☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to § 240.14a-12 |
☒ | No fee required | ||||
☐ | Fee paid previously with preliminary materials | ||||
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11 |
HESS CORPORATION
April 6, 2023
Dear Stockholder:
Oil and gas will be needed for decades to come and are fundamental to an affordable, just and secure energy transition. The world has a massive dual challenge – we will require approximately 20% more energy globally by 2050 and over the same period we need to reach net zero emissions. At the end of last year, the International Energy Agency (“IEA”) published its latest World Energy Outlook that offers three scenarios for addressing this dual challenge. In all three IEA scenarios, the world is facing a structural supply deficit in energy, and significantly more investment is required both in oil and gas and in renewable energy.
In a world that will need affordable and secure oil and gas resources for decades to come, Hess is in a strong position. Our strategy has been and continues to be to grow our resource base, deliver a low cost of supply and generate industry leading cash flow growth. Executing this strategy in 2022, we decreased our debt by $500 million, increased our regular quarterly dividend by 50% and completed a $650 million stock repurchase program. As our portfolio becomes increasingly free cash flow positive, we are committed to returning up to 75% of our annual free cash flow to shareholders, with the remainder going to strengthen the balance sheet.
By investing only in high return, low cost opportunities, we have built a differentiated and balanced portfolio. Key to our strategy is Guyana, one of the largest oil provinces discovered in the world over the last 20 years. On the Stabroek Block, where Hess has a 30% interest and ExxonMobil is the operator, we have had more than 30 discoveries including nine in 2022. Our four sanctioned oil developments on the block have world class economics, with a Brent breakeven oil price of between $25 and $35 per barrel. The Bakken, our largest operated asset, remains an important part of our portfolio with a robust inventory of high return future drilling locations.
As we continue to execute our strategy, our commitment to sustainability will remain a top priority. We support the aim of the Paris Agreement, and our board and senior leadership have set aggressive targets for greenhouse gas (“GHG”) emissions reduction with a commitment to achievenet zero Scope 1 and 2 GHG emissions on a net equity basis by 2050. After our company significantly outperformed our five year emissions reduction targets for 2020, we announced new five year GHG reduction targets for 2025, which are to reduce operated Scope 1 and 2 GHG emissions intensity by approximately 50% and methane emissions intensity by approximately 50% from 2017, and to eliminate routine flaring from our operations by the end of 2025.
Saving the world’s forests and the important role they play as natural carbon sinks is foundational to the Paris Agreement’s aim of limiting the global average temperature rise to well below 2° Celsius. At the end of 2022, we announced an agreement to purchase high quality, independently verified REDD+ carbon credits for a minimum of $750 million between 2022 and 2032 directly from the Government of Guyana.
We are honored to have been recognized throughout 2022 as an industry leader in our environmental, social and governance performance and disclosure and proud of the actions we are taking to make a positive social impact in the communities where we do business. In keeping with our Hess Values, we are committed to diversity, equity and inclusion, which we believe creates value for all of our stakeholders, and to the safety and wellbeing of our workforce and the communities where we operate.
You are cordially invited to participate in our annual meeting of stockholders, which will be held at our offices, 1501 McKinney Street, Houston, Texas 77010, on Wednesday, May 17, 2023 at 9:00 a.m., Central Time. Thank you for your continued support and interest in our company. We look forward to sharing more about our company at our annual meeting.
Sincerely,
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TABLE OF CONTENTS
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Cautionary Note Regarding Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; estimates of our crude oil and natural gas reserves and levels of production; benchmark prices of crude oil, natural gas liquids and natural gas and our associated realized price differentials; our projected budget and capital and exploratory expenditures; expected timing and completion of our development projects; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; and future economic and market conditions in the oil and gas industry.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:
fluctuations in market prices of crude oil, natural gas liquids and natural gas and competition in the oil and gas exploration and production industry;
reduced demand for our products, including due to perceptions regarding the oil and gas industry, competing or alternative energy products and political conditions and events;
potential failures or delays in increasing oil and gas reserves, including as a result of unsuccessful exploration activity, drilling risks and unforeseen reservoir conditions, and in achieving expected production levels;
changes in tax, property, contract and other laws, regulations and governmental actions applicable to our business, including legislative and regulatory initiatives regarding environmental concerns, such as measures to limit greenhouse gas emissions and flaring, fracking bans as well as restrictions on oil and gas leases;
operational changes and expenditures due to climate change and sustainability related initiatives;
disruption or interruption of our operations due to catastrophic and other events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber-attacks, public health measures or climate change;
the ability of our contractual counterparties to satisfy their obligations to us, including the operation of joint ventures under which we may not control and exposure to decommissioning liabilities for divested assets in the event the current or future owners are unable to perform;
unexpected changes in technical requirements for constructing, modifying or operating exploration and production facilities and/or the inability to timely obtain or maintain necessary permits;
availability and costs of employees and other personnel, drilling rigs, equipment, supplies and other required services;
any limitations on our access to capital or increase in our cost of capital, including as a result of limitations on investment in oil and gas activities, rising interest rates or negative outcomes within commodity and financial markets;
liability resulting from environmental obligations and litigation, including heightened risks associated with being a general partner of Hess Midstream LP; and
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As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
HESS CORPORATION
April 5, 2024
Dear Stockholder:
You are cordially invited to participate in our annual meeting of stockholders, which will be held as a virtual meeting, on Wednesday, May 15, 2024 at 9:00 a.m., Central Time. The formal notice of annual meeting and proxy statement, which are contained in the following pages, outline the action to be taken by the stockholders at the meeting.
We are pleased to furnish our proxy materials to our stockholders over the internet, as permitted by Securities and Exchange Commission rules. We believe this process will enable us to provide you with a convenient way to access our proxy materials, while reducing the costs and environmental impact of our annual meeting. A paper copy of our proxy materials may be requested through one of the methods described in the Notice of Internet Availability of Proxy Materials.
This proxy statement relates only to the annual meeting. As previously disclosed, on October 22, 2023, the company entered into an agreement and plan of merger (the “merger agreement”) with Chevron Corporation (“Chevron”) and Yankee Merger Sub Inc., a direct, wholly-owned subsidiary of Chevron (“Merger Subsidiary”). The merger agreement provides that, among other things and subject to the terms and conditions of the merger agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the merger as a direct, wholly-owned subsidiary of Chevron (such proposed transaction, the “merger”). Completion of the merger is subject to the satisfaction of certain closing conditions, including stockholder and regulatory approvals. We will be holding a separate special meeting of stockholders to vote on the proposed merger. For additional information related to the merger, please refer to the company’s merger proxy statement and other relevant materials to be filed with U.S. Securities and Exchange Commission (the “SEC”).
Thank you for your continued support and interest in our company. We look forward to sharing more about our company at our annual meeting.
Sincerely,
Independent Chair of the Board of Directors | Chief Executive Officer |
TABLE OF CONTENTS
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Cautionary Note Regarding Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; estimates of our crude oil and natural gas reserves and levels of production; benchmark prices of crude oil, natural gas liquids and natural gas and our associated realized price differentials; our projected budget and capital and exploratory expenditures; expected timing and completion of our development projects; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; future economic and market conditions in the oil and gas industry; and expected benefits, timing and completion of the proposed merger with Chevron.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:
fluctuations in market prices of crude oil, natural gas liquids and natural gas and competition in the oil and gas exploration and production industry;
reduced demand for our products, including due to perceptions regarding the oil and gas industry, competing or alternative energy products and political conditions and events;
potential failures or delays in increasing oil and gas reserves, including as a result of unsuccessful exploration activity, drilling risks and unforeseen reservoir conditions, and in achieving expected production levels;
changes in tax, property, contract and other laws, regulations and governmental actions applicable to our business, including legislative and regulatory initiatives regarding environmental concerns, such as measures to limit greenhouse gas emissions and flaring, fracking bans as well as restrictions on oil and gas leases;
operational changes and expenditures due to climate change and sustainability related initiatives;
disruption or interruption of our operations due to catastrophic and other events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber attacks, public health measures or climate change;
the ability of our contractual counterparties to satisfy their obligations to us, including the operation of joint ventures under which we may not control and exposure to decommissioning liabilities for divested assets in the event the current or future owners are unable to perform;
unexpected changes in technical requirements for constructing, modifying or operating exploration and production facilities and/or the inability to timely obtain or maintain necessary permits;
availability and costs of employees and other personnel, drilling rigs, equipment, supplies and other required services;
any limitations on our access to capital or increase in our cost of capital, including as a result of limitations on investment in oil and gas activities, rising interest rates or negative outcomes within commodity and financial markets;
liability resulting from environmental obligations and litigation, including heightened risks associated with being a general partner of Hess Midstream LP;
risks and uncertainties associated with our proposed merger with Chevron; and
• | other factors described in Item 1A – Risk Factors in our annual report on Form 10-K and any additional risks described in our other filings with the SEC. |
As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
HESS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Wednesday, May 17, 2023,15, 2024, at 9:00 a.m.
To the Stockholders:
The annual meeting of stockholders of Hess Corporation will be held at our offices, 1501 McKinney Street, Houston, Texas 77010, on Wednesday, May 17, 2023,15, 2024, at 9:00 a.m., Central Time, for the following purposes:
1. | To elect twelve directors for the ensuing one-year term (pages 2 to |
2. | To conduct a non-binding advisory vote to approve the compensation of our named executive officers (page |
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To act upon the ratification of the selection by the audit committee of Ernst & Young LLP as our independent registered public accountants (pages |
To transact any other business which properly may be brought before the meeting. |
All stockholdersThe annual meeting will be held as a virtual only meeting of stockholders. If you are cordially invited to attend, although only stockholdersa stockholder of record at the close of business on March 23, 2023,27, 2024, the record date for the annual meeting, you will be entitledable to attend the annual meeting as well as submit questions and vote atduring the meeting.live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HES2024. You will not be able to attend the annual meeting in person. Additional information on how to participate in the virtual annual meeting can be found on page 58.
By order of the board of directors,
Timothy B. Goodell
Secretary
April 6, 20235, 2024
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return the proxy card in the envelope provided to you, or to use the telephone or internet method of voting described in your proxy card, so that if you are unable to attend the meeting and vote electronically your shares can be voted.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 17, 2023:15, 2024:
Hess Corporation’s notice of meeting, proxy statement and 20222023 annual report are available at www.proxyvote.com.
The attached proxy statement is dated April 6, 20235, 2024 and is first being mailed to stockholders on or about April 6, 2023.5, 2024.
PROXY SUMMARY
The following section is only a summary of key elements of the proxy statement. This summary is intended to assist you in reviewing the proxy statement in advance of the annual meeting of stockholders. It does not contain all of the information you should consider, and we encourage you to read this entire proxy statement before submitting your vote.
20232024 Annual Meeting Information
Date & Time Wednesday, May at 9:00 a.m., Central Time |
Place
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Voting Matters
Proposals | Proposals | Board Vote Recommendation | Page Reference | |||||||||
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1. | Election of twelve director nominees for one-year term expiring in 2024 | ü FOR each nominee | 2 | Election of twelve director nominees for one-year term expiring in 2025 | ü FOR each nominee | 2 | ||||||
2. | Advisory approval of the compensation of our named executive officers |
ü FOR |
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2. | Advisory approval of the compensation of our named executive officers |
ü FOR |
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3. | Advisory vote on the frequency of voting on executive compensation |
ü FOR 1 YEAR |
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Ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the year ending December 31, 2023
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Ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the year ending December 31, 2024
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ü FOR |
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Your vote is important to us. Please exercise your right to vote.
How to Vote
Over the Internet
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Visit the website listed on your Notice of Internet Availability of Proxy Materials or proxy card or voting instruction form.
| Call the toll-free telephone number listed on your proxy card or voting instruction form.
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By Mail
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Follow the instructions on your proxy card or voting instruction form. | Stockholders are invited to attend the virtual annual meeting and vote
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Proxy Summary |
Our Purpose: To Be the World’s Most Trusted Energy Partner
Hess Corporation is a global Exploration and Production (“E&P”) company engaged in the exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas.
As a leading independent energy company, our purpose is to be the world’s most trusted energy partner through our strong company values and focus on long-term strategy. We are committed to developing oil and gas resources in an environmentally responsible and sustainable manner. We are focused on building a company that makes a positive impact for all stakeholders: our investors, employees, partners, suppliers and the communities where we operate.
Hess Values
Our company values set the framework and establish the ethical standards by which we conduct our business.
• INTEGRITY: We are committed to the highest level of integrity in all our relationships.
• PEOPLE: We are committed to attracting, retaining and energizing the best people by investing in their professional development and providing them with challenging and rewarding opportunities for personal growth.
• PERFORMANCE: We are committed to a culture of performance that demands and rewards outstanding results throughout our business.
• VALUE CREATION: We are committed to creating stockholder value based on sustained financial performance and long-term profitable growth.
• SOCIAL RESPONSIBILITY: We are committed to meeting the highest standards of corporate citizenship by protecting the health and safety of our employees, safeguarding the environment and creating a long-lasting, positive impact on the communities where we do business.
• INDEPENDENT SPIRIT: We are committed to preserving the special qualities and unique personality that have made us a successful independent enterprise. |
Corporate Culture and Human Capital Management
Our workplace culture is guided by the Hess values and reinforced by developing quality leadership, fostering diversity, equity and inclusion, emphasizing continuous learning, creating opportunities for engagement, driving innovation and embracing Lean processes. Our Life at Hess initiative is designed to optimize the work experience for our multigenerational and diverse workforce and unlock the discretionary effort that is required to perform at a high level on a sustained basis. The Life at Hess framework encompasses programs, policies and practices, and a listening system that draws on in-person dialogues, pulse polls and data analytics to help leaders understand employees’ perspectives and to ensure the health of our company culture and alignment with our values and strategic business priorities. During 2022,2023, we continued to adapt our work policies and benefits to prioritize emotional, mental and physical health and well-being and we instituted a hybrid work schedule atof our office locations to take a deliberate, measured and team-based approach to returning to the physical work environment.employees. Our diversity, equity and inclusion practices integrate with our workplace strategy, and we have six employee resource groups that provide valuable employee insights to sustain a diverse, equitable and inclusive environment for everyone to thrive and perform at their best. We publish our annual EEO-1 Report to enhance transparency of our workforce demographics. Additionally, workforce
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Proxy Summary |
and perform at their best. We publish our annual EEO-1Report to enhance transparency of our workforce demographics. Additionally, workforce activity and trends such as employee turnover, promotions, diversity, pay equity and leadership development metrics, along with qualitative information such as program development and progress, are considered by our executive-led diversity, equity and inclusion council. They are also discussed at the compensation and management development committee of our board of directors regularly throughout the year and shared with the full board. Directors have opportunities throughout the year to meet with employees across our portfolio.
Strategy of Value Creation
We have built a differentiated portfolio offering a unique value proposition – delivering durable cash flow growth that enables us to invest in some of the highest return projects in the industry and also to grow cash returns to our stockholders. Affordable and secure energy is essential to ensure a just and orderly energy transition that aligns with the Sustainable Development Goals of the United Nations. The IEA’s 2022 World Energy Outlook provides three scenarios of global energy demand in 2040 based on varying levels of global response to climate change. Under all of the IEA scenarios, oil and gas are expected to be needed for decades to come. Our strategy has been and continues to be to grow our resource base, deliver a low cost of supply and generate industry leading cash flow growth.
2022 Corporate Performance Highlights
In 2022, we continued to successfully execute our strategy and achieve strong operational and financial performance.
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Commitment to Sustainability
Hess is committed to helping meet the world’s growing energy needs in a safe, environmentally responsible, socially sensitive and profitable way. Our purpose is to be the world’s most trusted energy partner and sustainability is fundamental to our long-term strategy. We believe our focus on sustainability creates value for our stockholders and helps position us to continuously improve business performance. In 2021 we announcedWe describe our updated environment, health, safety and social responsibility (“EHS & SR”) strategy, including our new five year greenhouse gas (“GHG”) reduction targets, as discussed in our 20212022 sustainability report. We also have committed to eliminate routine flaring from our operations by the end of 2025 and to achieve net zero scope 1 and 2 GHG emissionson a net equity basis by 2050.
SustainabilityProposed Merger with Chevron
As previously disclosed, on October 22, 2023, the company entered into the merger agreement with Chevron. The merger agreement provides that, among other things and subject to the terms and conditions of the merger agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the merger as a direct, wholly-owned subsidiary of Chevron. Completion of the merger is subject to the satisfaction of certain closing conditions, including stockholder and regulatory approvals. We will be holding a separate special meeting of stockholders to vote on the proposed merger. For additional information related to the merger, please refer to company’s merger proxy statement and other relevant materials to be filed with the SEC when they become available.
2023 Corporate Performance Highlights
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Climate Change Strategy
We support the aim of the Paris Agreement with a company commitmentIn 2023, we continued to successfully execute our strategy and achieve net zero scope 1strong operational and 2 GHG emissions on a net equity basis by 2050. Our climate strategy is closely aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) established by the G20 Financial Stability Board, and its implementation is led by senior members of our leadership team with oversight by our board. Our climate change strategy ties to our broader business strategy, strategic planning and capital allocation decisions, including applying a theoretical price of carbon in our economic evaluations for significant new projects and conducting annual scenario planning exercises to test the long term resilience of Hess’ portfolio in a lower carbon economy using energy supply and demand scenarios developed by the IEA. These efforts help position Hess for the long term as a low-cost producer providing the energy necessary to ensure human welfare and global economic development, even in a low-carbon future.
Sustainability Focus Across Our Company
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Operated 4 rigs, drilling 118 wells and bringing 113 wells into production in the Bakken in 2023 In Guyana, commenced production at Payara significantly ahead of schedule, successfully sanctioned a 5th development at Uaru and submitted a 6th development at Whiptail for government approval | Net cash provided by operating activities of approximately $3.9 billion during 2023 Total liquidity of approximately $5.0 billion as of December 31, 2023, excluding Midstream and including committed credit facilities | Increased annual cash dividends on common stock to $1.75 per share, up from $1.50 per share in 2022 and $1.00 per share in 2021 | Continued exploration and appraisal success on the Stabroek Block offshore Guyana and an oil discovery at Pickerel in the Gulf of Mexico | Delivered 178% organic reserve replacement |
Board Oversight of Sustainability Practices
The board is actively engaged in overseeing Hess’ sustainability practices and works alongside senior management to evaluate sustainability risks and global scenarios in making strategic decisions, including those related to climate change. Furthermore, our independent board chair periodically accompanies our chief executive officer and other members of senior management to meet with investors to discuss stockholder views on EHS & SR and other topics.
The environmental, health and safety (“EHS”) committee has specific oversight responsibility and makes recommendations to the full board of directors so that sustainability practices, including those related to climate change, are taken into account when making strategic decisions. The EHS committee assists the board in identifying, evaluating and monitoring EHS & SR strategies and material risks with the potential to affect the people, environment and communities where we operate as well as our company’s business activities, performance and reputation. The EHS committee makes recommendations to the full board on how to address EHS & SR strategies and risks and monitors the company’s performance against such policies, programs and practices. The EHS committee reviews emergency response preparedness and planning and EHS & SR legal and regulatory matters that could affect the company’s business and operations. The EHS committee also advises the board’s compensation and management development committee regarding executive compensation measures to advance the EHS & SR goals of the company.
Board Climate Literacy
Our board is climate change literate, and these and other environmental issues are discussed at the board level and taken into account in strategic decisions. Each member of the EHS committee is independent and qualified under the standards established by applicable law, New York Stock Exchange (“NYSE”) listing standards and our Corporate Governance Guidelines. EHS committee members have extensive oil and gas industry experience, including operational, regulatory and financial expertise. During 2022, Lisa Glatch, Former President LNG & Net-Zero Solutions at Sempra Infrastructure, joined the board and EHS committee. To supplement the expertise of EHS committee members and the full board of directors, we bring in outside subject matter experts to advise members on current and developing issues relevant to our business, such as climate change. Board members, together with our executive leadership, also participate in field visits to Hess operated and non-operated assets to better understand our key EHS & SR strategies and risks. During these visits, the EHS committee engages with the Hess workforce and observes how Hess is managing EHS & SR risks and opportunities, such as leveraging Lean and technology-focused initiatives in the field to create a culture of innovation and improve efficiency.
Industry Leader in ESG Disclosure and Transparency
Hess is committed to transparency. The company’s disclosures, including our annual sustainability report, are aligned with the TCFD and informed by the oil and gas industry metrics published by the Sustainability Accounting Standards Board (“SASB”). Our website www.hess.comcontains information on our environmental and social policies and programs. Hess is recognized as an industry leader in environmental, social and governance disclosure and transparency:
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Proxy Summary |
Director Nominees
Diverse | Committee Memberships | |||||||||
Audit | Compensation | Governance | EHS | |||||||
Terrence J. Checki* Former EVP, Federal Reserve Bank of NY | Chair | ● | ● | |||||||
Leonard S. Coleman, Jr.* Former President of the National League of Major League Baseball; Former Commissioner of the New Jersey Department of Energy | ü | ● | ● | |||||||
Lisa Glatch* Former President LNG & Net-Zero Solutions, Sempra Infrastructure | ü | ● | ||||||||
John B. Hess Chief Executive Officer | ||||||||||
Edith E. Holiday* Corporate Director and Trustee | ü | Chair | ||||||||
Marc S. Lipschultz*
| Chair | |||||||||
Raymond J. McGuire* President of Lazard Ltd | ü | ● | ||||||||
David McManus* Former EVP, Pioneer Natural Resources | ● | ● | ||||||||
Kevin O. Meyers* Former SVP of Americas E&P, ConocoPhillips | ● | Chair | ||||||||
Karyn F. Ovelmen*
| ü | ● | ||||||||
James H. Quigley* Independent Chair of the Board; Former Chief Executive Officer, Deloitte, Touche Tohmatsu Limited | ● | ● | ||||||||
William G. Schrader* Former COO, TNK-BP Russia | ● | ● |
* | Independent Director |
Independent Director Nominee Characteristics
When evaluating nominees for our board of directors, the corporate governance and nominating committee considers diversity of viewpoints, backgroundsbackground and experience, including diversity of race, gender, nationality, ethnicity and sexual orientation, as well as tenure and age.
Proxy Summary |
Director Skills, Experiences and Expertise
When evaluating nominees for our board of directors, the corporate governance and nominating committee considers the following attributes to ensure effective oversight of our strategy and culture and effective representation of the interests of all stockholders.
Skills, Experience and Expertise | Relevance | |
C-Suite Executive | Track record of leadership and expertise related to the management and oversight of large and complex organizations | |
Environmental, Social & Governance | Understanding of key topics necessary for oversight of the company’s goal-setting, progress and initiatives related to sustainability, climate, environmental, social and governance matters | |
Financial, Banking & Risk Management | Expertise in finance, banking and risk management necessary to provide oversight of reporting, capital allocation and risk-related decision-making | |
Innovation & Technology | Background in overseeing innovative technology topics related to the business | |
International | Experience managing and overseeing business activities internationally | |
Oil & Gas | Understanding of broader industry trends and the nuances of the oil & gas business strategy and operations | |
Public Policy & Regulatory | Experience with navigating governmental, public policy and regulatory concerns related to the oil & gas industry and the company’s business and strategy |
C-Suite Executive
9 of 12 nominees |
Environmental, Social & Governance
9of 12 nominees |
Financial, Banking & Risk Management
6 of 12 nominees |
Innovation & Technology
5 of 12 nominees |
International
11 of 12 nominees |
Oil & Gas
7 of 12 nominees |
Public Policy & Regulatory
9 of 12 nominees |
Strong Governance Practices Promote Alignment with Stockholder Interests
ü | Independent directors (11 of 12 nominees) |
ü | Independent board chair |
ü |
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ü | Annual board and committee evaluations |
ü | Stockholder proxy access |
ü | Annual election of directors |
ü | Strong risk-oversight culture |
ü | No poison pill |
ü | Stock ownership policy for executives and directors |
ü | Majority vote for director elections |
ü | Annual CEO performance evaluation led by the |
ü | Independent board committees |
ü | Engagement with stockholders representing approximately 70% of outstanding shares |
Proxy Summary |
Executive Compensation Tied to Company Performance
Compensation Objective
We strive to attract and retain talented executives and motivate them to achieve our business goals through a combination of cash and stock-based compensation, which includes a base salary, annual incentive, and long-term incentives. The board oversees our compensation program and ensures that we implement our objectives by setting short-term targets that lead to long-term success and long-term targets based on total shareholder return (“TSR”). We also regularly engage with stockholders to ensure we fully understand the factors they consider to be the most important when evaluating our company, including our executive compensation program. At our 20222023 annual meeting of stockholders, approximately 97%98% of shares present and entitled to vote supported our 20212022 executive compensation program.
Pay Mix
The majority of executive compensation is variable and performance based. For our CEO and other named executive officers (“NEOs”), approximately 89%90% and 83%84%, respectively, of 20222023 target total direct compensation was variable. Variable pay directly ties each NEO’s pay to company performance outcomes, including financial results, operational results, strategic initiatives, and stock price performance. Our CEO’s long-term incentive mix consists of a combination of performance share units (“PSUs”) and stock options, making 100% of his long-term incentive compensation performance-contingent and closely aligning his total compensation to the company’s long-term performance.
Key Compensation Actions
Over the last several years, the compensation and management development committee (“committee”) has taken thoughtful actions to respond to the impacts of the evolving operating environment and market conditions on our business outlook and performance. In 2020, as a result of COVID-19 and its economic and oil price impact, the committee reduced the maximum payout under the annual incentive plan (“AIP”) from 200% to 50% of target to ensure that management shared in the necessary sacrifices to achieve our critical strategic initiative of preserving cash while also maintaining salaries and benefits for employees across the company. In 2021, with oil prices and our sector’s economic outlook stabilizing, the committee determined to return to pre-COVID target levels and structure, while holding NEO salaries and incentive compensation amounts flat at 2020 target levels.
For 2022,2023, the committee approved certain updates to our 20222023 NEO total direct compensation as a result of a competitive, industry-based compensation review as well as assessments of our current and anticipated operating conditions. These updates included moderate increases to base salaries and target AIP award opportunities under our annual incentive plan (“AIP”) for select NEOs, excluding our CEO and COO. The committee also approved increases to target long-termlong term incentive (“LTI”) awards for all NEOs, including our CEO and COO. These updates overall are proportionally weighted heaviest on LTI awards to reinforce our focus on long-term performance and recognize the retention value of long-term compensation. The changes also reflect that the committee had not approved any increase to target total direct compensation for our NEOs since 2020.
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Ultimate payouts under the AIP and PSU programs are determined based on attainment of pre-established metrics and remain highly sensitive to stockholder returns and our operational and strategic performance. The committee follows a rigorous target setting process each year to ensure the enterprise performance metrics of our AIP include challenging, yet attainable, targets for executives designed to align our executives’ interests with those of our stockholders. The committee also considers a number of factors when determining appropriate individual AIP target percentages, including the executive’s position within the company, his or her corresponding responsibilities, and the competitive annual incentive opportunity for similar positions at other companies in our industry.
In 2023, as part of its ongoing assessment of the company’s compensation programs, the committee determined to make changes to our AIP and PSU programs impacting all participants, including the NEOs. First, the committee
vii | 2024 PROXY STATEMENT |
Proxy Summary |
approved an enterprise-wide strategic modifier to better recognize qualitative accomplishments under the AIP. In 2023, the strategic modifier was based on five evaluation themes that were determined at the beginning of the year and assessed in early 2024 based on a comprehensive review of performance against each theme: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability. The strategic modifier may increase or decrease payout of the AIP by up to 25%, with total enterprise performance payout capped at 200%. The committee believes that the strategic modifier accounts for important enterprise-wide qualitative factors not otherwise quantifiable under the existing AIP metrics and is consistent with peer company practices.
ILLUSTRATION OF AIP DESIGN
Target Cash Incentive Opportunity ($) | X | Enterprise Performance Payout Range: 0%-200% of target = Enterprise Performance Metrics 0%-200% of target + Strategic Modifier +/- 0%-25% of target | X | Individual Performance Modifier +/- 0%-25% of target Payout can be reduced to 0% | = | Actual Cash Incentive Award ($) Payout capped at 200% of target |
Second, the committee determined to make adjustments to the 2023 PSU program in order to ensure its continued effectiveness in an evolving and consolidating industry environment. Beginning with the 2023 PSUs awards, performance will be determined based on the compound annual growth rate (“CAGR”) of the company’s total shareholder return for the three-year performance period ending December 31, 2025 compared to the CAGR of the XOP Total Return Index during the same period. The XOP Total Return Index consists primarily of U.S. oil and gas E&P companies, including the company’s 2023 peer group, and provides increased stability in assessing performance given ongoing industry consolidation. The committee determined to retain the S&P 500 Total Return Index as a performance modifier to increase or decrease payout of the 2023 PSUs by up to 10% of target based on the CAGR of the company’s TSR for the performance period compared to the CAGR of the S&P 500 Total Return Index during the same period. As part of this change, the committee modified the PSU payout range from 0-200% to 0-210%. The inclusion of the S&P 500 Total Return Index modifier maintains the company’s commitment to measure returns against both the company’s industry and the broader market.
Accordingly, the committee made the following determinations for 20222023 compensation:
Timeline | Component | Action |
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Set pay levels and performance targets for | Salary | • No increases for our CEO or COO. • Other NEOs received increases between | |||||||
AIP Targets | • No increases for our CEO or COO. • Other NEOs received increases between | ||||||||
| • NEO LTI award targets increased for each NEO between | ||||||||
March
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Performance | • AIP achieved at • Strong year operationally and financially resulted in above target final enterprise performance results of annual goals, as described on page 30. | |||||||
| • PSUs earned at • Hess achieved a our comparator group. |
2024 PROXY STATEMENT | viii |
Proxy Summary |
TSR Performance
We are focused on building long-term value in an industry where investments require significant capital and generally take several years before generating returns. The board believes that TSR is the most effective measure of long-term value creation currently available. Accordingly, vesting and payouts under our PSUs are tied to relative TSR to effectively measure our performance compared to peers. performance.
For the 2020-20222021-2023 performance cycle, our 3-yearwe achieved a 232% TSR was fourthover the three year performance period, ranking eighth among our 20202021 comparator group of peer group, as indicated below,companies and the S&P 500 Total Return Index, resulting in a PSU payout at 125%66% of target. Our 3-Yearthree-year TSR also greatly exceeded the TSR of the S&P 500 Total Return Index of 32% for the performance period. While we had exceptional TSR over the performance period, our relative TSR results compared to peers was impacted by our company’s early recovery in navigating the low oil price environment in 2020.
Over a five year period, our TSR ranks highest among our comparator group of peer companies and the S&P 500 Total Return Index, as illustrated in the chart below:
ix | 2024 PROXY STATEMENT |
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Hess Corporation for use at the annual meeting of stockholders to be held on Wednesday, May 17, 2023,15, 2024, at 9:00 a.m. Central Time at our office at 1501 McKinney Street, Houston, Texas 77010.virtually, via live webcast. You will be able to attend the annual meeting as well as submit questions and vote during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HES2024.
On or about April 6, 2023,5, 2024, we commenced mailing this proxy statement, the notice of annual meeting and the proxy card to stockholders. Holders of record of common stock of the company at the close of business on March 23, 202327, 2024 will be entitled to vote at the annual meeting. Each share of common stock will be entitled to one vote. As of March 23, 2023,27, 2024, there were 307,050,595308,102,605 shares of common stock outstanding and entitled to vote at the annual meeting. There are no other voting securities of the company outstanding. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the annual meeting. Abstentions and broker non-votes will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business.
In accordance with SEC rules, we are making our proxy materials available to stockholders over the internet. On or about April 6, 2023,5, 2024, we mailed the Notice of Internet Availability of Proxy Materials to our stockholders (the “Notice”). The Notice contains instructions on how to access this proxy statement and our annual report and submit a proxy over the internet. If you received the Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials by following the instructions contained in the Notice.
If at the close of business on March 23, 202327, 2024 your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the proxy materials, as applicable, are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares in your account. If that organization is not given specific direction, shares held in the name of that organization may not be voted and will not be considered as present and entitled to vote on any matter to be considered at the annual meeting, except with respect to the ratification of the company’s independent auditors. Brokers are not permitted to vote your shares with respect to Proposal 1, the election of directors, or Proposal 2, the advisory vote on executive compensation, or Proposal 3, the advisory vote on the frequency of voting on executive compensation, without your instructions as to how to vote. Please instruct your broker how to vote your shares using the voting instruction form provided by your broker so that your vote can be counted.
If you are a stockholder of record, you can vote by using the internet or by calling a toll-free telephone number. Internet and telephone voting information is provided on the proxy card or the Notice. A control number, located on the instruction sheet attached to the proxy card or the Notice, is designated to verify your identity and allow you to vote your shares and confirm that your voting instructions have been recorded properly. If you vote via the internet or by telephone, there is no need to return a signed proxy card. However, you may still vote by proxy by using the proxy card.
Proxies will be voted at the annual meeting in accordance with the specifications you make on the proxy. If you sign the proxy card or submit a proxy by telephone or over the internet and do not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the board of directors. For more information, see “Questions and Answers About the Annual Meeting and Voting” beginning on page 57.58.
This proxy statement relates only to the annual meeting. As previously disclosed, on October 22, 2023, the company entered into the merger agreement with Chevron. The merger agreement provides that, among other things and subject to the terms and conditions of the merger agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the merger as a direct, wholly-owned subsidiary of Chevron. Completion of the merger is subject to the satisfaction of certain closing conditions, including stockholder and regulatory approvals. We will be holding a separate special meeting of stockholders to vote on the proposed merger. For additional information related to the merger, please refer company’s merger proxy statement and other relevant materials to be filed with the SEC when they become available.
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PROPOSAL 1: ELECTION OF DIRECTORS
Majority Voting Standard
It is intended that proxies will be voted for the nominees set forth below. The company’s by-laws provide for majority voting in uncontested elections of directors, which is the case for the election of directors at the annual meeting. To be elected as a director of the company at the annual meeting, nominees must receive a majority of the votes cast. A majority of votes cast means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Abstentions and broker non-votes are not counted as votes cast.
If a director is not elected at the annual meeting and no successor has been elected at the annual meeting, the director is required to promptly tender his or her resignation to the board. The corporate governance and nominating committee is then required to make a recommendation to the board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The board will act on the tendered resignation and will publicly disclose its decision and rationale within 90 days following certification of the election results. These procedures are described in full in our by-laws, which may be found on the company’s website at www.hess.com.
It is expected that all candidates will be able to serve. However, if before the annual meeting any nominee in this proxy statement is unable to serve, or for good cause will not serve as a director, the proxy holders will vote the proxies for the remaining nominees and for substitute nominees chosen by the board of directors to fill the vacancy unless the board reduces the number of directors to be elected at the annual meeting.
Nominees for Director
The following table presents information as of January 20, 202317, 2024 about the nominees for election as directors of the company at the annual meeting, including the specific experience, qualifications, attributes and skills that led the board to conclude that such person should serve as a director. All of the directors on the board are elected for a one-year term expiring in 2024.2025, unless the closing of the merger with Chevron occurs prior to such date.
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Terrence J. Checki | ||
Independent Director Age: Director Since: 2014 Committees Served: Audit (Chair), Compensation, Governance Principal Occupation: Former Executive Vice President and Head, Emerging Markets and International Affairs, Federal Reserve Bank of New York.
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Other Directorships: Director or trustee of various Franklin Templeton funds.
Skills and Experience Mr. Checki has significant experience and expertise in complex domestic and international economic matters and public policy, having served in multiple leadership roles at the Federal Reserve Bank of New York, most recently as Head of Emerging Markets and International Affairs. His knowledge of global economic issues, along with his experience in international relations and management, provide a critical perspective to the Hess board pertaining to economic and international issues and risks. Mr. Checki currently chairs our audit committee. |
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Leonard S. Coleman, Jr. | ||
Independent Director Age: Director Since:2016 Committees Served:Governance, EHS Principal Occupation:Former President of the National League of Major League Baseball and Former Commissioner of the New Jersey Department of Energy.
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Other Directorships: Omnicom Group Inc. and Santander Consumer USA Holdings Inc. (private effective January 2022). Former Director, Avis Budget Group, Inc. and Electronic Arts Inc.
Skills and Experience Mr. Coleman brings to the Hess board substantial senior management experience, including leadership positions at Major League Baseball and deep public, energy sector experience from his role as Commissioner of the New Jersey Department of Energy, enabling him to provide the Hess board with a critical viewpoint on business development and government relations. Additionally, Mr. Coleman has extensive corporate governance experience from his prior directorships, contributes to the racial diversity of the Hess board and plays a critical role in overseeing the company’s diversity, equity and inclusion initiatives. |
2 |
Proposal 1: Election of Directors + Nominees for Director |
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Lisa Glatch | |
Independent Director Age: Director Since:2022 Committees Served:EHS Principal Occupation:Former President LNG & Net-Zero Solutions, Sempra Infrastructure. | ||
Other Directorships: Fluor Corporation and Xylem Inc. Former Director, Evoqua Water Technologies Corp.
Skills and Experience Ms. Glatch brings deep experience in sustainability, energy policy, operations and innovation functions. At Sempra, an energy infrastructure company, Ms. Glatch held multiple leadership roles since 2018 related to gas infrastructure, carbon sequestration and next-generation energy technologies. Prior to that, she was EVP, Chief Strategic Development Officer of CH2M Hill Companies Ltd. from 2014 to 2017, SVP of Global Sales for Jacobs Engineering Group Inc. from 2012 to 2014 and spent 24 years with Fluor Corporation in a range of senior management positions. She provides a valuable perspective to the Hess board to guide the company’s strategy and sustainability efforts. |
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John B. Hess | ||
Age: Director Since:1978 Principal Occupation:Chief Executive Officer of Hess Corporation and Hess Midstream GP LLC, the General Partner of Hess Midstream LP.
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Other Directorships: Hess Midstream GP
Skills and Experience Mr. Hess has over 45 years of experience with the company, serving as Chief Executive Officer since 1995. He is a leading voice in the global energy industry, with a deep understanding of sector trends, opportunities and risks and singular knowledge of the company’s development, strategy and operations. He and his family have been long-term stockholders and have had a long-standing commitment to the company. |
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Edith E. Holiday | ||
Independent Director Age: Director Since: 1993 Committees Served: Governance (Chair) Principal Occupation: Former Assistant to the President of the United States and Secretary of the Cabinet and Former General Counsel, United States Department of the Treasury. | |||
Other Directorships: Director or trustee of various Franklin Templeton
Skills and Experience Ms. Holiday brings an informed perspective on policy and government relations to the Hess board, including in the areas of corporate governance, risk management and the economy. She was the first woman to serve as General Counsel of the U.S. Treasury Department and has been Assistant to the President of the United States. Ms. Holiday currently chairs our corporate governance and nominating committee, which oversees the company’s corporate governance practices. |
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Marc S. Lipschultz | ||
Independent Director Age: Director Since: 2016 Committees Served: Compensation (Chair) Principal Occupation: | |||
Other Directorships: Blue Owl Capital Inc.
Skills and Experience Mr. Lipschultz brings significant energy, infrastructure, investment, finance and management experience to the Hess board, including two decades as the former Global Head of Energy and Infrastructure at KKR & Co. LP and as |
3 |
Proposal 1: Election of Directors + Nominees for Director |
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Raymond J. McGuire | ||
Independent Director Age: Director Since: 2022 Committees Served: Governance Principal Occupation: President of Lazard Ltd.
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Other Directorships: Vornado Realty Trust. Former Director, KKR & Co. Inc.
Skills and Experience Mr. McGuire has over 35 years of experience in finance and corporate strategy. Before joining Lazard in April 2023, he previously served as Vice Chairman of Citigroup from 2018 to 2020. He joined Citigroup in 2005, serving as Global Co- Head of Investment banking from 2005 to 2008, Global Head of Corporate and Investment Banking from 2008 to 2018 and as Vice Chairman from 2018 to 2020. Prior to that, Mr. McGuire served as Global Co-Head of Mergers and Acquisitions at Morgan Stanley from 2003 to 2005 and held various senior roles at Merrill Lynch & Co., Inc., Wasserstein Perella & Co., Inc. and The First Boston Corporation (Credit Suisse). Mr. McGuire also contributes to the racial diversity of the Hess board and was a candidate in the 2021 New York City Democratic mayoral primary, with a focus on shared prosperity, racial equity and economic recovery from COVID-19. |
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David McManus | ||
Independent Director Age: Director Since: 2013 Committees Served: Compensation, EHS Principal Occupation: Former Executive Vice President and Head of International Operations, Pioneer Natural Resources Co.
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Other Directorships: FLEX LNG Limited and Genel Energy plc. Former Director,
Skills and Experience Mr. McManus brings decades of industry experience in upstream oil and gas operations to the Hess board, including expertise gained as Head of International Operations at Pioneer Natural Resources. Mr. McManus’ deep operational expertise, understanding of the global energy landscape and in-depth knowledge of international markets helps the Hess board analyze asset portfolio opportunities and potential risks as it guides and oversees the company’s long-term strategy. |
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Kevin O. Meyers, Ph.D. | ||
Independent Director Age: Director Since: 2013 Committees Served: EHS (Chair), Audit Principal Occupation: Independent Energy Consultant. Former Senior Vice President of E&P for the Americas, ConocoPhillips.
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Other Directorships:
Skills and Experience Dr. Meyers has over |
4 |
Proposal 1: Election of Directors + Nominees for Director |
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Karyn F. Ovelmen | ||
Independent Director Age: Director Since: 2020 Committees Served: Audit Principal Occupation: Executive Vice President and Chief Financial Officer, Newmont Corporation; Former Gas and Power Transformation Leader, General Electric Company and Former Executive Vice President and Chief Financial Officer, Flowserve Corporation.
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Other Directorships: ArcelorMittal S.A. Former Director, Gates Industrial Corporation plc.
Skills and Experience Ms. Ovelmen has over 25 years of financial, accounting and operating experience across the energy, mining, manufacturing, retail and distribution industries. |
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James H. Quigley | ||
Independent Chair Age: Director Since: 2013 Committees Served: Audit, Compensation Principal Occupation: Chair of the Board of Hess Corporation; Former Chief Executive Officer, Deloitte, Touche Tohmatsu Limited.
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Other Directorships: Former Director
Skills and Experience Mr. Quigley brings to the Hess board extensive global experience in management, business strategy, governance, finance, accounting, tax, and regulatory matters, including expertise gained from leading Deloitte, Touche Tohmatsu Limited, one of the world’s largest accounting and consulting firms. During his 38 years at Deloitte, he was a trusted consultant on strategic leadership and operating matters to senior management teams of multinational companies across multiple industries. He currently serves as the independent chair of the Hess board. |
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William G. Schrader | ||
Independent Director Age: Director Since: 2013 Committees Served: Audit, EHS Principal Occupation: Former Chief Operating Officer, TNK-BP Russia.
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Other Directorships: Former Director, Challenger Energy Group PLC
Skills and Experience Mr. Schrader has deep operational expertise in international E&P activities, including leading the transformation of BP’s global E&P portfolio while navigating regulatory and political matters in international markets. His experience as a disciplined E&P operator with experience in production sharing structures, government relations and delivering returns provides the Hess board with a unique understanding of the operational and regulatory environments where Hess operates.
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The board of directors unanimously recommends that stockholders vote FOR the election of each of the twelve director nominees named above. |
5 |
Proposal 1: Election of Directors + Director Nominations |
Director Nominations
The corporate governance and nominating committee is responsible for recommending to the board qualified candidates for election as directors. In advance of each annual meeting, the committee meets to recommend nominees for election at the annual meeting. From time to time throughout the year, the committee reviews the mix of skills, qualifications and experience of the directors currently on the board and seeks to identify individuals whose skills, qualifications and experience will supplement and contribute to the effectiveness of the board.
The corporate governance and nominating committee and the board believe that the board collectively should encompass a broad range of skills, expertise, general industry knowledge and diversity of opinion. New perspectives and ideas are essential to the proper functioning of the board as is the experience and institutional knowledge of longer-tenured directors. The board has undergone significant refreshment over the last several years, replacing over 80%decade, and each of the board since 2013. In February 2022, Raymond J. McGuire was appointed tothree newest members enhance the board. He has over 35 years of experience in finance and also contributes to the racial diversity of the board. In May 2022, Lisa Glatch was elected to the board. She has extensive experience in sustainability, energy policy, operations and innovation functions and also contributes to the gender diversity of the Hess board. The corporate governance and nominating committee continues to evaluateregularly evaluates potential future candidates to support ongoing refreshment, prioritizing sourcing diverse director candidates with key skills that are important to our strategy.
In accordance with the company’s corporate governance guidelines approved by the board of directors, nominees are reviewed and recommended based on a variety of criteria including:
The corporate governance and nominating committee, in making its recommendations for nominees, will also consider carefully how nominees’ other directorships as well as other business and professional commitments may affect a nominee’s ability to commit adequate time to board and committee matters. The corporate governance and nominating committee did not recommend any changes to the 2024 nominees in light of the pending merger with Chevron.
Board Diversity
As noted above, among the criteria used to evaluate nominees for the board is diversity of viewpoints, background and experience, including diversity of race, gender, nationality, ethnicity and sexual orientation as well as professional background and industry experience. The board believes that such diversity provides varied perspectives which promote active and constructive dialogue among board members and between the board and management, resulting in more effective oversight. The board believes this diversity is demonstrated in the varied backgrounds, experience, qualifications and skills of the current members of the board. In the board’s executive sessions and in annual performance evaluations conducted by the board and its committees, the board from time to time considers whether the members of the board reflect such diversity and whether such diversity contributes to a constructive and collegial environment.
In accordance with the company’s corporate governance guidelines, the board is committed to seeking out qualified diverse candidates who meet the applicable search criteria, including women and minority candidates, to include in the pools from which potential nominees are considered (also known as the “Rooney Rule”). To further this goal, in 2023 the corporate governance and nominating committee has retained Russell Reynolds Associates, a director and executive search and recruiting firm, to identify and review potential independent director candidates and assist the committee and the board in assessing their qualifications and promoting the consideration of diverse candidates. The committee has not paid fees to any other third parties to assist in identifying or evaluating potential nominees. Each of the nominees for election at the 20232024 annual meeting were recommended by the non-management directors of the corporate governance and nominating committee, with the input of senior management and the committee’s consultants and advisors.
6 |
Proposal 1: Election of Directors + Director Nominations |
Stockholder Recommendations and Proxy Access
Stockholders may suggest candidates by writing to the corporate governance and nominating committee, in care of the corporate secretary of the company at the address set forth on page 62.63. Stockholder suggestions should include a summary of the candidate’s qualifications, the information required by SEC rules for director nominees and contact information for the candidate. Stockholder suggestions should be submitted no later than December 1 for consideration as nominees for election at the next annual meeting and otherwise in accordance with the company’s policy and by-laws. The committee follows the same process of identifying and evaluating nominees recommended by stockholders as that for candidates recommended by any other source.
In 2015, our board adopted a proxy access by-law that permits a stockholder, or group of up to 20 stockholders, owning at least 3% of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials up to the greater of two directors or 20% of our board of directors. Stockholders and nominees must satisfy the requirements set forth in the by-laws in connection with such nominations. We believe that this by-law provision provides meaningful and effective proxy access rights to our stockholders, and balances those benefits against the risk of misuse by stockholders with interests that are not shared by a significant percentage of our stockholders.
Board Evaluation
Our board is committed to continuous improvement and recognizes the importance of a rigorousthorough evaluation process to enhance board performance and effectiveness. Our corporate governance and nominating committee oversees the annual performance evaluation of the board and ensures that each of the board’s committees conducts an annual self-evaluation. The chair of the corporate governance and nominating committee also oversees the evaluation of our board chair. Below is a summary of the board self-evaluation conducted in 2023.
Our board evaluations are designed to solicit input and perspective on various topics, including:
• | access to management and internal and external experts, resources and support; |
• | key areas of focus for the board, including strategy, sustainability, crisis management and stockholder engagement; |
• | committee structure and process, member and chair performance, duties and functions and management support; and |
• | performance of the board chair, including communication, relationship with management, availability, focus on appropriate issues and inclusiveness. |
7 |
Proposal 1: Election of Directors + Board Leadership Structure / Independent Chair |
Board Leadership Structure / Independent Chair
Our by-laws provide separate positions for the chair of the board and chief executive officer. Mr. Quigley serves as the independent chair of the board and Mr. Hess serves as CEO and a director of the board.
The board currently believes that having a separate chair and chief executive officer allows for better alignment of corporate governance with stockholder interests and aids in the board’s oversight of management and the board’s ability to carry out its roles and responsibilities on behalf of the stockholders. The board also believes that the separation of the roles of chair and chief executive officer allows the chief executive officer to focus more of his time and energy on operating and managing the company and leverages the chair’s leadership and financial, governance and regulatory experience.
The chair, an independent member of the board who has not previously served as an executive officer of the company, is appointed by the board annually.
As set forth in the company’s corporate governance guidelines, the responsibilities of the chair include:
Director and Nominee Independence
The board of directors has affirmatively determined that all of the current directors on the board, other than Mr. Hess, and that eleven of the twelve nominees for election at the annual meeting, namely, Mr. Checki, Mr. Coleman, Ms. Glatch, Ms. Holiday, Mr. Lipschultz, Mr. McGuire, Mr. McManus, Dr. Meyers, Ms. Ovelmen, Mr. Quigley, and Mr. Schrader, are independent within the meaning of the rules and standards of the NYSE.New York Stock Exchange (“NYSE”). The board determined that these directors and nominees not only met all “bright-line” criteria under these rules, but also that, based on all known relevant facts and circumstances, there did not exist any relationship that would compromise the independence of these directors.
Meeting Attendance
The board of directors met ten times in 2022,2023, including twothree special meetings. Each incumbent director attended at least 75% of the aggregate of all meetings of the board of directors and all meetings of the committees of the board of directors on which he or she served during 2022.2023.
Non-management directors meet without members of management present after each regularly scheduled board meeting. The chair of the board of directors presides at these meetings.
All of the current directors who were serving as a director at the time of last year’s annual meeting attended that meeting.
8 |
Proposal 1: Election of Directors + Corporate Governance Guidelines |
Corporate Governance Guidelines
The board has approved a set of corporate governance guidelines in accordance with the rules of the NYSE. These guidelines set forth the key policies relating to corporate governance, including director qualification standards, director responsibilities and director compensation. The board has also approved a code of business conduct and ethics in accordance with rules of the NYSE and the SEC applicable to all directors, officers and employees, including the chief executive officer, the principal financial and accounting officer and other senior financial officers. The code is intended to provide guidance to directors and management to assure compliance with law and promote ethical behavior. The company’s corporate governance guidelines and its code of business conduct and ethics may be found on the company’s website at www.hess.com and are also available without charge upon request to the company’s corporate secretary at the address set forth on page 62.63.
Stockholder and Interested Party Communications
Any stockholder or interested party who wishes to communicate or request a meeting with members of the board of directors or with only non-management directors or any specified individual director may do so by writing to them in care of the chair of the board of directors, Hess Corporation, at the address set forth on page 62.63. Stockholders may also communicate directly to the chair by e-mail to BoardChairman@hess.com. Communications sent by mail or e-mail will be reviewed by the chair and will be referred for resolution and response as deemed appropriate by the chair. If a stockholder requests a meeting, the corporate governance and nominating committee will decide whether the subject matter is a proper one to be addressed by the board and, if so, whether a meeting is warranted. The corporate governance and nominating committee will meet periodically to review all stockholder communications received.
Related Party Transactions
The company expects all directors and executive officers to bring to the company’s attention any related party transactions, including transactions which may be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC. The company’s policies provide that if any company representative, including a director or an officer, considers conducting any transaction that reasonably would be expected to give rise to a conflict of interest between the representative and the company, such representative must disclose such transaction in advance to the company’s legal department for review. In addition, the company annually sends each director and executive officer a questionnaire requiring such person to describe any transaction contemplated under Item 404 or in the case of independent directors, any transaction that might compromise their independence. The company also annually conducts a review of its accounting records to determine whether any such related party transaction occurred in the prior fiscal year. If any proposed or existing related party transaction is identified, the transaction is brought to the general counsel for review. If the general counsel determines the transaction poses a conflict of interest, or would compromise the independence of a non-management director, the general counsel will advise the audit committee of the transaction and the disinterested members of the audit committee will determine whether the transaction serves the best interest of the company and its stockholders and whether if proposed, it may proceed and if existing, it may continue to exist. The general counsel and the disinterested members of the audit committee will determine the appropriate scope of, and process for, the review of any such transaction based on the then existing facts and circumstances of the transaction in view of applicable listing standards of the NYSE. During 2022,2023, there were no transactions in excess of $120,000 between the company and a related person in which the related person had or will have a direct or indirect material interest.
9 |
Proposal 1: Election of Directors + Committees of the Board |
Committees of the Board
The board has four standing committees: the compensation and management development committee, the corporate governance and nominating committee, the audit committee and the environmental, health and safety committee. Each committee’s written charter is available on our website at www.hess.com and also available without charge upon request to the company’s corporate secretary at the address set forth on page 62.63. The board receives regular reports from each committee and discusses matters of particular concern or importance.
Compensation and Management Development Committee
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Mr. Lipschultz (Chair) Mr. Checki Mr. McManus Mr. Quigley
All committee members are independent |
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The committee’s principal responsibilities are to:
• review and approve the company’s overall compensation and human capital management philosophy;
• establish performance goals and objectives for the company’s chief executive officer and review the goals set by the company’s chief executive officer for the other named executive officers;
• review the performance and approve the compensation of the company’s chief executive officer and other named executive officers;
• provide oversight and monitor the company’s compensation and benefit programs, including the company’s pension, savings, bonus, medical, health and wellness plans;
• administer and make awards of stock-based compensation under the company’s long-term incentive plans;
• review human capital programs, including management succession, learning and development as well as diversity, equity and inclusion policies;
• oversee the assessment of potential risks to the company from its compensation programs and policies;
• approve the retention and review the performance and independence of compensation consultants to the committee; and
• prepare an annual report on executive compensation for the company’s proxy statement.
Executive Compensation. The committee’s processes for determining executive compensation are described in “Compensation Discussion and Analysis” on page |
Corporate Governance and Nominating Committee
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Ms. Holiday (Chair) Mr. Checki Mr. Coleman Mr. McGuire
All committee members are independent |
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The committee’s principal responsibilities are to:
• develop and recommend to the board the criteria for board membership;
• identify and recommend individuals to the board for nomination as members of the board and its committees consistent with criteria approved by the board;
• review and make recommendations to the board regarding the size and composition of the board of directors and the establishment and composition of committees;
• oversee board, committee and chair performance evaluations;
• identify and recommend to the board potential continuing education opportunities for directors;
• periodically review and, if appropriate, make recommendations to the board relating to board practices and corporate governance; and
• develop, recommend to the board and periodically review a set of corporate governance principles applicable to the company.
Director Candidates. This committee recommends for election as directors qualified, diverse candidates identified through a variety of sources, as described on page 6. |
10 |
Proposal 1: Election of Directors + Committees of the Board |
Audit Committee
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Mr. Checki (Chair) Dr. Meyers Ms. Ovelmen* Mr. Quigley* Mr. Schrader
*Audit committee financial expert
All committee members are independent and financially literate. |
5 meetings in
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The audit committee’s principal responsibility is to provide assistance to the board of directors in fulfilling its oversight responsibility to the stockholders, the investment community and others, including to:
• review and discuss with management, internal audit and the independent registered public accountants matters relating to the company’s financial statements, earnings releases and annual and quarterly reports;
• meet with management, internal audit and the independent registered public accountants to review and discuss the company’s financial reporting practices and accounting policies and systems, including the appropriateness of management’s application of those policies;
• review and discuss with management, internal audit and the independent registered public accountants the adequacy and effectiveness of the company’s internal controls over financial reporting and disclosure controls and procedures;
• appoint and oversee the independent registered public accountants, determine their compensation and review their qualifications, performance and independence from management when deciding whether to retain the independent registered public accountants;
• review the scope and results of the internal audit program and the performance of the internal audit function;
• review and discuss with management the company’s policies with respect to risk assessment and risk management, including
• review compliance with legal and regulatory requirements and company policies and procedures and discuss the effectiveness of the company’s legal, regulatory and ethical compliance programs. | ||||
No member of the audit committee serves on the audit committees of more than three public companies, including ours. | ||||
Environmental, Health and Safety Committee
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Dr. Meyers (Chair) Mr. Coleman Ms. Glatch Mr. McManus Mr. Schrader
All committee members are independent |
3 meetings in
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The committee’s principal responsibilities are to:
• assist the board’s oversight of the company’s sustainability and EHS practices, so that sustainability and EHS risks and opportunities are taken into account when making strategic decisions, including those with the potential to affect the people, environment and communities where we operate;
• develop recommendations to the board for the formulation and adoption of policies, programs and practices to address sustainability and EHS risks and opportunities, including climate-change related issues, trends and developments;
• review and monitor the company’s compliance with policies, programs and practices concerning sustainability, EHS and climate-change related issues;
• identify, evaluate and monitor sustainability, EHS and climate-related risks, domestic and international, which affect or could affect the company’s business activities, performance and reputation;
• periodically review sustainability, EHS and climate-change related legislative and regulatory issues affecting the company’s business and operations; and
• review emergency response planning procedures for EHS events. |
11 |
Proposal 1: Election of Directors + Report of the Audit Committee |
Report of the Audit Committee
The audit committee of the board of directors oversees the company’s financial reporting on behalf of the board. Management is responsible for the system of internal controls and for preparing financial statements. Ernst & Young LLP, the company’s independent registered public accountants, are responsible for expressing an opinion on the effectiveness of internal controls over financial reporting and the fair presentation of the financial statements in conformity with generally accepted accounting principles. The audit committee is composed of independent directors and operates in accordance with a charter approved by the board of directors, which is available at www.hess.com. The charter sets forth the audit committee’s responsibilities, which are summarized under “Committees of the Board” on page 11. The committee reviews its charter annually and, when appropriate, makes recommendations for changes to the board.
20222023 Actions of the Audit Committee
The audit committee met five times during 20222023 and met in executive session after each of those meetings. Additionally, the audit committee met four times to review quarterly financial results.
During 2022,2023, the audit committee met with management, Ernst & Young LLP and internal auditors and among other things:
• | reviewed and discussed with management and Ernst & Young LLP our audited financial statements included in our annual report on Form 10-K and quarterly unaudited financial statements included in quarterly reports on Form 10-Q prior to filing with the SEC; |
discussed with management and Ernst & Young LLP accounting policies and management’s application of those policies as they relate to the company’s financial results, significant judgments inherent in the financial statements, disclosures, including on climate change-related risks and opportunities related to climate change as well as the pending merger with Chevron, and other matters required by generally accepted auditing standards;
discussed with Ernst & Young LLP all matters and communications required to be discussed by applicable Public Company Accounting Oversight Board (“PCAOB”) standards, including matters related to independence, received the written disclosures and the letter from Ernst & Young LLP required by the PCAOB regarding their independence and “critical audit matters” identified by the Ernst & Young LLP arising from the audit of the company’s financial statements;
reviewed and discussed with management the processes undertaken to evaluate the accuracy and fair presentation of our consolidated financial statements and the effectiveness of our systems of disclosure controls and procedures and internal control over financial reporting;
reviewed and discussed with management, the internal auditor, and Ernst & Young LLP, management’s assessment of the effectiveness of our internal control over financial reporting and Ernst & Young LLP’s opinion about the effectiveness of our internal control over financial reporting;
reviewed the scope and results of the internal audit program and received from the internal auditor summaries of significant reports to management prepared by the internal auditing department and management’s responses;
reviewed and discussed matters related to risk, risk controls and compliance and inquired about significant financial risk exposures, assessed the steps management is taking to mitigate these risks, and reviewed our policies for risk assessment and risk management, including the company’s overall insurance coverage;management;
met with management regarding our technology systems and cyber-securitycybersecurity incident detection, defense and response;
reviewed and assessed the overall adequacy and effectiveness of our legal, regulatory and ethical compliance programs, including concerns raised on the company’s whistleblower reporting system and the company’s anti-corruption policies;
reviewed the implications of tax law changes on our tax strategies; and
reviewed with the general counsel legal and regulatory matters that impact the consolidated financial statements or internal control over financial reporting.
The audit committee also met separately with Ernst & Young LLP and the internal auditors without management present.
12 |
Proposal 1: Election of Directors + Report of the Audit Committee |
Assessment of Independent Registered Public Accountants
The audit committee reviews the scope of and overall plans for the annual audit and negotiates fees and approves the other terms of Ernst & Young LLP’s engagement letter. The audit committee also oversees the periodic required rotation of the lead audit partner, as required by SEC rules, and is directly involved in the selection of such partner.
The audit committee discussed with Ernst & Young LLP their independence from management and the company and considered the compatibility of all non-audit services with the auditors’ independence. The audit committee also assessed the qualifications and performance of Ernst & Young LLP in determining whether to retain them. In conducting this assessment, the audit committee considered, among other things: information relating to audit effectiveness, including the results of PCAOB inspection reports; the depth and expertise of the audit team, including their demonstrated understanding of the company’s businesses, significant accounting practices, and system of internal control over financial reporting; the quality and candor of Ernst & Young LLP’s communications with the audit committee and management; the accessibility, responsiveness, technical competence, and professionalism of the lead audit partner and other members of the audit team assigned to our account; the impact to the company of changing auditors; the appropriateness of Ernst & Young LLP’s fees; and Ernst & Young LLP’s ability to employ professional skepticism, objectivity, integrity, and trustworthiness.
The audit committee reviewed the audited December 31, 20222023 financial statements of the company with management and the independent registered public accountants. Management represented to the committee that the financial statements were prepared in accordance with generally accepted accounting principles. In reliance on the reviews and discussions with management and the independent registered public accountants, the audit committee recommended to the board of directors, and the board approved, the inclusion of the audited financial statements in the annual report on Form 10-K for the year ended December 31, 20222023 filed with the SEC. Based on its assessment and review as described in this report, the audit committee has determined that selecting Ernst & Young LLP as independent registered public accountants for 20232024 is in the best interest of the company and its stockholders. The board has unanimously proposed that the stockholders ratify this selection at the annual meeting.
Committee Members:
Terrence J. Checki, Chair
Kevin O. Meyers
Karyn F. Ovelmen
James H. Quigley
William G. Schrader
The Report of the Audit Committee does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the company specifically incorporates the Report of the Audit Committee by reference therein.
13 |
Proposal 1: Election of Directors + Stockholder Engagement |
Stockholder Engagement
We engage with our stockholders on a regular basis to ensure we fully understand the factors they consider to be most important when evaluating our company. The purpose of our stockholder engagement program is to discuss and solicit stockholder views on our strategy, business plan, EHS & SR matters, human capital management, diversity, corporate governance and other matters of concern, including executive compensation.
During 2022,2023, our CEO and other members of senior management conducted a broad outreach effort to investors representing, in the aggregate, approximately 70% of our outstanding shares. Our independent board chair participated in several meetings with our institutional investors to discuss the board’s oversight of our strategy, corporate governance, EHS & SR and other matters.
Robust stockholder engagement program throughout the year
ü Participated in |
ü
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Presented at CERAWeek, a premier energy conference attended by institutional investors, industry leaders and policymakers
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ü CEO participated in over 100 meetings with institutional investors
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ü
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Participated in conferences hosted by Council of Institutional Investors
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Topics Covered
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Corporate Strategy and Performance
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Environment, Sustainability and Climate
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Human Capital Management, including Diversity, Equity and Inclusion
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Governance and Risk Oversight
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Executive Compensation
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Management and the chair provide feedback from these meetings to the full board on a regular basis.
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Risk Oversight
The board of directors has oversight of the company’s risk management policies with an emphasis on understanding the key enterprise risks affecting the company’s business and the ways in which the company attempts to prudently mitigate such risks, to the extent reasonably practicable and consistent with the company’s long-term strategy. Additionally, each of the board’s committees is assigned with overseeing risk management specific to their scope of responsibilities, as illustrated below. Management applies a comprehensive, standardized approach to identifying and managing risks of all types across our operations and the functions that support our operations. Our enterprise risk management process is used to develop a holistic risk profile for each asset and major project, drawing input from subject matter experts, performance data, incident investigations, lessons learned and recent internal audits. In these risk assessments, we identify each risk and assess its likelihood and potential impact to people, the environment, our reputation and our business, as well as other risks, as appropriate.
Periodically, the chief risk officer presents a comprehensive review of the company’s enterprise level risks, the status of the enterprise risk program and risk management strategies utilized by the company under its corporate risk policy to the audit committee, which has been delegated primary responsibility for oversight of the company’s risk management practices. The audit committee and the board will also receive updates at meetings during the year on any particular matters relating to specific risks that management believes needs to be brought to the attention of the committee or the board. In addition, the company conducts an annual risk assessment to determine the extent, if any, to which the company’s compensation programs and practices may create incentives for excessive risk-taking. For a discussion of this assessment, see “Compensation and Risk” on page 52.54.
14 |
Proposal 1: Election of Directors + Risk Oversight |
Cyber-security RiskBoard Oversight of Cybersecurity
Cyber-securityCybersecurity is an integral part of enterprise risk management at Hess. The board appreciates the rapidly evolving nature of threats presented by cyber-securitycybersecurity incidents and is committed to the prevention, timely detection, and mitigation of the effects of any such incidents on the company. The audit committee receives updates from management at least twice a year regarding cyber-security,cybersecurity, including the nature of threats, defense and detection capabilities, incident response plans and employee training activities. The company has not experienced a material cyber-security breachcybersecurity incident within the past three years. In addition, management updates the audit committee, as necessary, regarding any material cybersecurity incidents as well as other incidents with lesser impact potential. The audit committee reports to the full board regarding its activities, including those related to cybersecurity. The company has an ongoing information security training and compliance program that occurs quarterly and is mandatory for all employees, maintains property and casualty insurance that may cover damages caused as a result of a cyber-security event,cybersecurity incident, and is externally assessed based on corporate standards aligned to the NIST Cybersecurity Framework.
Board Oversight of Corporate Culture and Human Capital Management
We are committed to having an engaged, diverse and inclusive workplace that fosters learning, development and innovation. The board is actively engaged in overseeing our values and its connection to our long-term strategy. Directors have the opportunity to participate in our culture first-hand through interactions with employees and visits to our assets and offices. Through the compensation and management development committee, the board meets with management to understand and monitor company culture and its alignment with our values and strategic business priorities. Additionally, workforce activity and trends such as employee turnover, promotions, pay equity, diversity and leadership development metrics, along with qualitative information such as program development and progress, are considered by our executive-led diversity, equity and inclusion council. They are also discussed at the compensation and management development committee regularly throughout the year and shared with the full board of directors. The entire board attends the compensation and management development committee meetings that involve reviews and discussions of CEO performance objectives, evaluations, management succession and compensation.
15 |
Proposal 1: Election of Directors + Risk Oversight |
Board Oversight of Sustainability Practices and Climate Literacy
The board is actively engaged in overseeing our sustainability practices and works alongside senior management to evaluate sustainability risks and global scenarios in making strategic decisions, including those related to climate change. Furthermore, our independent board chair periodically accompanies our chief executive officer and other members of senior management to meet with investors to discuss stockholder views on EHS & SR and other topics.
The EHS committee has specific oversight responsibility and makes recommendations to the full board of directors so that sustainability practices, including those related to climate change, are taken into account when making strategic decisions. The EHS committee assists the board in identifying, evaluating and monitoring EHS & SR strategies and material risks with the potential to affect the people, environment and communities where we operate as well as our company’s business activities, performance and reputation. The EHS committee makes recommendations to the full board on how to address EHS & SR strategies and risks and monitors the company’s performance against such policies, programs and practices. The EHS committee reviews emergency response preparedness and planning and EHS & SR legal and regulatory matters that could affect the company’s business and operations. The EHS committee also advises the board’s compensation and management development committee regarding executive compensation measures to advance the EHS & SR goals of the company.
Our board is climate change literate, and these and other environmental issues are discussed at the board level and taken into account in strategic decisions. Each member of the EHS committee is independent and qualified under the standards established by applicable law, NYSE listing standards and our Corporate Governance Guidelines. EHS committee members have extensive oil and gas industry experience, including operational, regulatory and financial expertise. During 2022, Lisa Glatch, Former President LNG & Net-Zero Solutions at Sempra Infrastructure, joined the board and the EHS committee. To supplement the expertise of EHS committee members and the full board of directors, we bring in outside subject matter experts to advise members on current and developing issues relevant to our business, such as climate change. Board members, together with our executive leadership, also participate in field visits to Hess assets to better understand our key EHS & SR strategies and risks. During these visits, the EHS committee engages with the Hess workforce and observes how Hess is managing EHS & SR risks and opportunities, such as leveraging Lean and technology-focused initiatives in the field to create a culture of innovation and improve efficiency.
16 | 2024 PROXY STATEMENT |
Proposal 1: Election of Directors + Ownership of Voting Securities by Certain Beneficial Owners |
Ownership of Voting Securities by Certain Beneficial Owners
The following table sets forth, as of March 23, 202327, 2024 for Messrs. Hess, Brady Kean and GoodwillieKean and as of December 31, 20222023 for the other beneficial owners identified in the table, information as to the ownership of more than 5% of any class of the company’s voting securities by beneficial owners known by the company to hold more than 5% of any such class:
Name and address of beneficial owner
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Amount and nature of beneficial ownership(a)
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Percent
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Common Stock
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John B. Hess
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Nicholas F. Brady
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16,634,757(b)(c)(f)
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Thomas H. Kean
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FMR LLC 245 Summer Street Boston, MA 02210
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BlackRock, Inc.
New York, NY
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State Street Corporation State Street Financial Center
Boston, MA
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(a) | The individual amounts and percentages shown for Messrs. Hess, Brady |
(b) | This amount includes 7,779,037 shares held by a charitable lead annuity trust established under the will of Leon Hess. Mr. John B. Hess has sole voting power over the stock held by this trust and shares dispositive power over such stock with Messrs. Brady |
(c) | This amount includes 8,817,802 shares held by a limited partnership. Messrs. Hess, Brady |
(d) | This amount includes 6,436,881 shares held by the Hess Foundation, Inc. of which |
(e) | This amount includes: |
120,310138,718 shares owned directly by Mr. Hess;
678,22084,429 shares held in escrow under the company’s long-term incentive plans, as to which Mr. Hess has voting but not dispositive power;
700,458 shares underlying options to purchase common stock, as to which Mr. Hess has no voting or dispositive power until they are acquired upon exercise of the options;
71,45472,483 shares vested in the name of Mr. Hess under the employees’ savings plan, as to which he has sole voting and dispositive power;
817,856653,203 shares held by family limited liability companies, as tofor which Mr. Hess serves as investment manager and has sole voting power and dispositive power;
1,235,8771,209,280 shares held by Mr. Hess’ siblings or their children, or by trusts for the benefit of Mr. Hess’ siblings or their children, as to which Mr. Hess has sole voting power pursuant to shareholders agreements among Mr. Hess and his siblings or their children and as to 557,131706,273 shares of which he shares dispositive power pursuant to a shareholder’s agreement among Mr. Hess and a sibling and others. 557,131 of these shares (representing approximately 0.2% of Hess common stock outstanding) have been pledged by certain of the trusts. Mr. Hess has no financial or economic interest in the shares pledged by the trusts;
2024 PROXY STATEMENT | 17 |
Proposal 1: Election of Directors + Ownership of Voting Securities by Certain Beneficial Owners |
agreement among Mr. Hess and a sibling and others. 631,702 of these shares (representing approximately 0.2% of Hess common stock outstanding) have been pledged by certain of the trusts. Mr. Hess has no financial or economic interest in the shares pledged by the trusts; |
1,008,402 shares held by a trust for the benefit of Mr. Hess’ sibling, of which Mr. Hess has sole voting and shared dispositive power;
222,78328,753 shares held by trustsa family limited company controlled by Mr. Hess, as to which Mr. Hess has sole voting power and as to which Mr. Goodwillie has shared dispositive power; and
2,060,4841,859,006 shares held by threetwo limited liability companies as to which Mr. Hess has sole voting power. These shares (representing approximately 0.7%0.6% of Hess common stock outstanding) have been pledged. Mr. Hess has no financial or economic interest in the shares pledged by these entities.
(f) | This amount includes 37,918 shares held directly by Mr. Brady, as to which he has sole voting and dispositive power. |
(g) | This amount includes 19,458 shares held directly by Mr. Kean, as to which he has sole voting and dispositive power. |
(h) | This amount includes |
(i) | This amount includes (y) |
(j) | This amount includes |
|
This amount includes (y) |
18 | 2024 PROXY STATEMENT |
Proposal 1: Election of Directors + Ownership of Equity Securities by Management |
Ownership of Equity Securities by Management
The table below sets forth as to each director and named executive officer, and all directors and executive officers as a group, information regarding their ownership of equity securities of the company on March 23, 2023.27, 2024. The persons listed below have sole voting and investment power as to all shares indicated except as set forth in the footnotes to the table. Where no information appears in the column “Percent“Percentage of outstanding shares of common stock owned,” the securities held represent less than 1% of the common stock outstanding.
Name | Total number of shares beneficially owned and nature of beneficial ownership(a) | Percent of outstanding shares of common stock owned | Of total number of shares beneficially owned, number of option shares | Total number of shares beneficially owned and nature of beneficial ownership(a) | Percentage of outstanding shares of common stock owned | Of total number of shares beneficially owned, number of option shares | |||||||||||||||||||||
Checki, Terrence J. | 28,952 | — | — | 30,629 | — | — | |||||||||||||||||||||
Coleman, Leonard S. | 20,176 | — | — | 18,729 | — | — | |||||||||||||||||||||
Glatch, Lisa | 2,288 | — | — | 3,686 | — | — | |||||||||||||||||||||
Goodell, Timothy B. | 157,239 | — | 18,901 | 193,060 | — | 30,916 | |||||||||||||||||||||
Hess, John B. | 29,249,106 | (b) | 9.50 | 678,220 | 28,788,472 | (b) | 9.32 | 700,458 | |||||||||||||||||||
Hill, Gregory P. | 217,289 | — | 93,443 | 211,582 | — | 85,912 | |||||||||||||||||||||
Holiday, Edith E. | 62,274 | — | — | 63,672 | — | — | |||||||||||||||||||||
Lipschultz, Marc S. | 19,327 | — | — | 20,725 | — | — | |||||||||||||||||||||
Lowery-Yilmaz, Barbara | 148,078 | — | 34,408 | 152,697 | — | 19,006 | |||||||||||||||||||||
McGuire, Raymond J. | 3,143 | — | — | 4,541 | — | — | |||||||||||||||||||||
McManus, David | 38,673 | — | — | 40,071 | — | — | |||||||||||||||||||||
Meyers, Kevin O. | 35,804 | — | — | 37,202 | — | — | |||||||||||||||||||||
Ovelmen, Karyn F. | 6,232 | — | — | 7,630 | — | — | |||||||||||||||||||||
Quigley, James H. | 31,925 | — | — | 20,014 | — | — | |||||||||||||||||||||
Rielly, John P. | 356,921 | — | 42,165 | 394,808 | — | 54,649 | |||||||||||||||||||||
Schrader, William G. | 31,181 | — | — | 32,579 | — | — | |||||||||||||||||||||
All directors and executive officers as a group (19 persons) | 30,533,760 | 9.91 | 907,891 | 30,166,193 | 9.76 | 917,434 |
(a) | These figures include |
(b) | See footnotes (b), (c), (d) and (e) to the table under the caption “Ownership of Voting Securities by Certain Beneficial Owners.” |
19 |
Proposal 1: Election of Directors + Director Compensation |
Director Compensation
The following table shows compensation for services rendered by our non-employee directors during 2022.2023.
Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | All other ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | All other ($) | Total ($) | ||||||||||||||||||||||||||||
Checki, Terrence J. |
| 165,000 |
| 175,024 |
| 2,472 |
| 342,496 |
| 175,000 |
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| 200,010 |
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| 2,472 |
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| 377,482 |
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Coleman, Leonard S. |
| 125,000 |
| 175,024 |
| 3,001 |
| 303,025 |
| 140,000 |
|
| 200,010 |
|
| 2,995 |
|
| 343,005 |
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Glatch, Lisa |
| 68,874 |
| 105,586 |
| 15,370 |
| 189,830 |
| 130,000 |
|
| 200,010 |
|
| 28,016 |
|
| 358,026 |
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Holiday, Edith E. |
| 130,000 |
| 175,024 |
| 2,472 |
| 307,496 |
| 142,500 |
|
| 200,010 |
|
| 2,472 |
|
| 344,982 |
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Lipschultz, Marc S. |
| 130,000 |
| 175,024 |
| 276 |
| 305,300 |
| 145,000 |
|
| 200,010 |
|
| 276 |
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| 345,286 |
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McGuire, Raymond J. |
| 115,989 |
| 175,024 |
| 1,397 |
| 292,410 |
| 130,000 |
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| 200,010 |
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| 1,524 |
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| 331,534 |
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McManus, David |
| 125,000 |
| 175,024 |
| 1,524 |
| 301,548 |
| 140,000 |
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| 200,010 |
|
| 2,472 |
|
| 342,482 |
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Meyers, Kevin O. |
| 150,000 |
| 175,024 |
| 14,832 |
| 339,856 |
| 167,500 |
|
| 200,010 |
|
| 16,607 |
|
| 384,117 |
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Ovelmen, Karyn F. |
| 135,000 |
| 175,024 |
| 38,852 |
| 348,876 |
| 145,000 |
|
| 200,010 |
|
| 41,628 |
|
| 386,638 |
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Quigley, James H. |
| 335,000 |
| 175,024 |
| 3,530 |
| 513,554 |
| 360,000 |
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| 200,010 |
|
| 3,518 |
|
| 563,528 |
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Schrader, William G. |
| 140,000 |
| 175,024 |
| 1,850 |
| 316,874 |
| 155,000 |
|
| 200,010 |
|
| 2,570 |
|
| 357,580 |
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(1) | Stock awards consist of |
(2) | Amounts in this column consist of (i) annual life insurance premiums for each director, (ii) medical benefits of |
During 2022,2023, each director who was not an employee of the company or any of its subsidiaries received an annual cash retainer of $110,000$120,000 for membership on the board of directors and the independent chair of the board received an additional annual cash retainer of $185,000.$200,000. Directors received an additional annual cash fee of $25,000 for service on the audit committee, $5,000 for service on the EHS committee and $10,000 for service on each of the other standing committees of the board of directors on which such director serves. The chair of the audit committee received an annual cash fee of $30,000, the chair of the EHScompensation and management development committee received an annual cash fee of $10,000$20,000 and the chair of each of the other board standing committees received an annual cash fee of $15,000.$17,500. In addition, each non-employee director received shares of fully vested common stock constituting approximately $175,000$200,000 in value on the date of award. For 2022, Ms. Glatch and Mr. McGuire received pro-rated cash fees based on their length of service on the board and its committees.
20 | 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and 20222023 compensation decisions for our named executive officers (“NEOs”). The compensation and management development committee of our board of directors (the “compensation committee” or the “committee”), with input from its independent compensation consultant, oversees these programs and determines compensation for our NEOs.
For fiscal year 2022,2023, our NEOs were:
• | John B. Hess, Chief Executive Officer (“CEO”) |
• | Gregory P. Hill, Chief Operating Officer and President, Exploration & Production (“COO”) |
• | Timothy B. Goodell, Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer (“EVP & GC”) |
• | John P. Rielly, Executive Vice President and Chief Financial Officer (“EVP & CFO”) |
• | Barbara Lowery-Yilmaz, Senior Vice President and Chief Exploration Officer (“SVP & Chief Exploration Officer”) |
This CD&A, as well as certain compensation disclosures included in this proxy statement, are presented without regard to the terms of the proposed merger with Chevron. For further information regarding the terms, conditions and interests of certain persons under the merger, please refer to the company’s merger proxy statement and other relevant materials to be filed with the SEC when they become available.
CD&A Table of Contents
Compensation Program Key Practices Promote Alignment with Stockholder Interests | ||||||
Process for Determining Compensation and Role of Compensation Consultants | ||||||
Executive Summary
Our compensation program is focused on building long-term value in an industry where oil and gas reserves are depleted annually and investments require significant capital and generally take several years before yielding returns. It is critical we maintain and grow our resource base in a capital disciplined manner while ensuring our cost of production is sufficiently low to generate returns for our stockholders given the volatility in oil prices. The board believes that our compensation program should set short-term targets that lead to long-term success and long-term targets based on stockholder returns, which we believe is the most effective measure of long-term value creation currently available. As a result, our annual incentive plan is designed to maintain an annual focus on management’s day-to-day efforts on outcomes largely within its control, with a strong emphasis on formulaic, metrics-driven enterprise results. Our long-term incentive plan focuses on longer term objectives, including stockholder value creation and alignment of management’s interests with those of our stockholders.stockholders on the basis of overall returns as well as relative returns against both our industry and the broader equity market.
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Executive Compensation + Compensation Discussion and Analysis
Summary of Business and Strategy. Hess Corporation is a global Exploration and Production (“E&P”)&P company engaged in the exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. We have built a differentiated portfolio offering a unique value proposition – delivering durable cash flow growth that enables us to invest in some of the highest return projects in the industry and also to grow cash returns to our stockholders. Affordable and secure energy is essential to ensure a just and orderly energy transition that aligns with the Sustainable Development Goals of the United Nations. The IEA 2022 World Energy Outlook provides three scenarios of global energy demand in 2040 based on varying levels of global response to climate change. Under all of the IEA scenarios, oil and gas are expected to be needed for decades to come. Our strategy has been and continues to be to grow our resource base, deliver a low cost of supply and generate industry leading cash flow growth.
Key Compensation Actions. Over the last several years, the committee has taken thoughtful actions to respond to the impacts of the evolving operating environment and market conditions on our business outlook and performance. In 2020, as a result of COVID-19 and its economic and oil price impact, the committee reduced the maximum payout under the AIP from 200% to 50% of target to ensure that management shared in the necessary sacrifices to achieve our critical strategic initiative of preserving cash while also maintaining salaries and benefits for employees across the company. In 2021, with oil prices and our sector’s economic outlook stabilizing, the committee determined to return to pre-COVID target levels and structure, while holding NEO salaries and incentive compensation amounts flat at 2020 target levels.
For 2022,2023, the committee approved certain updates to our 20222023 NEO total direct compensation as a result of a competitive, industry-based compensation review as well as assessments of our current and anticipated operating conditions. These updates included moderate increases to base salaries and target AIP award opportunities under our AIP for select NEOs, excluding our CEO and COO. The committee also approved increases to target LTI awards for all NEOs, including our CEO and COO. These updates overall are proportionally weighted heaviest on LTI awards to reinforce our focus on long-term performance and recognize the retention value of long-term compensation. The changes also reflect that the committee had not approved any increase to target total direct compensation for our NEOs since 2020.
Ultimate payouts under the AIP and PSU programs are determined based on attainment of pre-established metrics and remain highly sensitive to stockholder returns and our operational and strategic performance. The committee follows a rigorous target setting process each year to ensure the enterprise performance metrics of our AIP include challenging, yet attainable, targets for executives designed to align our executives’ interests with those of our stockholders. The committee also considers a number of factors when determining appropriate individual AIP target percentages, including the executive’s position within the company, his or her corresponding responsibilities, and the competitive annual incentive opportunity for similar positions at other companies in our industry.
In 2023, as part of its ongoing assessment of the company’s compensation programs, the committee determined to make changes to our AIP and PSU programs impacting all participants, including the NEOs. First, the committee approved an enterprise-wide strategic modifier to better recognize qualitative accomplishments under the AIP. In 2023, the strategic modifier was based on five evaluation themes that were determined at the beginning of the year and assessed in early 2024 based on a comprehensive review of performance against each theme: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability. The strategic modifier may increase or decrease payout of the AIP by up to 25%, with total enterprise performance payout capped at 200%. The committee believes that the strategic modifier accounts for important enterprise-wide qualitative factors not otherwise quantifiable under the existing AIP metrics and is consistent with peer company practices.
Second, the committee determined to make adjustments to the 2023 PSU program in order to ensure its continued effectiveness in an evolving and consolidating industry environment. Beginning with the 2023 PSUs awards, performance will be determined based on the CAGR of the company’s TSR for the three-year performance period ending December 31, 2025 compared to the CAGR of the XOP Total Return Index during the same period. The XOP Total Return Index consists primarily of U.S. oil and gas E&P companies, including the company’s 2023 peer group, and provides increased stability in assessing performance given ongoing industry consolidation. The committee determined to retain the S&P 500 Total Return Index as a performance modifier to increase or decrease payout of the 2023 PSUs by up to 10% of target based on the CAGR of the company’s TSR for the performance period compared to the CAGR of the S&P 500 Total Return Index during the same period. As part of this change, the committee modified the PSU payout range from 0-200% to 0-210%. The inclusion of the S&P 500 Total Return Index modifier maintains the company’s commitment to measure returns against both the company’s industry and the broader market.
22 | 2024 PROXY STATEMENT |
Executive Compensation + Compensation Discussion and Analysis
Accordingly, the committee made the following determinations for 20222023 compensation:
Timeline | Component | Action | |||||
Set pay levels andperformance targets for | Salary | • No increases for our CEO or COO. • Other NEOs received increases between | |||||
AIP Targets | • No increases for our CEO or COO. • Other NEOs received increases between | ||||||
• NEO LTI award targets increased for each NEO between | |||||||
March
| Enterprise Performance | • AIP achieved at • Strong year operationally and financially resulted in above target final enterprise performance results of annual goals, as described on page | |||||
• PSUs earned at • Hess achieved a |
Corporate Performance. In 2022,2023, our company continued to successfully execute our strategy and achieve strong operational performance, positioning us to deliver increasingstrong financial returns and free cash flow while maintaining a robust balance sheet. We accelerated start-upOur overall production in 2023 was 394,000 barrels of the 4th rigoil equivalent per day (“boepd”), significantly above our initial 2023 guidance of 360,000 boepd, due to strong performance across our assets. In 2023, we operated four rigs in the Bakken in response to increasing oil prices and to optimize our infrastructure.infrastructure, drilling 118 wells and bringing 113 wells into production. In Guyana, we successfully brought Liza Phase 2 online,commenced production at the Payara development in November 2023 ahead of our initial 2024 target, sanctioned a fourthfifth development at YellowtailUaru on the Stabroek Block, submitted plans for a sixth development at Whiptail for governmental approval, and made additional investments in development duringaccelerated the year that werepurchase of the Liza Unity floating production, storage and offloading vessel (“FPSO”) originally planned for 2023. During 2022, net2024. Net cash provided by operating activities during 2023 was approximately $3.9 billion, compared with $2.9and the company had total liquidity of approximately $5.0 billion in the prior year. Throughout 2022, we continued to strengthen our portfolioas of December 31, 2023, excluding Midstream and balance sheet. The company repaid the $500 million outstanding balance on its term loan in February 2022.including committed credit facilities. The company also returned significant cash to shareholders,stockholders, including increasing annual dividends by 50%on common stock to $1.75 per share, up from $1.50 per share in 2022 and completing $650 million$1.00 per share in share repurchases. As a result of these successes, the company had the second highest TSR in the S&P 500 Index during 2022.2021.
The enterprise performance metrics of our annual incentive program are designed to reward management for progress made against challenging, measurable goals that align with our overall company strategy and incentivize strong near- andnear-and long-term performance, without promoting excessive risk-taking. For 2022,2023, the committee considered the progress made against each of these metrics, which are closely tied to our strategic priorities, in order to determine executive compensation payouts under the annual incentive program:
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Executive Compensation + Compensation Discussion and Analysis
|
Strategic Priority |
Annual Incentive Plan Metric
| |||||||||||
Environment, Health and Safety |
Production | Exploration Resource Additions | Capital and Exploratory Spend | Controllable Operated Cash Costs | Returns + Cash Flow | |||||||
1. Invest in high return, low cost opportunities
| We believe that EHS practices are vital for all stakeholders: our investors, employees, partners and the communities where we operate | |||||||||||
2. Build focused and balanced portfolio – robust at low prices
| ||||||||||||
3. Maintain financial strength and manage for risk
| ||||||||||||
4. Grow free cash flow in disciplined, reliable manner
| ||||||||||||
5. Prioritize return of capital to stockholders
|
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Executive Compensation + Compensation Discussion and Analysis |
Beginning in 2023, the committee also implemented a strategic modifier to increase or decrease payout of the AIP by up to 25% based on five evaluation themes: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability.
We are focused on building long-term value in an industry where investments require significant capital and generally take several years before generating returns. The board believes that TSR is the most effective measure of long-term value creation currently available. Accordingly, vesting and payouts under our PSUs are tied to relative TSR to effectively measure our performance compared to peers.performance. For the 2020-20222021-2023 performance cycle, our 3-yearwe achieved a 232% TSR was fourthover the three year performance period, ranking eighth among our 20202021 comparator group of peer group, as indicated below,companies and the S&P 500 Total Return Index, resulting in a PSU payout at 125%66% of target. Our 3-Yearthree-year TSR also greatly exceeded the TSR of the S&P 500 Total Return Index of 32% for the performance period.
While we had exceptional TSR over the performance period, our relative TSR results compared to peers was impacted by our company’s early recovery in navigating the low oil price environment in 2020. Over a five year period, our TSR ranks highest among our comparator group of peer companies and the S&P 500 Total Return Index.
Summary of Hess’ 20222023 Executive Compensation Program
Compensation Element
|
Form and Objective
|
|
Link to Business Strategy
| ||||||
Base salary | • Fixed rate of pay | • No increases for our CEO or COO.
• Other NEOs received increases between | • Competitive Pay Levels.Generally, we target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median.
• Individual Performance Rewarded.Sustained performance may be recognized in individual pay components, and pay will vary above or below target based primarily on enterprise and, to a lesser degree, individual performance outcomes.
| ||||||
Annual Incentive Plan (“AIP”) | • Payout from 0%-200% of target
• Payout based on enterprise performance factor (0% | • Enterprise performance result was
• | • Balanced Focus on Controllable Outcomes and Value Creation.In our industry, the macroeconomic environment and oil prices significantly impact our financial results and stock price performance. As a result, our AIP is designed to assess management’s day-to-day efforts on outcomes largely within its control, with a strong emphasis on formulaic, metrics-driven enterprise results.
| ||||||
Long-Term Incentive (“LTI”) |
• 60% PSUs; payout for 2023-2025 awards from0%-210% of target (previously 0%-200% of
• 20% Stock Options (40% for CEO); stock price must appreciate for any value to be realized
• 20% Restricted Stock (0% for CEO); vesting occurs ratably over three years | • Payout of PSUs for the | • Long-term Orientation.Our LTI is delivered using different types of awards to balance both absolute stock price performance and stock price performance relative to peers, over varying time horizons, and retention considerations.
• Stockholder Alignment. |
2024 PROXY STATEMENT | 25 |
Executive Compensation + Compensation Discussion and Analysis
Pay Mix. The majority of NEO compensation is variable and performance based. For our CEO and other NEOs, approximately 89%90% and 83%84%, respectively, of 20222023 target total direct compensation was variable. Variable pay directly ties each NEO’s pay to company performance outcomes, including financial results, operational results, strategic initiatives, and stock price performance. Mr. Hess’ long-term incentive mix consists of a combination of PSUs and stock options, making 100% of his long-term incentive compensation performance-contingent and closely aligning Mr. Hess’ total compensation to the company’s long-term performance.
|
Compensation Program Key Practices Promote Alignment with Stockholder Interests
At our 20222023 annual meeting of stockholders, approximately 97%98% of shares present and entitled to vote supported Hess’ executive compensation program. We regularly engage with stockholders to ensure we fully understand the factors they consider to be the most important when evaluating our executive compensation program. During 2022,2023, our CEO and other members of senior management, at times accompanied by our independent board chair, conducted a broad outreach effort to investors representing, in the aggregate, approximately 70% of our outstanding shares. The purpose of our stockholder engagement program is to discuss and solicit stockholder views on our strategy, business plan, EHS & SR matters, human capital management, diversity, corporate governance and other matters of concern, including executive compensation.
Our key executive compensation practices are summarized below. We believe these practices promote close alignment with the long-term interests of our stockholders.
What We Do
|
ü | Directly link pay to performance outcomes, operational results and stockholder returns | ||
ü | Engage in ongoing dialogue with stockholders to incorporate feedback into our compensation programs | ||
ü | Target total direct compensation (base salary / annual incentive / long-term incentives) within a competitive range of market median | ||
ü | Use a structured approach to CEO performance evaluation and related compensation decisions | ||
ü | Maintain a cap on CEO incentive compensation payments | ||
ü | Emphasize a culture of safety (a weighted metric in the AIP for all employees) | ||
ü | Maintain stock ownership guidelines for senior executives | ||
ü | Conduct annual CEO performance evaluation led by the board |
ü | Design compensation plans with provisions to mitigate undue risk | ||||
ü | Maintain double-trigger change-in-control severance benefits | ||||
ü | Maintain a compensation | ||||
ü | Have an anti-hedging policy and an anti-pledging policy for all executives | ||||
ü | Employ best-practice share counting and review share utilization annually | ||||
ü | Provide de minimis perquisites for executives | ||||
ü | Offer executives the same health and welfare benefit and savings plans as other salaried employees | ||||
ü | Devote significant time to management succession, corporate culture and leadership development efforts | ||||
ü | Retain an independent compensation consultant to advise the committee |
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Executive Compensation + Compensation Discussion and Analysis
What We Don’t Do |
| No employment contracts for NEOs | |||||||
No payment of dividends or dividend equivalents on unearned restricted stock or PSUs | ||||||||
No excise tax gross-ups in new change-in-control agreements since 2010 |
No re-pricing of underwater stock options without stockholder approval | |||||
No excessive severance or change-in-control benefits |
Compensation Objective and Philosophy
Compensation Objective. The objective of our executive compensation program is to attract and retain talented executives and motivate them to achieve our business goals through a combination of cash and stock-based compensation. The principal elements of an executive’s total compensation consist of base salary, annual incentive, and long-term incentives.
We are focused on building long-term value in an industry where investments require significant capital and generally take several years before showing returns. The board believes that the compensation program should set short-term targets that lead to long-term success and long-term targets based on TSR, which we believe to be the most effective measure of long-term value creation currently available.
We also review other elements of compensation, including retirement benefits, health and welfare plans and other benefits offered to employees generally, when evaluating comprehensive executive compensation packages.
Compensation Philosophy. Our compensation program is designed to provide competitive pay to executives, reward individual and company performance, and maintain a long-term orientation that aligns with stockholder interests. The annual incentive plan emphasizes formulaic, metrics-driven enterprise results with a focus on measures largely within management’s control that reflect the core operating functions throughout the business cycle. The long-term incentives balance absolute stock price performance and stock price performance relative to peers, and is designed to support our long-term business strategy, serve as a retention tool and align employees with stockholder interests.
Generally, we target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median. Sustained performance may be recognized in individual pay components and pay will vary above or below target based primarily on actual enterprise performance and, to a lesser degree, individual performance. Variations in total direct compensation among the NEOs reflect differences in competitive pay for their respective positions as well as the size and complexity of the groups or functions they oversee, the performance of those groups or functions, and individual performance. The committee also considers market conditions in our industry when making compensation decisions.
20222023 Total Direct Compensation
We structure NEO total direct compensation so that the majority is delivered in the form of long-term incentive awards in order to provide incentives to work toward growth of long-term profitability that will enhance stockholder returns. We also structure NEOs’ cash compensation so that a significant portion is at risk under the company’s annual incentive plan, payable primarily based on enterprise results, and to a lesser degree individual performance. We further detail each component of total direct compensation below.
Base Salary. We review base salaries annually, but we do not necessarily make updates to NEO salaries each year. In determining base salary levels for NEOs, the committee considers the following qualitative and quantitative factors: job level and responsibilities, relevant experience, individual performance, recent corporate and business unit performance, internal equity and our objective of paying competitive total direct compensation if performance is met. From time to time base salaries may be adjusted other than as a result of an annual review in order to address competitive pressures or in connection with a change in responsibility.
We held our CEO and COO salaries flat for 2022,2023, but made moderate increases toincreased the base salaries of the other NEOs to reflect market updates based on industry survey data. In accordance with our compensation objective, these changes also ensure that our executive compensation program remains relevant in an increasingly competitive labor market and that we can continue to attract and retain talented executives to drive long-term stockholder returns.
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Executive Compensation + Compensation Discussion and Analysis |
Salary | ||||||||||||
Name
| 2022
| 2021
| % Increase 2021-2022
| |||||||||
Hess, John B. CEO | $ | 1,500,000 |
| $ | 1,500,000 |
|
| 0.0% |
| |||
Hill, Gregory P. COO & President E&P | $ | 1,100,000 |
| $ | 1,100,000 |
|
| 0.0% |
| |||
Goodell, Timothy B. EVP & GC | $ | 825,000 |
| $ | 790,000 |
|
| 4.4% |
| |||
Rielly, John P EVP & CFO | $ | 850,000 |
| $ | 810,000 |
|
| 4.9% |
| |||
Lowery-Yilmaz, Barbara SVP & Chief Exploration Officer | $ | 700,000 |
| $ | 675,000 |
|
| 3.7% |
|
Salary | |||||||||||||||
Name
| 2023
| 2022
| % Increase 2022-2023
| ||||||||||||
Hess, John B. CEO | $ | 1,500,000 | $ | 1,500,000 |
| 0.0% |
| ||||||||
Hill, Gregory P. COO & President E&P | $ | 1,100,000 | $ | 1,100,000 |
| 0.0% |
| ||||||||
Goodell, Timothy B. EVP & GC | $ | 850,000 | $ | 825,000 |
| 3.0% |
| ||||||||
Rielly, John P EVP & CFO | $ | 900,000 | $ | 850,000 |
| 5.9% |
| ||||||||
Lowery-Yilmaz, Barbara SVP & Chief Exploration Officer | $ | 750,000 | $ | 700,000 |
| 7.1% |
|
Annual Incentive Plan. We establish an annual incentive target for employees, including each executive officer, based upon his or her position within the company, corresponding responsibilities and competitive annual incentive opportunity for similar positions at other companies in our industry. Payouts are in cash and may range from 0% to 200% of the target annual incentive opportunity based on actual enterprise and individual performance outcomes. Annual incentive targets for our CEO and COO were held flat for 2022,2023, but the committee approved moderate increases to the target bonus of the other NEOs between 2.0%3.3% and 11.1% to reflect market updates based on industry survey data and in light of changes to their base salaries, as described above.
2022 Annual Incentive Plan Opportunity | 2023 Annual Incentive Plan Opportunity | |||||||||||||||
Name
| Minimum (0% of target) | Target (100% of target)
| Maximum (200% of target)
| Minimum (0% of target) | Target (100% of target)
| Maximum (200% of target)
| ||||||||||
Hess, John B. CEO |
| $0 | $2,250,000 | $4,500,000 |
| $0 | $2,250,000 | $4,500,000 | ||||||||
Hill, Gregory P. COO & President E&P |
| $0 | $1,430,000 | $2,860,000 |
| $0 | $1,430,000 | $2,860,000 | ||||||||
Goodell, Timothy B. EVP & GC |
| $0 | $750,000 | $1,500,000 |
| $0 | $775,000 | $1,550,000 | ||||||||
Rielly, John P. EVP & CFO |
| $0 | $750,000 | $1,500,000 |
| $0 | $800,000 | $1,600,000 | ||||||||
Lowery-Yilmaz, Barbara SVP & Chief Exploration Officer |
| $0 | $450,000 | $ 900,000 |
| $0 | $500,000 | $ 1,000,000 |
20222023 AIP Design. Our annual incentive program is designed to motivate and reward employees for achieving the key business objectives that drive Hess’ long-term value creation. In our industry, the macroeconomic environment and oil prices have a significant impact on our financial results and stock price performance. As a result, our AIP is designed to focus management’s day-to-day efforts on outcomes largely within its control. The AIP payout for executive officers is primarily determined based on enterprise performance results that align with the company’s business strategy and apply to all employees. During 2023, the committee determined to increase the weighting of the Production metric from 15% to 20% and reduce the weighting of the Controllable Operated Cash Costs from 20% to 15% due to company strategic growth priorities to optimize our assets in the Bakken and Guyana.
| Weighting | |||||
Environment, Health & Safety |
| 20% |
| |||
Production |
|
|
| |||
Capital and Exploratory Spend |
| 15% |
| |||
Controllable Operated Cash Costs |
|
|
| |||
Returns and Cash Flow (2 measures) |
| 15% |
| |||
Exploration Resource Additions |
| 15% |
| |||
Total |
| 100% |
|
28 | 2024 PROXY STATEMENT |
Executive Compensation + Compensation Discussion and Analysis
Payouts
As part of its ongoing assessment of the company’s compensation programs, in February 2023, the committee determined to include a strategic modifier to increase or decrease payout of the AIP by up to 25%, with total enterprise payout capped at 200%, based on five evaluation themes aligned with our business objectives, which are not otherwise reflected in our quantitative pay metrics: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability. The committee believes that the strategic modifier accounts for important enterprise-wide qualitative factors not otherwise quantifiable under the existing AIP depend on enterprise performance resultsmetrics and can range from 0% to 175% of target. is consistent with peer company practices.
An individual performance multiplier can further reduce the annual incentive payout down to zero or increase it by up to 25% of target based on actual individual performance results measured against pre-defined individual performance goals, resulting in a maximum potential AIPgoals. The individual performance modifier cannot increase payout ofbeyond 200% of target. There will be no payout associated with an enterprise metric if the threshold leveltarget for our NEOs.
Payouts for the metric is not achieved.NEOs range from 0% to 200% of target based on attainment of the pre-established enterprise metrics, the strategic performance modifier and individual performance compared with individual goals pre-established at the beginning of the fiscal year.
The enterprise performance metrics are selected each year to reflect the core operating functions of our management team through the business cycle and are approved by the committee. There will be no payout associated with an enterprise metric if the threshold level for the metric is not achieved. The metrics provide a balance of annual and long-term objectives for the business, as described below:
• | Environment, Health and Safety goals are directly included in our AIP, underscoring the importance of sustainability, health and safety and its integration into our strategy and operations, incentivizing management to continue to build on our industry leading performance in these areas. |
• | Production and Controllable Operated Cash Costs tie to our annual financial results. The management team is incentivized to meet or exceed production goals but not at the expense of profitability or safety. |
• | Capital and Exploratory Spend, Exploration Resource Additions, Returns and Cash Flow primarily tie to our future results. In the offshore industry, it takes several years from the exploration of a resource to the generation of revenue. The board believes combining incentives for growing the resource base while also requiring adherence to a set capital budget with an emphasis on returns and cash flow, properly incentivizes management to grow our resource base without over-spending to achieve a short-term target. |
ILLUSTRATION OF AIP DESIGN
Target Cash Incentive Opportunity ($) | X |
Enterprise Performance Payout Range: 0% = Enterprise Performance Metrics 0%-200% of target + Strategic Modifier +/-0%-25% of target | X | Individual Performance Modifier
Payout can be reduced to 0% | = |
Actual Cash Incentive Award ($) Payout capped at 200% of target |
Actual Cash Incentive Awards. The following table shows actual performance as a percent of target based on the 20222023 results for each component of the AIP, and the actual cash incentive award for each NEO. The following discussion explains how the payouts for each component were determined. No individual performance adjustments were made for our NEOs.
Name
| 2022 Target
| X 2022 Payout as
| X 2022 Individual
| =
| 2022 Actual Incentive
| |||||||||||||
Hess, John B. CEO | $ | 2,250,000 |
|
| 111.9% |
| 100% | $ | 2,517,800 |
| ||||||||
Hill, Gregory P. COO & President E&P | $ | 1,430,000 |
|
| 111.9% |
| 100% | $ | 1,600,200 |
| ||||||||
Goodell, Timothy B. EVP & GC | $ | 750,000 |
|
| 111.9% |
| 100% | $ | 839,300 |
| ||||||||
Rielly, John P. EVP & CFO | $ | 750,000 |
|
| 111.9% |
| 100% | $ | 839,300 |
| ||||||||
Lowery-Yilmaz, Barbara SVP & Chief Exploration Officer | $ | 450,000 |
|
| 111.9% |
| 100% | $ | 503,600 |
|
2024 PROXY STATEMENT | 29 |
Executive Compensation + Compensation Discussion and Analysis
Name
| 2023 Target
| X 2023 Payout as
| X 2023 Individual
| =
| 2023 Actual Incentive
| |||||||||||||
Hess, John B. CEO | $ | 2,250,000 |
|
| 165.5% |
| 100% | $ | 3,723,800 |
| ||||||||
Hill, Gregory P. COO & President E&P | $ | 1,430,000 |
|
| 165.5% |
| 100% | $ | 2,366,700 |
| ||||||||
Goodell, Timothy B. EVP & GC | $ | 775,000 |
|
| 165.5% |
| 100% | $ | 1,282,600 |
| ||||||||
Rielly, John P. EVP & CFO | $ | 800,000 |
|
| 165.5% |
| 100% | $ | 1,324,000 |
| ||||||||
Lowery-Yilmaz, Barbara SVP & Chief Exploration Officer | $ | 500,000 |
|
| 165.5% |
| 100% | $ | 827,500 |
|
Rigorous Target Setting for Enterprise Performance Metrics. The committee follows a rigorous target setting process each year to ensure the AIP includes challenging, yet achievable, targets for executives. The enterprise metrics are selected each year to reflect the core operating functions of our management team through the business cycle. Given the evolution of our portfolio, including significant divestitures over the last several years, comparing changes in target levels on a year-over-year basis is not representative of the level of difficulty in achieving these targets. The committee relied on a thorough process informed by multiple inputs including our public guidance, budgets for the year and other business factors deemed to be relevant to the target setting process, and the committee believes that targets for 20222023 were set with sufficient rigor to create the proper incentives for the executive team for each of the enterprise performance metrics.
|
In 2023, the committee also applied a strategic modifier to account for important enterprise-wide qualitative factors not otherwise quantifiable under the existing AIP metrics that are aligned with the company’s key business objectives.
20222023 Enterprise Performance Metrics.Metrics and Results. The following table details our final 20222023 goals for enterprise performance metrics and actual results.
2022 Metric | Rationale for Use | 2022 Threshold /Target/ | 2022 Result(5) | Metric Payout | ||||||||||||||||||||
Environment, Health & Safety (4 measures)(1) | • Protects employees, contractors, communities, reputation and ensures safe operations and alignment with sustainability commitments | Varies by measure |
| 88 | % | |||||||||||||||||||
2023 Metric | ||||||||||||||||||||||||
2023 Metric | Rationale for Use | 2023 Threshold /Target/ | 2023 Result(5) | Metric Payout | ||||||||||||||||||||
Environment, Health & Safety (5 measures)(1) | • Protects employees, contractors, communities, reputation and ensures safe operations and alignment with sustainability commitments | Varies by measure |
| 143 | % | |||||||||||||||||||
Production(2) | • Aligned to growth • Primary output of E&P investments | 320 / 327.5 / 335 (MBOED) |
| 333 |
|
| 156 | % | • Aligned to growth • Primary output of E&P investments | 322 / 332 / 342 (MBOED) |
| 362 |
|
| 200 | % | ||||||||
Capital and Exploratory Spend(3) | • Aligned to sustainability and profitability | 2,700 / 2,600, / 2,500 ($MM) |
| 2,508 |
|
| 169 | % | • Aligned to sustainability and profitability | 3,800 / 3,700 / 3,600 ($MM) |
| 3,798 |
|
| 51 | % | ||||||||
Controllable Operated Cash Costs | • Management of expenses to maximize cash margin • Controllable component of cash margin | 1,222 / 1,164 / 1,106 ($MM) |
| 1,227 |
|
| 0 | % | • Management of expenses to maximize cash margin • Controllable component of cash margin | 1,422 / 1,354 / 1,286 ($MM) |
| 1,376 |
|
| 84 | % | ||||||||
Returns and Cash Flow (2 measures, CROCE & EBITDAX)
| • Measure company’s use of capital (cash return on capital employed, or “CROCE”) | 22.6 / 29.5 / 34.9 (%) |
| 32.0 |
|
| 135 | % | • Measure company’s use of capital (cash return on capital employed, or “CROCE”) | 18.1 / 22.6 / 29.0 (%) |
| 25.6 |
|
| 147 | % | ||||||||
• Measure ability to generate cash from operations (earnings before interest, taxes, depreciation, amortization and exploration expenses, or “EBITDAX”) | 4,665 / 6,020 / 7,180 ($MM) |
| 6,312 |
|
| 119 | % | • Measure ability to generate cash from operations (earnings before interest, taxes, depreciation, amortization and exploration expenses, or “EBITDAX”) | 3,420 / 4,490 / 6,005 ($MM) |
| 5,124 |
|
| 142 | % | |||||||||
Exploration Resource Additions(4) | • Aligned to sustainability • Aligned to growth | 83 / 100 / 125 (%) |
| Maximum |
|
| 175 | % | • Aligned to sustainability • Aligned to growth | 82 / 100 / 125 (%) |
| Maximum |
|
| 200 | % | ||||||||
(1) Includes 4 measures (equally weighted): SAP Preventative Maintenance and Correctives Compliance, Severe + Significant Safety Incident Rate, Loss of Primary Containment Rate and Bakken Routine Flare Rate. |
| Total: |
|
| 111.9 | % | ||||||||||||||||||
(1) Includes 5 measures (equally weighted): Critical Inspection Compliance, Severe + Significant Safety Incident Rate, Loss of Primary Containment Rate, Bakken Routine Flare Rate and Safety Observations. | (1) Includes 5 measures (equally weighted): Critical Inspection Compliance, Severe + Significant Safety Incident Rate, Loss of Primary Containment Rate, Bakken Routine Flare Rate and Safety Observations. |
| Total(6): |
|
| 140.5 | % | |||||||||||||||||
(2) Excludes Libya. 2022 result is rounded. (3) Excludes Midstream. (4) Target performance goal reflects risked, net entitlement volumes for wells drilled in 2022. Performance above target required exceptional results and caused a payout above target. (5) Production and Capital Spend results were adjusted to account for extreme weather related events and accelerated growth capital expenditures originally planned for 2023. | ||||||||||||||||||||||||
(2) Excludes Guyana tax barrels and percentage of proceeds (POP) volumes in the Bakken. (3) Excludes Midstream. (4) Performance at maximum reflected exceptional exploration and appraisal success in Guyana and an oil discovery at Pickerel in the Gulf of Mexico. (5) Capital Spend results were adjusted to account for purchase of Liza Unity FPSO originally planned for 2024. (6) Total enterprise performance results before strategic modifier, which is discussed on pages 31-32. | ||||||||||||||||||||||||
(2) Excludes Guyana tax barrels and percentage of proceeds (POP) volumes in the Bakken. (3) Excludes Midstream. (4) Performance at maximum reflected exceptional exploration and appraisal success in Guyana and an oil discovery at Pickerel in the Gulf of Mexico. (5) Capital Spend results were adjusted to account for purchase of Liza Unity FPSO originally planned for 2024. (6) Total enterprise performance results before strategic modifier, which is discussed on pages 31-32. | ||||||||||||||||||||||||
(2) Excludes Guyana tax barrels and percentage of proceeds (POP) volumes in the Bakken. (3) Excludes Midstream. (4) Performance at maximum reflected exceptional exploration and appraisal success in Guyana and an oil discovery at Pickerel in the Gulf of Mexico. (5) Capital Spend results were adjusted to account for purchase of Liza Unity FPSO originally planned for 2024. (6) Total enterprise performance results before strategic modifier, which is discussed on pages 31-32. | ||||||||||||||||||||||||
(2) Excludes Guyana tax barrels and percentage of proceeds (POP) volumes in the Bakken. (3) Excludes Midstream. (4) Performance at maximum reflected exceptional exploration and appraisal success in Guyana and an oil discovery at Pickerel in the Gulf of Mexico. (5) Capital Spend results were adjusted to account for purchase of Liza Unity FPSO originally planned for 2024. (6) Total enterprise performance results before strategic modifier, which is discussed on pages 31-32. | ||||||||||||||||||||||||
(2) Excludes Guyana tax barrels and percentage of proceeds (POP) volumes in the Bakken. (3) Excludes Midstream. (4) Performance at maximum reflected exceptional exploration and appraisal success in Guyana and an oil discovery at Pickerel in the Gulf of Mexico. (5) Capital Spend results were adjusted to account for purchase of Liza Unity FPSO originally planned for 2024. (6) Total enterprise performance results before strategic modifier, which is discussed on pages 31-32. |
30 | 2024 PROXY STATEMENT |
2022 Enterprise Performance.Executive Compensation + Compensation Discussion and Analysis
EHS remains a core focus of management, and the committee receives advice and input from the EHS committee regarding executive compensation measures to advance the EHS goals of the company. For 2022, performance ranges were set at more rigorous levels than 2021,2023, the committee made two changes to the measures. First, the committee added a Safety Observations metric, which is a leading indicator and includes workforce safety observations as well as leadership safety visits. Second, the Bakken flaring reductioncommittee expanded the Critical Inspection Compliance metric focused on routine flaring to reflect our commitmentadd mechanical integrity compliance in addition to eliminate routine flaring from our operations bysafety critical equipment maintenance and corrective work orders. In 2023, the end of 2025. The company delivered maximum performance under the SAP Preventative Maintenance and Correctives Compliance and the Bakken Routine Flare Rate but was below thresholdand the Safety Observations metrics, between target and maximum performance for theCritical Inspection Compliance and Severe and Significant Safety Incident Rate, and below threshold performance for the Loss of Primary Containment Rate, resulting in overall EHS performance belowabove target levels.
To emphasize our production delivery and capital budget, the threshold for payout on the Production and Capital and Exploratory Spend metrics were based on our public guidance range set early in the year. Achievement onIn 2023, the Production metric was adjusted to account for disruptions to ourfar exceeded the target goal and paid out at the maximum level, driven by successful operations in the Bakken operations caused by a winter storm disaster declaration in North Dakota.and Guyana. Achievement on the Capital and Exploratory Spend metric was adjusted primarily to account for growth capital expenditures originally planned for 2024 related to the operator’s decision to purchase the Liza Unity FPSO in the fourth quarter of 2023 that were accelerated into 2022, including the early start-upinstead of the 4th rigfirst quarter of 2024. Performance was below target levels due to higher development activities in Guyana and additional funds for the successful Pickerel development in the Bakken and additional investments in future Guyana developments. In 2022, our Production and Capital and Exploratory Spend metrics were above target performance levels.Gulf of Mexico.
Our Controllable Operated Cash Costs targets continue to be set at ambitious, stretch levels resulting in below thresholdtarget payout levels due to inflation and additional operating expenditures related to winter storm recovery in the Bakken.higher production. Cash Return on Capital Employed and EBITDAX were above target performance due to higher production and strong commodity prices.
The Exploration Resource Addition metric far exceeded the target goal and paid out at the maximum level, driven by our exceptional exploration and appraisal success in Guyana including 9 new discoveriesand an oil discovery at Pickerel in the Gulf of Mexico.
2023 Strategic Modifier Results. As part of its ongoing assessment of the company’s compensation programs, the committee determined to include a strategic modifier to increase or decrease payout of the AIP by up to 25% based on five evaluation themes: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability.
The following table details our final 2023 strategic modifiers and actual results. The 2023 objectives were set by the Stabroek Blockcommittee in 2022.February 2023. In March 2024, the committee approved a performance modifier of 25.0%, for a total enterprise performance payout of 165.5%. The significant accomplishments led by our NEOs were reflected in enterprise-wide performance applicable to all employees under the AIP pursuant to the strategic modifier. As a result, no adjustments for individual performance were made for the NEOs beyond the outcomes from the AIP performance scorecard and strategic modifier. For additional information on NEO contributions to the company’s performance, see pages 33-35.
Executive Compensation + Compensation Discussion and Analysis
Executive Compensation + Compensation Discussion and Analysis
Assessment of Individual Performance. We assess individual performance based on goals set at the beginning of each year, specific to each NEO. Following year-end, achievement of these pre-defined performance goals is assessed. The CEO conducts performance reviews for his direct reporting NEOs and makes compensation recommendations to the committee based on these reviews, with the committee making the final award determination. The cumulative assessment against these objectives for each NEO determines the modifier used (if any) to influence the final payout of their annual incentive award. The value for any NEO AIP award can be adjusted down to zero or increased by up to 25% of target based on each individual performance assessment. However, the individual performance modifier cannot increase payout beyond 200% of target for our NEOs. This individual performance review can also influence the grant date dollar value of LTI compensation and base salary adjustments for the subsequent year. The committee chair and chair of the board facilitate a process with the full board of directors to review the CEO self-assessment of prior year performance and discuss specific feedback on that performance against pre-established operational, financial and organizational performance objectives. Upon review of this collective feedback, the committee makes CEO award determinations for base salary increases, annual incentive awards and long-term incentive award dollar values. Other considerations by the committee in the compensation determinations include external market reference points and overall enterprise and share price performance. In
Executive Compensation + Compensation Discussion and Analysis
Each of Messrs. Hill, Goodell and Rielly and Ms. Lowery-Yilmaz contributed to the accomplishments listed above. In addition, the committee considered the items listed below specific to each individual as well as input from the CEO and other members of the board of directors. Mr. Hill, in his role as COO & President E&P, was instrumental in the continuing exploration, development and production success on the Stabroek Block in
Executive Compensation + Compensation Discussion and Analysis Mr. Goodell, in his role as EVP and GC, is responsible for our global legal strategy regarding all compliance, governance and litigation matters. Mr. Goodell also oversees our external affairs activities, internal communications teams and plays a critical role in the company’s diversity, equity and inclusion efforts.
Mr. Rielly, in his role as EVP and CFO, delivered key business and financial targets that continue to enhance the enterprise portfolio and balance sheet. The company’s regular quarterly dividend was increased by 17% beginning in March in line with the company’s return of capital framework, which Mr. Rielly was instrumental in establishing. The company finished the year with a significant cash balance of approximately $1.7 billion and received an upgrade to the company’s credit rating from Fitch Ratings. Mr. Rielly oversees the continued monetization of our midstream assets, which generated over $350 million in total proceeds to the company from equity sales in 2023. He also plays a critical role in our investor engagement activities, representing the company at various investor and industry conferences and Ms. Lowery-Yilmaz, in her role as SVP & Chief Exploration Officer, delivered key business results, which contributed to
LTI Program Structure. Long-term incentive compensation is an important tool to drive behavior that supports our long-term business strategy. LTI compensation is also an important retention tool and aligns employee interests with stockholder interests. As a result, LTI compensation represents the largest portion of each executive officer’s target total direct compensation package. When determining the appropriate mix of LTI awards, the committee considers the typical time horizons of investment decisions for Hess’ business and industry, the current commodity price environment, the current performance metric for PSUs and market practice. For
Executive Compensation + Compensation Discussion and Analysis Payout of PSUs is contingent upon the company’s TSR compared with
often extends over many years. Stock options, which only provide value upon absolute stock price appreciation, also reinforce a balance between relative and absolute stock price performance goals, given that the PSU payout is primarily based on relative TSR. Use of restricted stock promotes retention and aligns long-term interests of employees and stockholders. Timing of LTI Awards. In general, awards of restricted stock, stock options and PSUs to the NEOs are made in early March after our financial statements have been audited by our independent public accountants. However, the committee retains discretion to vary the timing of awards as it deems appropriate. Terms of LTI Awards. Restricted stock awards and stock options vest annually in equal installments over a three-year period from the date of grant and stock options remain exercisable for ten years after the date of grant. PSUs, if earned, vest fully following the completion of the three-year performance period. We believe these vesting periods are appropriate and are generally consistent with market practice. Generally, all our awards are subject to continued employment. Shares of restricted stock are entitled to dividend equivalents if and when such dividend equivalents are paid on shares of common stock. Dividend equivalents accrued on shares of restricted stock are paid upon vesting. To the extent earned, PSUs will be paid in shares of common stock which will vest and be issued following the end of the performance period. Dividend equivalents for PSUs will only be paid on earned PSUs, upon vesting after the completion of the applicable performance period. Value of LTI Awards. We aim to provide long-term incentive awards such that together with total cash compensation, target total direct compensation is within a competitive range of market median. Compensation is intended to vary based on company and individual performance outcomes. The committee determines individual award levels based on comparative market data for the executive’s position, award levels of comparably-situated executives, and an assessment of individual potential and sustained performance. In making awards to any individual, the committee does not consider his or her gains made, or failure to achieve gains, on prior restricted stock, stock option or performance share unit awards. The committee determined to increase 2023 LTI award targets for NEOs between 15.0% to 18.9% compared with 2022 target award values. In making these adjustments, the committee considered changes to the competitive market, the company’s strong multi-year performance and that NEOs had not received adjustments to LTI target award values from 2020 to 2022.
Executive Compensation + Compensation Discussion and Analysis The committee determined to retain the S&P 500 Total Return Index as a performance modifier to increase or decrease payout of the 2023 PSUs by up to 10% of target based on the CAGR of the company’s TSR for the performance period compared to the CAGR of the S&P 500 Total Return Index during the same period. The inclusion of the S&P 500 Total Return Index modifier maintains the company’s commitment to measure returns against both the company’s industry and the broader market:
Potential total payouts of the 2023 PSUs are linearly interpolated between threshold, target and maximum achievement levels and will range from 0% to 210% based on relative performance against the XOP Total Return Index as well as the performance modifier described above. If the company’s TSR for the performance period is negative, the percentage of PSUs earned may not exceed 100% of target. 2021 PSU Award Payout. In February 2024, the committee certified performance results with respect to the January 2021 to December 2023 performance period and determined that 66% of PSUs were earned with respect to the 2021 award to be paid out in 2024. The company achieved a 232% TSR over the three-year performance period, ranking eighth among our 2021 comparator group
Peer Group The committee engages with our compensation consultant annually to identify a peer group that is an appropriate comparative group from a compensation and performance perspective. To make this determination, the committee focuses primarily on domestic E&P companies and looks at factors including revenue, market capitalization, total assets, production, and whether the company lists Hess as a peer.
Executive Compensation + Compensation Discussion and Analysis As discussed above, we generally target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median. Overall, our review found that target total direct compensation of our NEOs was aligned with our executive compensation philosophy. 2023 PSU Comparator Group. Process for Determining Compensation and Role of Compensation Consultants The committee has exclusive authority for approving the compensation of the CEO and the other NEOs. Human resources management, acting under the supervision of the CEO, develops compensation recommendations for all officers and employees, including the NEOs, in accordance with the compensation philosophy and policies more fully described elsewhere in this CD&A. To assist in its review of the compensation recommendations, the committee directly engaged the firm Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant. Semler Brossy reported exclusively to the committee, which has sole authority to engage, dismiss and approve the terms of engagement of its consultant. During
The compensation consultant’s principal responsibility is to advise the committee on compensation recommendations for the NEOs, as well as on general matters relating to executive compensation strategy and programs. The CEO meets with the committee and the compensation consultant to discuss performance objectives and review compensation recommendations for executive officers directly reporting to him, including the other NEOs. Thereafter, the committee meets privately with the independent compensation consultant to review the compensation recommendations. Final decisions on compensation for the NEOs are made solely by the committee. Additional Information Other Benefits. We have adopted certain broad-based employee benefit plans in which executive officers are permitted to participate on the same terms as other eligible employees of the company, subject to applicable limits imposed on contributions and benefits under applicable law. Our objective is that the value of these benefits be competitive with what is offered by companies in our peer group. In addition to group life insurance and health and welfare plans, we have a savings plan under which participants can elect to invest (subject to contribution limits imposed by law) up to 50% of pre-tax or after-tax salary in a variety of funds, one of which invests in our common stock, and the company provides matching contributions up to approximately 6% of pre-tax salary for each participant, which are invested at the discretion of the participant. Pension Benefits. As explained elsewhere in this proxy statement, all of our employees hired prior to January 1, 2017 are eligible for both a qualified defined benefit pension plan and a non-qualified supplemental plan (the restoration plan referred to in the Pension Benefits table) that provides only the benefits that would otherwise be paid to participants under the qualified pension plan but for limitations imposed by the Internal Revenue Code (the “Code”). On January 1, 2017, we closed the existing final average pay formula pension plan to new employees and introduced a cash balance pension plan for new hires which has a restoration component. Employees are eligible to participate in our pension plans after one year of service and vest in the final average pay retirement benefit after five years of service. The vesting requirement for the cash balance plan is three years. All of our NEOs are participants in the final average pay formula pension plan. While benefits from the qualified final average pay formula pension plan are payable as monthly annuities beginning at retirement, benefits from the restoration plan are payable in a single lump
Executive Compensation + Compensation Discussion and Analysis sum at first retirement eligibility, but no earlier than six months following termination of employment. The value of the lump sum payment is determined by the benefit formula and various assumptions, including the interest rate which is used to determine the equivalent present value of the amount that would be payable monthly if the restoration plan paid annuities. Benefits from the cash balance pension plan are payable as a lump sum or annuity, per the employee’s election. Prior to 2010, the committee granted additional years of credited service under our pension restoration plan to Messrs. Hill and Rielly as part of the compensation packages necessary to recruit them. In 2009, the committee gave Mr. Hill credit for ten years of service with his prior employer, upon completion of five years of service with the company. Mr. Hill worked for over 25 years with Royal Dutch Shell plc and its affiliates, most recently in senior executive positions. This agreement was intended to compensate Mr. Hill for the difference between the pension benefits he would have received from his prior employer had he retired from his prior employment at age 60 and the pension benefits he would have received, absent such credited service, under the company’s pension plans for his retirement at the same age. The additional years of service for Mr. Rielly are equal to his service with his prior employer, and his supplemental benefits are offset by his pension benefits from his prior employer. Mr. Rielly had more than 16 years of experience with Ernst & Young LLP. He had a successful career at his prior employer and would have continued to accrue years of service under the pension plan of his prior employer. Again, the committee believed that an award of credited service was necessary to compensate this executive for the loss of pension benefits and to induce him to join the company. Perquisites. The company did not provide perquisites or personal benefits valued at $10,000 or more to any of our NEOs in Management Stock Ownership Guidelines. In order to further align the interests of senior management and stockholders, we maintain stock ownership guidelines for corporate officers. The guidelines provide that each corporate officer should attain a specified level of ownership of shares of the company’s common stock equal in value to a multiple of their base salary within five years of the later of the date of adoption of the guidelines and the officer’s first election to his or her role.
Our NEOs maintain significant ownership in Hess stock. Mr. Hess, our CEO, beneficially owns approximately Anti-hedging and Anti-pledging Policies. Under our hedging policy, we prohibit directors and all employees (including executive officers) from trading in derivative or other instruments in order to hedge the economic risks of holding the company’s stock received as long-term equity incentive awards under our compensation programs. Our hedging policy does not allow any type of hedge strategy that involves creating downside protection, or that will generate an offsetting gain, in the event of a decline in the value of our stock including, but not limited to, transactions involving purchasing put or selling call options, collars or forward sales contracts. However, derivative strategies that only increase downside risk and upside gains are permitted. Employees may not hedge movements in company stock held in our employee’s savings plan, issued stock or stock options they own even if they are fully vested. The purpose of our hedging policy is to align the interests, including the economic risk of ownership, of directors, employees and stockholders. In addition, we do not permit our executives to pledge shares of company stock in which they have a financial interest.
Executive Compensation + Compensation Discussion and Analysis
In addition, in the event of misconduct by an employee that results in material noncompliance with financial reporting requirements,
Change-in-Control Agreements. As explained in greater detail elsewhere in this proxy statement, we have change-in-control agreements with certain executives, including our NEOs, that provide for a lump sum cash payment equal to a multiple of the executive’s compensation, as well as other benefits, if (1) there is a change in control, as defined in the agreements, and (2) the executive is actually or constructively terminated within 24 months following a change in control (“double-trigger”). We believe these agreements are necessary to remain competitive with the overall compensation packages afforded by companies in our peer group. We also believe these agreements work to provide security to our executives, many of whom would have key roles in negotiating and implementing a potential change-in-control transaction, and further align their interests with the best long-term interests of stockholders. In 2010, the committee decided to eliminate “golden parachute” excise tax gross-up provisions from any such agreements entered into in the future. As a result, our change-in-control agreement with Ms. Lowery-Yilmaz, which was entered into during 2015, does not contain a tax gross up provision. Tax Accounting Compensation Committee Report The committee has reviewed and discussed this Compensation Discussion and Analysis with management, and based on this review and discussion, the committee recommended to the board of directors that this Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Compensation and Management Development Committee Members: Marc S. Lipschultz, Chair Terrence J. Checki David McManus James H. Quigley Compensation Committee Interlocks and Insider Participation None of the current members of the compensation and management development committee (whose names appear under “Compensation Committee Report”) is, or has ever been, an officer or employee of the company or any of its subsidiaries, or has or had any relationship with the company requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. In addition, during the last fiscal year, no executive officer of the company served as a member of the board of directors or the compensation committee of any other entity that has or has had one or more executive officers serving on our board of directors or our compensation and management development committee.
Executive Compensation + Summary Compensation Table
Summary Compensation Table
The following table sets forth information regarding compensation paid to or accrued for the last three fiscal years to the CEO, the chief financial officer and the three other most highly compensated executive officers, for services in all capacities to the company and its subsidiaries.
Grants of Plan-Based Awards
On
Equity awards under our long-term incentive plans are discussed in the “Compensation Discussion and Analysis” under the heading “LTI Program Structure.” Non-equity incentive plan awards are discussed in the “Compensation Discussion and Analysis” under the heading “Annual Incentive Plan.”
Executive Compensation + Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End
The following table shows outstanding equity awards held by the NEOs at the end of the last fiscal year.
Executive Compensation + Outstanding Equity Awards at Fiscal Year End
Executive Compensation + Option Exercises and Stock Vested
Option Exercises and Stock Vested
The following table sets forth information as to the NEOs regarding the exercise of stock options and the vesting of restricted stock and performance share units under the long-term incentive plan during the last fiscal year:
Pension Benefits
The following table sets forth information as to the NEOs regarding payments or other benefits at, following or in connection with retirement:
We maintain an employees’ pension plan, a qualified defined benefit plan under the Code, and a non-qualified supplemental plan, called the pension restoration plan, that provides benefits that would otherwise be payable to participants under the employees’ pension plan but for limitations imposed by the Code, with certain modifications discussed below. On January 1, 2017, we closed the existing final average pay formula pension plan to new employees and introduced a cash balance pension plan for new hires, which has a restoration component as well. Employees participate after one year of service in the employees’ pension plans and vest in the final average pay retirement benefit after five years of service, though the vesting requirement for the cash balance plan is three years.
All of our NEOs are in the final average pay formula pension plan. Annual retirement benefits for a participant at normal retirement age are determined by multiplying 1.6% of the participant’s final average compensation by his or
Executive Compensation + Pension Benefits her years of service and are then reduced by an offset for social security benefits. Under the employees’ pension plan, final average compensation is the average of any three years of highest annual compensation (consisting of salary and cash bonus as shown in columns (c), (d) and (g) of the Summary Compensation Table) paid to the participant during the ten years immediately preceding his or her retirement date. Under the restoration plan, final average compensation is the average of any three years of highest annual salary (as shown in column (c) of the Summary Compensation Table) plus the average of any three years of highest cash bonus (as shown in columns (d) and (g) of the Summary Compensation Table) paid to the participant during the ten years immediately preceding his or her retirement date. Normal retirement under the plans means retirement at age 65, but a participant retiring from active service is entitled to an unreduced benefit at age 60. A participant may elect early retirement if the participant is at least 55 years old and has ten years of service. All of our NEOs, except Ms. Lowery-Yilmaz, are eligible for early retirement under the employees’ pension plan and restoration plan as of December 31, 2022. The company awarded credit service for prior employment under the restoration plan for Messrs. Hill and Rielly for the reasons discussed in “Compensation Discussion and Analysis.” Under both plans, retirement benefits paid upon early retirement from active service at the age of 55 are reduced by 25% of the retirement benefit otherwise payable, with proportionately lower reductions for early retirement between ages 55 and 60. Early retirement reductions are greater if employment terminates prior to age 55. Retirement benefits under the employees’ pension plan are payable as a straight life annuity or in other forms of annuities actuarially equivalent to a straight life annuity. Retirement benefits under the restoration plan for employees with at least 10 years of service are payable as a lump sum six months after retirement. For employees with fewer than 10 years of service, retirement benefits are payable on the date the employee attains age 65. A participant’s right to payment under the restoration plan constitutes a general unsecured claim against the company. The valuation method and material assumptions used in quantifying the present value of the accumulated benefit shown in the table are explained in Note 9, Retirement Plans, to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, Nonqualified Deferred Compensation
We maintain a deferred compensation plan for certain highly-paid employees selected by us as eligible to participate under which a participant may elect in advance of any year to defer payment of up to 50% of salary and 100% of cash bonus payable for that year to a date no earlier than three years from the date of election, except that payments may be made earlier in the case of termination, death, disability, retirement or a change in control. Amounts deferred are deemed invested in investment vehicles identical to those offered under our qualified employees’ savings plan as the participant elects, except that the deferred compensation plan does not offer a fund for investing in the company’s stock, and earnings thereon are payable together with the deferred compensation. Payments may be made in a lump sum or in annual installments over a five year period, as the participant elects. The right of any participant to receive a payment constitutes a general unsecured claim against the company. None of our NEOs participate in the deferred compensation plan. Employment Agreements and Termination Agreements
We have no employment agreements with our NEOs other than agreements relating to credited service discussed under “Pension Benefits” and change-in-control agreements discussed under “Potential Payments upon Termination or Change in Control,” the initial terms of employment described below for Mr. Hill. Under the terms of employment negotiated with Mr. Hill upon joining the company in 2009, the company agreed that if the company terminates Mr. Hill’s employment without cause, he will be entitled to severance benefits equal to two times his annual base salary and target bonus for the year in which the termination occurs. The company also agreed to award credited service to Mr. Hill under the company’s pension restoration plan for the reasons described in the CD&A, provided Mr. Hill remained employed by the company for five years.
Executive Compensation + Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control
Termination In the event any of the NEOs’ employment terminated at the end of the last fiscal year, the officer would be entitled to the officer’s accumulated retirement benefits in accordance with the provisions of our retirement plans as described under “Pension Benefits” on pages In addition, in the case of our NEOs who were eligible for early retirement under the employees’ pension plan on December 31, If any of the NEOs’ employment terminated due to death or disability on December 31, In the event the company had terminated the employment of Mr. Hill without cause on December 31, Change in Control Equity Awards Under the
the acquisition of 20% or more of the outstanding voting stock of the company by any person or entity, other than acquisitions by Hess family members or Hess family-related entities;
the persons serving as directors of the company as of the effective date of the 2017 Incentive Plan, and those replacements or additions subsequently approved by a majority vote of the board, ceasing to make up at least a majority of the board;
consummation of a merger, consolidation or reorganization in which the stockholders of the company prior to the merger own 51% or less of the surviving corporation; or
consummation of a complete liquidation or dissolution of the company or sale of all or substantially all of the assets of the company, other than to a corporation more than 51% of which is owned after such sale by stockholders of the company prior to the sale. Under the 2017 Incentive Plan, unless otherwise determined by the committee (or unless otherwise set forth in a change-in-control, employment or similar agreement or an award agreement), if a participant’s employment is terminated without cause or on account of good reason within 2 years following a change in control, each award will become fully vested. Unless otherwise set forth in a change-in-control, employment or similar agreement or an award agreement, the committee, in its discretion, may provide that performance-based awards shall be (x) considered to be earned and payable based on achievement of performance goals or based on target performance (either in full or pro rata based on the portion of performance period completed as of the date of the change in control) or (y) converted into time-vesting restricted stock or restricted stock unit awards). In the event of a change in control, unless otherwise set forth in an employment, change-in-control or similar agreement or an award agreement, the committee may in its sole discretion provide: (i) for the cancelation of such awards for fair value; (ii) for the assumption or replacement of awards; (iii) for a period of at least 20 days prior to the change in control to exercise options or SARs whether vested or unvested or (iv) that any shares of restricted stock become fully vested. Severance Payments. The company has entered into change-in-control termination benefit agreements with the NEOs and certain other officers of the company. These agreements provide for “double-trigger” lump sum cash
Executive Compensation + Potential Payments upon Termination or Change in Control payments equal to a multiple of an executive’s annual compensation if, within 24 months following a change in control, the employment of the executive is terminated by the executive for good reason or by the company without cause. For these purposes, annual compensation consists of the executive’s base pay at the date of his termination or immediately before the change in control, whichever is higher, plus the greater of his or her target bonus for the year in which the change in control occurs or the highest bonus earned in the three fiscal years preceding the change in control. The multiple of annual compensation received is three times for Mr. Hess and two times for Messrs. Hill, Goodell and Rielly and Ms. Lowery-Yilmaz and all other officers with whom such agreements were made. In addition, the executive is entitled to receive a pro rata portion of his or her target bonus for the fiscal year in which termination occurs, outplacement benefits and continuation of medical, dental and other welfare benefits. The benefits continuation period is 36 months following termination for Mr. Hess and 24 months following termination for Messrs. Hill, Goodell and Rielly and Ms. Lowery-Yilmaz and all other officers with whom such agreements were entered into. The agreements provide for immediate vesting of retirement benefits upon termination, deemed age and service credit in determining retirement benefits for the number of years equal to the severance multiple, and deemed compensation in determining retirement benefits equal to the salary and bonus taken into account in determining the lump sum severance payment. The NEOs, other than Ms. Lowery-Yilmaz, are also entitled to a “gross-up” payment from the company for any excise tax imposed by the Code on “excess parachute payments” resulting from a change in control. However, the compensation and management development committee decided in 2010 to eliminate tax gross-up provisions in any change-in-control termination benefit agreements to be entered into thereafter. As a result, our change-in-control agreement with Ms. Lowery-Yilmaz, which was entered into during 2015, does not contain a tax gross up provision. Potential Change-in-Control Payments and Benefits. Set forth below is the total estimated value, assuming that a change in control occurred on December 31,
The amounts in the table above were calculated: assuming a change in control occurred on December 31,
Executive Compensation + Potential Payments upon Termination or Change in Control The definition of “change in control” under the termination benefits agreements is substantially similar to the definition of change in control in the incentive plans, except that (i) the change in a majority of board of directors must occur within a 24-month period and (ii) the exception for reorganization, merger, consolidation, liquidation, dissolution and asset sale is 60% rather than 51%. For purposes of these agreements, “good reason” is defined as a failure to maintain the executive in the office or position held immediately prior to the change in control (or a substantially equivalent position), the removal of the executive as a director if the executive was a director immediately prior to the change in control, a material adverse change in the nature or scope of the executive’s authorities, responsibilities or duties, a reduction in base salary or target annual bonus, termination of the ability of the executive to participate in the company’s welfare benefit plans or retirement plans as in effect immediately prior to the change in control or a material reduction in the scope or value of those welfare or retirement benefits, a relocation of the executive’s principal work location of more than 30 miles from the executive’s location immediately prior to the change in control, or an increase in the executive’s required business travel of more than 20% (based on days in any calendar quarter or year) than required in any of the three full years immediately prior to the change in control. “Cause” for purposes of these agreements is defined as conviction of a felony, gross and willful misconduct by the executive in performing the executive’s duties, or willful and continued failure of the executive to substantially perform the executive’s duties after written demand.
CEO Pay Ratio
As of December 31, We identified our median employee as of December 31,
base salary, including overtime pay if applicable,
compensation received under the annual incentive program, and
the grant date fair value of long-term incentive grants, if applicable. Next, we calculated each such employee’s total compensation as set forth above on December 31,
employer contributions to the company’s 401(k) plan,
change in pension values, and
company allowances. The single individual who represented the median of this sub-group was identified and this individual’s total annual compensation was then compared to the total annual compensation value reported in the “Summary Compensation Table” for our Chief Executive Officer. The total annual compensation for the year ended December 31,
Pay versus Performance This disclosure regarding executive compensation for our CEO and other NEOs has been prepared in accordance with the SEC’s pay versus performance rules in Item 402(v) of RegulationS-K under the Exchange Act and does not necessarily reflect value actually realized by the NEOs or how the committee evaluates compensation decisions in light of company or individual performance. For discussion of how the committee seeks to align pay with performance when making compensation decisions, please review the “Compensation Discussion and Analysis” section beginning on page
The amounts above shown for Compensation Actually Paid do not represent the value of cash and shares of the company’s common stock received by NEOs during the year, but rather are amounts that are calculated in accordance with the SEC rules and include, among other things, year-over-year changes in the value of unvested equity-based awards. Fair value or change in fair value, as applicable, of equity awards was determined in accordance with ASC 718 and the methodology required by Item 402(v) of RegulationS-K. Changes in actuarial present values are equal to the service costs incurred during the relevant period. No prior service costs were incurred as no modifications were made to the pension plans during the relevant period.
The comparison assumes $100 was invested for the period starting December 31 and through the end of the listed year in the company and in the Proxy Peer Group, respectively. Historical stock performance is not necessarily indicative of future stock performance.
Description of Relationship Between Compensation Actually Paid and TSR The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Non-CEO NEOs, the company’s cumulative TSR over the Our LTI compensation represents the largest portion of our executive officers’ target total direct compensation package, with a substantial portion consisting of PSUs that are earned based on our relative TSR Non-CEO NEOs was
TSR performance over Description of Relationship Between Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Non-CEO NEOs, and our net income during the pre-established metrics and remain highly sensitive to stockholder returns and our operational and strategic performance. As a result, while net income was not a specified metric under the company’s cash incentive and LTI programs, changes to ourNon-CEO NEOs.
Description of Relationship Between Compensation Actually Paid and One-Year The following chart sets forth the relationship between Compensation Actually Paid to our CEO, the average of Compensation Actually Paid to our Non-CEO NEOs, and the ranking of ourone-year TSR performance as compared to that of Non-CEO NEOs are a substantial portion of their total compensation and Non-CEO NEOs may not fully align with our one-year Tabular List of Most Important Financial Performance Measures The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our CEO and Non-CEO NEOs for
Compensation and Risk The company performed a risk assessment to determine whether the amount and composition of compensation for the company’s employees and the design of compensation programs may create incentives for excessive risk-taking by its employees. The risk assessment focused on the following areas and the results were reviewed with and approved by the company’s chief risk officer: assessment of residual risk associated with certain elements and design features of the company’s compensation program; calculation of approximate exposure values of each business unit by aggregating the value of material risks into a single “at risk” dollar figure (“Exposure”); assignment of a compensation risk score for major business units to attribute the level of compensation risk arising from potential for risk-taking and compensation mix (“Compensation Risk”); and review of higher risk areas by Exposure and Compensation Risk and appropriate mitigation plans. The risk assessment placed particular emphasis on identifying employees who have both significant compensation risk in the variability of their compensation and also the ability to expose the company to significant business risk. The company concluded that for the substantial majority of its employees, their compensation risk and their ability to take business risks is low, because their compensation consists largely of fixed cash salary and a cash bonus that has a capped payout, and they do not have the authority to take action on behalf of the company that could expose the company to significant business risks. The company focused on the compensation programs for its senior executives, as these are the employees whose actions may expose the company to significant business risk. The company reviewed the cash and equity incentive programs for these executives and concluded that the following factors tend to mitigate the likelihood of excessive risk-taking: the compensation mix for these executives is designed to deliver a substantial portion of compensation in the form of long-term equity awards, and in the case of senior executives, such awards constitute the majority of their compensation; payouts on annual cash bonuses are capped, reducing the incentive to take excessive risk for short-term gains; LTI awards are made at the discretion of the compensation and management development committee with the goal of creating incentives for these employees to work for growth in the long-term profitability of the company; the compensation and management development committee has the discretion to reduce the cash incentive awards as well as LTI awards as it deems appropriate; senior executives are subject to stock ownership guidelines requiring them to hold specified levels of the company’s stock during the term of their employment, the economic risk of which may not be hedged by equity derivative instruments, in order to align their interests with the long-term interests of all stockholders; incentive based compensation of any current or former executive officer may be subject to recoupment in certain circumstances involving financial restatement due to material noncompliance; compliance with the company’s code of business conduct and ethics is considered in compensation determinations; the company has an environmental, health and safety function which oversees and monitors compliance in these areas for the company; the company’s variable compensation programs include a variety of environmental, health and safety performance metrics; and the compensation and management development committee continually monitors the company’s compensation programs and practices to assure that they appropriately balance the interests of employees and stockholders. For these reasons, we do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the company. PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS In accordance with the Dodd-Frank Act enacted in 2010 and pursuant to Section 14A of the Exchange Act, an advisory vote on the frequency of stockholder votes on executive compensation was conducted in connection with the Accordingly, and pursuant to Section 14A of the Exchange Act, we are asking stockholders for an advisory approval of the compensation of our named executive officers as described in the “Compensation Discussion and Analysis,” the compensation tables and related narrative discussion included in this proxy statement. This proposal, commonly known as a “say on pay” proposal, gives stockholders an opportunity to approve, reject or abstain from voting with respect to our overall fiscal Please read the “Compensation Discussion and Analysis” section beginning on page This proposal allows our stockholders to express their opinions regarding the decisions of the committee on the prior year’s annual compensation to the named executive officers. Because your vote on this proposal is advisory, it will not affect existing compensation or be binding on the company, the board or the committee. However, the board and the committee will carefully consider the voting results on this proposal in future decisions on executive compensation. Your advisory vote will serve as an additional tool to guide the board and the committee in continuing to improve the alignment of the company’s executive compensation programs with the long-term interests of the company and its stockholders and is consistent with our commitment to high standards of corporate governance. Hess’ The board of directors unanimously recommends stockholders vote FOR, on an advisory basis, the following resolution: “RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.” Approval of the resolution requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting. Abstentions will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.
PROPOSAL 3:
OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS The audit committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accountants retained to audit the company’s financial statements. Accordingly, the audit committee has selected the firm of Ernst & Young LLP as the independent registered public accountants of the company for the fiscal year ending December 31, The audit committee evaluated Ernst & Young LLP’s qualifications, performance and independence, as described on page 13, and the audit committee and the board believe that the continued retention of Ernst & Young LLP as the company’s independent registered public accountants is in the best interest of the company and its stockholders. Therefore, the board proposes that the stockholders ratify this selection at the annual meeting. Ratification of the appointment of Ernst & Young LLP as the independent registered public accountants of the company for the fiscal year ending December 31, If the stockholders do not ratify the selection of Ernst & Young LLP, the selection of independent registered public accountants will be reconsidered by the audit committee. Representatives of Ernst & Young LLP are expected to be present at the annual meeting and will be afforded the opportunity to make a statement if they desire and will be available to respond to appropriate questions. Fee Information
Ernst & Young LLP’s fees, by category of professional service in each of the last two fiscal years, were (in thousands):
Audit fees include fees and expenses associated with the last annual audit, the reviews of the company’s quarterly reports on Form 10-Q, reporting on the effectiveness of internal controls over financial reporting, SEC registration statements, comfort letters and statutory audits required internationally. These amounts also include $1.650 million and $1.623 million for 2023 and Fees for audit-related services include pension and savings plan audits, attest services not required by statute or regulation, accounting consultations and consultations on internal accounting controls. Tax fees include tax compliance services as well as United States and international tax advice and planning. As part of its responsibility for oversight of the independent registered public accountants, the audit committee has established a pre-approval policy for the provision of engaging audit and permitted non-audit services provided by the company’s independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent registered public accountants is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved annually by the audit committee. Each such service and budgeted amount is thereafter updated quarterly. Any type of permitted service not previously approved by the audit committee must be specifically pre-approved before the
Proposal 3: Ratification of the Selection of Ernst & Young LLP
service can be provided. For each fiscal year, the audit committee may determine appropriate ratios between categories of services and the total fees paid to the independent registered public accountants. The audit committee has delegated authority to the chair of the audit committee to approve additional services or an increase in fees for a previously approved service in excess of the budgeted amount for that service. However, any increased fees or additional services so approved must be reported to the audit committee at its next scheduled meeting. In
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING Why did I receive these proxy materials?
You have received these proxy materials because you are a Hess Corporation stockholder, and our board of directors is soliciting your authority, or proxy, to vote your shares at the The following proposals are scheduled to be voted on at the annual meeting:
Can I access the proxy materials on the internet?
Yes. The company’s notice of annual meeting, proxy statement and In accordance with SEC rules, we are making our proxy materials available to stockholders over the internet. On or about April The Notice also includes instructions about how to request delivery of future proxy materials electronically by e-mail, and we encourage you to do so. Choosing to receive future proxy materials by e-mail will save us the cost of printing and mailing the materials to you and will reduce the impact of our annual meeting on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail prior to the next stockholder meeting containing links to the proxy materials and the proxy voting website. Your election to receive proxy materials by e-mail will remain in effect until you change it. How do I attend the annual meeting?
The annual meeting will be held If you hold shares beneficially in street name through a The virtual annual meeting webcast will begin promptly at 9:00 a.m., Central Time. We encourage you to access the virtual annual meeting website prior to the start time. Online check-in will begin at 8:45 a.m., Central Time, and you should allow ample time to ensure your ability to access the meeting.
What is the quorum requirement for holding the
A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the annual meeting. Abstentions and broker non-votes will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business. Who can vote?
Holders of record of common stock at the close of business on March What is the difference between holding shares as a holder of record and as a beneficial owner?
If at the close of business on March
How do I vote my shares?
You may vote your shares using one of the following methods (please also see the information provided above concerning the difference between holding shares as a holder of record and holding shares beneficially through a bank, broker or other nominee—beneficial holders should follow the voting instructions provided by such nominee):
A control number, located on the instruction sheet attached to the proxy card or the Notice, is designated to verify your identity and allow you to vote your shares and confirm that your voting instructions have been recorded properly. If you vote via the internet or by telephone, there is no need to return a signed proxy card. However, you may still vote by proxy by using the proxy card. If you vote by proxy prior to the annual meeting and also virtually attend the annual meeting, As noted above, if you hold shares beneficially in street name through a bank, broker or other nominee, you may vote by submitting the voting instruction form provided by your bank, broker or other nominee. Telephone and internet voting may be also available — please refer to the voting instruction form provided by your bank, broker or other nominee for more information. Can I change my vote?
Yes. You may revoke the proxy at any time prior to its use by:
delivering a written notice to the secretary of the company, mailed to Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036;
executing and submitting a later-dated proxy;
attending the virtual annual meeting and voting What vote is required to approve each of the proposals?
What are the recommendations of the board of directors?
The board of directors unanimously recommends that you vote your shares on your proxy card:
What does it mean if I receive more than one proxy card on or about the same time?
It generally means you hold shares registered in more than one account. In order to vote all of your shares, please sign and return each proxy card or, if you vote via the internet or telephone, vote once for each proxy card you receive.
What if I do not specify how I want my shares to be voted?
If you are the record holder of your shares and do not specify on your proxy card (or when giving your proxy by telephone or the internet) how you want to vote your shares, your shares will be voted:
If you are a beneficial owner of shares and do not specify how you want to vote, your shares may not be voted by the record holder and will not be considered as present and entitled to vote on any matter to be considered at the annual meeting, except with respect to the ratification of the company’s independent auditors. If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
What is the effect of an “abstain” vote?
Abstentions are considered to be present and entitled to vote with respect to each relevant proposal, but will not be considered a vote cast with respect to that proposal. Therefore, an abstention will effectively be a vote against each of the proposals, except for the election of directors. What is a “broker non-vote”?
A “broker non-vote” occurs when a beneficial owner of shares held by a broker, bank or other nominee fails to provide the record holder with voting instructions on any “non-routine” matters brought to a vote at a stockholder meeting. Under the rules of the NYSE, “non-routine” matters include, among others, the election of directors and the advisory vote to approve the compensation of named executive officers. As such, a broker may not vote your shares with respect to such matters without your instructions. If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters. How can I ask questions at the annual meeting? We will conduct the annual meeting virtually this year, so our stockholders can participate from any geographic location with Internet connectivity. We believe this enhances accessibility to our annual meeting for all of our stockholders. Stockholders may submit questions in advance of the meeting by visiting www.proxyvote.com or during the meeting by visiting www.virtualshareholdermeeting.com/HES2024. To ask a question, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or on your proxy card (or on your voting instruction form or as provided by your bank, broker or other nominee in the case of beneficial holders). The chair of the meeting has broad authority to conduct the virtual annual meeting in an orderly manner, including establishing rules of conduct and time limitations for stockholder questions. A copy of the rules of conduct will be available online at the virtual annual meeting. Responses to appropriate questions asked by stockholders during or in advance of the annual meeting will be posted to our website at www.hess.com as soon as is practical after the meeting. What if I have technical or logistical difficulties? We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual annual meeting. If you encounter any difficulties accessing the meeting during the check-in or meeting time, there will be a toll free number and international number available on the meeting website to assist you.
How does the proposed merger with Chevron impact the 2024 annual meeting? On October 22, 2023, the company entered into the merger agreement with Chevron. The merger agreement provides that, among other things and subject to the terms and conditions of the merger agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the merger as a direct, wholly-owned subsidiary of Chevron. Completion of the merger is subject to the satisfaction of certain closing conditions, including stockholder and regulatory approvals. We will be holding a separate special meeting of stockholders to vote on the proposed merger. For additional information related to the merger, please refer to company’s merger proxy statement and other relevant materials to be filed with the SEC when they become available. What should I do if I have other questions?
If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor, MacKenzie Partners, Inc., toll free at (800) 322-2885 or directly at (212) 929-5500.
ADDITIONAL INFORMATION Availability of Additional Materials
The company will provide to any person whose proxy is solicited by this proxy statement, without charge, upon written request to the company’s corporate secretary at our principal executive offices at Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036, a copy of the company’s annual report on Form 10-K for the fiscal year ended December 31, The information provided on the company’s website is referenced in this proxy statement for information purposes only. Neither the information on the company’s website, nor the information in the company’s sustainability report, shall be deemed to be a part of or incorporated by reference into this proxy statement or any other filings we make with the SEC. Proxy Solicitation Expenses
The cost of preparing and mailing the Notice of Internet Availability of Proxy Materials, this proxy statement and the accompanying proxy and the cost of solicitation of proxies on behalf of the board of directors will be borne by the company. Solicitation will be made by mail and internet. Some personal solicitation may be made by directors, officers and employees without special compensation, other than reimbursement for expenses. In addition, we have retained MacKenzie Partners, Inc. to aid in the solicitation. Its fees for this solicitation are not expected to exceed $25,000, exclusive of expenses. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable and documented expenses in connection therewith. Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the company’s directors, certain of its officers and persons who beneficially own more than 10% of the outstanding shares of the company’s common stock to file initial reports of ownership and reports of changes in ownership of the company’s common stock with the SEC. Based solely on the company’s review of such reports filed electronically with the SEC and on any written representations from such reporting persons, the company believes that in Submission of Stockholder Proposals and Nominations for the
We will hold our 2025 annual meeting of stockholders only if the Chevron merger has not already been completed by the date for which the 2025 annual meeting of stockholders is scheduled. Proposals and Director Nominees for Inclusion in Proxy Materials Proposals which stockholders wish to include in the company’s proxy materials relating to the Hess Corporation 1185 Avenue of the Americas New York, New York 10036 Attn: Corporate Secretary Stockholder nominations for candidates for election at the
Proposals and Director Nominees for Presentation at the Annual Meeting Any stockholder proposal for, or nominations for candidates for election at, the OTHER MATTERS The board of directors knows of no other matters to come before the meeting. Should any unanticipated business properly come before the meeting, the persons named in the enclosed proxy will vote in accordance with their best judgment. The accompanying proxy confers discretionary authority to such persons to vote on any unanticipated matters. It is important that proxies be returned promptly. Stockholders are urged to date and sign the proxy and return it promptly in the accompanying envelope, or to vote via the internet or by calling the toll-free number as instructed on the proxy card. By order of the Board of Directors, Timothy B. Goodell Secretary April
HESS CORPORATION 1185 AVENUE OF THE AMERICAS NEW YORK, NY 10036
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 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 Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — DETACH AND RETURN THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
will be
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HESS CORPORATION Annual Meeting of Stockholders Proxy Solicited by the Board of Directors for the Annual Meeting — May The undersigned hereby authorizes and appoints JOHN B. HESS, GREGORY P. HILL and TIMOTHY B. GOODELL, or any of them, as proxies, each with power of substitution, to vote all shares the undersigned is entitled to vote at the Annual Meeting of Stockholders of Hess Corporation to be held The undersigned hereby revokes any proxy heretofore given to vote said shares, and hereby ratifies all that said proxies may do at the Annual Meeting or any adjournments or postponements thereof. Please indicate on the reverse side of this card how this stock is to be voted. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned. If not otherwise specified, shares will be voted FOR each of the nominees in Proposal 1 and FOR Proposals 2 and Additional instructions for Hess Corporation Savings Plan Participants: Participants and Beneficiaries who do not vote the stock in the Company Stock Fund attributable to their accounts shall be deemed to have directed Fidelity Management Trust Company as Trustee to vote such stock on each proposal in the same proportion as the other participants in the plan vote. |