UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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HALLIBURTON COMPANY
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Notice of Annual Meeting of Stockholders and20142016 Proxy Statement
Wednesday, May 21, 201418, 2016 at 9:00 a.m. Central Daylight Time
3000 N. Sam Houston Parkway East, Life Center - Auditorium, Houston, Texas 77032
Halliburton’s success is rooted in a sound strategy executed by a management team and a dedicated workforce that are never satisfied with the status quo. We are driven to provide execution certainty, deliver on our commitments, and find new ways to increaseDelivering superior value for our customers, employees and stockholders is Halliburton’s primary objective, and we are committed to excellence in innovation, collaboration and execution — our most powerful tools for Halliburton, and for our stockholders.achieving it.
At Halliburton, we believe in setting bold goals that stretchWe have taken confident steps to expand our abilities,capabilities and drive our growth, and reflectour goals for maximizing the long-term prospects for our business. Over the past three years,business are both smart and bold. In 2015, we grew our deepwater business at doubleoutperformed the market rate, tripled the size ofand our peer group in both North America and international revenue by executing on our key strategies around unconventionals, mature fields business, extendedand deepwater. However, 2015 was a very challenging year for the industry, as reduced commodity prices created widespread pricing pressure and activity reductions for Halliburton on a global basis. While the intensity and duration of the current market downturn is uncertain, we are continuing to execute on our unconventionals leadership,two-pronged strategy in the downturn. The first part is to control what we can control in the short term, and delivered superior returns relativethe second is to look beyond the cycle and prepare for the recovery.
The coming year continues to present a challenging market environment; however, our major competitors. Following the same strategies,management team has handled previous downturns successfully, and we intend to do it again overemerge from this cycle strong and well prepared when the next three years.market rebounds.
We recognize the roleOur stockholders play a key role in our success. We greatly appreciateongoing success and we gratefully acknowledge the confidence our stockholdersyou continue to showplace in Halliburton, and the exceptional contributions of our Board of Directors, management team, and employees.Halliburton.
I am pleased to invite you to attend the Annual Meeting of Stockholders of Halliburton Company. The meeting will be held on Wednesday, May 21, 201418, 2016, at 9:00 a.m. Central Daylight Time atTime. The location will be our corporate office at 3000 N. Sam Houston Parkway East, Life Center - Auditorium, Houston, Texas 77032.Texas.
Please refer to the proxy statement for detailed information on each of the proposals presented this year.
It is very importantimperative that your shares arebe represented and voted at the meeting. If you attend the meeting, you may vote in person even if you have previously voted.
We appreciate theyour continuing interest of our stockholders in the business of Halliburton and we hope you will be able to attend the Annual Meeting.
Sincerely,
David J. Lesar
Chairman of the Board President
and Chief Executive Officer
April 8, 20145, 2016
HALLIBURTON - | iii |
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.
Eligibility to Vote (page 2)
You can vote if you were a stockholder of record at the close of business on March 24, 2014.21, 2016.
How to Cast Your Vote (page 2)
You can vote by any of the following methods:
• | Internet (www.envisionreports.com/HAL) until 1:00 a.m. Eastern |
• | Telephone until 1:00 a.m. Eastern |
• | Completing, signing and returning your proxy or voting instruction card before May |
• | In person, at the annual meeting: If you are a stockholder of record, we have a record of your ownership. If your shares are held in the name of a broker, nominee or other intermediary, you must bring proof of ownership with you to the meeting. |
Auditors (page 19)
As a matter of good corporate governance, we are asking our stockholders to ratify the selection of KPMG LLP as our principal independent public accountants for 2014.2016.
Voting matters (pages 10, 19, 22, 49)22)
Board Vote | Page Reference | |
Recommendation | (for more detail) | |
Election of Directors | FOR each Nominee | 10 |
Ratification of the Selection of Auditors | FOR | 19 |
Advisory Approval of Executive Compensation | FOR | 22 |
Governance of the Company (page 3)
Corporate Governance
• | Corporate Governance Guidelines and Committee Charters |
• | Code of Business Conduct |
• | Related Persons Transactions Policy |
The Board of Directors and Standing Committees of Directors | |
• | Board Attendance |
• | Board Leadership |
• | Lead Independent Director |
• | Independent Committees |
• | Board Risk Oversight |
• | Stockholder Nominations of Directors |
• | Qualifications of Directors |
• | Process for the Selection of New Directors |
• | |
HALLIBURTON - | iv |
Board Nominees (page 10)
Name | Age | Director since | Occupation | Independent (Yes/No) | Committee Memberships | Other Company Boards | Age | Director since | Occupation | Independent (Yes/No) | Committee Memberships | Other Company Boards | ||||||||||||||||
Abdulaziz F. Al Khayyal | 62 | 2014 | Retired Senior Vice | Yes | • | Health, Safety and | ||||||||||||||||||||||
President, Industrial | Environment | |||||||||||||||||||||||||||
Relations, Saudi Aramco | • | Nominating and Corporate Governance | ||||||||||||||||||||||||||
Alan M. Bennett | 63 | 2006 | Retired President and CEO of | Yes | • | Audit (Chair) | • | Fluor Corporation | 65 | 2006 | Retired President and CEO | Yes | • | Audit (Chair) | • | Fluor Corporation | ||||||||||||
H & R Block | • | Nominating and Corporate Governance | • | TJX Companies, Inc. | of H & R Block | • | Nominating and Corporate Governance | • | TJX Companies, Inc. | |||||||||||||||||||
James R. Boyd | 67 | 2006 | Retired Chairman of the Board of | Yes | • | Audit | 69 | 2006 | Retired Chairman of the | Yes | • | Audit | ||||||||||||||||
Arch Coal, Inc. | • | Compensation (Chair) | Board of Arch Coal, Inc. | • | Compensation (Chair) | |||||||||||||||||||||||
Milton Carroll | 63 | 2006 | Executive Chairman of the Board | Yes | • | Compensation | • | Western Gas Holdings, LLC | 65 | 2006 | Executive Chairman of the Board of CenterPoint Energy, Inc. | Yes | • • | Compensation Nominating and Corporate Governance | • • | Western Gas Holdings, LLC LyondellBasell Industries | ||||||||||||
of CenterPoint Energy, Inc. | • | Nominating and Corporate Governance | • | LyondellBasell Industries | ||||||||||||||||||||||||
Nance K. Dicciani | 66 | 2009 | Retired President and CEO of | Yes | • | Audit | • | Rockwood. Holdings, Inc | 68 | 2009 | Chair of the Board and | Yes | • | Audit | • | Praxair, Inc. | ||||||||||||
Honeywell International | • | Health, Safety and | • | Praxair, Inc. | ||||||||||||||||||||||||
Specialty Materials | Environment | • | LyondellBasell Industries | Interim Co-Principal Executive Officer of AgroFresh Solutions, Inc. | • | Health, Safety and Environment | • | LyondellBasell Industries | ||||||||||||||||||||
Murry S. Gerber | 61 | 2012 | Retired Executive Chairman of the | Yes | • | Audit | • | BlackRock, Inc. | 63 | 2012 | Retired Executive Chairman | Yes | • | Audit | • | BlackRock, Inc. | ||||||||||||
Board of EQT Corporation | • | Compensation | • | United States Steel Corporation | of the Board of EQT Corporation | • | Compensation | • | United States Steel Corporation | |||||||||||||||||||
José C. Grubisich | 57 | 2013 | Chief Executive Officer of Eldorado | Yes | • | Audit | • | Vallourec S.A. | 59 | 2013 | Chief Executive Officer of | Yes | • | Audit | • | Vallourec S.A. | ||||||||||||
Brasil Celulose | • | Health, Safety and Environment | Eldorado Brasil Celulose | • | Health, Safety and | |||||||||||||||||||||||
Abdallah S. Jum’ah | 72 | 2010 | Retired President and Chief | Yes | • | Health, Safety and Environment | • | Saudi Investment Bank | ||||||||||||||||||||
Executive Officer of Saudi Arabian Oil Company | • | Nominating and Corporate Governance | • | Zamil Industries | Environment | |||||||||||||||||||||||
David J. Lesar | 60 | 2000 | Chairman of the Board, President | No | • | Agrium, Inc. | ||||||||||||||||||||||
(Chairman) | and CEO of Halliburton | |||||||||||||||||||||||||||
David J. Lesar (Chairman) | 62 | 2000 | Chairman of the Board and CEO of Halliburton | No | ||||||||||||||||||||||||
Robert A. Malone | 62 | 2009 | President and Chief Executive | Yes | • | Compensation | • | Peabody Energy Company | 64 | 2009 | Executive Chairman, President and Chief Executive Officer of First Sonora Bancshares, Inc. | Yes | • • | Compensation Health, Safety and Environment (Chair) | • • | Peabody Energy Company Teledyne Technologies Incorporated | ||||||||||||
Officer of The First National Bank of Sonora, Texas | • | Health, Safety and Environment (Chair) | ||||||||||||||||||||||||||
J. Landis Martin (Lead Director) | 68 | 1998 | Founder of Platte River Equity | Yes | • | Health, Safety and Environment | • | Chairman of Crown Castle International Corporation | 70 | 1998 | Founder of Platte River Equity | Yes | • • | Health, Safety and Environment Nominating and Corporate | • | Lead Director of Apartment Investment and Management Company | ||||||||||||
• | Nominating and Corporate Governance | • | Lead Director of Apartment Investment and Management Company | Governance | • | Chairman of Crown | ||||||||||||||||||||||
• | Lead Director of Intrepid Potash, Inc. | Castle International Corporation | ||||||||||||||||||||||||||
• | Lead Director of Intrepid | |||||||||||||||||||||||||||
Potash, Inc. | ||||||||||||||||||||||||||||
Jeffrey A. Miller | 52 | 2014 | President of Halliburton | No | • | Atwood Oceanics, Inc. | ||||||||||||||||||||||
Debra L. Reed | 57 | 2001 | Chairman of the Board and CEO of Sempra Energy | Yes | • | Nominating and Corporate Governance (Chair) | 59 | 2001 | Chairman of the Board and | Yes | • | Compensation | • | Caterpillar | ||||||||||||||
• | Compensation | CEO of Sempra Energy | • | Nominating and Corporate Governance (Chair) |
Named Executive Officers (page 23)
Name | Age | Occupation | Since | Age | Occupation | Since |
David J. Lesar | 60 | Chairman of the Board, President and Chief Executive Officer | 2000 | 62 | Chairman of the Board and Chief Executive Officer | 2000 |
Mark A. McCollum | 55 | Executive Vice President and Chief Financial Officer | 2008 | |||
Christian A. Garcia | 52 | Senior Vice President, Finance and Acting Chief Financial Officer | 2015 | |||
James S. Brown | 59 | President - Western Hemisphere | 2008 | 61 | President - Western Hemisphere | 2008 |
Jeffrey A. Miller | 50 | Executive Vice President and Chief Operating Officer | 2012 | 52 | President | 2012 |
Joe D. Rainey | 59 | President - Eastern Hemisphere | 2011 | 59 | President - Eastern Hemisphere | 2011 |
2013 Financial Highlights2015 Overview
(forFor more detail please see Form 10-K)10-K.)
• | We |
• | We |
• | |
• | In |
HALLIBURTON - | v |
Executive Compensation
Objectives (page 24)
Our executive compensation program is composed of base salary, short-term incentives, and long-term incentives and is designed to achieve the following objectives:
• | Provide a clear and direct relationship between executive pay and our performance on both a short-term and long-term basis; |
• | Emphasize operating performance drivers; |
• | Link executive pay to measures that drive stockholder value; |
• | Support our business strategies; and |
• | Maximize the return on our human resource investment. |
20132015 Executive Total Compensation Mix (page 25)26)
2015 Executive Compensation Summary (page 38)
Non-Equity | Change in Pension Value | |||||||||||||||
Stock | Option | Incentive Plan | and Nonqualified Deferred | All Other | ||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Compensation Earnings | Compensation | Total | |||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||
David J. Lesar | 1,660,000 | 0 | 3,867,735 | 2,103,341 | 5,999,513 | 299,127 | 1,941,613 | 15,871,329 | ||||||||
Christian A. Garcia | 439,875 | 0 | 701,100 | 381,669 | 217,564 | 8,489 | 363,494 | 2,112,191 | ||||||||
James S. Brown | 879,750 | 0 | 1,281,455 | 697,943 | 1,634,785 | 101,969 | 1,360,886 | 5,956,788 | ||||||||
Jeffrey A. Miller | 977,500 | 0 | 2,169,515 | 1,179,488 | 2,218,718 | 30,615 | 1,084,536 | 7,660,372 | ||||||||
Joe D. Rainey | 816,212 | 0 | 1,281,455 | 697,943 | 1,634,785 | 75,712 | 2,720,300 | 7,226,407 |
2013 Executive Compensation Summary (page 36)
Name | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||
David J. Lesar | 1,630,000 | 0 | 4,793,714 | 2,381,533 | 10,180,804 | 155,196 | 1,723,967 | 20,865,214 | ||||||||
Mark A. McCollum | 732,000 | 0 | 1,230,066 | 611,358 | 2,679,877 | 22,366 | 470,366 | 5,746,033 | ||||||||
James S. Brown | 788,000 | 0 | 1,579,344 | 785,785 | 2,743,666 | 57,834 | 992,489 | 6,947,118 | ||||||||
Jeffrey A. Miller | 800,000 | 0 | 1,933,684 | 961,939 | 1,565,460 | 3,406 | 676,731 | 5,941,220 | ||||||||
Joe D. Rainey | 788,000 | 0 | 1,579,344 | 785,785 | 2,730,866 | 78,858 | 1,995,925 | 7,958,778 |
HALLIBURTON - | vi |
Notice of Annual Meeting of Stockholders to be held May 21, 201418, 2016
Halliburton Company, a Delaware corporation, will hold its Annual Meeting of Stockholders on Wednesday, May 21, 201418, 2016 at 9:00 a.m. Central Daylight Time at its corporate office at 3000 N. Sam Houston Parkway East, Life Center - Auditorium, Houston, Texas 77032. At the meeting, the stockholders will be asked to consider and act upon the matters discussed in the attached proxy statement as follows:
1. | To elect the | ||
2. | To consider and act upon a proposal to ratify the appointment of KPMG LLP as principal independent public accountants to examine the financial statements and books and records of Halliburton for the year ending December 31, | ||
3. | To consider and act upon advisory approval of our executive compensation. | ||
4. | |||
To transact any other business that properly comes before the meeting or any adjournment or adjournments of the meeting. |
These items are fully described in the following pages, which are made a part of this Notice. The Board of Directors has set the close of business on Monday, March 24, 201421, 2016 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting and at any adjournment of the meeting.
INTERNET AVAILABILITY OF PROXY MATERIALS
On or about April 8, 2014,5, 2016, we mailed our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our 20142016 proxy statement and 20132015 Annual Report on Form 10-K and how to vote online. The notice also provides instruction on how you can request a paper copy of these documents if you desire. If you received your annual materials via email, the email contains voting instructions and links to the proxy statement and Form 10-K on the Internet.
IF YOU PLAN TO ATTEND
Attendance at the meeting is limited to stockholders and one guest each. Admission will be on a first-come, first-served basis. Registration will begin at 8:00 a.m., and the meeting will begin at 9:00 a.m. Each stockholder holding stock in a brokerage account will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Please note that you will be asked to present valid picture identification, such as a driver’s license or passport.
April 8, 20145, 2016
By order of the Board of Directors,
Christina M. IbrahimRobb L. Voyles
Executive Vice President, Secretary and Corporate SecretaryGeneral Counsel
You are urged to vote your shares as promptly as possible by following the voting instructions in the Notice of Internet Availability of Proxy Materials. |
We are providing these proxy materials to you in connection with the solicitation by the Board of Directors of Halliburton Company, or the Board, of proxies to be voted at our 20142016 Annual Meeting of Stockholders and at any adjournment or postponement of the meeting. By executing and returning the enclosed proxy, by following the enclosed voting instructions or by voting via the Internet or by telephone, you authorize the persons named in the proxy to represent you and vote your shares on the matters described in the Notice of Annual Meeting.
The Notice of Internet Availability of Proxy Materials is being sent to stockholders on or about April 8, 2014.5, 2016. Our Annual Report on Form 10-K, including financial statements, for the fiscal year ended December 31, 20132015 accompanies this proxy statement. The Annual Report on Form 10-K shall not be considered as a part of the proxy solicitation material or as having been incorporated by reference.
Subject to space availability, all stockholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting, and each may be accompanied by one guest. Admission to the Annual Meeting will be on a first-come, first-served basis. Registration will begin at 8:00 a.m., and the Annual Meeting will begin at 9:00 a.m. Please note that we will ask you to present valid picture identification, such as a driver’s license or passport, when you check in at the registration desk.
If you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date.
You may not bring cameras, recording equipment, electronic devices, large bags, briefcases or packages into the Annual Meeting.
If you attend the Annual Meeting, you may vote in person. If you are not present, you can only vote your shares if you have voted via the Internet, by telephone or returned a properly executed proxy; in these cases, your shares will be voted as you specify. If you return a properly executed proxy and do not specify a vote, your shares will be voted in accordance with the recommendations of the Board. You may revoke the authorization given in your proxy at any time before the shares are voted at the Annual Meeting.
The record date for determination of the stockholders entitled to vote at the Annual Meeting is the close of business on March 24, 2014.21, 2016. Our common stock, par value $2.50 per share, is our only class of capital stock that is outstanding. As of March 24, 2014,21, 2016, there were 844,192,203858,517,672 shares of our common stock outstanding. Each of our outstanding shares of common stock is entitled to one vote on each matter submitted to the stockholders for a vote at the Annual Meeting. We will keep a complete list of stockholders entitled to vote at our principal executive office for ten days before, and will also have the list available at, the Annual Meeting. Our principal executive office is located at 3000 N. Sam Houston Parkway East, Administration Building, Houston, Texas 77032.
Votes cast by proxy or in person at the Annual Meeting will be counted by the persons we appoint to act as election inspectors for the Annual Meeting. Except as set forth below, the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the subject matter will be the act of the stockholders. Shares for which a stockholder has elected to abstain on a matter will count for purposes of determining the presence of a quorum and, except as set forth below, will have the effect of a vote against the matter.
Each Director shall be elected by the vote of the majority of the votes cast, provided that if the number of nominees exceeds the number of Directors to be elected and any stockholder-proposed nominee has not been withdrawn before the tenth (10th) day preceding the day we mail the Notice of Internet Availability of Proxy Materials to stockholders for the Annual Meeting, the Directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the election of Directors. A majority of the votes cast means that the number of shares voted “for” a Director must exceed the number of votes cast “against” that Director; we will not count abstentions. As a condition to being nominated by the Board for continued service as a Director, each Director nominee has signed and delivered to the Board an irrevocable letter of resignation limited to and conditioned on that Director failing to achieve a majority of the votes cast at an election where Directors are elected by majority vote. For any Director nominee who fails to be elected by a majority of votes cast, where Directors are elected by majority vote, his or her irrevocable letter of resignation will be deemed tendered on the date the election results are certified. Such resignation shall only be effective upon acceptance by the Board.
The election inspectors will treat broker non-vote shares, which are shares held in street name that cannot be voted by a broker on specific matters in the absence of instructions from the beneficial owner of the shares, as shares that are present and entitled to vote for purposes of determining the presence of a quorum. In determining the outcome of any matter for which the broker does not have discretionary authority to vote, however, those shares will not have any effect on that matter. A broker may be entitled to vote those shares on other matters.
In accordance with our confidential voting policy, no particular stockholder’s vote will be disclosed to our officers, Directors, or employees, except:
• | as necessary to meet legal requirements and to assert claims for and defend claims against us; |
• | when disclosure is voluntarily made or requested by the stockholder; |
• | when the stockholder writes comments on the proxy card; or |
• | in the event of a proxy solicitation not approved and recommended by the Board. |
The proxy solicitor, the election inspectors, and the tabulators of all proxies, ballots, and voting tabulations are independent and are not our employees.
HALLIBURTON - | 2 |
Corporate Governance Guidelines and Committee Charters
Our Board has long maintained a formal statement of its responsibilities and corporate governance guidelines to ensure effective governance in all areas of its responsibilities. Our corporate governance guidelines, as revised in January 2013,2015, are attached as Appendix A to this proxy statement and are also available on our website atwww.halliburton.comby clicking on the tab “About Us,” and then the “Corporate Governance” link. The guidelines are reviewed periodically and revised as appropriate to reflect the dynamic and evolving processes relating to corporate governance, including the operation of the Board.
In order for our stockholders to understand how the Board conducts its affairs in all areas of its responsibility, the full text of the charters of our Audit; Compensation; Health, Safety and Environment; and Nominating and Corporate Governance Committees are also available on our website.
Except to the extent expressly stated otherwise, information contained on or accessible from our website or any other website is not incorporated by reference into and should not be considered part of this proxy statement.
Code of Business Conduct
Our Code of Business Conduct, which applies to all of our employees and Directors and serves as the code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, and other persons performing similar functions, is available on our website. Any waivers to our Code of Business Conduct for our Directors or executive officers can only be made by our Audit Committee. There were no waivers of the Code of Business Conduct in 2013.2015.
Related Persons Transactions Policy
Our Board has adopted a written policy governing related persons transactions as part of the Board’s commitment to good governance and independent oversight. The policy covers transactions involving any of our Directors, executive officers, nominees for Director, or greater than 5% stockholders, or any immediate family member of the foregoing, among others.
The types of transactions covered by this policy are transactions, arrangements or relationships, or any series of similar transactions, arrangements or relationships, including any indebtedness or guarantee of indebtedness, in which (1) we or any of our subsidiaries were or will be a participant, (2) the aggregate amount involved exceeds $120,000 in any calendar year, and (3) any related person had, has or will have a direct or indirect interest (other than solely as a result of being a director of, or holding less than a 10% beneficial ownership interest in, another entity).
Under the policy, we generally only enter into or ratify related persons transactions when the Board determines such transactions are in our best interests and the best interests of our stockholders. In determining whether to approve or ratify a related person transaction, the Board will consider the following factors and such other factors it deems appropriate:
• | whether the related person transaction is on terms comparable to terms generally available with an unaffiliated third party under the same or similar circumstances; |
• | the benefits of the transaction to us; |
• | the extent of the related person’s interest in the transaction; and |
• | whether there are alternative sources for the subject matter of the transaction. |
HALLIBURTON - | 3 |
THE BOARD OF DIRECTORS AND STANDING COMMITTEES OF DIRECTORS
The Board has standing Audit; Compensation; Health, Safety and Environment; and Nominating and Corporate Governance Committees. Each of the standing committees are comprised of non-employee Directors, and in the business judgment of the Board, all of the non-employee Directors are independent, after considering all relevant facts and circumstances, as well as the independence standards set forth in our corporate governance guidelines. Our corporate governance guidelines are attached as Appendix A to this proxy statement and are also available on our website atwww.halliburton.comwww.halliburton.com..
Our independence standards meet, and in some instances exceed, NYSE independence requirements. Our definition of independence and compliance with our independence standards is periodically reviewed by the Nominating and Corporate Governance Committee. In connection with its independence determination, the Board considered that during 2015, we provided services in the ordinary course of business to Sempra Energy, of which Ms. Reed is the Chairman and Chief Executive Officer. The Board concluded that the relationship was not material and did not affect the independence of Ms. Reed. There were no relevant transactions, relationships, or arrangements not disclosed in this proxy statement that were considered by the Board in making its determination as to the independence of the Directors.
Board Attendance
During 2013,2015, the Board held nine6 meetings and met in Executive Session, without management present, on five5 occasions.
Committee meetings were held as follows:
Audit Committee | 9 |
Compensation Committee | 5 |
Health, Safety and Environment Committee | 5 |
Nominating and Corporate Governance Committee |
All members of the Board attended at least 93%80% of the total number of meetings of the Board and the committees on which he or she served during the last fiscal year.
All of our Directors attended the 20132015 Annual Meeting, as required by our corporate governance guidelines.
Board Leadership
Our By-lawscorporate governance guidelines provide that the Board should have the flexibility to determine the appropriate leadership of the Board, and whether the roles of Chairman and Chief Executive Officer should be combined or separate. After review and discussion, our Board has decided that a combined leadership role would best serve the needs of the Company and its stockholders. The Board believes that David J. Lesar, our current Chairman and Chief Executive Officer, with his industry expertise, financial expertise, and in-depth knowledge of Halliburton and its business, is the correct person to fill both roles.
HALLIBURTON - | 4 |
Lead Independent Director
In order to help ensure independent Board leadership and oversight, the Board has elected Mr. J. Landis Martin as our Lead Independent Director. Mr. Martin’s role and responsibilities are set forth in the Lead Independent Director Charter adopted by the Board and include presiding over the executive sessions of the non-employee Directors and executive sessions of the independent Directors. Mr. Martin also advises management on and approves the agenda items to be considered at meetings of the Board. With the exception of our Chairman and Chief Executive Officer, Mr. Lesar, and our President, Mr. Miller, the Board is composed of independent Directors. Our Lead Independent Director Charter can be found on our website atwww.halliburton.comwww.halliburton.com..
Independent Committees
As a governance best practice, key committees of the Board are comprised solely of independent Directors. We have established processes for the effective oversight of critical issues entrusted to independent Directors, such as:
• | the integrity of our financial statements; |
• | CEO and senior management compensation; |
• | CEO and senior management succession planning; |
• | the election of our Lead Independent Director; |
• | membership of our |
• | Board, Committee, and Director evaluations; and |
• | nominations for Directors. |
The Board believes it has a strong governance structure in place to ensure independent oversight on behalf of all stockholders.
Board Risk Oversight
We have implemented an Enterprise Risk Management system to identify and analyze enterprise level risks and their potential impact on us. At least annually, our Vice President and Treasurer reports to the Audit Committee of the Board receives a report on our processes with respect to risk assessment and risk management. Our executive officers are assigned responsibility for the various categories of risk, with the Chief Executive Officer being ultimately responsible to the Board for all risk categories. The responsibility of the Chief Executive Officer for all risk matters is consistent with his being primarily responsible for managing our day-to-day business.
Halliburton Board Leadership
• | Mr. David J. Lesar is our Chairman |
• | Mr. J. Landis Martin is our Lead Independent Director |
• | 10 of our |
• | All members of the Audit; Compensation; Health, Safety and Environment; and Nominating and Corporate Governance Committees are independent. |
Our Board believes that continuing to combine the position of Chairman and CEO is in the best interests of the Company and our stockholders, and that our Lead Independent Director and the strong presence of engaged independent Directors ensures independent oversight.
Members of the Committees of ourOur Board of Directors
Health, Safety and | Nominating and Corporate | ||
Audit Committee | Compensation Committee | Environment Committee | Governance Committee |
Alan M. Bennett* | James R. Boyd* | ||
James R. Boyd | Milton Carroll | ||
Nance K. Dicciani | Murry S. Gerber | ||
Murry S. Gerber | Robert A. Malone | Robert A. Malone* | J. Landis Martin |
José C. Grubisich | Debra L. Reed | J. Landis Martin | Debra L. Reed* |
* Chair |
HALLIBURTON - | 5 |
Audit Committee
The Audit Committee’s responsibilities include:
• | Recommending to the Board the appointment of the independent public accounting firm to audit our financial statements (the “principal independent public accountants”); |
• | Together with the Board, being responsible for the appointment, compensation, retention, and oversight of the work of the principal independent public accountants; |
• | Reviewing the scope of the principal independent public accountants’ examination and the scope of activities of the internal audit department; |
• | Reviewing our significant financial policies and accounting systems and controls; |
• | Reviewing financial statements; and |
• | Approving the services to be performed by the principal independent public accountants. |
The Board has determined that Alan M. Bennett, James R. Boyd, Nance K. Dicciani, Murry S. Gerber, and José C. Grubisich are independent under our corporate governance guidelines and are “audit committee financial experts” as defined by the Securities and Exchange Commission, or SEC. A copy of the Audit Committee Charter is available on our website atwww.halliburton.comwww.halliburton.com..
Compensation Committee
The Compensation Committee’s responsibilities include:
• | Overseeing the effectiveness of our compensation program in attracting, retaining, and motivating key employees; |
• | Utilizing our compensation program to reinforce business strategies and objectives for enhanced stockholder value; |
• | Administering our compensation program, including our incentive plans, in a fair and equitable manner consistent with established policies and guidelines; |
• | Developing an overall executive compensation philosophy and strategy; and |
• | Additional roles and activities with respect to executive compensation as described under Compensation Discussion and Analysis. |
A copy of the Compensation Committee Charter is available on our website atwww.halliburton.comwww.halliburton.com..
Health, Safety and Environment Committee
The Health, Safety and Environment Committee’s responsibilities include:
• | Reviewing and assessing our health, safety, and environmental policies and practices; |
• | Overseeing the communication and implementation of, and reviewing our compliance with, these policies, as well as applicable goals and legal requirements; and |
• | Assisting the Board with oversight of our risk-management processes relating to health, safety, and the environment. |
A copy of our Health, Safety and Environment Committee Charter is available on our website atwww.halliburton.com.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee’s responsibilities include:
• | Reviewing and recommending revisions to our corporate governance guidelines; |
• | Overseeing our Director self-evaluation process and performance reviews; |
• | Identifying and screening candidates for Board and committee membership; |
• | Reviewing the overall composition profile of the Board for the appropriate mix of skills, characteristics, experience, and expertise; and |
• | Reviewing and making recommendations on Director compensation practices. |
A copy of our Nominating and Corporate Governance Committee Charter is available on our website atwww.halliburton.comwww.halliburton.com..
HALLIBURTON - | 6 |
Stockholder Nominations of Directors
Stockholders may nominate persons for election to the Board at a meeting of stockholders in the manner provided in our By-laws, which include a requirement to comply with certain notice procedures. Nominations shall be made pursuant to written notice to the Vice President and Corporate Secretary at the address of our principal executive offices set forth on page 2 of this proxy statement, and for the Annual Meeting of Stockholders in 2015,2017, must be received not less than 90 days nor more than 120 days prior to the anniversary date of the 20142016 Annual Meeting of Stockholders, or no later than February 20, 201517, 2017 and no earlier than January 21, 2015.18, 2017.
The stockholder notice must contain, among other things, certain information relating to the stockholder and the proposed nominee as described in our By-laws. In addition, the proposed nominee may be required to furnish other information as we may reasonably require to determine the eligibility of the proposed nominee to serve as a Director. With respect to any proposed nominee nominated in accordance with Section 6 of our By-laws by a stockholder of record owning at least 1% of our issued and outstanding voting stock continuously for at least one year as of the date the written notice of the nomination is submitted to us, our Vice President and Corporate Secretary will (i) obtain from such nominee any additional relevant information the nominee wishes to provide in consideration of his or her nomination, (ii) report on each such nominee to the Nominating and Corporate Governance Committee, and (iii) facilitate having each such nominee meet with the Nominating and Corporate Governance Committee as the committeeCommittee deems appropriate.
Qualifications of Directors
Candidates nominated for election or reelection to the Board should possess the following qualifications:
– | high personal and professional ethics, integrity, and values; | |
– | an inquiring and independent mind; and | |
– | practical wisdom and mature judgment; | |
• | Broad training and experience at the policy-making level in business, government, education, or technology; | |
• | Expertise that is useful to us and complementary to the background and experience of other Board members, so that an optimum balance of members on the Board can be achieved and maintained; | |
• | Willingness to devote the required amount of time to carrying out the duties and responsibilities of Board membership; | |
• | Commitment to serve on the Board for several years to develop knowledge about our principal operations; | |
• | Willingness to represent the best interests of all of our stockholders and objectively appraise management performance; and | |
• | Involvement only in activities or interests that do not create a conflict with the Director’s responsibilities to us and our stockholders. |
The Nominating and Corporate Governance Committee is responsible for assessing the appropriate mix of skills and characteristics required of Board members in the context of the needs of the Board at a given point in time, and shall periodically review and update the criteria. In selecting Director nominees, the Board first considers the personal characteristics, experience, and other criteria as set forth in our corporate governance guidelines. We also identify nominees based on our specific needs and the needs of our Board at the time a nominee is sought.
We value all types of diversity, including diversity of our Board. In evaluating the overall mix of qualifications for a potential nominee, the Board also takes into account overall Board diversity in personal background, race, gender, age, and nationality. In considering whether current Directors should be nominated for reelection to the Board, the Nominating and Corporate Governance Committee and the Board will also consider the non-employee Directors’ annual assessment of the Board and annual performance review.
HALLIBURTON - | 7 |
Process for the Selection of New Directors
The Board is responsible for filling vacancies on the Board. The Board has delegated to the Nominating and Corporate Governance Committee the duty of selecting and recommending prospective nominees to the Board for approval. The Nominating and Corporate Governance Committee considers suggestions of candidates for Board membership made by current Committee and Board members, our management, and stockholders. A stockholder who wishes to recommend a prospective candidate should notify our Vice President and Corporate Secretary. The Committee may retain an independent executive search firm to identify and/or assist in evaluating candidates for consideration. A stockholder who wishes to recommend a prospective candidate should notify our Corporate Secretary.
When the Nominating and Corporate Governance Committee identifies a prospective candidate, the Committee determines the appropriate method to evaluate the candidate. This determination is based on the information provided to the Committee by the person recommending the prospective candidate and the Committee’s knowledge of the candidate. This information may be supplemented by inquiries to the person who made the recommendation, the candidate or to others. The preliminary determination is based on the need for additional Board members to fill vacancies or to expand the size of the Board, and the likelihood that the candidate will meet the Board membership criteria listed above. The Committee will determine, after discussion with the Chairman of the Board, the Lead Independent Director, and other Board members, whether a candidate should continue to be considered as a potential nominee. If a candidate warrants additional consideration, the Committee may request an independent executive search firm to gather additional information about the candidate’s background, experience, and reputation, and to report its findings to the Committee. The Committee then evaluates the candidate and determines whether to interview the candidate. One or more members of the Committee and others as appropriate then conduct the interviews. Once the evaluation and interviews are completed, the Committee recommends to the Board which candidates should be nominated. The Board makes a determination of nominees after review of the recommendation and the Committee’s report.
IDENTIFICATION OF QUALIFIED CANDIDATES | DUE DILIGENCE SCREENING | MEETINGS WITH SHORTLISTED CANDIDATES | DECISION AND NOMINATION | |||
Nominating and Corporate Governance Committee identifies candidates to become Board members | Review of qualifications to determine if candidate meets Board membership criteria | Committee members and, as appropriate, other Board members and management interview the shortlisted candidates | Selection of Director nominees best qualified to serve the interests of Halliburton stockholders | |||
HALLIBURTON - | 8 |
Stockholder Communication to the Board
To foster better communication withfrom our stockholders and other interested persons, we established a process for stockholders and others to communicate with the Audit Committee and the Board. The process has been approved by both the Audit Committee and the Board, and meets the requirements of the New York Stock Exchange, or NYSE, and the SEC. The methods of communication with the Board include telephone, mail and e-mail.
888.312.2692 | Board of Directors | BoardofDirectors@halliburton.com | |||||
or | c/o Director of Business Conduct | ||||||
770.613.6348 | Halliburton Company | ||||||
P.O. Box 42806 | |||||||
Houston, Texas 77242-2806 |
Our Director of Business Conduct, an employee, reviews all stockholder communications directed to the Audit Committee and the Board. The Chairman of the Audit Committee is promptly notified of any substantive communication involving accounting, internal accounting controls, or auditing matters. The Lead Independent Director is promptly notified of any other significant stockholder communications, and any board related matters which are addressed to a named Director are promptly sent to that Director. Copies of all communications are available for review by any Director. It should be noted, however, that some items such as advertisements, business solicitations, junk mail, resumes, and any communication that is overly hostile, threatening, or illegal will not be forwarded to the Board. Concerns may be reported anonymously or confidentially. Confidentiality shall be maintained unless disclosure is:
• | required or advisable in connection with any governmental investigation or report; |
• | in the interests of Halliburton, consistent with the goals of our Code of Business Conduct; or |
• | required or advisable in our legal defense of the matter. |
Information regarding these methods of communication is also on our website atwww.halliburton.comwww.halliburton.com..
HALLIBURTON- | 9 |
ELECTION OF DIRECTORS |
PROPOSAL NO. 1 ELECTION OF DIRECTORS
The eleventwelve nominees listed below are presently our Directors. The common stock represented by properly executed and returned proxies will be voted to elect the eleventwelve nominees as Directors unless we receive contrary instructions. If any nominee is unwilling or unable to serve, favorable and uninstructed proxies will be voted for a substitute nominee designated by the Board. If a suitable substitute is not available, the Board will reduce the number of Directors to be elected. Each nominee has indicated approval of his or her nomination and his or her willingness to serve if elected. The Directors elected will serve for the ensuing year and until their successors are elected and qualify.
Our corporate governance guidelines provide that each non-management Director shall retire from the Board immediately prior to the annual meeting of stockholders following his or her seventy-second (72nd) birthday. Though he has reached age 72, the Board has requested Abdallah S. Jum’ah to stand for reelection for another year because of his intimate knowledge of the oil and gas industry in the Middle East, where our business is growing considerably.
Information about Nominees for Director
Abdulaziz F. Al Khayyal | |
Age: 62 Director Since: 2014 Halliburton Committees: Health, Safety and Environment; Nominating and Corporate Governance |
Mr. Al Khayyal is the retired Senior Vice President of Industrial Relations of Saudi Arabian Oil Company (Saudi Aramco) (the world’s largest producer of crude oil). Mr. Al Khayyal served as Senior Vice President of Industrial Relations of Saudi Aramco from 2007 to 2014 and served as a director of Saudi Aramco from 2004 to 2014. The Board determined that Mr. Al Khayyal should be nominated for election as a Director because of his exceptional oil and gas knowledge, including significant international business experience in the energy industry, and his executive experience with the world’s largest producer of crude oil.
Alan M. Bennett | |
Age: Director Since: 2006 Halliburton Committees:Audit (Chair); Nominating and Corporate Governance |
Mr. Bennett is the retired President and Chief Executive Officer of H&R Block, Inc. (a tax and financial services provider). Mr. Bennett served as the President and Chief Executive Officer of H&R Block, Inc. from 2010 to 2011, the Interim Chief Executive Officer of H&R Block, Inc. from 2007 to 2008, and the Senior Vice President and Chief Financial Officer of Aetna, Inc. from 2001 to 2007. Mr. Bennett is a director of Fluor Corporation (since 2011) and TJX Companies, Inc. (since 2007), and is a former director of H&R Block, Inc. (2008-2011). The Board determined that Mr. Bennett should be nominated for election as a Director because of his financial expertise, ranging from internal audit to corporate controller to chief financial officer of a large, public company. He is a certified public accountant and also has chief executive officer experience.
James R. Boyd | |
Age: Director Since: 2006 Halliburton Committees: Audit; Compensation (Chair) |
Mr. Boyd is the retired Chairman of the Board of Arch Coal, Inc. (one of the largest United States coal producers). Mr. Boyd served as a director of Arch Coal, Inc. from 1990 to 2013, and as Chairman of the Board of Arch Coal, Inc. from 1998 to 2006. The Board determined that Mr. Boyd should be nominated for election as a Director because of his experience as a chief executive officer, chairman and lead director of a large company and his career experience in corporate business development, operations, and strategic planning.
Milton Carroll | |
Age: Director Since: 2006 Halliburton Committees: Compensation; Nominating and Corporate Governance |
Mr. Carroll has been the Executive Chairman of the Board of CenterPoint Energy, Inc. (a public utility holding company) since 2013 and Chairman of Health Care Service Corporation (a large health insurance company) since 2002. Mr. Carroll served as the Non-Executive Chairman of the Board of CenterPoint Energy, Inc., from 2002 to 2013. Mr. Carroll is a director of Western Gas Holdings, LLC, the general partner of Western Gas Partners L.P. (since 2008) and LyondellBasell Industries (since 2010). Mr. Carroll served as Chairman of Instrument Products, Inc. (a private oil-tool manufacturing company) (1977-2014) and asis a former director of LRE GP, LLC, the general partner of LRR Energy, L.P. (2011-2014). The Board determined that Mr. Carroll should be nominated for election as a Director because of his public company board experience as an independent director and his knowledge of the oil and natural gas services industry.
HALLIBURTON- | 10 |
Nance K. Dicciani | |
Age: Director Since: 2009 Halliburton Committees: Audit; Health, Safety and Environment |
Ms. Dicciani ishas been the retiredChair of the Board and Interim Co-Principal Executive Officer of AgroFresh Solutions, Inc. since 2016. Ms. Dicciani served as the President and Chief Executive Officer of Honeywell International Specialty Materials (a diversified technology and manufacturing company). Ms. Dicciani served as the President and Chief Executive Officer of Honeywell International Specialty Materials from 2001 to 2008. Ms. Dicciani is a director of Rockwood Holdings, Inc. (since 2008), Praxair, Inc. (since 2008), and LyondellBasell Industries (since 2013), and ArgoFresh Solutions, Inc. (since 2015). Ms. Dicciani is a former director of Rockwood Holdings, Inc. (2008-2014). The Board determined that Ms. Dicciani should be nominated for election as a Director because of her technical expertise in the chemical industry, her international operations expertise, and her executive experience as a chief executive officer of a multi-billion dollar strategic business group of a major multinational corporation.
Murry S. Gerber | |
Age: Director Since: 2012 Halliburton Committees: Audit; Compensation |
Mr. Gerber is the retired Executive Chairman of the Board of EQT Corporation (a leading producer of unconventional natural gas). Mr. Gerber served as the Executive Chairman of the Board of EQT Corporation from 2010 to 2011, the Chairman and Chief Executive Officer of EQT Corporation from 2000 to 2010, and the Chief Executive Officer and President of EQT Corporation from 1998 to 2007. Mr. Gerber is a director of BlackRock, Inc. (since 2000) and United States Steel Corporation (since 2012). The Board determined that Mr. Gerber should be nominated for election as a Director because of his executive leadership skills and his experience with the Marcellus shale and unconventional oil and natural gas basins.
José C. Grubisich | |
Age: Director Since: 2013 Halliburton Committees:Audit; Health, Safety and Environment |
Mr. Grubisich has been the Chief Executive Officer of Eldorado Brasil Celulose (a leader in the world cellulose market) since 2012. Previously, Mr. Grubisich served as President and Chief Executive Officer of ETH Bioenergia S.A. (an integrated producer of ethanol and electricity from biomass) from 2008 to 2012. Mr. Grubisich is a director of Vallourec S.A. (since 2012). The Board determined that Mr. Grubisich should be nominated for election as a Director because of his significant international business experience in Latin America and his executive leadership experience.
Age: Director Since: |
Mr. Jum’ahLesar is our Chairman of the retiredBoard and Chief Executive Officer. He served as our Chairman, President and Chief Executive Officer of Saudi Arabian Oil Company (Saudi Aramco) (the world’s largest producer of crude oil). Mr. Jum’ah was the President and Chief Executive Officer of Saudi Aramco from 19952000 to 2008. Mr. Jum’ah has served as Chairman of the Board of The Saudi Investment Bank since 2013 (Director since 2010). Mr. Jum’ah is a Board member of Economic Cities Authority and Zamil Industries, and is a former Vice Chairman of the International Advisory Board at King Fahd University of Petroleum and Minerals (2007-2009). The Board determined that Mr. Jum’ah should be nominated for election as a Director because of his industry expertise, including significant international business experience in the Eastern Hemisphere, and his executive experience as president and chief executive officer leading the world’s largest producer of crude oil.
Mr. Lesar has been our Chairman of the Board, President and Chief Executive Officer since 2000.2014. Mr. Lesar is a former director of Agrium, Inc. (since 2010)(2010-2015). The Board determined that Mr. Lesar should be nominated for election as a Director because of his industry expertise, financial expertise, and in-depth knowledge of Halliburton and its business.
Robert A. Malone | |
Age: Director Since: 2009 Halliburton Committees: Compensation; Health, Safety and Environment (Chair) |
Mr. Malone has been the Executive Chairman, President and Chief Executive Officer of First Sonora Bancshares, Inc. since 2014. Previously, Mr. Malone served as the President and Chief Executive Officer of The First National Bank of Sonora, Texas (a community bank) since 2009. Previously,bank owned by First Sonora Bancshares, Inc.) from 2009 to 2014. Mr. Malone was thealso an Executive Vice President of BP plc and Chairman of the Board and President, BP America Inc. (one of the nation’s largest producers of oil and natural gas) from 2006 to 2009. Mr. Malone is a directorthe Non-Executive Chairman of the Peabody Energy Company (since 2016) and director (since 2009), and director of Teledyne Technologies Incorporated (since 2015). The Board determined that Mr. Malone should be nominated for election as a Director because of his industry expertise and his executive leadership experience, including crisis management and safety performance.
J. Landis Martin | |
Age: Director Since: 1998 Halliburton Committees: Health, Safety and Environment; Nominating and Corporate Governance |
Mr. Martin is the founder of Platte River Equity (formerly Platte River Ventures, L.L.C.) (a private equity firm) and has served as its Managing Director since 2005. Previously, Mr. Martin was the Chairman, from 1989 to 2005, and Chief Executive Officer, from 1995 to 2005, of Titanium Metals Corporation. Mr. Martin serves as our Lead Independent Director. Mr. Martin is the Lead Director of Apartment Investment and Management Company (Director(director since 1994), the Chairman of Crown Castle International Corporation (since 2002) and Directordirector (since 1999), and the Lead Director of Intrepid Potash, Inc. (since 2008). The Board determined that Mr. Martin should be nominated for election as a Director because of his industry expertise, his executive and board leadership experience, and his knowledge of our operations.
11 |
Jeffrey A. Miller | |
Age: 52 Director Since: 2014 |
Mr. Miller has been our President and a Director since 2014. Mr. Miller was our Executive Vice President and Chief Operating Officer from 2012 to 2014. Mr. Miller also served as Senior Vice President Global Business Development and Marketing from 2011 to 2012. Mr. Miller is a director of Atwood Oceanics, Inc. (since 2013). The Board determined that Mr. Miller should be nominated for election as a Director because of his strong executive experience, and extensive expertise in global operations, business development, and marketing.
Debra L. Reed | |
Age: Director Since: 2001 Halliburton Committees: Compensation; Nominating and Corporate Governance (Chair) |
Ms. Reed has been the Chief Executive Officer of Sempra Energy (an energy infrastructure and regulated holding company) since 2011 and has served as Chairman of the Board of Sempra Energy since 2012. Previously, Ms. Reed was the Executive Vice President of Sempra Energy from 2010 to 2011, and the President and Chief Executive Officer of Southern California Gas Company, and San Diego Gas & Electric Company from 2006 to 2010. Ms. Reed is a director of Caterpillar (since 2015) and is a former director of Avery Dennison Corporation (2009-2011) and of Genentech, Inc. (2005-2009). The Board determined that Ms. Reed should be nominated for election as a Director because of her executive, operational, financial, and administrative expertise, and her experience as an independent director on public company boards.
HALLIBURTON- | 12 |
Directors’ Fees
All non-employee Directors receive an annual retainer of $100,000.$115,000. The Lead Independent Director receives an additional annual retainer of $25,000 and the chairperson of each committee also receives an additional annual retainer annually for serving as chair as follows:
Audit - $20,000; Compensation - $15,000;– $20,000; Health, Safety and Environment - $15,000; and Nominating and Corporate Governance - $15,000. Non-employee Directors are permitted to defer all or part of their fees under the Directors’ Deferred Compensation Plan described below.
Directors’ Equity Awards
Each non-employee Director receives an annual equity award with a value of approximately $160,000 on the date of the award. Prior to 2012, each non-employee Director received an annual equity award consisting of restricted shares of common stock. Beginning in 2012, each non-employee Director receives an annual equity award$185,000 consisting of restricted stock units (RSUs), each of which represents the right to receive a share of common stock at a future date. The actual number of RSUs is determined by dividing $160,000$185,000 by the average of the closing price of our common stock on the NYSE on each business day during the month of July. These annual awards are made on or about the first of August of each year. The value of the award may be more or less than $160,000$185,000 based on the closing price of our common stock on the NYSE on the date of the award in August. Non-employee Directors are permitted to defer all of their RSUs under the Directors’ Deferred Compensation Plan.
Additionally, when a non-employee Director is first elected tojoins the Board, he or she receives an equity award shortly thereafter. Prior to May of 2012, each newly elected non-employee Director received an equity award consisting of 2,000 restricted shares of common stock. Each non-employee Director first elected to the Board after May of 2012 receives an equity awardthereafter of RSUs equal to a pro-rated value of the annual equity award of $160,000.$185,000. The factor used to determine the pro-rated award is the number of whole months of service from the beginning of the month in which the Director is electedBoard service begins to the following first of August divided by 12. The number of RSUs awarded is determined by dividing the pro-rated award amount by the average of the closing price of our common stock on the NYSE on each business day during the month immediately preceding the Director’s election toDirector joining the Board.
Directors may not sell, assign, pledge, otherwise transfer, or encumber restricted shares (which were previously granted to non-employee Directors) or RSUs until the restrictions are removed. Restrictions on RSUs lapse 25% a year over four years of service with the applicable underlying shares of common stock distributed annually to the non-employee Director.Director unless the Director elected to defer receipt of their shares under the Directors’ Deferred Compensation Plan. Except as provided in the next sentence, if a non-employee Director has a separation of service from the Board before completing four years of service since the applicable award date, any unvested RSUs would be forfeited. Restrictions on restricted shares and RSUs lapse following termination of Board service only under specified circumstances, which may include, subject to the Board’s discretion, death or disability, retirement under the Director mandatory retirement policy, or early retirement after at least four years of service.
During the restriction period, Directors have the right to (i) vote restricted shares, but not shares underlying RSUs, and (ii) receive dividends or dividend equivalents in cash on restricted shares and RSUs that are not subject to a deferral election. RSUs that are subject to a deferral election receive dividend equivalents under the Directors’ Deferred Compensation Plan.
Directors’ Deferred Compensation Plan
The Directors’ Deferred Compensation Plan is a non-qualified deferred compensation plan and participation is completely voluntary. Under the plan, non-employee Directors are permitted to defer all or part of their retainer fees and all of the shares of common stock underlying their RSUs when they vest. If a non-employee Director elects to defer retainer fees under the plan, then the Director may elect to have his or her deferred fees accumulate under an interest bearing account or translate on a quarterly basis into Halliburton common stock
equivalent units (SEUs) under a stock equivalents account. If a non-employee Director elects to defer receipt of the shares of common stock underlying his or her RSUs when they vest, then those shares are retained as deferred RSUs under the plan. The interest bearing account is credited quarterly with interest at the prime rate of Citibank, N.A. The stock equivalents account and deferred RSUs are credited quarterly with dividend equivalents based on the same dividend rate as Halliburton common stock and those amounts are translated into additional SEUs or RSUs, respectively.
HALLIBURTON - 2016 Proxy Statement | 13 |
After a Director’s retirement, distributions under the plan are made to the Director in a single distribution or in annual installments over a 5- or 10-year period as elected by the Director. Distributions under the interest bearing account are made in cash, while distributions of SEUs under the stock equivalents account and deferred RSUs are made in shares of Halliburton common stock. Ms. Dicciani, Ms. Reed, and Messrs. Al Khayyal, Bennett, Boyd, Carroll, and CarrollJum’ah have elected to defer all or part of their retainer fees under the plan, and Ms. Dicciani, Ms. Reed, and Messrs. Al Khayyal, Bennett, Boyd, Carroll, Grubisich, Jum’ah, and Martin have elected to defer all of their RSUs under the plan. Mr. Abdallah S. Jum’ah retired from the Board on May 20, 2015.
Directors’ Stock Ownership Requirements
We have stock ownership requirements for all non-employee Directors to further align their interests with our stockholders. As a result, all non-employee Directors are required to own Halliburton common stock in an amount equal to or in excess of the greater of (A) the cash portion of the Director’s annual retainer for the five-year period beginning on the date the Director is first elected to the Board or (B) $500,000. The Nominating and Corporate Governance Committee reviews the holdings of all non-employee Directors, which include restricted shares, other Halliburton common stock, and RSUs owned by the Director, at each May meeting. Each non-employee Director has five years to meet the requirements, measured from the later of September 12, 2011, or the date he or she is first elected to the Board. Each non-employee Director currently meets the stock ownership requirements or is on track to do so within the requisite five-year period.
Director Clawback Policy
In January 2013, we adoptedWe have a clawback policy under which we will seek, in all appropriate cases, to recoup incentive compensation paid to, awarded to, or credited for the benefit of a Director if and to the extent that:
• | it is determined that, in connection with the performance of that Director’s duties, he or she substantially participated in a breach of a fiduciary duty arising from a material violation of a U.S. federal or state law, or recklessly disregarded his or her duty to exercise reasonable oversight; or |
• | the Director is named as a defendant in a law enforcement proceeding for having substantially participated in a breach of a fiduciary duty arising from a material violation of a U.S. federal or state law, the Director disagrees with the allegations relating to the proceeding and either (A) we initiate a review and determine that the alleged action is not indemnifiable or (B) the Director does not prevail at trial, enters into a plea arrangement, agrees to the entry of a final administrative or judicial order imposing sanctions, or otherwise admits to the violation in a legal proceeding. |
Depending on the circumstances described above, the disinterested members of the Board, the disinterested members of the Compensation Committee, and/or the disinterested members of the Nominating and Corporate Governance Committee may be involved in the process of reviewing, considering, and making determinations regarding the Director’s alleged conduct, whether recoupment is appropriate or required, and the type and amount of incentive compensation to be recouped from the Director.
The policy also provides that, to the extent permitted by applicable law and not previously disclosed in a filing with the SEC, we will disclose in our proxy statement the circumstances of any recoupment arising under the policy or that there has not been any recoupment pursuant to the policy for the prior calendar year. There was no recoupment under the policy in 2013.2015.
HALLIBURTON- | 14 |
Charitable Contributions and Other Benefits
Matching Gift Programs
To further our support for charities, Directors may participate in the Halliburton Foundation’s matching gift programs for educational institutions, not-for-profit hospitals, and medical foundations. For each eligible contribution, the Halliburton Foundation makes a contribution of two2.25 times the amount contributed by the Director, subject to approval by its Trustees. The maximum aggregate of all contributions each calendar year by a Director eligible for matching is $50,000, resulting in a maximum aggregate amount contributed annually by the Halliburton Foundation in the form of matching gifts of up to $100,000$112,500 for any Director who participates in the programs. Neither the Halliburton Foundation nor we have made a charitable contribution, within the preceding three years, to any charitable organization in which a Director serves as an employee or an immediate family member of the Director serves as an executive officer that exceeds in any single year the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues.
Accidental Death and Dismemberment
We offer an optional accidental death and dismemberment policy for non-employee Directors for individual coverage or family coverage with a benefit per Director of up to $250,000 and lesser amounts for family members. Ms. Dicciani and Messrs. Carroll, Gerber, and Malone elected individual coverage at a cost of $99 annually. Messrs. Al Khayyal, Grubisich, and Martin elected family coverage at a cost of $159 annually. These premiums are included in the All Other Compensation column of the 20132015 Director Compensation table for those who participate.
HALLIBURTON- | 15 |
20132015 Director Compensation
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||
Abdulaziz F. Al Khayyal | 115,000 | 178,694 | 0 | 3,529 | 297,224 | |||||||||||||||
Alan M. Bennett | 120,000 | 167,215 | 0 | 123,915 | 411,130 | 135,000 | 178,694 | 0 | 152,727 | 466,422 | ||||||||||
James R. Boyd | 115,000 | 167,215 | 0 | 77,375 | 359,590 | 133,063 | 178,694 | 0 | 201,766 | 513,524 | ||||||||||
Milton Carroll | 100,000 | 167,215 | 0 | 25,152 | 292,367 | 115,000 | 178,694 | 0 | 42,105 | 335,799 | ||||||||||
Nance K. Dicciani | 100,000 | 167,215 | 0 | 114,733 | 381,948 | 115,000 | 178,694 | 0 | 139,610 | 433,304 | ||||||||||
Murry S. Gerber | 100,000 | 167,215 | 0 | 104,908 | 372,123 | 115,000 | 178,694 | 0 | 120,328 | 414,022 | ||||||||||
S. Malcolm Gillis(1) | 42,651 | 0 | 0 | 24,144 | 66,795 | |||||||||||||||
José C. Grubisich | 78,056 | 231,502 | 0 | 1,601 | 311,159 | 115,000 | 178,694 | 0 | 7,526 | 301,220 | ||||||||||
Abdallah S. Jum’ah | 100,000 | 167,215 | 0 | 8,579 | 275,794 | 44,547 | 0 | 0 | 13,689 | 58,236 | ||||||||||
Robert A. Malone | 109,437 | 167,215 | 0 | 111,650 | 388,302 | 130,000 | 178,694 | 0 | 129,575 | 438,269 | ||||||||||
J. Landis Martin | 125,000 | 167,215 | 0 | 122,407 | 414,622 | 140,000 | 178,694 | 0 | 148,067 | 466,762 | ||||||||||
Debra L. Reed | 115,000 | 167,215 | 0 | 76,687 | 358,902 | 130,000 | 178,694 | 0 | 155,821 | 464,516 |
(1) |
Fees Earned or Paid In Cash.The amounts in this column represent retainer fees earned in fiscal year 2013,2015, but not necessarily paid in 2013.2015. Refer to the section Directors’ Fees for information on annual retainer fees.
Stock Awards.The amounts in the Stock Awards column reflect the grant date fair value of RSUs awarded in 2013. Accounting Standards Codification (ASC) 718 requires the reporting of the aggregate grant date fair value of equity awards granted to the Director during the fiscal year.2015. We calculate the fair value of equity awards by multiplying the number of RSUs granted by the closing stock price as of the award’s grant date.
The number of restricted shares, RSUs, and SEUs held at December 31, 20132015 by non-employee Directors are:
Name | Restricted Shares | RSUs | SEUs | Restricted Shares | RSUs | SEUs | ||||||
Abdulaziz F. Al Khayyal | 0 | 6,976 | 0 | |||||||||
Alan M. Bennett | 25,236 | 8,984 | 13,972 | 25,236 | 16,422 | 19,136 | ||||||
James R. Boyd | 25,236 | 8,984 | 26,120 | 25,236 | 16,422 | 32,709 | ||||||
Milton Carroll | 20,271 | 8,984 | 21,675 | 20,271 | 16,422 | 24,350 | ||||||
Nance K. Dicciani | 14,843 | 8,984 | 6,506 | 14,843 | 16,422 | 10,733 | ||||||
Murry S. Gerber | 2,000 | 7,557 | — | 2,000 | 9,527 | 0 | ||||||
José C. Grubisich | 0 | 5,267 | — | 0 | 12,593 | 0 | ||||||
Abdallah S. Jum’ah | 9,126 | 8,984 | — | |||||||||
Robert A. Malone | 14,843 | 7,557 | — | 14,843 | 9,527 | 0 | ||||||
J. Landis Martin | 35,162 | 8,984 | — | 35,162 | 16,422 | 0 | ||||||
Debra L. Reed | 33,562 | 8,984 | 10,680 | 33,562 | 16,422 | 13,859 |
Change in Pension Value and Nonqualified Deferred Compensation Earnings.None of the Directors had a change in pension value or nonqualified deferred compensation earnings that represented above market earnings in 2013.2015.
All Other Compensation.This column includes compensation related to the matching gift programs under the Halliburton Foundation, the Accidental Death and Dismemberment program, dividends or dividend equivalents in cash on restricted shares or RSUs, and dividend equivalents associated with the Directors’ Deferred Compensation Plan.
Directors who participated in the matching gift programs under the Halliburton Foundation and the corresponding match provided by the Halliburton Foundation are: Mr. Bennett - $100,000;$112,500; Mr. Boyd - $47,500;$151,875; Ms. Dicciani - $100,000;$112,500; Mr. Gerber - $100,000; Dr. Gillis - $14,000;$112,500; Mr. Malone - $100,000;$112,500; Mr. Martin - $100,000;$112,500; and Ms. Reed - $50,100.$112,500. The amounts reflected indicate matching payments made by the Halliburton Foundation in 2013.2015. Because of differences between the time when the Director makes the charitable contribution and the time when the Halliburton Foundation makes the matching payment, amounts paid by the Halliburton Foundation may apply to contributions made by the Directors in both 2014 and 2015 and the amounts shown may exceed $112,500 in those instances.
Directors who participated in the Accidental Death and Dismemberment program and incurred imputed income for the benefit amount of $99 for individual coverage and $159 for family coverage are: Mr. CarrollAl Khayyal - $159; Mr. Carroll- $99; Ms. Dicciani - $99; Mr. Gerber - $99; Dr. Gillis - $159; Mr. Grubisich - $159; Mr. Malone - $99;-$99; and Mr. Martin - $159.
Directors who received dividends or dividend equivalents in cash on restricted shares or RSUs held on Halliburton record dates are: Mr. Bennett - $13,249;$18,170; Mr. Boyd - $13,249;$18,170; Mr. Carroll - $10,642;$14,595; Ms. Dicciani - $7,793;$10,687; Mr. Gerber - $4,809; Dr. Gillis - $7,190;$7,729; Mr. Jum’ah - $4,791;$3,285; Mr. Malone - $11,551;$16,976; Mr. Martin - $18,460;$25,317; and Ms. Reed - $17,620.$24,165.
Directors who received dividend equivalents attributable to their stock equivalents account under the Directors’ Deferred Compensation Plan are: Mr. Bennett - $6,878;$11,965; Mr. Boyd - $12,838;$21,629; Mr. Carroll - $10,623;$17,319; Ms. Dicciani - $3,053;$6,232; Mr. Jum’ah - $1,919; and Ms. Reed - $5,179.$9,065.
Directors who received dividend equivalents attributable to their deferred RSUs under the Directors’ Deferred Compensation Plan are: Mr. Al Khayyal - $3,370; Mr. Bennett - $3,788;$10,092; Mr. Boyd - $3,788;$10,092; Mr. Carroll - $3,788;$10,092; Ms. Dicciani - $3,788; Dr. Gillis - $2,795;$10,092; Mr. Grubisich - $1,442;$7,367; Mr. Jum’ah - $3,788;$8,485; Mr. Martin - $3,788;$10,092; and Ms. Reed - $3,788.$10,092.
HALLIBURTON- | 16 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers to file reports of holdings and transactions in Halliburton stock with the SEC and the NYSE. Based on our records and other information, we believe that in 20132015 our Directors and our officers who are subject to Section 16 met all applicable filing requirements.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth beneficial ownership information about persons or groups that own or have the right to acquire more than 5% of our common stock, based on information contained in Schedules 13G filed with the SEC.
Amount and | Percent | |||||||
Name and Address | Nature of | of | ||||||
of Beneficial Owner | Beneficial Ownership | Class | ||||||
BlackRock, Inc. | 47,769,977 | (1) | 5.6% | |||||
55 East 52ndStreet, New York, NY 10055 | ||||||||
The Vanguard Group | 50,057,676 | (2) | 5.8% | |||||
100 Vanguard Blvd, Malvern, PA 19355 |
(1) | BlackRock, Inc. is a parent holding company and is deemed to be the beneficial owner of |
(2) | The Vanguard Group is an investment adviser and is deemed to be the beneficial owner of 50,057,676 shares. The Vanguard Group has sole power to vote or to direct the vote of 1,578,317 shares and has sole power to dispose or to direct the disposition of 48,380,904 shares. The Vanguard Group has shared power to vote or to direct the vote of 85,200 shares and has shared power to dispose or to direct the disposition of 1,676,772 shares. |
The following table sets forth information, as of March 6, 2014,11, 2016, regarding the beneficial ownership of our common stock by each Director, each Named Executive Officer, and by all Directors and executive officers as a group.
Amount and Nature of Beneficial Ownership | Amount and Nature of Beneficial Ownership | |||||||||||||||||||||
Name of Beneficial Owner or Number of Persons in Group | Sole Voting and Investment Power(1), (2) | Shared Voting or Investment Power | Percent of Class | Sole Voting and Investment Power(1), (2) | Shared Voting or Investment Power | Percent of Class | ||||||||||||||||
Abdulaziz F. Al Khayyal | 0 | * | ||||||||||||||||||||
Alan M. Bennett | 27,236 | * | 27,236 | * | ||||||||||||||||||
James R. Boyd | 47,236 | * | 47,236 | * | ||||||||||||||||||
James S. Brown | 457,975 | * | 472,868 | * | ||||||||||||||||||
Milton Carroll | 20,271 | * | 20,271 | * | ||||||||||||||||||
Nance K. Dicciani | 19,843 | * | 19,843 | * | ||||||||||||||||||
Christian A. Garcia | 86,373 | * | ||||||||||||||||||||
Murry S. Gerber | 33,318 | * | 41,820 | * | ||||||||||||||||||
José C. Grubisich | 0 | 0 | * | |||||||||||||||||||
Abdallah S. Jum’ah | 9,126 | * | ||||||||||||||||||||
David J. Lesar | 1,394,230 | 18,308 | (3) | * | 1,192,514 | 98,570 | (3) | * | ||||||||||||||
Robert A. Malone | 16,161 | * | 21,248 | * | ||||||||||||||||||
J. Landis Martin | 96,764 | (4) | * | 96,764 | (4) | * | ||||||||||||||||
Mark A. McCollum | 268,121 | * | ||||||||||||||||||||
Jeffrey A. Miller | 282,102 | * | 469,254 | * | ||||||||||||||||||
Joe D. Rainey | 200,220 | * | 312,014 | * | ||||||||||||||||||
Debra L. Reed | 33,562 | 500 | (5) | * | 33,562 | 500 | (5) | * | ||||||||||||||
Shares owned by all current Directors and executive officers as a group (20 persons) | 3,419,161 | * | ||||||||||||||||||||
Shares owned by all current Directors and executive officers as a group (21 persons) | Shares owned by all current Directors and executive officers as a group (21 persons) | 3,915,860 | * |
* | Less than 1% of shares outstanding. |
HALLIBURTON - 2016 Proxy Statement | 17 |
(1) | The table includes shares of common stock eligible for purchase pursuant to outstanding stock options within 60 days of March |
(2) | The table does not include restricted stock units (RSUs) held by non-employee Directors or stock equivalent units (SEUs) held by non-employee Directors under the Directors’ Deferred Compensation Plan for the following (RSUs/SEUs): Mr. Al Khayyal – 6,976 / 0; Mr. Bennett |
(3) | Shares held by Mr. Lesar’s spouse. Mr. Lesar disclaims the beneficial ownership of these shares. |
(4) | Includes 61,602 shares held by Martin Enterprises LLC. Mr. Martin is the sole manager, and Mr. Martin and trusts (of which Mr. Martin is the sole trustee) formed solely for the benefit of his children, are the sole members of Martin Enterprises LLC. |
(5) | Shares held by Ms. Reed’s spouse in an Individual Retirement Account. |
HALLIBURTON- | 18 |
PROPOSAL NO. 2 | RATIFICATION OF THE SELECTION OF AUDITORS |
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work of the principal independent public accountants retained to audit our financial statements. The Audit Committee and Board have approved the appointment of KPMG LLP as our principal independent public accountants to examine our financial statements for the year ending December 31, 2014,2016, and a resolution will be presented at the Annual Meeting to ratify this appointment.
KPMG began serving as our principal independent public accountants for the year ended December 31, 2002. The current appointment was made based on a careful review by the Audit Committee of KPMG’s qualification to continue to serve as independent public accountants for us, including the nature and extent of non-audit services performed by KPMG and other factors required to be considered when assessing KPMG’s independence from Halliburton and its management. In order to assure continued auditor independence, the Audit Committee periodically considers whether there should be a rotation of the principal independent public accountants. Further, in conjunction with the mandated rotation of the firm’s lead engagement partner, the Audit Committee and its Chairman are involved in the process for selecting KPMG’s new lead engagement partner. The Audit Committee and Board believe that the continued retention of KPMG to serve as our principal independent public accountants is in the best interests of Halliburton and our stockholders.
Representatives of KPMG are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions from stockholders.
The affirmative vote of the holders of a majority of the shares of our common stock represented at the Annual Meeting and entitled to vote on the matter is needed to approve the proposal.
If the stockholders do not ratify the selection of KPMG, the Board will reconsider the selection of independent public accountants.
The Board of Directors recommends a vote FOR ratification of the appointment of KPMG LLP as principal independent public accountants to examine our financial statements and books and records for the year ending December 31, 2014.2016.
HALLIBURTON- | 19 |
We operate under a written charter, a copy of which is available on Halliburton’s website,www.halliburton.comwww.halliburton.com.. As required by the charter, we review and reassess the charter annually and recommend any changes to the Board for approval.
Halliburton’s management is responsible for preparing Halliburton’s financial statements and the principal independent public accountants are responsible for auditing those financial statements. The Audit Committee’s role is to provide oversight of management in carrying out management’s responsibility and to appoint, compensate, retain, and oversee the work of the principal independent public accountants. The Audit Committee is not providing any expert or special assurance as to Halliburton’s financial statements or any professional certification as to the principal independent public accountants’ work.
In fulfilling our oversight role for the year ended December 31, 2013,2015, we:
• | reviewed and discussed Halliburton’s audited financial statements with management; |
• | discussed with KPMG LLP, Halliburton’s principal independent public accountants, the matters required by Statement on Auditing Standards No. 61 relating to the conduct of the audit; |
• | received from KPMG the written disclosures and the letter required by the Public Company Accounting Oversight Board regarding KPMG’s independence; and |
• | discussed with KPMG its independence and reviewed other matters required to be considered under Securities and Exchange Commission rules regarding KPMG’s independence. |
Based on our:
• | review of the audited financial statements; |
• | discussions with management; |
• | discussions with KPMG; and |
• | review of KPMG’s written disclosures and letter, |
we recommended to the Board that the audited financial statements be included in Halliburton’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013,2015, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Alan M. Bennett
James R. Boyd
Nance K. Dicciani
Murry S. Gerber
José C. Grubisich
HALLIBURTON- | 20 |
During 20132015 and 2012,2014, we incurred the following fees for services performed by KPMG LLP.
2013 | 2012 | 2015 | 2014 | |||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||
Audit fees | $ | 11.8 | $ | 13.0 | $ | 13.0 | $ | 11.8 | ||||||
Audit-related fees | 0.4 | 0.3 | 0.2 | 0.5 | ||||||||||
Tax fees | 2.6 | 2.1 | 3.6 | 3.7 | ||||||||||
All other fees | 0.1 | 0.4 | ||||||||||||
TOTAL | $ | 14.9 | $ | 15.8 | $ | 16.8 | $ | 16.0 |
Audit Fees
Audit fees represent the aggregate fees for professional services rendered by KPMG for the integrated audit of our annual financial statements for the fiscal years ended December 31, 20132015 and December 31, 2012.2014. Audit fees also include the audits of many of our subsidiaries in regards to compliance with statutory requirements in foreign countries, reviews of our financial statements included in the Forms 10-Q we filed during fiscal years 20132015 and 2012,2014, audits performed in 2015 for businesses we propose to divest in conjunction with the pending Baker Hughes acquisition, and reviews of registration statements.
Audit-Related Fees
Audit-related fees were incurred for assurance and related services that are traditionally performed by the independent auditor. These services primarily include professional services renderedattestation engagements required by KPMG for audits of ourcontractual or regulatory provisions and employee benefit plans.plan audits.
Tax Fees
The aggregate fees for tax services primarily consisted of international tax compliance and tax return services related to our expatriate employees.
All Other Fees
All other In 2015, tax compliance and preparation fees comprise professional services rendered by KPMG related to nonrecurring miscellaneous services.total $2.4 million and tax advisory fees total $1.2 million and in 2014, tax compliance and preparation fees total $2.4 million and tax advisory fees total $1.3 million.
Fee Approval Policies and Procedures
The Audit Committee has established a written policy that requires the approval by the Audit Committee of all services provided by KPMG as the principal independent public accountants that examine our financial statements and books and records and of all audit services provided by other independent public accountants. Prior to engaging KPMG for the annual audit, the Audit Committee reviews a Principal Independent Public Accountants Auditor Services Plan. KPMG then performs services throughout the year as approved by the Committee. KPMG reviews with the Committee, at least quarterly, a projection of KPMG’s fees for the year. Periodically, the Audit Committee approves revisions to the plan if the Committee determines changes are warranted. Our Audit Committee also considered whether KPMG’s provisions of tax services and all other fees as reported above are compatible with maintaining KPMG’s independence as our principal independent public accountants. All of the fees described above for services provided by KPMG to us were approved in accordance with the policy.
HALLIBURTON- | 21 |
PROPOSAL NO. 3 | ADVISORY APPROVAL OF EXECUTIVE COMPENSATION |
Pursuant to Section 14A of the Securities Exchange Act of 1934, our stockholders are being presented with the opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers as disclosed in this proxy statement. As approved by our stockholders at the 2011 Annual Meeting of Stockholders, consistent with our Board’s recommendation, we are submitting this proposal for a non-binding vote on an annual basis.
As described in detail under Compensation Discussion and Analysis, our executive compensation programs are designed to attract, motivate, and retain our named executive officers, who are critical to our success. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value.returns. Please read Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal year 20132015 compensation of our named executive officers.
The Compensation Committee continually reviews the compensation programs for our named executive officers to ensure the programs achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. We believe our executive compensation program achieves the following objectives identified in Compensation Discussion and Analysis:
• | Provide a clear and direct relationship between executive pay and our performance on both a short-term and long-term basis; |
• | Emphasize operating performance drivers; |
• | Link executive pay to measures that drive stockholder |
• | Support our business strategies; and |
• | Maximize the return on our human resource investment. |
We are asking our stockholders to indicate their support for our named executive officers’ compensation as described in this proxy statement and ask that our stockholders vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to Halliburton’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.”
The say-on-pay vote is advisory and, therefore, not binding on us, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our stockholders. To the extent there is any significant vote against the named executive officers’ compensation as disclosed in this proxy statement, the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends a vote FOR the approval, on an advisory basis, of the compensation of our named executive officers.
HALLIBURTON- | 22 |
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this Compensation Discussion and Analysis, we review the objectives and elements of Halliburton’s executive compensation program and discuss the 20132015 compensation earned by our Named Executive Officers, or NEOs.
For 2013,2015, our NEOs were:
Name | Age | Occupation | Since | Age | Occupation | Since | ||||||
David J. Lesar | 60 | Chairman of the Board, President and Chief Executive Officer | 2000 | 62 | Chairman of the Board and Chief Executive Officer | 2000 | ||||||
Mark A. McCollum | 55 | Executive Vice President and Chief Financial Officer | 2008 | |||||||||
Christian A. Garcia | 52 | Senior Vice President, Finance and Acting Chief Financial Officer | 2015 | |||||||||
James S. Brown | 59 | President - Western Hemisphere | 2008 | 61 | President - Western Hemisphere | 2008 | ||||||
Jeffrey A. Miller | 50 | Executive Vice President and Chief Operating Officer | 2012 | 52 | President | 2012 | ||||||
Joe D. Rainey | 59 | President - Eastern Hemisphere | 2011 | 59 | President - Eastern Hemisphere | 2011 |
2013 Financial Highlights2015 Overview
• | We |
• | We |
• | |
• | In |
During 2013, we grewWe experienced a decline in revenue and operating income during 2015, as compared to 2014, as a result of the depressed crude oil pricing environment and its corresponding negative impact on activity levels and pricing for our revenue to a new record of $29.4 billion, which increased $0.9 billion, or 3%, from 2012, mainly due to increased activityproducts and services. The industry experienced an unprecedented decline in all of our international regions and the Gulf of Mexico. We set new revenue records this year in all of our international regions and in both of our divisions. Additionally, during 2013, our revenue outside of North America comprised 48%stimulation activity during 2015, which significantly impacted our financial results. From its peak in November 2014 through December 31, 2015, the United States land rig count declined approximately 64%, which in turn has resulted in pricing pressure across the services industry.
While we generated $23.6 billion of consolidated revenue. The percentagerevenue during 2015, a 28% decrease from the $32.9 billion of revenue generated in 2014, we outperformed our revenue that relatespeer group in North America and internationally. We reported an operating loss of $165 million in 2015, as compared to our international operations has been steadily increasing and is representative of our ongoing strategy to grow our international business and balance our geographic mix. Our 2013 operating income of $3.1$5.1 billion in 2014. This decrease was due to a decline in activity and pricing in most of our product services lines, particularly stimulation activity in the United States land market, as well as our company-wide cost mitigation activities for which reflects an operating marginwe recorded $2.2 billion of 11%, was negatively impacted byimpairments and other charges during 2015. These charges were recorded primarily as a $1.0 billion, pre-tax, Macondo-related loss contingency.result of the downturn in the energy market, and consisted of equipment write-offs, asset impairments, expenses and write-downs related to idle equipment, impairments of intangible assets, inventory write-downs, severance costs, country and facility closures, and other items. We took actions to reduce our cost structure, including a global headcount reduction of approximately 25% during 2015, to help mitigate the current market conditions that we are experiencing. We will continue to take further actions as required to adjust to market conditions. While the intensity and duration of the current market downturn is uncertain, we are continuing to execute on our two-pronged strategy in the downturn. The first part is to control what we can control in the short term, and the second is to look beyond the cycle and prepare for the recovery. We continue to believe in the strength of the long-term fundamentals of our business.
Total Revenue (Indexed)
1Q11In March 2015, Halliburton and Baker Hughes Incorporated received stockholder approval for Halliburton’s proposal to 4Q13
issue shares of common stock as outlined in the merger agreement to purchase Baker Hughes. We have worked with the United States Department of Justice, European Commission and other competition enforcement authorities related to the acquisition to obtain approval of the transaction. In December 2015, the timing agreement with the Department of Justice expired without reaching an agreement and both companies have agreed to extend the time period for closing the transaction to no later than April 30, 2016. If review by the relevant competition authorities extends beyond April 30, 2016, the merger agreement does not terminate automatically; the parties may continue to seek relevant regulatory approvals or either of the parties may terminate the merger agreement.
HALLIBURTON - | 23 |
In November 2015, we issued $7.5 billion aggregate principal amount of senior notes. We intend to use the net proceeds of the offering for general corporate purposes, including financing a portion of the cash consideration component of our pending acquisition of Baker Hughes.
Results of 20132015 Advisory Vote on Executive Compensation
In accordance with our stockholdersstockholders’ preference, we submit our executive compensation program to an advisory vote annually. In 2013,2015, our compensation program received the support of 92%72% of the total votes cast at our annual meeting. Following the annual meeting, members of our executive management team met with a number of our large stockholders and discussed their concerns about our executive compensation program.
The Compensation Committee determined that based on the feedback from our stockholders and the reduced support for our say on pay in 2015 as compared to 2014, we needed to make certain changes to our executive compensation program as well as provide our stockholders a better understanding of the framework and rationale for compensation decisions. Accordingly, we are:
• | Providing a new section in Compensation Discussion and Analysis, Pay-For-Performance Analysis; and |
• | Increasing the level of disclosure with regard to our target setting, metric selection rationale, and the associated payout calculation under our short- and long-term incentive plans. |
We have also modified our long-term incentive mix to more heavily weight it towards performance units. Our Performance Unit Program now makes up 50% of total long-term incentives for our NEOs. The Committee believes that our compensation program closely aligns the interests of the company management with our stockholders’ interests. The positive results of the advisory vote on executive compensation held at the 2013 annual meeting reinforces this. The Committee determined, therefore, that no changes to the compensation program were necessary.
Halliburton’s Executive Compensation Objectives and Practices
Our executive compensation program is designed to achieve the following objectives:
• | Provide a clear and direct relationship between executive pay and our performance on both a short-term and long-term basis; |
• | Emphasize operating performance drivers; |
• | Link executive pay to measures that drive stockholder |
• | Support our business strategies; and |
• | Maximize the return on our human resource investment. |
These objectives serve to assure our long-term success and are built on the following compensation principles:
• | Executive compensation is managed from a total compensation perspective |
• | Each component of the total compensation package is analyzed in order to determine that compensation opportunities for our NEOs are competitive and market-driven. |
• | All elements of compensation are compared to the total compensation packages of a comparator peer group, which includes both competitors and companies representing general industry that reflect the markets in which we compete for business and people. |
HALLIBURTON - 2016 Proxy Statement | 24 |
Summary of our Executive Compensation Practices
Compensation Practice | Pursued at Halliburton? | More information | ||
Pay for performance | YES.The majority of our NEO compensation is performance based. | p28 | ||
Alignment between long-term objectives and thecreation of stockholder value | YES.Long-term incentives are at-risk and reward the achievement of value creation andperformance goals while aligning management with stockholders’ interests. | |||
Benchmarking against a relevant peer group | YES.The Compensation Committee reviews market data for peer group companies as wellas general industry surveys. | |||
Independent, External Compensation Consultant | YES.Pearl Meyer & Partners provides executive compensation consulting services to theCommittee. | |||
Stock Ownership Requirements | YES.Robust executive and director stock ownership requirements. | p14 and | ||
Hedging and Pledging Policy | YES.Executives and directors are prohibited from hedging and pledging company stock,except for charitable donation purposes. | p36 | ||
Clawback Policy | YES.Our policy provides for the forfeiture, recovery, or reimbursement of incentive planawards. We also will report to stockholders if any clawback occurred. | p14 and | ||
Annual “Say on Pay” vote | YES.Support of | |||
Repricing of underwater stock options | NO.We prohibit repricing. | |||
Exchange underwater options | NO.We prohibit the buyout or exchange of underwater options. | |||
NO.We prohibit liberal stock and option recycling. | ||||
Excise-tax gross-ups | NO.We do not provide for excise tax gross-ups. | |||
Guaranteed bonuses or uncapped incentives | NO.We do not provide guaranteed bonuses or uncapped incentives. |
Elements of our Executive Compensation Program for Fiscal 20132015
Halliburton’s executive compensation program is composed of base salary, short-term incentives, and long-term incentives, each of which is described below:
HALLIBURTON - 2016 Proxy Statement | 25 |
As illustrated below, the majority of our CEO’s and NEO’sNEOs’ total direct compensation opportunity is performance-based, at-risk, and long-term. The graphs depict the mix of total direct compensation set for our NEOs during 20132015 and assumes plan performance levels are achieved.
Executive Compensation Procedures
Our compensation procedures guide the actions taken by the Compensation Committee, or Committee. This ensures consistency from year to year and adherence to the responsibilities listed in the Committee’s Charter. The Committee reviews and approves total compensation annually, which includes:
• | Selecting and engaging an independent, external compensation consultant; |
• | Identifying the comparator peer group companies; |
• | Reviewing market data on benchmark positions; and |
• | Reviewing performance results against operating plans and our comparator peer group. |
These procedures are used to make the final determination of total compensation for our NEOs.
Our internal stock nomination process under the Halliburton Company Stock and Incentive Plan, or the Stock and Incentive Plan, ensures
that all award grant dates are prospective and not retroactive. For NEOs, the grant date is the day the Committee determines annual compensation actions, generally in December of each year. However, awards may be approved by the Committee throughout the year as they determine, such as for retention or performance purposes. Exercise prices are set at the closing stock price on the date of the approved grant.
Role of the CEO in Setting Compensation
Mr. Lesar does not provide recommendations concerning his own compensation, nor is he present when his compensation is discussed by the Committee. The Committee, with input from its independent, external compensation consultant, discusses the elements of his compensation in executive session and makes a recommendation to all of the non-employee members of the Board for discussion and final approval. At the Committee’s request, a member of our management team may attend the executive session to answer questions from the Committee.
Mr. Lesar does, however, assist the Committee in setting executive compensation for the other NEOs. He and the independent, external compensation consultant to the Committee are guided by our compensation principles. They also consider current business conditions.
The following recommendations are made to the Committee for each NEO:
• | Base salary adjustments, taking into account comparator peer group data, and the NEO’s individual performance and role within the company. |
• | Performance measures, target goals, and award schedules for short-term incentive opportunities under our performance pay plan, with performance targets being set relative to the projected business cycle and business plan. |
• | Long-term incentive awards made under the Stock and Incentive Plan, including developing and providing specific recommendations to the Committee on the aggregate number and types of shares to be awarded annually, reviewing the rationale and guidelines for annual stock awards, and recommending changes to the grant types, when appropriate. |
• | Retirement awards, which are calculated by an external actuary, under the Halliburton Company Supplemental Executive Retirement Plan. |
HALLIBURTON- 2016 Proxy Statement | 26 |
Use of Independent Consultants and Advisors
The Committee engaged Pearl Meyer & Partners, or PM&P, as its independent, external compensation consultant during 2013.2015. PM&P provides only executive compensation consulting services to the Committee. In 2013, PM&P also provided industry related compensation survey dataCommittee and does not provide any other services to us, the fees for which were less than $5,000.us. The primary responsibilities of the independent, external compensation consultant were to:
• | Provide the Committee with independent and objective market data; |
• | Conduct compensation analysis; |
• | Recommend potential changes to the comparator peer group; |
• | Recommend plan design changes; |
• | Advise on risks associated with compensation plans; and |
• | Review and advise on pay programs and pay levels. |
These services are provided as requested by the Committee throughout the year.
Executive Compensation Benchmarking
The companies comprising the comparator peer group are selected based on the following considerations:
• | Market capitalization; |
• | Revenue and number of employees; |
• | Scope in terms of global impact and reach; and |
• | Industry affiliation. |
Industry affiliation includes companies that are involved in the oil and natural gas and energy services industries. The comparator peer group is reviewed annually by the Committee to ensure relevance, with data provided to the Committee by the independent, external compensation consultant. The Committee targets between 20 and 25 companies for our comparator peer group.
Comparator Peer Group
The 20132015 comparator peer group was composed of specific peer companies within the energy industry as well as selected companies representing general industry. This peer group was utilized to determine market levels of total compensation for the 20132015 calendar year.
The comparator peer group used for our 20132015 compensation review, which remains unchangedchanged slightly from the comparator peer group used for our 20122014 compensation review,review. To modestly adjust the size of the comparator peer group for 2015 so that we were closer to the median in terms of revenue and market capitalization, the Committee removed Murphy Oil Corporation.
Our 2015 comparator peer group consisted of the following companies:
• | 3M Company |
• | Anadarko Petroleum Corporation |
• | Apache Corporation |
• | Baker Hughes Incorporated |
• | Caterpillar Inc. |
• | ConocoPhillips |
• | Deere and Company |
• | Emerson Electric Co. |
• | Fluor |
• | Hess Corporation |
• | Honeywell International Inc. |
• | Johnson Controls, Inc. |
• | National Oilwell Varco, Inc. |
• | Occidental Petroleum Corporation |
• | Raytheon Co. |
• | Schlumberger Ltd. |
• | Transocean Ltd. |
• | Weatherford International, Ltd. |
HALLIBURTON- 2016 Proxy Statement | 27 |
A slightly different comparator peer group is utilized for the 2013 cycle Performance Unit Program and is described in theLong-term Incentives—Performance Unitssection.
Analysis of Market Data
The market data is size adjusted by revenue as necessary so that it is comparable with our trailing 12 month revenue. We size adjust the total compensation benchmarking data because of variances in market capitalization and revenue size among the companies comprising our comparator peer group. These adjusted values are used as the basis of comparison of compensation between our executives and those of the comparator peer group.
Total executive compensation for each NEO is structured to target market competitive pay levels in base salary and short- and long-term incentive opportunities. We also place an emphasis on variable pay at risk, which enables this compensation structure to position actual pay above or below the 50thpercentile of our comparator peer group depending on performance.
A consistent pre-tax, present value methodology is used in assessing stock-based and other long-term incentive awards, including the Black-Scholes model used to value stock option grants.
The independent, external compensation consultant gathers and performs an analysis of market data for each NEO, comparing each of their individual components of compensation as well as total compensation to that of the comparator peer group. This competitive analysis consists of market data comparing each of the pay elements and total compensation at the 25th, 50th, and 75thpercentiles of the comparator peer group to current compensation for each of the NEOs.
Pay for Performance Analysis
As part of the Compensation Committee’s review of our executive compensation program, the Committee reviews a one- and three-year pay for performance analysis against our comparator peer group. The review examines the degree of alignment between our CEO’s realizable compensation relative to the realizable compensation of CEOs in our comparator peer group and our Return on Capital Employed, or ROCE, compared to the ROCE of our comparator peer group. ROCE is calculated as follows:
ROCE | = | Net income + after-tax interest expense | |
Stockholders’ equity (average of beginning and end of period) + Debt | |||
(average of beginning and end of period) |
Total realizable compensation consisted of the following:
• | base salary paid; |
• | cash incentive payouts; |
• | In-the-money value of stock options grants during the one- or three-year period valued as of December 31, 2014; |
• | face value of restricted stock grants during the one- or three-year period valued as of the December 31, 2014; and |
• | for performance based awards, (i) target value for awards still outstanding as of December 31, 2014 and (ii) realized value for performance periods beginning and ending within the one- or three-year period. |
This analysis demonstrated the following for the period ending December 31, 2014:
One-Year HAL Performance | One-Year HAL Total Realizable Compensation | ||
ROCE: | 89thpercentile | CEO: | 89thpercentile |
Three-Year HAL Performance | Three-Year HAL Total Realizable Compensation | ||
ROCE: | 84thpercentile | CEO: | 68thpercentile |
Based on the foregoing analysis, the Committee determined that our pay and performance are appropriately aligned.
The Committee selected ROCE for this analysis because we believe it is the best indicator of long-term Company performance, while reinforcing the Company’s objective for sustained long-term performance and value creation. ROCE measures Company profitability as well as the efficiency by which we deploy capital. It is also a measure that is tracked and understood by our stockholders. The Compensation Committee believes that tying a part of our NEOs long-term incentive opportunity to the achievement of challenging ROCE targets will help to increase revenue and improve margins and maintain focus on cost control. We chose ROCE as a performance measure rather than total shareholder return, or TSR, due to the cyclical nature of our business and because we believe ROCE has a greater line of sight from our management team to impact our financial results.
HALLIBURTON- 2016 Proxy Statement | 28 |
Integration of Compensation Components, Plan Design, and Decision-Making
The Committee considers all elements of the executive compensation package for each NEO for the upcoming year in December. The Committee receives historical and prospective breakdowns of the total compensation components for each NEO as follows:
• | Individual two-year total compensation history, which includes base salary, short- and long-term incentives, and other benefits and |
• | Total company-awarded stock position, including vested and unvested awards; |
• | Detailed supplemental retirement award calculations; and |
• | The market analysis prepared by the independent, external compensation consultant. |
The Committee also reviews our pay versus performance as well as the results of the advisory vote on executive compensation held at the prior year’s annual meeting and considers those results, along with many other factors, when evaluating our executive compensation program. Because 92% of our stockholders voting at our Annual Meeting approved the compensation paid to our executives as described in the 2013 proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, and because the Committee believes that our compensation program aligns our executive compensation structure with our stockholders’ interests and current market practices, the Committee did not implement any changes to our executive compensation program for 2014.results.
In making compensation decisions, each of the following compensation elements is reviewed separately and collectively:
• | Base salary; |
• | Short-term (annual) incentives; |
• | Long-term incentives; and |
• | Supplemental executive retirement benefits. |
Of these elements, all but base salary are variable and at risk of forfeiture. The Committee uses base salary as the primary reference point for determining the target value and actual value of each of the above elements of compensation, individually and in the aggregate, for each NEO. This assists the Committee in confirming that our compensation package for NEOs is appropriate and competitive to our comparator peer group.
The Committee then considers the following when making final compensation determinations:
• | How compensation elements serve to appropriately motivate and reward each NEO; |
• | Competitively positioning each NEO’s total compensation to retain their services; |
• | Individual NEO performance in reaching financial and operational objectives; |
• | Sustained levels of performance, future potential, time in position, and years of service; and |
• | Other factors including operational or functional goals as the Committee determines are appropriate. |
These factors are considered on an unweighted basis in making final pay decisions and to ensure internal equity among positions having similar scope and responsibility.
After considering these factors, the Committee then sets the final compensation opportunity for each NEO so that their actual total compensation is consistent with our executive compensation philosophy of paying at the 50thpercentile or higher for those years of superior performance and paying below the 50thpercentile when performance does not meet competitive standards.
The procedures used to set compensation for each of the NEOs are the same. Variations do exist in the amounts of compensation among the NEOs as a result of each NEO’s position and corresponding scope of responsibility, individual performance, length of time in the role, and differences in the competitive market pay levels for their positions.
Generally, in years when we achieve financial results substantially above or below expectations, actual compensation may fall outside the initial targets established by the Committee.
Determination of CEO and NEO Target Total Compensation
When determining target total compensation for Mr. Lesar, the Committee takes into consideration competitive market pay levels for the CEOs in the comparator peer group. They also consider Mr. Lesar’s performance and accomplishments in the areas of business development and expansion, management succession, development and retention of management, ethical leadership, and the achievement of financial and operational objectives.
Each year, Mr. Lesar and the members of the Board agree upon a set of objectives addressing the following areas specified in our corporate governance guidelines:
• | Leadership and vision; |
• | Integrity; |
• | Keeping the Board informed on matters affecting Halliburton and its operating units; |
• | Performance of the business; |
• | |
Accomplishment of strategic objectives; and | |
• | Development of management. |
The Board determined that Mr. Lesar met these objectives in 20132015 through the following achievements:
• | Halliburton and its business units maintained superior relative performance against major competitors in terms of revenue |
• | Led the organization through the business cycle through effective stakeholder |
HALLIBURTON - 2016 Proxy Statement | 29 |
• | Maintained unwavering commitment to our Health, Safety and Environment program. For the third consecutive year, Dow Jones Sustainability Index recognized Halliburton as best in class as it relates to the environment (leadership and vision); |
• | Continued |
• | Maintained unwavering commitment to our Code of Business Conduct and continued to act in a role model capacity as it relates to ethical behavior (integrity); |
• | Communicated regularly with the members of the Board providing status reports and notification of issues of concern and provided unfettered access to management and subject matter experts (keeping the Board informed); and |
• | Continued to work toward the closing of the pending Baker Hughes acquisition, including finalizing all regulatory filings, completing the divestiture proposals, and preparing for integration activities (accomplishment of strategic objectives). |
Other NEO compensation is determined similar to that of the CEO by evaluating each NEO’s performance and considering the market competitive pay levels of the comparator peer group for the NEO’s position.
Base Salary
The Committee generally targets base salaries at the median of the comparator peer group; however, the Committee also considers the following factors when setting base salary:
• | Level of responsibility; |
• | Experience in current role and equitable compensation relationships among internal peers; |
• | Performance and leadership; and |
• | External factors involving competitive positioning, general economic conditions, and marketplace compensation trends. |
No specific formula is applied to determine the weight of each factor. Salary reviews are conducted annually to evaluate each executive; however, individual salaries are not necessarily adjusted each year.
As a result of increases in base salary in our comparator peer group and, in the case of Mr. Miller, to recognize his September 2012 promotion to Executive Vice President and Chief Operating Officer, theThe Committee approved the following base salary increases for 2013:salaries effective January 1, 2015:
2012 | 2013 | 2014 | 2015 | |||||||||||||||||||||
NEO | Salary | Salary | % Increase | Salary | Salary | % Increase | ||||||||||||||||||
Mr. Lesar | $ | 1,530,000 | $ | 1,630,000 | 6.5 | % | $ | 1,630,000 | $ | 1,750,000 | 7.4% | |||||||||||||
Mr. McCollum | $ | 661,000 | $ | 732,000 | 10.7 | % | ||||||||||||||||||
Mr. Garcia(1) | $ | 380,000 | $ | 450,000 | 18.4% | |||||||||||||||||||
Mr. Brown | $ | 633,000 | $ | 788,000 | 24.5 | % | $ | 820,000 | $ | 900,000 | 9.8% | |||||||||||||
Mr. Miller | $ | 425,000 | $ | 800,000 | 88.2 | % | $ | 1,000,000 | $ | 1,000,000 | 0% | |||||||||||||
Mr. Rainey | $ | 550,000 | $ | 788,000 | 43.3 | % | $ | 788,000 | $ | 835,000 | 6.0% |
(1) | The salary increase was in recognition of Mr. Garcia’s promotion to Senior Vice President of Finance, and Acting Chief Financial Officer. |
(2) | Mr. Miller did not receive a salary increase on January 1, 2015 as his salary was determined to be aligned with the market. |
As a result ofIn an effort to help manage fixed costs during the changes shown above,downturn, all our NEOs averaged slightlytook a voluntary reduction in base salary on April 1, 2015. Mr. Lesar took a 6.9% reduction in his base salary and all other NEO’s took a 3% reduction. The column 2015 Salary above the market median as provided by our independent, external compensation consultant, PM&P.does not reflect these salary reductions.
HALLIBURTON - 2016 Proxy Statement | 30 |
Short-TermShort-term (Annual) Incentives
The Committee established the Annual Performance Pay Plan to:
• | Reward executives and other key members of management for improving financial results that drive the creation of economic value for our stockholders; and |
• | Provide a means to connect individual cash compensation directly to our performance. |
The Annual Performance Pay Plan provides for performance awards in accordance with the terms of the Stock and Incentive Plan.
The Annual Performance Pay Plan provides an incentive to our NEOs to achieve the business objective of generating more earnings than normally expected by the investors who have provided us with capital to grow our business. We measure achievement of this objective using Cash Value Added, or CVA.
CVA is a financial measurement that demonstrates the amount of economic value added to our business. The formula for calculating CVA is as follows:
Operating Income
+ Interest Income | |
+ Foreign Currency Gains (Losses) | |
+ Other Nonoperating Income (Expense), Net | |
= | Net Operating Profit |
– Income Taxes | |
= | Net Operating Profit After Taxes |
Net Invested Capital | |
x Weighted Average Cost of Capital | |
= | Capital Charge |
Cash Value Added (CVA) = Net Operating Profit After Taxes - Capital Charge
Net Operating Profit After Taxes equals the sum of operating income plus interest income plus foreign currency gains (losses) plus other nonoperating income (expense), reduced by our income taxes. When determining actual CVA performance, we apply our effective income tax rate.
Capital Charge equals total assets (excluding deferred income tax assets) less total liabilities (excluding debt and deferred income tax liabilities) multiplied by a weighted average cost of capital percentage.
Cash Value Added is computed monthly and accumulated throughout the calendar year. Adjustments in the calculation of the CVA payout may, at times, be approved by the Committee and can include the treatment of unusual items that may have impacted our actual results.
At the beginning of each plan year, the Committee approves an incentive award schedule that equates given levels of CVA performance with varying reward opportunities paid in cash. The performance goals range from “Threshold” to “Target” to “Maximum.” Threshold reflects the minimum CVA performance level which must be achieved in order for awards to be earned and Maximum reflects the maximum level that can be earned.
These goals are based on our annual operating plan, as reviewed and approved by our Board, and are set at levels believed to be sufficient to meet or exceed stockholder expectations of our performance, as well as expectations of the relative performance to our competitors.
Given the cyclical nature of our business, our performance goals vary from year to year, which can similarly impact the difficulty in achieving these goals.
The Committee set the 20132015 performance goals for our NEOs based on company-wide consolidated CVA results, specifying when these goals were set that the impact of any Macondo well incident related charges would be excluded from the CVA calculation.results. Threshold CVA was based on 89%90% of planned operating income, Target CVA on 100% of planned operating income, and Maximum CVA on 111%110% of planned operating income.
The Committee set the 2015 performance levels for our NEOs based on the company-wide consolidated CVA targetsresults:
Metric | Threshold | Target | Maximum | Actual | |||||||||||||
CVA | -$892 M | -$692 M | -$492 M | -$1,118 M |
Because the 2015 CVA actual results were below Threshold, our NEOs did not receive a CVA payout.
The Compensation Committee has selected CVA as the sole measure upon which to base our short-term incentive program because it is a key measure on which we set our performance expectations for 2013 were $185 million at Threshold, $494 million at Target,the year and $802 million at Maximum. Actualwe believe that CVA is a proven driver of value creation for 2013 was $630 million.stockholders of the Company.
The Compensation Committee considers other business performance factors, including health, safety, and environment and service quality, in determining the final payout amounts under the Annual Performance Pay Plan.
Individual incentive award opportunities are established as a percentage of base salary at the beginning of the plan year. The maximum amount a NEO can receive is limited to two times the target opportunity level. The level of achievement of annual CVA performance determines the dollar amount of incentive compensation payable to participants following completion of the plan year.
HALLIBURTON - 2016 Proxy Statement | 31 |
The Committee set incentive award opportunities under the plan as follows:
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||
NEO | Opportunity | Opportunity | Opportunity | Opportunity | Opportunity | Opportunity | ||||||||||||
Mr. Lesar | 60% | 150% | 300% | 60% | 150% | 300% | ||||||||||||
Mr. McCollum | 36% | 90% | 180% | |||||||||||||||
Mr. Garcia | 30% | 75% | 150% | |||||||||||||||
Mr. Brown | 40% | 100% | 200% | 44% | 110% | 220% | ||||||||||||
Mr. Miller | 40% | 100% | 200% | 50% | 125% | 250% | ||||||||||||
Mr. Rainey | 40% | 100% | 200% | 44% | 110% | 220% |
Threshold, Target, and Maximum opportunity dollar amounts can be found in the Grants of Plan-Based Awards in Fiscal 20132015 table.
Over the past ten years, the Annual Performance Pay Plan achieved Maximum performance levels sixfive times, achieved Target performance level two times, and fell short of the Threshold performance level twothree times.
Long-TermLong-term Incentives
The Committee established the Stock and Incentive Plan to achieve the following objectives:
• | Reward consistent achievement of value creation and operating performance goals; |
• | Align management with stockholder interests; and |
• | Encourage long-term perspectives and commitment. |
Our Stock and Incentive Plan provides for a variety of cash and stock-based awards, including nonqualified and incentive stock options, restricted stock and units, performance shares and units, stock appreciation rights, and stock value equivalents. Under the Stock and Incentive Plan, the Committee may, at its discretion, select from among these types of awards to establish individual long-term incentive awards.
Long-term incentives represent the largest component of total executive compensation opportunity. We believe this at-risk based compensation ties executive pay closely to stockholders’ interests.
For 2013,2015, we used a combination of long-term incentive vehicles, including time-based restricted stock or restricted stock units, performance units, and nonqualified stock options. Except where there is a distinction to make between restricted stock and restricted stock units, this Compensation Discussion and Analysis refers to both restricted stock and restricted stock units as “restricted stock”. Operations-basedIn response to stockholder feedback, we modified our long-term incentive mix from 40% performance units, 40% restricted stock, and 20% stock options to weight it more heavily towards performance units. In 2015, our operations-based incentives in the form of performance units were targeted 40%to 50% of the long-term incentive value, another 40%35% was delivered through restricted stock, and the remaining 20%15% was delivered in stock options.
Using a mix of incentives allows us to provide a diversified yet balanced long-term incentive program that effectively addresses volatility in our industry and in the stock market, in addition to maintaining an incentive to meet performance goals. Value to be earned by a NEO from stock options and restricted stock are directly tied to our stock price performance and, therefore, directly to stockholder value. Additionally, restricted stock provides a significant retention incentive
while the 2013 cycle Performance Unit Program motivates the NEOs to also focus on improving long-term returns on capital employed, measured on both absolute and relative bases. Because of the pending acquisition of Baker Hughes Incorporated, the Committee decided to modify the Performance Unit Program for the 2015 cycle, as described in the 2015 Cycle Performance Unit Program Opportunities for NEOs section below.
In determining the size of long-term incentive awards, the Committee first considers market data for comparable positions and then may adjust the awards upwards or downwards based on the Committee’s review of internal equity. This can result in positions of similar magnitude and pay receiving awards of varying size. The 20132015 restricted stock and stock option awards for each NEO were based primarily on market data and were targeted atto the 75thpercentile of our comparator peer group to recognize our NEOs for delivering strong performance in 2013.market median.
Restricted Stock and Stock Options
Our restricted stock and stock option awards are granted under the Stock and Incentive Plan and are listed in the Grants of Plan-Based Awards in Fiscal 20132015 table.
Restricted stock grants are generally subject to a graded vesting schedule of 20% per year over five years. However, different vesting schedules may be utilized at the discretion of the Committee. Shares of restricted stock receive dividend or dividend equivalent payments.
Stock option awards vest over a three-year graded vesting period with 33 ⅓% 1/3%of the grant vesting each year. All options are priced at the closing stock price on the date the grant is approved by the Committee.
The stock and option award columns in the Summary Compensation Table reflect the aggregate grant date fair value of the restricted stock and option awards for each NEO.
HALLIBURTON - 2016 Proxy Statement | 32 |
2013 Cycle Performance UnitsUnit Program Payout for NEOs
The 2013 cycle Performance Unit Program provides NEOs and other selected executives with incentive opportunities based on our consolidated Return on Capital Employed, or ROCE, during a three-year performance periods.period. This program reinforces our objectives for sustained long-term performance and value creation. It also reinforces strategic planning processes and balances short- and long-term decision making.
The program measures ROCE on both an absolute and a relative basis to the results of our comparator peer group companies used for the Performance Unit Program. The three-year performance period aligns this measurement with our and our comparator peer group’s business cycles.
ROCE indicates the efficiency and profitability of our capital investments and is determined based on the ratio of earnings divided by average capital employed. The calculationformula for ROCE is as follows:set forth in the Pay for Performance Analysis section.
The comparator peer group used for the Performance Unit Program is comprised of oilfield equipment and service companies and domestic and international exploration and production companies. This comparator peer group is used for the Performance Unit Program because these companies represent the timing, cyclicality, and volatility of the oil and natural gas industry and provide an appropriate industry group to measure our relative performance against.
The This comparator peer group as disclosed in our 2014 proxy statement was used for the 2013 cycle of the Performance Unit Program.
The 2013 cycle of the Performance Unit Program ended on December 31, 2015. Both the absolute and relative performance measures established at the beginning of the cycle were approved by the Committee. The Committee decided to exclude any Baker Hughes acquisition and integration related expenses from the calculation because the transaction and the associated costs were not anticipated when the targets were initially set in February 2013. The 2013 cycle of the Performance Unit Program yielded an award paid at 125% of the target opportunity level as shown in the table below.
2013 Cycle - Performance Matrix
HAL 3-Year Average ROCE | % of Target Incentive Paid | |||||||||||||||
Above 13% | 75% | 100% | 150% | 200% | ||||||||||||
11% to 13% | 50% | 75% | 125% | 150% | ||||||||||||
9% to < 11% | 0% | 50% | 100% | 125% | ||||||||||||
Below 9% | 0% | 0% | 50% | 75% | ||||||||||||
Absolute↑ | Less than | 25thto | 50thto | Above 75th | ||||||||||||
25th | 49th | 75th | Percentile | |||||||||||||
Percentile | Percentile | Percentile |
While we achieved average ROCE of 9.09% for the three-year period ending December 31, 2015, which was top quartile performance relative to our performance peers, the ROCE performance as measured on an absolute basis was below the target level of 11%.
The NEOs received these payments in 2016 as set forth in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table and in the related narrative following the table.
The program allows for rewards to be paid in cash, stock, or a combination of cash and stock. Over the past ten years, the program has achieved maximum performance levels six times and between maximum and target four times.
2015 Cycle Performance Unit Program Opportunities for NEOs
In anticipation of the pending Baker Hughes acquisition, the Committee modified the 2015 cycle of the Performance Unit Program and replaced the 50% relative and 50% absolute ROCE measures with quantitative Baker Hughes integration related metrics. This was done in order to keep management’s focus on the integration prior to, during, and post acquisition. In revising the 2015 cycle Performance Unit Program, the Committee used two equally weighted performance metrics based on: (i) the cumulative integration cost synergies realized through December 31, 2017, and (ii) a target for the combined company’s effective tax rate as of December 31, 2017. The Committee provisionally determined that if we did not acquire Baker Hughes, the 2015 cycle of the Performance Unit Program would be based on 100% relative ROCE measures with relative performance measured for the three-year period ending December 31, 2017 against the following Performance Unit Program peer group which remains unchanged from the comparator peer group used for the 2012 cycle2014 Performance Unit Program and consists of the following companies:peer group:
• | Anadarko Petroleum Corporation |
• | Apache Corporation |
• | Baker Hughes Incorporated |
• | Cameron International Corporation |
• | Chesapeake Energy Corporation |
• | Devon Energy Corporation |
• | Hess Corporation |
• | Marathon Oil Corporation |
• | Murphy Oil Corporation |
HALLIBURTON - 2016 Proxy Statement | 33 |
• | Nabors Industries Ltd. |
• | National Oilwell Varco, Inc. |
• | Schlumberger Ltd. |
• | Transocean Ltd. |
• | Weatherford International, Ltd. |
• | The Williams Companies, Inc. |
The program allows for rewardsDue to be paid in cash, stock, or a combination of cash and stock. Over the past ten years, the program has achieved maximum performance levels six times, between maximum and target three times, and below target one time.
2011 Cycle Performance Unit Program Payout for NEOs
The 2011 cycle of the Performance Unit Program ended on December 31, 2013. Both the absolute and relative performance measures established at the beginning of the cycle were approved by the Committee. The 2011 cycle required a three-year average ROCE above 13% to achieve the Maximum level on an absolute basis, and a three-year average ROCE above the 75thpercentile of the ROCE for our comparator peer group to achieve the Maximum level on a relative basis. The three-year average ROCE for our comparator peer group at the 75thpercentile was 10.01%. Our three-year average ROCE for the 2011 cycle was 15.25%. Because our results for this cycle were in excess of the Maximum levels on both an absolute basis and relative to our comparator peer group, the NEOs received payments in 2014 as set forth in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table and in the related narrative following the table.
2013 Cycle Performance Unit Program Opportunities for NEOstheir competitive nature, we do not disclose prospective metric targets.
Individual incentive opportunities are established based on market references and the NEO’s role within the organization. The Threshold, Target, and Maximum columns under the heading Estimated Future Payouts Under Non-Equity Incentive Plan Awards in the Grants of Plan-Based Awards in Fiscal 20132015 table indicate the potential payout for each NEO under the Performance Unit Program for the 20132015 cycle. The potential payouts are performance driven and completely at risk. Actual payout amounts, if any, will not be determined until the three yearthree-year cycle closes on December 31, 2015.2017.
Supplemental Executive Retirement Plan
The objective of the Supplemental Executive Retirement Plan, or SERP, is to provide a competitive level of pay replacement upon retirement. The current pay replacement target is 75% of final base salary at age 65 with 25 years of service.
The material factors and guidelines considered in making an allocation include:
• | Retirement benefits provided, both qualified and nonqualified; |
• | Current compensation; |
• | Length of service; and |
• | Years of service to normal retirement. |
The calculation takes into account the following variables:
• | Base salary; |
• | Years of service; |
• | Age; |
• | Employer portion of qualified plan savings; |
• | Age 65 value of any defined benefit plan; and |
• | Existing nonqualified plan balances and any other retirement plans. |
Several assumptions are made annually and include a base salary increase percentage, qualified and nonqualified plan contributions and investment earnings, and an annuity rate. These factors are reviewed and approved annually by the Committee in advance of calculating any awards.
To determine the annual benefit, external actuaries calculate the total lump sum retirement benefit needed at age 65 from all company retirement sources to produce an annual retirement benefit of 75% of final base salary. Company retirement sources include any qualified benefit plans and contributions to nonqualified benefit plans. If the combination of these two sources does not yield a total retirementbalance that will meet the 75% objective, then contributions may be made annually through the SERP to bring the total benefit up to the targeted level.
To illustrate, assume $10 million is needed at age 65 to produce an annual retirement benefit equal to 75% of final base salary. The participant is projected to have $3 million in his qualified benefit plans at retirement and $4 million in his nonqualified retirement plans at retirement. Since the total of these two sources is $7 million, a shortfall of $3 million results. This is the amount needed to achieve the 75% pay replacement objective. Such shortfall may be offset through annual contributions to the SERP.
Participation in the SERP is limited to the direct reports of the CEO and other selected executives as recommended by the CEO and approved at the discretion of the Committee. However, participation one year does not guarantee future participation. In 2013,2015, the Committee authorized retirement allocations under the SERP to all NEOs as listed in the 20132015 Nonqualified Deferred Compensation table and as included in the All Other Compensation column in the Summary Compensation Table. The average annual amounts allocated over the history of participation are as follows: Mr. Lesar: $303,600;$353,682; Mr. McCollum: $154,455;Garcia: $221,000; Mr. Brown: $419,333;$521,875; Mr. Miller: $334,000;$474,250; and Mr. Rainey: $343,750.$436,500.
Messrs. Lesar, Brown, and RaineyAll of the NEOs are fully vested in their respective account balances. Balances earn interest at an annual rate of 5%. In 2009, the Committee approved a change to the vesting schedule of the SERP for awards made in 2009 and in future years. The new vesting schedule requires participants to be at least 55 years of age with 10 years of service with us or meet the Rule of 70 (age plus years of service equal 70 or more). This change was made to increase the retentive value of the plan. Messrs. McCollum and Miller do not meet the vesting requirements for awards made in 2009 and subsequent years.
Other Executive Benefits and Policies
Retirement and Savings Plan
All NEOs participate in the Halliburton Retirement and Savings Plan, which is the defined contribution benefit plan available to all eligible U.S. employees. The matching contributions amounts we contributed on behalf of each NEO are included in the Supplemental Table: All Other Compensation.Compensation immediately following the Summary Compensation Table.
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Elective Deferral Plan
All NEOs may participate in the Halliburton Elective Deferral Plan, which was established to provide highly compensated employees with an opportunity to defer earned base salary and incentive compensation in order to help meet retirement and other future income needs.
The Elective Deferral Plan is a nonqualified deferred compensation plan and participation is completely voluntary. Pre-tax deferrals of up to 75% of base salary and/or eligible incentive compensation are allowed each calendar year. Gains or losses are credited based upon the participant’s election from among 12 benchmark investment choices with varying degrees of risk.
In 2013, none of our NEOs2015, Messrs. Lesar and Rainey participated in this plan. Messrs. Lesar,plan by deferring a percentage of their compensation. Mr. Brown and Rainey havehas an account balancesbalance from participation in prior years. Messrs. McCollumGarcia and Miller are not participants in the plan. Further details can be found in the 20132015 Nonqualified Deferred Compensation table.
Benefit Restoration Plan
The Halliburton Company Benefit Restoration Plan provides a vehicle to restore qualified plan benefits which are reduced as a result of limitations imposed under the Internal Revenue Code or due to participation in other plans we sponsor. It also serves to defer compensation that would otherwise be treated as excessive employee remuneration within the meaning of Section 162(m) of the Internal Revenue Code.
In 2013,2015, all NEOs received awards under this plan in the amounts included in the Supplemental Table: All Other Compensation and the 20132015 Nonqualified Deferred Compensation table.
Perquisites
Country club memberships are limited and provided on an as-needed basis for business purposes only. Messrs.Mr. Brown and Rainey had a club membershipsmembership in 2013.2015.
We do not provide cars to our NEOs. However, for security purposes and to allow for the efficient use of Mr. Lesar’s time, a company-leased car and part-time driver are provided for Mr. Lesar for the primary purpose of commuting to and from work.
A taxable benefit for executive financial planning is provided with the amount dependent on the NEO’s level within the company. This benefit does not include tax return preparation. It is paid, only if used, on a reimbursable basis.
We also provided for security at the personal residences of Messrs. Lesar, McCollum,Garcia, and Miller during 2013.2015.
At the direction of the Board, Mr. Lesar, his spouse, and children use company aircraft for all travel. The only personal use of the company aircraft in 20132015 for other NEOs is for spousal and dependent travel on select business trips.
Mr. Rainey is an expatriate under our long-term expatriate business practice and as such receives certain assignment allowances including a goods and services differential and host country housing and utilities.
A differential is commonly paid to expatriates in assignment locations where the cost of goods and services is greater than the cost for the same goods and services in the expatriate’s home country. Differentials are determined by Mercer/ORC, Worldwide, a third-party consultant. As part of his expatriate assignment, Mr. Rainey also participates in our tax equalization program, which neutralizes the tax effect of the international assignment and approximates the tax obligation the expatriate would pay in his home country.
Specific amounts for the above mentioned perquisites are detailed for each NEO in the Supplemental Table: All Other Compensation immediately following the Summary Compensation Table.Compensation.
Clawback Policy
We have a clawback policy under which we will seek to recoup incentive compensation in all appropriate cases paid to, awarded to, or credited for the benefit of any of our executive officers, which include all the NEOs, if and to the extent that:
• | The amount of incentive compensation was calculated based on the achievement of financial results that were subsequently reduced due to a restatement of our financial results; |
• | The officer engaged in fraudulent conduct that caused the need for the restatement; and |
• | The amount of incentive compensation that would have been awarded or paid to the officer, had our financial results been properly reported, would have been lower than the amount actually paid or awarded. |
Any such officer who receives incentive compensation based on the achievement of financial results that are subsequently the subject of a restatement will not be subject to recoupment unless the officer personally participates in the fraudulent conduct.
In addition, in January 2013, we amended the policy to provide that we will seek to recoup incentive compensation in all appropriate cases paid to, awarded to, or credited for the benefit of any of our executive officers, which include all the NEOs, and certain other senior officers if and to the extent that: