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 No. )
Filed by the Registrant | Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☑ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to § 240.14a-12 |
☐ Preliminary Proxy StatementArchrock, Inc.
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to §240.14a-12
ARCHROCK, INC.
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. | |||
☐ | ||||
Fee paid previously with preliminary materials. | ||||
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act | |||
MESSAGE TO OUR STOCKHOLDERS |
March 15, 2023
Dear Fellow Stockholder:
On behalf of the Board of Directors and our management team, we cordially invite you to attend Archrock, Inc.’s Annual Meeting of Stockholders, which will be held at 9:00 a.m. Central Time on Thursday, April 28, 202227, 2023 at our corporate offices located at 9807 Katy Freeway, Suite 100, Houston, Texas. The 2022 Annual Meeting of Stockholders will be held in-person and according to recommended safety protocols necessitated by the COVID-19 pandemic.
At this meeting, you will have a chance to vote on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote by internet, telephone, or mail as soon as possible to ensure your vote is recorded promptly. The instructions set forth in the Proxy Statement and on the proxy card explain how to vote your shares.
Thank you for your continued support of Archrock at a time when the delivery ofand our focus on providing reliable, affordable and cleaner energy to industries and homes acrossin the United States has never been more critical.form of natural gas.
Sincerely,
Gordon Hall, Chairman of the Board | Brad Childers, President and Chief Executive Officer |
NOTICE OF
|
ANNUAL MEETING
| MEETING AGENDA | |||
DATE Thursday, April TIME 9:00 a.m. Central Time LOCATION Archrock, Inc. 9807 Katy Freeway Suite 100 Houston, Texas 77024 RECORD DATE March 3, 2023 |
PROPOSAL | BOARD’S VOTING | PAGE
| |
| 1: Election of nine director nominees to serve until the 2024 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified | FOR EACH NOMINEE | 1 | |
| 2: Ratification of the appointment of | FOR | ||
| 3: Advisory, non-binding vote to approve | FOR | ||
4: Advisory, non-binding vote as to the frequency of future stockholder advisory votes on executive compensation | YEARLY | 63 |
The Board recommends that you vote “FOR”each director nominee, “FOR” proposals 2 and 3 and “FORYEARLY” each of the other proposals.for proposal 4. The full text of these proposals is set forth in the accompanying Proxy Statement. Stockholders of record at the close of business on March 3, 2023 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.
For specific instructions on how to vote your shares, please refer to the Notice of Internet Availability of Proxy Materials you received in the mail, the instructions provided in this document, or, if you requested to receive printed proxy materials, your proxy card.
By Order of the Board of Directors,
Stephanie C. Hildebrandt, Secretary March | AVAILABILITY OF PROXY MATERIALS This Proxy Statement and our |
VOTE AS SOON AS POSSIBLE
|
VOTE AS SOON AS POSSIBLE
Vote right away using any of the following methods. Have your proxy card or voting instructions accessible and follow the instructions. If your shares are held in the name of a broker or other nominee, follow the voting instructions you receive from your broker or other nominee.
CONTENTS |
Fees Paid to the Independent Registered Public Accounting Firm | |
Pre-Approval Policy | |
Report of the Audit Committee |
INCORPORATION BY REFERENCE
To the extent that this proxy statement has been or will be specifically incorporated by reference into any other filing of Archrock, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the sections of this proxy statement titled “Report of the Audit Committee” (to the extent permitted by the rules of the U.S. Securities and Exchange Commission (“SEC”)) and “Report of the Compensation Committee” shall not be deemed to be so incorporated, unless specifically stated otherwise in such filing. In addition, this proxy statement includes references to websites, website addresses, and additional materials found on those websites. For example, we reference our Diversity and Inclusion Policy and our 2022 Sustainability Report. The content of these materials as well as any websites and other materials named, hyperlinked, or otherwise referenced in this proxy statement are not incorporated by reference into this proxy statement on Schedule 14A or in any other report or document we file with the SEC, and any references to such websites and materials are intended to be inactive textual references only.
2022 IN REVIEW |
FISCAL 2022 HIGHLIGHTS
|
|
|
|
Generated net income and earnings per share growth |
Our 2022 growth capital spending reflected our continued commitment to capital discipline, allowing us to invest in our business to meet the |
Closed the sale of non-core |
Strength and durability of our business and cash flows supported returns to stockholders of |
Achieved |
Maintained a strong safety performance, with a Total Recordable Incident Rate in |
Continued our focus on improvements in environmental, social and governance (“ESG”) performance during 2022, including
● | the adoption of a | |
● | new build capital for electric drive compression as well as investments in new ventures that we believe will assist our | |
| ● | the integration of |
i
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Archrock, Inc. (“Archrock,” “we,” “our” or “us”) is committed to a strategy focused on natural gas and a cleaner energy future for us, our customers and other stakeholders. We believe that a multi-faceted approach focused on partnerships, customer expectations and investments in technology and sustained affordability, will drive an effective energy transition. At Archrock,long-term business sustainability. Sustainability is embedded in our corporate strategy and reinforced by rigorous corporate governance as we began by estimating and analyzing our scope 1, 2 and 3 emissions, reporting on our current state, closely monitoring trends and expectations and establishing the internal governance structureseek to advance our initiatives.maximize stockholder value. We recognize that the energy transitionfocus on reducing emissions intensity and a lower-carbon future will present both challenges and opportunities to the industry.industry and Archrock. We also appreciate the impact of affordable energy on our collective health and wellbeing – and our natural gas compression infrastructure plays a critical role.
To ensure wedemonstrate our commitment to continual improvement in our role as the leading provider of natural gas compression services, additional quantifiable ESG-focused metrics were included in our 2022 short-term incentive program. To help us not only achieve our near-term objectives, but also address long-term sustainability and evolving stakeholder expectations, we have identified the following points of focus that we believe are the most impactful to our operations:
Economic Impact. Our mission is to be the premier provider of natural gas compression services in the U.S. By providing superior service to maximize our customers’ operations, we play a critical role in the delivery of natural gas, a cleaner burning and affordable natural gas.energy source. In addition, we are focused on capital discipline, generation of free cash flow generation and returns to our stockholders. Finally, we foster a culture that is committed to sharing our time and resources for the betterment of our communities.
Customers and the Environment. Our mission to be the premier provider of compression services is the bedrock of our operating strategy. This demands the delivery of high quality services, a compression fleet of nearly 4 million available horsepower to help meet the gas compression services requirements of approximately 400 customers throughout all major U.S. energy producing regions, and the commitment to partner with our customers to help them meet evolving emissions standards.
Safety. With over 500 field service technicians and shop mechanics deployed across the U.S., operating safely must be and is a core value. Our talented technicians and mechanics are equipped with the support, training, tools and skills to perform their jobs safely, efficiently and in an environmentally-conscious way. Safety has consistently been a performance metric of our annual short-term incentive program.
Customers and the Environment. Our mission to be the premier provider of compression services means a commitment to helping our customers produce, compress and transport natural gas in a safe, efficient and environmentally responsible way. This demands the delivery of high quality services, a compression fleet of nearly 4 million available horsepower to help meet the gas compression services requirements of approximately 340 customers throughout all major U.S. energy producing regions, and the commitment to partner with our customers to help them meet evolving emissions standards and reduction objectives. This year, we advanced our effort to develop a suite of solutions to help our customers achieve their emissions reduction objectives through our minority investment in Ecotec International Holdings, LLC (“Ecotec”), a global leader in methane emissions monitoring and management, as well as through the development and successful pilot of a patent-pending methane capture technology for compression. We also pursued more electrification of our fleet both by converting some of our existing units to electric motor drive as well as building new electric units.
People. We take pride in operating and maintaining superior equipment, but it is our people who truly make the difference, providing best-in-class customer service to the energy industry on a 24/7/365 basis. To hire and retain the top people in the industry, we have made it a priority to create a work environment based on integrity, respect and inclusion and to offer training programs for continuous improvement as well as compensation and other programs that fairly reward and recognize employee contributions. During 2022, Archrock implemented a Company-wide Diversity and Inclusion Policy to codify our commitment to embracing a workplace culture of diversity and inclusion and to facilitate our efforts to ensure our employees feel safe and valued, leading to greater engagement, satisfaction and innovation in our workforce.
Leadership and Governance. We believe that good corporate governance practices are the foundation for lasting performance, and we are committed to maintaining best practices in governance, with appropriate Board oversight of strategy and risk, including environmental and social risks and opportunities. We believe our history bears out the value we ascribe to corporate governance and the effectiveness of our corporate governance structure and processes.
We invite our stockholders to learn more about our approach and performance with respect to environmental, social and governance matters by reading our 20202022 Sustainability Report and listening to our quarterly earnings calls. Our Sustainability Report can be found at www.archrock.com.
ii
CORPORATE GOVERNANCE
✓ | Annual election of all directors |
✓ | Plurality vote standard which requires that any nominee for director who receives a greater number of “withheld” votes than “for” votes must submit his or her resignation for consideration by the Board |
✓ | Separate independent chairman and chief executive officer |
✓ | Majority independent |
✓ | 100% independent |
✓ | Independent directors meet regularly without management present |
✓ | 33% gender and racial diversity; 50% of |
✓ |
✓ | Officer and director stock ownership guidelines |
✓ | No hedging or pledging of Company securities |
✓ | Annual |
Our philosophy is to reward performance with compensation that is a mix of fixed and variable compensation and is balanced between long-term and annual performance objectives. Good governance, adherence to best practices and consideration of stakeholder interests form the foundation of our executive compensation program, developed by a fully independent Compensation Committee with the support of an independent executive compensation consultant. Our best practices include:
✓ | Annual review and consideration of our peer group |
✓ | Three-year performance periods for long-term incentive awards |
✓ | Three-year equity vesting |
✓ | Separate performance measures for short-term and long-term incentives |
✓ | Caps on performance-based compensation |
✓ | Regular review of burn rate and dilution associated with long-term incentives |
✓ | Extremely limited perquisites |
✓ | Double trigger change of control agreements |
✓ | Performance-based compensation clawback policy |
For more information regarding our 20212022 executive compensation program, see the “Compensation Discussion and Analysis” in this Proxy Statement.
iii
ELECTION OF DIRECTORS |
Nine directors are nominated to be elected to the Board of Directors (the “Board”) at the Annual Meeting. Each nominee has consented to serve as a director if elected.
BOARD RECOMMENDATION The Board recommends a vote “FOR” the election of each director nominee to hold office for a one-year term expiring at the | VOTE REQUIRED With respect to the election of directors, you may vote “for” or withhold authority to vote for each director nominee. A plurality of the votes present in person or by proxy and entitled to vote is required to elect each director nominee, meaning that the nine director nominees who receive the highest number of shares voted “for” their election are elected. However, our Corporate Governance Principles require that any nominee who receives a greater number of |
OVERVIEW OF 20222023 DIRECTOR NOMINEES1
1 Gender/Racial Diversity is calculated based on the number of members of our Board who identify as either a traditionally underrepresented gender or a traditionally underrepresented race/ethnicity divided by the total number of directors.
ARCHROCK, INC. 2023 PROXY STATEMENT | 1
Archrock, inc. 2022 proxy statement | 1
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 2
The following biographical information is furnished with respect to each director nominee, together with a discussion of each nominee’s experience, qualifications and attributes or skills that were considered in their nomination to the Board.
ANNE-MARIE N. AINSWORTH Age Independent Director since April 2015 Member, Audit Committee Chair, Governance and Sustainability Committee | Qualifications | |
● | Extensive leadership experience in the oil and gas industry | |
● | Familiarity with governance issues, having served as chief executive officer of both public and private energy companies | |
● | Experience operating a portfolio of energy assets including direct responsibility for safety |
Career Highlights
● | President, Chief Executive Officer and director of the general partner of Oiltanking Partners, L.P. (a provider of terminal, storage and transportation services to the crude oil, refined petroleum and liquefied petroleum gas industries) and President and Chief Executive Officer of Oiltanking Holding Americas, Inc. from 2012 to 2014 |
● | Senior Vice President, Refining of Sunoco, Inc. (a petroleum and petrochemical manufacturer) from 2009 to 2012 |
● | General Manager of the Motiva Enterprises, LLC, refinery in Norco, Louisiana from 2006 to 2009 |
● | Director, Management Systems and Process Safety at Shell Oil Products U.S. from 2003 to 2006, and Vice President of Technical Assurance at Shell Deer Park Refining Company from 2000 to 2003 |
Board Service
● | Director, member of the compensation committee and chair of the safety and environment committee of Pembina Pipeline Corporation (a Canadian oil and gas pipeline company) |
● | Director and member of the audit committee and ESG and nominating committee of Kirby Corporation (an operator of inland and offshore tank barge fleets in the U.S. and provider of diesel engine services) |
● | Director and member of the EHS and public policy committee and finance committee of |
● | Former director of Seventy Seven Energy Inc. from 2014 to 2015 |
Education
● | BS, Chemical Engineering, cum laude, University of Toledo |
● | MBA, Rice University, where she also served as an Adjunct Professor from 2000 to 2009 |
● | Graduate, Institute of Corporate Directors Education Program, Rotman School of Management, University of Calgary, with ICD.D designation |
D. BRADLEY CHILDERS Age President and Chief Executive Officer, Archrock Non-Independent Director since April 2013 | Qualifications | |
● | Intimate knowledge of our strategy, operations and markets | |
● | Deep understanding of operational opportunities and challenges acquired through prior operating roles | |
● | Business judgment, management experience and leadership skills that are highly valuable in assessing our business strategies and accompanying risks |
Career Highlights
● | President and Chief Executive Officer since 2011, Senior Vice President from 2007 to 2011, as well as various senior management roles with Exterran Energy Solutions, L.P., a predecessor subsidiary, from 2008 to 2011, and with Universal Compression Holdings, Inc. (“UCI”), a predecessor company from 2002 to 2007 |
● | President, Chief Executive Officer and Chairman of the Board of Archrock GP LLC, the managing general partner of Archrock Partners, L.P., a master limited partnership in which we owned an equity interest (the “Partnership”) from 2011 until the Partnership’s merger into a wholly-owned subsidiary of Archrock, Inc. in 2018 (the “Partnership Merger”) |
● | Various roles with Occidental Petroleum Corporation (an international oil and gas exploration and production company) and its subsidiaries from 1994 to 2002 |
ARCHROCK, INC. 2023 PROXY STATEMENT | 3
Archrock, inc. 2022 proxy statement | 3
Board Service
● | Yellowstone Academy (a non-profit private school) since 2014 |
● | Former Chairman of the Board of the Partnership from 2008 until the Partnership Merger in 2018 |
Education
● | BA, Claremont McKenna College |
● | JD, University of Southern California |
GORDON T. HALL Age Independent Director since March 2002 Member, Audit and | Qualifications | |
● | Thorough understanding of our operational and strategic opportunities and challenges | |
● | Experience as a research analyst covering oil field services companies provides a broad-based understanding of the industry, as well as mergers, acquisitions and capital markets transactions | |
● | Extensive energy company board service |
Career Highlights
● | Independent Chairman of the Board since November 2015, having served as Vice Chairman and Lead Independent Director from 2013 to 2015 |
● | Chairman of the Board of Exterran Holdings, Inc. from 2007 to 2013 and Chairman of the Board of Hanover Compressor from 2005 to 2007 (both predecessor companies) |
● | Retired as Managing Director, Senior Oil Field Services Analyst and Co-Head of the Global Energy Group, Credit Suisse (an investment banking firm) in 2002 after fifteen years with the firm |
● |
Board Service
● | Member of the executive board of trustees, chairman of the finance committee and non-executive treasurer of Gordon College |
● | Former director of Noble Corporation from 2010 to 2021, of Weatherford International plc from 2019 (upon emergence from Weatherford’s Chapter 11 reorganization) to 2020, of Select Energy Services from 2012 to 2015, of Grant Prideco, Inc. from 2007 until its acquisition by National Oilwell Varco, Inc. in 2008 and of Hydril Company from 2002 until its merger with Tenaris S.A. in 2007 |
Education
● | BBA, Mathematics, Gordon College |
● | SM, M.I.T. Sloan School of Management |
FRANCES POWELL HAWES Age Independent Director since April 2015 Chair, Audit Committee Member, Governance and Sustainability Committee | Qualifications | |
● | Over 20 years of service as a financial advisor and CFO for both private and public companies resulting in financial expertise, business knowledge and leadership experience | |
● | Extensive understanding of the audit function and risk management | |
● | Financial consulting and advisory experience ● National Association of Corporate Directors Cyber Risk Oversight Certificate |
Career Highlights
● | CFO of New Process Steel, L.P. (a privately held steel distribution company) from 2012 to 2013 |
● | Senior Vice President and CFO of American Electric Technologies, Inc. (a publicly traded provider of power delivery solutions) from 2011 to 2012 |
● | CFO, Executive Vice President and Treasurer of NCI Building Systems, Inc. (a publicly traded firm providing engineered building solutions) from 2005 to 2008 |
● | CFO and Treasurer of Grant Prideco, Inc. (a manufacturer of engineered tubular products for the energy industry) from 2000 to 2001 |
Archrock, inc. 2022 proxy statement | 4
ARCHROCK, INC. 2023 PROXY STATEMENT | 4
● | Chief Accounting Officer, Vice President Accounting and Controller of Weatherford International Ltd. (a multinational oil field service company), having advanced through a number of positions of increasing responsibility, from 1989 to 2000 |
Board Service
● | Director, chair of the audit committee and member of the |
● | Director and audit committee member of PGT Innovations, Inc. (a manufacturer of premium windows and doors) |
● | Director of Financial Executives International, Houston Chapter |
● | Former director of Energen Corporation from 2013 to 2018 and of Express Energy Services from 2011 to 2014 |
Education
● | BBA, Accounting, University of Houston |
● | Certified Public Accountant |
J.W.G. “WILL” HONEYBOURNE Age Independent Director since April 2006 Member, Compensation and Governance and Sustainability Committees | Qualifications | |
● | ||
Thorough understanding of the challenges and opportunities of markets and financing through current and former energy company board service, for both publicly listed and privately held companies, and as managing director of a private equity firm focused on the energy industry ● Executive and operations leadership experience with oilfield services companies ● Technical background in petroleum engineering, experience in the commercialization of technical services, and prior service on the boards of energy sector technology companies |
Career Highlights
● | Managing Director and partner of First Reserve (a private equity firm) since 1999, |
● | Senior Vice President of Western Atlas International (a seismic and wireline logging company) from 1996 to 1998 |
● | Member of the Society of Petroleum Engineers and the Society of Exploration Geophysicists |
Board Service
● |
● | Former director of Red Technology Alliance from 2006 to 2010 |
● | Former director of Acteon Group from 2006 to 2012 |
● | Former non-executive chairman of KrisEnergy from 2009 to 2017 |
Education
● | Prior service on multiple energy sector boards of both privately held and publicly listed companies |
Education
● | BSc, Oil Technology, Imperial College, London University |
ARCHROCK, INC. 2023 PROXY STATEMENT | 5
JAMES H. LYTAL Age Independent Director since April 2015 Chair, Compensation Committee Member, Governance and Sustainability Committee | Qualifications | |
● | Over 40 years of experience in the midstream oil and gas sector, including executive leadership and advisory roles | |
● | Deep familiarity with the management of midstream assets | |
● | Through extensive board service, experience with public company executive compensation and governance matters |
Career Highlights
● | Advisor for Global Infrastructure Partners (a leading global, independent infrastructure investor) from 2009 to June 2021 |
● | Executive Vice President, Enterprise Products Partners (a North American midstream energy services provider) from 2004 to 2009 |
● | President of Leviathan Gas Pipeline Partners, which later became El Paso Energy Partners, and then Gulfterra Energy Partners, from 1994 to 2004 |
Archrock, inc. 2022 proxy statement | 5
● | Held a series of commercial, engineering and business development positions with various companies engaged in oil and gas exploration and production and gas pipeline services from 1980 to 1994 |
Board Service
● | Director and chairman of the audit committee of Rice Acquisition Corp. II (a special purpose acquisition company) |
● | Director of ColdStream Energy, LLC (a privately held oil and gas energy services company) |
● | Former director and member of the audit committee and chairman of the conflicts committee of Rice Midstream Management LLC, the managing general partner of Rice Midstream Partners, L.P. from 2015 until it was acquired in 2018 |
● | Former director of Gulfterra Energy Partners from 1994 to 2004 |
● | Former director of Azure Midstream Partners GP, LLC, the general partner of Azure Midstream Partners, LP from 2013 to 2017, including service as member of the audit committee and chairman of the conflicts committee |
● | Former director and chairman of the compensation committee and member of the audit committee of SemGroup Corporation from 2011 until it was acquired in 2019 |
Education
● | BS, Petroleum Engineering, The University of Texas at Austin |
LEONARD W. MALLETT Age: Independent Director since January 2021 Member, Compensation Committee | Qualifications | |
● | Significant executive leadership experience with responsibility for engineering, strategic sourcing and health, safety and environmental training, compliance and reporting | |
● | Operations experience and technical expertise, including construction, start-up and operation of natural gas and oil pipeline gathering, transportation and processing facilities |
Career Highlights
● | Executive Vice President and Chief Operations Officer of Summit Midstream Partners, LP (a midstream provider of natural gas, oil and water gathering services) from 2015 to 2019; Interim Chief Executive Officer during 2019 |
● | Senior Vice President, Engineering, Enterprise Products Partners L.P. (a midstream natural gas and oil pipeline company) from 2008 to 2015 and Senior Vice President of Environmental Health and Safety from 2006 to 2008 |
● | Served in roles of increasing responsibility with TEPPCO (a master limited partnership that provided oil and natural gas pipelines and storage and related facilities) from 1979 to 2006, including as Senior Vice President of Operations |
● | Formerly held leadership roles with the Pipeline Research Council International, the Office of Pipeline Safety and the Clean Channel Association |
Board Service
● | Director of Bravo Infrastructure Group (a privately held holding company for solar panel installation companies) |
● | Former director of Summit Midstream GP, LLC, the general partner of Summit Midstream Partners, LP, 2019 |
ARCHROCK, INC. 2023 PROXY STATEMENT | 6
Education
● | BS, Mechanical Engineering, Prairie View A&M University |
● | MBA, Houston Baptist University |
● | Kellogg Executive Development Program at Northwestern University |
Archrock, inc. 2022 proxy statement | 6
JASON C. REBROOK Age Non-Independent Director since July 2020 | Qualifications | |
● | Over 25 years of experience in capital markets, acquisitions, divestures and operations in both the upstream and midstream sectors | |
● | Operating experience and understanding of the unique risks, opportunities and challenges of the oil and gas industry | |
● | Leadership experience in a highly entrepreneurial and successful privately-held company |
Career Highlights
● | Chief Executive Officer and director of Harvest Midstream Company (a privately-held midstream company services provider) since 2018 and Chief Executive Officer of JDH Capital Company |
● | President of Hilcorp Energy Company (a privately held oil and gas production company) from 2018 to January 2021 and Executive Vice President from 2009 to 2018, having joined Hilcorp in 2008 as Asset Team Manager of the company’s Gulf of Mexico properties |
● | Previously served as Senior Vice President, Oil & Gas, GE Capital and in both domestic and international assignments with Chevron Corporation |
● | Member of Young Presidents’ Organization, Duke University’s Energy Task Force, the Society of Petroleum Engineers, the Independent Petroleum Association of America and the Greater Houston Partnership |
Board Service
● | Director of privately-held companies Hilcorp Energy Company, Baywater Drilling, LLC, Kenai Logistics, LLC and STX Beef, LLC |
● | Member of the board of trustees for Marietta College |
● | Former director of privately-held companies Elite Compression Services, LLC from 2012 to 2019 and Texas Coastal Ventures, LLC from 2016 to 2019 |
Education
● | BS, Petroleum Engineering, Marietta College |
● | MBA, Duke University’s Fuqua School of Business |
ARCHROCK, INC. 2023 PROXY STATEMENT | 7
EDMUND P. SEGNER, III Age Independent Director since July 2018 Member, Audit and Governance and Sustainability Committees | Qualifications | |
● | Technical experience and financial acumen | |
● | Thorough understanding of the energy industry and operational challenges unique to the industry | |
● | Experience with compensation, financing matters and the evaluation of acquisition opportunities through service as a president and director of other publicly-traded companies |
Career Highlights
● | Professor in the Practice of Engineering Management in the Department of Civil and Environmental Engineering at Rice University (Houston) since |
● | President, Chief of Staff and Director from 1999 to 2007 and principal financial officer from 2003 to 2007, EOG Resources, Inc. (a publicly traded independent oil and gas exploration and production company) |
Board Service
● |
● | Former |
Education
● | BS, Civil Engineering, Rice University |
● |
● |
ARCHROCK, INC. 2023 PROXY STATEMENT | 8
GOVERNANCE |
Archrock, inc. 2022 proxy statement | 7
Education
Archrock, inc. 2022 proxy statement | 8
Highlights of our corporate governance practices are provided at the beginning of this Proxy Statement under “2021“2022 in Review”. The Board is committed to responsible and responsive corporate governance policies and practices that serve the interests of all stockholders. The full Board, at the direction of theour Governance and Sustainability Committee, routinely reviews best practices in corporate governance, as well as environmental and social issues, and considers stakeholder interests and feedback. During 2021,Archrock takes a multipronged approach to investor communications, and during 2022, members of our senior management team attended 12 energyten investor eventsconferences and participated innon-deal roadshows as well as numerous phone callsmeetings to communicatediscuss our mission and vision with our stockholders and receive information on the issues they consider most important as an investor in Archrock.
DIRECTOR INDEPENDENCE AND TENURE
OurWe have adopted the Code of Business Conduct (the “Code of Business Conduct”), which is applicable to our directors, officers, and employees, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer or Controller (or persons performing similar functions). The Code of Business Conduct is posted on our website at www.investors.archrock.com under the “Governance Highlights” tab. We will furnish a copy of the Code of Business Conduct to any person, without charge, upon written request to the address provided under “Company Contact Information.” In the event we amend or waive any of the provisions of the Code of Business Conduct that applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer or Controller (or persons performing similar functions), we intend to disclose the subsequent information on our website.
The Code of Business Conduct requires all employees, officers and directors to avoid situations that may impact their ability to carry out their duties in an independent and objective fashion. Any circumstance that has the potential to compromise their ability to perform independently must be disclosed. In addition, we distribute director and officer questionnaires at least annually to elicit related-party information. The questionnaire includes our Code of Conduct and Corporate Governance Principles and requires that each director and executive officer certify their review and compliance with such documents. We also require that responses to the questionnaire be updated throughout the year to the extent circumstances change.
TheOur Governance and Sustainability Committee assesses director independence each yearannually by considering all direct and indirect business relationships between Archrock and each director (including his or her immediate family), as well as relationships with our registered public accounting firm, our compensation consultant, other for-profit concerns and charitable organizations. With theour Governance and Sustainability Committee’s recommendation, the Board makes a determination relating to the independence of each member, which is based on applicable laws, regulations, our Corporate Governance Principles and the rules of the New York Stock Exchange (“NYSE”).
During theour Governance and Sustainability Committee’s most recent review of independence, in addition to the responses to the director and officer questionnaires, the committee was provided information regarding transactions with any related parties as determined through a search of our accounting records. See “Related Party Information” in this Proxy Statement for more information.
Based on the recommendation of theour Governance and Sustainability Committee, the Board determined that the following nominees for director are independent: Mmes. Ainsworth and Hawes and Messrs. Hall, Honeybourne, Lytal, Mallett and Segner.
The Board believes it has a healthy mix of representation based on tenure of the directors currently serving, with twoone new directorsdirector added in the last two years.
ARCHROCK, INC. 2023 PROXY STATEMENT | 9
BOARD LEADERSHIP STRUCTURE AND OVERSIGHT
We separate the roles ofOur bylaws provide that our Chairman of the Board and Chiefmay be a “non-executive” Chairman or an Executive Officer.Chairman. We have selected an independent, non-executive Chairman to lead our Board of Directors. The Board recognizes the time, effort and energy that our Chief Executive Officer is required to devote to his position, as well as the stewardship commitment required to serve as our Chairman. Chairman and the benefits of having an independent Chairman lead the Board.
The Board believes this structure is appropriate for the Companyus and is in the best interest of our stockholders because of the size and composition of the Board, the scope of our operations and the responsibilities of the Board and management. In addition, in evaluating the leadership structure of the Board, consideration has been given to the heightened need to monitor the rapidly changing energy environment and markets, to innovate, and to focus on environmental and social performance. Dependent upon one or more of these factors, as well as stockholder sentiment, the Board would consider the adoption of a different leadership structure and in such event would promptly communicate that change to stockholders.
Archrock, inc. 2022 proxy statement | 9
The responsibilities of the Board Chairman include: | Presides over Board meetings and executive sessions of the independent directors. |
Oversees the annual Board calendar, and, in consultation with the CEO, schedules and sets the agendas for the Board meetings. | |
Oversees the dissemination of the appropriate information to the Board and ensures sufficient time for review and discussion of such materials. | |
Ensures open communication between the independent directors and executive leadership. | |
Assists the chairs of the various Board committees in preparing agendas for committee meetings. | |
Chairs the Company’s annual meeting of stockholders. | |
Provides input on the | |
Maintains frequent communication with the CEO in between Board meetings to consider issues of importance to the Company, management and the Board. | |
Performs other functions and responsibilities requested by the Board or CEO, including representation of the Board in communications with stockholders or other stakeholders. |
BOARD COMMITTEES AND MEETING ATTENDANCE
The Board has designated an Audit Committee, a Compensation Committee and a Governance and Sustainability Committee to assist in the discharge of the Board’s responsibilities. The Board and the committees of the Board are governed by our Code of Business Conduct, Corporate Governance Principles and the applicable committee charters, each of which is available to the public on our website at www.archrock.com or in print by submitting a written request to the address provided under “Company Contact Information.” The purpose and composition of each committee is summarized in the following table.
Audit Committee | ||||
Members Frances Powell Hawes, Chair Anne-Marie N. Ainsworth Gordon T. Hall Edmund P. Segner III Number of Meetings 7 Independent Directors 100% |
The Board has also determined that each of Mmes. Ainsworth and Hawes and Messrs. Hall and Segner qualifies as an “audit committee financial expert,” as that term is defined by the SEC. No member of our Audit Committee serves on the audit committee of more than two other public companies. The Report of the Audit Committee is included in this Proxy Statement on pages 23-24. |
ARCHROCK, INC. 2023 PROXY STATEMENT | 10
Compensation Committee | |
Members James H. Lytal, Chair Gordon T. Hall J.W.G. Honeybourne Leonard W. Mallett Number of Meetings 7 Independent Directors 100% | The Compensation Committee’s purpose is to oversee the development and implementation of our compensation philosophy and strategy with the goals of attracting, developing, retaining and compensating the senior executive talent required to achieve corporate objectives and linking pay and performance. In addition, our Compensation Committee is charged with overseeing our broad-based strategies related to human capital management, including our approach to diversity and inclusion. The Report of the Compensation Committee is included in this Proxy Statement on page 46. |
Governance and Sustainability Committee | |
Members Anne-Marie N. Ainsworth, Chair Frances Powell Hawes J.W.G. Honeybourne James H. Lytal Edmund P. Segner III Number of Meetings 5 Independent Directors 100% | The Governance and Sustainability Committee’s purpose is to identify qualified individuals to become Board members, determine whether existing Board members should be nominated for re-election, review the composition of the Board and its committees, develop and maintain our Corporate Governance Principles, oversee the annual evaluation of the Board and its committees and provide oversight of |
Mr. Hall serves as Chairman and presides overThe Board met ten times in 2022. Each director attended at least 94% of the regular sessionsmeetings of the Board and Board committees on which he or she served during 2022. It is our practice that all directors are invited to committee meetings, and all independent directors do customarily attend. Directors are also encouraged to attend each annual meeting of stockholders, and in 2022 all directors attended the executive sessionsmeeting.
RISK OVERSIGHT
The Board has an active role, as a whole and through its committees, in oversight of the Company’s risks consistent with the principles outlined in the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2017 framework and is assisted by management in the exercise of these responsibilities. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports, and our directors are invited to attend all committee meetings and typically do so. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. The involvement of the Board held at every regularly scheduledin reviewing, approving and monitoring our fundamental financial and business strategies, as contemplated by our Corporate Governance Principles, is important to the determination of the types and appropriate levels of risk we undertake.
Management is responsible for identifying risks and opportunities along with the associated risk response which may involve implementing processes and procedures intended to mitigate risks, which can range from risk avoidance or acceptance to reduction or transfer depending on the facts and circumstances. Archrock engages an outside consultant on a periodic basis to assist management with the identification of short-, intermediate- and long-term risks and to provide insight into emerging trends and best practices. In addition, risks associated with executive compensation are also reviewed by our independent compensation consultant. Identified risks are ranked based on likelihood of occurrence and potential impact. The assessment considered our risk response and mitigating factors, resulting in the assignment of a management effectiveness score. Risk exposure is considered in the development of our annual and long-term business planning and executive compensation program and informs our approach to business continuity and cybersecurity planning and our compliance and human resource programs. Validation of management’s risk response occurs through internal audits or resources independent of the functional area, our disclosure controls and procedures and, with respect to financial reporting, external auditing. While management presents their findings on risk exposure and our response, the Board meeting, as well ashas the executive sessionsauthority to override management on any risk matter.
ARCHROCK, INC. 2023 PROXY STATEMENT | 11
Risk management is a continuous process comprised of five intertwined components; strategy and objective setting, performance, review and revision, information, communication and reporting and governance and oversight. Through these activities, regular reports are provided to the Board and its committees. Importantly, management’s regular attendance at and in-person reports to the Board and its committees provide direct access to our management team, for example:
● | Our Vice President of Health, Safety and Environment provides quarterly updates to our Board. |
● | Our Director of Internal Audit reports directly to the Chair of our Audit Committee. |
● | Our Senior Vice President and General Counsel also serves as our Chief Compliance Officer, and provides monthly and quarterly compliance updates to the Audit Committee. |
● | Our Chief Information Officer regularly provides cybersecurity updates to our Audit Committee. |
● | Members of our senior management team report quarterly to the full Board on operations and financial performance. |
● | Our Director of Internal Audit, Chief Compliance Officer, Chief Financial Officer, Controller and independent auditors each meet separately with our Audit Committee in executive session with no other members of management present on a quarterly basis. |
● | Our Vice President, Tax provides quarterly updates to our Audit Committee. |
● | Our Vice President, Investor Relations, routinely reports on ESG matters to our Governance and Sustainability Committee. |
● | Our Senior Vice President and Chief Human Resource Officer attends all Compensation Committee meetings and the Committee meets privately with our independent compensation consultant. |
ARCHROCK, INC. 2023 PROXY STATEMENT | 12
The following sets forth the responsibility of the Board, Board committees and management with respect to risk oversight:
Board of Directors | ● Strategic, financial and execution risk associated with the annual performance plan and long-term plan, including major operational and sustainability initiatives ● Risks associated with capital management, including financing, dividends and capital expenditures ● Mergers, acquisitions and divestitures ● Major litigation, disputes and regulatory matters ● Management succession planning ● Emissions-related risks and opportunities that may impact our business strategy ● Oversight of the enterprise risk management (“ERM”) program |
Audit Committee | ● Financial reporting, accounting, disclosure and internal controls, including oversight of the internal and independent audit functions ● Assist the Board with oversight of the ERM process for identifying key risks and assessing management’s response ● Cybersecurity risk and prevention ● Compliance, litigation and tax regulatory matters |
Compensation Committee | ● Risks related to the overall effectiveness and cost of our compensation and benefit programs ● Risks associated with the design of executive compensation, including a mix of short-term and long-term incentive compensation that does not encourage excessive risk-taking ● Performance management as it relates to our executive officers ● Approach to human capital management ● Assist the Board with management succession planning |
Governance Sustainability | ● Risks associated with corporate governance and board composition and effectiveness and director succession planning ● Monitoring and disclosure of material ESG risks and integration of Company-wide response ● Review of the annual Sustainability Report prior to publication |
Management | ● Stay abreast of emerging regulatory issues, external and internal threats and best practices ● Annually identify short-, intermediate- or long-term material risks and rank such risks according to likelihood and potential impact ● Develop a risk response and create processes and procedures for risk mitigation, including through our routine disclosure controls and procedures ● Regularly evaluate the adequacy and implementation of risk mitigation processes and procedures ● Integrate risk management into our corporate strategy ● Regularly report to the Board or Board committees, as applicable, regarding risk management ● Regularly communicate with the Board regarding our strategic and financial plans |
DIRECTOR QUALIFICATIONS, DIVERSITY AND NOMINATIONS
TheOur Governance and Sustainability Committee believes that all Board candidates should be selected for their character, judgment, ethics, integrity, business experience, time commitment and acumen. The Board, as a whole, through its individual members, seeks to have competence in areas of particular importance to us such as finance, accounting, operations, energy industry, health, safety and the environment and relevant technical expertise. TheOur Governance and Sustainability Committee also considers issues of diversity in the director identification and nomination process.process and has benefitted from and believes it will continue to benefit from Board diversity. While theour Governance and Sustainability Committee does not have a formal policy with respect to diversity, it seeks nominees with a broad diversity of experience, professions, skills, education and backgrounds. TheOur Governance and Sustainability Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. TheOur Governance and Sustainability Committee believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Nominees are not discriminated against on the basis
ARCHROCK, INC. 2023 PROXY STATEMENT | 13
Directors must be committed to enhancing the long-term interests of our stockholders as a whole and should not be biased toward the interests of any particular segment of the stockholder or employee population. Board members should also be prepared to travel to attend meetings of the Board and its committees and should be ready to dedicate sufficient time to prepare in advance of such meetings to allow them to make an effective contribution to the meetings. Further, Board members should ensure that they are not otherwise committed to other activities which would make a commitment to the Board impractical or unadvisable. In addition, Board members should satisfy the independence, qualification and composition requirements of the Board and its committees, as required by applicable law, regulation and the rules of the NYSE, our certificate of incorporation, our bylaws and our Corporate Governance Principles.
Stockholders may propose director nominees to theour Governance and Sustainability Committee (for consideration for election at the 20232024 Annual Meeting of Stockholders) by submitting, within the time frame set forth in this Proxy Statement, the names and supporting information (including confirmation of the nominee’s willingness to serve as a director) to the address provided under “Company Contact Information.” Any stockholder-recommended nominee will be evaluated in the context of our director qualification standards and the existing size and composition of the Board. See “Additional Information – 20232024 Annual Meeting of Stockholders.”
COMMITTEES OF THE BOARD, MEMBERSHIP AND ATTENDANCE
The Board has designated an Audit Committee, a Compensation Committee and a Governance and Sustainability Committee to assist in the discharge of the Board’s responsibilities. The Board and the committees of the Board are governed by our Code of Business Conduct, Corporate Governance Principles and the applicable committee charters, each of which is available to the public on our website at www.archrock.com or in print by submitting a written request to the address provided under “Company Contact Information.” The purpose and composition of each committee is summarized in the following table.
Archrock, inc. 2022 proxy statement | 10
Members of each committee are elected by the Board at its first meeting following the annual meeting of stockholders to serve for one-year terms. The current members of our committees and number of meetings held during 2021 are indicated in the following chart:
Director | Independent Director | Audit Committee | Compensation Committee | Governance and Sustainability Committee |
Anne-Marie N. Ainsworth | ♦ | Member | Chair | |
D. Bradley Childers | ||||
Gordon T. Hall | ♦ | Member | Member | |
Frances Powell Hawes | ♦ | Chair | Member | |
J.W.G. Honeybourne | ♦ | Member | Member | |
James H. Lytal | ♦ | Chair | Member | |
Leonard W. Mallett | ♦ | Member | ||
Jason C. Rebrook | ||||
Edmund P. Segner, III | ♦ | Member | Member | |
Number of Meetings Held in 2021 | 5 | 8 | 5 |
Archrock, inc. 2022 proxy statement | 11
The Board met six times in 2021. Each director attended 100% of the meetings of the Board and Board committees on which he or she served during 2021. Directors are also encouraged to attend each annual meeting of stockholders, and in 2021 all directors attended the meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hall, Honeybourne, Lytal and Mallett served on theour Compensation Committee in 2021.2022. There are no matters relating to interlocks or insider participation that we are required to report.
THE BOARD’S ROLE IN RISK OVERSIGHT
The Board has an active role, as a whole and through its committees, in overseeing management of the Company’s risks. The Board receives regular reports from members of senior management on areas of material risk to us, including those listed in the chart below. The involvement of the Board in reviewing, approving and monitoring our fundamental financial and business strategies, as contemplated by our Corporate Governance Principles, is important to the determination of the types and appropriate levels of risk we undertake. The Board’s committees, all comprised solely of independent directors, assist the Board in fulfilling its oversight responsibilities.
|
| |
|
| |
|
| |
|
| |
While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.
Archrock, inc. 2022 proxy statement | 12
MANAGEMENT SUCCESSION PLANNING
Succession planning is a critical Board function. TheOur Compensation Committee considers our business strategy in evaluating the skills and experience necessary for us to achieve our objectives and is actively engaged in management succession planning. With input from our Chief Executive Officer, theour Compensation Committee routinely reviews management talent and leadership development and advises the Board in this regard. The Board has adopted a management succession plan, as well as a succession policy in the event of an unanticipated vacancy in the Chief Executive Officer position.
Related Party Policy and Practices. We recognize that transactions with related persons can present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than the best interests of Archrock and our stockholders. Therefore, our Audit Committee has adopted a written policy on related party transactions to provide guidance and set standards for the approval and reporting of transactions between Archrock and individuals with a direct or indirect affiliation with the Company and to ensure that those transactions are in Archrock’s best interest. Any proposed related party transaction must be submitted to theour Audit Committee for approval prior to entering into the transaction. Additionally, our policy requires a review by our Financial Reporting Department of any related party transactions on a quarterly basis. In the event the Company becomeswe become aware of any pending or ongoing related party transaction that has not been previously approved or ratified, the transaction must be promptly submitted to theour Audit Committee or its Chair for ratification, amendment or termination of the related party transaction. If a related party transaction is ongoing, theour Audit Committee may establish guidelines for management and will annually assess the relationship with such related party.
In reviewing a proposed or ongoing related party transaction, theour Audit Committee will consider, among other things, the following factors to the extent relevant to the related party transaction:
● | whether the terms of the transaction are fair to the Company and would apply on the same basis if the transaction did not involve a related party; |
● | whether there are any compelling business reasons for the Company to enter into the transaction; |
● | whether the transaction would impair the independence of an otherwise independent director; and |
ARCHROCK, INC. 2023 PROXY STATEMENT | 14
● | whether the transaction would present an improper conflict of interest for any director or executive officer of the Company, taking into account, among other factors |
Related Party Transactions During 2021.2022. On August 1, 2019, the Company and Archrock Services, L.P., a wholly owned subsidiary of the Company, acquired substantially all of the assets of Elite Compression Services, LLC (“Elite”), a portfolio company of Hildebrand Enterprises, LP (“Hildebrand Enterprises”), resulting in the issuance of 21,656,683 shares of Archrock’s common stock to JDH Capital Holdings, LP (“JDH”). Hildebrand Enterprises owns 100% of the limited partner interest in JDH. Hildebrand Enterprises is a holding company of energy-related and other operating companies and investments controlled by Jeffery D. Hildebrand, Executive Chairman and Founder of Hilcorp Energy Company (“Hilcorp”), which is one of Archrock’s customers. In February 2022, JDH changed its name to Old Ocean Reserves, LP (“Old Ocean”).
As of March 3, 2022, Old Ocean and its affiliates owned 11% of the outstanding shares, an affiliate of our common stock. Old Oceancustomer Hilcorp Energy Company (“Hilcorp”), has the right to designate one director to Archrock’s Board (the “Representative Director”) for so long as Old Ocean or its successors (together with all affiliates of such person) continue to hold, on an aggregate basis, at least 7.5% of the then-issued and outstanding shares of our common stock. As of March 3, 2023, Old Ocean and its affiliates owned approximately 9.4% of the outstanding shares of our common stock. Jason C. Rebrook, who was elected to the Board in July 2020 as Old Ocean’s Representative Director, is Chief Executive Officer and director of Harvest Midstream Company (“Harvest”), a Hilcorp affiliate. See “Election of Directors – Nominees for Director.”
In the normal course of business, the Company and its affiliates provide Hilcorp, Harvest and certain other Hilcorp affiliates with contract operations services and aftermarket parts at standard market rates. For fiscal year 2021, the Company received payments2022, we recognized revenue of approximately $39$36.2 million from transactions with Hilcorp, Harvest and their affiliates and made payments of approximately $30,000 to such companies.affiliates.
Pursuant to the ongoing transactions with Hilcorp, Harvest and their affiliates, and his position as the Representative Director, Mr. Rebrook is deemed not independent. Therefore, the Board may request that Mr. Rebrook recuse himself from discussions that would reasonably be expected to result in a conflict of interest, including (without limitation) matters relating directly to Hilcorp, Harvest or any of their Affiliates,affiliates, as well as pricing discussions.
Archrock, inc. 2022 proxy statement | 13
Our Compensation Committee is responsible for recommending director compensation to the full Board for approval. Director compensation is designed to ensure the Companywe can attract and retain outstanding directors who meet the qualifications outlined in the Board’s Corporate Governance Principles, ensure alignment with long-term stockholder interests and recognize the substantial time commitments associated with service on the Board.
Each non-employee member of the Board is compensated in cash and equity. Mr. Hall receives additional cash compensation to reflect his additional responsibilities as Chairman of the Board. As presidentPresident and chief executive officerChief Executive Officer of Archrock, Mr. Childers does not receive additional compensation for service on the Board.
Effective with the second quarter of 2020, the Compensation Committee determined to temporarily reduce all cash retainers by 25% due to the economic impact of the pandemic. Because the reduction in cash compensation was expected to be temporary, cash retainers in effect prior to the reduction were used for the independent consultant’s evaluation of 2021 director compensation. In their review, the Compensation Committee considered data provided by theOur independent compensation consultant which includedconducted a comprehensive market review of director compensation in October 2021, evaluating data derived from the proxy statements of our peer companies and the National Association of Corporate Directors Compensation Survey for energy industry companies with revenues between $450$400 million and $3.0$1.6 billion. The review indicated that the structure of our director compensation program was consistent with our peer group and our typical director compensation (pre-reduction) was atbelow the median of the peer group.
Cash Compensation. Each non-employee director earned an annual cash retainer (the “Base Retainer”) for his or her service during 2021.2022. The Chairman of the Board and the chairs of theour Audit Committee, Compensation Committee and Governance and Sustainability Committee each received an additional retainer for their services. All retainers are paid in arrears in equal quarterly installments. Directors are also reimbursed for reasonable expenses incurred to attend Board and committee meetings. DuringBased on our Compensation Committee’s evaluation of data provided by our independent compensation consultant, the first six monthsCommittee approved an increase in the Base Retainer from $90,000 to $100,000 effective January 1, 2022.
ARCHROCK, INC. 2023 PROXY STATEMENT | 15
2021 Director Cash Compensation | |||||||
Reduced Retainers Due to Pandemic | Restored Retainers | ||||||
Description of Remuneration | First Qtr | Second Qtr | Annualized | Third Qtr | Fourth Qtr | Annualized | |
Base Retainer | 16,875 | 16,875 | 67,500 | 22,500 | 22,500 | 90,000 | |
Additional Retainers | |||||||
Chairman of the Board | 18,750 | 18,750 | 75,000 | 25,000 | 25,000 | 100,000 | |
Audit Committee Chair | 4,219 | 4,219 | 16,875 | 5,625 | 5,625 | 22,500 | |
Compensation Committee Chair | 3,750 | 3,750 | 15,000 | 5,000 | 5,000 | 20,000 | |
Governance and Sustainability Committee Chair | 3,750 | 3,750 | 15,000 | 5,000 | 5,000 | 20,000 | |
Description of Director Remuneration | Annualized Cash Compensation $ | |
Base Retainer | 100,000 | |
Additional Retainers | ||
Chairman of the Board | 100,000 | |
Audit Committee Chair | 22,500 | |
Compensation Committee Chair | 20,000 | |
Governance and Sustainability Committee Chair | 20,000 |
Equity-Based Compensation. On March 5, 2021, theJanuary 27, 2022, our Compensation Committee approved the grant of restricted stock or restricted stock units with a deferred delivery date to each non-employee director with a grant date value equal to approximately $130,000. The number of shares awarded was determined based on the market closing price of our common stock on the grant date ($10.70)8.41) and resulted in the award of 12,14915,457 restricted shares or restricted stock units to each non-employee director. The equity award was one-quarter vested on the grant date, and on each of June 1, September 1 and December 1, 2021.2022.
Archrock, inc. 2022 proxy statement | 14
Stock Ownership Requirements. Our stock ownership policy requires each non-employee director to own an amount of our common stock equal to at least five times the Base Retainer amount (which equals $450,000$500,000 of our common stock) within five years of his or her election to the Board. We measure the stock ownership of our directors annually as of each June 30. All directors are in compliance with our stock ownership policy.
Director Stock and Deferral Plan. Under our Directors’ Stock and Deferral Plan (the “Directors’ Plan”), directors may elect to receive all or a portion of their cash compensation for Board service in the form of our common stock and may defer their receipt of the stock. No director elected to participate in the Directors’ Plan during 2021.2022.
Total Director Compensation. The following table shows the total compensation paid to each non-employee director for his or her service during 2021.2022. As shown below, excluding our Chairman of the Board, the equity (at-risk) portion of compensation is greater than 50% of each director’s total compensation.
Director | Fees Earned in Cash ($) | Stock Awards ($) 1 | All Other Compensation ($) 2 | Total ($) | Fees Earned in Cash ($) | Stock Awards ($) 1 | All Other Compensation ($) 2 | Total ($) |
Anne-Marie N. Ainsworth | 96,250 | 129,994 | 2,642 | 228,886 | 120,000 | 129,993 | 5,043 | 255,036 |
Wendell R. Brooks 3 | 3,750 | — | 3,750 | |||||
Gordon T. Hall | 166,250 | 129,994 | 2,642 | 298,886 | 200,000 | 129,993 | 5,043 | 335,036 |
Frances Powell Hawes | 98,438 | 129,994 | — | 228,432 | 122,500 | 129,993 | — | 252,493 |
J.W.G. Honeybourne | 78,750 | 129,994 | 2,642 | 211,386 | 100,000 | 129,993 | 5,043 | 235,036 |
James H. Lytal | 96,250 | 129,994 | 2,642 | 228,886 | 120,000 | 129,993 | 5,043 | 255,036 |
Leonard W. Mallett 3 | 75,000 | 129,994 | 2,642 | 207,636 | ||||
Leonard W. Mallett | 100,000 | 129,993 | 5,043 | 235,036 | ||||
Jason C. Rebrook | 78,750 | 129,994 | 2,642 | 211,386 | 100,000 | 129,993 | 5,043 | 235,026 |
Edmund P. Segner, III | 78,750 | 129,994 | — | 208,744 | 100,000 | 129,993 | — | 229,993 |
1 Represents the grant date fair value of our common stock calculated in accordance with ASC 718. In lieu of restricted stock, Ms. Hawes and Mr. Segner elected to receive restricted stock units with deferred delivery.
2 Represents the payment of dividends on unvested restricted stock. Dividend equivalent rights were accrued on the restricted stock units issued to Ms. Hawes and Mr. Segner and will be paid upon distribution of the shares underlying the units according to the terms of the Archrock, Inc. 2020 Stock Incentive Plan.
3 Mr. Brooks retired from and Mr. Mallett was elected to the Board in January 2021
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 1516
The following provides information regarding our executive and senior leadership officers as of March 3, 2022.2023. Information concerning the business experience of Mr. Childers is provided under “Nominees for Director” in this Proxy Statement.
Douglas S. Aron | |||
| Executive Vice President and Chief Financial Officer of HollyFrontier Corporation (an independent petroleum refiner and marketer of petroleum products) from 2011 to 2017 | ||
Prior to Frontier Oil Corporation’s merger with Holly Corporation in 2011, served Frontier as Executive Vice President and Chief Financial Officer, from 2009, as Vice President of Corporate Finance, from 2005 to 2008 and as Director of Investor Relations, from 2001 to 2005 | |||
Executive Vice President and Chief Financial Officer of Nine Energy Service, Inc. (a North America oilfield services company) in 2017 | |||
BA, Journalism, The University of Texas at Austin | |||
MBA, Jesse H. Jones Graduate School of Business, Rice University | |||
Donna A. Henderson | |||
Vice President, Accounting, of our primary operating subsidiary since 2015 | |||
Vice President and Chief Accounting Officer of Southcross Energy Partners GP, LLC (a provider of natural gas gathering, processing, treating, compression and transportation services) from 2013 to 2015 | |||
Vice President and Chief Audit Executive of GenOn Energy, Inc. (a wholesale electric generator that merged into NRG Energy) from 2011 to 2012 | |||
Assistant Controller of GenOn Energy, Inc. and its predecessor companies, RRI Energy, Inc. and Reliant Energy Inc., from 2005 to 2011, and various other leadership roles within the accounting department of that organization since 2000 | |||
From 1996 to 2000, various accounting positions with Lyondell Chemical (a manufacturer of chemicals and polymers), having begun her career with accounting firms Deloitte & Touche LLP and KPMG LLP | |||
Member of the Executive Committee and Board of Trustees of the Good Samaritan Foundation | |||
BBA, Accounting, Eastern New Mexico University | |||
Member of the American Institute of Certified Public Accountants | |||
Stephanie C. Hildebrandt | |||
Partner, Norton Rose Fulbright (a global law firm) from 2015 to 2017 | |||
Senior Vice President, General Counsel and Secretary of Enterprise Products Partners L.P. (“Enterprise”, a publicly traded pipeline and infrastructure company and consumer energy service provider) from 2010 to 2014, after serving in various other roles at Enterprise | |||
Member of the Board of Directors of FS Crude Parent, LLC | |||
• | Member of the Tulane Center for Energy Law Advisory Board since 2019 | ||
Member of the executive council, since 2020, and advisory council, since 2014, of The University of Texas Kay Bailey Hutchison Center for Energy, Law & Business | |||
Member of the President’s Advisory Board at the University of St. Thomas since 2016 | |||
Former director and member of the audit committee of WildHorse Resource Development Corporation from 2017 until it was acquired in 2019, and for a portion of her tenure, as chair of the compensation committee | |||
Former director and member of the conflicts committee of Rice Midstream Management LLC, the general partner of Rice Midstream Partners LP from 2016 until it was acquired in 2018 | |||
Former director, chair of the compensation committee and member of the nominating and governance committee of TRC Companies, Inc. from 2014 until it was acquired in 2017 | |||
BS, Foreign Service, Georgetown University | |||
JD, Tulane University Law School | |||
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 1617
Jason G. Ingersoll | |||
Senior Vice President, Marketing and Sales of Archrock since 2018 after having served as Vice President from 2015 to 2018 | |||
Vice President, Sales of our predecessor subsidiary Exterran Energy Solutions, L.P. (“EESLP”) from 2013 to 2015, as well as positions of increasing responsibility with EESLP, including as Regional Vice President, from 2012 to 2013, Business Unit Director from 2009 to 2012 | |||
• | Held positions of increasing responsibility including Country Manager of China with UCI | ||
• | BS, Mechanical Engineering, Texas A&M University | ||
Elspeth A. Inglis | |||
• | Vice President, Culture Integration at Baker Hughes from 2018 to 2019 | ||
• | Head of Human Resources, Downstream Technology Services, GE Oil and Gas (a global manufacturing business) from 2013 to 2017 | ||
• | Vice President, Human Resources supporting the startup operations for the US unconventional shale gas business of Reliance Industries from 2011 to 2013 | ||
From 2002 to 2009, held positions of increasing responsibility at CGG (a geophysical services company) including Marine Human Resource Manager and Vice President Human Resources, Western Hemisphere in Houston and Senior Vice President Geophysical Services based in Paris | |||
• | Human Resource Manager for Enron Corp. from 1999 to 2001 in both London and Houston | ||
• | Director and member of the human resource committee of Catholic Charities | ||
• | Advisory board member of Workforce Next | ||
• | |||
• | HR and Management education from Rice University and Henley Business Management School, University of Reading (UK); Associate’s degree from University of the Arts London (UK), Business Management | ||
Eric W. Thode | |||
Vice President, Operations since October 2018, having previously served as Vice President and Business Unit Director of the South Texas Business Unit of Archrock Services, L.P., our wholly owned operating subsidiary, since 2018 and 2014, respectively | |||
• | Director of Archrock’s Barnett Business Unit from 2012 to 2014 | ||
• | Director of Archrock Business Development, negotiating alliance contracts that generated over $100 million in annual revenue, having served our predecessor subsidiaries, EESLP and UCI, since 2004 | ||
• | Director, Public Relations of Enron Corporation from 1999 to 2004 | ||
• | Manager, Government and Public Affairs of TEPPCO Partners from 1991 to 1999 | ||
• | BS, Economics, Texas A&M University | ||
• | MPA, Texas A&M University | ||
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 17
18
STOCK OWNERSHIP |
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides information about beneficial owners, known by us as of March 3, 2022,2023, of 5% or more of our outstanding common stock (the “5% Stockholders”). Unless otherwise noted in the footnotes to the table, the 5% Stockholders named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class 1 |
BlackRock, Inc.
| ||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 17,490,6013 | 11.2% |
Old Ocean Reserves, LP 1111 Travis Street, Suite 2300 Houston, Texas 77002
| ||
| ||
EARNEST Partners, LLC 1180 Peachtree Street NE, Suite 2300 Atlanta, Georgia 30309
| 9.1% | |
| ||
Invesco Ltd. 1555 Peachtree Street NE, Suite 1800 Atlanta, Georgia 30309 | 6.2% | |
Dimensional Fund Advisors LP | 9,397,033 7 |
1 Reflects shares of common stock beneficially owned as a percentage of approximately 155157 million shares of common stock outstanding as of March 3, 2022.2023.
2Based solely on a review of the Schedule 13G/A filed by BlackRock, Inc. on January 26, 2022.2023. BlackRock, Inc. has sole voting power over 23,560,69423,865,838 shares and sole dispositive power over 24,386,73224,723,655 shares.
3Based on a review of the Form 4 filed on June 17, 2021, by Old Ocean Reserves, LP (“Old Ocean,” formerly known as JDH Capital Holdings, L.P.). Old Ocean shares voting and dispositive power over all shares with JDH Capital Company (“JDH Capital”), Hildebrand Enterprises, LP (“Hildebrand Enterprises”), Hildebrand Enterprises Company (“Hildebrand Company”), Melinda B. Hildebrand and Jeffery D. Hildebrand. The principal business of JDH Capital is to manage investments and to serve as the general partner of Old Ocean and other affiliated entities. The principal business of Hildebrand Enterprises is to serve as a holding company of energy-related and other operating companies and investments and as the sole limited partner of Old Ocean. The principal business of Hildebrand Company is to serve as the general partner of Hildebrand Enterprises. The principal business occupation of Mrs. Hildebrand is investments. The principal business occupation of Mr. Hildebrand is investments and to serve as Executive Chairman and founder of Hilcorp Energy Company and President and Chief Executive Officer of Hildebrand Enterprises.
4 Based solely on a review of the Schedule 13G/A filed on February 9, 20222023 by The Vanguard Group, Inc. (“Vanguard”). Vanguard does not have sole power to vote any of the shares reported, but has shared voting power over 145,005115,964 shares. Vanguard has sole dispositive power over 16,146,87417,249,211 shares and shared dispositive power over 256,231241,390 shares.
4 Based on a review of the Schedule 13D/A filed on March 3, 2023, by the following “Reporting Persons”: Old Ocean Reserves, LP (“Old Ocean,” formerly known as JDH Capital Holdings, L.P.), Hildebrand Enterprises Company (“Hildebrand Company,” the general partner of Old Ocean), Hildebrand Enterprises, LP (“Hildebrand Enterprises,” a holding company of energy-related and other operating companies and investments and the sole limited partner of Old Ocean), Melinda B. Hildebrand and Jeffrey D. Hilldebrand, Executive Chairman and founder of Hilcorp Energy Company and President and Chief Executive Officer of Hildebrand Enterprises. The shares reported herein are held directly by Old Ocean, however each Reporting Person may be deemed to beneficially own all 14,730,363 shares. Mr. and Mrs. Hildebrand, individually, have the power to vote or to direct the vote of, and to dispose or to direct the disposition of, the shares.
Archrock, inc. 2022 proxy statement
ARCHROCK, INC. 2023 PROXY STATEMENT | 1819
5Based solely on a review of the Schedule 13G filed by EARNEST Partners, LLC on February 9, 2022.13, 2023. EARNEST Partners, LLC has sole voting power over 10,623,12911,004,030 shares and sole dispositive power over 14,106,38614,242,055 shares.
6 Based solely on a review of the Schedule 13G filed by Invesco Ltd. on February 3, 2023. Invesco Ltd., in its capacity as a parent holding company to its investment advisers (Invesco Advisers, Inc., Invesco Investment Advisers, LLC and Invesco Capital Management LLC), may be deemed to beneficially own the shares. Invesco Ltd. has sole voting power over 9,620,038 shares and sole dispositive power over 9,680,770 shares.
7 Based solely on a review of the Schedule 13G/A filed by Dimensional Fund Advisors LP on February 8, 2022,10, 2023, which provides investment advice to four registered investment companies and acts as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). Dimensional and its subsidiaries (collectively, “Dimensional”) may act as an adviser, sub-adviser and/or manager to certain Funds. Dimensional possesses sole voting power over 9,228,4049,214,042 shares and sole dispositive power over the 9,454,1019,397,033 shares held by the Funds and may be deemed to be the beneficial owner of the shares held by the Funds. However, all shares are owned by the Funds, and Dimensional disclaims beneficial ownership of such shares.
7 Based solely on a review of the Schedule 13G filed by Invesco Ltd. on February 9, 2022. Invesco Ltd., in its capacity as a parent holding company to its investment advisers (Invesco Advisers, Inc., Invesco Investment Advisers, LLC and Invesco Capital Management LLC), may be deemed to beneficially own the shares. Invesco Ltd. has sole voting power over 7,930,052 shares and sole dispositive power over 7,991,544 shares.
The following table provides information, as of March 3, 2022,2023, regarding the beneficial ownership of our common stock by each of our directors, each of our Named Executive Officers and all of our current directors and executive officers as a group. Unless otherwise noted in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. The address for each individual listed below is c/o Archrock, Inc., 9807 Katy Freeway, Suite 100, Houston, Texas 77024.
Name of Beneficial Owner | Shares Owned Directly | Restricted Stock and Units 1 | Right to Acquire Stock | Indirect Ownership 2 | Total Ownership | Percent of Class | Shares Owned Directly | Restricted Stock and Units 1 | Right to Acquire Stock | Indirect Ownership 2 | Total Ownership | Percent of Class | |||||
Non-Employee Directors | |||||||||||||||||
Anne-Marie N. Ainsworth | 87,918 | 11,592 | — | — | 99,510 | * | 102,960 | 10,350 | — | — | 113,310 | * | |||||
Gordon T. Hall | 224,088 | 11,592 | — | — | 235,680 | * | 239,130 | 10,350 | — | — | 249,480 | * | |||||
Frances Powell Hawes | 71,904 | 27,606 | — | — | 99,510 | * | 85,704 | 27,606 | — | — | 113,310 | * | |||||
J.W.G. Honeybourne | 130,224 | 11,592 | — | — | 141,816 | * | 145,266 | 10,350 | — | — | 155,616 | * | |||||
James H. Lytal | 87,918 | 11,592 | — | — | 99,510 | * | 102,960 | 10,350 | — | — | 113,310 | * | |||||
Leonard W. Mallett | 16,014 | 11,592 | — | — | 27,606 | * | 36,056 | 10,350 | — | — | 46,406 | * | |||||
Jason C. Rebrook | 16,014 | 11,592 | — | — | 27,606 | * | 31,056 | 10,350 | — | — | 41,406 | * | |||||
Edmund P. Segner, III | 74,476 | 27,606 | — | — | 102,082 | * | 74,476 | 41,406 | — | — | 115,882 | * | |||||
Named Executive Officers | |||||||||||||||||
D. Bradley Childers | 1,285,482 | 638,959 | — | 1,453 | 1,925,894 | 1.2% | 1,431,286 | 660,293 | — | — | 2,091,579 | 1.3% | |||||
Douglas S. Aron | 220,797 | 190,698 | — | — | 411,495 | * | 300,871 | 220,744 | — | — | 521,615 | * | |||||
Stephanie C. Hildebrandt | 164,384 | 129,473 | — | — | 293,857 | * | 207,404 | 144,643 | — | — | 352,047 | * | |||||
Jason G. Ingersoll | 141,954 | 93,217 | — | — | 235,171 | * | 174,543 | 103,372 | — | — | 277,915 | * | |||||
Eric W. Thode | 61,260 | 91,017 | — | 8,479 | 160,756 | * | 92,210 | 101,114 | — | 8,539 | 201,863 | * | |||||
All directors and current executive officers as a group (14 persons) | 2,616,540 | 1,302,296 | — | 9,932 | 3,928,768 | 2.5% | 3,055,516 | 1,394,720 | — | 8,539 | 4,458,775 | 2.8% |
* Less than 1%
1 For Ms. Hawes and Mr. Segner, includes restricted stock units awarded in 2021 and 2022, and in 2023 for Mr. Segner, with deferred delivery. For all other directors, total includes unvested restricted stock awarded in 2022.2023. For executive officers, includes unvested restricted stock awards from annual grants that vest minimally over a three-year period from the date of grant. OfficersExcept with respect to the restricted stock units reported herein for Ms. Hawes and Mr. Segner, officers and directors have voting power and, once vested, dispositive power.
ARCHROCK, INC. 2023 PROXY STATEMENT | 20
Archrock, inc. 2022 proxy statement | 19
2For Mr. Childers, includes shares previously acquired under our 401(k) Plan and the 401(k) Plan's dividend reinvestment on such shares; for Mr. Thode, includes 8,3758,435 shares held by immediate family members for which he shares dispositive power. Mr. Thode does not share voting or dispositive power andover 104 shares held by a family member for whichand he disclaims beneficial ownership.ownership of such shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our directors and officers are required to file reports of holdings and transactions in Archrock stock with the SEC on a timely basis. Based on our records, we believe all filing requirements of Section 16(a) of the Exchange Act were met by our officers and directors in 2021.2022.
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 2021
PROPOSAL 2 RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM |
Deloitte & Touche LLP (“Deloitte”) served as our independent registered public accounting firm for the fiscal year ended December 31, 2021. The2022. Our Audit Committee has selected Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2023. We are submitting the selection of Deloitte for stockholder ratification at the Annual Meeting.
Representatives of Deloitte attended all meetings of theour Audit Committee in 20212022 as well as our 20212022 Annual Meeting of Stockholders. For additional information concerning theour Audit Committee and its activities with Deloitte, see “Pre-Approval Policy” and “Report of the Audit Committee” following this proposal description. We expect that a representative of Deloitte will attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.
|
The Board recommends a vote “FOR” the ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31,
| VOTE REQUIRED
Ratification of Proposal 2 requires
Our organizational documents do not require that our stockholders ratify the selection of our independent registered public accounting firm. We are requesting ratification because we believe it is a matter of good corporate practice. If our stockholders do not ratify the selection, |
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for professional services rendered by Deloitte and its member firms and respective affiliates on our behalf for calendar years 20212022 and 2020.2021.
Types of Fees | 2021 | 2020 | 2022 | 2021 | ||
(In thousands) | (In thousands) | |||||
Audit fees 1 | 1,470 | $1,595 | $1,614 | $1,470 | ||
Audit-related fees 2 | 70 | 240 | 185 | 70 | ||
Tax fees 3 | 100 | 125 | 45 | 100 | ||
All other fees | 2 | — | 2 | 2 | ||
Total | $1,642 | $1,960 | $1,846 | $1,642 |
ARCHROCK, INC. 2023 PROXY STATEMENT | 22
1 Audit fees include fees billed by our independent registered public accounting firm related to audits and reviews of financial statements we are required to file with the SEC, audits of internal control over financial reporting and assistance with and review of documents filed with the SEC.
2 Audit-related fees include fees billed by our independent registered public accounting firm primarily related to issuance of comfort letters.
3 Tax fees include fees billed by our independent registered public accounting firm primarily related to tax compliance and consulting services.
Archrock, inc. 2022 proxy statement | 21
In considering the nature of the services provided by Deloitte, theour Audit Committee determined that such services are compatible with the provision of independent audit services. TheOur Audit Committee discussed these services with Deloitte and our management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by (a) the SEC to implement the Sarbanes-Oxley Act of 2002, and (b) the American Institute of Certified Public Accountants.
TheOur Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services, and will not engage any other independent registered public accounting firm to render audit services, unless the service is specifically approved in advance by theour Audit Committee.
TheOur Audit Committee’s practice is to consider for approval, at its regularly scheduled meetings, all audit and non-audit services proposed to be provided by our independent registered public accounting firm. In situations where a matter cannot wait until the next regularly scheduled committee meeting, the chair of theour Audit Committee has been delegated authority to consider and, if appropriate, approve audit and non-audit services. Approval of services and related fees by theour Audit Committee chair is reported to the full Audit Committee at the next regularly scheduled meeting. All services performed by our independent registered public accounting firm in 20212022 were pre-approved pursuant to this policy.
The purpose of the Audit Committee is to assist the Board in its general oversight of Archrock’s financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the Audit Committee and is available on Archrock’s website at www.archrock.com.
The Audit Committee has reviewed and discussed the consolidated financial statements and management’s assessment and report on internal controls over financial reporting with management and Deloitte. The Audit Committee also reviewed and discussed with Deloitte its review and report on Archrock’s internal control over financial reporting. Archrock published these reports in its Annual Report on Form 10-K for the year ended December 31, 2021,2022, which it filed with the SEC on February 23, 2022.22, 2023. Management is responsible for the preparation, presentation and integrity of financial statements and the reporting process, including the system of internal controls. Deloitte is responsible for performing an independent audit of Archrock’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon, as well as expressing an opinion on the effectiveness of Archrock’s internal control over financial reporting. The Audit Committee monitors these processes.
The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the independent auditors. The Audit Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the independent auditors on the basis of the information it receives, discussions with management and the independent auditors, and the experience of the Audit Committee members in business, financial and accounting matters. In accordance with law, the Audit Committee has ultimate authority and responsibility for selecting, compensating, evaluating, and, when appropriate, replacing Archrock’s independent auditors. The Audit Committee has the authority to engage its own outside advisers, including experts in particular areas of accounting, as it determines appropriate, apart from counsel or advisers hired by management.
ARCHROCK, INC. 2023 PROXY STATEMENT | 23
Archrock, inc. 2022 proxy statement | 22
In this context, the Audit Committee discussed with Archrock’s internal auditors and Deloitte the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present, to discuss the results of their examinations, their evaluations of Archrock’s internal controls, and the overall quality of Archrock’s financial reporting. Management represented to the Audit Committee that Archrock’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee reviewed and discussed the consolidated financial statements with management and Deloitte, including a discussion of the quality, not just the acceptability, of the accounting principles applied, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements. The Audit Committee also discussed with Deloitte the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect.under applicable requirements of the Public Company Accounting Oversight Board and the SEC.
In addition, the Audit Committee discussed with Deloitte its independence, considered the compatibility of non-audit services with the auditors’ independence and received the written disclosures and letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as currently in effect.
Based on the reviews and discussions referred to above, the Audit Committee recommended to Archrock’s Board, and the Board has concurred, that (a) the audited financial statements be included in Archrock’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, for filing with the SEC; (b) Deloitte meets the requirements for independence; and (c) the appointment of Deloitte for 20222023 be submitted to the stockholders for ratification.
The Audit Committee of the Board of Directors
Frances Powell Hawes, Chair
Anne-Marie N. Ainsworth
Gordon T. Hall
Edmund P. Segner, III
The information contained in this Report of the Audit Committee shall not be deemed to be “soliciting material,” to be “filed” with the SEC or be subject to Regulation 14A or Regulation 14C or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing of Archrock, except to the extent that Archrock specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 2324
PROPOSAL 3 ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS |
Pursuant to Section 14A of the Exchange Act, our stockholders are provided the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. This proposal gives stockholders the opportunity to approve, reject or abstain from voting with respect to the compensation provided to our Named Executive Officers for 2021.2022.
As discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program is designed to attract and retain individuals with the level of expertise and experience needed to help achieve the business objectives intended to drive both short- and long-term success and stockholder value. You are encouraged to read the detailed information concerning our executive compensation program and policies contained in the Compensation Discussion and Analysis following this proposal description, as well as the compensation-related tabular and other disclosure following the Compensation Discussion and Analysis.
|
The Board has determined to hold a “say on pay” advisory vote every year. In accordance with this determination and Section 14A of the Exchange Act, the Board recommends that stockholders vote “FOR” the following resolution: “RESOLVED, that the stockholders of Archrock, Inc. approve, on an advisory basis, the compensation paid to its Named Executive Officers for 2022, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the Summary Compensation table and the other related tables and disclosure.” | VOTE REQUIRED
Approval of Proposal 3 requires | |
| Because the vote on this proposal is advisory in nature, the outcome will not be binding on the Company, the Board or the Compensation Committee and will not affect compensation already paid or awarded. However, the Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of the vote when considering future compensation arrangements for our Named Executive Officers. |
Consistent with the results of our stockholders’ most recent vote on the frequency of future “say on pay” votes, our Board has determined to hold future “say on pay” advisory votes on executive compensation on an annual basis. Unless the Board modifies its determination of the frequency of future “say on pay” advisory votes, the next “say on pay” advisory vote will be held at our 20232024 Annual Meeting of Stockholders.
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 2425
COMPENSATION DISCUSSION AND ANALYSIS |
Archrock, inc. 2022 proxy statementARCHROCK, INC. 2023 PROXY STATEMENT | 2526
The Compensation Discussion and Analysis that follows focuses on compensation earned during
2022 PERFORMANCE HIGHLIGHTS
ARCHROCK, INC. 2023 PROXY STATEMENT | 27
MOST RECENT SAY ON PAY VOTE AND HISTORICAL PROGRAM CHANGES
At our
ARCHROCK, INC. OUR BEST PRACTICES Our executive compensation program provides balanced incentives and does not promote risks that are reasonably likely to have a material adverse effect on us.
COMPONENTS OF OUR The charts below Target Total Direct Compensation Mix
ARCHROCK, INC. CEO REALIZABLE COMPENSATION The chart below illustrates that our CEO’s realizable compensation aligns with total stockholder return (“TSR”).
1 TSR derived from Standard & Poor’s Capital IQ Platform and reflects adjustments for spin-off and dividends. ARCHROCK, INC.
|