||||||
11/10/2011 | 65,866 | 15,733 | 24,233 | 10,833 | 10,833 | |||||||||||||||
3/1/2012 | — | 22,067 | — | — | — | |||||||||||||||
11/9/2012 | 62,681 | 18,085 | 28,396 | 16,195 | 16,195 | |||||||||||||||
11/10/2012 | 65,867 | 15,733 | 24,233 | 10,833 | 10,833 | |||||||||||||||
11/9/2013 | 62,681 | 18,085 | 28,396 | 16,195 | 16,195 |
(2) | The table below shows the vesting dates for the respective restricted stock |
Vesting Date | Mr. Walker | Mr. Gwin | Mr. Meloy | Mr. Daniels | Mr. Reeves | ||||||||||||||||||||
5/15/2014 | 5,770 | — | — | — | — | ||||||||||||||||||||
11/5/2014 | 18,288 | 6,517 | 6,690 | 6,690 | 5,102 | ||||||||||||||||||||
11/6/2014 | 10,004 | 3,994 | 4,085 | 4,085 | 3,126 | ||||||||||||||||||||
11/8/2014 | 9,033 | 5,415 | 5,559 | 5,559 | 8,210 | ||||||||||||||||||||
5/15/2015 | 5,771 | — | — | — | — | ||||||||||||||||||||
11/5/2015 | 18,288 | 6,519 | 6,692 | 6,692 | 5,102 | ||||||||||||||||||||
11/6/2015 | 10,004 | 3,993 | 4,084 | 4,084 | 3,126 | ||||||||||||||||||||
11/6/2016 | 10,005 | 3,994 | 4,085 | 4,085 | 3,126 |
Vesting Date | Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | |||||||||||||||
3/1/2011 | — | 9,966 | — | — | — | |||||||||||||||
11/9/2011 | 26,524 | 7,653 | 12,016 | 6,854 | 12,117 | |||||||||||||||
11/10/2011 | 29,766 | 7,133 | 10,966 | 4,330 | 4,330 | |||||||||||||||
12/1/2011 | 31,000 | 4,266 | 9,933 | 4,333 | 5,166 | |||||||||||||||
3/1/2012 | — | 9,967 | — | — | — | |||||||||||||||
11/9/2012 | 26,523 | 7,653 | 12,016 | 6,853 | 12,115 | |||||||||||||||
11/10/2012 | 29,767 | 7,133 | 10,967 | 34,640 | 34,640 | |||||||||||||||
11/9/2013 | 26,524 | 7,653 | 12,016 | 6,853 | 12,116 |
(3) | The table below shows the performance periods for the respective performance units listed in the above Outstanding Equity Awards Table. |
Performance Period | Performance to Date Payout | Mr. Walker | Mr. Gwin | Mr. Meloy | Mr. Daniels | Mr. Reeves | ||||||||||||||||||||||||
1/1/2011 to 12/31/2013 | 92% | 11,845 | 7,544 | 6,756 | 6,756 | 5,905 | ||||||||||||||||||||||||
1/1/2012 to 12/31/2013 | 54% | 4,416 | 2,647 | 2,717 | 2,717 | 2,072 | ||||||||||||||||||||||||
1/1/2012 to 12/31/2014 | 54% | 4,416 | 2,648 | 2,718 | 2,718 | 2,073 | ||||||||||||||||||||||||
5/15/2012 to 5/14/2014 | 54% | 2,837 | — | — | — | — | ||||||||||||||||||||||||
5/15/2012 to 5/14/2015 | 54% | 2,837 | — | — | — | — | ||||||||||||||||||||||||
1/1/2013 to 12/31/2014 | 54% | 9,270 | 3,304 | 3,392 | 3,392 | 2,586 | ||||||||||||||||||||||||
1/1/2013 to 12/31/2015 | 54% | 9,271 | 3,305 | 3,392 | 3,392 | 2,587 | ||||||||||||||||||||||||
1/1/2014 to 12/31/2015 | 100% | 21,998 | 8,782 | 8,981 | 8,981 | 6,874 | ||||||||||||||||||||||||
1/1/2014 to 12/31/2016 | 100% | 21,999 | 8,782 | 8,982 | 8,982 | 6,874 |
Performance to | ||||||||||||||||||||||||
Performance Period | Date Payout % | Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | ||||||||||||||||||
1/1/2008 to 12/31/2010 | 110 | % | 48,125 | 4,180 | 11,990 | 6,710 | 7,755 | |||||||||||||||||
1/1/2009 to 12/31/2010 | 182 | % | 127,946 | 17,563 | 40,950 | 17,836 | 21,385 | |||||||||||||||||
1/1/2009 to 12/31/2011 | 182 | % | 127,946 | 17,563 | 40,950 | 17,836 | 21,385 | |||||||||||||||||
1/1/2010 to 12/31/2011 | 54 | % | 23,976 | 5,724 | 8,829 | 7,668 | 7,668 | |||||||||||||||||
1/1/2010 to 12/31/2012 | 54 | % | 23,976 | 5,724 | 8,829 | 7,668 | 7,668 | |||||||||||||||||
1/1/2011 to 12/31/2012 | 100 | % | 28,418 | 8,199 | 12,874 | 7,343 | 7,343 | |||||||||||||||||
1/1/2011 to 12/31/2013 | 100 | % | 28,419 | 8,200 | 12,875 | 7,343 | 7,343 |
61 |
56
Executive Compensation
The following table provides information about the aggregate dollar value realized during 2013 by the NEOs Option Exercises and Stock Vested in 2010OPTION EXERCISES AND STOCK VESTED IN 2013onfor Anadarko awards, including option award exercises, vesting of restricted stock shares and units and performance unit award payouts during 2010.payouts. Option Awards Stock Awards Number of Shares Number of Shares Acquired on Value Realized on Acquired on Value Realized on Exercise (#) Exercise ($)(1) Vesting (#)(2) Vesting ($)(1)(3) James T. Hackett 584,534 17,233,518 248,671 16,414,664 Robert G. Gwin 0 0 38,063 2,558,601 R. A. Walker 0 0 62,073 4,102,645 Charles A. Meloy 0 0 30,126 1,991,818 Robert P. Daniels 69,300 2,500,815 40,738 2,692,554
Option Awards | Stock Awards | |||||||||||||||||||
Name | Number of Shares Acquired on Exercise(#) | Value Realized on Exercise($)(1) | Number of Shares Acquired on Vesting(#)(2) | Value Realized on Vesting($)(1) | ||||||||||||||||
R. A. Walker(3) | 87,400 | 3,702,772 | 66,077 | 5,787,906 | ||||||||||||||||
Robert G. Gwin(4) | 87,100 | 3,564,501 | 33,106 | 2,868,584 | ||||||||||||||||
Charles A. Meloy | 0 | 0 | 34,599 | 2,982,019 | ||||||||||||||||
Robert P. Daniels | 19,100 | 730,366 | 39,862 | 3,460,794 | ||||||||||||||||
Robert K. Reeves(5) | 76,500 | 3,239,195 | 29,850 | 2,603,833 |
(1) | The value realized reflects the taxable value to the NEO as of the date of the option exercise, vesting of restricted stock | |
(2) | ||
(3) | Mr. Walker’s value includes the exercise of expiring stock options purchased with shares of Company common stock previously held by Mr. Walker. On November 13, 2013 and November 14, 2013, respectively, Mr. Walker transferred 33,841 and 29,977 shares of Company common stock to the Company (based on the applicable stock prices of $91.22 and $91.08) as consideration for the exercise price and applicable withholding tax. |
(4) | Mr. |
(5) | Mr. Reeves’s value includes the exercise of expiring stock options purchased with shares of Company common stock previously held by Mr. Reeves. On November 13, 2013 and November 14, 2013, respectively, Mr. Reeves transferred 25,891 and 29,977 shares of Company common stock to the Company (based on the applicable stock price of $91.22 and $91.08) as consideration for the exercise price and applicable withholding tax. |
The Company maintains the Anadarko Retirement Plan APC Retirement Plan and APC Retirement Restoration Plan The APC Retirement Plan covers all 62 Executive Compensation The APC Retirement Pension Benefits for 2010PENSION BENEFITS FOR 2013or the(the APC Retirement Plan,Plan) and theKerr-McGee Corporation Retirement Plan or the(the KMG Retirement Plan,Plan), both of which are funded tax-qualified defined benefit pension plans. In addition, the Company maintains the Anadarko Retirement Restoration Plan, or the APC Retirement Restoration Plan, and the Kerr-McGee Benefits Restoration Plan, or the KMG Restoration Plan, both of which are unfunded, non-qualified pension benefit plans that are designed to provide for supplementary pension benefits due to limitations imposed by the IRC that restrict the amount of benefits payable under tax-qualified plans. collectively the APC Retirement PlansUnited States-basedU.S.-based Anadarko employees, except for legacy Kerr-McGee employees. The APC Retirement Restoration Plan covers certain United States-basedU.S.-based Anadarko employees, except for legacy Kerr-McGee employees, who are affected by certain IRC limitations. For those employees hired prior to January 1, 2007, which includes all of the NEOs except Mr. Meloy (who is a participant in the KMG Retirement Plan), benefits under these plans are based upon the employee’s years of service and the greater of either (1)average monthly earnings during the annual average of the employee’s36 highest compensation over threepaid consecutive calendar years outmonths of the last 10 years of employment with the Company; or (2) the annual average compensation over the last 36 consecutive120 months of employment with the Company.PlansPlan and the APC Restoration Plan (collectively, APC Retirement Plans) do not require contributions by employees and anemployees. An employee becomes vested in his or her benefit at the completion of three years of service. Compensation covered by the APC Retirement Plans includes base salary and payments under the AIP. The maximum amount of compensation for 20102013 that may be considered in calculating benefits under the APC Retirement Plan is $245,000was $255,000 due to the annual IRC
57
For employees hired prior to January 1, 2007, benefits under the APC Retirement Plans are calculated as a “life-only”life-only annuity (meaning that benefits end upon the participant’s death) and are equal to the sum of the following:
Covered compensation is the average (without indexing) of the Social Security taxable wage base during the35-year period ending with the last day of the year in which an individual reaches Social Security retirement age. Benefits are calculated based on a normal retirement age of 65; however, employees may receive a reduced early retirement benefit as early as age 55. Employees may choose to receive their benefits under several different forms provided under the APC Retirement Plan. Employees receive their benefits from the APC Retirement Restoration Plan in the form of a lump-sum payment.
As of December 31, 2013, Messrs. Walker and Reeves were the only NEONEOs eligible for early retirement under the APC Retirement Plans. Early retirement benefits are calculated using the formula described above; however, the value is multiplied by an early retirement reduction factor as follows:
Age | Early Retirement Factor | |||
62 and older | 100 | % | ||
61 | 97 | % | ||
60 | 94 | % | ||
59 | 91 | % | ||
58 | 88 | % | ||
57 | 85 | % | ||
56 | 82 | % | ||
55 | 79 | % |
Age | Early Retirement Factor | ||||
62 and older | 100% | ||||
61 | 97% | ||||
60 | 94% | ||||
59 | 91% | ||||
58 | 88% | ||||
57 | 85% | ||||
56 | 82% | ||||
55 | 79% |
KMG Retirement Plan and KMG Restoration Plan collectively the KMG Retirement Plans
The KMG Retirement Plan covers all United States-based,U.S.-based, legacy Kerr-McGee employees who have not incurred a break in service of greater than one year since the dateKerr-McGee was acquired by Anadarko. The KMG Restoration Plan covers certain legacy Kerr-McGee United States-basedU.S.-based employees that are affected by the IRC limitations. Benefits under these plans are based upon the employee’s years of service and the average monthly earnings during the 36 highest paid consecutive months of the last 120 months of employment.
The KMG Retirement PlansPlan and the KMG Restoration Plan (collectively, KMG Retirement Plans) do not require contributions by employees and anemployees. An employee becomes vested in his or her benefit at the
63 |
Executive Compensation
completion of three years of service. Compensation covered by the KMG Retirement Plans includes base salary and payments under the AIP. The maximum amount of compensation for 20102013 that may be considered in calculating benefits under the KMG Retirement Plan is $245,000was $255,000 due to the annual IRC limitation. Compensation in excess of $245,000 is$255,000 was recognized in determining benefits payable under the KMG Restoration Plan.
58
Part A:
Part B:
Covered compensation is the average (without indexing) of the Social Security taxable wage base during the35-year period ending with the last day of the year in which an individual reaches Social Security retirement age. Benefits are calculated based on a normal retirement age of 65; however, employees may receive a reduced early retirement benefit as early as age 52. Employees may choose to receive their benefits under several different forms provided under the KMG Retirement Plan. Employees receive their benefits from the KMG Restoration Plan in the form of a lump-sum payment.
64 |
Executive Compensation
Mr. Meloy is eligible for early retirement under the KMG Restoration Plan because of the additional years of age and service credited to him under his 2006 Retention Agreement.Plan. Early retirement benefits under the KMG Retirement Plans are calculated using the formula described above, however, the value is multiplied by an early retirement reduction factor as follows:
First Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned Before March 1, 1999) | Second Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned On or After March 1, 1999) | |||||
Age Benefit Payments Start | Part A | Part B | ||||
62 and older | 100% | 100% | 100% | |||
61 | 100% | 95% | 100% | |||
60 | 100% | 90% | 100% | |||
59 | 95% | 85% | 95% | |||
58 | 90% | 80% | 90% | |||
57 | 85% | 75% | 85% | |||
56 | 80% | 67.5% | 80% | |||
55 | 75% | 60% | 75% | |||
54 | 70% | 55% | 70% | |||
53 | 65% | 50% | 65% | |||
52 | 60% | 45% | 60% |
As of December 31, 2011, recognizing the high percentage of employees eligible to retire and based upon a recommendation from the Committee, the Board provided legacy participants in both the APC and KMG Retirement Plans a one-time option to either (1) continue to accrue benefits as outlined above (Option 1) or (2) accrue future benefits under the PWA using the same cash balance formula as employees hired on or after January 1, 2007 (Option 2). This one-time election was designed to increase employee retention by minimizing the impact of interest rate fluctuations on early retirement decisions and to accelerate the migration of employees into the PWA. For participants electing Option 2, the above formulae were modified such that:
First Formula | Second Formula | |||||||||||
Percentage of Normal | Percentage of Normal | |||||||||||
Retirement Age Benefit Payable | Retirement Age Benefit Payable | |||||||||||
(Age Reductions for Benefits Earned | (Age Reductions for Benefits | |||||||||||
Age Benefit | Before March 1, 1999) | Earned On or After March 1, 1999) | ||||||||||
Payments Start | Part A | Part B | ||||||||||
65 | 100 | % | 100 | % | 100 | % | ||||||
64 | 100 | % | 100 | % | 100 | % | ||||||
63 | 100 | % | 100 | % | 100 | % | ||||||
62 | 100 | % | 100 | % | 100 | % | ||||||
61 | 100 | % | 95 | % | 100 | % | ||||||
60 | 100 | % | 90 | % | 100 | % | ||||||
59 | 95 | % | 85 | % | 95 | % | ||||||
58 | 90 | % | 80 | % | 90 | % | ||||||
57 | 85 | % | 75 | % | 85 | % | ||||||
56 | 80 | % | 67.5 | % | 80 | % | ||||||
55 | 75 | % | 60 | % | 75 | % | ||||||
54 | 70 | % | 55 | % | 70 | % | ||||||
53 | 65 | % | 50 | % | 65 | % | ||||||
52 | 60 | % | 45 | % | 60 | % |
59
65 |
Executive Compensation
Messrs. Walker, Gwin, Daniels, and Reeves chose to continue receiving benefits under Option 1. Mr. Meloy chose to accrue benefits under the PWA beginning in 2012, according to Option 2. The current pay credits provided under the PWA are as follows:
Points | Pay Credit | ||||
80 or more | 13% | ||||
70 | 11% | ||||
60 | 9% | ||||
50 | 7% | ||||
40 | 6% | ||||
Less than 40 | 5% |
The present values provided in the table below are based on the pension benefits accrued through December 31, 2010,2013, assuming that such benefit is paid in the same form as reflected in the accounting valuation. The benefits are assumed to commence at the specified plan’s earliest unreduced retirement age, which is age 62 for those NEOs under the APC Retirement Plans and age 55 for Mr. Meloy under the KMG Retirement Plans pursuant to his 2006 Retention Agreement. All pre-retirement decrements such as pre-retirement mortality and terminations have been ignored for the purposes of these calculations. The interest rate used for discounting payments back to December 31, 20102013, is 5.0% for4.50% in the APC Restoration Plan and 5.00% in the APC Retirement Plan, 4.25% forPlan; and 4.50% in both the APC RetirementKMG Restoration Plan 4.5% forand the KMG Retirement Plan, and 4.25% for the KMG Restoration Plan, consistent with the weighted average discount raterates used in the accounting valuation. The long-term interest rate used for converting the benefit to a lump-sum form of payment is set at 100 basis points less than the discount rate, but not less than the most recently published 30-year Treasury rate. Lump sums for all Plans exceptNEOs who have locked in or will lock in a known interest rate pursuant to Option 2 (PWA) choice are valued using such lock-in rate. The interest rates used for calculating the values below are 3.89% in the APC Restoration Plan and 4.00% in the APC Retirement Plan; and 3.89% in both the KMG Restoration Plan which is set at 120 basis points less thanand the discount rate.
Number of | Present Value of | Payments | ||||||||||||
Years of | Accumulated | During | ||||||||||||
Credited Service | Benefit | 2010 | ||||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||||
James T. Hackett(1) | APC Retirement Plan | 7.000 | 302,673 | 0 | ||||||||||
APC Retirement Restoration Plan | 14.000 | 14,642,651 | 0 | |||||||||||
Robert G. Gwin | APC Retirement Plan | 5.000 | 135,503 | 0 | ||||||||||
APC Retirement Restoration Plan | 5.000 | 695,974 | 0 | |||||||||||
R. A. Walker(2) | APC Retirement Plan | 5.000 | 185,427 | 0 | ||||||||||
APC Retirement Restoration Plan | 13.000 | 4,067,427 | 0 | |||||||||||
Charles A. Meloy(3) | KMG Retirement Plan | 28.583 | 1,246,171 | 0 | ||||||||||
KMG Restoration Plan | 33.583 | 16,835,834 | 0 | |||||||||||
Robert P. Daniels | APC Retirement Plan | 25.000 | 841,705 | 0 | ||||||||||
APC Retirement Restoration Plan | 25.000 | 5,404,236 | 0 | |||||||||||
PENSION BENEFITS
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During 2013 ($) | |||||||||||||
R. A. Walker(1) | APC Retirement Plan | 8.000 | 358,153 | 0 | |||||||||||||
APC Retirement Restoration Plan | 16.000 | 7,699,683 | 0 | ||||||||||||||
Robert G. Gwin | APC Retirement Plan | 8.000 | 261,513 | 0 | |||||||||||||
APC Retirement Restoration Plan | 8.000 | 1,825,600 | 0 | ||||||||||||||
Charles A. Meloy(2) | KMG Retirement Plan | 31.583 | 1,639,093 | 0 | |||||||||||||
KMG Restoration Plan | 36.583 | 20,092,233 | 0 | ||||||||||||||
Robert P. Daniels | APC Retirement Plan | 28.000 | 1,137,717 | 0 | |||||||||||||
APC Retirement Restoration Plan | 28.000 | 6,706,206 | 0 | ||||||||||||||
Robert K. Reeves(1) | APC Retirement Plan | 10.000 | 429,854 | 0 | |||||||||||||
APC Retirement Restoration Plan | 15.000 | 4,045,479 | 0 |
(1) | The value of | |
66 |
Executive Compensation
of |
(2) | The value of Mr. Meloy’s KMG Retirement Restoration Plan benefit includes the effect of the additional pension service credits equal to five years of credit service provided under his 2006 Retention Agreement. Mr. Meloy vested in these additional pension service credits on August 10, 2009. The additional pension service credit was included in the 2006 Retention Agreement to compensate him for certain severance benefits he was otherwise entitled to receive under thechange-of-control agreement he had with Kerr-McGee. Mr. Meloy’s total pension value as of December 31, 2013, excluding these additional pension service credits is $14,365,910. |
60
Due to IRC limitations that restrict the amount of benefits payable under the tax-qualified 401(k) Plan, the Company hassponsors a non-qualified Savings Restoration Plan. The Savings Restoration Plan that accrues a benefit substantially equal to the amountexcess, if any, of Company matching and PWA contributions that in the absence of certain IRC limitations, would have been allocated to an NEO’sa participant’s 401(k) Plan account as Company matching contributionseach year without regard to IRC limitations over amounts that were, in fact, allocated to a participant’s account. After a participant reaches the IRC limitations under the 401(k) Plan.Plan, the Company makes contributions on their behalf up to the six-percent match on eligible compensation they would have otherwise been entitled to receive under the 401(k) Plan and, if applicable, an additional four percent of eligible compensation for PWA participants. Eligible compensation includes base salary and AIP bonus payments. In general, deferred amounts are distributed to the participant in lump-sum upon separation from service.
Both the Deferred Compensation Plan and the Savings Restoration Plan permit participants to allocate the deferred amounts among a group of notional accounts that mirror the gainsand/or losses of various investment funds provided in the 401(k) Plan (but excluding the Company stock fund). These notional accounts do not provide for above-market or preferential earnings. Each participant directs investments of the individual accounts set up for the participant under the plans and may make changes in the investments as often as daily. Since each executive officer chooses the investment vehicle or vehicles (including a selection of funds ranging from fixed income to emerging markets, as well as other equity, debt and mixed investment strategies in between) and may change their allocations from time to time, the return on the investment will depend on how well theeach underlying investment fund performed during the time the executive officer chose it as an investment vehicle. The aggregate performance of such investment is reflected in the “Aggregate Earnings/Losses in 2010”2013” column.
67 |
Executive Compensation
Executive officers were given the opportunity to make voluntary deferral elections for all of their annual restricted stock unit and performance unit awards granted under the Company’s 1999 Stock Incentive Plan and subsequently, the 2008 and 2012 Omnibus Plan.Plans. Any earningsand/or losses attributable to the deferred shares otherwise payable under these awards are based on the performance of the Company’s stock over the deferral period. In general, deferred awards are distributed to the participant, in the form of Company common stock or cash, as designated by the Compensation Committee at the time of grant, upon termination or at a specific date as elected by the participant. The Company does not subsidize or match any deferrals of compensation into these plans.
Executive | Company | Aggregate | Aggregate | Aggregate Balance | ||||||||||||||||
Contributions in | Contributions in | Earnings/Losses | Withdrawals/ | at End of | ||||||||||||||||
2010 | 2010 | in 2010 | Distributions | 2010 | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
James T. Hackett | ||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Savings Restoration Plan(1) | 0 | 304,318 | 195,088 | 0 | 1,664,922 | |||||||||||||||
1999 Stock Incentive Plan(2) | 4,686,710 | 0 | 777,770 | 0 | 5,464,480 | |||||||||||||||
Omnibus Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Robert G. Gwin | ||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Savings Restoration Plan(1) | 0 | 84,451 | 46,198 | 0 | 250,118 | |||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Omnibus Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
R. A. Walker | ||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Savings Restoration Plan(1) | 0 | 105,637 | 45,152 | 0 | 424,723 | |||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Omnibus Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
61
Name | Executive Contributions in 2013 ($) | Company Contributions in 2013 ($) | Aggregate Earnings/(Losses) in 2013 ($) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at End of 2013 ($) | ||||||||||||||||||||
R. A. Walker | |||||||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Savings Restoration Plan(1) | 0 | 200,933 | 109,964 | 0 | 1,011,348 | ||||||||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2008 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2012 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Robert G. Gwin | |||||||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Savings Restoration Plan(1) | 0 | 27,842 | 191,430 | 0 | 704,153 | ||||||||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2008 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2012 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Charles A. Meloy | |||||||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Savings Restoration Plan(1) | 0 | 149,393 | 130,985 | 0 | 960,848 | ||||||||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2008 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2012 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Robert P. Daniels | |||||||||||||||||||||||||
Deferred Compensation Plan(2) | 0 | 0 | 435,127 | 0 | 2,028,461 | ||||||||||||||||||||
Savings Restoration Plan(1) | 0 | 89,636 | 68,485 | 0 | 618,062 | ||||||||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2008 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2012 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Robert K. Reeves | |||||||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Savings Restoration Plan(1) | 0 | 93,367 | 74,078 | 0 | 739,329 | ||||||||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2008 Omnibus Plan | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
2012 Omnibus Plan | 0 | 0 | 0 | 0 | 0 |
Executive | Company | Aggregate | Aggregate | Aggregate Balance | ||||||||||||||||
Contributions in | Contributions in | Earnings/Losses | Withdrawals/ | at End of | ||||||||||||||||
2010 | 2010 | in 2010 | Distributions | 2010 | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Charles A. Meloy | ||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Savings Restoration Plan(1) | 0 | 89,498 | 48,274 | 0 | 405,474 | |||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Omnibus Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Robert P. Daniels | ||||||||||||||||||||
Deferred Compensation Plan | 0 | 0 | 184,078 | 0 | 1,448,999 | |||||||||||||||
Savings Restoration Plan(1) | 0 | 80,106 | 41,511 | 0 | 510,593 | |||||||||||||||
1999 Stock Incentive Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Omnibus Plan | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
(1) | Company contributions in the Savings Restoration Plan are reported in the Summary Compensation Table for each of the NEOs under the “All Other Compensation” column for the fiscal year | |
(2) | Mr. |
62
68 |
Executive Compensation
The following tables reflect potential payments to our NEOs under existing contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios involving a The following are general definitions that apply to the termination scenarios detailed below. These definitions have been summarized and are qualified in their entirety by the full text of the applicable plans or agreements to which our NEOs are parties. Involuntary For A 69 Executive Compensation Good In February 2011, the Compensation Committee eliminated on a prospective basis the Disability is generally defined as the absence of the executive officer from 70 Executive Compensation Additional details of the post-termination arrangements can be found Involuntary For Cause Potential Payments Upon Termination orChange-of-ControlPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROLchange-of-control change of control or termination of employment of each NEO, assuming a termination date of December 31, 2010 termination date,2013, and, where applicable, using the closing price of our common stock of $76.16$79.32 (as reported on the NYSE as of December 31, 2010)2013).“Termination”Termination is generally defined as any termination that does not result from the following termination events: resignation; retirement; for cause; death; qualifying disability; extended leave of absence; continued failure to perform duties or responsibilities; a termination in connection with any corporate sale transaction where continued employment is available; or a termination if the employeeNEO is eligible to receive benefits from a Key EmployeeChange-of-Control Contract.“ Contract, or under an employment or severance agreement.Cause”Cause is generally defined as the following:• the willful and continued failure of the executive to perform substantially the executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness) or material breach of any material provision in an employment agreement (if applicable), after written demand for substantial performance is delivered to the executive by the Board or the CEO of the Company which specifically identifies the manner in which the Board or CEO believes that the executive has not substantially performed the executive’s duties; or• the willful engaging by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.“Change-of-Control” Change of Control is generally defined as any one of the following occurrences:• any individual, entity or group acquires beneficial ownership of 20% or more of either the outstanding shares of our common stock or our combined voting power;• individuals who constitute the Board (as of the date of either a givenchange-of-control contract or an award agreement under our equity plans, as applicable) cease to constitute a majority of the Board, provided that an individual whose election or nomination as a director is approved by a vote of at least a majority of the directors as of the date of either thechange-of-control contract or an award agreement under our equity plans, as applicable, will be deemed a member of the incumbent Board;• a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets or the acquisition of assets of another entity, unless following the business combination, – all or substantially all of the beneficial owners of our outstanding common stock prior to the business combination own more than 60% of the outstanding common stock of the corporation resulting from the business combination; – no person, entity or group owns 20% or more of the outstanding voting securities of the corporation resulting from the business combination; and – at least a majority of the board of the corporation resulting from the business combination were members of our Board prior to the business combination; or • approval by our stockholders of our complete liquidation or dissolution.“Reason”Reason is generally defined as any one of the following occurrences within three years of aChange-of-Control:• diminution in the executive’s position, authority, duties or responsibilities that were effective immediately prior to theChange-of-Control, excluding for this purpose an isolated, insubstantial and63
any material change in the location, as defined in the applicable agreement, where the executive officer was employed immediately preceding the Change of Control, or the Company requiring the executive officer to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control;inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the executive;• any failure by the Company to provide compensation to the executive at levels that were effective immediately prior to theChange-of-Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the executive;• any material change in the location, as defined in the applicable agreement, where the executive was employed immediately preceding theChange-of-Control, or the Company requiring the executive to travel on Company business to a substantially greater extent than required immediately prior to theChange-of-Control;• any termination by the executive for any reason during the30-day period immediately following the first anniversary of aChange-of-Control;• any purported termination by the Company of the executive’s employment otherwise than as expressly permitted in theirChange-of-Control or Employment Agreement; or• any failure by the Company to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume the terms provided in the executive’sChange-of-Control or Employment Agreement.“Good Reason”Good Reason provision allowing an executive officer to terminate for any reason during the30-day period immediately following the first anniversary of aChange-of-Control Change of Control for all newChange-of-Controlkey employee change-of-control contracts executed with any newly appointedand/or newly hired senior executivesexecutive officers who are not otherwise subject to an existing agreement.“Disability” The new Severance Agreement for Mr. Walker also excludes this modified single-trigger provision.the executive’shis or her duties with the Company on a full-time basis for 180 business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the executive officer or the executive’sexecutive officer’s legal representative.in the Compensation Discussion and Analysis beginning on page 45.or Voluntary Termination (Including Retirement) Mr. Hackett(1) Mr. Gwin Mr. Walker Mr. Meloy(1) Mr. Daniels Retirement Restoration Plan Benefits(2) $ 16,446,642 $ 539,360 $ 1,092,900 $ 16,112,160 $ 4,136,079 Non-qualified Deferred Compensation(3) $ 7,129,402 $ 250,118 $ 424,723 $ 405,474 $ 1,959,592 Pro-rata Portion of Performance Unit Awards(4) $ 8,017,922 $ — $ — $ 1,392,256 $ — Health and Welfare Benefits(5) $ 100,993 $ — $ — $ — $ — Repayment of Retention Payment(6) $ — $ — $ — $ (5,000,000 ) $ — $ 31,694,959 $ 789,478 $ 1,517,623 $ 12,909,890 $ 6,095,671
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Cash Severance | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Total | 0 | 0 | 0 | 0 | 0 |
Voluntary Termination (Including Retirement) |
| ||||||||||||||||||||||||
Mr. Walker($)(1) | Mr. Gwin($) | Mr. Meloy($)(1) | Mr. Daniels($) | Mr. Reeves($)(1) | |||||||||||||||||||||
Prorated Portion of Performance Unit Awards(2) | 546,049 | 0 | 143,718 | 0 | 109,595 | ||||||||||||||||||||
Total | 546,049 | 0 | 143,718 | 0 | 109,595 |
(1) | As of December 31, 2013, Messrs. | |
(2) | ||
64
Under the terms of the performance unit agreements, | ||
Involuntary Not For Cause Termination
Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | ||||||||||||||||
Cash Severance(1) | $ | 10,815,750 | $ | 2,109,250 | $ | 2,205,000 | $ | — | $ | 1,696,250 | ||||||||||
Pro-rata AIP Bonus for 2010(2) | $ | 2,975,115 | $ | 1,093,094 | $ | 1,027,896 | $ | 955,937 | $ | 955,937 | ||||||||||
Accelerated Equity Compensation(3) | $ | 37,929,039 | $ | 12,977,759 | $ | 14,301,873 | $ | 9,837,752 | $ | 11,469,313 | ||||||||||
Retirement Restoration Plan Benefits(4) | $ | 23,658,198 | $ | 539,360 | $ | 1,092,900 | $ | 19,156,280 | $ | 4,136,079 | ||||||||||
Non-qualified Deferred Compensation(5) | $ | 7,129,402 | $ | 250,118 | $ | 424,723 | $ | 405,474 | $ | 1,959,592 | ||||||||||
Health and Welfare Benefits(6) | $ | 172,519 | $ | 44,322 | $ | 67,417 | $ | 41,212 | $ | 324,532 | ||||||||||
Total | $ | 82,680,023 | $ | 17,013,903 | $ | 19,119,809 | $ | 30,396,655 | $ | 20,541,703 |
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Cash Severance(1) | 5,980,000 | 2,212,500 | 2,065,000 | 2,065,000 | 2,065,000 | ||||||||||||||||||||
Pro-rata AIP Bonus(2) | 2,923,700 | 1,181,740 | 1,005,064 | 1,005,064 | 1,077,757 | ||||||||||||||||||||
Accelerated Equity Compensation(3) | 12,631,562 | 4,364,421 | 4,471,391 | 4,471,391 | 3,731,254 | ||||||||||||||||||||
Retirement Restoration Plan Benefits(4) | 0 | 0 | 2,704,483 | 0 | 0 | ||||||||||||||||||||
Health and Welfare Benefits(5) | 130,033 | 68,856 | 52,873 | 510,813 | 80,226 | ||||||||||||||||||||
Total | 21,665,295 | 7,827,517 | 10,298,811 | 8,052,268 | 6,954,237 |
(1) | Mr. | |
(2) | ||
(3) | Reflects thein-the-money value of unvested stock options, the estimated current value of unvested performance units (based on performance to date) and the value of unvested restricted stock | |
(4) | Reflects the lump-sum present value of |
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the additional supplemental pension benefits that would have accrued assuming they were eligible for subsidized early retirement benefits. Messrs. |
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Walker, Meloy, and | |
(5) | Reflects the | |
Change-of-Control:Change of Control: Involuntary Termination or Voluntary Termination For Good Reason
Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | ||||||||||||||||
Cash Severance(1) | $ | 10,815,750 | $ | 4,959,044 | $ | 5,787,687 | $ | — | $ | 4,582,290 | ||||||||||
Pro-rata AIP Bonus for 2010(2) | $ | 2,037,750 | $ | 995,015 | $ | 1,260,754 | $ | 1,005,100 | $ | 1,005,100 | ||||||||||
Accelerated Equity Compensation(3) | $ | 41,040,023 | $ | 13,720,472 | $ | 15,447,471 | $ | 10,832,706 | $ | 12,464,267 | ||||||||||
Retirement Restoration Plan Benefits(4) | $ | 23,636,357 | $ | 2,260,821 | $ | 5,384,096 | $ | 19,156,280 | $ | 8,144,268 | ||||||||||
Non-qualified Deferred Compensation(5) | $ | 8,086,455 | $ | 557,921 | $ | 783,959 | $ | 689,892 | $ | 2,244,010 | ||||||||||
Health and Welfare Benefits(6) | $ | 242,035 | $ | 70,357 | $ | 193,733 | $ | 61,524 | $ | 346,012 | ||||||||||
Outplacement Assistance | $ | 30,000 | $ | 30,000 | $ | 30,000 | $ | 30,000 | $ | 30,000 | ||||||||||
Financial Counseling(7) | $ | — | $ | 41,190 | $ | 41,190 | $ | 41,190 | $ | 41,190 | ||||||||||
Excise Tax andGross-up(8) | $ | 13,252,887 | $ | 5,449,468 | $ | 8,069,428 | $ | 3,424,670 | $ | 6,045,231 | ||||||||||
Total | $ | 99,141,257 | $ | 28,084,288 | $ | 36,998,318 | $ | 35,241,362 | $ | 34,902,368 |
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Cash Severance(1) | 7,475,000 | 5,344,973 | 4,856,630 | 4,856,630 | 4,931,015 | ||||||||||||||||||||
Pro-rata AIP Bonus(2) | 2,923,700 | 1,093,094 | 974,700 | 974,700 | 1,000,350 | ||||||||||||||||||||
Accelerated Equity Compensation(3) | 12,929,954 | 4,543,317 | 4,655,031 | 4,655,031 | 3,871,292 | ||||||||||||||||||||
Retirement Restoration Plan Benefits(4) | 6,390,043 | 2,238,386 | 2,704,483 | 4,753,675 | 1,537,936 | ||||||||||||||||||||
Nonqualified Deferred Compensation(5) | 638,800 | 135,000 | 502,410 | 301,446 | 306,063 | ||||||||||||||||||||
Health and Welfare Benefits(6) | 193,391 | 102,893 | 81,038 | 536,656 | 119,766 | ||||||||||||||||||||
Outplacement Assistance | 30,000 | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||||||||||||||
Financial Counseling(7) | 0 | 46,309 | 46,309 | 46,309 | 46,309 | ||||||||||||||||||||
Excise Tax and Gross-Up(8) | N/A | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Best-of-Net Tax Adjustment(9) | (4,324,441 | ) | N/A | N/A | N/A | N/A | |||||||||||||||||||
Total | 26,256,447 | 13,533,972 | 13,850,601 | 16,154,447 | 11,842,731 |
(1) | Mr. | |
(2) | Mr. | |
(3) | Includes thein-the-money value of unvested stock options, the |
(4) | Reflects the lump-sum present value of |
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NEOs were eligible for subsidized early retirement benefits. | |
(5) | Includes the | |
(6) | Values represent 36 months of health and welfare benefit coverage. | |
(7) | Values | |
(8) | Values estimate the total payment required to make each executive officer whole for the 20% excise tax imposed by IRC Section 4999. Mr. Walker is no longer eligible for this excise tax gross-up benefit per the terms of his Severance Agreement. |
Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | ||||||||||||||||
Cash Severance | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Pro-rata AIP Bonus for 2010(1) | $ | 2,037,750 | $ | 624,625 | $ | 704,039 | $ | 546,250 | $ | 546,250 | ||||||||||
Accelerated Equity Compensation(2) | $ | 41,040,023 | $ | 13,720,472 | $ | 15,447,471 | $ | 10,832,706 | $ | 12,464,267 | ||||||||||
Retirement Restoration Plan Benefits(3) | $ | 16,446,642 | $ | 539,360 | $ | 1,092,900 | $ | 16,112,160 | $ | 4,136,079 | ||||||||||
Non-qualified Deferred Compensation(4) | $ | 7,129,402 | $ | 250,118 | $ | 424,723 | $ | 405,474 | $ | 1,959,592 | ||||||||||
Health and Welfare Benefits(5) | $ | 1,266,246 | $ | 450,541 | $ | 416,147 | $ | 352,178 | $ | 343,502 | ||||||||||
Total | $ | 67,920,063 | $ | 15,585,116 | $ | 18,085,280 | $ | 28,248,768 | $ | 19,449,690 |
(9) | Reflects the aggregate impact of the best-of-net tax adjustment as prescribed under Mr. Walker’s Severance Agreement (as discussed on page 54). |
Disability
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Cash Severance | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Pro-rata AIP Bonus(1) | 1,690,000 | 683,087 | 580,962 | 580,962 | 622,981 | ||||||||||||||||||||
Accelerated Equity Compensation(2) | 12,929,954 | 4,543,317 | 4,655,031 | 4,655,031 | 3,871,292 | ||||||||||||||||||||
Health and Welfare Benefits(3) | 906,673 | 459,225 | 399,831 | 380,211 | 360,112 | ||||||||||||||||||||
Total | 15,526,627 | 5,685,629 | 5,635,824 | 5,616,204 | 4,854,385 |
(1) | Represents payment of a pro-rata target AIP bonus based on target bonus percentages effective for the | |
(2) | Includes the in-the-money value of unvested stock options, the value of unvested restricted stock units and the estimated current value of unvested performance units, all as of December 31, 2013. In the event of a termination as a result of a disability, unvested performance units granted prior to 2012 would be paid at target. Performance units granted in 2012 and 2013 would be paid after the end of the applicable performance period, based on actual performance. For performance units payable based on actual performance, current values reflect performance to date estimates as of December 31, 2013. |
(3) | Reflects the cost of the continuation of additional death benefit coverage provided to executive officers of the Company until age 65. All amounts are present values determined in accordance with FASB ASC Topic 715. |
Death
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Cash Severance | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Pro-rata AIP Bonus(1) | 1,690,000 | 683,087 | 580,962 | 580,962 | 622,981 | ||||||||||||||||||||
Accelerated Equity Compensation(2) | 16,036,777 | 5,514,036 | 5,651,528 | 5,651,528 | 4,631,099 | ||||||||||||||||||||
Life Insurance Proceeds(3) | 2,928,510 | 2,463,394 | 2,067,183 | 2,067,183 | 2,239,449 | ||||||||||||||||||||
Total | 20,655,287 | 8,660,517 | 8,299,673 | 8,299,673 | 7,493,529 |
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(1) | Represents payment of a pro-rata target AIP bonus based on target bonus percentages effective for the 2013 AIP and eligible earnings as of December 31, 2013. |
(2) | Includes the in-the-money value of unvested stock options, the target value of unvested performance units, and the value of unvested restricted stock | |
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Mr. Hackett | Mr. Gwin | Mr. Walker | Mr. Meloy | Mr. Daniels | ||||||||||||||||
Cash Severance | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Pro-rata AIP Bonus for 2010(1) | $ | 2,037,750 | $ | 624,625 | $ | 704,039 | $ | 546,250 | $ | 546,250 | ||||||||||
Accelerated Equity Compensation(2) | $ | 41,040,023 | $ | 13,720,472 | $ | 15,447,471 | $ | 10,832,706 | $ | 12,464,267 | ||||||||||
Retirement Restoration Plan Benefits(3) | $ | 16,446,642 | $ | 539,360 | $ | 1,092,900 | $ | 16,112,160 | $ | 4,136,079 | ||||||||||
Non-qualified Deferred Compensation(4) | $ | 7,129,402 | $ | 250,118 | $ | 424,723 | $ | 405,474 | $ | 1,959,592 | ||||||||||
Life Insurance Proceeds(5) | $ | 7,606,894 | $ | 2,250,197 | $ | 2,313,139 | $ | 1,809,599 | $ | 1,809,599 | ||||||||||
Total | $ | 74,260,711 | $ | 17,384,772 | $ | 19,982,272 | $ | 29,706,189 | $ | 20,915,787 |
(3) | ||
Includes amounts payable under additional death benefits provided to executive officers and other key employees of the Company. These liabilities are not insured, but are self-funded by the Company. Proceeds are not exempt from federal taxes; values shown include an additional taxgross-up amount to equate benefits with nontaxable life insurance proceeds. Values exclude death benefit proceeds from programs available to all employees. |
In addition to the benefits outlined above for each termination scenario, each of the NEOs would be paid following termination for any reason, the following vested amounts under our nonqualified benefit programs, which have been previously earned but not paid:
Mr. Walker($) | Mr. Gwin($) | Mr. Meloy($) | Mr. Daniels($) | Mr. Reeves($) | |||||||||||||||||||||
Retirement Restoration Plan Benefits(1) | 10,360,461 | 1,891,960 | 21,111,121 | 6,562,068 | 5,588,367 | ||||||||||||||||||||
Non-qualified Deferred Compensation(2) | 1,011,348 | 704,153 | 960,848 | 2,646,523 | 739,329 | ||||||||||||||||||||
Health and Welfare Benefits(3) | 113,518 | 0 | 0 | 0 | 122,289 | ||||||||||||||||||||
Total | 11,485,327 | 2,596,113 | 22,071,969 | 9,208,591 | 6,449,985 |
(1) | Reflects the lump-sum present value |
(2) | Reflects the combined vested balances in the non-qualified Savings Restoration Plan and Deferred Compensation Plan. |
(3) | Messrs. Walker’s and Reeves’s values represent the lump-sum value of vested subsidized retiree medical benefits. This benefit is coordinated with any additional continuation of health and welfare benefits. In the event of an involuntary not for cause termination, Messrs. Walker’s and Reeves’s vested benefits would be reduced to $82,000 and $90,803, respectively. In the event of an involuntary not for cause or voluntary for good reason termination following a change of control, Messrs. Walker’s and Reeves’s vested benefits would be reduced to $67,166 and $76,012, respectively. |
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Transactions with Related Persons
The Company recognizes that related-person transactions can present potential or actual conflicts of interest and it is the Company’s preference that related-person transactions are avoided as a general matter. However, the Company also recognizes that there are situations, including certain transactions negotiated on an arm’s length basis, where related-person transactions may be in, or may not be inconsistent with, the best interest of the Company and our stockholders. Therefore, the Company has written procedures for the approval, ratification and review of ongoing related-person transactions. Either the Board’s NominatingGovernance and Corporate GovernanceRisk Committee or the full Board (as determined by the NominatingGovernance and Corporate GovernanceRisk Committee) will review, ratify or approve, as necessary, any related-person transactions prior to the transaction being entered into, or ratify any related personrelated-person transactions that have not been previously approved, in which a director,five-percent owner, executive officer or immediate family member of any such person has a material interest, and whichwhere the transaction is in an amount in excess of $120,000, either individually or in the aggregate of several transactions during any calendar year. This review typically occurs in connection with regularly scheduled Board meetings.
In addition to those matters described above, the NominatingGovernance and Corporate GovernanceRisk Committee has approved in advance the following categories of related-person transactions: (i) the rates and terms involved in such transactions where the Company’s standard rates and terms for such transactions apply:apply; and (ii) the hiring of a related person (including immediate family members) as an employee of the Company (but not an officer), provided that total annual compensation (meaning base salary, annual incentive bonus and other amounts to be reported on aW-2) does not exceed $120,000.
In 2011, the Company leased a mineral interest in the Supply Chain Management department who worked for theWard County, Texas owned by Mr. Geren. The Company from 2001paid Mr. Geren $134,902 in royalty payments during 2013, pursuant to July 2010. Mr. Prince’s totalW-2 compensation for 2010 was greater than $120,000 but less than $300,000. The Nominating and Corporate Governance Committee has reviewed and approved his employment arrangement in accordancea lease with the Company’s policy on transactions with related persons.
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ITEM 2 — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITOR
The Audit Committee has appointed KPMG LLP, an independent registered public accounting firm, to audit the Company’s financial statements for 2011.2014. The Board, at the request of the Audit Committee, is asking you to ratify that appointment.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP TO AUDIT THE COMPANY’S FINANCIAL STATEMENTS FOR 2011.2014. If the stockholders do not ratify the appointment of KPMG LLP, the Audit Committee will make the final determination of the independent auditor for 2011.
KPMG LLP, an independent registered public accounting firm, served as the Company’s independent auditor during 2010.2013. Representatives of KPMG LLP will be present at the meetingAnnual Meeting to make a statement, if they desire to do so, and to respond to appropriate questions from stockholders.
The following table presents fees for the audits of the Company’s annual consolidated financial statements for 20102013 and 20092012 and for other services provided by KPMG LLP.
2010 | 2009 | |||||||
Audit Fees | $ | 5,535,000 | $ | 5,600,000 | ||||
Audit-related Fees | 947,000 | 1,369,000 | ||||||
Tax Fees | 605,000 | 230,000 | ||||||
All Other Fees | 0 | 0 | ||||||
Total | $ | 7,087,000 | $ | 7,199,000 | ||||
2013 | 2012 | ||||||
Audit Fees | $ | 6,530,000 | $ 6,042,000 | ||||
Audit-related Fees | 1,219,000 | 871,000 | |||||
Tax Fees | 0 | 4,000 | |||||
All Other Fees | 274,000 | 0 | |||||
|
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| |||||
Total | $ | 8,023,000 | $ 6,917,000 | ||||
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Audit fees are primarily for the audit of the Company’s consolidated financial statements included in theForm 10-K, including the audit of the effectiveness of the Company’s internal controls over financial reporting, and the reviews of the Company’s financial statements included in theForms 10-Q. KPMG LLP also served as the independent auditor of Western Gas Partners, LP (WES)WES and fees for the audit of WES’s annual consolidated financial statements for 20102013 and 20092012 were $920,000$1,031,000 and $915,000,$948,000, respectively, which are not included in the table above.
Audit-related fees are primarily for the audits of the Company’s benefit plans, other audits, consents, comfort letters and certain financial accounting consultation. Audit-related fees related to WES for 20102013 and 20092012 were $640,000$758,000 and $289,000,$665,000, respectively, which are not included in the table above.
Tax fees are primarily for tax planning compliance and services including approximately $5,000 and $93,000 in 2010 and 2009, respectively, for services related to individual income tax services for Company employees in connection with foreign assignments.services. The Audit Committee has concluded that the provision of tax services is compatible with maintaining KPMG LLP’s independence.
All Other Fees are primarily for consulting services. The Audit Committee has concluded that these services are compatible with maintaining KPMG LLP’s independence.
The Audit Committee adopted a Pre-Approval Policy with respect to services which may be performed by KPMG LLP. This policy lists specific audit, audit-related, and tax services as well as any
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Independent Auditor
other services that KPMG LLP is authorized to perform and sets out specific dollar limits for each specific service, which may not be exceeded without additional Audit Committee authorization. The Audit Committee receives quarterly reports on the status of expenditures pursuant to that Pre-Approval Policy.
The Audit Committee reviews the policy at least annually in order to approve services and limits for the current year. Any service that is not clearly enumerated in the policy must receive specific pre-approval by the Audit Committee or by its Chairperson, to whom such authority has been conditionally delegated, prior to engagement. During 2010,2013, no fees for services outside the scope of audit, review, or attestation that exceed the waiver provisions of 17 CFR 210.2-01(c)(7)(i)(C) were requested of or approved by the Audit Committee.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 As described in detail under the heading 78 Advisory Vote to Approve Executive Compensation As described on page 35, our compensation program consists of several practices that we believe contribute to good governance. These practices include the following: Require a Majority of Pay to Be At-Risk No Employment Contracts Emphasize Long-Term Performance No Tax Gross-Ups on Perquisites Maintain a Competitive Compensation Package No Permitted Short Sales or Derivative Transactions in Company Stock Require Robust Stock Ownership No New Excise Tax Gross-Ups Provide for Double-Trigger Equity Acceleration Upon a Change of Control No Payment of Current Dividends or Dividend Equivalents on Unvested Awards Provide for Clawback Provisions Applicable to Incentive Awards No Repricing of Stock Options and Stock Appreciation Rights Structure Incentive Compensation to Be Deductible No Hedging or Pledging of Company Stock Please read the ONTO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION (Act) enables our stockholders to vote to approve, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules.“CompensationCompensation Discussion and Analysis,” the Committee believes that the main objective of our executive compensation program alignsis to pay for performance while aligning executives’ interests with our business strategy, focuses on long-term value creation for our stockholders and deliversstockholder interests. We pay relativecompetitive levels of compensation to our performance, which will attract and retain experienced, talented executives and we structure pay to ensuresupport our business objectives with appropriate rewards for short-term operating results and long-term stockholder value creation. Accordingly, our compensation philosophy recognizes the value of rewarding our executive officers for their performance and motivating them to continue to excel in the future. The incentive compensation earned and paid to our NEOs for 2013 and the decisions made by the Committee impacting compensation for our NEOs in 2013 reflect the pay-for-performance alignment of our compensation programs and adherence to our compensation philosophy. Specifically:success. achievement of record-setting sales volumes and reserve growth, financial discipline through prudent capital spending and efficient cost management, and a continued commitment to the safety of our employees, a performance score of 173% was achieved under the Annual Incentive Program for 2013 for the NEOs.What We Do What We Don’t Do
(beginning with awards granted in 2012)“CompensationCompensation Discussion and Analysis”Analysis beginning on page 2830 for additional details about our executive compensation program, including information about the compensation of our NEOs during 2010.During 2010, the Compensation Committee undertook a comprehensive review and assessment of the various design features of the Company’s executive compensation and benefits programs to confirm that such programs are competitively structured, are aligned with our short and long-term strategic goals and reflect a strongpay-for-performance orientation. Following the Deepwater Horizon events (Anadarko owns a 25% non-operating leasehold interest in the Macondo lease), the Compensation Committee considered various retention challenges in addition to the Company’s operational and financial performance to ensure that the Company retained a strong and focused executive leadership team. The compensation actions taken with respect to 2010 reflect the Compensation Committee’s adherence to its established executive compensation philosophy and principles, and a strongpay-for-performance orientation.Below are the key actions and decisions made regarding the Company’s executive compensation program review in 2010 and early 2011, as approved by the Compensation Committee with counsel from its independent compensation consultant:• held base salaries for Messrs. Hackett, Daniels and Meloy at current levels (for the second year in a row) and increased the base salaries for Messrs. Gwin and Walker for competitive reasons;• reduced or maintained the value of the 2010 annual long-term incentive awards for each of the NEOs relative to the value of the annual long-term incentive awards made for 2009;• made performance-based incentive bonus awards to NEOs to recognize both Company and individual performance for 2010 and, beginning with the 2011 plan year, established maximum caps of 275% for each performance metric under the Annual Incentive Program, (in addition to the existing overall program cap of 200%);• increased the stock ownership requirements for our CEO from five times base salary to six times base salary and for our non-employee directors from five times annual retainer to seven times annual retainer;• reduced the level of executive severance benefits provided in the event of an involuntary not for cause termination, outside of achange-of-control, by eliminating: (1) the special retirement benefit enhancement, except for in special cases as approved by the Compensation Committee; and (2) the post-termination financial planning benefits;• reduced the level of post-change-of-control severance benefits for prospective senior executives by: (1) eliminating the modified single trigger provision and replacing it with a double trigger provision; (2) reducing the protection period from three years to two years; (3) eliminating the full excise taxgross-up provision and replacing it with abest-of-net approach; and (4) eliminating the post-termination financial planning benefits;• executed a special retention agreement with Mr. Meloy, providing for his continued leadership of the Company’s worldwide operations, to ensure that the Company is able to successfully execute on its business strategy in light of ongoing regulatory challenges in the Gulf of Mexico; and
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THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
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ITEM 4 — ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATIONThe Act enables our stockholders to indicate how frequently we should seek an advisory vote on the compensation of the NEOs, as disclosed pursuant to the SEC’s compensation disclosure rules, such as Item 3 included in this proxy statement. By voting on this Item 4, stockholders may indicate whether the advisory vote should occur every three years, every two years or every year, or abstain on this matter.After careful consideration of this Item 4, the Board has determined that an advisory vote on executive compensation that occurs every three years (a triennial vote) is the most appropriate alternative for the Company, as described further below.Setting a three-year period for holding this stockholder vote will provide a clear, simple and effective means for us to obtain information on investor sentiment about our executive compensation philosophy and react thereto. As further discussed in the “Compensation Discussion and Analysis — Our Executive Compensation Philosophy and Guiding Principles” and “— Paying for Performance,” we seek to maintain a consistent compensation program based on certain core compensation principles, including long-term relative performance measures that emphasize an increase in stockholder value over time. A triennial vote would closely align stockholder feedback with the multi-year performance measurement cycle we use to reward long-term performance while at the same time afford our stockholders an effective means of providing feedback on the application of our consistent core compensation principles. Additionally, as we seek to avoid significant deviation in our compensation programs year to year, in part to ensure retention of talented executive team members, we believe our stockholders are not subject to the type of risks associated with fluctuating executive compensation that is cause for more frequent stockholder review. Furthermore, we believe a triennial vote represents the most effective timeframe for us to respond to stockholder feedback and provides us with sufficient time to engage with stockholders to understand and respond to the vote results and develop and implement any adjustments to our executive compensation program.The Board is aware of and took into account views that some have expressed in support of conducting an annual advisory vote on executive compensation. We are aware that some stockholders believe that annual advisory votes will enhance or reinforce accountability. However, we have in the past been, and will in the future continue to be, proactively engaged with our stockholders on a number of topics and in a number of forums. Thus, we view the advisory vote on executive compensation as an additional, but not exclusive, opportunity for our stockholders to communicate with us regarding their views on the Company’s executive compensation programs. In addition, because our executive compensation programs have typically not changed materially fromyear-to-year and are designed to foster long-term performance, we are concerned that an annual advisory vote on executive compensation could lead to a short-term perspective inappropriately bearing on our executive compensation programs. Furthermore, we grant awards with multi-year performance and service periods to encourage our NEOs to focus on long-term performance, and believe a triennial vote allows our executive compensation programs to be evaluated over a similar time frame and in relation to our long-term performance. Finally, although we believe that holding an advisory vote on executive compensation every72
The New York City Fire Department PensionState Common Retirement Fund, and thelocated at 633 Third Avenue-31st Floor, New York, City Board of Education Retirement System, located at 1 Centre Street, New York, NY10007-2341, 10017, telephone(212) 669-2651, are the beneficial owners of more than $2,000 worth of the Company’s common stock, and have notified the Company that they intend to present the following resolution at the meeting for action by the stockholders.
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1. | Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum. |
2. | Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: |
a. | The identity of the recipient as well as the amount paid to each; and |
b. | The title(s) of the person(s) in the Company responsible for decision-making. |
The report shall be presented to the board of directors’ audit committeedirectors or other relevant oversightboard committee and posted on the company’s website to reduce costs to shareholders.
STOCKHOLDER SUPPORTING STATEMENT
As long-term shareholders of Anadarko Petroleum, Corporation, we support transparency and accountability in corporate spending on political activities. These include any activities includeconsidered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect political contributions to political candidates, political parties, political organizations or ballot referendums;organizations; independent expenditures; or electioneering communications on behalf of a federal, state or local candidate.
Disclosure is consistent with public policy, in the best interest of the company and its shareholders and critical for compliance with federal ethics laws. Moreover, the majority in the Supreme Court’sCitizens Uniteddecision recognized the importance of political spending disclosure for shareholders when it said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way.” This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value.
Anadarko Petroleum Corporation contributed at least $1,544,705$2,044,863 in corporate funds since the 20022003 election cycle. (CQ:http://moneyline.cq.com/pml/home.domoneyline.cq.com and National Institute on Money in State Politics:http:www.followthemoney.org/index.phtml.)
However, relying on publicly available data does not provide a complete picture of the Company’s political expenditures.spending. For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In manysome cases, even management does not know how trade
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Stockholder Proposals
associations use their company’s money politically. The proposal asks the Company to disclose all of its political contributions,spending, including payments to trade associations and other tax exempt organizations.organizations used for political purposes. This would bring our Company in line with a growing number of leading companies, including Hewlett-Packard, AetnaQualcomm, Exelon, Merck and American Electric PowerMicrosoft that support political disclosure and accountability and present this information on their websites.
The Company’s Board and its shareholders need completecomprehensive disclosure to be able to fully evaluate the political use of corporate assets. Thus, weWe urge your support for this critical governance reform.
What does the Board recommend?
THE BOARD OF DIRECTORS’ STATEMENT REGARDINGDIRECTORS RECOMMENDS A VOTE “AGAINST” THE ABOVE
STOCKHOLDER PROPOSAL
The Board has adopted a Political and Public Engagement Policy that addresses the items to be included in the reports requested in the proposal. The Policy can be found on the Company’s website at https://www.anadarko.com/Responsibility/Pages/PoliticalContributions.aspx. As a result of Directors recommends a vote “AGAINST”this Policy and the above stockholder proposal foradditional actions described below, the following reasons:
Anadarko believes that it is in the best interest of the CompanyAnadarko and its stockholders for usthe Company to participate in the political processprocess. The oil and gas industry, and as a result, the Company’s business and operations, are directly affected by engagingpolitical developments, including but not limited to policies related to energy, tax, and the environment. Anadarko has a stake in helping to elect candidates who understand and support the oil and gas industry. Accordingly, the Company maintains a government relations program to educate public officials about our position on issues significant to the Company’s business, and to support those candidates who advocate pro-growth, free enterprise economic policies. A major vehiclepolicies and for causes consistent with Company goals and interests. Anadarko participates in the Company’s political activitiesprocess only to the extent that it is the Anadarko Petroleum Corporation Political Action Committee (“APC PAC”). The APC PAC was formed more than 20 years ago as a nonpartisan committee which allows Anadarko employees the opportunity to voluntarily contribute personal funds and join together to make political contributions topermissible under federal, state, and local candidates who sharelaws, rules and regulations. Its political contributions originate from corporate funds, where permitted by law, as well as through Anadarko’s commitment to a strong, free enterprise-based energy industry. All of APC PAC’snon-partisan political action committee (APC PAC), which is financed through voluntary contributions made by eligible employees.
To ensure that Anadarko’s political activities are fully disclosedtransparent to the Federal Election Commission (“FEC”)Company’s stockholders and posted byother stakeholders, the FECPolicy requires the Company to post on its website, where they can be reviewed by any stockholder or member of the public.
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Stockholder Proposals
The Governance and Risk Committee of the Board, a committee which consists solely of independent directors, has oversight responsibility for the Policy and for Anadarko’s political activity. The Policy requires that the Vice President, Government Relations provide an annual report to the Governance and Risk Committee. The report must detail the Company’s political contributions, contributions to 501(c)(4) social welfare organizations and trade association payments.
In lightaddition, the Policy establishes the Company’s internal approval process to ensure that its political contributions comply with applicable laws and are consistent with the Company’s public policy agenda and business priorities. Pursuant to the policy, no Company resources, including the use of these industry specific purposes, it wouldCompany premises, use of Company equipment, or monetary payments, may be misleadingcontributed to treat all such paymentsany political candidate, political committee (other than for the administrative or solicitation expenses of the APC PAC, as “political contributions”permitted by law), political party, ballot measure committee, trade association, or 501(c)(4) social welfare organization, or to any other organization for the purpose of attempting to influence elections or ballot measures without advance approval by the Company.
The requester’s usePolicy further requires that all political contributions made with Company funds or resources, or made through APC PAC, must promote the interests of the term “political contribution,” whichCompany and must be made without regard for the requester does not define, appears to be extremely overbroad. Moreover,personal political preferences of Company officers or executives. Contribution decisions are made based upon the requester loosely seeks disclosure of “indirect” contributions, without specifying what would be considered an indirect contribution. Particularly in light offollowing principles:
The Board believes that additionalthe Policy substantially fulfills the purposes of the reports requested in the proposal, beyond the public disclosure thatproposal. Requiring the Company is already required to make and does make,provide such additional reports would result in an unnecessary and unproductive use of the Company’s time and resources.
THE BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS STOCKHOLDER PROPOSAL.
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Stockholder Proposals
ITEM 5 — STOCKHOLDER PROPOSAL — REPORT ON CLIMATE CHANGE RISK
The Park Foundation Inc., located at P.O. Box 550, Ithaca, NY 14851, telephone (607) 272-9124, is the beneficial owner of more than $2,000 worth of the Company’s common stock, and has notified the Company that it intends to present the following resolution at the meeting for action by the stockholders.
What is the Proposal?
WHEREAS:
Anadarko Petroleum Corporation is among the world’s largest independent oil and natural gas exploration and production companies.
In recognition of the need to address climate change and minimize global temperature rise, nearly every national government has agreed that “deep cuts in greenhouse gas emissions (GHG) are required;” and that “the increase in global temperature should be below 2 degrees Celsius.”
The International Energy Agency (IEA) states that “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2 degrees Celsius goal, unless carbon capture and storage technology is widely deployed.”
To achieve a 66 percent probability of not exceeding a global temperature rise above 2 degrees Celsius, the Intergovernmental Panel on Climate Change estimates that approximately 987 gigatons of carbon dioxide can be emitted through 2100. The IEA states that total proven reserves of coal, oil, and natural gas, represent approximately 2,860 gigatons of potential CO2 emissions.
Several analysts indicate that companies may not be adequately accounting for or disclosing the downside risks that could result from lower than expected demand or prices for oil.
Given the growing public concern about climate change, investors are concerned that actions to significantly reduce GHG emissions could reduce the value of Anadarko’s oil and gas reserves and/or related infrastructure before the end of their expected useful life.
Investors require additional information on how Anadarko is preparing for potential scenarios in which demand for oil and gas is greatly reduced due to regulation or other climate-associated drivers. Without additional disclosure, shareholders are unable to determine whether Anadarko is adequately managing these risks or seizing related opportunities.
RESOLVED:
Shareholders request Anadarko to prepare a report by September 2014, omitting proprietary information and prepared at reasonable cost, on the company’s goals and plans to address global concerns regarding fossil fuels and their contribution to climate change, including analysis of long and short term financial and operational risks to the company.
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Stockholder Proposals
STOCKHOLDER SUPPORTING STATEMENT
We recommend the report include:
What does the Board recommend?
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE ABOVE
STOCKHOLDER PROPOSAL FOR THE FOLLOWING REASONS:
Anadarko continues to demonstrate its commitment to responsible environmental stewardship by continually looking for ways to minimize the overall environmental impacts of its activities, including the reduction of GHG emissions. In light of the Company’s current reporting on this matter and other steps the Company has taken to assess various risks associated with climate change which are discussed below, the Board believes that the requested report would result in an unnecessary and unproductive use of the Company’s time and resources.
In support of its commitment to responsible environmental stewardship, in 2003 Anadarko formed a Climate Change Committee to organize, evaluate and take action on climate change and GHG emissions. The committee’s charter can be found on the Company’s website at http://www.anadarko.com/SiteCollectionDocuments/PDF/ClimateChangeCmtCharter.pdf. The committee, which reports annually to the Governance and Risk Committee of the Board, assists management with monitoring the science of climate change, monitoring the Company’s measures to reduce GHG emissions and overseeing implementation of GHG emission programs in an effort to maximize the commercial value of proactive GHG management.
Anadarko already reports information responsive to the proposal that addresses the long and short term financial and operational risk to the Company of concerns regarding climate change. Anadarko annually reports climate-related risks and opportunities to the Carbon Disclosure Project (CDP) and will continue to do so in 2014. As part of this disclosure, for each identified risk, Anadarko reports potential financial implications, methods for mitigation, and costs of mitigation. Anadarko’s reports can be found on the Company’s website at http://www.anadarko.com/Responsibility/Pages/ClimateChange.aspx.
In its CDP reports, Anadarko has identified the potential for changing consumer behavior, particularly a decline in the demand for petroleum products, to represent an indirect financial risk to revenues from Anadarko’s crude oil production. Anadarko currently considers this risk to have little to
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Stockholder Proposals
no impact to its operations and revenues based on its deep, balanced and diversified portfolio and the flexibility it affords. Specifically, Anadarko is among the largest producers of clean-burning natural gas in the U.S. Natural gas is a low-carbon alternative supported by state and federal administrations to reduce global greenhouse gas emissions, while providing reliable, efficient and affordable energy to consumers. Anadarko anticipates that natural gas demand may increase as consumer preferences shift away from more carbon-intensive fuels, particularly as end users seek greater energy security, recoil from volatile oil prices, and refining demand lowers.
To further demonstrate its commitment to responsible environmental stewardship Anadarko has incorporated best practices into its operations that are intended to reduce GHG emissions, including:
The Company also supports and
Finally, in order to implement the proposal, the Company would be required to engage in speculation on a variety of matters, including future possible restrictions on carbon emissions and the reaction and conduct of consumers in response to any such regulations. The Company cannot, at a reasonable cost, determine what actions political bodies, including U.S. federal, state or foreign governments, are likely to take in the future relating to restrictions on fossil fuels and their contribution to climate change.
For these reasons, the Board believes that the requested report would result in an unnecessary and unproductive use of the Company’s time and resources.
THE BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS STOCKHOLDER PROPOSAL.
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BY ORDER OF THE BOARD OF DIRECTORS | ||
Amanda M. McMillian | ||
Vice President, Deputy General Counsel, Corporate Secretary and Chief Compliance Officer |
Dated: March 25, 2011
The Woodlands, Texas
See enclosed proxy card — please vote promptly
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1201 LAKE ROBBINS DRIVE THE WOODLANDS, TX 77380 | WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING. BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. VOTE BY INTERNET– www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time the day before thecut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Anadarko Petroleum Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BYPHONE–1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time the day before thecut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Anadarko Petroleum Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
KEEP THIS PORTION FOR YOUR RECORDS | ||||
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ANADARKO PETROLEUM CORPORATION | ||||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEMS 1, 2 AND 3. Vote on Directors | ||||||||||||||||||||||||||
1. | Election of Directors Nominees: | For | Against | Abstain | ||||||||||||||||||||||
1a. | John R. Butler, Jr. | o | o | o | ||||||||||||||||||||||
1b. | Kevin P. Chilton | o | o | o | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR “3 YEARS” FOR ITEM 4. | 3 Years | 2 Years | 1 Year | Abstain | |||||||||||||||||
1c. 1d. | Luke R. Corbett H. Paulett Eberhart | o o | o o | o o | 4. | Advisory Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation. | o | o | o | o | ||||||||||||||||
1e. | Preston M. Geren III | o | o | o | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” ITEMS 5, 6, 7 AND 8. | For | Against | Abstain | ||||||||||||||||||
1f. | John R. Gordon | o | o | o | 5. | Stockholder Proposal- Gender Identity Non-Discrimination Policy. | o | o | o | |||||||||||||||||
1g. | James T. Hackett | o | o | o | 6. | Stockholder Proposal- Adoption of Policy of Independent Director Chairman. | o | o | o | |||||||||||||||||
Vote on Proposals | 7. | Stockholder Proposal- Adoption of Policy on Accelerated Vesting of Equity Awards. | o | o | o | |||||||||||||||||||||
2. | Ratification of Appointment of KPMG LLP as Independent Auditor. | o | o | o | 8. | Stockholder Proposal- Report on Political Contributions. | o | o | o | |||||||||||||||||
3. | Advisory Vote on Named Executive Officer Compensation. | o | o | o | ||||||||||||||||||||||
For address changes and/or comments, please check this box and write them on the back where indicated. | o | The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder(s).If no direction is made, this proxy will be voted FOR Items 1, 2 and 3, for “3 YEARS” for Item 4, andAGAINST Items 5, 6, 7 and 8. If any other matters come properly before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion. | ||||||||||||||||||||||||
Please indicate if you plan to attend this meeting. | o Yes | o No | ||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | Each signatory to this proxy acknowledges receipt from Anadarko Petroleum Corporation, prior to execution of this proxy, of a notice of Annual Meeting of Stockholders and a proxy statement dated March 25, 2011. |
ANADARKO PETROLEUM CORPORATION | ||||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3. | ||||||||||||||||||||||||||
Vote On Directors |
1. Election of Directors | For | Against | Abstain | |||||||||||||||||||
Nominees: | ||||||||||||||||||||||
1a. Anthony R. Chase | ¨ | ¨ | ¨ | |||||||||||||||||||
Vote On Proposals | For | Against | Abstain | |||||||||||||||||||
1b. Kevin P. Chilton | ¨ | ¨ | ¨ | 2. | Ratification of Appointment of KPMG LLP as Independent Auditor. | ¨ | ¨ | ¨ | ||||||||||||||
1c. H. Paulett Eberhart | ¨ | ¨ | ¨ | 3. | Advisory Vote to Approve Named Executive Officer Compensation. | ¨ | ¨ | ¨ | ||||||||||||||
1d. Peter J. Fluor | ¨ | ¨ | ¨ | |||||||||||||||||||
1e. Richard L. George | ¨ | ¨ | ¨ | |||||||||||||||||||
1f. Charles W. Goodyear | ¨ | ¨ | ¨ | THEBOARDOFDIRECTORSRECOMMENDSAVOTE“AGAINST”ITEMS4 AND 5. | ||||||||||||||||||
1g. John R. Gordon | ¨ | ¨ | ¨ | 4. | Stockholder Proposal – Report on Political Contributions. | ¨ | ¨ | ¨ | ||||||||||||||
1h. Eric D. Mullins | ¨ | ¨ | ¨ | 5. | Stockholder Proposal – Report on Climate Change Risk. | ¨ | ¨ | ¨ | ||||||||||||||
1i. R. A. Walker | ¨ | ¨ | ¨ | |||||||||||||||||||
For address changes and/or comments, please check this box and write them on the back where indicated. | ||||||||||||||||||||||
¨ | The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder(s).If no direction is made, this proxy will be voted FOR Items 1, 2 and 3, and AGAINST Items 4 and 5.If any other matters come properly before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion. | |||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | EachsignatorytothisproxyacknowledgesreceiptfromAnadarkoPetroleumCorporation, priortoexecutionofthisproxy,ofanoticeofAnnualMeetingofStockholdersandaproxy statementdatedMarch21,2014. | |||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||
Important Notice Regarding the reverse side.)
The Notice and Proxy Statement and10-K/Annual Report are available at:
https://materials.proxyvote.com/032511
¨(CONTINUED FOLD AND TO BE SIGNED ON THE REVERSE SIDE)DETACH HERE
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M67543-P49060-Z62564
ANADARKO PETROLEUM CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS May 13, 2014 The undersigned hereby appoint(s) R. A. Walker, Robert G. Gwin and Robert K. Reeves, and each of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and vote, as designated on the reverse side of this proxy, all of the shares of Common Stock of Anadarko Petroleum Corporation that the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at 8:00 a.m., Central Daylight Time, on May 13, 2014, at The Hyatt Market Street Hotel, 9595 Six Pines Drive, Suite 1100, The Woodlands, Texas 77380, and any adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND AS RECOMMENDED BY THE BOARD OF DIRECTORS FOR EACH PROPOSAL. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. | ||||||||
Address Changes/Comments: | ||||||||
(If you noted any Address Changes/Comments above, please mark the corresponding box on the reverse side.) (CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) |