Mr. McKinley, 58, has served as Managing Partner of MK Resources LLC, a private oil and gas development company specializing in the recovery and production of crude oil and the development of unconventional resource projects, for more than ten years. He is also the founder and President of Labrador Oil Company, a private oil and natural gas exploration and development firm. Mr. McKinley currently serves on the Boards of Directors of the Merrymac McKinley Foundation and the Tip of the Spear Foundation. Mr. McKinley’s entrepreneurial, operational and business achievements during his long career in domestic and international oil and natural gas development bring valuable perspective to the Board. | | | | | | | Director Since: February 2015 Independent Current Directorships: Buckeye GP, LLC | | | | | | ERIC D. MULLINS | | | | | Mr. Mullins, 51,52, has served as the Co-Chief Executive Officer and Chairman of the Board of Directors of LRE GP, LLC, the general partner of LRR Energy, L.P., a company which operates, acquires, exploits and develops producing oil and natural gas properties, since May 2011. He also serves as the Managing Director and Co-Chief Executive Officer of Lime Rock Resources, a company that he co-founded in 2005 which acquires, operates and improves lower-risk oil and natural gas properties. Prior to co-founding Lime Rock Resources, Mr. Mullins served as a Managing Director in the Investment Banking Division of Goldman Sachs where he led numerous financing, structuring and strategic advisory transactions in the division’s Natural Resources Group. Mr. Mullins’s career experiences and knowledge in financing and strategic mergers and acquisitions for exploration and production companies greatly assists and enhances the Board’s ability to direct a sustainable and growing enterprise. | | | |
| | | | Director Since: May 2012 Independent Current Directorships: LRE GP, LLC |
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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW. Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2016 | | | | | R. A. WALKER | | | | | Mr. Walker, 57,58, was named Chairman of the Board of the Company in May 2013, in addition to the role of Chief Executive Officer and director, both of which he assumed in May 2012, and the role of President, which he assumed in February 2010. He previously served as Chief Operating Officer from March 2009 until his appointment as Chief Executive Officer. He served as Senior Vice President, Finance and Chief Financial Officer from September 2005 until March 2009. Mr. Walker serves on the Boards and Executive Committeesis a director of the American Petroleum Institute and America’s Natural Gas Alliance, in addition to being a memberHouston Branch of the Business Roundtable and the Business Council.Dallas Federal Reserve. He is also serves on the Board of Trustees for the Houston Museum of Natural Science.Science, a member of the Business Council, the Business Roundtable, All-American Wildcatters, and serves as a director of the American Petroleum Institute (Executive Committee) and America’s Natural Gas Alliance (Executive Committee). In addition to his current directorships of public companies noted in the box to the right, in the past five years he also served on the boards of Western Gas Equity Holdings, LLC and Western Gas Holdings, LLC, both of which are subsidiaries of Anadarko, and on the board of Temple-Inland, Inc, where he chaired the Audit Committee, and the board of trustees for the United Way of Greater Houston. Mr. Walker served as Chairman of the Board of Western Gas Holdings LLC from August 2007 to September 2009.Inc. Mr. Walker has more than 30 years of experience in the energy industry, with a focus on exploration and production, including finance, institutional investing, and mergers and acquisitions. He has served on the boards of directors of more than ten public companies, including Maxus Energy Corporation, Ocean Energy, Inc., Seagull Energy Corporation, Hadson Corporation, 3TEC Energy Corporation, TEPPCO Partners, L.P. and others.companies. This experience provides him with a broad perspective on various corporate governance and other matters. He also has significant involvement in various civic and charitable organizations. | | | |
| | | | Director Since: May 2012 Not Independent -– Management Current Directorships: BOK Financial Corporation CenterPoint Energy, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Corporate Governance Our Board recognizes that excellence in corporate governance is essential in carrying out our responsibilities to our stakeholders, including our stockholders, employees, customers, communities, and creditors, as well as to the environment. Our Corporate Governance Guidelines, By-Laws, Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, and written charters for the Audit Committee, the Compensation Committee, and the Governance and Risk Committee, all as amended from time to time, can be found on the Company’s website at http://www.anadarko.com/About/Pages/Governance.aspx.Responsibility/Good-Governance/#!GDocs. These documents provide the framework for our corporate governance. Any of these documents will be furnished in print free of charge to any stockholder who requests them.upon request. You can submit such a request to the Corporate Secretary at 1201 Lake Robbins Drive, The Woodlands, Texas 77380-1046. Under the Company’s Corporate Governance Guidelines, directors are expected to attend regularly scheduled Board of Director meetings and meetings of committees on which they serve, as well as the Annual Meeting of Stockholders. Each incumbent director thatwho served on our Board during 20132014 attended at least 75% of the meetings of the Board and the committees on which he or she served. There were eight Board meetings and 19a total of 24 Board committee meetings in 2013.2014. In addition, all of the incumbent directors attended the 20132014 Annual Meeting, other than Mr. Chase,Messrs. Gorder and McKinley, who joined the Board in July 2014 and February 2014.2015, respectively. BOARD LEADERSHIP STRUCTURE Mr. Walker was initially elected Chairman of the Board effective following the Company’s 2013 Annual Meeting. Mr. Walker, asMeeting and has been re-elected to such role each year since that time. As the Company’s Chief Executive Officer (CEO), Mr. Walker works in concert with the rest of our majority-independent Board and the independent Lead Director, Mr. Gordon, to oversee the execution of the Company’s strategy. The Board believes that the combined Chairman and CEO role ensures open communication between the Board and executive management and promotes consistent and effective leadership of both the Board and executive management. Given Mr. Walker’s successful leadership transition during 2012 and 2013,In addition, the Board believes that a combined Chairman and CEO role is currently the best approach to promote long-term stockholder value for several reasons:the reasons listed below. | • | | Promotes Unified Approach on Corporate Strategy Development and Execution — Maintaining a combined role enables the Company’s CEO to act as a bridge between management and the Board, helping both to act with a common purpose. This also fosters consensus building and alignment on strategy and tactical execution of a Board-approved vision and strategy at the top levels within the Company;Company. |
| • | | Requires that the CEO Recognize Importance of Good Corporate Governance — Maintaining a combined position requires that the CEO’s responsibilities include a mastery of good corporate governance, a focus on broad stakeholder interests, and an open channel of communication, and requires the CEO to work together with the Lead Director as a team and to appreciate the vital importance of good governance practices in executing the Company’s strategy;strategy. |
| • | | Provides Clear Lines of Accountability — A combined position has the practical effect of simplifying the accountability of the executive management team, thereby reducing potential confusion and fractured leadership that could result from reporting to two individuals as opposed to one; andleadership. |
| • | | Provides Clear Roadmap for Stockholder/Stakeholder Communications — A combined position provides the Company’s stakeholders the opportunity to deal with one versus several points of overall authority, which we believe results in more efficient and effective communications with stakeholders. |
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Corporate Governance Role of Lead Director. Consistent with industry best practices, the Board has a strong and active Lead Director whose duties and responsibilities ensure the Company maintains a corporate-governance structure with appropriate independence and balance. Our independent Lead Director’s duties are closely aligned with the role of an independent, non-executive chairman. As the Lead Director who is elected exclusively by the independent directors, Mr. Gordon’s roleis to assist the Chairman and the remainder of the Board in assuring effective corporate governance in managing the affairs of the Board and the Company. Mr. Gordon serves as a liaison between the Chairman and the independent directors and works with the Chairman to approve all meeting agendas. He presides at (i) executive sessions of the non-employeeindependent directors, which are held in conjunction with each regularly scheduled quarterly meeting of the Board, (ii) executive sessions of the independent directors, which are held at least once a year, and (iii) any other meetings as determined by the Lead Director. Mr. Gordon also approves information sent to the Board and approves meeting schedules to assure there is sufficient time for discussion of all agenda items. In addition, as Lead Director, Mr. Gordon has authority to call special meetings of the Board and is also a member of the Board’s Executive Committee, providing additional representation for the independent directors in all actions considered by the Executive Committee between Board meetings. Mr. Gordon is required, if requested by major stockholders, to be available for consultation and direct communication. THE BOARD’S ROLE IN RISK OVERSIGHT The Board’s role in the identification, assessment, oversight and management of potential risks that could affect the Company’s ability to achieve its strategic, operational and financial objectives consists of (i) reviewing and discussing the Company’s risk framework and risk management policies, (ii) facilitating appropriate coordination among the Board’s committees with respect to oversight of risk management by delegating oversight of the Company’s enterprise risk management program to the Governance and Risk Committee, the risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures, to the Audit Committee, and compensation risk to the Compensation Committee, and (iii) periodically meeting with members of management, including members of the Company’s internal Risk Council, to identify, review and assess the Company’s major risk exposures and steps taken to monitor, mitigate and report such exposures. Board Committees. The Governance and Risk Committee is responsible for oversight of the Company’s significant risk exposures and periodically reviews and discusses with members of management those risk exposures and the steps being taken to identify, monitor and mitigate such exposures. With the assistance of the Compensation Committee’s independent executive compensation consultant, the Compensation Committee is responsible for the oversight of the annual risk assessment of the Company’s compensation programs. The Audit Committee is responsible for oversight of the Company’s risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures, and periodically reviews and discusses such framework and policies with members of management. Internal Risk Council. In order to facilitate oversight of potential risk exposures to the Company that have not been specifically delegated to any Board committee, the Board periodically meets with members of the Company’s internal Risk Council to review and assess the Company’s risk managementrisk-management processes and to discuss significant risk exposures. Members of senior management comprise the Company’s internal Risk Council and provide periodic reports to the CEO, the Governance and Risk Committee and the full Board regarding the Company’s risk profile and risk-management strategies. In addition, the Company’s internal audit function regularly provides additional perspective and insight to the BoardAudit Committee regarding potential risks facing the Company. | | | | | | | 14
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Corporate Governance COMPENSATION COMMITTEE RISK ASSESSMENT The Compensation Committee reviewed a comprehensive compensation risk assessment conducted independently by Frederic W. Cook & Co., Inc. (FWC), the Compensation Committee’s executive compensation consultant. The assessment focused on the design and application of the Company’s executive and non-executive compensation programs and whether such programs encourage excessive risk taking by executive officers and other employees. Based on the outcomes of this assessment and the Compensation Committee’s review, the Compensation Committee believes that the Company’s compensation programs (i) do not motivate our executive officers or our non-executive employees to take excessive risks, (ii) are well designed to encourage behaviors aligned with the long-term interests of stockholders and (iii) are not reasonably likely to have a material adverse effect on the Company. Anadarko’s compensation programs are designed to support and reward appropriate risk taking and include the following: an appropriate balance of fixed versus variable pay, cash and equity pay components, operating and financial performance measures, short-term and long-term performance periods, extended vesting schedules, and established formulas and discretion; established policies to mitigate compensation risk including significant stock ownership guidelines for officers of the Company, insider-trading prohibitions, clawback provisions, and specified caps on incentive awards; and independent Compensation Committee oversight, which also extends to incentive plans below the executive officer level. COMMITTEES OF THE BOARD The Board has four standing committees: (i) the Audit Committee,Committee; (ii) the Compensation Committee,Committee; (iii) the Governance and Risk Committee,Committee; and (iv) the Executive Committee. For each of the current committees of the Board, the table below shows the current membership, the principal functions and the number of meetings held in 2013:2014: | | | | | Name, Members and Meetings | | Principal Functions | AUDIT COMMITTEE(1) Eric D. Mullins (Chair)(2) Kevin P. Chilton Charles W. Goodyear Paula R. ReynoldsMark C. McKinley
Meetings in 2013: 82014: 11 | | • | | Discusses the integrity of the Company’s accounting policies, internal controls, financial reporting practices and the financial statements with management, the independent auditor and internal audit. | | • | | Reviews and discusses with management the Company’s risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures. | | • | | Monitors the qualifications, independence and performance of the Company’s internal audit function and independent auditor, and meets periodically with management, internal audit and the independent auditor in separate executive sessions. | | | • | | Establishes and maintains procedures for the submission, receipt, retention and treatment of complaints and concerns received by the Company regarding accounting, internal controls or auditing matters, including those received through the confidential anonymous Anadarko Hotline. |
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Corporate Governance | | | | | Name, Members and Meetings | | Principal Functions | AUDIT COMMITTEE (Continued) | | • | | Monitors compliance with legal and regulatory requirements and the business practices and ethical standards of the Company. | | | • | | Approves the appointment, compensation, retention and oversight of the work of the Company’s independent auditor and establishes guidelines for the retention of the independent auditor for any permissible services. | | | • | | Prepares the Audit Committee report, which is on page 28.30. | COMPENSATION AND BENEFITS COMMITTEE(3) Peter J. Fluor (Chair) Richard L. GeorgeJoseph W. Gorder
John R. Gordon Meetings in 2013: 72014: 6 | | • | | Approves and evaluates the Company’s director and officer compensation plans, policies and programs. | | • | | Conducts an annual review and evaluation of the CEO’s performance in light of the Company’s goals and objectives. | | • | | Retains, and is directly responsible for the oversight of, compensation or other consultants to assist in the evaluation of director or executive compensation and otherwise to aid the Compensation Committee in meeting its responsibilities. For additional information on the role of compensation consultants, please see Compensation Discussion and Analysis beginning on page 30.32. | | • | | Annually reviews the Company’s compensation-related risk profile to confirm that compensation-related risks are not reasonably likely to have a material adverse effect on the Company. | | • | | Periodically reviews and discusses with its independent compensation consultants and senior management the Company’s policy on executive severance arrangements, and recommends any proposed changes to the Board to the extent required by the Compensation Committee charter. | | • | | Reviews the Compensation Discussion and Analysis, disclosures for advisory votes by stockholders on executive compensation, including frequency of such votes, and other relevant disclosures made in the proxy statement. | | • | | Produces an annual Compensation Committee report, which is on page 29.31. | GOVERNANCE AND RISK COMMITTEE(4) H. Paulett Eberhart (Chair) Anthony R. Chase Preston M. Geren IIIRichard L. George
Meetings in 2013: 42014: 6 | | • | | Recommends nominees for director to the full Board and ensures such nominees possess the director qualifications set forth in the Company’s Corporate Governance Guidelines. | | • | | Reviews the qualifications of existing Board members before they are nominated for re-election to the Board. | | • | | Recommends members of the Board for committee membership. | | • | | Proposes Corporate Governance Guidelines for the Company and reviews them annually. | | • | | Oversees the Company’s compliance structure and programs. |
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Corporate Governance | | | | | Name, Members and Meetings | | Principal Functions | GOVERNANCE AND RISK COMMITTEE (Continued) | | • | | Develops and oversees an evaluation process for the Board and its committees. | | • | | Oversees the emergency and expected CEO succession plans. | | | • | | Reviews and approves related-person transactions in accordance with the Board’s procedures. | | | • | | Reviews and investigates reports to the confidential anonymous Anadarko Hotline regarding material non-financial matters. | | | • | | Reviews and discusses with management the Company’s significant risk exposures and the steps management has taken to identify, monitor and mitigate such exposures. | | | • | | Oversees the work of the Company’s independent reserve engineering consultant. | | | • | | Oversees the Anadarko Petroleum Corporation Political and Public Engagement Policy and the Company’s political activity, including annually reviewing the Company’s political contributions and trade association payments. | | | • | | Reviews and discusses with management the Company’s environmental, health and safety programs. | EXECUTIVE COMMITTEE R. A. Walker (Chair) H. Paulett Eberhart Peter J. Fluor John R. Gordon Eric D. Mullins Meetings in 2013: 02014: 1 | | • • | | Acts with the power and authority of the Board, in accordance with the Company’s By-Laws, in the management of the business and affairs of the Company while the Board is not in session. | | • | | Approves specific terms of financing or other transactions that have previously been approved by the Board. | | | | | | | | | | | | |
(1) | None of the Audit Committee members serveserves on the audit committee of more than two other public companies. |
(2) | The Board has determined that Mr. Mullins qualifies as an “audit committee financial expert” under the rules of the SEC based upon his education and employment experience as more fully detailed in Mr. Mullins’s biography set forth above.experience. The Board has also determined that Mr. Mullins, as well as each member of the Audit Committee, is independent, as independence for audit committee members is defined in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (Exchange Act), and under the standards set forth by the NYSE. |
(3) | The Board has determined that each member of the Compensation Committee isis: (i) independent under the standards set forth by the NYSE governing Compensation Committee membership; (ii) a “non-employee director” under Rule 16b-3 of the Exchange Act; and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (IRC). |
(4) | The Board has determined that each member of the Governance and Risk Committee is independent under the standards set forth by the NYSE governing Board membership. |
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Corporate Governance BOARD OF DIRECTORS Director Independence In accordance with NYSE rules, the Sarbanes-Oxley Act of 2002, the Exchange Act, and the rules and regulations adopted thereunder, and the Company’s Corporate Governance Guidelines, the Board must affirmatively determine the independence of each director and director nominee in accordance with the Company’s director independence standards, which are contained in the Company’s Corporate Governance Guidelines found on the Company’s website at http://www.anadarko.com/About/Pages/Governance.aspx.content/ documents/apc/Responsibility/Governance_Documents/Corporate_Governance_Guidelines.pdf. Based on the standards contained in our Corporate Governance Guidelines, and the recommendation by the Governance and Risk Committee, the Board has determined that each of the following non-employee director nominees is independent and has no material relationship with the Company that could impair such nominee’s independence: | | | • Anthony R. Chase | | • Richard L. GeorgeJoseph W. Gorder | • Kevin P. Chilton | | • Charles W. Goodyear
| • H. Paulett Eberhart
| | • John R. Gordon | • H. Paulett Eberhart | | • Mark C. McKinley | • Peter J. Fluor | | • Eric D. Mullins | • Richard L. George | | |
Mr. Walker is not independent because he is the Chairman, President and CEO of the Company. For information regarding our policy on Transactions with Related Persons, please see page 7578 of this proxy statement. Selection of Directors The Company’s Corporate Governance Guidelines require that with respect to Board vacancies, the Governance and Risk Committee (or a subcommittee thereof): (i) identify the personal characteristics needed in a director nominee so that the Board as a whole will possess such qualifications as more fully identified below; (ii) compile, through such means as the Governance and Risk Committee considers appropriate, a list of potential director nominees thought to possess the individual qualifications identified in the Corporate Governance Guidelines, as well as any additional specific qualifications the Board deems appropriate at the time; (iii) engage an outside consultant, as necessary, to assist in the search for qualified nominees; (iv) review the background, character, experience and temperament of each potential nominee; (v) conduct interviews, and if appropriate recommend that other members of the Board and/or management interview such potential nominee; and (vi) evaluate each potential nominee in relation to the culture of the Company and the Board, which emphasizes independent thinking and teamwork. | | | | | | | 18
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Corporate Governance As stated in our Corporate Governance Guidelines, one of the core competencies our Board has identified in assessing the qualifications of the Board as a whole is a diversity of experience, professional expertise, perspective and age. The Board recognizes that such diversity is an important factor in board composition and the Governance and Risk Committee ensures that such diversity considerations are discussed in connection with each candidate for director. For the past several years, our Board has reviewed on at least an annual basis a director skillset chart that identifies characteristics that the Board believes contribute to an effective and well-functioning board and that the Board as a whole should possess. The factors the Board considers include the following: other board service (both prior and current) current or former experience as CEO of a public company public company executive service (both prior and current) financial expertise banking/finance expertise exploration and production operations expertise | • | | oil and gas service company expertise | |
| • | | international business experience | |
| • | | government relations experience | |
| • | | marketing/commodity risk management experience | |
| • | | manufacturing/operations experience | |
| • | | civic/charitable experience | |
oil and gas service company expertise international business experience government relations experience marketing/commodity risk management experience manufacturing/operations experience civic/charitable experience The Governance and Risk Committee considers these and other factors and the extent to which such skillsets can be represented when evaluating potential candidates for the Board. Together, this diversity of skillsets, experiences and personal backgrounds allows our directors to provide the diversity of thought that is critical to the Board’s decision-making and oversight process. Annual Evaluations The Board and each of the independent committees have conducted self-evaluations related to their performance in 2013.2014, including an evaluation of each director. The performance evaluations were supervised by the Governance and Risk Committee andCommittee. Following a discussion of the results were discussed byof the applicable committee andevaluations, the Board. The Board and each committee have implemented any necessary changes as a result of these evaluations.changes. Communication with the Directors of the Company The Board welcomes questions or comments about the Company and its operations. Interested parties who wish to communicate with the Board, including the Lead Director, the non-employee or independent directors, or any individual director, may contact the Chairperson of the Governance and Risk Committee at governanceriskchair@anadarko.com or at Anadarko Petroleum Corporation, Attn: Corporate Secretary, 1201 Lake Robbins Drive, The Woodlands, Texas 77380-1046. If requested, any questions or comments will be kept confidential to the extent reasonably possible. Depending on the subject matter, the Chairperson of the Governance and Risk Committee, with the assistance of the Corporate Secretary, will: forward the communication to the director or directors to whom it is addressed; refer the inquiry to the General Counsel for referral to the appropriate corporate department if it is a matter that does not appear to require direct attention by the Board or an individual director; or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. | | | | | | | 20 | 19
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Corporate Governance These procedures may change from time to time, and you are encouraged to visit our website for the most current means of contacting our directors. If you wish to request copies of any of our governance documents, please seerefer to page 1314 of this proxy statement for instructions on how to obtain them.instructions. Stockholder Participation in the Selection of Director Nominees During the past year, no stockholder submitted names to the Governance and Risk Committee of individuals for nomination to the Company’s Board pursuant to the procedures discussed below. For nomination at the 20152016 Annual Meeting, the Board will consider individuals identified by stockholders on the same basis as nominees identified from other sources. To nominate a director for the 20152016 Annual Meeting, a stockholder must follow the procedures described in the Company’s By-Laws, which require that the stockholder give written notice to the Company’s Corporate Secretary at the Company’s principal executive offices. The notice to the Corporate Secretary must include the following: the name and address of the stockholder and beneficial owner, if any, as they appear on the Company’s books; the class or series and number of shares of the Company which are, directly or indirectly owned (including through a partnership) beneficially and of record by the stockholder and such beneficial owner and any derivative instrument directly or indirectly owned beneficially by such stockholder; any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of any security of the Company; any economic interest in any security of the Company, including any short interest, and any rights to dividends on the shares of the Company owned beneficially by such stockholder that are separated or separable from the underlying shares of the Company; any performance-related fees (other than an asset-based fee) that such stockholder (including such stockholder’s immediate family) is entitled to based on any increase or decrease in the value of shares of the Company or derivative instruments, if any, as of the date of such notice; a representation as to whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee and/or otherwise to solicit proxies from stockholders in support of such nomination; all information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates and each proposed nominee, and his or her respective affiliates and associates; | | | | | | | 20
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Corporate Governance with respect to each nominee for election or reelectionre-election to the Board, a completed and signed questionnaire, representation and agreement that the nominee is not and will not become a party to the following: | – | | any agreement, arrangement or understanding as to how such person, if elected as a director of the Company, will act or vote on any issue or question that has not been disclosed to the Company; |
| – | | any voting commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Company, with such person’s fiduciary duties under applicable law; |
| – | | any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed; and |
any such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. In addition, the nominee must be in compliance, if elected as a director of the Company, and agree to continue to comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Company. Generally, nominations must be received no earlier than the close of business on the 120th day prior to, and no later than the close of business on the 90th day prior to, the first anniversary of our last annual meeting of stockholders, or, if the nomination is with respect to a special meeting of stockholders, not earlier than the close of business on the 120th day prior to, and no later than the close of business on the 90th day prior to, such special meeting. For more information on stockholder participation in the selection of director nominees, please refer to that section in our Corporate Governance Guidelines and our By-Laws, which are posted on the Company’s website at http://www.anadarko.com/About/Pages/Governance.aspx.Responsibility/Good-Governance/#!GDocs. Directors’ Continuing Education The Company’s Director Education Policy encourages all members of the Board to attend director education programs appropriate to their individual backgrounds to stay abreast of developments in corporate governance and best practices relevant to their contribution to the Board as well as their responsibilities in their specific committee assignments. The Director Education Policy provides that the Company will reimburse directors for all costs associated with attending any director education program. Compensation and Benefits Committee Interlocks and Insider Participation The Compensation Committee is made up of three independent directors. None of our executive officers currently serve, or in the past year have served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee. | | | | | | | 22 | 21
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Corporate Governance Director Compensation Non-employee directors receive a combination of cash and stock-based compensation designed to attract and retain qualified candidates to serve on the Board. Mr. Walker does not receive any compensation for his service as a director. In setting non-employee director compensation, the Board considers the significant amount of time that non-employee directors spend in fulfilling their duties to the Company and its stockholders as well as the skill level required by the Company’s Board members. The Compensation Committee is responsible for determining the type and amount of compensation for non-employee directors. To assist in the 20132014 annual review of director compensation, the Compensation Committee directly retained FWC as its outside independent compensation consultant to provide benchmark compensation data and recommendations for compensation program design. Retainer and Meeting Fees.Cash Compensation Program. The following is a schedule of current annual retainers and meeting fees for non-employee directors in effect during 2013 and2014, payable on a quarterly basis:
| | | | | | Type of Fee2014 Cash Compensation
| | Amount($) | Annual Board Retainer | | | | 70,000 | | Additional Annual Retainer tofor Chairperson of Audit Committee, and of Compensation Committee and Governance and Risk Committee(1) | | | | 25,000 | | Additional Annual Retainer to Chairperson of Governance and Risk Committeefor Lead Director | | | | 15,000 | | Additional Annual Retainer to Lead Director(1)
| | | | 35,000 | | Additional Annual Retainer tofor Audit Committee, and Compensation Committee Membersand Governance and Risk Committee Members(1) | | | | 6,000 | | Additional Annual Retainer for Governance and Risk Committee Members
| | | | 3,000 | | Fee for each Board Meeting Attended (plus expenses related to attendance) | | | | 2,000 | | Fee for each Board Committee Meeting Attended (plus expenses related to attendance) | | | | 2,000 | | Additional Fee for Non-Employee Director Residing Outside North America to Attend Each
In-Person Board Meeting in the U.S.
| | | | 4,000 | |
(1) | Effective July 1, 2013,2014, the Annual RetainerRetainers for the Lead Director wasChairperson and the Members of the Governance and Risk Committee were increased from $15,000 to $25,000 and $3,000 to $35,000$6,000, respectively, to reflect the enhanced duties of the committee assumed in November 2013. |
In November 2014, the Compensation Committee approved changes designed to streamline and simplify the non-employee director cash compensation program. Effective January 1, 2015, the Compensation Committee increased the annual Board retainer to $110,000 and eliminated (i) the annual retainer for committee members and (ii) the $2,000 fee for attending each Board and/or committee meeting. The Compensation Committee believes the revised program provides an equivalent level of compensation for serving as a director and committee member as compared to the previous structure and continues to properly compensate the additional responsibilities of the Lead Director and committee chairperson roles. The following is a schedule of annual retainers for non-employee directors effective January 1, 2015: | | | | | | 2015 Cash Compensation | | Amount($) | Annual Board Retainer | | | | 110,000 | | Additional Annual Retainer for Chairperson of Audit Committee, Compensation Committee and Governance and Risk Committee | | | | 25,000 | | Additional Annual Retainer for Lead Director role discussed on page 14. | | | | 35,000 | |
The annual retainers are payable on a quarterly basis. Additionally, to compensate a director in a year when there is an unusually high level of service required, a per meeting fee of $2,000 will be paid | | | | | | | | 23 | |
Corporate Governance for each meeting attended in excess of 20 meetings in a calendar year (combined Board and committee meetings). Non-employee directors may elect to receive their retainer and meeting fees in cash, common stock, or, deferredif eligible, defer cash undercompensation into the Anadarko Deferred Compensation Plan described below,(described below), or any combination thereof. The amount of stock issued to non-employee directors for payment in lieu of their cash fees is determined at the end of the quarter for which compensation is earned, and is calculated by dividing the closing stock price of the Company’s common stock on the date of grant into the applicable fee for that period. This election option provides non-employee directors a method to invest in the Company as a stockholder and further align their interests with the interests of the Company’s stockholders. Deferred Compensation Plan for Non-employee Directors. Non-employee directors who are eligible toresident in the U.S. may participate in the Company’s Deferred Compensation Plan. The Deferred Compensation Plan allows non-employee directors to defer receipt of up to 100% of their retainers and meeting fees, and to allocate the deferred amounts among a group of notional accounts that mirror the gains and/or losses of various investment funds, including common stock of the Company. The interest rate earned on the deferred amounts is not above-market or preferential. In general, deferred amounts are distributed to the participant upon leaving the Board or at a specific date as elected by the participant. Messrs.Mr. Fluor and Geren and Ms. Reynoldsis the only director who elected to defer compensation during 2013.2014. | | | 22
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Stock Plan for Non-employee Directors. Stock-based awards made to non-employee directors are made pursuant to the Anadarko Petroleum Corporation 2008 Director Compensation Plan. In addition to the retainer and meeting fee compensation, non-employee directors receive annual equity grants. Equity grants to non-employee directors are automatically awarded each year on the date of the Company’s annual meeting of stockholders. For 2013,2014, each non-employee director elected at the 2014 Annual Meeting of Stockholders received an annual equity grant with a value targeted at approximately $250,000. For U.S.$250,000 and Canadian-resident non-employee directors, 100% of the value was delivered in deferred shares. Messrs. Chase, Gorder and McKinley each received a prorated equity grant when they were elected to the Board in February 2014, July 2014 and February 2015, respectively. Non-employee directors may elect to receive thesethe shares on a specific date, but not earlier than one year from the date of grant, or when they leave the Board. For non-employee directors residing in the United Kingdom, 100% of the value was delivered in restricted shares, which vest on the fifth anniversary of the date of grant. Stock Ownership Guidelines for Non-employee Directors. Non-employee directors are required to hold stock with a value equivalent to seven times the annual Board retainer and have threefive years from the date of their initial election to the Board to comply with the guidelines. Effective with the increase of the annual Board retainer on January 1, 2015, the required stock ownership value increased from $490,000 (7 X $70,000) to $770,000 (7 X $110,000). All non-employee directors exceeded their ownership guidelines at December 31, 2014, other than Mr. Chase,directors who joined the Board in 2014 currently exceedand 2015 and are still within the Company’s stock ownership guidelines.five-year compliance period. Other Compensation. Non-employee directors are covered under the Company’s Accidental Death & Dismemberment Plan and the Company pays the annual premium for such coverage on behalf of each non-employee director. The Company also provides each non-employee director with Personal Excess Liability coverage and pays the annual premium on their behalf. The Company maintains an Aid to Education Program under which certain gifts by employees, officers, non-employee directors and retired employees to qualified institutions of learning are matched on a two-to-one basis. The maximum contribution matched per donor, per calendar year is $2,500, resulting in a maximum Company yearly match of $5,000. | | | | | | | 24 | 23
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Corporate Governance DIRECTOR COMPENSATION TABLE FOR 20132014 The following table sets forth information concerning total non-employee director compensation earned during the 20132014 fiscal year by each incumbent director who served on the Board in 2013,2014, other than Mr. Walker, who does not receive any compensation for his service as a director: | Name | | Fees Earned or Paid in Cash($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Non- qualified Deferred Compensation Earnings($) | | All Other Compensation ($)(3) | | Total($) | | Fees Earned or Paid in Cash($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Non- qualified Deferred Compensation Earnings($) | | All Other Compensation ($)(3) | | Total($) | Anthony R. Chase | | | 85,923 | | | 312,574 | | | 0 | | | 0 | | | 0 | | | 4,122 | | | 402,619 | | Kevin P. Chilton | | 116,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 371,004 | | | 114,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 368,419 | | Luke R. Corbett(4) | | 97,000 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 351,446 | | | 12,578 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2,716 | | | 15,294 | | H. Paulett Eberhart | | 139,640 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 394,086 | | | 124,500 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 378,919 | | Peter J. Fluor(5) | | 141,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 396,004 | | | 131,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 385,419 | | Richard L. George(6) | | 116,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 371,004 | | | Preston M. Geren III(4)(5) | | 128,903 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 383,349 | | | Richard L. George | | | 102,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 356,419 | | Preston M. Geren III(4) | | | 42,828 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3,165 | | | 45,993 | | Charles W. Goodyear | | 126,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 381,004 | | | 114,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 368,419 | | Joseph W. Gorder | | | 40,490 | | | 208,410 | | | 0 | | | 0 | | | 0 | | | 3,290 | | | 252,190 | | John R. Gordon | | 146,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 401,004 | | | 141,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 395,419 | | Eric D. Mullins | | 122,245 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 376,691 | | | 141,000 | | | 250,082 | | | 0 | | | 0 | | | 0 | | | 4,337 | | | 395,419 | | Paula R. Reynolds(4)(5) | | 116,558 | | | 250,065 | | | 0 | | | 0 | | | 0 | | | 4,381 | | | 371,004 | | | Paula R. Reynolds(4) | | | 51,930 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3,165 | | | 55,095 | |
(1) | For all non-employee directors, exceptExcept for Mr. Goodyear,Messrs. Chase and Gorder, the amounts included in this column represent the aggregate grant date fair value of 2,8172,479 deferred shares granted to each non-employee director elected by stockholders on May 14, 2013,13, 2014, computed in accordance with FASB ASC Topic 718. Messrs. Corbett and Geren and Ms. Reynolds were not granted deferred shares due to their retirement from the Board. For Mr. Goodyear,Chase, the amount includes 2,817 restricted765 deferred shares granted upon his appointment to the Board on February 12, 2014, and 2,479 deferred shares granted on May 14, 2013, computed in accordance with FASB ASC Topic 718.13, 2014. For Mr. Gorder, the amount includes 1,936 deferred shares granted upon his appointment to the Board on July 28, 2014. The value ultimately realized by each director may or may not be equal to this determined value. For a discussion of valuation assumptions, see Note 15 –— Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2013.2014. As of December 31, 2013,2014, each of the non-employee directors had aggregate outstanding deferred shares as follows: Mr. Chase — 3,244; Gen. Chilton — 10,030;12,509; Mr. Corbett — 21,707;0; Ms. Eberhart — 25,707;28,186; Mr. Fluor — 23,378;25,857; Mr. George — 6,584;9,063; Mr. Geren — 15,157;5,769; Mr. Goodyear — 729;3,208; Mr. Gorder —1,936; Mr. Gordon — 38,483;40,962; Mr. Mullins — 2,817;2,479; and Ms. Reynolds — 21,429.0. Mr. Goodyear also had 6,584 restricted shares outstanding as of December 31, 2013.2014. |
(2) | The non-employee directors did not receive any stock option awards in 2013;2014; however, as of December 31, 2013,2014, each of the non-employee directors had aggregate outstanding vested and exercisable stock options as follows: Mr. Chase — 0; Gen. Chilton — 0; Mr. Corbett — 27,100;0; Ms. Eberhart — 0; Mr. Fluor — 5,650; Mr. George — 0; Mr. Geren — 8,900;1,400; Mr. Goodyear — 0; Mr. Gorder — 0; Mr. Gordon — 32,100;24,600; Mr. Mullins — 0; and Ms. Reynolds — 5,650. There were no unvested options as of December 31, 2013.2014. |
(3) | TheFor all non-employee directors, except for Messrs. Chase, Corbett, Geren, Gorder and Ms. Reynolds, the amounts in this column include annual premiums paid by the Company for each director’s benefit in the amount of $124$162 and $1,757$1,675 for Accidental Death & Dismemberment (AD&D) coverage and Personal Excess Liability (PEL) coverage, respectively. TheFor Mr. Chase, the amount includes $144 for AD&D coverage and $1,478 for PEL coverage. For Mr. Corbett, the amount includes $19 for AD&D coverage and $197 for PEL coverage. For Mr. Geren and Ms. Reynolds, the amount includes $59 for AD&D coverage and $606 for PEL |
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Corporate Governance | coverage. For Mr. Gorder, the amount includes $70 for AD&D coverage and $720 for PEL coverage. For all non-employee directors the amounts also include a $2,500 charitable donation made on their behalf to a charity of their choice. |
(4) | Mr. Corbett retired from the Company’s Board effective February 11, 2014. Mr. Geren and Ms. Reynolds retired from the Board effective May 13, 2014. Mr. Goodyear will retire from the Board effective as of the close of the Annual Meeting. |
(5) | Messrs.Mr. Fluor and Geren each deferred all of their retainer and meeting fees into the Company’s Deferred Compensation Plan. Ms. Reynolds deferred forty percent of herhis retainer and meeting fees into the Company’s Deferred Compensation Plan. |
(6) | Mr. George elected to receive all of his fees in common stock. |
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Security Ownership of Certain Beneficial Owners and Management The information provided below summarizes the beneficial ownership of our NEOs, each of our directors and director nominees, all of our directors, director nominees and executive officers as a group, and owners of more than five percent of our outstanding common stock. “BeneficialGenerally, “beneficial ownership” generally includes those shares of common stock held by someone who has investment and/or voting authority of such shares or has the right to acquire such common stock within 60 days. The ownership includes common stock that is held directly and also stock held indirectly through a relationship, a position as a trustee, or under a contract or understanding. DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS The following table sets forth the number and percentage of Anadarko common stock beneficially owned by our NEOs, each of our directors and director nominees, and all of our executive officers, directors and director nominees as a group as of March 3, 2014:2, 2015. None of the common stock beneficially owned as set forth below is pledged as security. | | | Amount and Nature of Beneficial Ownership | | Amount and Nature of Beneficial Ownership | Name of Beneficial Owner | | Number of Shares of Common Stock Beneficially Owned(1)(2) | | Stock Acquirable Within 60 Days | | Total Beneficial Ownership(3)(4) | | Percent of Class | | Number of Shares of Common Stock Beneficially Owned(1)(2) | | Stock Acquirable Within 60 Days | | Total Beneficial Ownership(3)(4) | | Percent of Class | R. A. Walker(5) | | | 194,639 | | | | 535,078 | | | | 729,717 | | | | * | | | | 219,786 | | | | 442,499 | | | | 662,285 | | | | * | | Robert G. Gwin | | | 61,257 | | | | 345,202 | | | | 406,459 | | | | * | | | | 70,567 | | | | 358,494 | | | | 429,061 | | | | * | | Charles A. Meloy | | | 107,802 | | | | 198,594 | | | | 306,396 | | | | * | | | | 106,250 | | | | 196,233 | | | | 302,483 | | | | * | | Robert P. Daniels(6) | | | 86,976 | | | | 215,824 | | | | 302,800 | | | | * | | | | 86,593 | | | | 261,633 | | | | 348,226 | | | | * | | Robert K. Reeves(7) | | | 156,456 | | | | 288,378 | | | | 444,834 | | | | * | | | | 166,257 | | | | 282,324 | | | | 448,581 | | | | * | | Anthony R. Chase | | | 765 | | | | 0 | | | | 765 | | | | * | | | | 5,071 | | | | 0 | | | | 5,071 | | | | * | | Kevin P. Chilton | | | 10,030 | | | | 0 | | | | 10,030 | | | | * | | | | 12,509 | | | | 0 | | | | 12,509 | | | | * | | H. Paulett Eberhart | | | 25,707 | | | | 0 | | | | 25,707 | | | | * | | | | 28,186 | | | | 0 | | | | 28,186 | | | | * | | Peter J. Fluor | | | 32,089 | | | | 5,650 | | | | 37,739 | | | | * | | | | 36,063 | | | | 5,650 | | | | 41,712 | | | | * | | Richard L. George | | | 17,339 | | | | 0 | | | | 17,339 | | | | * | | | | 19,818 | | | | 0 | | | | 19,818 | | | | * | | Preston M. Geren III | | | 25,158 | | | | 8,900 | | | | 34,058 | | | | * | | | Charles W. Goodyear | | | 17,313 | | | | 0 | | | | 17,313 | | | | * | | | | 19,792 | | | | 0 | | | | 19,792 | | | | * | | Joseph W. Gorder | | | | 1,936 | | | | 0 | | | | 1,936 | | | | * | | John R. Gordon | | | 164,543 | | | | 32,100 | | | | 196,643 | | | | * | | | | 154,522 | | | | 24,600 | | | | 179,122 | | | | * | | Mark C. McKinley | | | | 1,179 | | | | 0 | | | | 1,179 | | | | * | | Eric D. Mullins | | | 6,584 | | | | 0 | | | | 6,584 | | | | * | | | | 9,063 | | | | 0 | | | | 9,063 | | | | * | | Paula R. Reynolds | | | 30,333 | | | | 5,650 | | | | 35,983 | | | | * | | | All directors, director nominees and executive officers as a group (17 persons) | | | 1,001,196 | | | | 1,750,581 | | | | 2,751,777 | | | | * | | | | 1,011,949 | | | | 1,721,806 | | | | 2,733,754 | | | | * | |
(1) | This column does not include shares of common stock that the directors or executive officers of the Company have the right to acquire within 60 days of March 3, 2014.2, 2015. This column does include shares of common stock held in the Company’s Benefits Trust as a result of the director compensation and deferral elections made in accordance with our benefit plans described elsewhere in this proxy statement. Those shares are subject to shared voting power with the trustee under that Trust and receive dividend equivalents on such shares, but the individuals do not have the power to dispose of, or direct the disposition of, such shares until such shares are distributed to them. In addition, some shares of common stock reflected in this column for certain individuals are subject to restrictions. |
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Security Ownership of Certain Beneficial Owners and Management (2) | This column does not include the following number of restricted stock units, which do not have voting rights but do receive dividend equivalents and are payable (after taxes are withheld) in the form of Company common stock: Mr. Walker 86,706;— 73,341; Mr. Gwin 30,308;— 26,221; Mr. Meloy 31,068;— 26,842; Mr. Daniels 31,068— 26,842 and Mr. Reeves 27,695.— 20,525. The restricted stock units do not have voting rights but do receive dividend equivalents which are reinvested in Company stock and paid upon vesting of the underlying award. |
(3) | In addition to the Anadarko common stock reported in the table, as of December 1, 2013,2014, the directors and executive officers beneficially owned common units of Western Gas Partners, LP (WES) as follows: Mr. Walker — 6,900; Mr. Gwin — 10,000; Mr. Meloy — 3,000; Mr. Daniels — 5,150; Mr. Reeves — 9,000; Mr. Chase — 7,400; Ms. Eberhart — 1,000; and Ms. Reynolds, 19,758.Mr. McKinley — 9,000. The Company owns a majority interest in WES indirectly through its wholly-owned subsidiaries. As of December 31, 2013,2014, there were 117,322,812127,695,130 common units of WES outstanding. The directors and executive officers, individually and as a group, beneficially own less than one percent of WES’s outstanding common units. |
(4) | In addition to the Anadarko common stock reported in the table, as of December 1, 2013,2014, the directors and executive officers beneficially owned common units of Western Gas Equity Partners, LP (WGP) as follows: Mr. Walker 6,000;— 5,000; Mr. Gwin — 200,000; Mr. Meloy — 5,000; Mr. Daniels — 20,000; Mr. Reeves — 9,000; Mr. Chilton — 900; Mr. Fluor 144,801;— 61,118; and Mr. George 5,000; Mr. Geren, 2,000; Mr. Gordon, 10,000; and Ms. Reynolds, 9,000.— 5,000. As of December 31, 2013,2014, there were 218,895,515218,909,977 common units of WGP outstanding. The directors and executive officers, individually and as a group, beneficially own less than one percent of WGP’s outstanding common units. |
(5) | Includes 108,000 shareshares of common stock held by a limited liability company (LLC) ofover which Mr. Walker exercisesand his spouse exercise investment control. The membership interests in the LLC are held by Mr. Walker, his wifespouse and family trusts of which he is the trustee. |
(6) | Includes 63,766 shares of common stock held by a family limited partnership (FLP) ofover which Mr. Daniels exercises investment control. The limited partner interests in the FLP are held by Mr. Daniels and family trusts. |
(7) | Includes 95,000 shares of common stock held by aan FLP. Two LLCs serve as the general partners of the FLP. Mr. Reeves serves as the sole manager of one of the LLCs and his wifespouse serves as the sole manager of the other. The limited partner interests in the FLP are held by family trusts of which Mr. Reeves is the trustee. Mr. Reeves disclaims beneficial ownership of these shares. |
CERTAIN BENEFICIAL OWNERS The following table shows the beneficial owners of more than five percent of the Company’s common stock as of December 31, 2013,2014, based on information available as of February 14, 2014:17, 2015: | Title of Class | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class | Common Stock | | BlackRock Inc. 40 East 52nd Street New York, NY 10022 | | | | 40,059,983(1) | | | | | 8.00% | | | BlackRock, Inc. 55 East 52nd Street New York, NY 10022 | | | | 43,286,886 | (1) | | | | 8.50% | | Common Stock | | The Vanguard Group 100 Vanguard Blvd. Malvem, PA 19355 | | | | 25,647,988(2) | | | | | 5.09% | | | The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | | | 28,587,442 | (2) | | | | 5.64% | | Common Stock | | | State Street Corporation State Street Financial Center One Lincoln Street Boston, MA 02111 | | | | 25,693,952 | (3) | | | | 5.10% | |
(1) | Based upon its Schedule 13G/A filed February 10, 2014,January 22, 2015, with the SEC with respect to Company securities held as of December 31, 2013,2014, BlackRock, Inc. has sole voting power as to 34,708,17438,500,134 shares of common stock and sole dispositive power as to 40,059,98343,286,886 shares of common stock. |
(2) | Based upon its Schedule 13G13G/A filed February 11, 2014,2015, with the SEC with respect to Company securities held as of December 31, 2013,2014, The Vanguard Group has sole voting power as to 818,175868,893 shares of common stock, sole dispositive power as to 24,882,54927,780,791 shares of common stock and shared dispositive power as to 765,439806,651 shares of common stock. |
(3) | Based upon its Schedule 13G filed February 11, 2015, with the SEC with respect to Company securities held as of December 31, 2014, State Street Corporation has shared voting power and shared dispositive power as to 25,693,952 shares of common stock. |
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Section 16(A) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC and any exchange or other system on which such securities are traded or quoted, initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities. Officers, directors and more than 10% stockholders are required by the SEC’s regulations to furnish the Company and any exchange or other system on which such securities are traded or quoted with copies of all Section 16(a) forms they filed with the SEC. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that all reporting obligations of the Company’s officers, directors and more than 10% stockholders under Section 16(a) were satisfied during the year ended December 31, 2013,2014, except that James J. Kleckner, Executive Vice President, International and Deepwater OperationsAnthony R. Chase, a member of the Company,Board, inadvertently omitted 8,436127 shares of the Company’s common stock from an otherwise timely filed Form 3. An amended Form 3 was filed on February 13,September 2, 2014. | | | | | | | | 2729
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Audit Committee Report The following report of the Audit Committee of the Company, dated February 25, 2014,19, 2015, shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. The Audit Committee of the Board is responsible for independent, objective oversight of the Company’s accounting functions and internal controlscontrol over financial reporting. The Audit Committee is composed of four directors, each of whom is independent as defined by the NYSE listing standards. The Audit Committee operates under a written charter approved by the Board of Directors, which is available on the Company’s web sitewebsite at http://www.anadarko.com/About/Pages/Governance.aspx.content/documents/apc/Responsibility/Governance_ Documents/2013-11-07_Audit_Committee_Charter.pdf. Management is responsible for the Company’s internal controlscontrol over financial reporting. The independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards in the United States of America and issuing a report thereon. The independent auditor is also responsible for performing an independent auditsaudit of the Company’s internal controlscontrol over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. KPMG LLP served as the Company’s independent auditor during 20132014 and was appointed by the Audit Committee to serve in that capacity for 20142015 (and we are seeking ratification by the Company’s stockholders at this Annual Meeting of such appointment). KPMG LLP has served as the Company’s independent auditor since its initial public offering in 1986. In connection with these responsibilities, the Audit Committee met with management and the independent auditor to review and discuss the December 31, 20132014 audited consolidated financial statements and matters related to Section 404management’s assessment of the Sarbanes-Oxley Acteffectiveness of 2002.the Company’s internal control over financial reporting as of December 31, 2014. The Audit Committee also discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as superseded by Auditing Standard No. 16.standards of the Public Company Accounting Oversight Board (PCAOB). The Audit Committee also received the written disclosures and the letter from the independent auditor required by Public Company Accounting Oversight Board Rule 3526 regardingthe PCAOB regulating the independent auditor’s communications with the Audit Committeeaudit committee concerning independence and the Audit Committeehas discussed with the independent auditor that firm’s independence. Based upon the Audit Committee’s review and discussions with management and the independent auditor referred to above, the Audit Committee recommended thatto the Board of Directors includethat the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20132014 filed with the SEC. THE AUDIT COMMITTEE Eric D. Mullins, Chairperson Kevin P. Chilton Charles W. Goodyear Paula R. ReynoldsMark C. McKinley
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Compensation and Benefits Committee Report on 20132014 Executive Compensation
The Compensation Committee, the members of which are listed below, is responsible for establishing and administering the executive compensation programs of the Company. The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. THE COMPENSATION AND BENEFITS COMMITTEE Peter J. Fluor, Chairperson Richard L. GeorgeJoseph W. Gorder
John R. Gordon | | | | | | | | 2931
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Compensation Discussion and Analysis This Compensation Discussion and Analysis focuses on the following:2014 Pay-for-Performance Highlights:
| • | | executive summary;Exceptional 2014 operational performance recognized in top-quartile annual relative total stockholder return(TSR) |
| • | | our pay-for-performance philosophy and practices;Three-year relative TSR performance impacted by Tronox Adversary Proceeding |
| • | | how we makeContinued robust stockholder engagement, including direct engagement by the Chairperson of our Compensation Committee, resulted in compensation decisions;program changes designed to further strengthen the link between pay and performance |
| • | | elements of ourAnnual target total compensation program; andopportunity for NEOs held flat |
| • | | analysis of 2013 compensation actions.(CEO held flat since appointment in 2012) |
EXECUTIVE SUMMARY The Compensation Committee believes that Anadarko achieved exceptional operational and financial performance in 2013, as it has done over the last several years. This performance has not, however, been reflected in our stock performance, which we believe is largely as a result of uncertainty related to the Tronox Adversary Proceeding (described below). Our delivery of executive compensation for 2013 reflects these factors — while payouts under the Annual Incentive Plan were above target, reflecting strong annual performance, the value of long-term equity awards (representing more than 75% of target total compensation) decreased as a result of lower stock price performance.
Operational and Financial Performance.Anadarko is among the world’s largest independent exploration and production companies, with approximately 2.82.86 billion barrels of oil equivalent (BOE) of proved reserves at December 31, 2013.2014. Our asset portfolio is aimed at delivering long-termsustainable value to stockholders by combining a large inventory of development opportunities in the U.S. onshore with high-potential worldwide offshore exploration and development activities.
Our executive compensation program is closely benchmarked to our industry peer group with best practice design and continuous review and improvement. The main objectives of our executive compensation program are to pay for performance while aligning executives’ interests with stockholder interests and to attract, motivate and retain executive talent. In pursuing this philosophy, we connect pay and performance by structuring more than 85% of our executive officers’ target total compensation opportunity in at-risk cash and equity-based compensation components tied to the achievement of short- and long-term performance criteria that are aligned with our strategic business objectives. Exceptional Operational Performance in 2014. Anadarko again achieved exceptional operational performance in 2014. The Company’s 20132014 performance continued the trend over the last several years of delivering consistent high-quality additions of proved reserves, increasing year-over-year margins, increasing year-over-year sales volumes by nearly 40,000 BOE per day above initial guidance, and allocating capital efficiently, all while maintaining a strong safety record. Achieving these key business objectives is fundamental to delivering superior returns for our stakeholdersstockholders over time. Specific achievements included: | • | | Continued Volumes GrowthGrowth.. The Company achieved recordCompany’s full year sales volumes in 2013,averaged 843 thousand barrels of oil per day, representing a 7% year-over-yearan 8% increase of daily sales volumes.over 2013. |
| • | | Continued ReserveReserves Growth. The Company added over 500 million barrels of proved reserves, replacing 194%more than 160% of its production in 2013 before the effects of price revisions, at very competitive costs. Year-end proved reserves for 2014 were approximately 2.82.86 billion BOE, representing a 9% increase over 2012.BOE. |
| • | | Sustained Exploration SuccessStrategic Acceleration of Value. The Company continued its exploration success with an industry-leading deepwater exploration/appraisal success rate of approximately 67% in 2013, which provides resources and optionality for strategically managing the Company’s portfolio. |
| • | | Active Portfolio Management. The Company continued to demonstrate its focus on and commitment to active portfolio management, including a property exchange in the Wattenberg field and an acquisition of additional working interests in the Moxa area of Wyoming. The Company also announced approximately $4.5monetized more than $2.5 billion of asset monetization transactionsassets during the year through carried-interest arrangements, divestitures and exploration farm-outs, which accelerate value, reduce execution risk and enhance returns without leveraging theincreasing balance sheet.sheet leverage. |
| • | | Advancement of Mega-ProjectsMega-Projects.. The Company achieved significant progress on several large-scale projects, which was highlighted by the achievement of first production from all three facilitiesoil at the El Merk complexLucius spar located in Algeria, successfully sanctioned the TEN (Tweneboa, Enyenra, and Gulf of Mexico in early 2015. |
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Compensation Discussion and Analysis | Ntomme) complex offshore Ghana and the Heidelberg project in the deepwater Gulf of Mexico, and successfully installed the Lucius spar on location in the Gulf of Mexico.
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| • | | Exceptional Safety Performance. The Company’s safety performance in 2013 was the best in the Company’s history. This record performance demonstrates the Company’s safety-oriented culture and continuing commitment to safety across the organization. |
| • | | DoubledIncreased Quarterly DividendDividend.. In August 2013,May 2014, the Board increased the quarterly dividend paid to its common stockholders from 918 cents per share to 1827 cents per share. This marked the second significant increase in our quarterly dividend within a one-year timeframe. |
In addition to these achievements,Total Stockholder Return — One Year. As an exploration and production company, our revenues, operating results and future growth rates are highly dependent on the prices we receive for our oil, natural gas and natural gas liquids. Commodity prices declined significantly during 2013 Anadarko was once again recognized by various independent organizationsthe second half of 2014, which had a substantial impact on our absolute TSR for the Company’s leadership, innovationyear, as well as on the TSR for our peers. We believe that our continued volumes and environmental stewardshipreserves growth, deep portfolio, talented people, financial strength, operating capacity and demonstrated commitment to active portfolio management enabled us to differentiate ourselves from our peers and create value for our stockholders. Accordingly, we ended the year in its operating areas. For example, based on our ability to find, develop and produce onshore resources Wood Mackenzie identified Anadarko in a December 2013 study as the top company inquartile of our industry for creating value from U.S. onshore resources. Additionally, we receivedpeer group with positive TSR performance while most of our peers ended the 2013 Platts Global Energy Award for E&P Leadership, the Oil Council’s Large Cap Companyyear with negative TSR performance. We believe this outperformance is a result of the Year and the Colorado Oil & Gas Conservation Commission’s Technology Application/Community Relations/Local Government Coordination Award. Forexceptional operational performance achieved in 2014.
Copyright© 2014 S&P, a full listdivision of Anadarko’s awards and recognitions see http://www.anadarko.com/Responsibility/Pages/AwardsRecogniton.aspx.The McGraw-Hill Companies Inc. All rights reserved. Stock Price Performance.Total Stockholder Return — Three Years. Our relative total stockholder return (TSR)As discussed in our previous proxy statements, we believe that for the past few years the uncertainty associated with the Tronox Adversary Proceeding negatively impacted our TSR. As of December 31, 2012 and 2013, does not reflectour three-year TSR performance was below the Company’s exceptionalmedian of our peers despite our strong operational and financial performance. We believe this apparent disconnect is largely due toOn April 3, 2014, Anadarko announced the ongoing litigation relating to the Tronox Adversary Proceeding, including the issuance of a Memorandum of Opinion, After Trial in December 2013 by the U.S. Bankruptcy Court for the Southern District of New York in which the court found Kerr-McGee Corporation, a subsidiary acquired by the Company in 2006, liable for fraudulent transfer in connection with a 2002 internal corporate restructuring of Kerr-McGee and the 2005 initial public offering of Tronox Incorporated, a subsidiary of Kerr-McGee. For additional information regarding the nature and statussettlement of the Tronox Adversary Proceeding seeNote 17 — Contingencies—and our stock price immediately increased approximately 15%. Following the Tronox Litigation inannouncement, our 2014 year-to-date TSR rose to the Notes to Consolidated Financial Statements under Item 8top quartile of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. While the Company’s TSR performance relative to our peers rankedpeer group and remained in the top quartile through the end of 2014. While we believe our three-year TSR for the three-year periods ending in 2011 and 2010, we believeperiod ended December 31, 2014 continues to reflect the uncertainty related toassociated with the Tronox Adversary Proceeding has adversely affectedduring 2012 and 2013, we also firmly believe that our top quartile TSR standing for 2014 better reflects the inherent value contained within our deep portfolio, our financial strength and our consistently strong operational performance.
Copyright© 2014 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. | | | | | | | | 33 | |
Compensation Discussion and Analysis The charts above illustrate the cumulative total return to our stockholders for the one and three-year periods ended December 31, 2014 relative to the cumulative total return of our industry peer group (listed on page 38) and the S&P 500 Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in the Company’s common stock, price performance for both of the three-year periods ending in 2012 and 2013. For 2010-2012, TSR performance relative to our peers was in the third quartileS&P 500 Index and for 2011-2013 performance was in the fourth quartile.industry peer group at the beginning of each period reflected in the graphs above. The information contained in the graphs above is furnished and not filed, and is not incorporated by reference into any document that incorporates this proxy statement by reference. Impact of 2013 Company PerformancePay For Performance. As demonstrated in the charts on Executive Compensation
We have structured our cash and equity-based compensation program to position more than 85%page 40, the vast majority of our executive officers’ target total compensation opportunity is delivered in at-risk compensation components tied to the achievement of short- and long-term performance criteria aligned with our business objectives. Long-term incentives combineobjectives:
Awards under our annual cash bonus program are based on key operating, financial and safety performance units,metrics that drive our business and stockholder value. Our long-term incentive compensation is comprised of 50% performance unit awards that reward relative stockholder value and 25% stock options andto reward absolute value creation (for a total of 75% long-term equity awards that are performance-based). The remaining 25% is granted in restricted stock units, the value of which is tied to provideour share price and which we believe are necessary to retain executive talent in our highly competitive industry. The Compensation Committee (Committee) believes that the compensation programs in place during 2014 operated as intended and the incentive compensation received by our NEOs appropriately reflected the Company’s performance results. As shown below, our financial discipline and strong operational and safety performance in 2014 resulted in an above-target payout under our annual cash bonus program while the Company’s two- and three-year stock price performance, which we believe was influenced in large part by the Tronox Adversary Proceeding, resulted in a compensation opportunitypayout below target for previously granted performance unit awards subject to performance periods ended December 31, 2014. | | | 34 | | |
Compensation Discussion and Analysis The performance unit payouts demonstrate that our program is designed to pay out at levels aligned with actual performance and that the value actually earned by the executive officers under our executive compensation program can differ substantially from the grant date values required to be reported in the Summary Compensation Table and other proxy tables. Active Stockholder Engagement. For several years we have routinely engaged with our stockholders to solicit feedback on Anadarko’s executive compensation program, as well as corporate governance, sustainability and environmental issues and other matters. During the last year, we have solicited feedback from stockholders representing approximately half of the Company’s long-term stock performance, delivered through awardsoutstanding common stock. The Board and its Committees regularly discuss and consider the significant comments or concerns that are performance-basedidentified through this feedback process. Our stockholders’ views on corporate governance and executive compensation are important to us, and we value and utilize the feedback and insights that we have received, and continue to receive, from our stockholders. At the 2014 Annual Meeting of Stockholders, our executive compensation program received the support of approximately 62% of the votes cast. This result was below our previous support of more than 85% of votes cast even though the core objectives and design of our executive compensation program remained materially consistent. Following the 2014 Annual Meeting of Stockholders, the Committee carefully considered specific feedback expressed by stockholders during our outreach efforts and sought an appropriate balance in absoluteour executive compensation program to best serve the interests of our stockholders while continuing to attract, motivate and relative terms, whileretain the talent necessary to achieve the Company’s strategy. In November 2014, the Committee approved changes to the executive compensation program in response to stockholder feedback and taking into account standards in our industry and peer group and the appropriate decisions for our business. We then continued to actively engage with our stockholders to discuss the changes and solicit further feedback. The Chairperson of the Committee also encouraging retention.led in-person or telephonic meetings with several stockholders, including five of our top ten largest stockholders, which represented diverse perspectives on the Company’s executive compensation program. Additionally, the Chairperson led engagement efforts with the major proxy advisory firms on the drivers of our business and how our executive officers’ performance is measured against these drivers. | | | | | | | | 3135
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Compensation Discussion and Analysis The Company’s excellent operationalWhile stockholders expressed a variety of views about our executive compensation program, the Committee believes the following actions taken in 2014 are aligned with the most significant and financial performance was reflectedcommon feedback we received and are in above target payouts under the AIP:
The Company’s lagging stock price performance in 2013, however, resulted in below target payouts forbest interest of the performance units payable for the performance periods 2011-2013Company and 2012-2013.
its stockholders: | | | | | Common Feedback | | | | Our Response | The majority of annual long-term incentive awards should be performance-based. | | 32
| | We increased the percentage of performance unit awards to our executive officers to 50% (from 40% last year and 25% two years ago) so that our annual long-term equity awards are 75% performance-based (including stock options). | Performance periods for long-term incentive awards should be at least three years. | | | | We eliminated our two-year performance unit program so that going forward all performance unit awards will be subject to a three-year performance period. | The performance payout for a median relative TSR ranking should not exceed target. | | | | We reduced the performance unit award payout opportunity for a relative TSR ranking at the 55th percentile to 100% from 110%. | | | | | We also reduced the payout opportunities for all TSR performance levels in the third quartile by 12% – 14%. |
2014 NEO Target Compensation DiscussionHeld Flat. As part of its annual review of executive compensation, in November 2014 the Committee determined that the target total compensation opportunity for the NEOs should remain flat year-over-year as compared to 2013 and Analysis Furthermore, the lagging 2013 stock price performance has negatively impactedthat no changes should be made to the current base salaries, target bonus opportunities, and target grant value of executiveannual long-term incentive awards. The following chart illustratesCommittee believes that as of December 31, 2013, the intrinsic value of the CEO’s 2013 long-term incentive awards (as defined below) is 75% less than the original grant date values and a revised year-end fair market valuation of the awards is 30% less than the original grant date values:
| 2013 CEO Long-Term Incentive Awards(1)
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| | | | | | | | | | | | | | | | | Award Type | | Grant Date | | | Grant Date Fair Market Values($)(2) | | | 12/31/2013 Intrinsic Values($)(3) | | | 12/31/2013 Fair Market Values($)(4) | | Stock Options | | | 11/6/2013 | | | | 3,848,495 | | | | 0 | | | | 3,019,648 | | Restricted Stock Units | | | 11/6/2013 | | | | 2,755,539 | | | | 2,375,237 | | | | 2,375,237 | | Performance Units(1) | | | 11/5/2012 | | | | 2,775,473 | | | | 0 | | | | 1,183,364 | | Total | | | | 9,379,507 | | | | 2,375,237 | | | | 6,578,249 | | % Decrease from Grant Date Value | | | | -75% | | | | -30% | |
(1) | The above table reflects values for the equity incentive awards reported in the 2013 Summary Compensation Table, with the exception that the performance unit values reflect the performance units granted in November 2012. The 2012 performance units have a performance period that commenced January 1, 2013, whereas the performance units awarded in 2013 have a performance period commencing January 1, 2014. |
(2) | Grant date fair market values reflect the accounting grant date fair value of awards as reported in the applicable Summary Compensation Table. |
(3) | Intrinsic values reflect the value of the equity awards on December 31, 2013 based on the Company’s closing stock price of $79.32. The stock options, with an exercise price of $92.02, are currently underwater and based on our 2013 TSR performance the performance units are currently tracking a zero percent payout. |
(4) | The December 31, 2013 fair market values include: (i) a revised Black-Scholes valuation for the stock options assuming the year-end stock price of $79.32 and a shorter expected term; and (ii) a revised Monte Carlo valuation for the performance units which takes into account our 2013 TSR performance relative to our peers. These revised values arepay opportunity provided to reflect the fact that, while the stock options and performance units currently have an intrinsic value of $0, assuming sufficient absolute stock price improvement and improvement in relative TSR, there remains a payout opportunity under the awards. |
In addition to the Company’s performance, the Committee’s compensation decisions for 2013, summarized below, were influenced by the following:
current levels of fixed and at-risk compensation components properly reflects the Committee’s desirescope and responsibilities associated with each NEO’s position, is appropriately aligned with the industry peer group and serves to retain and motivate a highly experienced and cohesive executive team with a strong track record of working together to successfully manage the operations of a global company of our scope and complexity; and the leadership skills exhibited by the NEOs, which were reflected in the Company’s continued achievement of strong annual operating and financial results and management ofcomplexity, including key challenges including the uncertainty presented by the Tronox Adversary Proceeding,such as recent commodity price volatility and uncertain political and regulatory environments,environments.Mr. Walker’s base salary level, target bonus opportunity and severe flooding in Colorado and Texas. CEO Compensation. In connection with Mr. Walker’starget grant value of annual long-term incentive awards have remained the same since his appointment to CEO in May 2012, at which time the Committee positioned his targeted annualtarget total direct compensation opportunity at the median of the survey data, whichindustry peer then-CEOs. This represented a 22% decrease relative to Mr. Walker’s predecessor. As a result of leadership changes and related compensation actions at several industry peer companies since Mr. Walker’s appointment, his predecessor in 2011. In November 2013, based on a recommendation from Mr. Walker in light oftarget total compensation is now between the lack of clarity at the time with regard50th and 75th percentiles compared to the Tronox Adversary Proceeding,Peer Proxy Data (defined on page 39). This positioning is similarly aligned with the Committee determined not to adjust Mr. Walker’s targeted annualCompany’s market capitalization and total direct compensation opportunity for 2013.
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Compensation Discussion and Analysis
asset position against the industry peer group, as discussed beginning on page 38. As CEO, Mr. Walker’s compensation is higher than the compensation of the other NEOs. This difference in compensation is supported by the industry peer group benchmark data, which is substantially higher for the CEO role than for the other NEO positions, and is indicative of the greater responsibility the CEO position entails for the strategic direction, financial condition, operating results and reputation of the Company. | | | 36 | | |
Other NEO Compensation. In November 2013, the Committee approved salary increases for the other NEOs ranging from 4.9% to 16.7%. The base salary increase for Mr. Gwin represents his first increase since November 2010Compensation Discussion and the base salary increases for Messrs. Meloy, Daniels and Reeves represent their first increases since November 2011. No changes were made to the NEO bonus targets for 2014. The annual equity awards made to the other NEOs in November 2013 reflect approximately 12% increases over their prior year awards. These compensation actions were determined based on the Committee’s consideration of each NEO’s contribution, individually and collectively as an executive team, to the successful execution of the Company’s strategic goals for the year; the importance of retaining and motivating the executive team for the execution of the Company’s long-term strategy, particularly in light of the departure of a senior executive officer to a peer company during the year; Peer Proxy Data (as defined on page 37); and internal equity factors. These actions position the aggregate total target direct compensation of our NEOs at approximately the 75th percentile of the Peer Proxy Data, which is similarly aligned with the Company’s total assets and market capitalization positioning against the industry peer group as discussed on page 37.Analysis
A detailed description of our executive compensation program and the compensation decisions made by the Committee for 20132014 are reported on the pages that follow. Continued Engagement with StockholdersTrack Record of Good Governance Practices.
Our stockholders’ views on corporate Through our commitment to good governance, and executive compensation are important to us, and we value the feedback and insights that we receive fromincluding our stockholders through ongoing dialogue. Since our 2013 Annual Meeting,continued stockholder engagement efforts, we have continued to engage in periodic dialogue with stockholders and have solicited feedback from stockholders representing approximately 48% of the Company’s outstanding common stock.
At our 2013 Annual Meeting, more than 85% of our stockholders who voted on the proposal voted in support of our executive compensation program. We believe our stockholders’ strong support reaffirmed the design and structure of our compensation program. While the feedback we receive from our stockholders varies depending upon investment goals and strategies, our stockholders have consistently emphasized that executive compensation should be closely aligned with long-term performance results. Following discussions with stockholders, the Committee tookimplemented the following actions:
In February 2013practices over the Committee determined that for annual equity-based awards to be made to our executive officers in 2013, performance units would comprise no less than 35% of the total grant values and time-vested restricted stock units would comprise no more than 25% of such grant values.
In November 2013, when the annual equity-based grants were approved, the Committee determined that additional emphasis should be placed on relative TSR performance and further increased the amount of performance units to 40% of the total grant values.
past several years: | | | | | | | | | | | What We Do | | | | | | What We Don’t Do | 34
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Compensation Discussion and Analysis
OUR PAY-FOR-PERFORMANCE PHILOSOPHY AND PRACTICES
The main objective of our executive compensation program is to pay for performance while aligning executives’ interests with stockholder interests. Our compensation philosophy recognizes the value of rewarding our NEOs for their performance and motivating them to continue to excel in the future. We provide competitive pay levels to attract and retain the best talent and we structure pay to support our business objectives with appropriate rewards for short-term operating results and long-term stockholder value creation.
What We Do
| Require a Majority of Pay To Be At-Risk — MoreWe structure our executive officers’ compensation so that more than 85% of pay is at risk | | | | | | We do not have employment contracts with our executive officer’s target total compensation opportunity is at-risk, including our annual target bonuses and annual long-term incentive awards. A smaller portion is represented by base salary, or fixed, compensation.officers |
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| No Repricing — The 2008 and 2012 Omnibus Plans expressly prohibit | We consider deductibility when structuring compensation | | | | | | We do not allow repricing of stock options and stock appreciation rights unless approved by stockholders.stockholders |
| No Hedging or Pledging — We prohibit directors, officers and other employees from entering into equity derivative or other financial instruments that would have the effect of limiting downward market risk of owning the Company’s securities (including equity securities received as part of the Company’s compensation program). We also prohibit directors and executive officers from purchasing Company securities on margin and pledging such securities as security for loans (including holding Company securities in a margin account). |
HOW WE MAKE COMPENSATION DECISIONS The Committee has overall responsibility for approving and evaluating the director and officer compensation plans, policies and programs of the Company. The Committee is also responsible for producing a Compensation Committee report reviewing the Company’s Compensation Discussion and Analysis. The Committee uses several different tools and resources in reviewing elements of executive compensation and making compensation decisions. These decisions, however, are not purely formulaic and the Committee exercises judgment and discretion in making them. In making compensation decisions, the Committee may formas appropriate. | | | | | | | | 37 | |
Compensation Discussion and delegate authority to subcommittees and individual directors when the Committee determines that such action is appropriate.Analysis Compensation Consultant. The Committee has retained Frederic W. Cook & Co., Inc. (FWC)FWC as an independent consultant to provide advice on executive compensation matters. The decision to engage FWC was made by the Committee and FWC reports directly and exclusively to the Committee; however, at the Committee’s direction, the consultant works directly with management to review or prepare materials for the Committee’s consideration. While engaged as the Committee’s consultant, | | | 36
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Compensation Discussion and Analysis
FWC did not perform any services for the Company outside the scope of its arrangement with the Committee. During 2013,2014, the Committee reviewed FWC’s independence and determined that there were no conflicts of interest as a result of the Committee’s engagement of FWC. The Committee did not engage any consultant other than FWC during 20132014 to provide executive compensation consulting services. In 2013,2014, FWC attended all of the Committee meetings and provided the Committee with market analyses, including both survey and Peer Proxy Data (as defined below)(defined on page 39), and an annual independent assessment of the risk associated with the Company’s compensation programs. In addition, FWC advised the Committee on the following: market trends; regulatory and governance developments and how they may impact our executive compensation programs; the design and structure of our executive compensation programs to ensure linkage between pay and performance; setting the pay for our CEO; and compensation recommendations for the other executive officers, in consultation with the CEO. Benchmarking Peers. Within the oil and gas industry, there are a very limited number of companies that closely resemble us in size, scope and nature of business operations. Our industry peer group contains companies in our industry that vary in these respects because we compete with these companies for talent and believe the selected companies are currently the most appropriate with respect to executive compensation benchmarking. The differences and similarities between us and the companies in our industry peer group are taken into consideration when referencing benchmarks for executive compensation decisions. Each year, FWC conducts an independent review of the Company’s industry peer group for the Committee to use as a reference point for assessing competitive executive compensation data (including base salary, target annual incentives and annualized long-term incentive grant values). This review includes an evaluation of Anadarko’s peers as designated by proxy advisors, peers of direct peers, and companies included in Anadarko’s broad Global Industry Classification Standard Industry Group. In each case, FWC assesses whether there are companies that should be added to or deleted from Anadarko’s existing peer group based on relevant size, scope and the nature of their business operations. Unless significant and material changes have affected the companies in our peer group such that a company is no longer an appropriate peer, the Committee prefers to maintain a high degree of continuity of the peer group to ensure consistent comparison for both pay and performance from year to year. Following this year’s annual review, the Committee determined that with the exception of Plains Exploration & Production Company, which was acquired in May 2013, the other 1112 companies included in the Company’s industry peer group remain appropriate for comparison. The Committee also determined that Murphy Oil Company should replace Plains Exploration & Production Company since it meets the industry criteria and is the appropriate size, is a peer of the Company’s direct peers and is also designated as a peer of Anadarko by various proxy advisors. At the time of the 2013 review, the Company’s revenues were at the median and its total assets and market capitalization approximated the 75th percentile of the peer group. The Company’s industry peer group used for conducting the 20132014 executive compensation benchmarking assessment is listed below. | | | | | • Apache Corporation | | • Devon Energy Corporation | | • Murphy Oil Company | • Chesapeake Energy Corporation | | • EOG Resources, Inc. | | • Noble Energy, Inc. | • Chevron Corporation | | • Hess Corporation | | • Occidental Petroleum Corporation | • ConocoPhillips | | • Marathon Oil Corporation | | • Pioneer Natural Resources Company |
Within
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Compensation Discussion and Analysis At the oiltime of the Committee’s 2014 review, the Company’s market capitalization and gas industry, there are a very limited numbertotal assets were between the median and the 75th percentile of companies that closely resemble us in size, scope and nature of business operations. Our industrythe peer group, contains companies in our industry that vary in these respects because we compete with these companies for talent and believeas illustrated by the selected companies are currently the most appropriate with respect to executive compensation benchmarking. The differences and similarities between us and the companies in our industry peer group are taken into consideration when referencing benchmarks for executive compensation decisions.chart below: Benchmarking Data. To assist in reviewing the design and structure of our executive compensation program, FWC provides the Committee with an independent assessment of the compensation programs and practices of the companies in our industry peer group. This comprehensive analysis includes both third-party survey data and supplemental compensation data that is obtained from the latest peer proxy statements and updated, as applicable, with recent public filings for company-by-company detail on peer NEO positions (Peer Proxy Data). | | | | | | | | 37
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Compensation Discussion and Analysis
Historically, the primary focus of the Committee has been on as well as supplemental third-party survey data that provides aggregated data by functional position. data.
Due to organizational differences in executive leadership structures and business strategies across our peers, it has become increasinglyis difficult to benchmark comparable executive leadership positions for many of our NEOs. As a result, the Committee placed moreplaces emphasis on the Peer Proxy Data in making compensation decisions for 2013 because this data provides greater transparency and insight into the comparability of our NEOs and executive leadership structure relative to the NEOs and executive leadership structure of our peers. The Peer Proxy Data includes individual incumbent data for each company in our industry peer group and illustrates the differences in job scope, incumbent tenure and overall experience level of peer NEOs compared to our NEOs. In assessing the Peer Proxy Data, the Committee reviewed data summarized by functional positions, by order of pay (i.e., second highestsecond-highest paid, third highestthird-highest paid, etc.), and aggregated by the total direct compensation opportunity of the NEOs collectively as a management team at each peer company. Evaluating the total direct compensation opportunity for each peer company’s management team as a whole allows the Committee to consider how each peer company structures the compensation opportunity for their management team regardless of individual functional responsibilities. This approach recognizes the differences in executive leadership structures and business strategies across our peers. When reviewing benchmarking data, the Committee reviews 25th, 50th, and 75th percentile data; however, the Committee does not target a specific percentile of the benchmark data and in making officer compensation decisions takes into account other considerations as noted below. Role of CEO and/or Other Executive Officers in Determining Executive Compensation. The Committee, after reviewing the information provided by FWC and considering other factors and with input from FWC, determines each element of compensation for our CEO. When making determinations about each element of compensation for the other executive officers, the Committee also considers recommendations from our CEO. Additionally, at the Committee’s request, our executive officers may assess the design of, and make recommendations related to, our compensation | | | | | | | | 39 | |
Compensation Discussion and Analysis and benefit programs, including recommendations related to the performance measures used in our incentive programs. The Committee is under no obligation to implement these recommendations. Executive officers and others may also attend Committee meetings when invited to do so.so, but the executive officers do not attend when their individual compensation is being discussed. Other Important Considerations. In addition to the above resources, the Committee strongly considers other factors when making compensation decisions, such as individual experience, individual performance, internal pay equity, development and succession status, and other individual or organizational circumstances. With respect to equity-based awards, the Committee also considers the expense of such awards, the impact on dilution, and the relative value of each element comprising the executive officers’ target total target executive compensation.compensation opportunity. Tally Sheets. The Committee uses tally sheets in its annual executive compensation review to enhance the analytical data used by the Committee to evaluate our executive officer compensation and to provide the Committee with a consolidated source for viewing the aggregate value of all elements of executive compensation. The Committee does not assign a specific weighting to the tally sheets in their overall decision-making process, but uses them to gain additional perspective and as a reference in the decision-making process. | | | 38
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Compensation Discussion and Analysis
ELEMENTS OF OUR COMPENSATION PROGRAM Our executive compensation program includes direct and indirect compensation elements. We believe that a majority of an executive officer’s total compensation opportunity should be performance-based; however, we do not have a specified formula that dictates the overall weighting of each element. The Committee determines total compensation opportunity based on a review of competitive compensation data, including both survey and Peer Proxy Data, consistency with our compensation philosophy, and its judgment as a committee. In doing so, the Committee considers any specific circumstances related to the Company and/or the executive officer. As illustrated in the charts below, 79% of the current CEO and 75%, on average, of target total compensation opportunity for the other NEOs is provided through equity-based incentives that are dependent upon long-term corporate performance and stock-price appreciation. Any value ultimately realized for these long-term equity-based awards is directly tied to Anadarko’s absolute and relative stock-price performance.performance and will fluctuate along with stockholder returns. The charts above are based on the following: current base salaries, as discussed on page 41;42; target bonus opportunities approved by the Committee in 20132014 for 2014,2015, as discussed on page 42;43; and the estimated grant date value for the 20132014 annual equity awards, as discussed on page 48. | | | | | | | 40 | 39
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Compensation Discussion and Analysis Direct Compensation Elements The direct compensation elements are outlined in the table below. The indirect compensation elements are outlined in a table on page 49.51.
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| 41 | |
Compensation Discussion and Analysis ANALYSIS OF 20132014 COMPENSATION ACTIONS The following is a discussion of the specific actions taken by the Committee in 20132014 related to each of our direct compensation elements. Each element is reviewed annually, as well as at the time of a promotion, other change in responsibilities, other significant corporate events or a material change in market conditions. As discussed above, the Committee determined that the target total compensation opportunity for the NEOs should remain flat year-over-year and that no changes should be made to the current base salaries, target bonus opportunities, and target grant value of annual long-term incentive awards. Base Salary The table below reflects the base salaries for the NEOs that were approved by the Committee in 2013:2014: | | | | | | | | | | | | | | | | Name | | Salary as of January 1, 2013($) | | Salary as of November 10, 2013($) | | Increase% | Mr. Walker | | | | 1,300,000 | | | | | 1,300,000 | | | | | 0% | | Mr. Gwin | | | | 715,000 | | | | | 750,000 | | | | | 4.9% | | Mr. Meloy | | | | 600,000 | | | | | 700,000 | | | | | 16.7% | | Mr. Daniels | | | | 600,000 | | | | | 700,000 | | | | | 16.7% | | Mr. Reeves | | | | 650,000 | | | | | 700,000 | | | | | 7.7% | |
Mr. Walker’s base salary has not been increased since his appointment to CEO in May 2012. The base salary increase for Mr. Gwin represents his first increase since November 2010 and the base salary increases for Messrs. Meloy, Daniels and Reeves represent their first increases since November 2011. See page 34 for additional discussion regarding the Committee’s decision to increase certain of our NEO’s base compensation in 2013.
| | | | | | | | | | | | | | | | Name | | Salary as of January 1, 2014($) | | Salary as of November 9, 2014($) | | Increase | Mr. Walker | | | | 1,300,000 | | | | | 1,300,000 | | | | | 0% | | Mr. Gwin | | | | 750,000 | | | | | 750,000 | | | | | 0% | | Mr. Meloy | | | | 700,000 | | | | | 700,000 | | | | | 0% | | Mr. Daniels | | | | 700,000 | | | | | 700,000 | | | | | 0% | | Mr. Reeves | | | | 700,000 | | | | | 700,000 | | | | | 0% | |
Performance-Based Annual Cash Incentives (Bonuses) OurAll employees of the Company, including our executive officers, participate in the Annual Incentive Program (AIP), which is part of our 2012 Omnibus Incentive Compensation Plan (2012 Omnibus Plan) that was approved by our stockholders in May 2012. Our AIP is designed to focus our executive officers and employees on the key drivers of the Company’s continued success and reward our executivesthem for effectively managing the Company’s investment dollars in the safe and efficient growth of sales volumes, reserves and cash flows by focusing on the following performance criteria:
| | | • Reserve Additions | | • EBITDAX/BOE | • Sales Volumes | | • Total Recordable Incident Rate | • Capital Expenditures | | |
Capital expenditure and cash flow margin targets are incorporated in the incentive compensation program to incentivize financial discipline and cost management. We believe theseThese five metrics work together in order for the Company to achieve its long-term strategic performance objectives and provide the best, most direct means of aligning the actions of our executive officers and employees in the short term to position the company to deliver superior total stockholder returns over the long term. In February 2013,2014, the Committee established a baseline AIP performance hurdle for the NEOs of $3.1 billion of Cash Flow from Operating Activities (Net cash provided by (used in) operating activities) as calculated in the Consolidated Statements of Cash Flows, but excluding the effect of any significant (i.e., $100 million or greater) legal settlements/satisfaction of judgments (as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources of Cash — Operating Activities) for the fiscal year as published in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.2014. If this performance hurdle was not achieved, the NEOs subject to Section 162(m) of the IRC would earn no | | | 42 | | |
Compensation Discussion and Analysis AIP bonuses for the year under the 2012 Omnibus Plan. If the performance hurdle was met, the bonus | | | | | | | | 41
| |
Compensation Discussion and Analysis
pool would be funded at the maximum bonus opportunity level for each NEO. The Committee may apply negative discretion in determining actual awards, taking into consideration our actual performance against corporate annual performance goals, each individual officer’s performance and contributions, and other factors. The Committee does not have the discretion to increase bonuses above funded amounts. The AIP bonus pool was fully funded for the 20132014 performance year because the Company exceeded the established performance hurdle. If the initial performance hurdle is met, the Committee uses the following formula as a guideline for determining individual bonus payments: | | | | | | | | | | | | | | | | | | | | | | | | | | Individual base salary earnings
for the year
| | X | | Individual target bonus opportunity
(equal to a
% of base salary)
| | X | | AIP performance
score %
| | +/- | | Individual performance adjustments (if any) | | = | | Actual bonus earned |
Individual Target Bonus Opportunities. Individual target bonus opportunities are set as a percentage of base salary. Executive officers may earn from 0% to 200% of their individual bonus target. The bonus targets for the NEOs for 20132014 are shown in the table below. Following its annual review of executive compensation in November 2013,2014, the Committee made no changes to the NEO bonus targets for 2014.2015. | Name | | Minimum Payout as a % of Salary | | Target Payout as a % of Salary | | Maximum Payout as a % of Salary | | Target Payout as a % of Salary | | Minimum Payout as a % of Salary (i.e., 0% of bonus target) | | Maximum Payout as a % of Salary (i.e., 200% of bonus target) | Mr. Walker | | | | 0% | | | | | 130% | | | | | 260% | | | | 130% | | | | 0% | | | | 260% | | Mr. Gwin | | | | 0% | | | | | 95% | | | | | 190% | | | | 95% | | | | 0% | | | | 190% | | Mr. Meloy | | | | 0% | | | | | 95% | | | | | 190% | | | | 95% | | | | 0% | | | | 190% | | Mr. Daniels | | | | 0% | | | | | 95% | | | | | 190% | | | | 95% | | | | 0% | | | | 190% | | Mr. Reeves | | | | 0% | | | | | 95% | | | | | 190% | | | | 95% | | | | 0% | | | | 190% | |
| | | | | | | 42
| 43 | |
Compensation Discussion and Analysis AIP Performance Goals and Score. The Company’s AIP performance score for 20132014 was based on the achievement of targeted levels of performance for the following internal operational, financial and safety goals: | | | Performance Goals | | Purpose | Operational: • Reserve Additions • Sales Volumes | | The primary business objectives for an exploration and production company are to find reserves at a competitive cost while generating economic value for its stockholders and assuring that these reserves are prudently converted into production and cash flow. Including specific operational goals on reserve additions (excluding price revisions, acquisitions and divestitures) and sales volumes provides a direct line of sight for our employees and gives them a direct stake in our operational successes. | Financial(1): • Capital Expenditures • EBITDAX/BOE | | These financial goals focus on financial discipline and encourage employees to manage costs relative to gross margins and the commodity price environment. | Safety: • Total Recordable Incident Rate | | The health and safety of our employees is very important to us and critical to our success. Accordingly, we include among our performance goals a target total recordable incident rate per 100 employees so that employees are focused on maintaining a safe work environment. |
(1) | For AIP purposes, Capital Expenditures excludes the capital expenditures of WES and WGP, expenditures for acquisitions, non-cash investments, and certain other expenditures including capital associated with assets expected to be divested and capital that is carried or subsequently reimbursed by another party. EBITDAX/BOE is calculated as earnings before interest, taxes, depreciation, depletion, amortization, and exploration expenses divided by sales volumes for the year. For AIP purposes, it excludes hedging arrangements, gains/losses on sales of assets, major legal-related settlements or expenses and other non-operating income/expense items. |
In early 2014, the Committee approved specified performance goals and target performance levels that were aligned with the Company’s capital budget at the time. The AIP performance goals were approved by the Committee with the qualification that certain modifications might be required during the course of the year as a result of any material developments related to (i) the Tronox Adversary Proceeding and/or (ii) additional clarity relating to the timing of the Mozambique development project. The outcome of both of these issues was largely beyond the direct control of the Company’s management. In May 2014, following settlement of the Tronox Adversary Proceeding, the Board increased the Company’s capital budget as a result of reduced uncertainty regarding the financial impact of that matter. At the same time, despite substantial efforts by the Company and due principally to circumstances beyond the Company’s control, it became apparent that the reserves related to the Mozambique development project (which were included in the initial Reserve Additions performance goal) would not be booked in 2014, making the original targeted performance level no longer relevant. As a result of these two events, the Committee approved the following modifications to the targeted performance goals: an increase in Capital Expenditures from $8,400 MM to $8,900 MM and an increase in Sales Volumes from 295 MMBOE to 298 MMBOE to align with the new capital budget; and a decrease in Reserve Additions from 550 MMBOE to 492 MMBOE reflecting an increase in Reserve | | | | | | | 44 | 43
| |
Compensation Discussion and Analysis Additions associated with the increase to the capital budget and adjusted to reflect the reserves associated with the Mozambique development project. The Committee determined that these modifications were necessary in order to align the program with the revised direction and goals of the Company for 2014 and properly incentivize all employees. As illustrated inFollowing these modifications, the charts below,2014 AIP operational performance goals remained more challenging than the prior years’s goals. Over the last several years the Committee establisheshas established increasingly challenging annual operational performance goals under our AIP to generate competitive returns and advance our longer-term growth objectives, without compromising the safety of our employees. For 2013 theThe Committee again increased the targeted goals for reserve additions, sales volumes and safety performance (as compared tobelieves that the targets established for 2012)all of the 2014 AIP performance goals were challenging and appropriately required the executive officers and all employees to strive for strong performance on key metrics that ultimately result in long-term stockholder value creation.
For 2014, the Company outperformed each goalthe goals relating to Reserve Additions, Sales Volumes and Safety performance with record-setting operational results and a continued commitment to safety.
(1) | U.S. Oil and Natural Gas Industry averages for 2011 and 2012 as published in the American Petroleum Institute Workplace Injuries and Illnesses Safety (WIIS) Report for 2003 - 2012. The 2013 data is not yet available. |
For 2013 the Company also outperformed the targeted financial goals established by the Committee for Capital Expenditures and EBITDAX/BOE, (as reflected in the table below), which demonstrates our continued commitment to financial discipline by spending efficiently and maximizing margins. Because the targeted performance levels for Capital Expenditures and EBITDAX/BOE may fluctuate each year based on the oil and gas operating budget approved by the Board of Directors and the commodity price environment in which we operate, historical performance charts are not helpful for these two performance goals. The Committee believes that the targets established for all of the AIP performance goals are challenging and appropriately require the executive officers to strive for strong performance on key metrics that will result in long-term stockholder value creation.
| | | 44
| | |
Compensation Discussion and Analysis2014 Performance Results.
The relative weighting and the 2013 performance targets were established by the Committee at the beginning of the year. The table below reflects the 20132014 performance results against each of thesethe specified targets. Each performance goal is capped at 275% and the total AIP score cannot exceed 200%.
| 2013 AIP Performance Goals | | Relative Weighting Factor | | AIP Target Performance | | AIP Performance Results(1) | | AIP Performance Score(1) | | 2014 AIP Performance Goals | | | Relative Weighting Factor | | AIP Target Performance | | AIP Performance Results(1) | | AIP Performance Score(1) | Reserve Additions (before price revisions and divestitures), MMBOE | | 25% | | | 454 | | | | 514.3 | | | 52% | | 25% | | | 492 | | | | 503.0 | | | 35% | Sales Volumes, MMBOE | | 25% | | | 281 | | | | 284.2 | | | 39% | | 25% | | | 298 | | | | 307.4 | | | 51% | Capital Expenditures, $MM | | 20% | | | 7,700 | | | | 6,954 | | | 33% | | 20% | | | 8,900 | | | | 8,585 | | | 25% | EBITDAX/BOE($) | | 20% | | | 31.80 | | | | 34.79 | | | 26% | | 20% | | | 31.60 | | | | 34.61 | | | 25% | Total Recordable Incident Rate (Safety) | | 10% | | | 0.49 | | | | 0.28 | | | 23% | | 10% | | | 0.35 | | | | 0.30 | | | 15% | | | | | | | | | | | | | | | | | | | | | | Total | | 100% | | | | | | | | 173% | | 100% | | | | | | 151% |
(1) | The Committee did not make any adjustments to the measured 20132014 AIP performance results or overall calculated 20132014 AIP performance score. |
Individual Performance Adjustments. The Committee may make an adjustment to an executive officer’s bonus payment based on individual performance to recognize an individual’s significant contributions that may not be reflected in the overall AIP performance score. Such adjustment cannot result in a bonus payment that exceeds the maximum bonus opportunity funded for each NEO by the achievement of the prescribed IRC Section 162(m) performance hurdle. The Committee did not make individual performance adjustments for any NEO’s 20132014 bonus payments in recognition of the team effort necessary to drive the Company’s success. | | | | | | | | 45 | |
Compensation Discussion and Analysis Actual Bonuses Earned for 2013.2014. The AIP awards for 20132014 for the NEOs are shown in the table below and are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Base Salary Earnings for 2013($) | | | | Target Bonus as % of Base Salary | | | | AIP Performance Score | | | | Individual Performance Adjustments | | | | Actual Bonus Award ($) | Mr. Walker | | | | 1,300,000 | | | X | | | | 130% | | | X | | | | 173% | | | + | | | | 0 | | | = | | | | 2,923,700 | | Mr. Gwin | | | | 719,038 | | | X | | | | 95% | | | X | | | | 173% | | | + | | | | 0 | | | = | | | | 1,181,740 | | Mr. Meloy | | | | 611,539 | | | X | | | | 95% | | | X | | | | 173% | | | + | | | | 0 | | | = | | | | 1,005,064 | | Mr. Daniels | | | | 611,539 | | | X | | | | 95% | | | X | | | | 173% | | | + | | | | 0 | | | = | | | | 1,005,064 | | Mr. Reeves | | | | 655,769 | | | X | | | | 95% | | | X | | | | 173% | | | + | | | | 0 | | | = | | | | 1,077,757 | |
| | | | | | | | 45
| |
Compensation Discussion and Analysis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Base Salary Earnings for 2014($) | | | | Target Bonus as % of Base Salary | | | | AIP Performance Score | | | | Individual Performance Adjustments | | | | Actual Bonus Award ($) | Mr. Walker | | | | 1,300,000 | | | X | | | | 130% | | | X | | | | 151% | | | + | | | | 0 | | | = | | | | 2,551,900 | | Mr. Gwin | | | | 750,000 | | | X | | | | 95% | | | X | | | | 151% | | | + | | | | 0 | | | = | | | | 1,075,875 | | Mr. Meloy | | | | 700,000 | | | X | | | | 95% | | | X | | | | 151% | | | + | | | | 0 | | | = | | | | 1,004,150 | | Mr. Daniels | | | | 700,000 | | | X | | | | 95% | | | X | | | | 151% | | | + | | | | 0 | | | = | | | | 1,004,150 | | Mr. Reeves | | | | 700,000 | | | X | | | | 95% | | | X | | | | 151% | | | + | | | | 0 | | | = | | | | 1,004,150 | |
Equity Compensation Our equity-based long-term incentive program is designed to reward our executive officers for sustained long-term share performance. This program represents 75% or more of target total compensation opportunity and includes a combination of equity-based awards (performance units, stock options and restricted stock units) that we believe are performance-based in absolute and relative terms. Pursuant to our Equity Grant Administration Proceduresequity grant administration procedures established by the Committee, annual equity-based awards for executive officers are typically made at the regularly scheduled Committee meeting in November. Equity awards for newly hired executive officers or awards made in connection with promotions are made on the date such awards are approved by the Committee. Changes to Equity Compensation Program in 2014.Our annual awards are determined based on a targeted dollar value. The 2013After receiving feedback from our stockholders that the majority of equity compensation granted to executive officers should be more performance-based, the Committee increased the amount of performance units so that the 2014 targeted equity award value was allocated 40%50% in performance units 35%(from 40% in 2013 and 25% in 2012), 25% in non-qualified stock options (from 35% in 2013), and 25% in restricted stock units. ThisThe Committee believes that this allocation provides a combination of equity-based awards that is performance-based in absoluterelative and relativeabsolute terms, while also encouraging retention.providing a retentive element that is necessary in an industry where there is increasing competition for executive talent. The Committee also eliminated our two-year performance unit program so that all performance unit awards granted in 2014 are subject to a three-year performance period. In addition, the Committee reduced the TSR performance payout opportunity for all new performance unit awards. For additional details on the terms of these awards see page 59.61. Performance Units. With respect to performance units, theThe Committee has established TSR as the performance criterion because it provides a relative comparison of our performance against an industry peer group. As part of its annual assessment,for the Committee considered whether to include additional performance metrics in theCompany’s performance unit program. The Committee specifically discussed various operationalawards, and financial measures, including return measures, but concluded that the performance measures with the strongest correlation to TSR are already included in our AIP. It was also determined that return metrics are not appropriate given the long-natured and upfront-capital requirements of our exploration program as the capital we invest today may not generate cash returns for many years. The Committee believes that such a metric would not appropriately incentivize the executive officers. Instead, the Committee believes that a focus on TSR and growth should improve return over time without requiring a specific return metric. As a result, the Committee determined that a single focus on TSR as the performance criterion for the performance units wasis appropriate at this time and is consistent with most energy industry peers. TSR provides an effective relative comparison of our performance against an industry peer group. The Committee has discussed the extent to which certain operational or financial measures could be used as relative long-term performance criteria, such as return on capital employed. The Committee concluded that the performance measures included in our AIP are intended to capture the key drivers of the Company’s business, and that such AIP metrics should drive TSR performance over time. However, the Committee will continue to consider whether to include additional performance metrics in the performance unit program. | | | 46 | | |
Compensation Discussion and Analysis Performance Unit Peer Group.The industry peer group for our awards granted in 20132014 is listed below: | | | | | • Apache Corporation | | • EOG Resources, Inc. | | • Noble Energy, Inc. | • Chevron Corporation | | • Hess Corporation | | • Occidental Petroleum Corporation | • ConocoPhillips | | • Marathon Oil Corporation | | • Pioneer Natural Resources Company | • Devon Energy Corporation | | • Murphy Oil Company | | |
If any of these peer companies undergoes a change in corporate capitalization or a corporate transaction (including, but not limited to, a going-private transaction, bankruptcy, liquidation, merger or consolidation) during the performance period, the Committee shall undertake an evaluation to determine whether such peer company will be replaced. TheAt the time these awards were granted, the Committee has pre-approved Chesapeake Energy Corporation and Talisman Energy as replacement companies (in that order). | | | 46
| | |
Compensation DiscussionPerformance Unit Payout Opportunity. In November 2014, the Committee reduced the payout opportunity for achievement of TSR performance at the 55th percentile from a payout of 110% to a payout of 100% and Analysisreduced the payout opportunities for achievement of all applicable TSR performance levels in the third quartile by 12% to 14% (as reflected in the shaded areas in the table below) for all new awards. While certain stockholders suggested eliminating the payout opportunity for TSR performance below median, the Committee believes that completely eliminating any opportunity would place the Company at a competitive disadvantage in attracting and retaining executive talent because all of the companies in the industry peer group provide for some level of payout below median. The Committee also considered placing a cap on earned awards at target if absolute TSR is negative for the performance period, regardless of relative TSR. Our business is highly dependent on the prices we receive for our oil, natural gas and natural gas liquids, and the Committee believes that stockholders are best served by a management team that is highly incentivized to deliver differentiating performance in a challenging industry-wide environment. Accordingly, the Committee determined that placing such a cap on earned awards is not appropriate at this time. In addition, the Committee maintains the ability to apply negative discretion to these awards should the Committee deem such discretionary adjustment necessary.
The following table reflects the payout scale for the annual performance unit program:program for awards granted in November 2014 as well as outstanding performance unit awards granted prior to November 2014: | Final TSR Ranking | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | Payout as % of Target | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% | | TSR Performance Percentile | | | 100% | | 91% | | 82% | | 73% | | 64% | | 55% | | 46% | | 36% | | 27% | | 18% | | 9% | | 0% | | | | Payout as % of Target | Awards Granted in November 2014 | | | 200% | | 182% | | 164% | | 146% | | 128% | | 100% | | 80% | | 60% | | 40% | | 0% | | 0% | | 0% | Awards Granted Prior to November 2014 | | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% |
Below is an example of
| | | | | | | | 47 | |
Compensation Discussion and Analysis The examples below illustrate how the performance unit payout scale works under two different TSR ranking outcomes, assuming an executive officer received a target award of 20,000 performance units.units in November 2014 subject to a three-year performance period. Each performance unit earned is a right to receive a cash payment equal to the closing price of one share of our common stock on the date the Committee certifies the performance results for the performance period. | | | | | | | | | | | | | | | Total Target
Award
| | | | Performance
Period | | Target
Performance
Units for
Each
Performance
Period | | Relative TSR Ranking for
theThree-Year Performance Period | | Payout
%Percentage | | Number of Performance Units Earned(1) | | Timing of
PayoutEarned | 20,000
performance
units
| | | | 50% tied to a
two-year
performance
period | | 10,000
(20,000 x 50%)Example 1 | | 3rd | | 164% | | 16,40032,800 units (10,00020,000 x 164%) | | Paid after end of
two-year
performance
period | | | 50% tied to a
three-year
performance
period | | 10,000
(20,000 x 50%) Example 2 | | 10th | | 0% | | 0 units
(10,00020,000 x 0%) | | No payout after
end of three-year
performance
period |
(1) | Each performance unit earned is a right to receive a cash payment equal to the closing price of one share of our common stock on the date the Committee certifies the performance results for the respective performance period. |
Stock Options. Stock options typically vest pro-rata annually over three years, beginning with the first anniversary of the date of grant, and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders. Restricted Stock Units. With respect to the restricted stock units, theThe Committee establishes objective performance criteria for each calendar year that must be achieved before any restricted stock units are awarded to executive officers the following year. If the performance criteria are achieved, the Committee may make awards of restricted stock units to the executive officers. The restricted stock units awarded vest pro-rata annually over three years, beginning with the first anniversary of the grant date. All of the restricted stock unit awards made in November 20132014 were made after the Company’s achievement of the 20122013 performance criterion, which was to obtain $2.5at least $3.1 billion in Cash Flows from Operating Activities (Net cash provided by (used in) operating activities), as calculatedpresented in the Consolidated Statements of Cash Flows for the fiscal year as published in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.2013. | | | | | | | | 47
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Compensation Discussion and Analysis
Equity Awards Made During 20132014 On November 6, 2013,2014, the Committee approved the following awards under our 2012 Omnibus Plan for the NEOs. The target grant value of each of the awards was held flat as compared to awards granted in 2013. These awards, as well as a description of the methodology for calculating the grant date fair value, are included in the Grants of Plan-Based Awards Table on page 59.62. | | | Total LTI Grant Date Value($) | | Performance Units (40%) | | Stock Options (35%) | | Restricted Stock Units (25%) | | Total LTI Grant Date Value($) | | Performance Units (50%) | | Stock Options (25%) | | Restricted Stock Units (25%) | Name | | Target # of Units | | Grant Date Value($) | | # of Stock Options | | Grant Date Value($) | | # of Units | | Grant Date Value($) | | Target # of Units | | Grant Date Value($) | | # of Stock Options | | Grant Date Value($) | | # of Units | | Grant Date Value($) | Mr. Walker | | | 11,039,373 | | | | 43,997 | | | | 4,435,339 | | | | 148,378 | | | | 3,848,495 | | | | 29,945 | | | | 2,755,539 | | | | 11,097,530 | | | | 55,606 | | | | 5,557,820 | | | | 118,005 | | | | 2,779,856 | | | | 29,514 | | | | 2,759,854 | | Mr. Gwin | | | 4,406,940 | | | | 17,564 | | | | 1,770,627 | | | | 59,232 | | | | 1,536,306 | | | | 11,954 | | | | 1,100,007 | | | | 4,430,129 | | | | 22,198 | | | | 2,218,690 | | | | 47,107 | | | | 1,109,704 | | | | 11,782 | | | | 1,101,735 | | Mr. Meloy | | | 4,507,133 | | | | 17,963 | | | | 1,810,852 | | | | 60,579 | | | | 1,571,244 | | | | 12,226 | | | | 1,125,037 | | | | 4,530,919 | | | | 22,703 | | | | 2,269,165 | | | | 48,179 | | | | 1,134,958 | | | | 12,050 | | | | 1,126,796 | | Mr. Daniels | | | 4,507,133 | | | | 17,963 | | | | 1,810,852 | | | | 60,579 | | | | 1,571,244 | | | | 12,226 | | | | 1,125,037 | | | | 4,530,919 | | | | 22,703 | | | | 2,269,165 | | | | 48,179 | | | | 1,134,958 | | | | 12,050 | | | | 1,126,796 | | Mr. Reeves | | | 3,449,489 | | | | 13,748 | | | | 1,385,936 | | | | 46,363 | | | | 1,202,522 | | | | 9,357 | | | | 861,031 | | | | 3,467,795 | | | | 17,376 | | | | 1,736,731 | | | | 36,873 | | | | 868,621 | | | | 9,223 | | | | 862,443 | |
| | | 48 | | |
Compensation Discussion and Analysis Performance Units — Results for Performance Periods Ended in 2013December 31, 2014 In January 2014,2015, the Committee certified the performance results for the 20102011 and 20112012 annual performance unit awards for the three-yearthree- and two-year performance periods, respectively, that ended December 31, 2013.2014. Under the provisions of these awards, the targeted performance units were subject to our relative TSR performance against the defined TSR peer group discussed under the Equity Compensation section on page 46.47. However, Plains Exploration & Production Company, which was included in the TSR peer group at the time the awards were granted, was acquired in May 2013 and the Committee replaced it with Murphy Oil Company. TSR performance is based on the difference between (1) the average closing stock price for the 30 trading days preceding the beginning of the performance period, and (2) the average closing stock price for the last 30 trading days of the performance period, plus dividends paid for the performance period, and further adjusted for any other distributions or stock splits, where applicable. The Committee believes that these below-target payouts for below-median performance demonstrate that our performance unit program, and our overall executive compensation program, is well-designed to link pay and performance. This year’s payouts show that the values actually earned by executives under our executive compensation program can differ substantially from the grant date values required to be reported in the Summary Compensation Table and other proxy tables, as our program is designed to pay out at levels aligned with actual performance. For the performance periods ended December 31, 2013,2014, the performance results and Anadarko’s ranking, as highlighted, were as follows: 20102011 Annual Award — Three-Year Performance Period (January 1, 20112012 to December 31, 2013)2014)
| Final TSR Ranking | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | APC
7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | APC
9 | | 10 | | 11 | | 12 | TSR | | 118.4% | | 82.9% | | 78.5% | | 69.5% | | 59.1% | | 53.5% | | 26.8% | | 13.6% | | 12.4% | | 8.5% | | -14.4% | | -20.3% | | 90.4% | | 69.3% | | 43.1% | | 34.5% | | 20.7% | | 18.8% | | 13.8% | | 10.8% | | 9.8% | | 0.0% | | -1.9% | | -28.0% | Payout as % of Target | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% | | 2011 Annual Award — Two-Year Performance Period (January 1, 2012 to December 31, 2013) | | 2012 Annual Award — Two-Year Performance Period (January 1, 2013 to December 31, 2014) | | 2012 Annual Award — Two-Year Performance Period (January 1, 2013 to December 31, 2014) | Final TSR Ranking | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | APC
9 | | 10 | | 11 | | 12 | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | APC
7 | | 8 | | 9 | | 10 | | 11 | | 12 | TSR | | 106.3% | | 69.2% | | 51.9% | | 47.5% | | 43.9% | | 42.2% | | 36.3% | | 27.7% | | 11.8% | | 6.6% | | -0.3% | | -2.3% | | 56.5% | | 50.1% | | 42.3% | | 29.1% | | 17.6% | | 17.1% | | 12.9% | | 11.9% | | 3.5% | | 3.2% | | -0.6% | | -14.7% | Payout as % of Target | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% |
| | | | | | | 48
| 49 | |
Compensation Discussion and Analysis The following table lists the number of performance units awarded at minimum, target, and maximum levels and the actual number of performance units earned by the NEOs for the 2011 and 2012 annual performance unit awards for the three-year and two-year performance periods that ended December 31, 2013:2014: | | | 2010 Annual Performance Unit Award | | | | 2011 Annual Performance Unit Award | | 2011 Annual Performance Unit Award | | | | 2012 Annual Performance Unit Award | Name | | Minimum # Units | | Target # Units | | Maximum # Units | | Actual # Units Earned | | | | Minimum # Units | | Target # Units | | Maximum # Units | | Actual # Units Earned | | Minimum # Units | | Target # Units | | Maximum # Units | | Actual # Units Earned | | | | Minimum # Units | | Target # Units | | Maximum # Units | | Actual # Units Earned | Mr. Walker | | | 0 | | | | 12,875 | | | | 25,750 | | | | 11,845 | | | | | | 0 | | | | 8,178 | | | | 16,356 | | | | 4,416 | | | | 0 | | | | 8,178 | | | | 16,356 | | | | 4,416 | | | | | | 0 | | | | 17,167 | | | | 34,334 | | | | 15,794 | | Mr. Gwin | | | 0 | | | | 8,200 | | | | 16,400 | | | | 7,544 | | | | | | 0 | | | | 4,902 | | | | 9,804 | | | | 2,647 | | | | 0 | | | | 4,903 | | | | 9,806 | | | | 2,648 | | | | | | 0 | | | | 6,119 | | | | 12,238 | | | | 5,629 | | Mr. Meloy | | | 0 | | | | 7,343 | | | | 14,686 | | | | 6,756 | | | | | | 0 | | | | 5,032 | | | | 10,064 | | | | 2,717 | | | | 0 | | | | 5,033 | | | | 10,066 | | | | 2,718 | | | | | | 0 | | | | 6,281 | | | | 12,562 | | | | 5,779 | | Mr. Daniels | | | 0 | | | | 7,343 | | | | 14,686 | | | | 6,756 | | | | | | 0 | | | | 5,032 | | | | 10,064 | | | | 2,717 | | | | 0 | | | | 5,033 | | | | 10,066 | | | | 2,718 | | | | | | 0 | | | | 6,281 | | | | 12,562 | | | | 5,779 | | Mr. Reeves | | | 0 | | | | 6,418 | | | | 12,836 | | | | 5,905 | | | | | | 0 | | | | 3,837 | | | | 7,674 | | | | 2,072 | | | | 0 | | | | 3,838 | | | | 7,676 | | | | 2,073 | | | | | | 0 | | | | 4,789 | | | | 9,578 | | | | 4,406 | |
Performance Units — Results for 2012 CEO Appointment Award In connection with his appointment to CEO on May 15, 2012, Mr. Walker received a promotional equity award, including performance units (2012 CEO Appointment Award). The performance units were subject to the same performance criteria as performance unit awards for executive officers, except that the two- and three-year performance periods for the grant to Mr. Walker begin on May 15, 2012 and end on May 14, 2014 and May 14, 2015, respectively. In June 2014, the Committee certified the performance results for the two-year performance period that ended May 14, 2014. For such performance period, the performance result and Anadarko’s ranking, as highlighted, was as follows: 2012 CEO Appointment Award — Two-Year Performance Period (May 15, 2012 to May 14, 2014) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Final TSR Ranking | | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | APC 7 | | 8 | | 9 | | 10 | | 11 | | 12 | TSR | | 91.1% | | 81.3% | | 64.6% | | 53.4% | | 46.0% | | 43.5% | | 36.9% | | 28.6% | | 25.4% | | 12.5% | | 5.9% | | -5.4% | Payout as % of Target | | 200% | | 182% | | 164% | | 146% | | 128% | | 110% | | 92% | | 72% | | 54% | | 0% | | 0% | | 0% |
The following table lists the number of performance units awarded at minimum, target, and maximum levels and the actual number of performance units earned by Mr. Walker for the two-year performance period that ended May 14, 2014: | | | | | | | | | | | | | | | | | | | | | | | 2012 CEO Appointment Award | Name | | Minimum # Units | | Target # Units | | Maximum # Units | | Actual # Units Earned | Mr. Walker | | | | 0 | | | | | 5,253 | | | | | 10,506 | | | | | 4,833 | |
| | | 50 | | |
Compensation Discussion and Analysis Indirect Compensation Elements As identified in the table below, the Company provides certain benefits and perquisites (considered indirect compensation elements) that are considered typical within our industry and necessary to attract and retain executive talent. The value of each element of indirect compensation is generally structured to be competitive within our industry. | | | | | Indirect Compensation Element | | | | Primary Purpose | Retirement Benefits | | • • | | Attracts talented executive officers and rewards them for extended service Offers secure and tax-advantaged vehicles for executive officers to save effectively for retirement | Other Benefits (for example, health care, paid time off, disability and life insurance) and Perquisites | | • • | | Enhances executive welfare and financial security Provides a competitive package to attract and retain executive talent, but does not constitute a significant part of an executive officer’s compensation | Severance Benefits | | • • | | Attracts and helps retain executives in a volatile and consolidating industry Provides transitional income following an executive’s involuntary termination of employment |
Retirement Benefits Our executive officers participate in the following retirement and related plans: Anadarko Employee Savings Plans. The Anadarko Employee Savings Plan (401(k) Plan) is a tax-qualified retirement savings plan that allows participating U.S. employees to contribute up to 30% of eligible compensation, on a before-tax basis or on an after-tax basis (via a Roth or traditional after-tax contribution), into their 401(k) Plan accounts. Eligible compensation includes base salary and AIP bonus payments. Under the 401(k) Plan, we match an amount equal to one dollar for each dollar contributed by participants up to six percent of their total eligible compensation. The 401(k) Plan is subject to applicable IRC limitations regarding participant and Company contributions. Due to IRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor a non-qualified Savings Restoration Plan. The Savings Restoration Plan accrues a benefit equal to the | | | | | | | | 49
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excess, if any, of Company matching and Personal Wealth Account (PWA) contributions that would have been allocated to a participant’s 401(k) Plan account each year without regard to the IRC limitation over amounts that were, in fact, allocated to a participant’s account. For additional details on the Savings Restoration Plan see page 67.69. Amounts deferred, if any, under the 401(k) Plan and the Savings Restoration Plan (collectively, the Savings Plans) by the NEOs are included, respectively, in the “Salary” and “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table. Our matching contributions allocated to the NEOs under the Savings Plans are included in the “All Other Compensation” column of the Summary Compensation Table. | | | | | | | | 51 | |
Compensation Discussion and Analysis Pension Plans. Anadarko provides funded, tax-qualified retirement benefits for all U.S. employees. Due to IRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor non-qualified restoration plans that cover the executive officers and certain other employees. The pension plans do not require contributions by participants and a participant becomes vested in his or her benefit at the completion of three years of service as defined in the pension plans. Eligible compensation covered by the pension plans includes base salary and AIP bonus payments. Messrs. Walker and Reeves each have supplemental retirement benefits under our non-qualified Retirement Restoration Plan that provide for special service credits of eight years and five years, respectively, if they each remain employed by us until the age of 55. Messrs. Walker and Reeves vested in these benefits in 2012. The service credits are considered applicable service towards our retirement benefit programs, including pension and retiree medical and dental benefits.benefits, where applicable. These supplemental retirement benefits were provided to Messrs. Walker and Reeves in 2007 to recognize that they were mid-career hires that we would like to retain for the remainder of their careers. Providing them additional service credits recognizes a portion of their prior industry experience and service years which directly benefit us and our stockholders. Mr. Meloy is eligible to receive supplemental pension benefits under the terms of his retention agreement, which was entered into in August 2006 in connection with the closing of the Kerr-McGee acquisition (2006 Retention Agreement). The accrued benefits for each of the NEOs, including the benefits related to any special service credits are discussed in the Pension Benefits Table on page 66.69. The Committee does not intend to grant any additional pension credits to executive officers and has not done so since 2007. Other Benefits We provide other benefits such as medical, dental, and vision insurance, flexible spending and health savings accounts, paid time off, payments for certain relocation costs, disability coverage and life insurance to each executive officer. These benefits are also provided to all other eligible U.S.-based employees. Certain employees, including the executive officers, are eligible for participation in the Company’s Management Life Insurance Plan, which provides an additional life insurance benefit of two times base salary, and the Deferred Compensation Plan, which allows participants to voluntarily defer receipt of up to 75% of their salary and/or up to 100% of their AIP bonus payments. Details regarding the Deferred Compensation Plan and participation in the plan by the NEOs are discussed beginning on page 67. | | | 50
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Compensation Discussion and Analysis
69. Perquisites We provide a limited number of perquisites to the executive officers. These perquisites are assessed annually by the Committee as part of the total competitive review. The expenses related to the perquisites are imputed and considered taxable income to the executive officers as applicable. We do not provide any tax gross-ups on these perquisites. The perquisites provided to the executive officers are as follows: Financial Counseling, Tax Preparation and Estate Planning Annual Physical Exam Program Personal Excess Liability Insurance Limited Personal Use of Company Aircraft | | | 52 | | |
Compensation Discussion and Analysis Club Memberships Limited Personal Use of Company Facilities and Event Venues Mr. Walker has a personal usage limit allowing him to use Company aircraft for a limited amount of personal travel and, to the extent his usage exceeds such amount, requiring him to reimburse the Company pursuant to a time-sharing agreement. The prior year’s aggregate incremental direct operating costs for each aircraft is used to calculate the value of personal usage. For 2014, Mr. Walker iswas allowed up to $250,000$300,000 of personal usage annually.usage. The incremental costs of the various perquisites provided are included in the “All Other Compensation” column of the Summary Compensation Table on page 5759 and in the All Other Compensation Table and supporting footnotes following the Summary Compensation Table on page 58.60. Severance Benefits Post-termination and change-of-control severance benefits are typical within our industry. The Company currently provides the severance benefits described below to its executive officers. These plans are an essential component of our executive compensation program and are necessary to attract and retain executive talent in a highly competitive market, provide continuity of management in the event of an actual or threatened change of control and provide executive officers with the security to make decisions that are in the best long-term interest of the stockholders. On a periodic basis, the Committee, in consultation with its executive compensation consultant, will review, consider and adjust, as necessary and appropriate, the provisions of post-termination and change-of-control severance benefits provided to executive officers to ensure that such arrangements serve the Company’s interests in retaining key executives, are consistent with market practice and are reasonable. Officer Severance Plan. Our executive officers are eligible for benefits under the Officer Severance Plan.Plan with the exception of Mr. Walker whose severance benefits are included in his Severance Agreement, which is described on page 56. Benefits provided under this planthe Officer Severance Plan may vary depending upon the executive officer’s level within the organization and years of service with us and are made at the discretion of the Committee. Executive officers receiving benefits under the Officer Severance Plan are required to execute an agreement releasing us from any and all claims from any and all kinds of actions arising from the executive officer’s employment with us or the termination of such employment. Mr. Walker does not participate in this plan as his severance benefits are included in his Severance Agreement, which is described on page 54. | | | | | | | | 51
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Compensation Discussion and Analysis
The typical severance benefits that may be provided for our executive officers following the occurrence of an involuntary termination event (as described on page 69)72) include the following: a payment equal to two times annual base salary plus one year’s target bonus under our AIP; if provided, a pro-rata bonus under our AIP for the year of termination, which will be payable at the end of the performance period, based on actual Company performance as certified by the Committee; if applicable, the present value of retiree life insurance;
the option to continue existing medical and dental coverage levels at current active employee rates for up to six months. After six months, we will pay the cost of COBRA until the first to occur of (a) 18 months or (b) the officer obtaining comparable coverage as a result of employment with another employer; | | | | | | | | 53 | |
Compensation Discussion and Analysis the vesting of some or all unvested restricted stock, unvested restricted stock units and stock options; and a payout, if any, of outstanding performance units, which will be made at the end of the performance period based on actual Company performance results. Key Employee Change-of-Control Contracts. We have key employee change-of-control contracts with all of our executive officers, including the NEOs, with the exception of Mr. Walker, whose change-of-control severance benefits are included in his Severance Agreement, which is described on page 54.56. If we experience a change of control (as defined on page 69)72) during the term of the contract, then the contract becomes operative for a specified protection period. These contracts generally provide that the executive officer’s terms of employment (including position, work location, compensation and benefits) will not be adversely changed during the protection period. If we (or any successor in interest) terminate the executive officer’s employment (other than for cause (as defined on page 69)72), death or disability), the executive officer terminates for good reason (as defined on page 70)73) during such protection period, or upon certain terminations prior to a change of control or in connection with or in anticipation of a change of control, the executive officer is generally entitled to receive certain payments and benefits. In 2013,2014, no payments were paid under the change-of-control contracts. | | | 5254
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Compensation Discussion and Analysis In February 2011, the Committee approved changes to the contracts that reduced the level of post-change-of-control severance benefits under the Key Employee Change-of-Control Contracts, on a prospective basis, for newly appointed and newly hired executive officers who are not otherwise subject to an existing agreement. The table below summarizes the general provisions of the contracts (our current NEOs have contracts that were entered into prior to February 2011). | | | | | | | | | Key Employee Change-of-Control Contracts Entered Into Prior to February 2011 | | | | Key Employee Change-of-Control Contracts Entered Into Post-February 2011 | • | | Initial three-year term automatically extended each year unless either party provides notice not to extend | | • | | Initial three-year term automatically extended each year unless either party provides notice not to extend | • | | Modified single-trigger provision(1) | | • | | Double-trigger provision(2) | • | | Three-year protection period | | • | | Two-year protection period | • | | 2.9 times base salary plus AIP bonus (based on highest AIP bonus paid over last three years) | | • | | 2.9 times base salary plus AIP bonus (based on highest AIP bonus paid over last three years) | • | | Up to three additional years of matching contributions into the Savings Restoration Plan | | • | | Up to three additional years of matching contributions into the Savings Restoration Plan | • | | Up to three additional years of age and service credits under the Company’s retirement and pension plans | | • | | Up to three additional years of age and service credits under the Company’s retirement and pension plans | • | | Three years continuation of medical, dental, and life insurance benefits | | • | | Three years continuation of medical, dental, and life insurance benefits | • | | Three years of financial planning benefits | | • | | No continuation of financial planning benefits | • | | Excise tax gross-up(3) | | • | | Best-of-net tax provision (i.e., no tax gross-up by the Company)(4) | • | | Outplacement services up to a maximum of $30,000 | | • | | Outplacement services up to a maximum of $30,000 | • | | Officer is subject to a confidentiality provision | | • | | Officer is subject to a confidentiality provision |
(1) | A good reason provision allowing an executive officer to terminate for any reason during the 30-day period immediately following the first anniversary of a change of control and receive severance benefits. |
(2) | Severance payments are made only in the event of both a change of control and the termination of the executive officer’s employment without cause or for good reason during the applicable protection period. |
(3) | The executive officer will be entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under IRC Section 4999. |
(4) | Requires the Company to either (1) reduce the amount of certain severance benefits otherwise payable so that such severance benefits will not be subject to the tax imposed by IRC Section 4999, or alternatively (2) pay the full amount of severance benefits to the executive officer (but with no tax gross-up), whichever produces the better after-tax result for the executive officer. |
| | | | | | | | 5355
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Compensation Discussion and Analysis As a condition to receipt of change-of-control severance benefits, the executive officer must remain employed by us and provide services commensurate with his or her position until the executive officer is terminated pursuant to the provisions of the contract. The executive officer must also agree to retain in confidence any and all confidential information known to him or her concerning us and our business so long as the information is not otherwise publicly disclosed. Change of Control — Treatment of Outstanding Unvested Equity Awards. The treatment of unvested outstanding equity awards upon a change of control of Anadarko is prescribed by the applicable plan document under which the awards were granted. The Company’s 2008 Omnibus Incentive Compensation Plan (2008 Omnibus Plan), which governs awards made prior to May 15, 2012, included a single-trigger provision for the accelerated vesting of equity awards upon a change of control. All outstanding awards to the NEOs under the 2008 Omnibus Plan will bewere fully vested by the end of 2014. The 2012 Omnibus Plan, which governs awards made on or after May 15, 2012, includes a double-trigger provision that provides that, unless otherwise specified in the award agreement, there is only accelerated vesting of awards in the event of both a change of control of the Company and the termination of the participant’s employment without cause or for good reason during the applicable protection period. All equity awards issued under the 2012 Omnibus Plan contain this double-trigger feature. DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS We have entered into indemnification agreements with our directors and certain executive officers, in part to enable us to attract and retain qualified directors and executive officers. These agreements require us, among other things, to indemnify such persons against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses for proceedings for which they may be indemnified, and to cover such person under any directors’ and officers’ liability insurance policy that we may maintain from time to time. These agreements are intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and are in addition to any other rights our directors and executive officers may have under our Restated Certificate of Incorporation, By-Laws and applicable law. AGREEMENTS WITH EXECUTIVE OFFICERS Mr. Walker — Severance Agreement At the time the Board announcedIn connection with Mr. Walker’s appointment to President and CEO in 2012, the Committee determined that Mr. Walker’shis employment should be continued on an at-will basis. On February 16, 2012, the Company and Mr. Walker entered into a Severance Agreement to combine and restructure certain severance benefits previously provided to him under the Officer Severance Plan and through his key employee change-of-control contract. Effective May 15, 2012, Mr. Walker was no longer eligible to receive benefits under the Officer Severance Plan and waived the severance benefits under his key employee change-of-control contract, thereby reducing the level of change-of-control severance benefits that he was formerly eligible to receive. The general provisions of the Severance Agreement are described in the tables below:
| | | Severance Benefits Outside of a Change of Control | • | | Prorated annual bonus based on actual performance for the year of termination | • | | Two times the sum of his annual base salary and annual target bonus for the year of termination | • | | Up to six months continued participation in the Company’s medical and dental care plans at active employee rates and reimbursement for the cost of up to 18 additional months of COBRA continuation coverage |
| | | 5456
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Compensation Discussion and Analysis | | | Change-of-Control Severance Benefits | • | | Double-trigger provision (requiring both a change-of-control and a termination of employment) | • | | Three-year protection period following Change of Control | • | | 2.5 times salary plus the higher of target bonus for the year of termination or the average bonus for the last two years | • | | Up to three additional years of matching contributions into the Savings Restoration Plan | • | | Up to three additional years of age and service credits under the Company’s retirement and pension plans | • | | Three years continuation of medical, dental, and life insurance benefits | • | | Best-of-net tax provision (i.e., no tax gross-up by the Company) | • | | Outplacement services up to a maximum of $30,000 | • | | Subject to a confidentiality provision |
The above description of Mr. Walker’s Severance Agreement is not a full summary of all of the terms and conditions of the agreement and is qualified in its entirety by the full text of the agreement, which is on file with the SEC. STOCK OWNERSHIP GUIDELINES We have maintained stock ownership guidelines for executive officers since 1993 with the goal of promoting equity ownership and aligning our executive officers’ interests with those of our stockholders. These guidelines must be met within three years after becoming subject to them. Currently, all of our executive officers either meet or exceed their specified guidelines. The ownership guidelines are currently established at the following minimum levels: | | | | | | | | | | | Position | | Guideline | | Ownership Status as of 12/31/20132014 | Chief Executive Officer | | 6 x base salary | | | | Exceeds | | Executive Vice Presidents | | 3 x base salary | | | | Exceeds | | Senior Vice Presidents | | 2.5 x base salary | | | | Exceeds | | Vice Presidents | | 2 x base salary | | | | Exceeds | (1) |
(1) | Currently, allAll of the vice presidents either meet or exceedexceeded their specifiedownership guidelines at December 31, 2014, with the exception of threefour officers appointed in 2013 and 2014, who are still within the three-year compliance period. |
The Committee reviews the stock ownership levels annually. During 2013, Messrs. Gwin, Meloy, Daniels and Reeves were promoted from Senior Vice Presidents to Executive Vice Presidents and their stock ownership requirements were subsequently increased to three times base salary. In determining stock ownership levels, we include shares of common stock held directly by the executive officer (including shares beneficially owned in a trust, by a limited liability company or partnership, and by a spouse and/or minor children, unless the non-management director or officer expressly disclaims beneficial ownership of such shares); shares of common stock held indirectly through the Anadarko Employee Savings Plan; deferred share balances resulting from an investment in the Company Stock Fund as defined in the Anadarko Petroleum Corporation Deferred Compensation Plan provided such balance is payable in shares; and unvested restricted stock and unvested restricted stock units. For those executive officers of Anadarko who are also officers of WES and/or WGP, any WES and/or WGP equity they own is also included in the calculation to determine their compliance. Outstanding | | | | | | | | 55
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performance units and unexercised stock options are not included. If an executive officer does not satisfy the stock ownership requirements, during the applicable timeframe, he or she must retain all shares acquired on the vesting of equity awards or the exercise of stock options (net of | | | | | | | | 57 | |
Compensation Discussion and Analysis exercise costs and taxes) until compliance is achieved. Because of our robust ownership levels, other than as described above we do not maintain separate holding requirements for our equity awards. CLAWBACK POLICY All awards granted under Anadarko’s 2012 Omnibus Plan are conditioned on repayment or forfeiture in accordance with applicable laws, Company policy, and any relevant provisions in the related award agreement. Each award agreement under the 2012 Omnibus Plan specifically provides that the awards are subject to forfeiture or repayment if the Company is required to prepare an accounting restatement due to material noncompliance of the Company with applicable rules as a result of misconduct. In addition, the 2012 Omnibus Plan provides that the Committee may specify in an award agreement or otherwise that a recipient’s rights, payment, and benefits with respect to the award shall be reduced, cancelled, forfeited or recouped upon the occurrence of certain specified events, including termination of employment for cause, violations of material Company policies, or other conduct by the recipient that is detrimental to the business or reputation of the Company. REGULATORY REQUIREMENTS Together with the Committee, the Company carefully reviews and takes into account current tax, accounting and securities regulations as they relate to the design of our compensation programs and related decisions. IRC Section 162(m) limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation is performance-based as defined under federal tax laws. Stock options, performance units and cash awards granted under our 2008 and 2012 Omnibus Plans and our 1999 Stock Incentive Plan are intended to satisfy the performance-based requirements and, as such, are designed to be fully deductible. Since 2008, the Committee has approved an annual program intended to qualify our restricted stock awards (including restricted shares and restricted stock units) as performance-based compensation under IRC Section 162(m). The Committee reviews and considers the deductibility of our executive compensation programs; however, the Committee believes it is important to provide compensation that is not fully deductible when necessary to retain and motivate certain executive officers and when it is in the best interest of the Company and our stockholders. For these reasons, Mr. Walker receives a base salary above $1 million, and therefore the portion of base salary in excess of $1 million is not deductible. Awards of performance units, stock options, restricted shares and restricted stock units under our 2012 Omnibus Plan, 2008 Omnibus Plan and 1999 Stock Incentive Plan are accounted for under FASB ASC Topic 718. The benefits payable under non-qualified plans for our executive officers and directors are unsecured obligations to pay. Assets to pay these benefits may be held under the Company’s Benefits Trust, which is subject to the claims of the general creditors of the Company. CONCLUSION We believe our executive compensation program is designed to pay for performance. It aligns the interests of our executive officers with those of our stockholders and provides executive officers with the necessary motivation to maximize the long-term operational and financial performance of the Company, while using sound financial controls and high standards of integrity. We also believe that total compensation for each executive officer should be, and is, commensurate with the execution of specified short- and long-term operational, financial and strategic objectives. The programs currently offered have been effective in retaining executive officers during a period of strong competitive demand and a shortage of talented executives within the oil and gas exploration and production industry. We believe that the quality of our executive compensation program will continue to be reflected in positive long-term operational and financial performance which will result in long-term stockholder value creation. | | | 5658
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Executive Compensation SUMMARY COMPENSATION TABLE The following table summarizes the compensation for the fiscal years ended December 31, 2014, 2013, 2012, and 20112012 for our CEO, our Chief Financial Officer (CFO) and our three highest paid executive officers other than our CEO and CFO: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) �� | | Stock Awards ($)(1) | | Option Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(3) | | All Other Compensation ($)(4) | | Total ($) | R. A. Walker(5) Chairman, President and Chief Executive Officer | | | | 2013 | | | | | 1,300,000 | | | | | 0 | | | | | 7,190,878 | | | | | 3,848,495 | | | | | 2,923,700 | | | | | 1,154,412 | | | | | | | | | | 501,944 | | | | | 16,919,429 | | | | | 2012 | | | | | 1,105,769 | | | | | 0 | | | | | 8,578,095 | | | | | 5,694,735 | | | | | 2,248,890 | | | | | 1,545,387 | | | | | | | | | | 492,009 | | | | | 19,664,885 | | | | | 2011 | | | | | 742,500 | | | | | 0 | | | | | 3,892,653 | | | | | 2,647,467 | | | | | 1,128,600 | | | | | 1,105,184 | | | | | | | | | | 290,270 | | | | | 9,806,674 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert G. Gwin Executive Vice President, Finance and Chief Financial Officer | | | | 2013 | | | | | 719,038 | | | | | 0 | | | | | 2,870,634 | | | | | 1,536,306 | | | | | 1,181,740 | | | | | — | | | | | (6) | | | | | 236,592 | | | | | 6,544,310 | | | | | 2012 | | | | | 715,000 | | | | | 0 | | | | | 2,361,475 | | | | | 1,566,974 | | | | | 0 | | | | | 840,846 | | | | | | | | | | 188,380 | | | | | 5,672,675 | | | | | 2011 | | | | | 715,000 | | | | | 0 | | | | | 2,333,484 | | | | | 1,586,972 | | | | | 1,032,460 | | | | | 637,703 | | | | | | | | | | 146,829 | | | | | 6,452,448 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charles A. Meloy Executive Vice President, US Onshore Exploration and Production | | | | 2013 | | | | | 611,539 | | | | | 0 | | | | | 2,935,889 | | | | | 1,571,244 | | | | | 1,005,064 | | | | | — | | | | | (6) | | | | | 232,411 | | | | | 6,356,147 | | | | | 2012 | | | | | 600,000 | | | | | 0 | | | | | 2,424,231 | | | | | 1,608,632 | | | | | 974,700 | | | | | 1,729,903 | | | | | | | | | | 173,034 | | | | | 7,510,500 | | | | | 2011 | | | | | 577,885 | | | | | 0 | | | | | 2,395,464 | | | | | 1,629,204 | | | | | 834,465 | | | | | 2,253,427 | | | | | | | | | | 148,653 | | | | | 7,839,098 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert P. Daniels Executive Vice President, International and Deepwater Exploration | | | | 2013 | | | | | 611,539 | | | | | 0 | | | | | 2,935,889 | | | | | 1,571,244 | | | | | 1,005,064 | | | | | — | | | | | (6) | | | | | 173,942 | | | | | 6,297,678 | | | | | 2012 | | | | | 600,000 | | | | | 0 | | | | | 2,424,231 | | | | | 1,608,632 | | | | | 974,700 | | | | | 1,425,005 | | | | | | | | | | 113,439 | | | | | 7,146,007 | | | | | 2011 | | | | | 577,885 | | | | | 0 | | | | | 2,395,464 | | | | | 1,629,204 | | | | | 834,465 | | | | | 1,330,904 | | | | | | | | | | 121,801 | | | | | 6,889,723 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert K. Reeves Executive Vice President, General Counsel and Chief Administrative Officer | | | | 2013 | | | | | 655,769 | | | | | 0 | | | | | 2,246,967 | | | | | 1,202,522 | | | | | 1,077,757 | | | | | — | | | | | (6) | | | | | 174,495 | | | | | 5,357,510 | | | | | 2012 | | | | | 650,000 | | | | | 0 | | | | | 1,848,466 | | | | | 1,226,577 | | | | | 1,000,350 | | | | | 992,888 | | | | | | | | | | 109,674 | | | | | 5,827,955 | | | | | 2011 | | | | | 621,869 | | | | | 0 | | | | | 2,826,579 | | | | | 1,242,190 | | | | | 850,717 | | | | | 872,784 | | | | | | | | | | 121,759 | | | | | 6,535,898 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($)(1) | | Option Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(3) | | All Other Compensation ($)(4) | | Total ($) | R. A. Walker(5) Chairman, President and Chief Executive Officer | | | | 2014 | | | | | 1,300,000 | | | | | 0 | | | | | 8,317,674 | | | | | 2,779,856 | | | | | 2,551,900 | | | | | 5,205,613 | | | | | | | | | | 565,144 | | | | | 20,720,187 | | | | | 2013 | | | | | 1,300,000 | | | | | 0 | | | | | 7,190,878 | | | | | 3,848,495 | | | | | 2,923,700 | | | | | 1,154,412 | | | | | | | | | | 501,944 | | | | | 16,919,429 | | | | | 2012 | | | | | 1,105,769 | | | | | 0 | | | | | 8,578,095 | | | | | 5,694,735 | | | | | 2,248,890 | | | | | 1,545,387 | | | | | | | | | | 492,009 | | | | | 19,664,885 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert G. Gwin Executive Vice President, Finance and Chief Financial Officer | | | | 2014 | | | | | 750,000 | | | | | 0 | | | | | 3,320,425 | | | | | 1,109,704 | | | | | 1,075,875 | | | | | 740,102 | | | | | | | | | | 223,255 | | | | | 7,219,361 | | | | | 2013 | | | | | 719,038 | | | | | 0 | | | | | 2,870,634 | | | | | 1,536,306 | | | | | 1,181,740 | | | | | — | | | | | (6 | ) | | | | 236,592 | | | | | 6,544,310 | | | | | 2012 | | | | | 715,000 | | | | | 0 | | | | | 2,361,475 | | | | | 1,566,974 | | | | | 0 | | | | | 840,846 | | | | | | | | | | 188,380 | | | | | 5,672,675 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charles A. Meloy Executive Vice President, US Onshore Exploration and Production | | | | 2014 | | | | | 700,000 | | | | | 0 | | | | | 3,395,961 | | | | | 1,134,958 | | | | | 1,004,150 | | | | | 2,023,567 | | | | | | | | | | 223,739 | | | | | 8,482,375 | | | | | 2013 | | | | | 611,539 | | | | | 0 | | | | | 2,935,889 | | | | | 1,571,244 | | | | | 1,005,064 | | | | | — | | | | | (6 | ) | | | | 232,411 | | | | | 6,356,147 | | | | | 2012 | | | | | 600,000 | | | | | 0 | | | | | 2,424,231 | | | | | 1,608,632 | | | | | 974,700 | | | | | 1,729,903 | | | | | | | | | | 173,034 | | | | | 7,510,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert P. Daniels Executive Vice President, International and Deepwater Exploration | | | | 2014 | | | | | 700,000 | | | | | 0 | | | | | 3,395,961 | | | | | 1,134,958 | | | | | 1,004,150 | | | | | 1,947,610 | | | | | | | | | | 168,820 | | | | | 8,351,499 | | | | | 2013 | | | | | 611,539 | | | | | 0 | | | | | 2,935,889 | | | | | 1,571,244 | | | | | 1,005,064 | | | | | — | | | | | (6 | ) | | | | 173,942 | | | | | 6,297,678 | | | | | 2012 | | | | | 600,000 | | | | | 0 | | | | | 2,424,231 | | | | | 1,608,632 | | | | | 974,700 | | | | | 1,425,005 | | | | | | | | | | 113,439 | | | | | 7,146,007 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert K. Reeves Executive Vice President, General Counsel and Chief Administrative Officer | | | | 2014 | | | | | 700,000 | | | | | 0 | | | | | 2,599,174 | | | | | 868,621 | | | | | 1,004,150 | | | | | 1,433,125 | | | | | | | | | | 179,368 | | | | | 6,784,438 | | | | | 2013 | | | | | 655,769 | | | | | 0 | | | | | 2,246,967 | | | | | 1,202,522 | | | | | 1,077,757 | | | | | — | | | | | (6 | ) | | | | 174,495 | | | | | 5,357,510 | | | | | 2012 | | | | | 650,000 | | | | | 0 | | | | | 1,848,466 | | | | | 1,226,577 | | | | | 1,000,350 | | | | | 992,888 | | | | | | | | | | 109,674 | | | | | 5,827,955 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The amounts included in these columns represent the aggregate grant date fair value of the awards made to NEOs in 20132014 computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The value ultimately realized by the NEOs upon the actual vesting of the award(s) or the exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of valuation assumptions, see Note 15 — Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2013.2014. The values in the “Stock Awards” column represent the grant date fair values for both restricted stock unit and performance unit awards. The performance unit awards are subject to market conditions and have been valued based on the probable outcome of the market conditions as of the grant date. |
(2) | The amounts in this column reflect the incentive cash bonus awards for 20132014 that were determined by the Compensation Committee and paid out in February 20142015 pursuant to the Company’s AIP. These awards are discussed in further detail beginning on page 41.42. |
(3) | The amounts in this column reflect the actuarial increase, if any,annual aggregate change in the actuarial present value of benefitseach NEO’s accumulated benefit, expressed as a lump sum, under the Company’s pension plans determined by using interest rate and mortality rate assumptions consistent with those useddescribed in more detail beginning on page 65. The numbers reported in this column are not a current cash payment but represent the year-over-year change in the Company’s financial statementsvalue of the NEO’s pension based on specified interest and include amounts that the NEO may not currently bediscount rate |
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Executive Compensation | assumptions for each year and include amounts that the NEO may not currently be entitled to receive because such amounts are not vested. The actual value of the pension will be determined at the time each NEO retires from the Company. The Company’s Deferred Compensation Plan does not provide for above-market or preferential earnings so no such amounts are included. |
Generally for 2014, decreases in both the discount rate and the lump sum interest rate assumptions used to determine the present value of pension benefits at year-end were the primary factors contributing to the increase in the values reported in this column. These rates could be higher or lower at the time of actual retirement. For Mr. Walker, the reported value is impacted to a greater extent by a higher level of average compensation reflecting an additional twelve months of pay at the CEO level than the prior year’s calculation (Mr. Walker was promoted to CEO in May 2012). For 2014, the amount in this column for Mr. Walker represents a 65% increase in the present value of his pension benefits as shown in the Pension Benefits Table on page 69. The table below provides additional detail regarding the impact of the factors contributing to the 65% change in the pension value for Mr. Walker. | | | | | | | | | | | Factors | | Percent Increase in Pension Value | | Change in Present Value ($) | Lower Discount Rate and Lump Sum Interest Rate | | | | 16% | | | | | 1,303,821 | | Higher 36-Month Average Compensation | | | | 33% | | | | | 2,641,486 | | Additional Year of Age | | | | 6% | | | | | 481,076 | | Additional Year of Service | | | | 10% | | | | | 779,230 | | Total Increase | | | | 65% | | | | | 5,205,613 | |
(4) | The amounts shown in this column are described further in the All Other Compensation Table below. |
(5) | On May 14, 2013, Mr. Walker assumed the position ofwas appointed CEO in May 2012 at which time his base salary was increased to $1,300,000. He was appointed Chairman President and CEO. Prior to that date, Mr. Walker served as President and CEO.in May 2013 with no additional salary increase. |
(6) | Messrs. Gwin, Meloy, Daniels, and Reeves each had a negative change in pension value for 2013 as follows: Mr. Gwin — $(222,912); Mr. Meloy — $(334,010); Mr. Daniels — $(1,157,927); and Mr. Reeves — $(198,775). |
All Other Compensation Table for 20132014 The following table describes each component of the “All Other Compensation” column for the fiscal year ended December 31, 20132014 in the Summary Compensation Table: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Personal Use of Aircraft ($)(1) | | Payments by the Company to Employee 401(k) Plan and Savings Restoration Plan ($) | | Club Membership Dues ($)(2) | | Financial/ Tax/Estate Planning ($) | | Excess Liability Insurance ($) | | Tax Benefit ($) | | Totals ($) | R. A. Walker(3) | | | | 247,600 | | | | | 212,933 | | | | | 37,488 | | | | | 2,166 | | | | | 1,757 | | | | | 0 | | | | | 501,944 | | Robert G. Gwin | | | | 150,013 | | | | | 43,142 | | | | | 27,415 | | | | | 14,265 | | | | | 1,757 | | | | | 0 | | | | | 236,592 | | Charles A. Meloy | | | | 47,588 | | | | | 158,624 | | | | | 10,177 | | | | | 14,265 | | | | | 1,757 | | | | | 0 | | | | | 232,411 | | Robert P. Daniels | | | | 37,542 | | | | | 95,174 | | | | | 25,204 | | | | | 14,265 | | | | | 1,757 | | | | | 0 | | | | | 173,942 | | Robert K. Reeves | | | | 34,070 | | | | | 99,367 | | | | | 8,936 | | | | | 30,365 | | | | | 1,757 | | | | | 0 | | | | | 174,495 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Personal Use of Aircraft ($)(1) | | Payments by the Company to Employee 401(k) Plan and Savings Restoration Plan ($) | | Club Membership Dues ($)(2) | | Financial/ Tax/Estate Planning ($) | | Excess Liability Insurance ($) | | Other ($)(3) | | Totals ($) | R. A. Walker(4) | | | | 253,027 | | | | | 253,422 | | | | | 38,388 | | | | | 2,764 | | | | | 1,675 | | | | | 15,868 | | | | | 565,144 | | Robert G. Gwin | | | | 53,668 | | | | | 115,904 | | | | | 37,173 | | | | | 14,835 | | | | | 1,675 | | | | | 0 | | | | | 223,255 | | Charles A. Meloy | | | | 0 | | | | | 170,506 | | | | | 32,062 | | | | | 14,835 | | | | | 1,675 | | | | | 4,661 | | | | | 223,739 | | Robert P. Daniels | | | | 38,885 | | | | | 102,304 | | | | | 11,121 | | | | | 14,835 | | | | | 1,675 | | | | | 0 | | | | | 168,820 | | Robert K. Reeves | | | | 57,366 | | | | | 106,665 | | | | | 8,508 | | | | | 4,370 | | | | | 1,675 | | | | | 784 | | | | | 179,368 | |
(1) | The amount reported above reflects the value of personal aircraft use for 2013.2014. The value of personal aircraft use is based on the Company’s aggregate incremental direct operating costs, including cost of fuel, maintenance, landing and ramp fees, and other miscellaneous trip-related variable costs. Because the |
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Executive Compensation | Company’s aircraft are used predominantly for business purposes, fixed costs, which do not change based on use of the aircraft, are excluded. The value of travel to board meetings for companies other than Anadarko or its affiliates and civic organizations for which the NEOs serve as directors is considered personal use and is included in the amount reported above. Compensation is imputed for personal use of our aircraft by the NEOs and their guests. |
(2) | The amounts disclosed represent the payment of club membership fees. For those clubs not used exclusively for business, the entire amount has been included, although we believe that only a portion of this cost represents a perquisite. |
(3) | The amounts disclosed represent reimbursements to the executive officer for the cost of an executive physical. |
(4) | Mr. Walker has a personal usage limit with respect to the Company’s aircraft, which is discussed in more detail on page 51.53. |
GRANTS OF PLAN-BASED AWARDS IN 20132014 The Grants of Plan-Based Awards Table sets forth information concerning annual incentive awards, performance units, stock options, and restricted stock units granted or modified during 20132014 for each of the NEOs as described below. Non-equity incentive plan awards. Values disclosed reflect the estimated cash payouts under the Company’s AIP, as discussed on page 41,42, based on actual salaries earned in 2013.2014. If threshold levels of performance are not met, the payout can be zero. If maximum levels of performance are achieved, the payout can be 200% of each NEO’s target. The amounts actually paid to the NEOs for 20132014 are disclosed in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. | | | 58
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Executive Compensation
Equity incentive plan awards. Awards reported reflect performance units, as discussed beginning on page 46, which are denominated as an equivalent of one share of our stock and, if earned, are paid in cash. Executive officers may earn from 0% to 200% of the targeted award based on the Company’s relative TSR performance against a specified peer group over a designatedthree-year performance period. The threshold value reported represents the lowest earned amount, other than zero, based on a defined payout scale. Fifty percent of the award is tied to a two-year performance period and the remaining fifty percent is tied to a three-year performance period. Executive officers do not have voting rights with respect to performance units, and unless after a change of control the award has been converted into restricted stock units of the surviving company, no dividend equivalents are paid on the awards. Stock awards. Awards reported reflect restricted stock unit awards that vest pro-rata annually over three years, beginning with the first anniversary of the grant date. Dividend equivalents are reinvested in shares of the Company’s common stock and paid upon the applicable vesting of the underlying award. Awards are eligible to be voluntarily deferred. | | | | | | | | 61 | |
Executive Compensation Stock option awards. Stock options vest pro-rata annually over three years, beginning with the first anniversary of the date of grant and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(1) | Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | | | R. A. Walker | | | | | | | | | 0 | | | | | 1,690,000 | | | | | 3,380,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 148,378 | | | | | 92.02 | | | | | 3,848,495 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 29,945 | | | | | — | | | | | — | | | | | 2,755,539 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | 11,879 | | | | | 43,997 | | | | | 87,994 | | | | | — | | | | | — | | | | | — | | | | | 4,435,339 | | Robert G. Gwin | | | | | | | | | 0 | | | | | 683,087 | | | | | 1,366,174 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 59,232 | | | | | 92.02 | | | | | 1,536,306 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 11,954 | | | | | — | | | | | — | | | | | 1,100,007 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | 4,742 | | | | | 17,564 | | | | | 35,128 | | | | | — | | | | | — | | | | | — | | | | | 1,770,627 | | Charles A. Meloy | | | | | | | | | 0 | | | | | 580,962 | | | | | 1,161,924 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 60,579 | | | | | 92.02 | | | | | 1,571,244 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 12,226 | | | | | — | | | | | — | | | | | 1,125,037 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | 4,850 | | | | | 17,963 | | | | | 35,926 | | | | | — | | | | | — | | | | | — | | | | | 1,810,852 | | Robert P. Daniels | | | | | | | | | 0 | | | | | 580,962 | | | | | 1,161,924 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 60,579 | | | | | 92.02 | | | | | 1,571,244 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 12,226 | | | | | — | | | | | — | | | | | 1,125,037 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | 4,850 | | | | | 17,963 | | | | | 35,926 | | | | | — | | | | | — | | | | | — | | | | | 1,810,852 | | Robert K. Reeves | | | | | | | | | 0 | | | | | 622,981 | | | | | 1,245,962 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 46,363 | | | | | 92.02 | | | | | 1,202,522 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 9,357 | | | | | — | | | | | — | | | | | 861,031 | | | | | | 11/6/2013 | | | | | — | | | | | — | | | | | — | | | | | 3,712 | | | | | 13,748 | | | | | 27,496 | | | | | — | | | | | — | | | | | — | | | | | 1,385,936 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(1) | Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | | | R. A. Walker | | | | | | | | | 0 | | | | | 1,690,000 | | | | | 3,380,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 118,005 | | | | | 93.51 | | | | | 2,779,856 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 29,514 | | | | | — | | | | | — | | | | | 2,759,854 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | 22,242 | | | | | 55,606 | | | | | 111,212 | | | | | — | | | | | — | | | | | — | | | | | 5,557,820 | | Robert G. Gwin | | | | | | | | | 0 | | | | | 712,500 | | | | | 1,425,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 47,107 | | | | | 93.51 | | | | | 1,109,704 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 11,782 | | | | | — | | | | | — | | | | | 1,101,735 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | 8,879 | | | | | 22,198 | | | | | 44,396 | | | | | — | | | | | — | | | | | — | | | | | 2,218,690 | | Charles A. Meloy | | | | | | | | | 0 | | | | | 665,000 | | | | | 1,330,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 48,179 | | | | | 93.51 | | | | | 1,134,958 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 12,050 | | | | | — | | | | | — | | | | | 1,126,796 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | 9,081 | | | | | 22,703 | | | | | 45,406 | | | | | — | | | | | — | | | | | — | | | | | 2,269,165 | | Robert P. Daniels | | | | | | | | | 0 | | | | | 665,000 | | | | | 1,330,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 48,179 | | | | | 93.51 | | | | | 1,134,958 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 12,050 | | | | | — | | | | | — | | | | | 1,126,796 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | 9,081 | | | | | 22,703 | | | | | 45,406 | | | | | — | | | | | — | | | | | — | | | | | 2,269,165 | | Robert K. Reeves | | | | | | | | | 0 | | | | | 665,000 | | | | | 1,330,000 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 36,873 | | | | | 93.51 | | | | | 868,621 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 9,223 | | | | | — | | | | | — | | | | | 862,443 | | | | | | 11/6/2014 | | | | | — | | | | | — | | | | | — | | | | | 6,950 | | | | | 17,376 | | | | | 34,752 | | | | | — | | | | | — | | | | | — | | | | | 1,736,731 | |
(1) | Unless otherwise noted, the amounts in this column reflect the aggregate grant date fair value of awards made to NEOs in 20132014 computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of the valuation assumptions, see Note 15 — Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2013.2014. |
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Executive Compensation OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 20132014 The following table reflects outstanding stock option awards and unvested and unearned stock awards (both time-based and performance-contingent) as of December 31, 2013,2014, assuming a market value of $79.32$82.50 a share (the closing stock price of the Company’s stock on December 31, 2013)2014). | | | Option Awards(1) | | | Stock Awards(2)(3) | | | Option Awards(1) | | | Stock Awards(2)(3) | | | | | | | | Equity Incentive Plan Awards | | | | | | Equity Incentive Plan Awards | | | | Restricted Stock/Units | | Performance Units | | | | Restricted Stock/Units | | Performance Units | | | | Number of Shares or Units of Stock That Have Not Vested(#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) | | | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($) | | | | Number of Shares or Units of Stock That Have Not Vested(#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) | | | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($) | | | Number of Securities Underlying Unexercised Options | | Option Exercise Price($) | | | Option Expiration Date | | | | Number of Securities Underlying Unexercised Options | | Option Exercise Price($) | | | Option Expiration Date | | | Name | | Exercisable(#) | | Unexercisable(#) | | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Exercisable(#) | | Unexercisable(#) | | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | | R. A. Walker | | 62,200 | | | 0 | | | 59.87 | | | 11/6/2014 | | | 9,033 | | | 716,498 | | | 11,845 | | | 939,545 | | | | | | | | | | | | | | | 4,416 | | | 364,320 | | | | | | | | | | | | | | 5,831 | | | 481,058 | | | 4,834 | | | 398,805 | | | | 182,900 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 11,541 | | | 915,432 | | | 8,832 | | | 700,554 | | | 72,700 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 18,480 | | | 1,524,600 | | | 31,589 | | | 2,606,093 | | | | 72,700 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 36,576 | | | 2,901,208 | | | 5,674 | | | 450,062 | | | 85,189 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 20,218 | | | 1,667,985 | | | 64,236 | | | 5,299,470 | | | | 85,189 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 30,013 | | | 2,380,631 | | | 18,541 | | | 1,470,672 | | | 87,076 | | | 0 | | | 83.95 | | | 11/8/2018 | | | 29,609 | | | 2,442,743 | | | 55,606 | | | 4,587,495 | | | | 58,051 | | | 29,025 | | | 83.95 | | | 11/8/2018 | | | | | | | | 43,997 | | | 3,489,842 | | | 35,007 | | | 17,504 | | | 66.38 | | | 5/15/2019 | | | | | | | | | | | | | 17,504 | | | 35,007 | | | 66.38 | | | 5/15/2019 | | | | | | | | | | | | 113,067 | | | 56,533 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | | 56,534 | | | 113,066 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | 49,460 | | | 98,918 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | | 0 | | | 148,378 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | 0 | | | 118,005 | | | 93.51 | | | 11/6/2021 | | | | | | | | | | | Robert G. Gwin | | 21,700 | | | 0 | | | 59.87 | | | 11/6/2014 | | | 5,415 | | | 429,518 | | | 7,544 | | | 598,390 | | | | | | | | | | | | 6,587 | | | 543,428 | | | 2,648 | | | 218,460 | | | | 22,300 | | | 0 | | | 64.69 | | | 3/12/2015 | | | 13,036 | | | 1,034,016 | | | 5,295 | | | 419,999 | | | | | | | | | | | | 8,072 | | | 665,940 | | | 11,258 | | | 928,785 | | | | 78,600 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 11,981 | | | 950,333 | | | 6,608 | | | 524,147 | | | 78,600 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 11,820 | | | 975,150 | | | 25,644 | | | 2,115,630 | | | | 66,200 | | | 0 | | | 34.95 | | | 3/1/2016 | | | | | | | | 17,564 | | | 1,393,176 | | | 66,200 | | | 0 | | | 34.95 | | | 3/1/2016 | | | | | | | | 22,198 | | | 1,831,335 | | | | 47,200 | | | 0 | | | 65.44 | | | 11/10/2016 | | | | | | | | | | | | 47,200 | | | 0 | | | 65.44 | | | 11/10/2016 | | | | | | | | | | | | | 54,256 | | | 0 | | | 63.34 | | | 11/9/2017 | | | | | | | | | | | | 54,256 | | | 0 | | | 63.34 | | | 11/9/2017 | | | | | | | | | | | | | 34,797 | | | 17,399 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | 52,196 | | | 0 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | | 20,149 | | | 40,298 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | 40,298 | | | 20,149 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | | 0 | | | 59,232 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | 19,744 | | | 39,488 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | | | 0 | | | 47,107 | | | 93.51 | | | 11/6/2021 | | | | | | | | | | | Charles A. Meloy | | 34,600 | | | 0 | | | 59.87 | | | 11/6/2014 | | | 5,559 | | | 440,940 | | | 6,756 | | | 535,886 | | | | | | | | | | | | | | | | | 2,718 | | | 224,235 | | | | | | | | | | | | | | 6,762 | | | 557,865 | | | 11,558 | | | 953,535 | | | | 26,500 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 13,382 | | | 1,061,460 | | | 5,435 | | | 431,104 | | | 32,500 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 8,255 | | | 681,038 | | | 26,226 | | | 2,163,645 | | | | 32,500 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 12,254 | | | 971,987 | | | 6,784 | | | 538,107 | | | 48,586 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 12,089 | | | 997,343 | | | 22,703 | | | 1,872,998 | | | | 48,586 | | | 0 | | | 63.34 | | | 11/9/2017 | | | | | | | | 17,963 | | | 1,424,825 | | | 53,585 | | | 0 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | | 35,723 | | | 17,862 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | 41,369 | | | 20,685 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | | 20,685 | | | 41,369 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | 20,193 | | | 40,386 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | | 0 | | | 60,579 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | 0 | | | 48,179 | | | 93.51 | | | 11/6/2021 | | | | | | | | | | | Robert P. Daniels | | 40,100 | | | 0 | | | 59.87 | | | 11/6/2014 | | | 5,559 | | | 440,940 | | | 6,756 | | | 535,886 | | | | | | | | | | | | | | | | | 2,718 | | | 224,235 | | | | 95,400 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 13,382 | | | 1,061,460 | | | 5,435 | | | 431,104 | | | 65,400 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 6,762 | | | 557,865 | | | 11,558 | | | 953,535 | | | | 32,500 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 12,254 | | | 971,987 | | | 6,784 | | | 538,107 | | | 32,500 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 8,255 | | | 681,038 | | | 26,226 | | | 2,163,645 | | | | 48,586 | | | 0 | | | 63.34 | | | 11/9/2017 | | | | | | | | 17,963 | | | 1,424,825 | | | 48,586 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 12,089 | | | 997,343 | | | 22,703 | | | 1,872,998 | | | | 35,723 | | | 17,862 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | 53,585 | | | 0 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | | 20,685 | | | 41,369 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | 41,369 | | | 20,685 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | | 0 | | | 60,579 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | 20,193 | | | 40,386 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | | | 0 | | | 48,179 | | | 93.51 | | | 11/6/2021 | | | | | | | | | | | Robert K. Reeves | | 50,900 | | | 0 | | | 59.87 | | | 11/6/2014 | | | 4,239 | | | 336,237 | | | 5,905 | | | 468,385 | | | | | | | | | | | | | | | | | 2,073 | | | 171,023 | | | | 115,300 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 3,971 | | | 314,980 | | | 4,145 | | | 328,781 | | | 115,300 | | | 0 | | | 35.18 | | | 11/4/2015 | | | 5,156 | | | 425,370 | | | 8,813 | | | 727,073 | | | | 36,700 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 10,204 | | | 809,381 | | | 5,173 | | | 410,322 | | | 36,700 | | | 0 | | | 65.44 | | | 11/10/2016 | | | 6,318 | | | 521,235 | | | 20,072 | | | 1,655,940 | | | | 42,469 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 9,378 | | | 743,863 | | | 13,748 | | | 1,090,491 | | | 42,469 | | | 0 | | | 63.34 | | | 11/9/2017 | | | 9,252 | | | 763,290 | | | 17,376 | | | 1,433,520 | | | | 27,237 | | | 13,619 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | 40,856 | | | 0 | | | 83.95 | | | 11/8/2018 | | | | | | | | | | | | | 15,772 | | | 31,544 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | 31,544 | | | 15,772 | | | 70.70 | | | 11/5/2019 | | | | | | | | | | | | | 0 | | | 46,363 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | 15,455 | | | 30,908 | | | 92.02 | | | 11/6/2020 | | | | | | | | | | | | | | 0 | | | 36,873 | | | 93.51 | | | 11/6/2021 | | | | | | | | | | |
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Executive Compensation (1) | The table below shows the vesting dates for the respective unexercisable stock options listed in the above Outstanding Equity Awards Table: |
| Vesting Date | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | 5/15/2014 | | | 17,503 | | | | | — | | | | | — | | | | | — | | | | | — | | | 11/5/2014 | | | 56,533 | | | | 20,149 | | | | 20,684 | | | | 20,684 | | | | 15,772 | | | 11/6/2014 | | | 49,460 | | | | 19,744 | | | | 20,193 | | | | 20,193 | | | | 15,455 | | | 11/8/2014 | | | 29,025 | | | | 17,399 | | | | 17,862 | | | | 17,862 | | | | 13,619 | | | 5/15/2015 | | | 17,504 | | | | | — | | | | | — | | | | | — | | | | | — | | | | 17,504 | | | | | — | | | | | — | | | | | — | | | | | — | | 11/5/2015 | | | 56,533 | | | | 20,149 | | | | 20,685 | | | | 20,685 | | | | 15,772 | | | | 56,533 | | | | 20,149 | | | | 20,685 | | | | 20,685 | | | | 15,772 | | 11/6/2015 | | | 49,459 | | | | 19,744 | | | | 20,193 | | | | 20,193 | | | | 15,454 | | | | 49,459 | | | | 19,744 | | | | 20,193 | | | | 20,193 | | | | 15,454 | | 11/6/2015 | | | | 39,335 | | | | 15,703 | | | | 16,060 | | | | 16,060 | | | | 12,291 | | 11/6/2016 | | | 49,459 | | | | 19,744 | | | | 20,193 | | | | 20,193 | | | | 15,454 | | | | 49,459 | | | | 19,744 | | | | 20,193 | | | | 20,193 | | | | 15,454 | | 11/6/2016 | | | | 39,335 | | | | 15,702 | | | | 16,059 | | | | 16,059 | | | | 12,291 | | 11/6/2017 | | | | 39,335 | | | | 15,702 | | | | 16,060 | | | | 16,060 | | | | 12,291 | |
(2) | The table below shows the vesting dates for the respective restricted stock units, including any dividend equivalents accrued but unvested, listed in the above Outstanding Equity Awards Table: |
| Vesting Date | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | 5/15/2014 | | | 5,770 | | | | | — | | | | | — | | | | | — | | | | | — | | | 11/5/2014 | | | 18,288 | | | | 6,517 | | | | 6,690 | | | | 6,690 | | | | 5,102 | | | 11/6/2014 | | | 10,004 | | | | 3,994 | | | | 4,085 | | | | 4,085 | | | | 3,126 | | | 11/8/2014 | | | 9,033 | | | | 5,415 | | | | 5,559 | | | | 5,559 | | | | 8,210 | | | 5/15/2015 | | | 5,771 | | | | | — | | | | | — | | | | | — | | | | | — | | | | 5,831 | | | | | — | | | | | — | | | | | — | | | | | — | | 11/5/2015 | | | 18,288 | | | | 6,519 | | | | 6,692 | | | | 6,692 | | | | 5,102 | | | | 18,480 | | | | 6,587 | | | | 6,762 | | | | 6,762 | | | | 5,156 | | 11/6/2015 | | | 10,004 | | | | 3,993 | | | | 4,084 | | | | 4,084 | | | | 3,126 | | | | 10,108 | | | | 4,035 | | | | 4,127 | | | | 4,127 | | | | 3,159 | | 11/6/2015 | | | | 9,869 | | | | 3,940 | | | | 4,030 | | | | 4,030 | | | | 3,084 | | 11/6/2016 | | | 10,005 | | | | 3,994 | | | | 4,085 | | | | 4,085 | | | | 3,126 | | | | 10,110 | | | | 4,037 | | | | 4,128 | | | | 4,128 | | | | 3,159 | | 11/6/2016 | | | | 9,870 | | | | 3,940 | | | | 4,029 | | | | 4,029 | | | | 3,084 | | 11/6/2017 | | | | 9,870 | | | | 3,940 | | | | 4,030 | | | | 4,030 | | | | 3,084 | |
(3) | The table below shows the performance periods for the respective performance units listed in the above Outstanding Equity Awards Table. Generally, theThe number of outstanding units and the estimated payout percentages disclosed for each award isare calculated based on our relative performance ranking as of December 31, 2013,2014 and are isnot necessarily indicative of what the payout percent earned will be at the end of the specified performance period. The awards with performance periods beginning in 2013 are currently tracking a 0% payout; however the number of outstanding units disclosed is calculated based on achieving threshold performance. For awards that were granted in 20132014 with performance periods beginning in 2014,2015, target payout has been assumed. |
| Performance Period | | Performance to Date Payout | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | | Performance to Date Payout | | Mr. Walker | | Mr. Gwin | | Mr. Meloy | | Mr. Daniels | | Mr. Reeves | 1/1/2011 to 12/31/2013 | | | 92% | | | | 11,845 | | | | 7,544 | | | | 6,756 | | | | 6,756 | | | | 5,905 | | | 1/1/2012 to 12/31/2013 | | | 54% | | | | 4,416 | | | | 2,647 | | | | 2,717 | | | | 2,717 | | | | 2,072 | | | 1/1/2012 to 12/31/2014 | | | 54% | | | | 4,416 | | | | 2,648 | | | | 2,718 | | | | 2,718 | | | | 2,073 | | | | 54% | | | | 4,416 | | | | 2,648 | | | | 2,718 | | | | 2,718 | | | | 2,073 | | 5/15/2012 to 5/14/2014 | | | 54% | | | | 2,837 | | | | | — | | | | | — | | | | | — | | | | | — | | | 5/15/2012 to 5/14/2015 | | | 54% | | | | 2,837 | | | | | — | | | | | — | | | | | — | | | | | — | | | | 92% | | | | 4,834 | | | | | — | | | | | — | | | | | — | | | | | — | | 1/1/2013 to 12/31/2014 | | | 54% | | | | 9,270 | | | | 3,304 | | | | 3,392 | | | | 3,392 | | | | 2,586 | | | | 92% | | | | 15,794 | | | | 5,629 | | | | 5,779 | | | | 5,779 | | | | 4,406 | | 1/1/2013 to 12/31/2015 | | | 54% | | | | 9,271 | | | | 3,305 | | | | 3,392 | | | | 3,392 | | | | 2,587 | | | | 92% | | | | 15,795 | | | | 5,629 | | | | 5,779 | | | | 5,779 | | | | 4,407 | | 1/1/2014 to 12/31/2015 | | | 100% | | | | 21,998 | | | | 8,782 | | | | 8,981 | | | | 8,981 | | | | 6,874 | | | | 146% | | | | 32,117 | | | | 12,822 | | | | 13,112 | | | | 13,112 | | | | 10,036 | | 1/1/2014 to 12/31/2016 | | | 100% | | | | 21,999 | | | | 8,782 | | | | 8,982 | | | | 8,982 | | | | 6,874 | | | | 146% | | | | 32,119 | | | | 12,822 | | | | 13,114 | | | | 13,114 | | | | 10,036 | | 1/1/2015 to 12/31/2017 | | | | 100% | | | | 55,606 | | | | 22,198 | | | | 22,703 | | | | 22,703 | | | | 17,376 | |
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Executive Compensation OPTION EXERCISES AND STOCK VESTED IN 20132014 The following table provides information about the aggregate dollar value realized during 20132014 by the NEOs for Anadarko awards, including option exercises, vesting of restricted stock units and performance unit payouts. | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise(#) | | Value Realized on Exercise($)(1) | | Number of Shares Acquired on Vesting(#)(2) | | Value Realized on Vesting($)(1) | | Number of Shares Acquired on Exercise(#) | | Value Realized on Exercise($)(1) | | Number of Shares Acquired on Vesting(#)(2) | | Value Realized on Vesting($)(1) | R. A. Walker(3) | | | 87,400 | | | | 3,702,772 | | | | 66,077 | | | | 5,787,906 | | | | 245,100 | | | | 16,122,860 | | | | 64,407 | | | | 5,907,352 | | Robert G. Gwin(4) | | | 87,100 | | | | 3,564,501 | | | | 33,106 | | | | 2,868,584 | | | | 44,000 | | | | 2,000,651 | | | | 26,192 | | | | 2,339,408 | | Charles A. Meloy | | | 0 | | | | 0 | | | | 34,599 | | | | 2,982,019 | | | | 61,100 | | | | 3,560,843 | | | | 25,885 | | | | 2,317,441 | | Robert P. Daniels | | | 19,100 | | | | 730,366 | | | | 39,862 | | | | 3,460,794 | | | | 70,100 | | | | 3,481,070 | | | | 25,885 | | | | 2,317,441 | | Robert K. Reeves(5) | | | 76,500 | | | | 3,239,195 | | | | 29,850 | | | | 2,603,833 | | | | 50,900 | | | | 2,451,233 | | | | 24,473 | | | | 2,205,653 | |
(1) | The value realized reflects the taxable value to the NEO as of the date of the option exercise, vesting of restricted stock units, or payment of performance unit awards. |
(2) | The numbers disclosed include restricted stock units and performance unit awards paid in shares and cash, respectively, for which restrictions lapsed during 2013. |
(3) | Mr. Walker’s value includes the exercise of expiring stock options purchased with shares of Company common stock previously held by Mr. Walker. On November 13, 2013 and November 14, 2013, respectively, Mr. Walker transferred 33,841 and 29,977 shares of Company common stock to the Company (based on the applicable stock prices of $91.22 and $91.08) as consideration for the exercise price and applicable withholding tax. |
(4) | Mr. Gwin’s value includes the exercise of expiring stock options purchased with shares of Company common stock previously held by Mr. Gwin. On January 3, 2013, Mr. Gwin transferred 20,738 shares of Company common stock to the Company (based on the applicable stock price of $76.29) as consideration for the exercise price and applicable withholding tax. |
(5) | Mr. Reeves’s value includes the exercise of expiring stock options purchased with shares of Company common stock previously held by Mr. Reeves. On November 13, 2013 and November 14, 2013, respectively, Mr. Reeves transferred 25,891 and 29,977 shares of Company common stock to the Company (based on the applicable stock price of $91.22 and $91.08) as consideration for the exercise price and applicable withholding tax.2014. |
PENSION BENEFITS FOR 20132014 The Company maintains the Anadarko Retirement Plan (the APC Retirement Plan) and theKerr-McGee Corporation Retirement Plan (the KMG Retirement Plan), both of which are funded tax-qualified defined benefit pension plans. In addition, the Company maintains the Anadarko Retirement Restoration Plan, or the APC Retirement Restoration Plan, and the Kerr-McGee Benefits Restoration Plan, or the KMG Restoration Plan, both of which are unfunded, non-qualified pension benefit plans that are designed to provide for supplementary pension benefits due to limitations imposed by the IRC that restrict the amount of benefits payable under tax-qualified plans. APC Retirement Plan and APC Retirement Restoration Plan The APC Retirement Plan covers all U.S.-based Anadarko employees, except for legacyKerr-McGee employees. The APC Retirement Restoration Plan covers certain U.S.-based Anadarko employees, except for legacy Kerr-McGee employees, who are affected by certain IRC limitations. For those employees hired prior to January 1, 2007, which includes all of the NEOs except Mr. Meloy (who is a participant in the KMG Retirement Plan), benefits under these plans are based upon the employee’s years of service and the average monthly earnings during the 36 highest paid consecutive months of the last 120 months of employment with the Company. | | | 62
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The APC Retirement Plan and the APC Retirement Restoration Plan (collectively, APC Retirement Plans) do not require contributions by employees. An employee becomes vested in his or her benefit at the completion of three years of service. Compensation covered by the APC Retirement Plans includes base salary and payments under the AIP. The maximum amount of compensation for 20132014 that may be considered in calculating benefits under the APC Retirement Plan was $255,000$260,000 due to the annual IRC limitation. Compensation in excess of $255,000$260,000 was recognized in determining benefits payable under the APC Retirement Restoration Plan. | | | | | | | | 65 | |
Executive Compensation For employees hired prior to January 1, 2007, benefits under the APC Retirement Plans are calculated as a life-only annuity (meaning that benefits end upon the participant’s death) and are equal to the sum of the following: 1.4% x average compensation x years of service with the Company; plus 0.4% x (average compensation - compensation—covered compensation) x years of service with the Company (limited to 35 years). Covered compensation is the average (without indexing) of the Social Security taxable wage base during the 35-year period ending with the last day of the year in which an individual reaches Social Security retirement age. Benefits are calculated based on a normal retirement age of 65; however, employees may receive a reduced early retirement benefit as early as age 55. Employees may choose to receive their benefits under several different forms provided under the APC Retirement Plan. Employees receive their benefits from the APC Retirement Restoration Plan in the form of a lump-sum payment. As of December 31, 2013,2014, Messrs. Walker, Daniels and Reeves were the only NEOs eligible for early retirement under the APC Retirement Plans. Early retirement benefits are calculated using the formula described above; however, the value is multiplied by an early retirement reduction factor as follows: | | | | | | Age | | Early Retirement Factor | 62 and older | | | | 100% | | 61 | | | | 97% | | 60 | | | | 94% | | 59 | | | | 91% | | 58 | | | | 88% | | 57 | | | | 85% | | 56 | | | | 82% | | 55 | | | | 79% | |
KMG Retirement Plan and KMG Restoration Plan The KMG Retirement Plan covers all U.S.-based, legacy Kerr-McGee employees who have not incurred a break in service of greater than one year since the date Kerr-McGee was acquired by Anadarko. The KMG Restoration Plan covers certain legacy Kerr-McGee U.S.-based employees that are affected by the IRC limitations. Benefits under these plans are based upon the employee’s years of service and the average monthly earnings during the 36 highest paid consecutive months of the last 120 months of employment. The KMG Retirement Plan and the KMG Restoration Plan (collectively, KMG Retirement Plans) do not require contributions by employees. An employee becomes vested in his or her benefit at the | | | | | | | | 63
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completion of three years of service. Compensation covered by the KMG Retirement Plans includes base salary and payments under the AIP. The maximum amount of compensation for 20132014 that may be considered in calculating benefits under the KMG Retirement Plan was $255,000$260,000 due to the annual IRC limitation. Compensation in excess of $255,000$260,000 was recognized in determining benefits payable under the KMG Restoration Plan. | | | 66 | | |
Executive Compensation Benefits under the KMG Retirement Plans are calculated as a life-only annuity for single participants, and a joint and 50% contingent annuity for married participants who are eligible for retirement. Benefits under this plan are equal to the sum of Part A and Part B: Part A: 1.1% x average compensation x years of service prior to March 1, 1999; plus 0.5% x (average compensation - covered compensation) x years of service prior to March 1, 1999 (limited to 35 years). Part B: 1.667% x average compensation x years of service on or after March 1, 1999 (limited to 30 years); plus 0.75% x average compensation x years of service on or after March 1, 1999 in excess of 30 years; less 1% x primary Social Security benefit x years of service on or after March 1, 1999 as of age 65 (limited to 30 years) x (years of service on or after March 1, 1999 divided by years of service on or after March 1, 1999 at age 65). Covered compensation is the average (without indexing) of the Social Security taxable wage base during the 35-year period ending with the last day of the year in which an individual reaches Social Security retirement age. Benefits are calculated based on a normal retirement age of 65; however, employees may receive a reduced early retirement benefit as early as age 52. Employees may choose to receive their benefits under several different forms provided under the KMG Retirement Plan. Employees receive their benefits from the KMG Restoration Plan in the form of a lump-sum payment. | | | 64
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Mr. Meloy is eligible for early retirement under the KMG Restoration Plan. Early retirement benefits under the KMG Retirement Plans are calculated using the formula described above, however, the value is multiplied by an early retirement reduction factor as follows: | | | First Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned Before March 1, 1999) | | Second Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned On or After March 1, 1999) | | First Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned Before March 1, 1999) | | Second Formula Percentage of Normal Retirement Age Benefit Payable (Age Reductions for Benefits Earned On or After March 1, 1999) | Age Benefit Payments Start | | Part A | | Part B | | | Part A | | Part B | | 62 and older | | 100% | | 100% | | 100% | | 100% | | 100% | | 100% | 61 | | 100% | | 95% | | 100% | | 100% | | 95% | | 100% | 60 | | 100% | | 90% | | 100% | | 100% | | 90% | | 100% | 59 | | 95% | | 85% | | 95% | | 95% | | 85% | | 95% | 58 | | 90% | | 80% | | 90% | | 90% | | 80% | | 90% | 57 | | 85% | | 75% | | 85% | | 85% | | 75% | | 85% | 56 | | 80% | | 67.5% | | 80% | | 80% | | 67.5% | | 80% | 55 | | 75% | | 60% | | 75% | | 75% | | 60% | | 75% | 54 | | 70% | | 55% | | 70% | | 70% | | 55% | | 70% | 53 | | 65% | | 50% | | 65% | | 65% | | 50% | | 65% | 52 | | 60% | | 45% | | 60% | | 60% | | 45% | | 60% |
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Executive Compensation As of December 31, 2011, recognizing the high percentage of employees eligible to retire and based upon a recommendation from the Compensation Committee, the Board provided legacy participants in both the APC and KMG Retirement Plans a one-time option to either (1) continue to accrue benefits as outlined above (Option 1) or (2) accrue future benefits under the PWA using the same cash balance formula as employees hired on or after January 1, 2007 (Option 2). This one-time election was designed to increase employee retention by minimizing the impact of interest rate fluctuations on early retirement decisions and to accelerate the migration of employees into the PWA. For participants electing Option 2, the above formulae were modified such that: Future accruals consist of pay credits (outlined in the table below, with points equal to the sum of age and years of service) and interest credits; Consistent with the treatment of employees hired on or after January 1, 2007, Anadarko will make an additional contribution each year to the Employee Savings Plan (and/or the Savings Restoration Plan, to the extent required) of four percent of eligible compensation; Service and average compensation used in determining benefits under the above final average pay formulae were frozen as of December 31, 2011; If retirement eligible on or before December 31, 2012, the lump sum interest rate used in determining the lump sum value of pre-2012 accruals would be no greater than 3.18%; and If not retirement eligible on or before December 31, 2012, the lump sum interest rate used in determining the lump sum value of pre-2012 accruals would be no greater than the rate in effect on the date the participant first becomes eligible for early retirement. | | | | | | | | 65
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Messrs. Walker, Gwin, Daniels, and Reeves chose to continue receiving benefits under Option 1. Mr. Meloy chose to accrue benefits under the PWA beginning in 2012, according to Option 2. The current pay credits provided under the PWA are as follows: | | | | | | Points | | Pay Credit | 80 or more | | | | 13% | | 70 | | | | 11% | | 60 | | | | 9% | | 50 | | | | 7% | | 40 | | | | 6% | | Less than 40 | | | | 5% | |
The present values provided in the table below are based on the pension benefits accrued through December 31, 2013,2014, assuming that such benefit is paid in the same form as reflected in the accounting valuation. The benefits are assumed to commence at the specified plan’s earliest unreduced retirement age, which is age 62 for those NEOs under the APC Retirement Plans and age 55 for Mr. Meloy under the KMG Retirement Plans pursuant to his 2006 Retention Agreement. All pre-retirement decrements such as pre-retirement mortality and terminations have been ignored for the purposes of these calculations. The interest rate used for discounting payments back to December 31, 2013,2014, is 4.50%4.00% in the APC Retirement Restoration Plan and 5.00%4.25% in the APC Retirement Plan; and 4.50%4.00% in both the KMG Restoration Plan and the KMG Retirement Plan, consistent with the discount rates used in the accounting valuation. The long-term interest rate used for converting the benefit to a lump-sum form of payment is set at 100 basis points less than the discount rate, but not less than the most recently | | | 68 | | |
Executive Compensation published 30-year Treasury rate. Lump sums for NEOs who have locked in or will lock in a known interest rate pursuant to Option 2 (PWA) choice are valued using such lock-in rate. The interest rates used for calculating the values below are 3.89%3.00% in the APC Retirement Restoration Plan and 4.00%3.25% in the APC Retirement Plan; and 3.89%3.00% in both the KMG Restoration Plan and the KMG Retirement Plan. PENSION BENEFITS | Name | | Plan Name | | Number of Years of Credited Service (#) | | Present Value of Accumulated Benefit ($) | | Payments During 2013 ($) | | Plan Name | | Number of Years of Credited Service (#) | | Present Value of Accumulated Benefit ($) | | Payments During 2014 ($) | R. A. Walker(1) | | APC Retirement Plan | | | 8.000 | | | | 358,153 | | | | 0 | | | APC Retirement Plan | | | 9.000 | | | | 479,663 | | | | 0 | | | | APC Retirement Restoration Plan | | | 16.000 | | | | 7,699,683 | | | | 0 | | | APC Retirement Restoration Plan | | | 17.000 | | | | 12,783,787 | | | | 0 | | Robert G. Gwin | | APC Retirement Plan | | | 8.000 | | | | 261,513 | | | | 0 | | | APC Retirement Plan | | | 9.000 | | | | 366,167 | | | | 0 | | | | APC Retirement Restoration Plan | | | 8.000 | | | | 1,825,600 | | | | 0 | | | APC Retirement Restoration Plan | | | 9.000 | | | | 2,461,049 | | | | 0 | | Charles A. Meloy(2) | | KMG Retirement Plan | | | 31.583 | | | | 1,639,093 | | | | 0 | | | KMG Retirement Plan | | | 32.583 | | | | 1,787,510 | | | | 0 | | | | KMG Restoration Plan | | | 36.583 | | | | 20,092,233 | | | | 0 | | | KMG Restoration Plan | | | 37.583 | | | | 21,967,383 | | | | 0 | | Robert P. Daniels | | APC Retirement Plan | | | 28.000 | | | | 1,137,717 | | | | 0 | | | APC Retirement Plan | | | 29.000 | | | | 1,422,081 | | | | 0 | | | | APC Retirement Restoration Plan | | | 28.000 | | | | 6,706,206 | | | | 0 | | | APC Retirement Restoration Plan | | | 29.000 | | | | 8,369,453 | | | | 0 | | Robert K. Reeves(1) | | APC Retirement Plan | | | 10.000 | | | | 429,854 | | | | 0 | | | APC Retirement Plan | | | 11.000 | | | | 566,269 | | | | 0 | | | | APC Retirement Restoration Plan | | | 15.000 | | | | 4,045,479 | | | | 0 | | | APC Retirement Restoration Plan | | | 16.000 | | | | 5,342,189 | | | | 0 | |
(1) | The value of Messrs. Walker’s and Reeves’s APC Retirement Restoration benefit in the table includes the effect of the additional pension service credits equal to eight and five years of credited service, respectively, provided in 2007 to recognize that they were mid-career hires that we would like to retain for the remainder |
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| of their careers. Providing them additional service credits recognized a portion of their prior industry and service years, which directly benefits us and our stockholders. Messrs. Walker and Reeves vested in these additional pension service credits on February 20, 2012 and December 12, 2012, respectively. Messrs. Walker’s and Reeves’s total pension values as of December 31, 2013,2014, excluding these additional pension service credits are $4,022,454$6,533,908 and $2,977,792,$3,488,957, respectively. |
(2) | The value of Mr. Meloy’s KMG Retirement Restoration Plan benefit includes the effect of the additional pension service credits equal to five years of credit service provided under his 2006 Retention Agreement. Mr. Meloy vested in these additional pension service credits on August 10, 2009. The additional pension service credit was included in the 2006 Retention Agreement to compensate him for certain severance benefits he was otherwise entitled to receive under the change-of-control agreement he had with Kerr-McGee. Mr. Meloy’s total pension value as of December 31, 2013,2014, excluding these additional pension service credits is $14,365,910.$14,474,691. |
NON-QUALIFIED DEFERRED COMPENSATION FOR 20132014 The Company maintains a Deferred Compensation Plan for certain employees, including the NEOs. Under this Plan, certain employees may voluntarily defer receipt of up to 75% of their salary and/or up to 100% of their AIP payments. The Company does not match these deferred amounts. In general, deferred amounts are distributed to the participant upon separation from service or at a specific date as elected by the participant. At the time deferral elections are made, participants also elect to receive their distributions in either lump-sum or annual installments not exceeding 15 years. Due to IRC limitations that restrict the amount of benefits payable under the tax-qualified 401(k) Plan, the Company sponsors a non-qualified Savings Restoration Plan. The Savings Restoration Plan accrues a benefit equal to the excess, if any, of Company matching and PWA contributions that would have been allocated to a participant’s 401(k) Plan account each year without regard to IRC limitations over amounts that were, in fact, allocated to a participant’s account. After a participant reaches the IRC | | | | | | | | 69 | |
Executive Compensation limitations under the 401(k) Plan, the Company makes contributions on their behalf up to the six-percent match on eligible compensation they would have otherwise been entitled to receive under the 401(k) Plan and, if applicable, an additional four percent of eligible compensation for PWA participants. Eligible compensation includes base salary and AIP bonus payments. In general, deferred amounts are distributed to the participant in lump-sum upon separation from service. Both the Deferred Compensation Plan and the Savings Restoration Plan permit participants to allocate the deferred amounts among a group of notional accounts that mirror the gains and/or losses of various investment funds provided in the 401(k) Plan (but excluding the Company stock fund). These notional accounts do not provide for above-market or preferential earnings. Each participant directs investments of the individual accounts set up for the participant under the plans and may make changes in the investments as often as daily. Since each executive officer chooses the investment vehicle or vehicles (including a selection of funds ranging from fixed income to emerging markets, as well as other equity, debt and mixed investment strategies in between) and may change their allocations from time to time, the return on the investment will depend on how well each underlying investment fund performed during the time the executive officer chose it as an investment vehicle. The aggregate performance of such investment is reflected in the “Aggregate Earnings/Losses in 2013”2014” column. | | | | | | | 70 | 67
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Executive Compensation Executive officers were given the opportunity to make voluntary deferral elections for all of their annual restricted stock unit and performance unit awards granted under the Company’s 1999 Stock Incentive Plan and the 2008 and 2012 Omnibus Plans. Any earnings and/or losses attributable to the deferred shares otherwise payable under these awards are based on the performance of the Company’s stock over the deferral period. In general, deferred awards are distributed to the participant, in the form of Company common stock or cash, as designated by the Compensation Committee at the time of grant, upon termination or at a specific date as elected by the participant. The Company does not subsidize or match any deferrals of compensation into these plans. | Name | | Executive Contributions in 2013 ($) | | Company Contributions in 2013 ($) | | Aggregate Earnings/(Losses) in 2013 ($) | | Aggregate Withdrawals / Distributions ($) | | Aggregate Balance at End of 2013 ($) | | Executive Contributions in 2014 ($) | | Company Contributions in 2014 ($) | | Aggregate Earnings/(Losses) in 2014 ($) | | Aggregate Withdrawals / Distributions ($) | | Aggregate Balance at End of 2014 ($) | R. A. Walker | | | | | | | | | | | | | | | | | | | | | Deferred Compensation Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Savings Restoration Plan(1) | | 0 | | | 200,933 | | | 109,964 | | | 0 | | | 1,011,348 | | | 0 | | | 241,422 | | | 62,448 | | | 0 | | | 1,315,218 | | 1999 Stock Incentive Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2008 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2012 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Robert G. Gwin | | | | | | | | | | | | | | | | | | | | | Deferred Compensation Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Savings Restoration Plan(1) | | 0 | | | 27,842 | | | 191,430 | | | 0 | | | 704,153 | | | 0 | | | 108,981 | | | 54,178 | | | 0 | | | 867,313 | | 1999 Stock Incentive Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2008 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2012 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Charles A. Meloy | | | | | | | | | | | | | | | | | | | | | Deferred Compensation Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Savings Restoration Plan(1) | | 0 | | | 149,393 | | | 130,985 | | | 0 | | | 960,848 | | | 0 | | | 159,737 | | | 61,226 | | | 0 | | | 1,181,811 | | 1999 Stock Incentive Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2008 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2012 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Robert P. Daniels | | | | | | | | | | | | | | | | | | | | | Deferred Compensation Plan(2) | | 0 | | | 0 | | | 435,127 | | | 0 | | | 2,028,461 | | | 0 | | | 0 | | | 115,808 | | | 0 | | | 2,144,269 | | Savings Restoration Plan(1) | | 0 | | | 89,636 | | | 68,485 | | | 0 | | | 618,062 | | | 0 | | | 95,842 | | | 33,753 | | | 0 | | | 747,657 | | 1999 Stock Incentive Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2008 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2012 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Robert K. Reeves | | | | | | | | | | | | | | | | | | | | | Deferred Compensation Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Savings Restoration Plan(1) | | 0 | | | 93,367 | | | 74,078 | | | 0 | | | 739,329 | | | 0 | | | 100,204 | | | 39,633 | | | 0 | | | 879,165 | | 1999 Stock Incentive Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2008 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 2012 Omnibus Plan | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
(1) | Company contributions in the Savings Restoration Plan are reported in the Summary Compensation Table for each of the NEOs under the “All Other Compensation” column for the fiscal year 2013.2014. The Savings Restoration Plan Aggregate Balance includes amounts reported in the “All Other Compensation” column of the Summary Compensation Table for 20132014 as well as amounts previously reported in prior Summary Compensation Tables. The amounts currently or previously reported in the Summary Compensation Table for each NEO are as follows: Mr. Walker — $772,787;$1,014,209; Mr. Gwin — $359,084;$468,065; Mr. Meloy — $669,708;$829,445; Mr. Daniels — $402,331;$498,173; and Mr. Reeves — $387,407.$487,611. |
(2) | Mr. Daniels’s balance in the Deferred Compensation Plan includes $366,203 previously reported in prior Summary Compensation Tables. |
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Executive Compensation POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL The following tables reflect potential payments to our NEOs under existing contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios involving a change of control or termination of employment of each NEO, assuming a termination date of December 31, 2013,2014, and, where applicable, using the closing price of our common stock of $79.32$82.50 (as reported on the NYSE as of December 31, 2013)2014). The following are general definitions that apply to the termination scenarios detailed below. These definitions have been summarized and are qualified in their entirety by the full text of the applicable plans or agreements to which our NEOs are parties. Involuntary Termination is generally defined as any termination that does not result from the following termination events: resignation; retirement; for cause; death; qualifying disability; extended leave of absence; continued failure to perform duties or responsibilities; a termination in connection with any corporate sale transaction where continued employment is available; or a termination if the NEO is eligible to receive benefits from a Key Employee Change-of-Control Contract, or under an employment or severance agreement. For Cause is generally defined as the following: the willful and continued failure of the executive officer to perform substantially the executive officer’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness) or material breach of any material provision in an employment agreement (if applicable), after written demand for substantial performance is delivered to the executive officer by the Board or the CEO of the Company which specifically identifies the manner in which the Board or CEO believes that the executive officer has not substantially performed the executive officer’s duties; or the willful engaging by the executive officer in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. A Change of Control is generally defined as any one of the following occurrences: any individual, entity or group acquires beneficial ownership of 20% or more of either the outstanding shares of our common stock or our combined voting power; individuals who constitute the Board (as of the date of either a given change-of-control contract or an award agreement under our equity plans, as applicable) cease to constitute a majority of the Board, provided that an individual whose election or nomination as a director is approved by a vote of at least a majority of the directors as of the date of either the change-of-control contract or an award agreement under our equity plans, as applicable, will be deemed a member of the incumbent Board; a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets or the acquisition of assets of another entity, unless following the business combination, | – | | all or substantially all of the beneficial owners of our outstanding common stock prior to the business combination own more than 60% of the outstanding common stock of the corporation resulting from the business combination; |
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Executive Compensation | – | | no person, entity or group owns 20% or more of the outstanding voting securities of the corporation resulting from the business combination; and |
| – | | at least a majority of the board of the corporation resulting from the business combination were members of our Board prior to the business combination; or |
approval by our stockholders of our complete liquidation or dissolution. Good Reason is generally defined as any one of the following occurrences within three years of a Change of Control: diminution in the executive officer’s position, authority, duties or responsibilities that were effective immediately prior to the Change of Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the executive officer; any failure by the Company to provide compensation to the executive officer at levels that were effective immediately prior to the Change of Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the executive officer; any material change in the location, as defined in the applicable agreement, where the executive officer was employed immediately preceding the Change of Control, or the Company requiring the executive officer to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control; any termination by the executive officer for any reason during the 30-day period immediately following the first anniversary of a Change of Control (such occurrence is not part of the good reason definition under Mr. Walker’s Severance Agreement); any purported termination by the Company of the executive officer’s employment otherwise than as expressly permitted in their Change-of-Control, Employment or Severance Agreement; or any failure by the Company to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume the terms provided in the executive officer’s Change-of-Control or Employment or Severance Agreement. In February 2011, the Compensation Committee eliminated on a prospective basis the Good Reason provision allowing an executive officer to terminate for any reason during the 30-day period immediately following the first anniversary of a Change of Control for all key employee change-of-control contracts executed with any newly appointed and/or newly hired senior executive officers who are not otherwise subject to an existing agreement. The newMr. Walker’s Severance Agreement for Mr. Walker also excludes this modified single-trigger provision. Disability is generally defined as the absence of the executive officer from his or her duties with the Company on a full-time basis for 180 business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the executive officer or the executive officer’s legal representative. | | | | | | | 70
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Executive Compensation Additional details of the post-termination arrangements can be found beginning on page 51.53. Involuntary For Cause Termination | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | Total | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Voluntary Termination (Including Retirement) | | | | Mr. Walker($)(1) | | Mr. Gwin($) | | Mr. Meloy($)(1) | | Mr. Daniels($) | | Mr. Reeves($)(1) | Prorated Portion of Performance Unit Awards(2) | | | | 546,049 | | | | | 0 | | | | | 143,718 | | | | | 0 | | | | | 109,595 | | Total | | | | 546,049 | | | | | 0 | | | | | 143,718 | | | | | 0 | | | | | 109,595 | |
Voluntary Termination (Including Retirement) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Walker($)(1) | | Mr. Gwin($) | | Mr. Meloy($)(1) | | Mr. Daniels($)(1) | | Mr. Reeves($)(1) | Prorated Portion of Performance Unit Awards(2) | | | | 3,431,260 | | | | | 0 | | | | | 1,219,377 | | | | | 1,219,377 | | | | | 932,352 | | Total | | | | 3,431,260 | | | | | 0 | | | | | 1,219,377 | | | | | 1,219,377 | | | | | 932,352 | |
(1) | As of December 31, 2013,2014, Messrs. Walker, Meloy, Daniels and Reeves were eligible for retirement. |
(2) | Under the terms of the performance unit agreements, retirement-eligible participants receive a prorated payout, paid after the end of the performance period, based on actual performance and the number of months worked during the performance period. Messrs. Walker’s, Meloy’s, Daniels’s and Reeves’s values reflect an estimated payout based on performance to date through December 31, 2013,2014, which is not indicative of the payout they will receive at the end of the performance period based on actual performance. |
Involuntary Not For Cause Termination | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance(1) | | | 5,980,000 | | | | 2,212,500 | | | | 2,065,000 | | | | 2,065,000 | | | | 2,065,000 | | | | 5,980,000 | | | | 2,212,500 | | | | 2,065,000 | | | | 2,065,000 | | | | 2,065,000 | | Pro-rata AIP Bonus(2) | | | 2,923,700 | | | | 1,181,740 | | | | 1,005,064 | | | | 1,005,064 | | | | 1,077,757 | | | | 2,551,900 | | | | 1,075,875 | | | | 1,004,150 | | | | 1,004,150 | | | | 1,004,150 | | Accelerated Equity Compensation(3) | | | 12,631,562 | | | | 4,364,421 | | | | 4,471,391 | | | | 4,471,391 | | | | 3,731,254 | | | | 18,654,402 | | | | 6,833,627 | | | | 6,993,773 | | | | 6,993,773 | | | | 5,349,032 | | Retirement Restoration Plan Benefits(4) | | | 0 | | | | 0 | | | | 2,704,483 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,350,368 | | | | 0 | | | | 0 | | Health and Welfare Benefits(5) | | | 130,033 | | | | 68,856 | | | | 52,873 | | | | 510,813 | | | | 80,226 | | | | 136,035 | | | | 72,780 | | | | 60,523 | | | | 100,788 | | | | 84,629 | | Total | | | | 21,665,295 | | | | | 7,827,517 | | | | | 10,298,811 | | | | | 8,052,268 | | | | | 6,954,237 | | | | | 27,322,337 | | | | | 10,194,782 | | | | | 11,473,814 | | | | | 10,163,711 | | | | | 8,502,811 | |
(1) | Mr. Walker’s value assumes two times the sum of his base salary in effect at the end of 20132014 plus his target AIP bonus (with his target AIP calculated based on his salary in effect at the beginning of the year); all other NEO values assume two times base salary plus one times target AIP bonus, in each case calculated based on the NEO’s base salary in effect at the end of 2013.2014. |
(2) | All payments, if provided, will be paid at the end of the performance period following the Compensation Committee’s certification of corporate performance. All NEO values in the table are based on base salary earnings for the year and reflect the actual bonuses awarded under the Company’s 20132014 AIP as discussed on page 45.46. |
(3) | Reflects the in-the-money value of unvested stock options, the estimated current value of unvested performance units (based on performance to date)as of December 31, 2014) and the value of unvested restricted stock units, all as of December 31, 2013.2014. In the event of an involuntary termination, unvested performance units would be paid after the end of the applicable performance periods based on actual performance. |
(4) | Reflects the lump-sum present value of additional benefits related to the Company’s supplemental pension benefits which are contingent upon the termination event. All values include special pension credits, provided through an employment agreement, retention agreement, the APC Retirement Restoration Plan or the KMG Restoration Plan, respectively. On a case-by-case basis, the Compensation Committee may approve a special retirement benefit enhancement that is equivalent to the additional supplemental pension benefits |
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Executive Compensation | that would have accrued assuming they were eligible for subsidized early retirement benefits. Messrs. |
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| Walker, Meloy, Daniels and Reeves are not eligible for this supplemental benefit because they were eligible for early retirement as of December 31, 2013.2014. If the Compensation Committee were to have approved this special benefit for the other NEOs, the incremental value as of December 31, 2013,2014, to the Retirement Restoration Plan benefits disclosed above would have been $993,719$1,146,508 for Mr. Gwin and $3,519,791 for Mr. Daniels.Gwin. |
(5) | Reflects the value of a total of 24 months of health and welfare benefit coverage. All amounts are present values determined in accordance with FASB ASC Topic 715. Mr. Daniels’s value also includes the present value of a retiree death benefit in the Management Life Insurance Plan (MLIP). The MLIP provides for a retiree death benefit equal to one times final base salary. This retiree death benefit is only applicable to participants who were employed by the Company on June 30, 2003. Therefore, this benefit is only applicable to Mr. Daniels. |
Change of Control: Involuntary Termination or Voluntary Termination For Good Reason | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance(1) | | | 7,475,000 | | | 5,344,973 | | | | 4,856,630 | | | | 4,856,630 | | | | 4,931,015 | | | | 9,715,738 | | | 5,602,046 | | | | 4,944,686 | | | | 4,944,686 | | | | 5,155,495 | | Pro-rata AIP Bonus(2) | | | 2,923,700 | | | 1,093,094 | | | | 974,700 | | | | 974,700 | | | | 1,000,350 | | | | 2,551,900 | | | 1,181,740 | | | | 1,005,064 | | | | 1,005,064 | | | | 1,077,757 | | Accelerated Equity Compensation(3) | | | 12,929,954 | | | 4,543,317 | | | | 4,655,031 | | | | 4,655,031 | | | | 3,871,292 | | | | 18,654,402 | | | 6,833,627 | | | | 6,993,773 | | | | 6,993,773 | | | | 5,349,032 | | Retirement Restoration Plan Benefits(4) | | | 6,390,043 | | | 2,238,386 | | | | 2,704,483 | | | | 4,753,675 | | | | 1,537,936 | | | | 5,805,175 | | | 2,740,364 | | | | 1,350,368 | | | | 1,504,698 | | | | 1,391,055 | | Nonqualified Deferred Compensation(5) | | | 638,800 | | | 135,000 | | | | 502,410 | | | | 301,446 | | | | 306,063 | | | | 760,266 | | | 347,713 | | | | 511,519 | | | | 306,912 | | | | 319,996 | | Health and Welfare Benefits(6) | | | 193,391 | | | 102,893 | | | | 81,038 | | | | 536,656 | | | | 119,766 | | | | 230,027 | | | 109,346 | | | | 90,327 | | | | 151,611 | | | | 127,022 | | Outplacement Assistance | | | 30,000 | | | 30,000 | | | | 30,000 | | | | 30,000 | | | | 30,000 | | | | 30,000 | | | 30,000 | | | | 30,000 | | | | 30,000 | | | | 30,000 | | Financial Counseling(7) | | | 0 | | | 46,309 | | | | 46,309 | | | | 46,309 | | | | 46,309 | | | | 0 | | | 48,160 | | | | 48,160 | | | | 48,160 | | | | 48,160 | | Excise Tax and Gross-Up(8) | | | N/A | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | N/A | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Best-of-Net Tax Adjustment(9) | | | (4,324,441 | ) | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | (6,519,724 | ) | | N/A | | | | N/A | | | | N/A | | | | N/A | | Total | | | | 26,256,447 | | | | 13,533,972 | | | | | 13,850,601 | | | | | 16,154,447 | | | | | 11,842,731 | | | | | 31,227,784 | | | | 16,892,996 | | | | | 14,973,897 | | | | | 14,984,904 | | | | | 13,498,517 | |
(1) | Mr. Walker’s value assumes 2.5 times the sum of his base salary in effect at the end of 20132014 plus the average of his targettwo prior AIP bonus for the year of termination;awards; all other NEO values assume 2.9 times the sum of base salary plus the highest AIP bonus paid in the past three years. |
(2) | Mr. Walker’s value assumes payment of a pro-rata AIP bonus based on his target AIP bonus percentage in effect for the year of termination, his base salary in effect at the beginning of the year and the Company’s actual performance under the Company’s 20132014 AIP; all other NEO values assume the full-year equivalent of the highest annual AIP bonus the officer received over the past three years. |
(3) | Includes the in-the-money value of unvested stock options, the value of unvested restricted stock units and the estimated current value of unvested performance units, all as of December 31, 2013. Upon a Change of Control, unvested performance units granted prior to 2012 would be paid at target.2014. Upon a Change of Control, the value of any outstanding performance units granted in 2012 and 2013 willwould be calculated based on the Company’s TSR performance and the price of the Company’s Common Stock at the time of the Change of Control and converted into restricted stock units of the surviving company. In the event of an involuntary not for cause or voluntary for good reason termination within two years following a Change of Control, the units will generally be paid on the first business day that is at least six months and one day following the separation from service. In the event of an involuntary not for cause or voluntary for good reason termination that is more than two years following a Change of Control, the units will be paid at the end of the performance period. For performance units payable based on actual performance, current values reflect performance to date estimates as of December 31, 2013.2014. |
(4) | Reflects the lump-sum present value of additional benefits related to the Company’s supplemental pension benefits which are contingent upon the termination event. For Messrs.Mr. Gwin, and Daniels, who as of December 31, 2013 were2014 was not retirement eligible, the values include a special retirement benefit enhancement that is equivalent to the additional supplemental pension benefits that would have accrued assuming the |
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| NEOs were eligible for subsidized early retirement benefits. All values include special pension credits, provided through an employment agreement, retention agreement, the APC Retirement Restoration Plan, the KMG Restoration Plan or a key employee change-of-control contract, respectively. |
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Executive Compensation (5) | Includes the value of an additional three years of employer contributions into the Savings Restoration Plan based on each officer’s current contribution rate to the Plan. |
(6) | Values represent 36 months of health and welfare benefit coverage. All amounts are present values determined in accordance with FASB ASC Topic 715. Mr. Daniels’s value also includes the present value of a retiree death benefit in the MLIP. The MLIP provides for a retiree death benefit equal to one times final base salary. This retiree death benefit is only applicable to participants who were employed by the Company on June 30, 2003. Therefore, this benefit is only applicable to Mr. Daniels. |
(7) | Values reflect the cost of continuation of financial counseling services for three years after termination. Per the terms of Mr. Walker’s Severance Agreement, he is not eligible for post-termination financial counseling benefits. |
(8) | Values estimate the total payment required to make each executive officer whole for the 20% excise tax imposed by IRC Section 4999. Mr. Walker is no longer eligible for this excise tax gross-up benefit per the terms of his Severance Agreement. |
(9) | Reflects the aggregate impact of the best-of-net tax adjustment as prescribed under Mr. Walker’s Severance Agreement (as discussed on page 54)56). |
Disability | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Pro-rata AIP Bonus(1) | | | 1,690,000 | | | | 683,087 | | | | 580,962 | | | | 580,962 | | | | 622,981 | | | | 1,690,000 | | | | 712,500 | | | | 665,000 | | | | 665,000 | | | | 665,000 | | Accelerated Equity Compensation(2) | | | 12,929,954 | | | | 4,543,317 | | | | 4,655,031 | | | | 4,655,031 | | | | 3,871,292 | | | | 18,654,402 | | | | 6,833,627 | | | | 6,993,773 | | | | 6,993,773 | | | | 5,349,032 | | Health and Welfare Benefits(3) | | | 906,673 | | | | 459,225 | | | | 399,831 | | | | 380,211 | | | | 360,112 | | | | 526,642 | | | | 297,299 | | | | 248,672 | | | | 229,779 | | | | 216,201 | | Total | | | | 15,526,627 | | | | | 5,685,629 | | | | | 5,635,824 | | | | | 5,616,204 | | | | | 4,854,385 | | | | | 20,871,044 | | | | | 7,843,426 | | | | | 7,907,445 | | | | | 7,888,552 | | | | | 6,230,233 | |
(1) | Represents payment of a pro-rata target AIP bonus based on target bonus percentages effective for the 20132014 AIP and eligible earnings as of December 31, 2013.2014. |
(2) | Includes the in-the-money value of unvested stock options, the value of unvested restricted stock units and the estimated current value of unvested performance units, all as of December 31, 2013. In the event of a termination as a result of a disability, unvested performance units granted prior to 2012 would be paid at target.2014. Performance units granted in 2012 and 2013 would be paid after the end of the applicable performance period, based on actual performance. For performance units payable based on actual performance, current values reflect performance to date estimates as of December 31, 2013.2014. |
(3) | Reflects the cost of the continuation of additional death benefit coverage provided to executive officers of the Company until age 65. All amounts are present values determined in accordance with FASB ASC Topic 715. |
Death
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | Pro-rata AIP Bonus(1) | | | | 1,690,000 | | | | | 683,087 | | | | | 580,962 | | | | | 580,962 | | | | | 622,981 | | Accelerated Equity Compensation(2) | | | | 16,036,777 | | | | | 5,514,036 | | | | | 5,651,528 | | | | | 5,651,528 | | | | | 4,631,099 | | Life Insurance Proceeds(3) | | | | 2,928,510 | | | | | 2,463,394 | | | | | 2,067,183 | | | | | 2,067,183 | | | | | 2,239,449 | | Total | | | | 20,655,287 | | | | | 8,660,517 | | | | | 8,299,673 | | | | | 8,299,673 | | | | | 7,493,529 | |
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Executive Compensation Death | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Cash Severance | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | Pro-rata AIP Bonus(1) | | | | 1,690,000 | | | | | 712,500 | | | | | 665,000 | | | | | 665,000 | | | | | 665,000 | | Accelerated Equity Compensation(2) | | | | 17,132,701 | | | | | 6,207,458 | | | | | 6,353,538 | | | | | 6,353,538 | | | | | 4,858,910 | | Life Insurance Proceeds(3) | | | | 6,373,816 | | | | | 2,583,979 | | | | | 2,411,714 | | | | | 2,411,714 | | | | | 2,411,714 | | Total | | | | 25,196,517 | | | | | 9,503,937 | | | | | 9,430,252 | | | | | 9,430,252 | | | | | 7,935,624 | |
(1) | Represents payment of a pro-rata target AIP bonus based on target bonus percentages effective for the 20132014 AIP and eligible earnings as of December 31, 2013.2014. |
(2) | Includes the in-the-money value of unvested stock options, the target value of unvested performance units, and the value of unvested restricted stock units, all as of December 31, 2013.2014. |
(3) | Includes amounts payable under additional death benefits provided to executive officers and other key employees of the Company. These liabilities are not insured, but are self-funded by the Company. Proceeds are not exempt from federal taxes; values shown include an additional tax gross-up amount to equate benefits with nontaxable life insurance proceeds. Values exclude death benefit proceeds from programs available to all employees. |
In addition to the benefits outlined above for each termination scenario, each of the NEOs would be paid following termination for any reason, the following vested amounts under our nonqualified benefit programs, which have been previously earned but not paid: | | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | | Mr. Walker($) | | Mr. Gwin($) | | Mr. Meloy($) | | Mr. Daniels($) | | Mr. Reeves($) | Retirement Restoration Plan Benefits(1) | | | 10,360,461 | | | | 1,891,960 | | | | 21,111,121 | | | | 6,562,068 | | | | 5,588,367 | | | | 14,256,761 | | | | 2,007,121 | | | | 21,300,898 | | | | 9,821,610 | | | | 6,097,026 | | Non-qualified Deferred Compensation(2) | | | 1,011,348 | | | | 704,153 | | | | 960,848 | | | | 2,646,523 | | | | 739,329 | | | | 1,315,218 | | | | 867,313 | | | | 1,181,811 | | | | 2,891,926 | | | | 879,165 | | Health and Welfare Benefits(3) | | | 113,518 | | | | 0 | | | | 0 | | | | 0 | | | | 122,289 | | | | 175,159 | | | | 0 | | | | 0 | | | | 309,055 | | | | 0 | | Total | | | | 11,485,327 | | | | | 2,596,113 | | | | | 22,071,969 | | | | | 9,208,591 | | | | | 6,449,985 | | | | | 15,747,138 | | | | | 2,874,434 | | | | | 22,482,709 | | | | | 13,022,591 | | | | | 6,976,191 | |
(1) | Reflects the lump-sum present value of vested benefits related to the Company’s supplemental pension benefits. |
(2) | Reflects the combined vested balances in the non-qualified Savings Restoration Plan and Deferred Compensation Plan. |
(3) | Messrs.Mr. Walker’s and Reeves’s values represent the lump-sum value of vested subsidized retiree medical benefits. This benefit is coordinated with any additional continuation of health and welfare benefits. In the event of an involuntary not for cause termination, Messrs.Mr. Walker’s and Reeves’s vested benefits would be reduced to $82,000 and $90,803, respectively.$121,308. In the event of an involuntary not for cause or voluntary for good reason termination following a change of control, Messrs.Mr. Walker’s and Reeves’s vested benefits would be reduced to $67,166 and $76,012, respectively.$95,811. Values shown for Mr. Daniels reflect the value of his retiree death benefit in the MLIP. The MLIP provides for a retiree death benefit equal to one times final base salary. This retiree death benefit is only applicable to participants who were employed by the Company on June 30, 2003. Therefore, this benefit is only applicable to Mr. Daniels. |
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Transactions with Related Persons The Company recognizes that related-person transactions can present potential or actual conflicts of interest and it is the Company’s preference that related-person transactions are avoided as a general matter. However, the Company also recognizes that there are situations, including certain transactions negotiated on an arm’s length basis, where related-person transactions may be in, or may not be inconsistent with, the best interest of the Company and our stockholders. Therefore, the Company has written procedures for the approval, ratification and review of ongoing related-person transactions. Either the Board’s Governance and Risk Committee or the full Board (as determined by the Governance and Risk Committee) will review, ratify or approve, as necessary, any related-person transactions prior to the transaction being entered into, or ratify any related-person transactions that have not been previously approved, in which a director, five-percent owner, executive officer or immediate family member of any such person has a material interest, and where the transaction is in an amount in excess of $120,000, either individually or in the aggregate of several transactions during any calendar year. This review typically occurs in connection with regularly scheduled Board meetings. In addition to those matters described above, the Governance and Risk Committee has approved in advance the following categories of related-person transactions: (i) the rates and terms involved in such transactions where the Company’s standard rates and terms for such transactions apply; and (ii) the hiring of a related person (including immediate family members) as an employee of the Company (but not an officer), provided that total annual compensation (meaning base salary, annual incentive bonus and other amounts to be reported on a W-2) does not exceed $120,000. In 2011, the Company leased a mineral interest in Ward County, Texas owned by Mr. Geren. The Company paid Mr. Geren $134,902$258,884 in royalty payments during 2013,from January 1, 2014 through February 28, 2015, pursuant to a lease with standard industry terms. Mr. Geren retired from the Board on May 13, 2014. | | | | | | | 78 | 75
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Independent Auditor ITEM 2 — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITOR The Audit Committee has appointed KPMG LLP, an independent registered public accounting firm, to audit the Company’s financial statements for 2014.2015. The Board, at the request of the Audit Committee, is asking you to ratify that appointment. THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP TO AUDIT THE COMPANY’S FINANCIAL STATEMENTS FOR 2014.2015. If the stockholders do not ratify the appointment of KPMG LLP, the Audit Committee will make the final determination of the independent auditor for 2014.2015. KPMG LLP, an independent registered public accounting firm, served as the Company’s independent auditor during 2013.2014. Representatives of KPMG LLP will be present at the Annual Meeting to make a statement, if they desire to do so, and to respond to appropriate questions from stockholders. The following table presents fees for the audits of the Company’s annual consolidated financial statements for 2013 and 2012 and for other services provided by KPMG LLP.
| | | | | | | | | | 2013 | | 2012 | Audit Fees | | | $ | 6,530,000 | | | $ 6,042,000 | Audit-related Fees | | | | 1,219,000 | | | 871,000 | Tax Fees | | | | 0 | | | 4,000 | All Other Fees | | | | 274,000 | | | 0 | | | | | | | | | Total | | | $ | 8,023,000 | | | $ 6,917,000 | | | | | | | | |
Audit fees are primarily for the audit of the Company’s consolidated financial statements included in the Form 10-K, including the audit of the effectiveness of the Company’s internal controls over financial reporting, and the reviews of the Company’s financial statements included in the Forms 10-Q. KPMG LLP also served as the independent auditor of WES and fees for the audit of WES’s annual consolidated financial statements for 2013 and 2012 were $1,031,000 and $948,000, respectively, which are not included in the table above. In addition, KPMG LLP served as the independent auditor of WGP and fees for the audit of WGP’s annual consolidated financial statements for 2013 and 2012 were $300,000 and $450,000, respectively, which are not included in the table above.
Audit-related fees are primarily for the audits of the Company’s benefit plans, other audits, consents, comfort letters and certain financial accounting consultation. Audit-related fees related to WES for 2013 and 2012 were $758,000 and $665,000, respectively, which are not included in the table above. Audit-related fees related to WGP for 2013 and 2012 were $75,000 and $275,000, respectively, which are not included in the table above.
Tax fees are primarily for tax planning compliance and services. The Audit Committee has concluded that the provision of tax services is compatible with maintaining KPMG LLP’s independence.
All Other Fees are primarily for consulting services. The Audit Committee has concluded that these services are compatible with maintaining KPMG LLP’s independence.
The Audit Committee adopted a Pre-Approval Policy with respect to services which may be performed by KPMG LLP. This policy lists specific audit, audit-related, and tax services as well as any | | | 76
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other services that KPMG LLP is authorized to perform and sets out specific dollar limits for each specific service, which may not be exceeded without additional Audit Committee authorization. The Audit Committee receives quarterly reports on the status of expenditures pursuant to that Pre-Approval Policy. The Audit Committee reviews the policy at least annually in order to approve services and limits for the current year. Any service that is not clearly enumerated in the policy must receive specific pre-approval by the Audit Committee or by its Chairperson, to whom such authority has been conditionally delegated, prior to engagement. During 2013,2014, no fees for services outside the scope of audit, review, or attestation that exceed the waiver provisions of 17 CFR 210.2-01(c)(7)(i)(C) were requested of or approved by the Audit Committee. The following table presents fees for the audits of the Company’s annual consolidated financial statements for 2014 and 2013 and for other services provided by KPMG LLP. | | | | | | | | | | | | | 2014 | | 2013 | Audit Fees | | | $ | 6,790,000 | | | | $ | 6,530,000 | | Audit-related Fees | | | | 1,088,000 | | | | | 1,219,000 | | Tax Fees | | | | 348,000 | | | | | — | | All Other Fees | | | | — | | | | | 274,000 | | | | | | | | | | | | | Total | | | $ | 8,226,000 | | | | $ | 8,023,000 | | | | | | | | | | | | |
Audit fees are primarily for the audit of the Company’s consolidated financial statements included in the Form 10-K, including the audit of the effectiveness of the Company’s internal control over financial reporting, and the reviews of the Company’s financial statements included in the Forms 10-Q. KPMG LLP also served as the independent auditor of WES and fees for the audit of WES’s annual consolidated financial statements were $1,227,000 for 2014 and $1,031,000 for 2013, which are not included in the table above. In addition, KPMG LLP served as the independent auditor of WGP and fees for the audit of WGP’s annual consolidated financial statements were $300,000 for 2014 and 2013, which are not included in the table above. | | | | | | | | 7779
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Independent Auditor Audit-related fees are primarily for the audits of the Company’s benefit plans, other audits, consents, comfort letters and certain financial accounting consultation. Audit-related fees related to WES were $491,000 for 2014 and $758,000 for 2013, which are not included in the table above. Audit-related fees related to WGP were $150,000 for 2014 and $75,000 for 2013, which are not included in the table above. Tax fees are primarily for tax planning and compliance services. The Audit Committee has concluded that the provision of tax services is compatible with maintaining KPMG LLP’s independence. All other fees are primarily for consulting services. The Audit Committee has concluded that these services are compatible with maintaining KPMG LLP’s independence. | | | 80 | | |
Advisory Vote to Approve Executive Compensation ITEM 3 — ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, along with section 14A of the Exchange Act enacted thereunder, enables our stockholders to vote to approve, on ana non-binding advisory basis, the compensation of the Company’s NEOs, as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules. The Board recognizes the importance of our stockholders’ opportunity for an advisory say-on-pay vote as a means of expressing views regarding the compensation practices and programs for our NEOs. Based upon the outcome of our 2011 say-on-pay frequency vote, the Company will hold an annual advisory say-on-pay vote at our annual stockholder meeting until the next say-on-pay frequency vote, which, in accordance with applicable law, will occur no later than the Company’s annual meeting of stockholders in 2017. As described in detail under the heading Compensation Discussion and Analysis beginning on page 32, the Committee believes that the main objective of our executive compensation program is to pay for performance while aligning executives’ interests with stockholder interests. We pay competitive levels of compensation to attract and retain experienced, talented executives and we structure pay to support our business objectives with appropriate rewards for short-term operating results and long-term stockholder value creation. Accordingly, our compensation philosophy recognizes the value of rewarding our executive officers for their performance and motivating them to continue to excel in the future. At the 2014 Annual Meeting of Stockholders, our executive compensation program received the support of approximately 62% of the votes cast. This result was below our previous support of more than 85% of votes cast even though the core objectives and design of our executive compensation program remained materially consistent. Following the 2014 Annual Meeting of Stockholders, the Committee carefully considered specific feedback expressed by stockholders during our outreach efforts and sought an appropriate balance in our executive compensation program to best serve the long-term interests of our stockholders while continuing to attract, motivate and retain the talent necessary to achieve the Company’s long-term strategy. The Chairperson of the Committee also led in-person or telephonic meetings with several stockholders, including five of our top ten largest stockholders, which represented a diversity of perspectives on the Company’s executive compensation program. Additionally, the Chairperson led engagement efforts with the major proxy advisory firms on the drivers of our business and how our executive officers’ performance is measured against these drivers. The incentive compensation earned and paid to our NEOs for 2013 and the decisions made by the Committee impacting compensation for our NEOs in 20132014, including changes made in consideration of stockholder feedback, reflect the pay-for-performance alignment of our compensation programs and adherence to our compensation philosophy. Specifically: Under our long-term incentive program, the relative total stockholder return performance for the two- and three-year performance periods ended December 31, 2013, was below the median of our peers and our NEOs earned below-target payouts of 54% and 92% (out of a maximum 200%) of their performance units for these periods.
| | | • | | The Committee determined that the target total compensation opportunity for the NEOs should remain flat year-over-year as compared to 2013 and that no changes should be made to their base salaries, target bonus opportunities, and the target grant value of annual long-term incentive awards. | | | • | | The amount of performance units included in the 2014 targeted equity award value was increased so that awards were allocated 50% in performance units (from 40% in 2013), 25% in non-qualified stock options (from 35% in 2013), and 25% in restricted stock units. |
As a result of the Company’s achievement of record-setting sales volumes and reserve growth, financial discipline through prudent capital spending and efficient cost management, and a continued commitment to the safety of our employees, a performance score of 173% was achieved under the Annual Incentive Program for 2013 for the NEOs.
Based on a recommendation from Mr. Walker in light of the lack of clarity with respect to the Tronox Adversary Proceeding, the Committee determined not to adjust Mr. Walker’s compensation for 2013 as compared to 2012, which represented a 22% decrease relative to his predecessor in 2011.
The Committee approved salary increases for the NEOs, other than the CEO, ranging from 4.9% to 16.7%, and increased their annual equity awards by approximately 12% based on the Company’s successful execution of the strategic goals for the year, peer benchmarking data and the desire to retain and motivate the executive team for the execution of the Company’s long-term strategy. The base salary increase for Mr. Gwin represents his first increase since November 2010 and the base salary increases for Messrs. Meloy, Daniels and Reeves represent their first increases since November 2011.
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Advisory Vote to Approve Executive Compensation | | | • | | The two-year performance unit program was eliminated so that all performance unit awards granted in 2014 are subject to a three-year performance period. In addition, the payout opportunity for achievement of TSR performance at the 55th percentile was reduced from a payout of 110% to a payout of 100%. The payout opportunities for achievement of applicable TSR performance levels in the third quartile were also reduced by 12% – 14%. | | | • | | Under our long-term incentive program, the relative TSR performance for the two- and three-year performance periods ended December 31, 2014, was below the median of our peers and our NEOs earned below-target payouts of 92% and 54% (out of a maximum 200%) of their performance units for the respective periods. | • | | As a result of the Company’s achievement of record-setting sales volumes and reserves growth, financial discipline through prudent capital spending and efficient cost management, and a continued commitment to the safety of our employees, a performance score of 151% was achieved under the AIP for 2014 for all employees, including the NEOs. |
As described on page 35,37, our compensation program consists of several practices that we believe contribute to good governance. These practices include the following: | | | What We Do | | What We Don’t Do | Require a Majority of Structure more than 85% Pay to Be At-Risk
| | No Employment Contracts | Emphasize Long-Term Performance | | No Tax Gross-Ups on Perquisites | Maintain a Competitive Compensation Package | | No Permitted Short Sales or Derivative Transactions in Company Stock | Require Robust Stock Ownership | | No New Excise Tax Gross-Ups since 2011 | Provide for Double-Trigger Equity Acceleration Upon a Change of Control | | No Payment of Current Dividends or Dividend Equivalents on Unvested Awards
(beginning (beginning with awards granted in 2012) | Provide for Clawback Provisions Applicable to Incentive Awards | | No Repricing of Stock Options and Stock Appreciation Rights | Structure Incentive Consider Deductibility When Structuring Compensation to Be Deductible
| | No Hedging or Pledging of Company Stock |
Please read the Compensation Discussion and Analysis beginning on page 3032 for additional details about our executive compensation program, including information about the compensation of our NEOs during 2013.2014. The Board has determined that the Company’s NEO compensation aligns with our business strategy, focuses on long-term value creation for our stockholders and delivers competitive pay relative to our performance. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION, WHICH DISCLOSURE SHALL INCLUDE THE COMPENSATION DISCUSSION AND ANALYSIS, THE SUMMARY COMPENSATION TABLE, AND THE RELATED TABLES AND DISCLOSURE IN THIS PROXY STATEMENT. | | | | | | | 82 | 79
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Stockholder Proposals ITEM 4 — STOCKHOLDER PROPOSAL — REPORT ON POLITICAL CONTRIBUTIONSPROXY ACCESS The New York State CommonCity Employees’ Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers’ Retirement System, the New York City Police Pension Fund, and the New York City Board of Education Retirement System, located at 633 Third Avenue-31st Floor,One Centre Street, Room 629, New York, NY 10017,10007-2341, telephone (212) 681-4489, is669-2517, are the beneficial ownerowners of more than $2,000 worth of the Company’s common stock, and hashave notified the Company that it intendsthey intend to present the following resolution at the meeting for action by the stockholders. What is the Proposal? Resolved, thatRESOLVED: Shareholders of Anadarko Petroleum Corporation (the “Company”) ask the shareholdersboard ofAnadarko Petroleum (“Company” directors (the “Board”) hereby request thatto adopt, and present for shareholder approval, a “proxy access” bylaw. Such a bylaw shall require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy card.
The number of shareholder-nominated candidates appearing in proxy materials shall not exceed one quarter of the directors then serving. This bylaw, which shall supplement existing rights under Company bylaws, should provide that a report, updated semiannually, disclosing the Company’s:Nominator must: | 1.a) | Policies and procedureshave beneficially owned 3% or more of the Company’s outstanding common stock continuously for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influenceat least three years before submitting the general public, or any segment thereof, with respect to an election or referendum.nomination; |
| 2.b) | Monetarygive the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and non-monetary contributionsany Securities and expenditures (direct and indirect) usedExchange Commission rules about (i) the nominee, including consent to being named in the manner described in section 1 above, including:proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (the “Disclosure”); and |
| a.c) | The identitycertify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the recipient as well asNominator’s communications with the amount paidCompany shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials; and (c) to each; and |
| b. | The title(s)the best of its knowledge, the person(s)required shares were acquired in the Company responsible for decision-making.ordinary course of business and not to change or influence control at the Company. |
The reportNominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority to be presentedgiven to multiple nominations exceeding the board of directors or relevant board committee and posted on the Company’s website.one-quarter limit. STOCKHOLDER SUPPORTING STATEMENT
As long-term shareholdersWe believe proxy access is a fundamental shareholder right that will make directors more accountable and contribute to increased shareholder value. The CFA Institute’s 2014 assessment of Anadarko Petroleum, we support transparencypertinent academic studies and accountabilitythe use of proxy access in other markets similarly concluded that proxy access:
Would “benefit both the markets and corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties,boardrooms, with little cost or organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.Disclosure is in the best interest of the company and its shareholders and critical for compliance with federal ethics laws. Moreover, the Supreme Court’s Citizens United decision recognized the importance of political spending disclosure for shareholders when it said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.disruption.” Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value.
Anadarko Petroleum contributed at least $2,044,863 in corporate funds since the 2003 election cycle. (CQ: http://moneyline.cq.com and National Institute on Money in State Politics: http://www.followthemoney.org)
However, relying on publicly available data does not provide a complete picture of the Company’s political spending. For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In some cases, even management does not know how trade
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Stockholder Proposals associations use their company’s money politically. The proposal asks
Has the Companypotential to disclose all of its political spending, including paymentsraise overall US market capitalization by up to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a growing number of leading companies, including Qualcomm, Exelon, Merck and Microsoft that support political disclosure and accountability and present this information on their websites.$140.3 billion if adopted market-wide. (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1) The Company’s Boardproposed bylaw terms enjoy strong investor support — votes for similar shareholder proposals averaged 55% from 2012 through September 2014 — and its shareholders need comprehensive disclosure to be able to fully evaluate the political usesimilar bylaws have been adopted by companies of corporate assets. various sizes across industries, including Chesapeake Energy, Hewlett-Packard, Western Union and Verizon. We urge your support forshareholders to vote FOR this critical governance reform.proposal. What does the Board recommend? THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE ABOVE STOCKHOLDER PROPOSAL FOR THE FOLLOWING REASONS:REASONS: Anadarko values its relationships with its stockholders and is actively engaged in ongoing and constructive dialogue with its stockholders regarding various corporate governance and other matters, including proxy access. Under the appropriate circumstances, Anadarko fully supports the right of stockholders to nominate and elect directors to oversee the management of its corporate affairs. Stockholders with a long-term financial commitment to the Company are likely aligned with the Company’s longer-term management philosophy, which the Board believes is beneficial to all stockholders. For the reasons discussed below, the Board has determined that the specific provisions of a proxy access framework that allows stockholders owning a minimum of 3% of the Company’s outstanding shares for three years to nominate up to one quarter of the Board, as set forth in the proposal, is not in the best interest of the stockholders and is inconsistent with the Company’s long-term management philosophy. Minimum Ownership Threshold.If approved, the proposal would require the Company to include in its proxy materials director nominees submitted by stockholders owning a minimum of 3% of the Company’s outstanding shares. The Board believes that such a proxy access framework could provide activist stockholders and special interest groups with a relatively low-cost avenue to disrupt board composition and corporate strategy. The Board is united by a common purpose to maximize long-term stockholder value, which requires corporate policies supporting that goal. Proxy access with such a low ownership threshold would allow a stockholder with a special interest to use the process to promote a specific agenda. These special interests may conflict with the Company’s long-term interests and the best interests of stockholders. Number of Directors to Be Elected. The proposal would require the Company to include shareholder-nominated candidates in the proxy materials representing up to one quarter of the directors then serving on the Board. The Board is concerned that, if approved, the proposal could cause significant disruptions in the operations of the Board and the Company and believes it is important to limit the number of directors that may be elected. The Board is concerned that the divisiveness that may result from regularly contested director elections could cause high annual turnover on the Board. Such turnover could produce an inexperienced Board that lacks the necessary knowledge and understanding of the Company’s current and historical business to provide meaningful and effective oversight of the Company’s operations and long-term strategies. In addition, the prospect of routinely standing for election in a contested situation may deter highly qualified individuals from Board service. | | | 84 | | |
Stockholder Proposals Ownership Holding Period. The proposal would require that stockholders hold at least the minimum ownership threshold for three years. The Board believes that proxy access should be structured in such a way that it requires a sustained commitment to the Company in terms of both a stockholder’s ownership amount and duration in order to align with the Board’s focus on managing the business for the long term. The Board believes that providing proxy access to stockholders with a holding period of only three years could result in a shorter-term focus at the board level that may not be in the best interest of all stockholders. Moreover, the Company has continually engaged in dialogue with stockholders and listens to their views on corporate governance matters, including proxy access. The Company’s corporate governance policies and practices already provide shareholders with the ability to effectively voice their opinions and concerns and ensure that the Board is accountable to stockholders. For example: All directors are elected annually; The Company’s By-Laws provide for the election of directors by a majority vote of the stockholders and require that any director who fails to receive the requisite number of votes to offer to resign; and Stockholders may: propose director nominees for consideration by the Governance and Risk Committee; Communicate with any director, Board committee or the full Board; and Submit proposals for consideration at the Company’s annual meeting and for inclusion in the proxy statement for that meeting, subject to certain conditions and the rules and regulations of the SEC. The Board supports the right of stockholders to nominate and elect directors to oversee the management of the Company, but believes it is important as this issue evolves to ensure the Board has adopted a Political and Public Engagement Policy that addressesfull view of stockholder feedback regarding the items to be included inappropriate framework for the reports requested inCompany before implementing proxy access. However, for the proposal. The Policy can be found on the Company’s website at https://www.anadarko.com/Responsibility/Pages/PoliticalContributions.aspx. As a result of this Policy and the additional actions described below,reasons set forth above, the Board believes that the requested reports would result in an unnecessary and unproductive usespecific proxy access framework set forth by the proponent, which allows stockholders owning a minimum of 3% of the Company’s time and resources. Anadarko believes that itoutstanding shares for three years to nominate up to one quarter of the Board, is not in the best interest of Anadarkothe stockholders and its stockholders for the Company to participate in the political process. The oil and gas industry, and as a result,is inconsistent with the Company’s business and operations, are directly affected by political developments, including but not limited to policies related to energy, tax, and the environment. Anadarko has a stake in helping to elect candidates who understand and support the oil and gas industry. Accordingly, the Company maintains a government relations program to educate public officials about our position on issues significant to the Company’s business, and to support those candidates who advocate pro-growth, free enterprise economic policies and for causes consistent with Company goals and interests. Anadarko participates in the political process only to the extent that it is permissible under federal, state, and local laws, rules and regulations. Its political contributions originate from corporate funds, where permitted by law, as well as through Anadarko’s non-partisan political action committee (APC PAC), which is financed through voluntary contributions made by eligible employees.long-term management philosophy.
To ensure that Anadarko’s political activities are transparent to the Company’s stockholders and other stakeholders, the Policy requires the Company to post on its website, at least annually, a report regarding its political contributions and its contributions to 501(c)(4) social welfare organizations. The report identifies Anadarko’s corporate and PAC political contributions in the United States, as well as contributions to state or local ballot measure committees and other organizations organized under Section 527 of the Internal Revenue Code. The report also discloses all 501(c)(4) social welfare organizations to which the Company made payments in excess of $25,000 in the aggregate for a fiscal year that are paid or managed through Anadarko’s Government Relations department.THE BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS STOCKHOLDER PROPOSAL.
The Company participates in various industry trade associations. The Company’s dues and other payments to trade associations are used for a wide variety of purposes by those organizations, such as educational initiatives, developing and publishing technical industry standards and providing professional development and research. Some trade associations also engage in certain lobbying activities that seek to promote legislative solutions that are sound and responsible and appropriately advance Anadarko’s business goals and interests. Since the primary reason for membership in such associations is not political, the Company believes that it is not necessary to report such payments.
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Stockholder Proposals The Governance and Risk Committee of the Board, a committee which consists solely of independent directors, has oversight responsibility for the Policy and for Anadarko’s political activity. The Policy requires that the Vice President, Government Relations provide an annual report to the Governance and Risk Committee. The report must detail the Company’s political contributions, contributions to 501(c)(4) social welfare organizations and trade association payments.
In addition, the Policy establishes the Company’s internal approval process to ensure that its political contributions comply with applicable laws and are consistent with the Company’s public policy agenda and business priorities. Pursuant to the policy, no Company resources, including the use of Company premises, use of Company equipment, or monetary payments, may be contributed to any political candidate, political committee (other than for the administrative or solicitation expenses of the APC PAC, as permitted by law), political party, ballot measure committee, trade association, or 501(c)(4) social welfare organization, or to any other organization for the purpose of attempting to influence elections or ballot measures without advance approval by the Vice President, Government Relations or the Senior Vice President, General Counsel and Chief Administrative Officer.
The Policy further requires that all political contributions made with Company funds or resources, or made through APC PAC, must promote the interests of the Company and must be made without regard for the personal political preferences of Company officers or executives. Contribution decisions are made based upon the following principles:
Any political activity must appropriately advance the Company’s business goals and interests.
The Company advocates for sound and responsible legislative and regulatory policies.
The Company supports candidates who support the oil and gas industry.
The Board believes that the Policy substantially fulfills the purposes of the reports requested in the proposal. Requiring the Company to provide such additional reports would result in an unnecessary and unproductive use of the Company’s time and resources.
THE BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS STOCKHOLDER PROPOSAL.
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ITEM 5 — STOCKHOLDER PROPOSAL — PROVIDE A REPORT ON CLIMATE CHANGECARBON RISK The Park Foundation Inc., located at P.O. Box 550, Ithaca, NY 14851, telephone (607) 272-9124, isand the Connecticut Retirement Plans and Trust Funds, located at 55 Elm Street, Hartford, Connecticut 06106-1773, telephone (860) 702-3000, are each the beneficial owner of more than $2,000 worth of the Company’s common stock, and hashave notified the Company that it intendsthey intend to present the following resolution at the meeting for action by the stockholders. What is the Proposal? WHEREAS: Investors require information on how Anadarko Petroleum Corporation is amongpreparing for the world’s largest independentlikelihood that demand for oil and natural gas explorationmay be significantly reduced due to regulation or other climate-associated drivers, increasing risk for stranding some portion of its reserves. Recognizing the severe and production companies. In recognition of the need to addresspervasive risks associated with a warming climate, change and minimize global temperature rise, nearly every national government hasgovernments have agreed that “deep cuts in greenhouse gas emissions (GHG) are required;” and that “the increaseincreases in global temperature should be held below 2 degrees Celsius.”
The To achieve this goal, the International Energy Agency (IEA) states that “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if2050… .” HSBC notes that the worldequity valuation of oil producers could drop by 40 to 60 percent under such a low carbon consumption scenario.
U.S. and China leaders recently signed an historic accord to limit greenhouse gas emissions; European leaders have committed to a 40 percent reduction by 2030. In addition to the potential for global treaties, oil demand is being affected by technology innovations, falling renewable energy costs, consumer substitution, and policies related to achieve the 2 degrees Celsius goal, unless carbon captureair quality, fuel efficiency, and storage technology is widely deployed.” To achieve a 66 percent probability of not exceeding a global temperature rise above 2 degrees Celsius, the Intergovernmental Panel on Climate Change estimates that approximately 987 gigatons of carbon dioxide can be emitted through 2100. The IEA states that total proven reserves of coal,lower-carbon energy, cumulatively reducing demand for oil and natural gas, represent approximately 2,860 gigatons of potential CO2 emissions.gas.
Several analysts indicate that companies may not be adequately accounting for or disclosing the downside risks that could result from lower than expected demand or prices for oil.
A March 2013 research paper by Citi statedreport states that market forces could “put in a plateau for global oil demand by the end of this decade.” The IEA and Deutsche Bank forecast global oil demand could peak in the next ten to fifteen years.HSBC reportsIndustry production costs — and risk — are rising as companies invest in higher cost, higher carbon reserves. Kepler Cheuvreux declares a “capex crisis,” noting that, the equity valuation ofsince 2005, annual upstream investment for oil producers could drophas increased by 40 to 60100 percent, under a low emissions scenario. while crude oil supply has increased by only three percent.Given the growing public concern about climate change, investorslikelihood of slowing demand and increasing costs, Anadarko’s investments in high cost projects, including a range of deep water and ultra-deepwater projects, are increasingly at risk of stranding. Investors are concerned that actions to significantly reduce GHG emissions could reduce the value of Anadarko’s oil and gas reserves and/or related infrastructure before the end of their expected useful life. Anadarko is not adequately accounting for these risks. Investors require additional information on whether and how Anadarkothe company is preparing for potential scenarios in which demand for oil and gas is greatly reduced due to regulation or other climate-associated drivers. Without additional disclosure, shareholders are unable to determine whether Anadarko is adequately managing these risks or seizing related opportunities.changing market conditions. RESOLVED: Shareholders request Anadarko to prepare a scenario analysis report by September 2014,2015, omitting proprietary information, and prepared at reasonable cost, on the company’s goals and plansCompany’s strategy to address the risk of stranded assets presented by global concerns regarding fossil fuels and their contribution to climate change and associated demand reductions for oil and gas, including analysis of long and short term financial and operational risks to the company. | | | | | | | 86 | 83
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Stockholder Proposals STOCKHOLDER SUPPORTING STATEMENTSTATEMENT:
We recommend the report include:report: The risks and opportunities associated with variousEvaluate a range of low-carbon, low-demand scenarios, including reducing GHG emissions by 80 percent by 2050, as well as a scenario in which global oil demand declines due to evolving policy, technology, or consumer responses to address climate change;two thirds of reserves cannot be monetized;
Whether and how the company’sProvide an assessment of different capital allocation plans accountstrategies for the risks and opportunities in these scenarios;
How the company will manage these risks, such as reducing the carbon intensity of its assets,low-demand scenarios including diversifying its business by investing in lower-carbon energy sources,capital investment or returning capital to shareholders;
The Board of Directors’ roleProvide information on carbon price and crude oil price assumptions used in overseeing capital allocation and climate risk reduction strategies.each scenario.
What does the Board recommend? THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE ABOVE STOCKHOLDER PROPOSAL FOR THE FOLLOWING REASONS: Anadarko continues to demonstrate its commitment to responsible environmental stewardship by continually looking for waysevaluating and acting as an industry leader in implementing technologies to minimize the overall environmental impacts of its activities, including the reduction of GHGgreenhouse gas (GHG) emissions. In light of the Company’s current reporting on this matterenvironmental stewardship and other steps the Company has taken to assess various potential risks associated with climate change, which are discussed below, as well as independent studies that continue to highlight the important role oil and natural gas are expected to continue to play for the next quarter-century or more in meeting the growing energy demands of our world, the Board believes that there is minimal risk to the Company arising from low carbon, low-demand scenarios and that the requested report would result in an unnecessary and unproductive use of the Company’s time and resources. In support of its commitment to responsible environmental stewardship, in 2003 Anadarko formed a Climate ChangeGHG and Air-Quality Committee to organize, evaluate and take action on climate changeto address emissions and GHG emissions.other issues pertaining to air quality. The committee’s charter can be found on the Company’s website at http://www.anadarko.com/SiteCollectionDocuments/PDF/ClimateChangeCmtCharter.pdf. content/documents/apc/Responsibility/GHG_and_Air_Quality_ Committee_Charter.pdf. The committee, which reports annually to the Governance and Risk Committee of the Board, assists management with monitoring the science of climate change monitoringand the Company’s measures to reduce GHG emissions, recommending assessment of various risks, and overseeing implementationevaluation of GHG emission programs in an effort to maximize the commercial value of proactive GHG management. Anadarko already reports information responsiveAmong the tasks that this Committee oversees is assessment of Anadarko’s GHG emissions data. Evaluation of Anadarko’s 2013 GHG emissions data as reported to the proposalEnvironmental Protection Agency (EPA) found that addressesour GHG emissions intensity is roughly half of that reported to EPA by all reporting entities. Our record of continuous environmental improvement is found not only in the longdata, but also in our actions that incorporate best practices into our operations, including:
Leak detection surveying and short term financialinefficient pipe replacement; Plunger lift, flare, and operational risknatural gas recovery system installation to the Companyreduce vented CH4; Replacement of concerns regarding climate change. natural gas-fired pneumatic pumps with solar-powered pumps; and Replacement of older and less efficient compressors. Anadarko annually reports climate-related risks and opportunities to the Carbon Disclosure Project (CDP) and will continue to do so in 2014.2015. As part of this disclosure, for each identified risk, | | | | | | | | 87 | |
Stockholder Proposals Anadarko reports potential financial implications, methods for mitigation, and costs of mitigation. Anadarko’s reports can be found on the Company’s website at http://www.anadarko.com/Responsibility/Pages/ClimateChange.aspx. Sustainable-Development/HSE/Greenhouse-Gas-Management/. In its CDP reports, Anadarko has identified the potential for changing consumer behavior, particularly a decline in the demand for petroleum products, to represent an indirect financial risk to revenues from Anadarko’s crude oil production. Anadarko also identifies and evaluates risks associated with potential international and domestic regulation, including carbon taxes and cap and trade schemes that could limit GHG emissions. Anadarko currently considers this riskthese risks to have little to | | | 84
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Stockholder Proposals
no impact to its operations and revenues based on its deep, balanced and diversified portfolio and the flexibility it affords. Specifically, Anadarko is among the largest producers of clean-burning natural gas in the U.S. Natural gas is a low-carbon alternative supported by state and federal administrations to reduce global greenhouse gas emissions, while providing reliable, efficient and affordable energy to consumers. Anadarko anticipates In President Obama’s 2014 State of the Union Address, he stated that natural gas demand may increase as consumer preferences shift away from more carbon-intensive fuels, particularly as end users seek greater energy security, recoil from volatile oil prices,is a “bridge fuel that can power our economy with less of the carbon pollution that causes climate change.” He also stated that “My administration will keep working with the industry to sustain production and refining demand lowers. To further demonstrate its commitment to responsible environmental stewardshipjob growth while strengthening protection of our air, our water, and our communities.” In the spirit of this statement, Anadarko has incorporated best practices into its operations that are intended to reduce GHG emissions, including:
Leak detection surveying and inefficient pipe replacement
Plunger lift, flare, and natural gas recovery system installation to reduce vented CH4
Replacement of natural gas-fired pneumatic pumps with solar-powered pumps
Replacement of older and less efficient compressors
The Company also supports and participates in ongoing GHG emission-mitigation research. For example, Anadarko partnered with the Environmental Defense Fund (EDF) and university research teams to conduct studies based on sound scientific principles to assess emissions, find and more accurately measure leaks and releases across the natural gas supply chain, determine the impacts and ultimately reduce them. In addition, Anadarko worked collaboratively with Colorado’s Governor, the EDF and other industry peers on proposed state regulations that would utilize industry-leading practices and more formal processes for identifying, controlling and reducing methane leaks and other emissions.
Finally,Anadarko also follows energy commodity markets and demand projections very closely. Current Energy Information Agency (EIA) projections indicate that oil and natural gas production in orderthe United States is expected to stay constant, at a minimum, through 2040. Similarly, the International Energy Agency’s reference scenario estimates that by 2035, 75 percent of global energy demand will be met by fossil fuels. In the electricity sector in the U.S. as projected by the EIA, natural gas is expected to increase as a generation fuel, overtaking coal-fired generation by 2019 and accounting for up to 43 percent of the total electricity mix by 2040. The Company continually evaluates various commodities pricing scenarios in its risk assessment processes, given current and pending regulations, state and federal administrations, and commodities demand for all existing and new projects.
In light of the current political atmosphere, EIA projections, and our ongoing, leading practices to manage GHG emissions, Anadarko anticipates that natural gas demand may increase as consumer preferences shift away from more carbon-intensive fuels, particularly as end users seek greater energy security, recoil from volatile oil prices, and refining demand lowers. To implement the proposal, the Company would be required to engage in speculation on a variety of matters, including future possible restrictions on carbon emissions and the reaction and conduct of consumers in response to any such regulations. The Company cannot, at a reasonable cost, determine what actions political bodies, including U.S. federal, state or foreign governments, are likely to take inassumptions resulting from such speculation could impact the future relating to restrictions on fossil fuels and their contribution to climate change.practical value of any such report. For these reasons, the Board believes that the risk to the Company arising from low carbon, low-demand scenarios is minimal and that the requested report would result in an unnecessary and unproductive use of the Company’s time and resources. THE BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS STOCKHOLDER PROPOSAL. | | | | | | | 88 | 85
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| | | | | BY ORDER OF THE BOARD OF DIRECTORS | | | | | | | | Amanda M. McMillian | | | Vice President, Deputy General Counsel, Corporate Secretary and Chief Compliance Officer |
Dated: March 21, 201423, 2015 The Woodlands, Texas See enclosed proxy card — please vote promptly | | | 86
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1201 LAKE ROBBINS DRIVE
THE WOODLANDS, TX 77380
| | WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE
VOTING. BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
VOTE BY INTERNET– www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time the day before thecut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by Anadarko Petroleum Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BYPHONE–1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time the day before thecut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Anadarko Petroleum Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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1201 LAKE ROBBINS DRIVE THE WOODLANDS, TX 77380 WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING. BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Anadarko Petroleum Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Anadarko Petroleum Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | | | | M67542-P49060-Z62564M82812-P62032 | | KEEP THIS PORTION FOR YOUR RECORDS |
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