UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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CALIFORNIA RESOURCES CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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California resources corporation 2019 proxy report and notice of annual meeting
Letter to Shareholders from the Chairman of the Board
Dear Shareholders,
Strong execution, financial discipline and sustained community engagement are compelling hallmarks of California Resources Corporation (“CRC”), reflecting the Company’s core values of Character, Responsibility and Commitment and the high expectations set by the Board of Directors (the “Board”). In 2018, CRC is committed to continuing our track record ofachieved strong results through the exceptional execution in 2018. Guided by our focus on value creation, living within cash flow and delivering smart growth, our team’s performance during the recent severe commodity price downturn demonstrated the strengthleadership of our assets and the resiliency of our business model. Our management team made a series of proactive, strategic moves to effectively navigate the bottom of the cycle, and now CRC has a stronger foundation in place to capture significant value as the Company invests in its deep inventory of projects. Our management team’s focus on optimizing investment in our vast, world-class resources, driving operational execution in a return-focused way and strengthening our financial position is expected to drive CRC’s performance in 2018 and beyond.
A key aspect of CRC’s success is our strong corporate culture bound by high ethical standards and values that rewards acting with character, responsibility and commitment. CRC's Board, which includes eight independent directors, regularly reviews the Company's governance policies to ensure good business practices and a strong compliance program. Our management team and Boardthe dedication of Directors are committedour diverse workforce who operate critical infrastructure and supply essential resources to Californians with an innovative and entrepreneurial mindset. With the Board’s active direction, CRC thoughtfully navigated a volatile pricing environment with a dynamic and flexible operating plan that prioritized projects to deliver value both in the immediate and longer term, while continuing to meaningfully strengthen our financial position. We believe this value-driven approach to managing our business truly sets CRC apart. It enables us to capture the full value of our robust portfolio of assets throughout the commodity cycle and ensures effective capital allocation that delivers positive results for our shareholders. Coupled with an unwavering focus on operational excellence that unifies the organization, it is a powerful strategic approach that sustains CRC’s high levels of safety, environmental stewardship, reliability and ethical corporate governance, which we believe sustains and enhances shareholder value.
CRC regularly engages in dialogue with our shareholders to ensure we remain aligned and responsive as we strive for governance best practices. To that end, we are working on several fronts for continuous improvement on issues that reflect investor feedback and take into account key governance topics, including super-majority voting, overboarding and compensation matters.quality.
In response2018, an engaged Board aligned with shareholder priorities brought to shareholderbear a wealth of experience and varied perspectives from within the energy industry, as well as from financial services, accounting, real estate, human resources and organizational disciplines. To ensure that CRC continues to attract and maintain the most effective mix of Board talent, we regularly engage in a review process to evaluate desired skill sets that strengthen governance, promote diversity of thought, and align with the evolving demands of our business. In 2018, Laurie Siegel joined our Board. Her breadth of experience as a human resources executive and public company director strengthens our Board’s diversity of relevant skills in the areas of talent management, succession planning, organizational capability, and corporate culture.
Our commitment to investor outreach and engagement continues on numerous fronts. Consistent with investor feedback, we are recommending amendmentsonce again proposing to eliminate CRC’s supermajority thresholds in its certificate of incorporationincorporation. While these efforts failed to reducereach the current supermajority voting thresholdsrequisite vote last year, many shareholders regarded the action favorably and encouraged CRC to a majority vote. If approved, the Board also intendsprovide shareholders with another opportunity to approve related amendments to the corresponding provisions in the Company’s bylaws.vote on this governance measure this year. Additionally, the Board amended its overboarding policy in 2017 to restrict directors who are currently sitting CEOs of public companies from serving on more than two other public company boards without approval of CRC’s Nominating and Governance Committee. Building on strongwe received supportive shareholder support offeedback around our executive compensation practices, fostering a transparent and balanced approach that both aligns with industry practices and rewards executives appropriately based on specific quantitative annual and multi-year performance metrics, as well as progress toward longer-term organizational objectives, including our 2030 Sustainability Goals.
As a responsible California oil and natural gas company operating in the Compensation Committee also responded to shareholder feedback by increasingworld’s fifth largest economy, CRC promotes safety first, with the proportionprotection of stock-based, long-term performance-based awards, reducingpeople, our communities and the qualitative, individual portionenvironment as our top priority in the design, construction, maintenance and operation of the annual incentive awards and providing more detailed disclosure regarding compensation decisions under the qualitative portion of the annual incentive.
CRC’s workplace is built on an unwaveringour facilities. This commitment to promoting healthCalifornia values is implemented through our statewide Project Labor Agreement that ensures our facilities are built and safetymaintained by a highly-qualified local workforce. It is reflected in our ongoing dialogue with neighbors, regulators and other stakeholders, as well as through investments that promote conservation of water, habitat and energy throughout our operationsoperations. The Board holds the management team and providingour entire workforce accountable for these principles by measuring CRC’s progress annually with quantitative safety, spill prevention and water conservation metrics that directly affect incentive compensation of our employees. In addition, management works to advance our Board’s 2030 Sustainability Goals, which include specific quantitative targets for water recycling, reduction of methane emissions, renewable power and carbon capture and storage. We have already implemented several projects that have increased our volume of recycled produced water and reduced methane emissions compared to a pathway2013 baseline. The Company also facilitates numerous large-scale solar power projects in several oil and gas fields through surface use agreements, in addition to middle-class jobs, ample career advancementdesigning CRC owned and strength through diversity. CRC isoperated solar projects on two of our properties. Our sustainability efforts are further supported by the ongoing development of an innovative carbon capture and sequestration system at our Elk Hills field. In these ways, we are proud to participate in an industry that provides high wages for working families and reflectswork together with the ethnic diversityState of California. However, there is moreCalifornia to be done as we look to promote the benefits of diversity throughout the organization.
Dedicated to supplying energy for California by Californians, CRC proudly shares and endorses California’sfulfill our shared commitment to conserve our natural resources and protect our environment. To that end,
While stakeholders often think about sustainability in environmental terms, we are pleasedbelieve diversity is also a key success factor for our business and for California’s future. We view diversity holistically, from the composition of our Board and management to report that CRC has adopted 2030 Sustainability Goalsgrowing and developing our workforce to reflect the communities where we operate. CRC’s employee-led Women’s Interest Network provides professional development and support to women throughout our operations which advance the State’s 2030 goalswith strong support and aid in our life-of-field planning process. CRC’s goals are measured against a 2013 baseline,
which is the year before we launched as an independent company, and include four key components: 1) significantly increase the volume of recycled produced water, sustaining our role as a net water supplier for agriculture; 2) integrate renewable power into oil and gas operations to reduce our electricity demandparticipation from the grid, as well as greenhouse gas and other air emissions; 3) significantly reduce methane emissions in both the design and construction of new facilities and through retrofitting existing facilities and equipment; and 4) design and permit a carbon dioxide capture and storage system that would achieve carbon neutral status for the Elk Hills Field, our flagship location, through carbon dioxide enhanced oil recovery.
CRC plans to report annually on our progress on our 2030 Sustainability Goals, including quantitative metrics on water recycling, renewable power and methane reductions, and intends to set interim milestones for each sustainability goal. These goals will be subject to liquidity, funding and permitting requirements, and to adjustment for major acquisitions and dispositions. We believe these goals underscore CRC’s commitment to being responsible stewards of California’s natural resources. In furtherance of this commitment, we also participate in multiple environmental, sustainability and governance surveys. By increasing local production of oil, natural gas and electricity, CRC and other California producers make our energy supply more secure, affordable and reliable, reduce reliance on imports from across the globe, and make our economy and society more resilient and self-sufficient.
The Board and I could not be more pleased withmanagement. Our community outreach efforts similarly champion inclusivity – from an array of childhood health, education and training programs to civic empowerment of diverse communities – because at our core, we believe that CRC succeeds when Californians thrive.
Helping meet the needs of Californians positions CRC to create and sustain value for our shareholders for years to come. Our confidence in the future is due in no small part to CRC’s progress since its spin-offextraordinary workforce. Our employees embrace an entrepreneurial “OneCRC” mindset that promotes innovative thinking, increased collaboration and accountability, and a focus on process improvements in 2014. In a more favorable pricing environment, fundamentals are in placeeverything we do. We expect this to translate into continued growth for shareholders to reap the rewards of your commitmentas we manage our assets for margin expansion and continued support as CRC focuses on exceptional executioncash-on-cash returns using our value-driven approach in 2019 and smart value-creating investment in our business.beyond.
Regards,
William “Bill” Albrecht
Chairman of the Board
California Resources Corporation
Notice of the 2019 Annual Meeting of Stockholders
Meeting Date: | May 8, 2019 |
Meeting Time: | 11:00 a.m., local time |
Location: | Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301 |
Record Date: | March 11, 2019 |
Purposes of the 2019 annual meeting of stockholders:
(1) | To elect the ten director nominees named in this proxy statement, each to a one-year term; |
(2) | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; |
(3) | To hold an advisory vote to approve named executive officer compensation; |
(4) | To approve the Amended and Restated California Resources Corporation Long-Term Incentive Plan; |
(5a) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement; |
(5b) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend the Bylaws to a majority vote requirement; |
(5c) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement; and |
(6) | To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof; however, our Board of Directors does not know of any such matters that are to be presented for action at the Annual Meeting. |
Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 11, 2019 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
Beginning on March 26, 2019, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.
By Order of the Board of Directors,
Michael L. Preston
Executive Vice President, General Counsel and Corporate Secretary
If you owned shares of our common stock at the close of business on March 12, 2018,11, 2019, you are entitled to one vote per share upon each matter presented at our 20182019 annual meeting of stockholders to be held on May 9, 2018.8, 2019. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 12, 201811, 2019 to attend the 20182019 annual meeting, they will need to obtain a proxy from the broker, bank or other nominee that holds their shares authorizing them to vote at the annual meeting.
YourIf you hold shares in “street name,” your broker is not permitted to vote on your behalf on the election of directors and other matters to be considered at the annual meeting, except on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2018,year 2019, unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet. For your vote to be counted, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.
YOUR VOTE IS IMPORTANT
Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.
QUESTIONS
If you have any questions about the proxy voting process, and you own shares that are registered in your own name, please contact AST Shareholder Services at (866) 659-2647 or (718) 921-8124. If you have any questions about the proxy voting process, and your shares are held in “street name,” please contact the broker, bank or other nominee where you hold your shares. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-6010 or by e-mail at IR@crc.com.
ATTENDING THE ANNUAL MEETING IN PERSON
Only stockholders of record or their legal proxy holders as of March 12, 201811, 2019 or our invited guests may attend the annual meeting in person. If you plan to attend the annual meeting in person, you must present a valid form of government-issued photo identification, such as a driver’s license or passport. In addition to such personal identification, you will need an admission ticket or proof of ownership of CRC stock as of the record date to enter the annual meeting. If your shares are registered in your name, you will find an admission ticket attached to the notice regarding the internetInternet availability of proxy materials or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership as of the record date for the meeting, and will need to obtain a proxy from your broker, bank or other nominee if you wish to vote at the annual meeting.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 9, 20188, 2019
The Notice of the 20182019 Annual Meeting of Stockholders, the Proxy Statement for the 20182019 Annual Meeting of Stockholders and the 20172018 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2017)2018) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/.
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TABLE OF CONTENTS
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Conversion of Occidental Long-Term Incentive Awards in Connection with Spin-off in 2014 |
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Potential Payments |
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Security Ownership of Directors, Management and Certain Beneficial Holders |
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Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm |
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Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation |
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Annex A–Reconciliation of Non-GAAP | A-1 |
Annex |
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Annex C-1–Proposal 5(a) Amendment to Certificate of Incorporation | C-1-1 |
Annex C-2–Proposal 5(b) Amendment to Certificate of Incorporation | C-2-1 |
Annex C-3–Proposal 5(c) Amendment to Certificate of Incorporation | C-3-1 |
CALIFORNIA RESOURCES CORPORATION i
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Proxy Statement Summary
This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting. California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.” The 2019 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
20182019 Annual Meeting of Stockholders
Date: | May |
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Time: | 11:00 a.m., local time |
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Place: | Bakersfield Marriott at the Convention Center |
| 801 Truxtun Avenue, Bakersfield, California 93301 |
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Record Date: | March |
Agenda and the Board’s Recommendation on Voting Matters
The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.
Agenda Item |
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| Description |
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| Proposal 1 |
| Election of |
| FOR | |
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| Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal |
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| Advisory vote to approve named executive officer compensation |
| FOR | |
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| Approval of the |
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| Proposal 5(a) |
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CALIFORNIA RESOURCES CORPORATION 1
2019 PROXY STATEMENT |
Proxy Statement Summary
Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.
CALIFORNIA RESOURCES CORPORATION 1
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Proxy Statement Summary
The Board of Directors is comprised of eight independent directors, our Chairman, and our President and CEO.Chief Executive Officer (“CEO”). The following table provides summary information about each director, including the director nominees and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. See “Required Vote and Method of Counting–Majority Voting for Directors” below.
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Director | Positions | Age | Independent | Since | Audit | Compensation | Environmental | Governance | Committee | Positions | Age | Independent | Since | Audit | Compensation | Environmental | Governance |
William E. Albrecht | Chairman | 66 | No | 2014 |
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| Chair | Chairman | 67 | No | 2014 |
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Justin A. Gannon |
| 68 | Yes | 2014 | Chair | ● |
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| 69 | Yes | 2014 | Chair | ● |
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Ronald L. Havner, Jr.* |
| 60 | Yes | 2014 | ● |
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Harold M. Korell | Lead Independent Director | 73 | Yes | 2014 |
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| Lead Independent Director | 74 | Yes | 2014 |
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Harry T. McMahon |
| 64 | Yes | 2017 | ● | Chair |
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| 65 | Yes | 2017 | ● | Chair |
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Richard W. Moncrief |
| 75 | Yes | 2014 | ● |
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| 76 | Yes | 2014 | ● |
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Avedick B. Poladian |
| 66 | Yes | 2014 |
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| 67 | Yes | 2014 |
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Anita M. Powers |
| 62 | Yes | 2017 |
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Laurie A. Siegel |
| 63 | Yes | 2018 | ● |
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Robert V. Sinnott |
| 68 | Yes | 2014 |
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| 69 | Yes | 2014 |
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Todd A. Stevens | President & CEO | 51 | No | 2014 |
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| ● | President & CEO | 52 | No | 2014 |
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* Mr. Havner is not standing for reelection, and his term will expire at the 2018 Annual Meeting.
At the time of the Spin-off (as described on page 12), our Board of Directors was temporarily divided into three classes. Commencing with the election of the directors at the 2018 annual meeting, the Board of Directors has ceased to be classified, and the directors elected at the 2018 annual meeting (and each annual meeting thereafter) will be elected for a one-year term.
Corporate Governance HighlightsLead Independent Director
74 | Yes | 2014 |
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CALIFORNIA RESOURCES CORPORATION 2
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Proxy Statement Summary
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Business Performance Highlights●
In 2017, our management team delivered significant accomplishments against our strategic priorities.
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Harry T. McMahon | 65 | Yes | 2017 | ● | Chair |
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CALIFORNIA RESOURCES CORPORATION 3Richard W. Moncrief
76 | Yes | 2014 | ● | |
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Proxy Statement Summary
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Avedick B. Poladian | 67 | Yes | 2014 | ● | ● | |||
Anita M. Powers | 63 | Yes | 2017 | ● | ||||
Laurie A. Siegel | 63 | Yes | 2018 | ● | ● |
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Compensation Program Highlights
CRC’s stock price performance in 2017 exceeded the median performance of our peer companies. However, our depressed stock price, driven in large part by the highly leveraged balance sheet our management team inherited from Occidental at our Spin-off, continued to impact the realizable compensation for our named executive officers. For 2017, our Compensation Committee continued to balance the alignment of long-term compensation to stockholder returns with the need to retain our highly experienced, high-performing management team. As oil prices recovered during 2017 and into 2018, the Compensation Committee realigned the long-term compensation to stockholder returns by returning to entirely share-based long-term incentive awards for 2018.
2017 and 2018 Compensation Actions
In the first quarter of 2017, our Compensation Committee decided to continue the compensation program from 2016, which focused on paying for performance in the context of a depressed commodity price environment and the significant debt burden the management team inherited at the Spin-off. With the recovery in oil prices during 2017 and into 2018, and based on feedback received from stockholder outreach, the Compensation Committee took the following actions in early 2018:
Reduced the individual portion of the annual incentive to 20% for 2018.
Redesigned the performance-based long-term incentive awards to be entirely stock-based, further aligning executive compensation with stockholders.
Reduced the portion of time-vested restricted stock unit awards from 50% to 40% of the grant date value of the long-term incentive awards.
Compensation Program Practices
Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is well designed, incorporating best practices, and is governed by an engaged Compensation Committee. Our short-term and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders.
CALIFORNIA RESOURCES CORPORATION 4
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Proxy Statement Summary
The Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:
CALIFORNIA RESOURCES CORPORATION 5
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Notice of the 2018 Annual Meeting of Stockholders
Notice of the 2018 Annual Meeting of Stockholders
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Purposes of the 2018 annual meeting of stockholders:
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Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 12, 2018 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
Beginning on March 27, 2018, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.
By Order of the Board of Directors,
Michael L. Preston
Executive Vice President, General Counsel and Corporate Secretary
CALIFORNIA RESOURCES CORPORATION 6
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2018 Proxy Statement; Purposes of Annual Meeting; Board Recommendations; Internet Availability
This proxy statement is furnished to you in connection with the solicitation of proxies by and on behalf of the Board of Directors of California Resources Corporation (together with its subsidiaries, referred to herein as “we,” “our,” “us,” the “Company” or “CRC”) for use at the 2018 annual meeting of stockholders to be held on May 9, 2018 at 11:00 a.m., local time, at the Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301, or at any adjournment or postponement thereof (the “Annual Meeting”).
Purposes of the Annual Meeting; Board Recommendations
The agenda for the Annual Meeting includes the following items:
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Notice of Internet Availability of Proxy Materials
On March 27, 2018, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders of record and beneficial owners who owned shares of our common stock at the close of business on March 12, 2018. The Notice of Internet Availability of Proxy Materials contained instructions on how to access the proxy materials and vote online. We have made these proxy materials available to you over the Internet or, upon your request, have delivered paper versions of these materials to you by mail, in connection with the solicitation of proxies by our Board of Directors for the Annual Meeting.
Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
CALIFORNIA RESOURCES CORPORATION 7
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Voting Procedures
At the close of business on March 12, 2018, the “Record Date” for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting, there were 45,337,486 shares of common stock outstanding, each share of which is entitled to one vote. Common stock is the only class of our outstanding securities entitled to receive notice of and to vote at the Annual Meeting.
Our Board of Directors asks you to appoint Todd A. Stevens and William E. Albrecht as your proxy holders (“Proxy Holders”) to vote your shares at the Annual Meeting. You make this appointment by using one of the voting methods described below.
Quorum and Discretionary Authority
The presence at the Annual Meeting of a majority of shares of our common stock issued and outstanding and entitled to vote, present in person or by proxy, is necessary to constitute a quorum in order to transact business at the Annual Meeting. Your shares are counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions will be counted as present for purposes of determining whether a quorum is present at the Annual Meeting.
The Chairman of the Annual Meeting or, if directed by the Chairman of the Annual Meeting, a majority of the shares so represented, may adjourn the Annual Meeting from time to time, whether or not there is a quorum represented, and the Proxy Holders will vote the proxies they have been authorized to vote at the Annual Meeting in favor of such an adjournment. In the event a quorum is present at the Annual Meeting but sufficient votes to approve any of the items proposed by our Board of Directors have not been received, the Chairman of the meeting or the Proxy Holders may propose one or more adjournments of the Annual Meeting to permit further solicitation of proxies. A stockholder vote may be taken on one or more of the proposals in this proxy statement prior to such adjournment if sufficient proxies have been received and it is otherwise appropriate.
Our Board of Directors does not know of any other matters that are to be presented for action at the Annual Meeting. However, if other matters properly come before the Annual Meeting, the proxies solicited by the Board of Directors will provide the Proxy Holders with the authority to vote on those matters and nominees in accordance with such persons’ discretion. Where a stockholder has appropriately specified how a proxy is to be voted, it will be voted by the Proxy Holders in accordance with the specification.
CALIFORNIA RESOURCES CORPORATION 8
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Voting Procedures
How to Vote Shares Registered in Your Name
If you own shares that are registered in your own name, you are a “registered stockholder” and you may attend the Annual Meeting and vote in person. You also may vote by proxy without attending the Annual Meeting in any of the following ways:
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For stockholders who have their shares voted by duly submitting a proxy by Internet, telephone or mail, the Proxy Holders will vote all shares represented by such valid proxies in accordance with the stockholders’ instructions. If a stockholder signs and mails a proxy card, but does not indicate how the Proxy Holders should vote, the Proxy Holders will vote in accordance with the Board of Directors’ recommendations as set forth above.
If you received more than one Notice of Internet Availability of Proxy Materials, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately vote the shares shown on each Notice of Internet Availability of Proxy Materials that you receive in order for all of your shares to be voted at the Annual Meeting.
How to Vote Shares Held in “Street Name”
If you hold shares through a brokerage firm, trustee, bank, other financial intermediary or nominee (known as shares held in “street name”), you will receive from that broker, trustee, bank, financial intermediary or other nominee (the “intermediary”) a voting instruction form that will explain how to direct the voting of your shares through the intermediary, which may include the ability to provide voting instructions via the Internet or by telephone.
If your shares are held in street name through a brokerage firm that is a member of the NYSE and you want to vote on any of the proposals to be submitted to a vote at the Annual Meeting (except as to Proposal 2), you MUST indicate how you wish your shares to be voted. The broker will vote shares held by you in street name in accordance with your voting instructions, as indicated on your signed voting instruction form or by the instructions you provide via the Internet or by telephone. Absent such instructions, the proxy submitted by the broker with respect to your shares will indicate that the broker is not able to cast a vote with respect to the matter, which is commonly referred to as a “broker non-vote.” Accordingly, if your shares are held in street name, it is important that you provide voting instructions to the broker or other intermediary so that your vote will be counted. Under NYSE rules, Proposal 2 is considered a “routine matter,” and thus a broker is permitted in its discretion to cast a vote on this proposal as to your shares in the event that you do not provide the broker with voting instructions.
CALIFORNIA RESOURCES CORPORATION 9
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Voting Procedures
If you hold shares in street name and wish to vote your shares in person at the Annual Meeting, you must first obtain a valid proxy from the intermediary. To attend the Annual Meeting in person (regardless of whether you intend to vote your shares in person at the Annual Meeting), you should follow the instructions under “Attending the Annual Meeting in Person” below.
If you received more than one voting instruction form, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately follow the foregoing voting procedures for each voting instruction form that you receive in order for all of your shares to be voted at the Annual Meeting.
If you are a registered stockholder, you may revoke your proxy at any time before your shares are voted at the Annual Meeting by:
voting again through the Internet or by telephone prior to 11:59 p.m., Eastern Time on May 8, 2018;
requesting, completing and mailing in a new paper proxy card, as outlined in the Notice of Internet Availability of Proxy Materials;
voting in person at the Annual Meeting by completing a ballot; however, attending the Annual Meeting without completing a ballot will not revoke any previously submitted proxy; or
submitting a written notice of revocation to the Corporate Secretary of California Resources Corporation at 27200 Tourney Road, Suite 315, Santa Clarita, California 91355 that is received no later than May 8, 2018.
If you are a street-name stockholder and you vote by proxy, you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with that entity’s procedures.
Required Vote and Method of Counting
Proposal 1. Election of Directors
We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. See “Majority Voting for Directors” below. The election of directors involves a matter on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to this item, your broker may not vote your shares with respect to this proposal. In such case, a broker non-vote will occur. Abstentions and broker non-votes are not considered votes cast and will have no effect on the outcome of the election of directors.
Proposal 2. Ratification of the Appointment of the Independent Registered Public Accounting Firm
The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve Proposal 2. Proposal 2 involves a matter on which a broker (or other nominee) does have “discretionary” authority to vote. Even if you do not instruct your broker how to vote with respect to this item, your broker may vote your shares with respect to this proposal in its discretion. With respect to Proposal 2, a vote of “ABSTAIN” will have the same effect as a vote “AGAINST.”
Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation; and
Proposal 4. Approve the Second Amendment to ESPP
The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve the recommendations in Proposals 3 and 4. Such proposals involve matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items, your broker may not vote your shares with respect to these proposals. If you do not instruct your broker how to vote with respect to this item, your broker may not vote your shares
CALIFORNIA RESOURCES CORPORATION 10
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Voting Procedures
with respect to this proposal. In such case, a broker non-vote will occur. Broker non-votes are not considered to be entitled to vote and will have no effect on the outcome of Proposals 3 and 4. Abstentions are treated as present or represented and voting and will have the same effect as a vote “AGAINST.”
With respect to Proposal 3, while this vote is required by law, it will neither be binding on the Company or the Board of Directors nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, the Company or the Board of Directors. However, the views of our stockholders are important to us, and our Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” including the compensation tables that follow, which discusses in detail how our executive compensation program implements our compensation philosophy.
Proposals 5(a), 5(b) and 5(c). Change the Supermajority Vote Requirements to a Majority Vote Requirement for (a) Stockholders to Remove Directors Without Cause; (b) Stockholders to Amend the Bylaws; and (c) Stockholders to Amend Certain Provisions of the Amended and Restated Certificate of Incorporation
Stockholders will vote on Proposals 5(a), 5(b) and 5(c) separately, and the approval of each proposal is not conditioned on the approval of the other proposals. The affirmative vote of the holders of at least 75% in voting power of the outstanding shares of our stock entitled to vote at the Annual Meeting is required to approve each of Proposals 5(a), 5(b) and 5(c). Such proposals involve matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items, your broker may not vote your shares with respect to these proposals. In such case, a broker non-vote will occur. Abstentions and broker non-votes will have the same effect as votes cast “AGAINST” the approval of these proposals. These charter amendments, if approved, will not be effective until we file certificates of amendment with the Secretary of State of Delaware following the Annual Meeting.
We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. In accordance with our Bylaws, in order to be elected as a director, a director nominee must receive more votes cast “FOR” than “AGAINST” his or her election. This policy does not apply if the number of nominees for director exceeds the number of directors to be elected on or after the tenth day preceding the date we first mail the Notice of Annual Meeting, in which case directors shall be elected by a plurality of shares present in person or represented by proxy at the Annual Meeting.
Unless the election is by plurality vote as set forth above, if an incumbent nominee for director receives an equal or greater number of votes cast “AGAINST” than votes cast “FOR” his or her election, the nominee shall promptly tender his or her resignation to the Board of Directors. Such director resignation will become effective upon acceptance by the Board of Directors of such resignation based on any factors deemed relevant by the Board of Directors. The foregoing summary is qualified by the terms of our majority voting policy, which are included in our Bylaws.
Method and Cost of Soliciting and Tabulating Votes
The Board of Directors is providing these proxy materials to you in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting. In addition to solicitation by mail, our officers, directors and employees may solicit proxies personally or by telephone, facsimile or electronic means. These officers, directors and employees will not receive any extra compensation for these services. In addition, we will make arrangements with brokerage houses, custodians, nominees and other fiduciaries to send proxy materials to the beneficial owners of our stock, and we will reimburse them for postage and clerical expenses. We will bear the costs of the solicitation, including the cost of the preparation, assembly, printing and, where applicable, mailing of the Notice of Internet Availability of
CALIFORNIA RESOURCES CORPORATION 11
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Voting Procedures; Spin-off from Occidental; Corporate Governance
Proxy Materials, the Notice of the 2018 Annual Meeting of Stockholders, this proxy statement, the proxy card and any additional information furnished by us to our stockholders. In addition, we have hired D.F. King & Co., Inc. to assist us in soliciting proxies, which it may do by telephone or in person. We will pay D.F. King & Co. a fee of $7,500, plus expenses.
Attending the Annual Meeting in Person
Only stockholders of record or their legal proxy holders as of the Record Date or our invited guests may attend the Annual Meeting in person. If you plan to attend the Annual Meeting in person, you must present a valid form of government-issued photo identification, such as a driver’s license or passport. In addition to such personal identification, you will need an admission ticket or proof of ownership of CRC stock to enter the Annual Meeting. If your shares are registered in your name, you will find an admission ticket attached to the notice regarding the internet availability of proxy materials or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership as of the Record Date.
No cameras, telephones, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Annual Meeting. No banners, signs, firearms or weapons will be allowed in the meeting room. We reserve the right to inspect all items entering the meeting room.
The Annual Meeting will be held at the Bakersfield Marriott at the Convention Center, located at 801 Truxtun Avenue, Bakersfield, California 93301.
On November 30, 2014, Occidental Petroleum Corporation (“Occidental”) completed the Spin-off (the “Spin-off”) of its California oil and gas operations and related assets, liabilities and obligations, which we assumed in connection with the Spin-off from Occidental. As a result, we became a separate, publicly traded company on December 1, 2014. The Spin-off was effected through a pro-rata distribution to Occidental stockholders of our common stock. Occidental retained 18.5% of our common stock, which it distributed to Occidental’s stockholders on March 24, 2016.
We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Health, Safety and Environmental Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 27200 Tourney Road, Suite 315, Santa Clarita, California 91355. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers.
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Corporate Governance
At the time of the Spin-off, our Board of Directors was temporarily divided into three classes. One of the three classes has been elected each year on a rotating basis to succeed the directors of the subject class whose terms are expiring. Commencing with the election of the directors at the 2018 Annual Meeting, the Board of Directors will cease to be classified, and the directors elected at the 2018 Annual Meeting (and each annual meeting thereafter) shall be elected for a one-year term.
Mr. Havner is not standing for reelection to the Board of Directors due to concerns raised by investors relating to his service on multiple boards while serving as the chief executive officer of a publicly traded company. This decision is not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices. As a result, Mr. Havner’s term will expire at the 2018 Annual Meeting, at which time the size of the Board of Directors will be reduced from ten to nine directors.
Set forth below is a chart that summarizes the core competencies of our Board, and biographical information regarding each of our directors as well as the specific experience, qualifications, attributes and skills that led to the conclusion that such individual should serve as director. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person was selected as a director or an executive officer.
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Todd A. Stevens | President & CEO | 52 | No | 2014 |
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CALIFORNIA RESOURCES CORPORATION 13
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Corporate Governance
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• Chairman of the Special Committee
Mr. Albrecht has served on the Board of Directors of CRC since 2014. He was appointed as Chairman of the Board in 2016. He served as Executive Chairman of the Board of Directors from 2014 to 2016. Mr. Albrecht served as Vice President of Occidental from 2008 to 2014 and as President, Oxy Oil & Gas, Americas from 2012 to 2014. Mr. Albrecht also served as President—Oxy Oil & Gas, USA from 2008 to 2012. During his tenure with Occidental, Mr. Albrecht had managerial oversight over its upstream assets. Mr. Albrecht has more than 38 years of experience in the domestic oil and gas industry, having previously served as an executive officer for domestic energy producer EOG Resources, and as a petroleum engineer for Tenneco Oil Company. Since 2015, Mr. Albrecht has served on the board of directors of the Rowan Companies, plc, an international offshore drilling contractor providing jackups and drill ships for the offshore drilling industry. Mr. Albrecht is a member of its Compensation Committee and Nominating and Corporate Governance Committee, and was elected as chairman of the board as of the 2017 annual meeting. Since 2016, Mr. Albrecht has served on the board of directors of Halliburton Co. and is a member of its Compensation Committee and Health, Safety and Environment Committee. Mr. Albrecht holds a Master of Science degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy. Mr. Albrecht is a National Association of Corporate Directors (“NACD”) Board Leadership Fellow, and has completed NACD’s comprehensive program of study for directors and corporate governance professionals.
Skills and Qualifications
Mr. Albrecht brings extensive managerial and operational experience in the upstream domestic and international energy business to the Board of Directors. He also has a deep knowledge of our assets that gives the Board a valuable perspective on the specific strengths and challenges associated with our operations. Mr. Albrecht brings broad experience in proactively engaging with regulatory agencies, communities, and other stakeholders that makes him a valuable member of our Board of Directors.
CALIFORNIA RESOURCES CORPORATION 14
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Corporate Governance
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• Chairman of the Audit Committee
• Member of the Compensation Committee
• Member of the Special Committee
Mr. Gannon has served on the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultant and private investor. From 2003 to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, tax and advisory firm, including as National Leader of Merger and Acquisition Development from 2011 to 2013, Central Region Managing Partner from 2010 to 2011, Office Managing Partner in Houston, Texas from 2007 to 2011 and Office Managing Partner in Kansas City, Missouri from 2004 to 2007. From 1971 to 2002, Mr. Gannon worked at Arthur Andersen LLP, including as an Audit Partner for 21 years. Mr. Gannon is also a Director, Chairman of the Audit Committee and Member of the Conflicts Committee of the general partner of CrossAmerica Partners LP, a publicly-traded master limited partnership engaged in motor fuels distribution. He also serves on the Board of Directors of Vantage Energy Acquisition Corp. for which he chairs the Audit Committee and serves on the compensation committee. He is a former chairman of the Board of Directors of American Red Cross chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. Mr. Gannon received a Bachelor of Science degree in Accounting from Loyola Marymount University and is a Certified Public Accountant in Texas (active) and California (inactive).
Skills and Qualifications
Mr. Gannon’s more than four decades in financial accounting practice and his private investment experience give him deep insight into financial analysis and management. His experience is especially valuable to the Board because of the extent to which his clients were involved in oil and gas upstream exploration and production. His financial acumen enables Mr. Gannon to guide the Board in its fiscal and strategic oversight of CRC.
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• Member of the Audit Committee
• Member of the Health, Safety and Environmental Committee
Mr. Havner has served on the Board of Directors of CRC since 2014. Mr. Havner is the Chairman of the Board and Chief Executive Officer of Public Storage, a developer, owner and operator of self-storage facilities. He was elected Vice Chairman and Chief Executive Officer of Public Storage in 2002 and was elected Chairman
CALIFORNIA RESOURCES CORPORATION 15
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Corporate Governance
of the Board in 2011. He joined Public Storage in 1986. Mr. Havner has been Chairman of the Board of Public Storage’s affiliate, PS Business Parks, Inc. since 1996 and served as its Chief Executive Officer until 2003. He has served on the board of Avalon Bay, a publicly-traded real estate investment company, since 2014 and serves as a member of its Audit Committee and its Investment and Finance Committee. He has been a member of the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. since 2006, and served as its Chairman in 2014. Mr. Havner holds a Bachelor of Arts degree from the University of California in Los Angeles.
Skills and Qualifications
Mr. Havner’s experience as Chief Executive Officer of a public, California-headquartered business with locations across the United States and Europe gives him valuable insight into business generally, and business in California in particular. His nearly three decades of experience growing a business gives him valuable perspectives that help CRC implement its business plans. His experience as Chief Executive Officer gives him a broad perspective across corporate functions, including management, operations, finance, human resources and governance.
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• Member of the Nominating and Governance Committee
• Member of the Health, Safety and Environmental Committee
Mr. Korell has served on the Board of Directors of CRC and as Lead Independent Director since 2014. From 2002 through 2014, Mr. Korell served as the Chairman of the Board of Southwestern Energy Company, an independent energy company engaged in natural gas and oil exploration, development and production. From 2009 to 2010, he served as Southwestern’s Executive Chairman and, from 1999 to 2009, as its Chief Executive Officer. From 1997 to 2009, Mr. Korell served in various other roles at Southwestern, including President and Executive Vice President and Chief Operating Officer. Prior to his tenure at Southwestern, Mr. Korell was Senior Vice President—Operations of American Exploration Company, Executive Vice President of McCormick Resources, held various technical and managerial positions during his 17 years with Tenneco Oil Company, including Vice President of Production, and held various positions with Mobil Corporation. He is a member of the Society of Petroleum Engineers and, until 2010, served as a Board Member for the Independent Petroleum Association of America and the American Exploration & Production Council and as a Board Member and Executive Committee Member for America’s Natural Gas Alliance. He also serves on the Board of Governors at the Colorado School of Mines and the Board of Trustees at the Baylor College of Medicine. Mr. Korell holds a degree in Chemical and Petroleum Refining Engineering from the Colorado School of Mines.
Skills and Qualifications
Mr. Korell’s experience over four decades in the oil and gas industry gives him a broad understanding of the upstream oil and gas business as well as the midstream and public utility businesses. Mr. Korell’s leadership during a time of dramatic expansion for his company provides valuable insights into strategic and operational, corporate and governance matters. In addition, Mr. Korell provides a deep understanding of our assets due to his involvement with a number of them early in his career that lend specific knowledge and understanding to Board discussions.
CALIFORNIA RESOURCES CORPORATION 16
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Corporate Governance
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• Member of the Audit Committee
• Chairman of the Compensation Committee
• Member of the Special Committee
Mr. McMahon has served on the Board of Directors of CRC since 2017. Since 2015 he has been a Senior Advisor to the G100 Network, a Leadership Advisory Consortium focused on CEO and Board Development. From 1983 to 2015, Mr. McMahon served in various positions for Bank of America Merrill Lynch including, most recently, as Executive Vice Chairman (the firm's first following the merger of Merrill Lynch and Bank of America). His other roles included service as Vice Chairman and Co-Head of Global Corporate Finance of Merrill Lynch and over 25 years running Investment Banking for the firm's Western Region. During his career Mr. McMahon advised on more than 400 transactions. Mr. McMahon also serves as a trustee of Claremont McKenna College, and is a director of Cottage Health Systems. Mr. McMahon received a Masters of Business Administration degree from the University of Chicago Booth School of Business and a Bachelor of Arts degree in Economics from Claremont McKenna College.
Skills and Qualifications
Mr. McMahon's over three decades of investment banking experience provides the Board with deep insight into financial structuring matters and fashioning innovative strategic solutions. His senior managerial roles, including as Executive Vice Chairman of one of the nation's largest banks and as Senior Advisor to the G100 Network, also give him valuable perspectives on governance and maintaining ties between boards and management.
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• Chairman of the Health, Safety and Environmental Committee
• Member of the Audit Committee
Mr. Moncrief has served on the Board of Directors of CRC since 2014. Mr. Moncrief has been a principal in Moncrief Oil International, Inc., an oil and gas exploration and production company with headquarters in Fort Worth, Texas, since founding the company in 1970. He currently serves as its Chief Executive Officer. Moncrief Oil participates in U.S. and international oil and gas exploration and production. Mr. Moncrief also serves on the boards of trustees for the Amon Carter Museum and the University of Texas Development
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Corporate Governance
Board. He holds a Bachelor of Science degree in Petroleum Engineering as a Distinguished Graduate from the University of Texas.
Skills and Qualifications
Mr. Moncrief’s extensive experience as the head of a large private upstream oil and gas exploration company allows him to bring an in-depth understanding of key industry issues to the Board of Directors. His leadership experience at Moncrief Oil provides him with strategic and management insights from which CRC benefits. Mr. Moncrief offers entrepreneurial expertise forged over years in the business of oil and gas exploration.
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• Member of the Compensation Committee
• Member of the Nominating and Governance Committee
• Member of the Special Committee
Mr. Poladian has served on the Board of Directors of CRC since 2014. From 2006 to 2016, Mr. Poladian served as Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. Mr. Poladian previously served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen LLP from 1974 to 2002, most recently as a Partner, and is a Certified Public Accountant (inactive). He is a past member of the Young Presidents Organization, the Chief Executive Organization, the California Society of CPAs and the American Institute of CPAs. Mr. Poladian is a director emeritus of the YMCA of Metropolitan Los Angeles, a member of the Board of Councilors of the USC Sol Price School of Policy, a member of the Board of Advisors of the Ronald Reagan UCLA Medical Center, and a former Trustee of Loyola Marymount University. Mr. Poladian was appointed to the California State Board of Accountancy and served for nine years. He serves as a director and on the Audit Committees of two funds managed by Western Asset Management Funds. He is also a member of the Board of Trustees of Public Storage where he is the Chair of the Audit Committee and the Chair of the Nominating and Corporate Governance Committee. Mr. Poladian also serves as a director of Occidental Petroleum Corporation where he is a member of the Nominating, Corporate Governance and Social Responsibility Committee and chair of the Audit Committee. He previously served as a director of California Pizza Kitchen.
Skills and Qualifications
Mr. Poladian’s service in a senior management position at one of the world’s largest accounting firms, combined with his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company, gives Mr. Poladian deep knowledge of key business issues, including personnel and asset utilization. He also provides insight into all aspects of fiscal management. Through his work on the boards of various entities, Mr. Poladian has garnered valuable insight into our business and corporate governance generally.
CALIFORNIA RESOURCES CORPORATION 18
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Corporate Governance
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• Member of the Health, Safety and Environmental Committee
The Board of Directors appointed Ms. Powers as a director effective as of August 2, 2017. In January 2017, Ms. Powers retired from Occidental Petroleum Corporation after more than 30 years of service at Oxy. Prior to her retirement, Ms. Powers served since 2009 as Executive Vice President of Worldwide Exploration for Occidental Oil and Gas Corporation and as Vice President of parent Occidental Petroleum Corporation. From 2006 to 2009, Ms. Powers served as Vice President of Worldwide Exploration. Prior to 2006, Ms. Powers served as Director of Worldwide Geoscience, Vice President of Exploration in Colombia and Chief Exploration Geologist for Worldwide Exploration. Ms. Powers holds a Bachelor of Science degree in Geology with high honors from Texas A&M University.
Skills and Qualifications
Ms. Powers brings over 36 years of experience in the oil and gas industry to CRC’s Board. Her expertise as a senior geoscientist working in hydrocarbon provinces around the world and, in particular, her knowledge of California’s geology greatly benefits CRC’s Board. The Board also benefits from her perspective gained from many years of executive management in the industry.
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• Chairman of the Nominating and Governance Committee
• Member of the Special Committee
Mr. Sinnott was appointed to the Board of Directors of CRC in 2014. Mr. Sinnott is co-chairman of Kayne Anderson Capital Advisors, L.P., an investment management firm. From 2010 until 2016, he served there as President, Chief Executive Officer and Chief Investment Officer. He also served as a Managing Director there from 1992 to 1996 and as its Senior Managing Director from 1996 until assuming the role of Chief Executive Officer in 2010. He is also President of Kayne Anderson Investment Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P. Mr. Sinnott served as a director of Kayne Anderson Energy Development Company from 2006 through 2013. He was Vice President and Senior Securities Officer of the Investment Banking Division of Citibank from 1986 to 1992 and previously held positions with United Energy Resources, a pipeline company, and Bank of America in its oil and gas finance department. Since 1998, Mr. Sinnott has served on the board of PAA GP Holdings LLC and its predecessor entities and currently serves as chairman of its compensation committee. Since January 2017, Mr. Sinnott has been Vice Chairman of the
CALIFORNIA RESOURCES CORPORATION 19
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Corporate Governance
Board of Directors of Kayne Anderson Acquisition Corp., which is a newly organized blank check company that intends to acquire and operate a business in the energy industry. Additionally, he is a director of the Kayne Anderson Capital Advisors Foundation and a member of the Board of Visitors of the UCLA Anderson School of Management. Mr. Sinnott received a Bachelor of Arts degree from the University of Virginia and a Masters of Business Administration from Harvard University.
Skills and Qualifications
As President of a California-based investment company investing in energy and other areas, Mr. Sinnott brings extensive insight into the oil and gas and financial industries to the CRC Board of Directors. His experience in analyzing industry players and managing a multi-billion dollar investment enterprise allow him to provide insight on a broad variety of matters affecting the oil and gas industry generally and the company specifically. He brings deep understanding of and insight into strategic alternatives, industry trends, deal structures and finance.
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• Member of the Special Committee
Mr. Stevens was appointed President, Chief Executive Officer and a Director of CRC in 2014. Mr. Stevens served as Vice President—Corporate Development of Occidental from 2012 to 2014, as Vice President—California Operations, Oxy Oil & Gas from 2008 to 2012, and as Vice President—Acquisitions and Corporate Finance of Occidental from 2004 to 2012. Mr. Stevens holds a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy.
Skills and Qualifications
Our Board of Directors benefits from Mr. Stevens’ deep knowledge of the oil and gas industry and his expertise in strategically evaluating and valuing oil and gas assets that is derived from years of buying and integrating exploration and production assets, many of which we currently own. Mr. Stevens also brings specific insight into the Company’s operations from his significant managerial experience as an executive at Occidental, including his strong experience in allocating capital and managing Occidental’s and our assets. Mr. Stevens’ extensive experience dealing with California’s regulatory environment, agencies and political landscape and his ability to forge strong ties within the state have proven a valuable asset to the Company.
CALIFORNIA RESOURCES CORPORATION 20
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Consideration of Director Nominees
Consideration of Director Nominees
Identifying and Evaluating Nominees for Directors
Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.
Director Criteria, Qualifications, Experience and Diversity
Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience;
independence under applicable standards;
business judgment;
service on boards of directors of other companies;
personal and professional integrity, including commitment to the Company’s core values;
willingness to commit the required time to serve as a Board of Directors member;
familiarity with the Company and its industry; and
such other matters as the committee deems appropriate.
The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors.
With respect to the reelection of an existing director, the Nominating and Governance Committee will consider and review the director’s:
past Board and committee meeting attendance and performance;
length of Board service;
personal and professional integrity, including commitment to the Company’s core values;
relevant experience, skills, qualifications and contributions that the existing director brings to the Board;
independence under applicable standards; and
such other matters as the committee deems appropriate.
CALIFORNIA RESOURCES CORPORATION 21
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Board Leadership Structure and Committees
Board Leadership Structure and Committees
Chairman
The Board of Directors’ leadership structure separates the CEO and Chairman of the Board positions. Mr. Stevens currently serves as our President and CEO, and Mr. Albrecht serves as our non-executive Chairman.
The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chairman positions, and have an independent director serve as Lead Independent Director working in conjunction with the Chairman. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chairman and Lead Independent Director focus on leading the Board of Directors in its oversight role.
Lead Independent Director
74
Yes
2014
●
●
Harry T. McMahon
65
Yes
2017
●
Chair
Richard W. Moncrief
76
Yes
2014
●
Chair
Avedick B. Poladian
67
Yes
2014
●
●
Anita M. Powers
63
Yes
2017
●
Laurie A. Siegel
63
Yes
2018
●
●
Robert V. Sinnott
69
Yes
2014
Chair
Todd A. Stevens
President & CEO
52
No
2014
Corporate Governance Highlights
✓ | Renewed Effort: Supermajority votes. Based on shareholder feedback, the Board is resubmitting for approval proposals to amend the Company’s certificate of incorporation to reduce the current supermajority voting thresholds to majority votes. |
✓ | Overboarding Policy.The Board implemented a policy to restrict directors who are currently sitting CEOs of |
✓ | Majority vote standard. Our Bylaws provide that each director must be elected by a majority of votes cast, not a plurality, in uncontested elections. |
✓ | Clawback Policy. The Board adopted a comprehensive, standalone policy that covers cash, equity, equity-based and other awards under our incentive compensation programs. |
✓ | Anti-Hedging and Anti-Pledging Policy. The Board expanded our Insider Trading Policy to specifically address the hedging or pledging of our securities. |
✓ | Board is not classified. Our directors are elected on an annual basis. |
✓ | Separate Chairman of the Board and CEO. |
✓ | 8 out of 10 Board members are independent. The Board has |
✓ | Independent |
✓ | Independent Board committees. Each standing committee is made up of independent directors. Each standing committee operates under a written charter that has been approved by the Board |
✓ | Each committee has the authority to retain independent |
CALIFORNIA RESOURCES CORPORATION 2
2019 PROXY STATEMENT |
Proxy Statement Summary
✓ | Director evaluation process. Each year, each of the Board
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✓ | CEO and |
Business Performance Highlights
In 2018, our management team delivered significant accomplishments against our strategic priorities which the Compensation Committee considered as part of its review of management’s performance for compensation purposes.
Performance on Strategic Priorities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use our Value Creation Index (“VCI”)(1) metric to | > Increased investment to $747 million which included over $100 million of development joint venture (“JV”) capital to support higher activity. At current prices, the > Consolidated remaining interests in the former Elk Hills unit to add production, reserves, cash flow, operational synergies and longer-term development. This flagship asset provides potential carbon capture opportunities to further our sustainability goals. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Optimize operational performance to capture efficiencies, improve results and reduce costs | > Implemented $34 million of annualized synergies through Elk Hills consolidation, which was significantly more than expected and within a shorter timeframe than originally anticipated. > Managed controllable costs despite increase in activity and energy and fuel gas costs. Quarterly per unit production costs decreased sequentially throughout 2018. > Adjusted EBITDAX margin(3) increased in 2018 from the prior year. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Utilize our technical knowledge and experience to target production growth, future expansion and hydrocarbon recovery | > Benefiting from our low decline and our acquisition of the
CALIFORNIA RESOURCES CORPORATION 3
Proxy Statement Summary
Compensation Program Highlights CRC’s stock price performance in 2018 was the highest of our peer companies. However, our stock price generally remained at depressed levels, driven in large part by the highly leveraged balance sheet our management team inherited from Occidental Petroleum Corporation (“Occidental”) at our Spin-off from Occidental (the “Spin-off”), and continued to impact the realizable compensation for our named executive officers. For 2018, our Compensation Committee realigned the long-term compensation to stockholder returns by returning to entirely share-based long-term incentive awards. 2018 Compensation Actions In the first quarter of 2018, based on feedback received from stockholder outreach, the Compensation Committee took the following actions: Reduced the individual portion of the annual incentive to 20%. Redesigned the performance-based long-term incentive awards to be entirely stock-based, further aligning the most significant executive compensation opportunity with stockholders. Reduced the portion of time-vested restricted stock unit awards from 50% to 40% of the grant date value of the long-term incentive awards and instead granted premium priced stock options, shifting the long-term incentive program to 60% performance-based. CALIFORNIA RESOURCES CORPORATION 4
Proxy Statement Summary Compensation Program Practices Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is well designed, incorporating best practices, and is governed by an engaged Compensation Committee. Our short-term and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders and retain our highly experienced, high-performing management team. The Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways: WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executive officers are stock-based. We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines which require our named executive officers and directors to have meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee. WHAT WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company. CALIFORNIA RESOURCES CORPORATION 5
Board of Directors and Corporate Governance Board of Directors and Corporate Governance Our Board of Directors has nominated 10 directors for election at the 2019 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected. Our Board exhibits an effective mix of diversity, perspective, skills and experience. INDEPENDENCE 20% 80% independent non-independent GENDER 20% 80% male female AGE 10% 20% 70% 50s 60s 70s Set forth below is a chart that summarizes the core competencies of our Board, and biographical information regarding each of our directors as well as the specific experience, qualifications, attributes and skills that led to the conclusion that such individual should serve as director. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person was selected as a director or an executive officer. Director Skills and Qualifications
CALIFORNIA RESOURCES CORPORATION 6
Board of Directors and Corporate Governance
Mr. Albrecht has served on the Board of Directors of CRC since 2014. He was appointed as Chairman of the Board in 2016. He served as Executive Chairman of the Board of Directors from 2014 to 2016. Mr. Albrecht served as Vice President of Occidental from 2008 to 2014 and as President, Oxy Oil & Gas, Americas from 2012 to 2014. Mr. Albrecht also served as President—Oxy Oil & Gas, USA from 2008 to 2012. During his tenure with Occidental, Mr. Albrecht had managerial oversight over its upstream assets. Mr. Albrecht has more than 39 years of experience in the domestic oil and gas industry, having previously served as an executive officer for domestic energy producer EOG Resources, and as a petroleum engineer for Tenneco Oil Company. Since 2015, Mr. Albrecht has served on the board of directors of the Rowan Companies, plc, an international offshore drilling contractor providing jackups and drill ships for the offshore drilling industry. Mr. Albrecht is a member of its Compensation Committee and Nominating and Corporate Governance Committee, and was elected as chairman of the board as of the 2017 annual meeting. Since 2016, Mr. Albrecht has served on the board of directors of Halliburton Co. and is a member of its Compensation Committee and Health, Safety and Environment Committee. Mr. Albrecht holds a Master of Science degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy. Mr. Albrecht is a National Association of Corporate Directors (“NACD”) Board Leadership Fellow, and has completed NACD’s comprehensive program of study for directors and corporate governance professionals. Skills and Qualifications Mr. Albrecht brings extensive managerial and operational experience in the upstream domestic and international energy business to the Board of Directors. He also has a deep knowledge of our assets that gives the Board a valuable perspective on the specific strengths and challenges associated with our operations. Mr. Albrecht brings broad experience in proactively engaging with regulatory agencies, communities, and other stakeholders that makes him a valuable member of our Board of Directors.
• Chairman of the Audit Committee • Member of the Compensation Committee CALIFORNIA RESOURCES CORPORATION 7
Board of Directors and Corporate Governance Mr. Gannon has served on the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultant and private investor. From 2003 to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, tax and advisory firm, including as National Leader of Merger and Acquisition Development from 2011 to 2013, Central Region Managing Partner from 2010 to 2011, Office Managing Partner in Houston, Texas from 2007 to 2011 and Office Managing Partner in Kansas City, Missouri from 2004 to 2007. From 1971 to 2002, Mr. Gannon worked at Arthur Andersen LLP, including as an Audit Partner for 21 years. Mr. Gannon is also a Director, Chairman of the Audit Committee and Member of the Conflicts Committee of the general partner of CrossAmerica Partners LP, a publicly-traded master limited partnership engaged in motor fuels distribution. He also serves on the Board of Directors of Vantage Energy Acquisition Corp. for which he chairs the Audit Committee and serves on the compensation committee. He is a former chairman of the Board of Directors of American Red Cross chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. Mr. Gannon received a Bachelor of Science degree in Accounting from Loyola Marymount University and is a Certified Public Accountant in Texas (active) and California (inactive). Skills and Qualifications Mr. Gannon’s more than four decades in financial accounting practice and his private investment experience give him deep insight into financial analysis and management. His experience is especially valuable to the Board because of the extent to which his clients were involved in oil and gas upstream exploration and production. His financial acumen enables Mr. Gannon to guide the Board in its fiscal and strategic oversight of CRC.
• Member of the Nominating and Governance Committee • Member of the Health, Safety and Environmental Committee Mr. Korell has served on the Board of Directors of CRC and as Lead Independent Director since 2014. From 2002 through 2014, Mr. Korell served as the Chairman of the Board of Southwestern Energy Company, an independent energy company engaged in natural gas and oil exploration, development and production. From 2009 to 2010, he served as Southwestern’s Executive Chairman and, from 1999 to 2009, as its Chief Executive Officer. From 1997 to 2009, Mr. Korell served in various other roles at Southwestern, including President and Executive Vice President and Chief Operating Officer. Prior to his tenure at Southwestern, Mr. Korell was Senior Vice President—Operations of American Exploration Company, Executive Vice President of McCormick Resources, held various technical and managerial positions during his 17 years with Tenneco Oil Company, including Vice President of Production, and held various positions with Mobil Corporation. He is a member of the Society of Petroleum Engineers and, through 2010, served as a Board Member for the Independent Petroleum Association of America and the American Exploration & Production Council and as a Board Member and Executive Committee Member for America’s Natural Gas Alliance. He also serves on the Board of Governors at the Colorado School of Mines and the Board of Trustees at the Baylor College of Medicine. Mr. Korell holds a degree in Chemical and Petroleum Refining Engineering from the Colorado School of Mines. CALIFORNIA RESOURCES CORPORATION 8
Board of Directors and Corporate Governance Mr. Korell’s experience over five decades in the oil and gas industry gives him a broad understanding of the upstream oil and gas business as well as the midstream and public utility businesses. Mr. Korell’s leadership during a time of dramatic expansion for his company provides valuable insights into strategic and operational, corporate and governance matters. In addition, Mr. Korell provides a deep understanding of our assets due to his involvement with a number of them early in his career that lend specific knowledge and understanding to Board discussions.
• Member of the Audit Committee • Chairman of the Compensation Committee Mr. McMahon has served on the Board of Directors of CRC since 2017. Since 2015 he has been a Senior Advisor to the G100 Network, a Leadership Advisory Consortium focused on CEO and Board Development. From 1983 to 2015, Mr. McMahon served in various positions for Bank of America Merrill Lynch including, most recently, as Executive Vice Chairman (the firm's first following the merger of Merrill Lynch and Bank of America). His other roles included service as Vice Chairman and Co-Head of Global Corporate Finance of Merrill Lynch and over 25 years running Investment Banking for the firm's Western Region. During his career Mr. McMahon advised on more than 400 transactions. Mr. McMahon also serves as a trustee of Claremont McKenna College, and is a director of Cottage Health Systems and Parsons Corporation. Mr. McMahon received a Master of Business Administration degree from the University of Chicago Booth School of Business and a Bachelor of Arts degree in Economics from Claremont McKenna College. Skills and Qualifications Mr. McMahon's over three decades of investment banking experience provides the Board with deep insight into financial structuring matters and fashioning innovative strategic solutions. His senior managerial roles, including as Executive Vice Chairman of one of the nation's largest banks and as Senior Advisor to the G100 Network, also give him valuable perspectives on maintaining ties between boards and management.
• Chairman of the Health, Safety and Environmental Committee • Member of the Audit Committee CALIFORNIA RESOURCES CORPORATION 9
Board of Directors and Corporate Governance Mr. Moncrief has served on the Board of Directors of CRC since 2014. Mr. Moncrief has been a principal in Moncrief Oil International, Inc., an oil and gas exploration and production company with headquarters in Fort Worth, Texas, since founding the company in 1970. He currently serves as its Chief Executive Officer. Moncrief Oil participates in U.S. and international oil and gas exploration and production. Mr. Moncrief also serves on the boards of trustees for the Amon Carter Museum and the University of Texas Development Board. He holds a Bachelor of Science degree in Petroleum Engineering and is a Distinguished Graduate of the School of Engineering of the University of Texas. Skills and Qualifications Mr. Moncrief’s extensive experience as the head of a large private upstream oil and gas exploration company allows him to bring an in-depth understanding of key industry issues to the Board of Directors. His leadership experience at Moncrief Oil provides him with strategic and management insights from which CRC benefits. Mr. Moncrief offers entrepreneurial expertise forged over years in the business of oil and gas exploration.
• Member of the Compensation Committee • Member of the Nominating and Governance Committee Mr. Poladian has served on the Board of Directors of CRC since 2014. From 2006 to 2016, Mr. Poladian served as Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. Mr. Poladian previously served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen LLP from 1974 to 2002, most recently as a Partner, and is a Certified Public Accountant (inactive). He is a past member of the Young Presidents Organization, the Chief Executive Organization, the California Society of CPAs and the American Institute of CPAs. Mr. Poladian is a director emeritus of the YMCA of Metropolitan Los Angeles, a member of the Board of Councilors of the USC Sol Price School of Policy, a member of the Board of Advisors of the Ronald Reagan UCLA Medical Center, and a former Trustee of Loyola Marymount University. He serves as a director and on the Audit Committees of funds managed by Western Asset Management Funds. He is also a member of the Board of Trustees of Public Storage where he is the Chair of the Audit Committee and the Chair of the Nominating and Corporate Governance Committee. Mr. Poladian also serves as a director of Occidental Petroleum Corporation where he is a member of the Nominating, Corporate Governance and Social Responsibility Committee and chair of the Audit Committee. He previously served as a director of California Pizza Kitchen. CALIFORNIA RESOURCES CORPORATION 10
Board of Directors and Corporate Governance Mr. Poladian’s service in a senior management position at one of the world’s largest accounting firms, combined with his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company, gives Mr. Poladian deep knowledge of key business issues, including personnel and asset utilization. He also provides insight into all aspects of fiscal management. Through his work on the boards of various entities, Mr. Poladian has garnered valuable insight into our business and corporate governance generally.
• Member of the Health, Safety and Environmental Committee Ms. Powers was appointed to the Board of Directors in 2017. Ms. Powers retired from Occidental Petroleum Corporation in January 2017 after more than 30 years of service at Occidental. Prior to her retirement, Ms. Powers served since 2009 as Executive Vice President of Worldwide Exploration for Occidental Oil and Gas Corporation and as Vice President of parent Occidental Petroleum Corporation. From 2006 to 2009, Ms. Powers served as Vice President of Worldwide Exploration. Prior to 2006, Ms. Powers served as Director of Worldwide Geoscience, Vice President of Exploration in Colombia and Chief Exploration Geologist for Worldwide Exploration. Since October 2018, Ms. Powers has served as a director of EQT Corporation. Ms. Powers holds a Bachelor of Science degree in Geology with high honors from Texas A&M University. Skills and Qualifications Ms. Powers brings over 36 years of experience in the oil and gas industry to CRC’s Board. Her expertise as a senior geoscientist working in hydrocarbon provinces around the world and, in particular, her knowledge of California’s geology greatly benefits CRC’s Board. The Board also benefits from her perspective gained from many years of executive management in the industry.
• Member of the Audit Committee • Member of the Compensation Committee CALIFORNIA RESOURCES CORPORATION 11
Board of Directors and Corporate Governance The Board of Directors appointed Ms. Siegel as a director effective as of August 21, 2018. Ms. Siegel is the President of LAS Advisory Services, a firm providing advice to organizations on issues related to talent management, succession planning, organizational capability and culture. From 2003 to 2012, Ms. Siegel served as Senior Vice President of Human Resources and Internal Communications of Tyco International Ltd., a diversified manufacturing and service company. Ms. Siegel had responsibility for rebuilding the leadership team, executing a strategy to restore the confidence of the company's employees and building an HR function with deep expertise in global human resource practices. From 1994 to 2002, she held various positions with Honeywell International Inc., including Vice President of Human Resources — Specialty Materials and was a principal at Strategic Compensation Associates. Ms. Siegel is currently Program Chair of the G100 Talent Consortium. Ms. Siegel is a director and compensation committee chair of the board of directors of CenturyLink, Inc., a broadband, telecommunications and data hosting company, FactSet Research Systems Inc., a multinational financial data and software company, and Volt Information Services, a provider of global infrastructure solutions in technology, information services and staffing acquisition. Ms. Siegel has an MBA and a Master’s degree in City and Regional Planning, both from Harvard University, and a Bachelor’s degree from the University of Michigan. Skills and Qualifications Ms. Siegel brings to our Board substantial experience as a human resources executive with large global enterprises as well as substantial public company board experience. Her background will provide the Board with unique insight into various issues including talent management, succession planning and culture.
• Chairman of the Nominating and Governance Committee Mr. Sinnott was appointed to the Board of Directors of CRC in 2014. Mr. Sinnott is co-chairman of Kayne Anderson Capital Advisors, L.P., an investment management firm. From 2010 until 2016, he served there as President, Chief Executive Officer and Chief Investment Officer. He also served as a Managing Director there from 1992 to 1996 and as its Senior Managing Director from 1996 until assuming the role of Chief Executive Officer in 2010. He is also President of Kayne Anderson Investment Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P. Mr. Sinnott served as a director of Kayne Anderson Energy Development Company from 2006 through 2013. He was Vice President and Senior Securities Officer of the Investment Banking Division of Citibank from 1986 to 1992 and previously held positions with United Energy Resources, a pipeline company, and Bank of America in its oil and gas finance department. Since 1998, Mr. Sinnott has served on the board of PAA GP Holdings LLC and its predecessor entities and currently serves as chairman of its compensation committee. Mr. Sinnott received a Bachelor of Arts degree from the University of Virginia and a Masters of Business Administration from Harvard University. CALIFORNIA RESOURCES CORPORATION 12
Board of Directors and Corporate Governance As President of a California-based investment company investing in energy and other areas, Mr. Sinnott brings extensive insight into the oil and gas and financial industries to the CRC Board of Directors. His responsibility for analyzing industry players and managing a multi-billion dollar investment enterprise allow him to provide insight on a broad variety of matters affecting the oil and gas industry generally and the company specifically. He brings deep understanding of and insight into strategic alternatives, industry trends, deal structures and finance.
Mr. Stevens was appointed President, Chief Executive Officer and a Director of CRC in 2014. Mr. Stevens served as Vice President—Corporate Development of Occidental from 2012 to 2014, as Vice President—California Operations, Oxy Oil & Gas from 2008 to 2012, and as Vice President—Acquisitions and Corporate Finance of Occidental from 2004 to 2012. He also serves on the board of directors of the Western States Petroleum Association. Mr. Stevens holds a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy. Skills and Qualifications Our Board of Directors benefits from Mr. Stevens’ deep knowledge of the oil and gas industry and his expertise in strategically evaluating and valuing oil and gas assets that is derived from years of buying and integrating exploration and production assets, many of which we currently own. Mr. Stevens also brings specific insight into the Company’s operations from his significant managerial experience as an executive at Occidental, including his strong experience in allocating capital and managing Occidental’s and our assets. Mr. Stevens’ extensive experience dealing with California’s regulatory environment, agencies and political landscape and his ability to forge strong ties within the state have proven a valuable asset to the Company. Board Refreshment and Evaluation Identifying and Evaluating Nominees for Directors Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting. CALIFORNIA RESOURCES CORPORATION 13
Board of Directors and Corporate Governance Director Criteria, Qualifications and Experience Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience: independence under applicable standards; business judgment; service on boards of directors of other companies; personal and professional integrity, including commitment to the Company’s core values; willingness to commit the required time to serve as a Board of Directors member; familiarity with the Company and its industry; and such other matters as the committee deems appropriate. The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors. In 2018, the Board of Directors appointed Ms. Siegel as a director, which further diversified the board. Board Evaluations and Incumbent Directors Our Board believes that a robust annual evaluation process is an important part of its governance practices. For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board. The committee distributes written evaluation surveys to each director, and the Chairman of the Board discusses the results of these written surveys with the individual directors. In addition, the Chairman shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness. With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s: past Board and committee meeting attendance and performance; length of Board service; personal and professional integrity, including commitment to the Company’s core values; relevant experience, skills, qualifications and contributions that the existing director brings to the Board; independence under applicable standards; and such other matters as the committee deems appropriate. CALIFORNIA RESOURCES CORPORATION 14
Board of Directors and Corporate Governance The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction. From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest. The Company also makes resources available to individual directors, including access to director education from third party providers. Director Independence Determinations
Majority independent directors 20% non-independent 80% independent The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Gannon, Korell, McMahon, Moncrief, Poladian and Sinnott and Mses. Powers and Siegel are independent directors as that term is defined in the listing standards of the NYSE. Neither Mr. Albrecht, the Chairman of the Board, nor Mr. Stevens, the President and Chief Executive Officer, is considered by the Board of Directors to be an independent director because of his prior or current employment with CRC. CALIFORNIA RESOURCES CORPORATION 15
Board of Directors and Corporate Governance Board Leadership Structure and Committees The Board of Directors’ leadership structure separates the CEO and Chairman of the Board positions. Mr. Stevens currently serves as our President and CEO, and Mr. Albrecht serves as our non-executive Chairman. The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chairman positions, and have an independent director serve as Lead Independent Director working in conjunction with the Chairman. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chairman and Lead Independent Director focus on leading the Board of Directors in its oversight role. The Board of Directors has created the position of Lead Independent Director, selected annually by the Board from among the independent directors. Mr. Korell has served as Lead Independent Director since December 2014, and the Board selected him to continue in this position at the meeting in February 2019. The Board of Directors believes that the Lead Independent Director position provides additional independent oversight for the Board and management. The responsibilities of the Lead Independent Director include acting as chair at meetings of the Board of Directors when the Chairman is not present, and preparing the agenda and presiding over executive sessions of the non-management directors of the Board of Directors. During 2018, the Board of Directors held six meetings, and each of the standing committees held the number of meetings included in the description of the committees set forth below. Each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2018. Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. Nine then-incumbent directors attended the annual meeting in May 2018. Executive Sessions of the Board The Board of Directors intends to hold regularly scheduled meetings of independent directors in executive session without management present in conjunction with each regular board meeting. In addition to these regularly scheduled meetings, executive sessions may be called upon the request of any independent director. In 2018, the Board of Directors held executive sessions on the day of all of the regularly scheduled board meetings. CALIFORNIA RESOURCES CORPORATION 16
Board of Directors and Corporate Governance As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. The membership and purposes of each of the committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.
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Board of Directors and Corporate Governance
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Board of Directors and Corporate Governance The Board’s Role in Risk Oversight Our Company’s management is responsible for the day-to-day management of risks to the Company. The Board of Directors has broad oversight responsibility for our risk management programs. Compensation Committee Interlocks and Insider Participation No member of our Compensation Committee is now, or at any time since the beginning of 2018 has been, employed by or served as an officer of CRC or any of its subsidiaries or had any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or at any time has been, since the beginning of 2018, a member of the compensation committee or board of directors of another entity one of whose executive officers has been a member of our Board of Directors or Compensation Committee. CALIFORNIA RESOURCES CORPORATION 19
Board of Directors and Corporate Governance Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our board, to the Lead Independent Director (who presides over the executive sessions of our independent and non-management directors), or to any director in particular, should be sent to: Board of Directors, committee name or director’s name, as appropriate California Resources Corporation Attention: Corporate Secretary 27200 Tourney Road, Suite 315 Santa Clarita, California 91355 We will forward all correspondence directly to the committee or individual director, as appropriate. Our independent directors approved our process for collecting and organizing stockholder communications to the Board of Directors. If any stockholder or third party has a complaint or concern regarding accounting, internal accounting controls or auditing matters at CRC, they should send their complaint in writing to Mr. Gannon, the Chairman of the Audit Committee, at the address listed above. Availability of Corporate Governance Documents We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Health, Safety and Environmental Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 27200 Tourney Road, Suite 315, Santa Clarita, California 91355. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers. Certain Relationships and Related Transactions Our Board of Directors adopted written policies regarding related party transactions. We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our Corporate Secretary’s office implements procedures to obtain information from the directors and executive officers with respect to related party transactions. The Audit Committee reviews and discusses with management and the independent registered public accounting firm any material related party transactions as defined by, and required to be disclosed under, the rules of the Securities and Exchange Commission (“SEC”) and the NYSE. Agreements that embody transactions that are material in amount or significance are filed with the SEC as required. CALIFORNIA RESOURCES CORPORATION 20
Board of Directors and Corporate Governance Our business ethics and corporate policies prohibit significant conflicts of interest. Any waivers of these policies require approval by the compliance officer, or in the case of conflicts of our executive officers or directors, the Board of Directors. Under our Business Ethics and Corporate Policies, conflicts of interest generally are deemed to occur when private or family interests do not appear impartial, interfere or compete with the interests of our Company. We have multiple processes for reporting conflicts of interests and related party transactions. Under our Business Ethics and Corporate Policies, all of our directors and employees are required to report any known or apparent conflict of interest, or potential conflict of interest, to their supervisors, the compliance officer, a member of the corporate compliance committee, our legal counsel, human resources, or the Board of Directors, as appropriate. As part of any review of any conflict of interest, potential conflict of interest or related party transaction, the following factors are generally considered: the nature of the related person’s interest in the transaction; the material terms of the transaction; the importance of the transaction to the related person; the importance of the transaction to us; whether the transaction would impair the judgment of a director or executive officer to act or their ability to act in our best interest; whether the transaction might affect a director’s independence under NYSE standards; and any other matters deemed appropriate with respect to the particular transaction. We also have other policies and procedures to prevent conflicts of interest and related person transactions. For example, the charter of our Nominating and Governance Committee requires that the committee members assess the independence of the non-management directors at least annually, including a requirement that it determine whether any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described above under “Director Independence Determinations.” This section discusses transactions and relationships with related persons since the beginning of our most recently completed fiscal year. We sell and purchase products with subsidiaries of Plains All American Pipeline, L.P. (“Plains”). Funds managed by Kayne Anderson Capital Advisors L.P., of which Mr. Sinnott serves as co-chairman, and affiliates (“Kayne Anderson”) own approximately 10% of the general partner of Plains, approximately 1.41% of the limited partner units of Plains and an additional approximately 5.04% general partner interest in Plains GP Holdings, L.P. (the public portion of the general partner). Mr. Sinnott serves as a director for the general partner of Plains. For the year ended December 31, 2018, transactions with Plains accounted for approximately $181 million of our net sales. Transactions with Related Persons, Promoters and Certain Control Persons Certain funds controlled by Kayne Anderson Investment Management, Inc. (“Kayne Anderson Investment”), of which Mr. Sinnott serves as President, purchased in 2016, and as of December 31, 2018 continued to hold, approximately $12.5 million in aggregate principal amount of our 8% secured second lien notes due 2022. Mr. Sinnott did not participate in Kayne Anderson’s decision-making process with respect to these transactions. CALIFORNIA RESOURCES CORPORATION 21
Other Governance Matters In 2018, we reached out to our largest shareholders, including those who held in aggregate over one-third of our total outstanding shares, for meetings on corporate governance issues. In the meetings that were arranged, we discussed recent governance changes, board refreshment and diversity practices, and compensation philosophy. We also asked about broader trends and practices on corporate governance for Board feedback and consideration. At the 2018 annual meeting, the Board submitted proposals to amend the Company’s certificate of incorporation to reduce the current supermajority vote thresholds to majority votes. These proposals only received votes for approval from approximately 42% of the total outstanding shares, which were short of the 75% required approval threshold. However, we received feedback from our shareholder engagement meetings that we should resubmit these proposals for consideration at the 2019 Annual Meeting, so the Board has included these proposals in this proxy statement. Sustainability and Stewardship In 2017, CRC consulted with its workforce, state and community leaders, sustainability professionals and labor and non-profit groups about ways to expand our annual HSE metrics and enhance our life-of-field planning process. As a result of this dialogue, CRC adopted four 2030 Sustainability Goals – for water recycling, renewables, methane and carbon – in 2017 which advance California’s 2030 goals and aid in our life-of-field planning process. CRC issued a Sustainability Report describing the goals that year, in addition to its annual water management summary. The report noted that the Sustainability Goals are subject to liquidity, funding and permitting and are measured against a 2013 baseline, the year before CRC launched as an independent company and also a baseline year for certain state goals. In 2018, CRC adopted specific quantitative targets for the Sustainability Goals, and its 2018 Sustainability Report described those targets, the specific projects and teams assigned to each goal and the Company’s progress toward meeting the goals. CRC has committed to report annually on its progress, which is specifically tied to the review of individual performance of Company executives, since our executives have an ability to advance the successful attainment of the Sustainability Goals. The specific 2030 targets against a 2013 baseline and our progress through 2018 are detailed on our website Sustainability page (www.crc.com/sustainability) and the 2018 Sustainability Report which is hosted on the Sustainability page. Our 2030 targets against a 2013 baseline are summarized below: Water Goal -- Increase volume of recycled produced water by 30%. Renewables Goal -- Integrate renewables into oil and gas operations by adding 10 MW from renewable sources. Methane Goal -- Reduce methane emissions by 50%. CALIFORNIA RESOURCES CORPORATION 22
Other Governance Matters Carbon Goal -- Design and permit a carbon capture and sequestration system at Elk Hills by 2030 that would, if permitted, funded and installed, reduce GHG emissions by 30%. CRC’s 2030 Sustainability Goals underscore the Company’s commitment to serve as a responsible steward of California’s natural resources and to advance California’s long-term goals. Importantly, by helping to increase local production of oil, natural gas and electricity, CRC also:
CALIFORNIA RESOURCES CORPORATION 23
Audit Committee Report The Audit Committee of the Board of Directors of California Resources Corporation approves the appointment and services of the independent registered public accounting firm, and monitors (1) the integrity of the financial statements of CRC; (2) the independent registered public accounting firm’s qualifications, independence and performance; (3) the effectiveness and performance of CRC’s internal audit function; (4) CRC’s system of disclosure controls and procedures, internal control structure over financial reporting and compliance with ethical standards; and (5) the compliance by CRC with legal and regulatory requirements related to financial statements. The Board of Directors has determined that each of the members of the Audit Committee satisfies the standards of independence established under the SEC’s rules and regulations and listing standards of the NYSE. The Board of Directors has further determined that each of the members of the Audit Committee is financially literate and that Mr. Gannon is an “audit committee financial expert” as defined by the rules and regulations of the SEC. In connection with our financial statements for the year ended December 31, 2018, the Audit Committee has: reviewed and discussed with management the audited financial statements contained in CRC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018; discussed with CRC’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by applicable auditing standards; received the written disclosures from KPMG LLP as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence; discussed with KPMG LLP its independence from CRC and members of its management; considered any non-audit services in assessing auditor independence; had an executive session with KPMG LLP to provide them with the opportunity to discuss any other matters that they desired to raise without management present; and had an executive session with Ryder Scott Company, CRC’s independent reserves audit firm, to discuss the oil and gas reserves determination process and related public disclosures, and to provide them with the opportunity to discuss any other matters that they desired to raise without management present. Based on the review and discussions with CRC’s management, independent registered public accounting firm and independent reserves audit firm, as set forth above, the Audit Committee recommended to CRC’s Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for filing with the SEC. Audit Committee, Justin A. Gannon Harry T. McMahon Richard W. Moncrief Laurie A. Siegel February 19, 2019 CALIFORNIA RESOURCES CORPORATION 24
Compensation Committee Report Compensation Discussion and Analysis This Compensation Discussion and Analysis (“CD&A”) provides a description of the elements and key features of our compensation program, as well as context and rationale for decisions made with respect to the compensation for our “named executive officers” or “NEOs” for the year ended December 31, 2018, who are identified below:
Table of Contents
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Compensation Committee Report Execution on Our Strategic Priorities in 2018 In 2018, our management team continued to deliver significant accomplishments against our strategic priorities which the Compensation Committee considered as part of its review of management’s performance for compensation purposes.
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Use our Value Creation Index (VCI)(1) metric to ensure consistent, disciplined and effective capital allocation | > Increased investment to $747 million which included over $100 million of development JV capital to support higher activity. At current prices, the program provides VCIs above our threshold and replaced over 296% of reserves with an F&D cost of $8.76.(2)
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Optimize operational performance to capture efficiencies, improve results and reduce costs | > Implemented $34 million of annualized synergies through Elk Hills consolidation, which was significantly more than expected and within a shorter timeframe than originally anticipated. > Managed controllable costs despite increase in activity and energy and fuel gas costs. Quarterly per unit production costs decreased sequentially throughout 2018. > Adjusted EBITDAX margin(3) increased in 2018 from the prior year. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Strengthen our balance sheet | > Negotiated new bank amendments to provide additional flexibility to repurchase notes and > Opportunistically repurchased debt at a > Monetized a
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Compensation Committee Report
Historical Perspective – Drivers of Strategic Priorities CRC was spun off from Occidental Petroleum Corporation on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion, which peaked at $6.765 billion including the effect of the capital program being implemented by Oxy immediately prior to the spin-off, and implemented the spin-off just as a severe and extended downturn in commodity prices began. Our highly leveraged balance sheet, resulting from decisions made by Occidental prior to the spin-off, has been a significant factor disproportionately affecting our stock price performance in a negative manner compared to our industry peers during the recent downturn. For perspective, despite achieving total shareholder returns that were the best of our peer group for 2018 and top quartile for the two-year period 2017-2018, CRC’s equity market capitalization decreased almost 70%, from $2.8 billion at the spin-off to $0.8 billion at December 31, 2018. To address stockholder concerns regarding CRC’s leverage, our management team focused on the difficult task of reducing our debt in the low commodity price environment. Since the second quarter following the spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity. As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers who had greater access to capital because of their lower leverage. CALIFORNIA RESOURCES CORPORATION 27
Compensation Committee Report The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team employed to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate eight amendments to our credit facility, including an amendment in 2018. HISTORY OF PROACTIVE DECISIONS ACTIONS TO REDUCE DEBT CALIFORNIA RESOURCES CORPORATION 28
Compensation Committee Report The table below compares CRC’s stock performance to peers.
In summary, our stock price performance during the industry downturn has been disproportionately affected by the highly leveraged balance sheet that we inherited from Occidental. Our management team has made significant accomplishments in deleveraging the balance sheet and improving CRC’s strategic position to take advantage of potential future commodity price increases. CALIFORNIA RESOURCES CORPORATION 29
Compensation Committee Report Aligning Pay with Stockholder Interests Since our spin-off in 2014, the Compensation Committee has taken several actions to ensure our executive compensation program is aligned with stockholder interests. CALIFORNIA RESOURCES CORPORATION 30
Compensation Committee Report Linkage Between Pay and Performance Our compensation program is well designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing retention incentives necessary to retain our executives through this challenging period. The pay mix at target grant date values for our chief executive officer and other named executive officers for 2018 was primarily long-term and performance-based. CALIFORNIA RESOURCES CORPORATION 31
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The chart below illustrates the degree to which our CEO’s realizable pay has been impacted by changes in the stock price after the grant date, illustrating the significant alignment of CRC’s compensation program with shareholder returns.
Notes regarding the CEO Realizable Pay:
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Compensation Discussion and Analysis
Historical Perspective – Drivers of Strategic Priorities
CRC was spun off from Occidental Petroleum Corporation on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion and implemented the Spin-off just as a severe and extended downturn in commodity prices began.
Our highly leveraged balance sheet, resulting from decisions made by Occidental prior to the Spin-off, has been a significant factor disproportionately affecting our stock price performance in a negative manner compared to our industry peers during the recent downturn. For perspective, CRC’s equity market capitalization decreased almost 70%, from $2.8 billion at the Spin-off to $0.8 billion at December 31, 2017.
To address stockholder concerns regarding CRC’s leverage, our management team focused on the difficult task of reducing our debt in the low commodity price environment. Since the second quarter following the Spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity.
As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers who had greater access to capital because of their lower leverage.
The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team employed to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate seven amendments to our credit facility, including two amendments in 2017.
History of Proactive Decisions
CALIFORNIA RESOURCES CORPORATION 33
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Compensation Discussion and Analysis
The tables below compare CRC’s leverage ratio and stock performance to peers.
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In summary, our stock price performance during the industry downturn has been disproportionately affected by the highly leveraged balance sheet that we inherited from Occidental. Our management team has made significant accomplishments in deleveraging the balance sheet and improving CRC’s strategic position. These actions have positioned CRC for growth as commodity prices recover.
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Compensation Discussion and Analysis
Aligning Pay with Stockholder Interests
Since our Spin-off in 2014, the Compensation Committee has taken several actions to ensure our executive compensation program is aligned with stockholder interests.
Linkage Between Pay and Performance
Our compensation program is well designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing retention incentives necessary to retain our executives through this challenging period.
CALIFORNIA RESOURCES CORPORATION 35
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Compensation Discussion and Analysis
The pay mix at target grant date values for our chief executive officer and other named executive officers for 2017 was primarily long-term and performance-based.
The chart below illustrates the degree to which our CEO’s realizable pay has been impacted by the decline in the stock price since the Spin-off, illustrating the significant alignment of CRC’s compensation program with shareholder returns.
CALIFORNIA RESOURCES CORPORATION 36
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Compensation Discussion and Analysis
Notes regarding the CEO Realizable Pay:
Pre Spin-off Converted Awards are CRC restricted stock awards granted to replace unvested Occidental awards at the time of the Spin-off. These awards were not granted by the CRC Compensation Committee and were not based on CRC service.
Realizable Pay is defined as: (i) base salary paid each year; (ii) actual annual incentive earned for the year; (iii) for option grants, the intrinsic (“in-the-money”) value of each year’s grant as of December 31, 2018; (iv) for restricted stock grants, the value of each year’s grant based on the December 31, 2018 stock price; (v) for performance awards that have vested, the value of the award based on the actual payout percentage and the stock price at December 31, 2018; and (vi) for performance awards that have not vested, the target payout of the award based on the stock price as of December 31, 2018.
2014 realizable Annual Incentive reflects payout at 105% of target. The Compensation Committee exercised negative discretion in the determination of the payout based on economic conditions at the time of the payout, reducing the payout from significantly above target to 105% of target.
2014 realizable Long-Term Incentives are all stock-based and reflect 60% of the target long-term incentive value in the form of stock options that are significantly underwater with an exercise price of $81.10 compared to the stock price of $19.44 as of December 29, 2017.
2015 Base Salary reflects the full year at the CRC Base Salary, which was not increased over the initial Base Salary at the time of the Spin-off.
2015 realizable Annual Incentive reflects payout at 92% of target. The Compensation Committee exercised negative discretion in the determination of the payout based on economic conditions at the time of the payout, reducing the payout from above target to 92% of target.
2014 realizable Long-Term Incentives were all stock-based and reflect 60% of the target long-term incentive value in the form of stock options that are significantly underwater with an exercise price of $81.10 compared to the stock price of $17.04 as of December 31, 2018.
2015 Base Salary reflects the full year at the CRC Base Salary, which was not increased over the initial Base Salary at the time of the Spin-off.
2015 realizable Annual Incentive reflects payout at 92% of target. The Compensation Committee exercised negative discretion in the determination of the payout based on economic conditions at the time of the payout, reducing the payout from above target to 92% of target.
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2019 PROXY STATEMENT |
Compensation Committee Report
2016 realizable Base Salary reflects a 10% reduction from March 2016 to October 2016 implemented to conserve cash during the most severe period of the downturn in oil prices.
2016 target Long-Term Incentives reflect a total grant date value that was 30% lower than the prior year to be consistent with anticipated changes in peer company grant values due to the sustained downturn in oil prices.
2016 realizable Long-Term Incentives reflect the effect on the RSU portion (50% of the target value) of the increase in the stock price from the May 27, 2016 grant date ($15.40) to December 31, 2018 ($17.04).
2017 realizable Long-Term Incentives reflect the effect on the RSU portion (50% of the target value) of the decrease in the stock price from the February 13, 2017 grant date ($18.81) to December 31, 2018 ($17.04).
2018 realizable Long-Term Incentives reflect the effect of the decrease in the stock price from the February 21, 2018 grant date ($18.34) to December 31, 2018 ($17.04).
We regularly request meetings with several of our stockholders to discuss our governance and executive compensation practices. Overall, we received positive feedback on our corporate governance and compensation practices as part of our 2018 stockholder outreach initiative, in particular with regards to the changes we made to our compensation program in 2018:
We will continue to reach out to stockholders to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.
Stockholder Approval of Executive Compensation
Our stockholder advisory vote in 2018 on the compensation paid to our named executive officers in 2017, resulted in a 96.5% approval of such compensation. In adjusting our executive compensation programs, the Compensation Committee considered the results of last year’s advisory vote on executive compensation and many other factors, including the Compensation Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by the Compensation Committee's independent compensation consultant, feedback from our ongoing stockholder outreach initiative and review of data relating to pay practices of our compensation peer group.
CALIFORNIA RESOURCES CORPORATION 33
2019 PROXY STATEMENT
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Compensation Committee Report
Elements of Our Compensation Program
The following core principles form the foundation of our compensation program:
Compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.
A high percentage of senior executives’ pay should be based on performance to ensure the highest level of accountability to stockholders.
Performance-based pay should offer an opportunity for above market compensation when our performance exceeds our goals balanced by the risk of below market compensation when it does not.
Our compensation programs should focus our executives on the long-term performance of the Company, thereby more closely aligning our executives’ interests with those of our stockholders.
Compensation Program Best Practices
Our executive compensation program is well-designed, incorporates best practices and is governed by a highly engaged Compensation Committee. Our short-term and long-term incentive plans are primarily performance-based and are intended to align with the short- and long-term best interests of stockholders. The Compensation Committee has engaged in best practices to further align executive pay with Company performance and to ensure good governance in the following ways:
WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executive officers are stock-based. We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines which require our named executive officers and directors to have meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.
CALIFORNIA RESOURCES CORPORATION 34
2019 PROXY STATEMENT
Compensation Committee Report
WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create ssive or inappropriate risk for the Company. Compensation Peer Group Selection
The Compensation Committee believes that the most relevant compensation peer companies are those that could compete for our talent with similar operating complexity and financial characteristics to CRC. The Compensation Committee reviews the peer companies each year based on the criteria below and adjusts as necessary to ensure alignment with those objectives.
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Asset Value | •Indicator of size •Indicator of geographic footprint, business model, operational complexity and •The Compensation Committee does not believe
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Peer company selection based on equity market capitalization would generally result in companies that are much smaller in complexity and scope of operations than CRC due to our highly leveraged balance sheet and resulting depressed equity market capitalization. The Compensation Committee does not believe that companies with similar equity market capitalizations represent the competitive market for our executive team’s skills and experience and accordingly believes that setting CRC compensation levels consistent with these smaller companies would penalize our management team for factors beyond their control, causing substantial retention problems.
CALIFORNIA RESOURCES CORPORATION 35
2019 PROXY STATEMENT |
Compensation Committee Report
Prior to making 2018 compensation program design decisions in February 2018, the Compensation Committee reviewed our 2017 compensation peer companies and decided an increase in the number of peer companies from 15 to 23 would provide a broader industry perspective. In addition to adding nine companies, Concho Resources Inc. was removed due to its larger size relative to CRC.
Company | Enterprise Value (July 2017) | Asset Value (June 2017) |
Cabot Oil & Gas Corporation | $ 13,376 | $ 5,219 |
Cimarex Energy Co. | $ 11,797 | $ 4,563 |
Diamondback Energy, Inc. * | $ 11,217 | $ 6,784 |
Parsley Energy, Inc. | $ 8,795 | $ 8,086 |
Range Resources Corporation | $ 8,624 | $ 11,621 |
Southwestern Energy Company * | $ 8,009 | $ 7,150 |
Newfield Exploration Company | $ 7,747 | $ 4,595 |
WPX Energy, Inc. | $ 7,400 | $ 7,962 |
RSP Permian, Inc. * | $ 6,643 | $ 5,859 |
Murphy Oil Corporation | $ 6,411 | $ 10,137 |
Energen Corporation | $ 5,990 | $ 4,747 |
Whiting Petroleum Corporation | $ 5,232 | $ 9,405 |
EP Energy Corporation | $ 4,733 | $ 4,888 |
Oasis Petroleum Inc. | $ 4,513 | $ 6,262 |
Laredo Petroleum, Inc. * | $ 4,449 | $ 1,941 |
SM Energy Company | $ 4,323 | $ 6,213 |
Gulfport Energy Corporation * | $ 4,308 | $ 5,294 |
PDC Energy, Inc. * | $ 4,054 | $ 4,657 |
QEP Resources, Inc. | $ 3,906 | $ 7,266 |
Denbury Resources Inc. | $ 3,667 | $ 4,425 |
Matador Resources Company * | $ 3,242 | $ 1,777 |
Carrizo Oil & Gas, Inc. * | $ 2,915 | $ 1,964 |
Callon Petroleum Company * | $ 2,725 | $ 2,582 |
25th Percentile | $ 4,181 | $ 4,579 |
50th Percentile | $ 5,232 | $ 5,294 |
75th Percentile | $ 7,878 | $ 7,208 |
California Resources Corporation | $ 5,655 | $ 6,154 |
Percentile Rank | 53% | 58% |
* 2018 addition to peer group
*
CALIFORNIA RESOURCES CORPORATION 36
2019 PROXY STATEMENT |
Compensation Committee Report
In July 2018, the Compensation Committee reviewed the compensation peer companies and determined that no changes were needed for 2019 compensation planning purposes, other than removing RSP Permian, Inc., in light of its pending acquisition.
Company | Enterprise Value (June 2018) | Asset Value (June 2018) |
Diamondback Energy, Inc. | $14,922 | $ 8,225 |
Cabot Oil & Gas Corporation | $ 11,303 | $ 4,538 |
Parsley Energy, Inc. | $ 11,076 | $ 8,941 |
Cimarex Energy Co. | $ 10,733 | $ 5,260 |
WPX Energy, Inc. | $ 9,332 | $ 8,127 |
Newfield Exploration Company | $ 8,214 | $ 5,122 |
Range Resources Corporation | $ 8,154 | $11,730 |
Energen Corporation | $ 7,850 | $ 5,206 |
Murphy Oil Corporation | $ 7,813 | $ 9,938 |
Whiting Petroleum Corporation | $ 7,630 | $ 7,533 |
Oasis Petroleum Inc. | $ 6,932 | $ 7,639 |
Southwestern Energy Company | $ 6,518 | $ 7,713 |
QEP Resources, Inc. | $ 5,365 | $ 7,609 |
SM Energy Company | $ 5,138 | $ 6,660 |
PDC Energy, Inc. | $ 5,107 | $ 4,522 |
Denbury Resources Inc. | $ 5,206 | $ 4,487 |
EP Energy Corporation | $ 4,857 | $ 4,989 |
Gulfport Energy Corporation | $ 4,304 | $ 6,028 |
Matador Resources Company | $ 4,171 | $ 2,276 |
Carrizo Oil & Gas, Inc. | $ 3,896 | $ 2,539 |
Callon Petroleum Company | $ 3,095 | $ 2,836 |
Laredo Petroleum, Inc. | $ 3,039 | $ 2,088 |
25th Percentile | $ 4,919 | $ 4,526 |
50th Percentile | $ 6,725 | $ 5,644 |
75th Percentile | $ 8,199 | $ 7,695 |
California Resources Corporation | $ 7,471 | $ 6,699 |
Percentile Rank | 56% | 57% |
Prior to making 2019 compensation program design decisions in February 2019, the Compensation Committee removed Energen Corporation in light of its pending acquisition.
CALIFORNIA RESOURCES CORPORATION 37
2019 PROXY STATEMENT |
Compensation Committee Report
In February 2018, the Compensation Committee made 2018 compensation program design decisions focused on paying for performance, motivating and retaining the current management team and managing the remaining shares available for grants with the continued low stock price.
Compensation Program Changes Made for 2018
The Compensation Committee considered feedback received through stockholder outreach and made the following changes to the compensation program for 2018:
Reduced the strategic and individual objective portion of the annual incentive from 40% to 20%
Increased the portion of compensation that is performance-based by granting premium-priced stock options in place of 20% of the long-term incentive that was time-vested restricted stock, resulting in 60% of the long-term incentive value granted as performance-based awards
Changed the long-term performance-based award to be equity-based
2018 Compensation Program Elements
Our 2018 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2018 COMPENSATION PROGRAM ELEMENTS
Restricted Stock ( 40% of LTI) > Time-vested 1/3 per year > Stock- and cash- settled Long-Term Incentive (LTI) Annual incentive base salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative unit costs - Combined production cost and G&A per BOE - CRC change in costs vs. Peer Companies' change > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual incentive award > vci (current year) > production > production costs > ebitdax > debt > hse – injury and illness rate (IIR) > hse – spill prevention > hse – net water supplied to agriculture > individual goals
CALIFORNIA RESOURCES CORPORATION 38
2019 PROXY STATEMENT |
Compensation Committee Report
The Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned. The Compensation Committee adjusted base salaries for some of the NEOs based on the individual’s performance, scope of job responsibilities, internal alignment and position relative to peer group compensation data.
Name | 2018 Annual Base Salary | 2017 Annual Base Salary |
Rationale for Action | |
Todd A. Stevens | $875,000 | $825,000 | Performance and alignment with peer group median | |
Marshall D. Smith | $600,000 | $600,000 | Well positioned internally and against peer group | |
Darren Williams | $450,000 | $450,000 | Well positioned internally and against peer group | |
Charles F. Weiss | $440,000 | $425,000 | Performance and internal alignment | |
Shawn M. Kerns | $400,000 | - | Scope of responsibilities and internal alignment |
2018 Annual Incentive Design
The annual incentive component of our 2018 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures were comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.
Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2018. Target performance criteria were set at levels that would represent successful execution of the 2018 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2018 business plan.
CALIFORNIA RESOURCES CORPORATION 39
2019 PROXY STATEMENT |
Compensation Committee Report
The table below provides the weightings for each performance measure and the threshold, target, and maximum performance criteria as established by the Compensation Committee. Also shown in the table are the actual 2018 results under each quantitative performance measure and the resulting percentage of target bonus payout.
Performance Measure (1) |
Component Weighting (a) |
Threshold (50% Payout) |
Target (100% Payout) |
Maximum (200% Payout) |
2018 Results |
Component Payout as Percent of Target (b) | Resulting % of Target Bonus Payout | ||||
Investment
Value Creation Index (VCI) |
20% |
1.10 |
1.30 |
1.50 |
1.59 |
200% |
40.00% | ||||
Operations
Production Production Costs |
5% 5%
|
124 $908 |
127 $886 |
130 $844 |
132.3 $912 |
200% 0% |
10.00% 0.00% | ||||
Health, Safety & Environmental (HSE) |
10% |
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- Combined IIR (33%) |
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0.60 |
0.50 |
0.40 |
0.50 |
100% |
3.33% | ||||
- Spill prevention rate (33%) |
|
99.9991% |
99.9995% |
99.9998% |
99.9996% |
133% |
4.44% | ||||
- Net water supplied to Ag (34%) |
| 180% | 209% | 238% | 276% | 200% | 6.67% | ||||
Liquidity
- EBITDAX - Debt |
20% 20% |
$762 $5.0 |
$800 $4.5 |
$880 $4.0 |
$1,047 $5.3 |
200% 0% |
40.00% 0.00% | ||||
Total Quantitative Measures |
80% |
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130.56% |
104.45% | ||||||
Strategic and Individual Objectives | 20% | Multiple Individual Measures |
| 0% - 200% | 0% - 40% | ||||||
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| Range of Potential Payouts | 104.45% - 144.45% | |||||
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| Negative Discretion Applied by Compensation Committee | - | |||||
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Final Payout Range
| 104.45% - 144.45% |
(1) | Descriptions of the performance measures: |
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Compensation Discussion and Analysis
2017 Peer GroupPerformance Measure
In February 2017, prior to making 2017 compensation decisions,Description
Value Creation Index
VCI is calculated at year end as the discounted expected future revenue (using SEC pricing) from production of reserves added during 2018 net of production operating expenses and taxes other than income taxes, but before any general and administrative charges and income taxes, divided by the discounted capital invested for 2018, each using a 10% discount rate. The Compensation Committee reviewed our 2016 compensation peer companies and affirmed that they were still appropriatedecided to use as our 2017 compensation peer companies, based onchange the criteria outlined above.
Company | Enterprise Value (September 2016) | Asset Value (June 2016) |
Concho Resources Inc. | $ 22,190 | $ 10,902 |
Cimarex Energy Co. | $ 13,608 | $ 4,532 |
Cabot Oil and Gas Corporation | $ 13,023 | $ 5,570 |
Range Resources Corporation | $ 12,152 | $ 6,380 |
Newfield Exploration Company | $ 10,896 | $ 4,285 |
Whiting Petroleum Corporation | $ 7,353 | $ 10,806 |
Murphy Oil Corporation | $ 7,292 | $ 9,915 |
WPX Energy, Inc. | $ 6,582 | $ 7,862 |
Parsley Energy, Inc. | $ 6,319 | $ 3,290 |
SM Energy Company | $ 5,954 | $ 5,044 |
Energen Corporation | $ 5,844 | $ 4,505 |
QEP Resources, Inc. | $ 5,836 | $ 7,482 |
EP Energy Corporation | $ 4,992 | $ 5,004 |
Denbury Resources Inc. | $ 4,366 | $ 4,990 |
Oasis Petroleum Inc. | $ 4,190 | $ 5,436 |
25th Percentile | $ 5,840 | $ 4,761 |
50th Percentile | $ 6,582 | $ 5,436 |
75th Percentile | $ 11,524 | $ 7,672 |
California Resources Corporation | $ 6,385 | $ 6,476 |
Percentile Rank | 45% | 65% |
CALIFORNIA RESOURCES CORPORATION 40
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Compensation Discussion and Analysis
Prior to making 2018 compensation program design decisions in February 2018, the Compensation Committee reviewed our 2017 compensation peer companies and decided an increase in the number of peer companiespricing assumptions from 15 to 23 would provide a broader industry perspective. In addition to adding nine companies, Concho Resources Inc. was removed due to its size relative to CRC.
Company | Enterprise Value (July 2017) | Asset Value (June 2017) |
Cabot Oil & Gas Corporation | $ 13,376 | $ 5,219 |
Cimarex Energy Co. | $ 11,797 | $ 4,563 |
Diamondback Energy, Inc. | $ 11,217 | $ 6,784 |
Parsley Energy, Inc. | $ 8,795 | $ 8,086 |
Range Resources Corporation | $ 8,624 | $ 11,621 |
Southwestern Energy Company | $ 8,009 | $ 7,150 |
Newfield Exploration Company | $ 7,747 | $ 4,595 |
WPX Energy, Inc. | $ 7,400 | $ 7,962 |
RSP Permian, Inc. | $ 6,643 | $ 5,859 |
Murphy Oil Corporation | $ 6,411 | $ 10,137 |
Energen Corporation | $ 5,990 | $ 4,747 |
Whiting Petroleum Corporation | $ 5,232 | $ 9,405 |
EP Energy Corporation | $ 4,733 | $ 4,888 |
Oasis Petroleum Inc. | $ 4,513 | $ 6,262 |
Laredo Petroleum, Inc. | $ 4,449 | $ 1,941 |
SM Energy Company | $ 4,323 | $ 6,213 |
Gulfport Energy Corporation | $ 4,308 | $ 5,294 |
PDC Energy, Inc. | $ 4,054 | $ 4,657 |
QEP Resources, Inc. | $ 3,906 | $ 7,266 |
Denbury Resources Inc. | $ 3,667 | $ 4,425 |
Matador Resources Company | $ 3,242 | $ 1,777 |
Carrizo Oil & Gas, Inc. | $ 2,915 | $ 1,964 |
Callon Petroleum Company | $ 2,725 | $ 2,582 |
25th Percentile | $ 4,181 | $ 4,579 |
50th Percentile | $ 5,232 | $ 5,294 |
75th Percentile | $ 7,878 | $ 7,208 |
California Resources Corporation | $ 5,655 | $ 6,154 |
Percentile Rank | 53% | 58% |
CALIFORNIA RESOURCES CORPORATION 41
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Compensation Discussion and Analysis
In 2017, the Compensation Committee continued its focus on paying for performance in the context of a depressed commodity price environment and the significant debt burden the management team inherited at the Spin-off, which has driven the severely depressed stock price performance.
Occidental’s decision to spin off CRC with a highly leveraged balance sheet, and the resulting impact on the share price5-year Brent strip, held stable after 5 years, due to the sustained downturnextreme volatility of Brent pricing at year end. The SEC pricing has been less volatile, is consistent with reserve reporting requirements and better reflects the conditions under which management makes its investment decisions that result in the VCI achieved.
Production
Total production in thousands of barrels of oil prices, has continuedequivalent per day (Boep/d)
Production Costs
Absolute production cost (millions)
HSE – Combined IIR
Injury and illness incidence rate of employees and contractors
HSE – Spill Prevention Rate
(Boe produced minus net reportable oil spill volume) divided by Boe produced
HSE – Net water supplied to drive retention challenges dueAg
Volume of water supplied to agriculture divided by volume of fresh water purchased
EBITDAX
Adjusted EBITDAX (millions) excluding EBITDAX attributable to the significant reduction in realizable compensation under our previously granted long-term awards. For 2017, as in 2016, the Compensation Committee believed it was in the stockholders’ best interests to retain the current management team by providing a compensation program that mitigates someBSP JV ($70 million). See Annex A for CRC’s calculation of the share price volatility that is outsideadjusted EBITDAX.
Debt
Face value of the management team’s control while they continue to work to reduce the Company’s debt.outstanding debt less available cash (billions)
2017 Compensation Program Elements
Our 2017 compensation program for our CEO and other NEOs was comprised of the following elements, which are discussed in more detail below:
2017 COMPENSATION PROGRAM ELEMENTS
CALIFORNIA RESOURCES CORPORATION 40
2019 PROXY STATEMENT
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Compensation Committee Report
All executives were subject to the same Investment, Operations, Health, Safety and Environmental, and Liquidity quantitative measures. The actual 2018 results against these goals yielded a payout of 130.56% of target for the quantitative measures portion of the annual incentive.
The Compensation Committee reviewed the annual incentive targets for each of our NEOs against Peer Group market data, and with consideration to internal equity. In February 2018, the Compensation Committee determined that the 2018 annual incentive targets for the NEOs, other than Mr. Kerns, remained appropriate at the 2017 levels and no changes were made for 2018. For Mr. Kerns, the Compensation Committee determined his target based on the scope of his job, Peer Group market data and internal equity.
The Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data, as well as from an internal perspective. The Compensation Committee determined that no base salary adjustments were necessary for the NEOs other than for Mr. Barnes, where the Compensation Committee approved an increase from $400,000 to $415,000, reflecting Mr. Barnes’ increased job responsibilities after assuming operational authority over all of CRC’s North and South operations.
Name | 2017 Annual Base Salary | 2016 Annual Base Salary |
Todd A. Stevens | $825,000 | $825,000 |
Marshall D. Smith | $600,000 | $600,000 |
Robert A. Barnes | $415,000 | $400,000 |
Charles F. Weiss | $425,000 | $425,000 |
Darren Williams | $450,000 | $450,000 |
2018 Annual Incentive | |
| 110% |
Marshall D. Smith | 100% |
Darren Williams | 90% |
Charles F. Weiss | 75% |
Shawn M. Kerns | 80% |
2018 Individual Annual Incentive Results
For each of our NEOs, the executive’s performance in 2018 was considered against his strategic and individual objectives in determination of the payout amounts under the 2018 Annual Incentive as described below. Each of the NEOs had individual objectives covering some of the following areas:
- | Execution of
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| - | Debt management |
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Compensation Discussion and Analysis
The table below provides the weightings for each performance measure-
Quality and the threshold, target,consistency of risk management efforts
- | Results of ongoing and |
- | Outreach and |
- | Succession planning and leadership development |
- | Stockholder relations |
The following tables present a partial list of the accomplishments the Compensation Committee reviewed in determining the payout amounts for each of the NEOs.
CALIFORNIA RESOURCES CORPORATION 41
2019 PROXY STATEMENT |
Compensation Committee Report
Todd A. Stevens – President and Chief Executive Officer
Performance Measure (1) |
Component Weighting (a) |
Threshold (50% Payout) |
Target (100% Payout) |
Maximum (200% Payout) |
2017 Results |
Component Payout as Percent of Target (b) | Resulting % of Target Bonus Payout | ||||
Investment
Value Creation Index (VCI) |
5% |
1.1 |
1.3 |
1.5 |
1.71 |
200% |
10.00% | ||||
Operations
Production Production Costs per BOE G&A Expenses |
5% 5% 5% |
127 $19.25 $280 |
130 $18.75 $270 |
133 $17.75 $250 |
129.4 $18.68 $268 |
90% 107% 110% |
4.50% 5.35% 5.50% | ||||
Health, Safety & Environmental (HSE) |
5% |
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- Combined IIR (33%) |
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0.55 |
0.50 |
0.45 |
0.62 |
0% |
0.00% | ||||
- Spill prevention rate (33%) |
| 99.9993% | 99.9995% | 99.9997% | 99.9999% | 200% | 3.33% | ||||
- Increase in net water supplied to Ag (33%) |
| 182% | 209% | 236% | 289% | 200% | 3.33% | ||||
Liquidity
- EBITDAX - Interest Coverage - Debt |
10% 10% 15% |
$676 1.00 $5.00 |
$710 1.20 $4.75 |
$782 1.60 $4.50 |
$761 1.92 $5.3 |
171% 200% 0% |
17.08% 20.00% 0.00% | ||||
Total Quantitative Measures |
60% |
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115.17% |
69.09% | ||||||
Strategic and Individual Objectives | 40% | Multiple Individual Measures |
| 0% - 200% | 0% - 80% | ||||||
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| Range of Potential Payouts | 69.09% - 149.09% | |||||
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| Negative Discretion Applied by Compensation Committee | - | |||||
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Final Payout Range
| 69.09% - 149.09% |
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Objective Area
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CALIFORNIA RESOURCES CORPORATION 44
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Compensation DiscussionExecution of strategic plan and Analysis initiatives
Debt Management
Executed a large midstream joint venture which provided funding for the purchase of Chevron’s interest in the former Elk Hills unit, providing greater flexibility at our flagship asset to be able to create value and continue to drive down costs.
Executed upstream joint ventures that made an immediate impact, helping CRC manage cash flow and add value through proving up additional inventory and de-risking existing inventory.
Restructured the organization around focus on VCI and management of cash margins, pushing ownership, decision making and responsibility down in the organization with a focus on allocating human capital to the same Investment, Operations, Health, Safetymost valuable projects and Environmental,managing field level operating costs and Liquidity quantitative measures. The actual 2017 results against these goals yieldedG&A.
Maintained focus on controllable costs as activity ramped up through the year and then tempered at year-end due to extreme oil price volatility.
Continued execution of opportunistic hedging strategy targeting 50% of oil production, underpinning cash flows and maximizing liquidity, resulting in a payout of 115.17% of targetnet derivative gain for the quantitative measures portion2018.
Obtained reaffirmation of the annual incentive.borrowing base under our credit agreements while removing assets from the borrowing base, creating greater flexibility for debt repurchases.
Outreach and dialogue with stakeholders on key community and public policy issues
The Compensation Committee reviewed the annual incentive targets for each of our NEOs against Peer Group market data,
Engaged on industry specific and business-related issues by maintaining and developing working relationships with consideration to internal equity. In February 2017, the Compensation Committee determinedkey policy and decision makers in local and state governments so that the 2017 annual incentive targets for the NEOs other than the CEO remained appropriateCRC has a seat at the 2016 levels. For the CEO, the Compensation Committee determined that an increase was warranted to bring his target in line with the Peer Group median.
Name | 2017 Annual Incentive Target | 2016 Annual Incentive Target |
Todd A. Stevens | 110% | 100% |
Marshall D. Smith | 100% | 100% |
Robert A. Barnes | 90% | 90% |
Charles F. Weiss | 75% | 75% |
Darren Williams | 90% | 90% |
2017 Individual Annual Incentive Results
For each of our NEOs, the executive’s performance in 2017 was considered against his strategic and individual objectives in determination of the payout amounts under the 2017 Annual Incentive as described below. Each of the NEOs had individual objectives covering the following areas:
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Todd A. Stevens – President and Chief Executive Officer
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Championed community involvement through company support for employee engagement in the communities where we live and work.
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CALIFORNIA RESOURCES CORPORATION 45Stockholder relations
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Compensation DiscussionParticipated in 19 equity and Analysis 4 debt conferences during 2018, along with 7 non-deal road shows.
Met with over 670 different investors throughout 2018. Continued to receive positive feedback from our largest holders. | |
Quality and consistency of risk management efforts | Constantly reinforced safety culture and importance of environmental protection, resulting in achievement of record or near record environmental performance with respect to spills, air emissions, and water delivered to agriculture. Achieved third best safety year on record despite the increased activity for the year.
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CALIFORNIA RESOURCES CORPORATION 42
2019 PROXY STATEMENT | |
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Compensation Committee Report
Formalized the mentor program structured with senior advisors in the engineering and geoscience functions to provide future leaders with access to resources to help develop leadership skills. Supported formal external leadership training program for future leaders. Identified key personnel risks and created succession plans to mitigate risks.
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Marshall D. Smith – Senior Executive Vice President and Chief Financial Officer
Objective Area | Accomplishments and Actions |
Debt management | Completed eighth amendment of CRC’s senior bank facility and first amendment of the 2017 credit agreement, restoring $300 million of repurchase capacity and allowing us to repurchase debt at a discount with no time limit, enhancing our ability to refinance the 2016 and 2017 term loans. |
Lead borrowing base reviews resulting in affirmation of the borrowing base even with significant non-core properties removed from borrowing base properties, creating greater flexibility for debt repurchases. | |
Stockholder relations | Effectively communicated with both equity and fixed income investors (including banks) on CRC’s value proposition and strategic direction. Developed and maintained critical relationships necessary to facilitate negotiations on debt management. |
Darren Williams – Executive Vice President – Operations and Geoscience
Objective Area | Accomplishments and Actions |
Execution of strategic plan and initiatives | Implemented new Operations Resources organization to provide consistent and efficient execution across all of CRC’s assets. Instilled culture of drill readiness and long-term planning, resulting in growth of permit inventory. Delivered 10-well exploration program generating over $170 million net PV10 with a fully-burdened VCI of 1.5, primarily funded through farmout agreements. Oversaw refocused 2018 investment plan leading to sustained organic production growth in second half of 2018. Focused on value and margins, delivering significant increases in operating area margins from Q1 to Q4. Supported Geoscience teams to present at external conferences which showcased quality of CRC assets and technical capabilities. |
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CALIFORNIA RESOURCES CORPORATION 43
2019 PROXY STATEMENT | |
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Compensation Committee Report
Charles F. Weiss – Executive Vice President – Public Affairs
Objective Area | Accomplishments and Actions |
Quality and consistency of risk management efforts | Delivered effective risk evaluation, mechanical integrity and HSE assessment programs for significant pipelines and facilities. Championed the Safety Leadership Team and programs that enabled CRC to meet or exceed our 2018 quantitative HSE metrics and qualitative objectives. Obtained third party revalidation of CRC’s HSE management system. Successfully completed multiple pipeline audits, major emergency drills and targeted HSE awareness campaigns to sustain exemplary performance and regulatory compliance.
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Outreach and dialogue with stakeholders on key community and public policy issues
Oversaw implementation of CRC’s Community Outreach Plan to increase our advocacy and education on energy literacy and the importance of local production, leveraging our workforce and coalitions with business, labor, agriculture and diverse community organizations.
Robert A. Barnes – Executive Vice President – OperationsRevised CRC’s Sustainability Report and achieved the highest environmental and second highest social rating from an industry leading corporate governance advisor.
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Shawn M. Kerns – Executive Vice President – Operations and Engineering
Objective Area | Accomplishments and Actions |
Execution of strategic plan and initiatives |
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CALIFORNIA RESOURCES CORPORATION 46
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Compensation Discussion and Analysis
Charles F. Weiss – Executive Vice President – Public Affairs
Succession planning and leadership development
Outreach and dialogue with stakeholders on key community and public policy issues
Exceeded 2018 production targets with organic growth from our development program.
Supported operational excellence efforts, resulting in quarterly per unit operating costs decreasing sequentially through 2018.
Successfully executed capital program of 343 wells with VCI in excess of 1.6 while replacing more than 100% of reserves from Improved recovery and development programs.
Delivered near record safety and environmental performance with 20% improvement in HSE safety metrics.
Negotiated and closed the Elk Hills midstream Joint Venture transaction.
Delivered operational synergies from the Elk Hills acquisition ahead of schedule, exceeding initial estimates.
Mentored Operations leadership team and supporting staff.
Led effort with support from Engineering Mentors to define technical and engineering management training and succession planning programs.
Sponsored community outreach teams and attended numerous stakeholder events in the communities where we operate, participating as a guest or keynote speaker at six industry events to champion CRC’s efforts in local communities.
Supported efforts to receive recognition for CRC as corporate citizen of the year in a local community where we operate.
CALIFORNIA RESOURCES CORPORATION 44
2019 PROXY STATEMENT |
Compensation Committee Report
The Compensation Committee assessed the CEO’s performance against his Strategic and Individual objectives to be above target, but decided to limit his individual component result to approximately target due to CRC’s negative shareholder return for the year. The CEO’s assessments of the other NEOs against their respective Strategic and Individual objectives were also above target, but were similarly limited, other than Mr. Kerns. The Compensation Committee approved the following 2018 annual incentive payouts:
Name |
| Base Salary |
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| Target (% of Salary) |
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| (a) Target in $ |
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| (b) Quantitative Component $ [80% * (a) * 130.56%] |
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| (c) Individual Component Result (% of target) |
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| (d) Individual Component $ [20% * (a) * (c)] |
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| (e) Total Payout $ [(b) + (d)] |
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| Total % of Target [(e) / (a)] |
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Todd A. Stevens |
| $ | 875,000 |
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| 110% |
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| $ | 962,500 |
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| $ | 1,005,300 |
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| 101% |
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| $ | 194,700 |
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| $ | 1,200,000 |
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| 125% |
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Marshall D. Smith |
| $ | 600,000 |
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| 100% |
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| $ | 600,000 |
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| $ | 626,700 |
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| 103% |
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| $ | 123,300 |
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| $ | 750,000 |
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| 125% |
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Darren Williams |
| $ | 450,000 |
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| 90% |
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| $ | 405,000 |
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| $ | 423,000 |
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| 107% |
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| $ | 87,000 |
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| $ | 510,000 |
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| 126% |
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Charles F. Weiss |
| $ | 440,000 |
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| 75% |
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| $ | 330,000 |
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| $ | 344,700 |
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| 122% |
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| $ | 80,300 |
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| $ | 425,000 |
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| 129% |
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Shawn M. Kerns |
| $ | 400,000 |
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| 80% |
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| $ | 320,000 |
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| $ | 334,200 |
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| 181% |
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| $ | 115,800 |
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| $ | 450,000 |
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| 141% |
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2018 Long-Term Incentives
For 2018, the long-term incentives consisted of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consisted of performance stock unit awards and premium-priced stock options.
2018 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%
CALIFORNIA RESOURCES CORPORATION 45
2019 PROXY STATEMENT | |
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Compensation Committee Report
2018 Restricted Stock Unit Award–The 2018 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 60% in shares and 40% in cash with required tax withholding taken first from the cash portion of the payout, in order to manage the remaining shares available for awards under the LTIP.
2018 Performance Stock Unit Award –The 2018 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on CRC’s unit costs per Boe relative to industry peers with similar cost structures and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 60% in stock and 40% in cash. For payouts greater than the target number of units, the payout of units in excess of target will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payout, in order to manage the remaining shares available for awards under the LTIP.
The performance measures for the 2018 PSU Award continued to focus the management team on making decisions that will enhance shareholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative cost performance metrics ensure that management continues to control costs and maximize our margins over the long term relative to our peers. These factors are within management’s control.
The peer companies chosen for the relative unit cost performance measures under these awards were selected based upon companies with similar asset and operating cost characteristics to CRC, rather than similar size to CRC as used for compensation benchmarking purposes. The peer companies selected by the Compensation Committee for the 2018 PSU Award are: Anadarko Petroleum Corporation, BP p.l.c., Canadian Natural Resources Limited, Cenovus Energy Inc., Chevron Corporation, ConocoPhillips Company, Denbury Resources Inc., Exxon Mobil Corporation, Hess Corporation, Husky Energy Inc., Imperial Oil Limited, Marathon Oil Company, Occidental Petroleum Corporation, Royal Dutch Shell plc, and Suncor Energy Inc. This peer group was not used for compensation benchmarking purposes.
CALIFORNIA RESOURCES CORPORATION 46
2019 PROXY STATEMENT | |
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Darren Williams – Executive Vice President – Exploration
Compensation Committee Report
The PSU Award will vest at the end of three years from the grant date contingent on the Compensation Committee’s certification of achievement of the performance measures shown below:
Key Features of the 2018 Performance Stock Unit Award
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Award Feature | Unit Cost Component | Value Creation Index | |
Component Weight | 50% | 50% | |
Performance Period | January 1, 2018 – | January 1, 2018 – | |
Performance Measure | Change in CRC Cost per Boe minus Change in Peer Group Cost per Boe where: • Change in CRC Cost per Boe is the percentage change in weighted average of CRC’s Cost per Boe for the years 2018, 2019 and 2020, weighted by CRC’s production for each year compared to CRC’s Cost per Boe for the year 2017. • Change in Peer Group Cost per Boe is the percentage change in the average of the Cost per Boe for the peer companies for 2018, 2019 and 2020 compared to the Average Cost per Boe for the peer companies for 2017 for domestic operations. • Cost per Boe is the sum of production costs and general and administrative expenses measured on a per-Boe basis. | Cumulative VCI calculated as the weighted average of the VCI results for 2018, 2019, and 2020, weighted based on discounted capital invested for each year. | |
Payout Range (1) | Threshold Payout | 50% of Target | 50% of Target |
Performance Resulting in Threshold Payout | Change in CRC cost per Boe compared to change in Peer Group cost per Boe not more than +10% | Cumulative VCI of 1.1 | |
Target Payout | 100% of Target | 100% of Target | |
Performance Resulting in Target Payout | Change in CRC cost per Boe equal to change in Peer Group cost per Boe | Cumulative VCI of 1.3 | |
Maximum Payout | 200% of Target | 200% of Target | |
Performance Resulting in Maximum Payout | Change in CRC cost per Boe compared to change in Peer Group cost per Boe at most -10% | Cumulative VCI of 1.5 or higher |
Based on the Compensation Committee’s performance assessment of our CEO and the CEO’s assessments of the other NEOs against their respective Strategic and Individual objectives, the Compensation Committee approved the following 2017 annual incentive payouts:
Name |
| Base Salary |
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| Target (% of Salary) |
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| (a) Target in $ |
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| (b) Quantitative Component $ [60% * (a) * 115.17%] |
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| (c) Individual Component Result (% of target) |
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| (d) Individual Component $ [40% * (a) * (c)] |
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| (e) Total Payout $ [(b) + (d)] |
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| Total % of Target [(e) / (a)] |
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Todd A. Stevens |
| $ | 825,000 |
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| 110% |
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| $ | 907,500 |
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| $ | 627,100 |
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| 150% |
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| $ | 542,900 |
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| $ | 1,170,000 |
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| 129% |
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Marshall D. Smith |
| $ | 600,000 |
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| 100% |
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| $ | 600,000 |
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| $ | 414,600 |
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| 181% |
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| $ | 435,400 |
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| $ | 850,000 |
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| 142% |
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Robert A. Barnes |
| $ | 415,000 |
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| 90% |
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| $ | 373,500 |
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| $ | 258,100 |
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| 112% |
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| $ | 166,900 |
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| $ | 425,000 |
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| 114% |
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Charles F. Weiss |
| $ | 425,000 |
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| 75% |
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| $ | 318,750 |
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| $ | 220,300 |
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| 196% |
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| $ | 249,700 |
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| $ | 470,000 |
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| 147% |
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Darren Williams |
| $ | 450,000 |
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| 90% |
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| $ | 405,000 |
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| $ | 279,900 |
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| 167% |
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| $ | 270,100 |
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| $ | 550,000 |
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| 136% |
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CALIFORNIA RESOURCES CORPORATION 47
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Compensation Discussion and Analysis
The extraordinarily severe industry conditions continued into the first half of 2017 and prompted the Compensation Committee to continue the 2016 design of our performance-based long-term incentive awards to address the following objectives:
Retention of our management team in light of the substantial erosion of realizable pay caused by the linkage of the long-term incentive program to the leverage, financial risk profile and volatility of the share price as a result of the debt placed on our balance sheet by Occidental.
Minimize stockholder dilution as a result of the continued low share prices at the time of the 2017 grants.
Ensure a long-term incentive risk profile consistent with long-term interests of stockholders.
Motivation of our executives to impact positive change in areas over which they have control, noting that the stock price performance is strongly influenced by the balance sheet leverage that is largely outside of management’s control.
For 2017, our long-term incentives were provided in a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant values were allocated half to time-vested restricted stock unit awards and half to performance-based awards, which are described under 2017 Performance Incentive Award below. We did not grant any stock options in 2017.
The Compensation Committee decided to increase grant date target values of our 2017 long-term incentives based on anticipated changes in competitive compensation levels among our peers with improving industry conditions and to restore values to pre-2016-reduction levels to address retention concerns. The grant date target values of our 2016 long-term incentive values were 30% lower than 2015 levels to be consistent with anticipated reductions by CRC’s peer companies during the severe downturn.
CALIFORNIA RESOURCES CORPORATION 48
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Compensation Discussion and Analysis
2017 Restricted Stock Unit Award–The 2017 Restricted Stock Unit Award (RSU Award) is a stock-based, stock-settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date.
2017 Performance Incentive Award –The 2017 Performance Incentive Award (PIA Award) is a cash-based, cash-settled long-term performance award with performance measures based 50% on CRC’s unit costs per BOE relative to industry peers with similar cost structures and 50% on VCI, both measured over a three-year period. This award structure addressed the above concerns as follows:
The performance measures for the 2017 PIA Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative cost performance metrics ensure that management continues to control costs and maximize our margins over the long term relative to our peers. These factors are within management’s control.
The cash-based nature of the PIA Award reduced the overall risk profile and volatility of the total compensation program since the target performance award value is not directly linked to the stock price. The amounts that will be realized by the executives will be driven solely by the results attained against the performance measures. While these awards do not have the direct stockholder alignment that a stock-based award would have, the Compensation Committee determined that (a) success in achieving these performance measures should contribute directly to improved stock price performance and is within management’s control and (b) stockholder interests would be better served in this extraordinary situation by promoting retention of the current management team.
The cash-settled nature of the PIA Award eliminates the potential stockholder dilution that would have been created by granting stock-settled performance awards in a low stock price environment.
The peer companies chosen for the relative unit cost performance measures under these awards were selected based upon companies with similar asset and operating cost characteristics to CRC, rather than similar size to CRC as used for compensation benchmarking purposes. The peer companies selected by the Compensation Committee for the 2017 PIA Award are: Anadarko Petroleum Corporation, BP p.l.c., Canadian Natural Resources Limited, Cenovus Energy Inc., Chevron Corporation, ConocoPhillips Company, Denbury Resources Inc., Exxon Mobil Corporation, Hess Corporation, Husky Energy Inc., Imperial Oil Limited, Marathon Oil Company, Occidental Petroleum Corporation, Royal Dutch Shell plc, and Suncor Energy Inc. This peer group was not used for compensation benchmarking purposes.
Grant amounts related to the 2017 PIA Awards do not appear in the Summary Compensation Table (SCT) for 2017 on page 59, since they are not equity-based awards. Rather, the cash amounts earned, if any, under the awards will appear in the SCT for 2020, the year the award will be paid.
The PIA Award will vest at the end of three years from the grant date based on achieved performance against pre-determined performance criteria. The following table summarizes key features of the PIA Award granted to our named executive officers.
CALIFORNIA RESOURCES CORPORATION 49
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Compensation Discussion and Analysis
Key Terms of the 2017 Performance Incentive Award
Award Feature | Unit Cost Component | Value Creation Index | |
Component Weight | 50% | 50% | |
Performance Period | January 1, 2017 – | January 1, 2017 – | |
Performance Measure | Change in CRC Cost per barrel of oil equivalent (“BOE”) minus Change in Peer Group Cost per BOE where: • Change in CRC Cost per BOE is the percentage change in weighted average of CRC’s Cost per BOE for the years 2017, 2018 and 2019, weighted by CRC’s production for each year compared to CRC’s Cost per BOE for the year 2016. • Change in Peer Group Cost per BOE is the percentage change in the average of the Cost per BOE for the peer companies for 2017, 2018 and 2019 compared to the Average Cost per BOE for the peer companies for 2016. • Cost per BOE is the sum of production costs and general and administrative expenses measured on a per-BOE basis. | Cumulative VCI calculated as the weighted average of the VCI results for 2017, 2018, and 2019, weighted based on discounted capital invested for each year. | |
Vesting Date | February 12, 2020 | ||
Form of Payout | Cash | ||
Payout Range (1) | Threshold Payout | 75% of Target | 75% of Target |
Performance Resulting in Threshold Payout | Change in CRC cost per BOE compared to change in Peer Group cost per BOE not more than +10% | Cumulative VCI of 1.1 | |
Target Payout | 100% of Target | 100% of Target | |
Performance Resulting in Target Payout | Change in CRC cost per BOE equal to change in Peer Group cost per BOE | Cumulative VCI of 1.3 | |
Maximum Payout | 200% of Target | 200% of Target | |
Performance Resulting in Maximum Payout | Change in CRC cost per BOE compared to change in Peer Group cost per BOE at most -10% | Cumulative VCI of 1.5 or higher |
(1) | Payouts interpolated |
CALIFORNIA RESOURCES CORPORATION 50
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Compensation Discussion and Analysis
In February 2018, the Compensation Committee made 2018 compensation program design decisions focused on paying for performance retention of the current management teamresults between threshold and managing shareholder dilution with the continued low stock price.
Compensation Program Changes Made for 2018
The Compensation Committee considered feedback received through stockholder outreachtarget or target and made the following changes to the compensation program for 2018:
Reduced the strategic and individual objective portion of the annual incentive to 20%
Increased the portion of compensation that is performance-based by granting stock options in place of a portion of the long-term incentive that was time-vested restricted stock
Changed the long-term performance-based award to be equity-based
2018 Compensation Program Elements
Our 2018 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2018 CEO COMPENSATION PROGRAM ELEMENTS
CALIFORNIA RESOURCES CORPORATION 51
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Compensation Discussion and Analysis
The annual incentive component of our 2018 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures were comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.
Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2018. Target performance criteria were set at levels that would represent successful execution of the 2018 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2018 business plan.
The table below provides the weightings for each performance measure as established by the Compensation Committee.
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CALIFORNIA RESOURCES CORPORATION 47
2019 PROXY STATEMENT | ||
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All executives are subject to the same Investment, Operations, Health, Safety and Environmental, and Liquidity quantitative measures.
CALIFORNIA RESOURCES CORPORATION 52
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Compensation Discussion and Analysis
For 2018, the long-term incentives consist of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consist of performance stock unit awards and stock options.
2018 Restricted Stock Unit Award –The 2018 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 60% in shares and 40% in cash with required tax withholding taken first from the cash portion of the payout.
2018 Performance Stock Unit Award –The 2018 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on CRC’s unit costs per BOE relative to industry peers with similar cost structures and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 60% in stock and 40% in cash. For payouts greater than the target number of units, the payout of units in excess of target will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payouts.
The performance measures for the 2018 PSU Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative cost performance metrics ensure that management continues to control costs and maximize our margins over the long term relative to our peers. These factors are within management’s control.
The peer companies chosen for the relative unit cost performance measures under these awards are the same as those selected by the Compensation Committee for the 2017 PIA Award as shown on page 49.
The PSU Award will vest at the end of three years from the grant date based on achieved performance against pre-determined performance criteria.
CALIFORNIA RESOURCES CORPORATION 53
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Compensation Discussion and Analysis
Compensation Committee Report
2018 Stock Options – The Compensation Committee granted stock options as part of the 2018 long-term incentive awards to further align executives with stockholders. The 2018 stock options were premium-priced, granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.
The Compensation Committee reviewed the long-term incentive grant date target values of the NEOs to determine if they remained appropriately positioned against the peer group compensation data and internally aligned. The Compensation Committee adjusted the long-term incentive grant date values for the CEO and some of the other NEOs based on such factors as the individual’s performance, increased job responsibility and position relative to peer group compensation data.
Name | 2018 LTI Grant Date Target Value | 2017 LTI Grant Date Target Value |
Rationale for Action | |
Todd A. Stevens | $5,200,000 | $4,800,000 | Performance and position relative to peer group | |
Marshall D. Smith | $1,900,000 | $1,900,000 | Well positioned internally and relative to peer group | |
Darren Williams | $1,050,000 | $1,000,000 | Scope of responsibilities and internal alignment | |
Charles F. Weiss | $1,100,000 | $1,100,000 | Well positioned internally and relative to peer group | |
Shawn M. Kerns | $1,150,000 | - | Scope of responsibilities and internal alignment |
CALIFORNIA RESOURCES CORPORATION 48
2019 PROXY STATEMENT |
Compensation Committee Report
In February 2019, the Compensation Committee made 2019 compensation program design decisions continuing to focus on paying for performance, retention of the current management team and managing shareholder dilution with a continued low stock price.
Compensation Program Changes Made for 2019
The Compensation Committee considered the favorable feedback received through stockholder outreach regarding the changes to the compensation program made in 2018 and determined that the structure of the program remained appropriate for 2019 with the following changes to the performance metrics under the program’s performance-based awards:
Reduced the number of metrics under the Annual Incentive to provide greater focus on key objectives
Changed a performance metric under the Performance Stock Unit award to a relative total shareholder return measure
2019 Compensation Program Elements
Our 2019 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2019 COMPENSATION PROGRAM ELEMENTS
Restricted Stock ( 40% of LTI) > Time-vested 1/3 per year > Stock- and cash- settled Long-Term Incentive (LTI) Annual incentive base salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative total shareholder return (TSR) – CRC vs. 2019 peer companies > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual incentive award > vci (current year) > ebitdax > debt > hse – injury and illness rate (IIR) > hse – spill prevention > hse – net water supplied to agriculture > individual goals
CALIFORNIA RESOURCES CORPORATION 49
2019 PROXY STATEMENT |
Compensation Committee Report
The annual incentive component of our 2019 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures are comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.
Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2019. Target performance criteria were set at levels that would represent successful execution of the 2019 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2019 business plan.
The table below provides the weightings for each performance measure as established by the Compensation Committee.
Performance Measure (1) | Component Weighting | |
Investment Value Creation Index (VCI) | 25% | |
Operations | ||
Health, Safety & Environmental (HSE) | 10% | |
- Combined IIR (33%) | ||
- Spill prevention rate (33%) | ||
- Net water supplied to Ag (33%) | ||
Liquidity EBITDAX Debt | 25% 20% | |
Total Quantitative Performance Measures | 80% | |
Strategic and Individual Objectives | 20% | |
Total | 100% |
(1) | Descriptions of the quantitative performance measures are as follows: |
Performance Measure | Description |
Value Creation Index | VCI as calculated for 2019 activity |
HSE – Combined IIR | Injury and illness incidence rate of employees and contractors |
HSE – Spill Prevention Rate | (Boe produced minus net reportable oil spill volume) divided by Boe produced |
HSE – Net water supplied to Ag | Water supplied to agriculture divided by fresh water purchased |
EBITDAX | Adjusted EBITDAX (millions). See Annex A for CRC’s calculation of adjusted EBITDAX. |
Debt | Face value of outstanding debt less available cash (billions) |
All executives are subject to the same Investment, Operations, and Liquidity quantitative measures.
CALIFORNIA RESOURCES CORPORATION 50
2019 PROXY STATEMENT |
Compensation Committee Report
For 2019, the long-term incentives consist of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consist of performance stock unit awards and stock options.
2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%
2019 Restricted Stock Unit Award –The 2019 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 50% in shares and 50% in cash with required tax withholding taken first from the cash portion of the payout.
2019 Performance Stock Unit Award –The 2019 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on relative total shareholder return and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 50% in stock and 50% in cash. For payouts greater than the target number of units, the payout of units in excess of target will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payouts.
The performance measures for the 2019 PSU Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative total shareholder return measure directly ties compensation to shareholder returns.
The peer companies chosen for the relative unit cost performance measures under these awards are the same as those selected by the Compensation Committee for the 2018 PSU Award as shown on page 47.
The PSU Award will vest at the end of three years from the grant date based on achieved performance against pre-determined performance criteria.
2019 Stock Options – The Compensation Committee granted stock options as part of the 2019 long-term incentive awards to further align executives with stockholders. The 2019 stock options were granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.
CALIFORNIA RESOURCES CORPORATION 51
2019 PROXY STATEMENT |
Compensation Committee Report
Our Executive Compensation Process
Role of Compensation Committee
Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). In its oversight role, the committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.
Our CEO, Chairman and Vice President of Compensation and Benefits provided input to the Compensation Committee with respect to executive compensation, key job responsibilities, achievement of performance objectives and compensation program design. We believe these individuals provide helpful support to the Compensation Committee in these areas given their understanding of our business and personnel, compensation programs and competitive environment. The Compensation Committee is not obligated to accept management’s recommendations with respect to executive compensation matters, and meets in executive session to discuss such matters outside of the presence of our management. During 2018, the Compensation Committee held two executive sessions.
Role of Independent Compensation Consultants
The Compensation Committee retained Meridian as its independent compensation consultant in January 2015, after considering all factors relevant to Meridian’s independence from our management and members of our Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards.
In 2018, the compensation consultant was responsible for reviewing our executive compensation program, assisting in the design of our annual and long-term incentive programs and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies and other factors. Representatives of the compensation consultant participated in all meetings of the committee during 2018, including executive sessions without management. The compensation consultant provided no other services to CRC.
Over the course of the year, our Compensation Committee analyzed the comparative total compensation of our executive officers. To facilitate this analysis, the compensation consultant provided the committee with comparative compensation data that included base salaries, annual incentive opportunities, and long-term incentive opportunities. This information reflected recent publicly available information and other market data. We believe that it provided our Compensation Committee with a sufficient basis to analyze the comparative total compensation of our executive officers.
Other Compensation and Benefits
In addition to the components of the executive compensation program described above, we provide the following programs to our named executive officers.
Qualified Defined Contribution Plan–All of our employees, including our named executive officers, are eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provides for periodic cash contributions by us based on annual cash compensation and employee deferrals. Employees are permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by IRS regulations. Employees are able to direct their account balances to a variety of investments.
CALIFORNIA RESOURCES CORPORATION 52
2019 PROXY STATEMENT |
Compensation Committee Report
Nonqualified Defined Contribution Plans–Substantially all employees, including our named executive officers, whose participation in our qualified defined contribution plan is limited by applicable tax laws are eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provides additional retirement benefits outside of those limitations.
Annual allocations for each participant are generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations, and certain employer allocations are subject to a vesting schedule that requires the completion of three years of service. Vested account balances will be payable following separation from service.
Interest on SSP account balances is allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.
In addition, we sponsor a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for all of our named executive officers. All account balances under the SRP II are fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations are made under the SRP II other than the crediting of interest.
In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allows in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.
Nonqualified Deferred Compensation Plan–Certain management and other highly compensated employees (including each of our named executive officers) are eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants are able to elect to defer a portion of their base salary and annual bonus for a given year. Each year, we will allocate an additional amount to a DCP participant’s account equal to the sum of 7% (which is immediately vested) and 12% (which is subject to a vesting schedule that requires the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that are not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts will earn interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.
Tax Preparation and Financial Planning–Our executives, including each of the named executive officers, are eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.
Insurance–We offer a variety of health coverage options to all employees. Named executive officers participate in these plans on the same terms as other employees. In addition, for executives, including the named executive officers, we pay for an annual comprehensive physical examination. We provide all employees with life insurance equal to twice the employee’s base salary. We also provide executives, including the named executive officers, with excess liability insurance coverage.
Severance Benefits–We maintain a notice and severance pay plan that, in connection with a qualifying termination of employment, provides for up to 12 months of base salary and other insurance coverage, depending on years of service, for non-bargained employees, including the named executive officers.
CALIFORNIA RESOURCES CORPORATION 53
2019 PROXY STATEMENT |
Compensation Committee Report
Employee Stock Purchase Plan–We adopted the California Resources Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), effective January 1, 2015, which provides our employees (including our named executive officers) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of the first day of each offering period or the last day of each offering period, whichever amount is less.
The maximum number of shares of our common stock which may be issued pursuant to the ESPP is 1.5 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP are subject to certain limits on the number of shares that can be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.
Corporate Aircraft Use–Executives and directors may use the Company’s fractional interest in aircraft for personal travel, if space is available. The named executive officers and directors reimburse CRC for personal use of the Company’s fractional interest in aircraft, including any guests accompanying them, at not less than the standard industry fare level rate (which is determined in accordance with IRS regulations), or income is imputed and the executive or director is reimbursed for related taxes.
Conversion of Occidental Long-Term Incentive Awards in Connection with Spin-off in 2014
Each long-term incentive award with respect to Occidental common stock that was held by our named executive officers was converted upon the Spin-off into an award of shares of CRC’s restricted common stock (an “RSA”), with the number of shares determined based upon the trading price of Occidental’s common stock preceding the Spin-off and our common stock following the Spin-off. Performance-based awards were converted based on target performance payout for awards with more than one year remaining in the performance period, or at actual performance payout (as determined by the Occidental Compensation Committee) for awards with less than one year remaining in the performance period. The converted RSAs are subject to time-based vesting requirements the same as the time-based vesting requirements that were applicable to the corresponding Occidental award and performance-based vesting requirements established by the CRC Compensation Committee.
The RSAs held by our named executive officers were performance-based awards with payouts that were dependent on the outcome of the performance criteria and the price of our stock on the award certification date, as applicable, with the possibility of no payout if the performance criteria were not met. These were long-term awards with two-year and three- to seven-year performance periods, as applicable, that, based on achievement of performance criteria, vested in their entirety by the end of 2018.
Key Compensation Policies and Practices
We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the Chief Executive Officer is six times annual base salary, and for the other named executive officers, is three times annual base salary. Executives have five years to attain their required ownership levels. Since the Spin-off occurred on November 30, 2014, the named executive officers have until November 30, 2019 or later to meet the target ownership levels.
Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation by a named executive officer whose fraud or misconduct either caused or contributed to the need for such restatement. Such incentive compensation generally includes any cash, equity, equity-based or other award under the LTIP, or an annual bonus or annual incentive plan of the Company.
CALIFORNIA RESOURCES CORPORATION 54
2019 PROXY STATEMENT |
Compensation Committee Report
Anti-Hedging and Anti-Pledging Policy
Under the Company’s Insider Trading Policy, all directors, officers and employees, including the named executive officers, are prohibited from hedging, buying or selling options, engaging in short sales, or trading prepaid variable forwards, equity swaps, exchange funds, forward-sale contracts, collars or other derivatives or monetizations on Company securities. In addition, all directors, officers and employees, including named executive officers, may not pledge or mortgage Company securities as collateral for a loan, or hold Company securities in a margin account.
Our compensation programs are designed to motivate and reward our employees for their performance during the current year and over the long term, and for taking appropriate business risks to enhance CRC’s business performance. The Compensation Committee has analyzed CRC’s employee compensation programs and policies and believes that they are not reasonably likely to have a material adverse effect on CRC. CRC’s compensation programs do not encourage unnecessary or excessive risk-taking and any potential risk that the executive compensation program could influence behavior that would be inconsistent with the overall interests of CRC and its stockholders is mitigated by several factors:
Target compensation mix utilizes a balance of salary, annual incentives and long-term equity compensation vesting over three years
Transparent financial and operational metrics that are readily ascertainable from publicly-filed information
External performance metrics, such as relative costs per Boe, for a portion of the long-term performance-based incentive awards
Forfeiture and clawback provisions for incentive award compensation in the event of a restatement of our financial statements or violation of CRC’s Code of Business Ethics
Together with the Compensation Committee, the Company carefully reviews and takes into account current tax law and regulations as they relate to the design of our compensation programs and related decisions. Prior to the enactment of tax reform legislation signed into law on December 22, 2017, which was originally known as the Tax Cuts and Jobs Act (the “TCJA”), Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limited a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation was performance-based as defined under federal tax laws. Subject to certain transitional rules, the TCJA has repealed the exemption for performance-based compensation from the deduction limitation of Section 162(m) of the Code for taxable years beginning after 2017. The Compensation Committee historically reviewed and considered the deductibility of our executive compensation programs; and provided compensation that was not fully deductible when necessary to retain and motivate certain executive officers and when it was in the best interest of the Company and our stockholders. To the extent compensatory awards are not covered by the transitional rules, the performance-based compensation exception to the deduction limitation under Section 162(m) of the Code will no longer be available to the Company and annual compensation paid to certain executives in excess of $1 million will not be deductible.
CALIFORNIA RESOURCES CORPORATION 55
2019 PROXY STATEMENT |
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 2019 Annual Meeting of Stockholders.
Compensation Committee,
Justin A. Gannon
Harry T. McMahon
Avedick B. Poladian
Laurie A. Siegel
February 19, 2019
CALIFORNIA RESOURCES CORPORATION 56
2019 PROXY STATEMENT |
Executive Compensation Tables
On May 31, 2016, we completed a reverse stock split using a ratio of one share of common stock for every ten shares then outstanding. Share and per share amounts included herein have been adjusted to reflect this reverse split.
Summary Compensation Table (SCT)
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| Non-Equity | Deferred |
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| Stock | Option |
| Incentive Plan | Compensation |
| All Other |
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Name |
| Year | Salary | Bonus | Awards (2) | Awards (2) |
| Compensation (3) | Earnings (4) |
| Compensation (5) | Total (1) |
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Todd A. Stevens |
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| 2018 |
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| $ | 867,308 |
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| $ | 0 |
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| $ | 4,680,020 |
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| $ | 520,008 |
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| $ | 1,200,000 |
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| $ | 36,953 |
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| $ | 430,368 |
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| $ | 7,734,657 |
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President and Chief |
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| 2017 |
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| $ | 825,000 |
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| $ | 0 |
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| $ | 2,400,000 |
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| $ | 0 |
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| $ | 1,170,000 |
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| $ | 19,178 |
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| $ | 440,483 |
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| $ | 4,854,661 |
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Executive Officer |
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| 2016 |
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| $ | 772,962 |
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| $ | 0 |
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| $ | 1,684,375 |
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| $ | 0 |
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| $ | 1,310,000 |
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| $ | 15,248 |
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| $ | 335,923 |
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| $ | 4,118,508 |
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Marshall D. Smith |
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| 2018 |
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| $ | 600,000 |
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| $ | 0 |
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| $ | 1,710,022 |
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| $ | 190,009 |
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| $ | 750,000 |
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| $ | 7,648 |
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| $ | 300,821 |
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| $ | 3,558,500 |
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Senior Executive Vice |
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| 2017 |
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| $ | 600,000 |
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| $ | 0 |
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| $ | 950,000 |
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| $ | 0 |
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| $ | 850,000 |
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| $ | 2,783 |
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| $ | 322,349 |
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| $ | 2,725,132 |
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President and |
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| 2016 |
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| $ | 562,154 |
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| $ | 0 |
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| $ | 673,750 |
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| $ | 0 |
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| $ | 940,000 |
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| $ | 1,415 |
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| $ | 307,763 |
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| $ | 2,485,082 |
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Chief Financial Officer |
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Darren Williams |
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| 2018 |
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| $ | 450,000 |
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| $ | 0 |
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| $ | 945,005 |
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| $ | 105,010 |
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| $ | 510,000 |
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| $ | 4,666 |
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| $ | 200,368 |
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| $ | 2,215,049 |
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Executive Vice President– |
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| 2017 |
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| $ | 450,000 |
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| $ | 0 |
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| $ | 500,000 |
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| $ | 0 |
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| $ | 550,000 |
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| $ | 1,735 |
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| $ | 202,424 |
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| $ | 1,704,159 |
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Operations and Geoscience |
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| 2016 |
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| $ | 421,615 |
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| $ | 0 |
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| $ | 463,217 |
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| $ | 0 |
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| $ | 540,000 |
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| $ | 845 |
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| $ | 164,445 |
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| $ | 1,590,122 |
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Charles F. Weiss |
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| 2018 |
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| $ | 437,692 |
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| $ | 0 |
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| $ | 990,030 |
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| $ | 110,010 |
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| $ | 425,000 |
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| $ | 16,982 |
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| $ | 188,979 |
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| $ | 2,168,693 |
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Executive Vice President– |
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| 2017 |
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| $ | 425,000 |
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| $ | 0 |
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| $ | 550,000 |
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| $ | 0 |
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| $ | 470,000 |
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| $ | 9,126 |
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| $ | 181,450 |
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| $ | 1,635,576 |
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Public Affairs |
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| 2016 |
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| $ | 398,192 |
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| $ | 0 |
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| $ | 505,320 |
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| $ | 0 |
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| $ | 475,000 |
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| $ | 7,613 |
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| $ | 125,269 |
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| $ | 1,511,394 |
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Shawn M. Kerns(6) |
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| 2018 |
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| $ | 393,077 |
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| $ | 0 |
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| $ | 1,035,018 |
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| $ | 115,010 |
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| $ | 450,000 |
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| $ | 12,679 |
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| $ | 152,817 |
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| $ | 2,158,601 |
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Executive Vice President– |
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Operations and Engineering |
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(1) | Amounts shown for 2017 and 2016 do not fully reflect compensation decisions made for those years, since cash-based Performance Incentive Awards (PIA awards) granted in February 2017 and August 2016 were not reported for those years. The PIA awards are not equity-based and, therefore, will instead be reported, to the extent earned, in the SCT for 2020 and 2019, respectively, which will result in higher totals. The significant increases in the SCT totals for 2018 compared to 2017 are primarily due to this reporting requirement. The table below shows alternative totals which include the target values that will be earned upon achievement of target performance goals of the 2017 and 2016 PIA awards and the resulting total compensation that would have been reported if they were included in the SCT for the year they were granted. Mr. Kerns is omitted from the table since he was not an NEO in 2017 or 2016 and compensation for those years has not been reported. |
Name |
Year | Stock Awards as Shown in SCT Above |
| Option Awards as Shown in SCT Above |
|
PIA Award Target Values Not in SCT Above |
| Total with PIA Awards Included | ||||
Todd A. Stevens | 2018 | $ | 4,680,020 |
| $ | 520,008 |
| $ | 0 |
| $ | 7,734,657 |
| 2017 | $ | 2,400,000 |
| $ | 0 |
| $ | 2,400,000 |
| $ | 7,254,661 |
| 2016 | $ | 1,684,375 |
| $ | 0 |
| $ | 1,750,000 |
| $ | 5,868,508 |
Marshall D. Smith | 2018 | $ | 1,710,022 |
| $ | 190,009 |
| $ | 0 |
| $ | 3,558,500 |
| 2017 | $ | 950,000 |
| $ | 0 |
| $ | 950,000 |
| $ | 3,675,132 |
| 2016 | $ | 673,750 |
| $ | 0 |
| $ | 900,000 |
| $ | 3,385,082 |
Darren Williams | 2018 | $ | 945,005 |
| $ | 105,010 |
| $ | 0 |
| $ | 2,215,049 |
| 2017 | $ | 500,000 |
| $ | 0 |
| $ | 500,000 |
| $ | 2,204,159 |
| 2016 | $ | 463,217 |
| $ | 0 |
| $ | 481,250 |
| $ | 2,071,372 |
Charles F. Weiss | 2018 | $ | 990,030 |
| $ | 110,010 |
| $ | 0 |
| $ | 2,168,693 |
| 2017 | $ | 550,000 |
| $ | 0 |
| $ | 550,000 |
| $ | 2,185,576 |
| 2016 | $ | 505,320 |
| $ | 0 |
| $ | 525,000 |
| $ | 2,036,394 |
(2) | The amounts shown for each year represent the grant date fair value of the awards granted in that year as computed in accordance with U.S. generally accepted accounting principles (GAAP), as more fully described in Note 11 (for 2018) and Note 10 (for 2017 and 2016) to the Consolidated Financial Statements in CRC’s Form 10-K for the year ended December 31 of the indicated year. For 2017 and 2016, amounts reported in the Stock Awards column reflect the grant date value of restricted stock units, the vesting of which is contingent solely on the NEO’s continued service with us. For 2018, awards reported in the Stock Awards column reflect the value of both time-vested restricted stock units and performance-vested performance stock units. For all years, the ultimate payout value may be significantly less than the amount shown in the table, depending on the value of CRC stock on the award certification date. For |
CALIFORNIA RESOURCES CORPORATION 57
2019 PROXY STATEMENT |
Executive Compensation Tables
performance stock units granted in 2018, there is a possibility of no payout depending on the outcome of the performance criteria. At the maximum performance payout level, the amounts would be $7,280,026, $2,660,034, $1,470,006, $1,540,046, and $1,610,032, for Messrs. Stevens, Smith, Williams, Weiss, and Kerns, respectively. |
(3) | The amounts shown include the annual incentive award, which was paid in the first quarter of the year following the year in which it was earned. |
(4) | The amounts shown are the portion of each executive’s interest credited on nonqualified deferred compensation plan balances that was in excess of 120% of the long-term applicable federal rate, compounded monthly, as prescribed under Section 1274(d) of the Code. |
(5) | The following table shows “All Other Compensation” amounts for 2018. |
| Todd A. | Marshall D. | Darren | Charles F. |
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| Shawn M. | |||||||||||||||||||
| Stevens | Smith | Williams | Weiss |
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| Kerns |
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Qualified Plan(a) |
| $ | 36,500 |
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| $ | 36,500 |
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| $ | 36,500 |
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| $ | 36,500 |
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| $ | 36,500 |
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Supplemental Plan(b) |
| $ | 360,766 |
|
|
| $ | 243,742 |
|
|
| $ | 153,967 |
|
|
| $ | 135,552 |
|
|
| $ | 112,686 |
|
|
|
Dividend Equivalents(c) |
| $ | 6,938 |
|
|
| $ | 2,775 |
|
|
| $ | 1,908 |
|
|
| $ | 2,081 |
|
|
| $ | 1,249 |
|
|
|
Personal Benefits |
| $ | 26,164 |
| (d) |
| $ | 5,804 |
| (e) |
| $ | 1,993 |
| (f) |
| $ | 14,846 |
| (g) |
| $ | 2,382 |
| (h) |
|
Relocation Benefits |
| $ | 0 |
|
|
| $ | 12,000 |
|
|
| $ | 6,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
Total |
| $ | 430,368 |
|
|
| $ | 300,821 |
|
|
| $ | 200,368 |
|
|
| $ | 188,979 |
|
|
| $ | 152,817 |
|
|
|
(a) | The amount shown reflects the Company matching and retirement contributions to the qualified defined contribution savings plan–the California Resources Corporation Savings Plan (the “Qualified Plan”). |
(b) | The amount shown is the Company contributions to the nonqualified defined contribution plan–the California Resources Corporation Supplemental Savings Plan (the “Supplemental Plan”), which restores amounts limited by IRS limits on the Qualified Plan. For Mr. Stevens, includes $2,888 of Company contributions to the nonqualified deferred compensation plan–the California Resources Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) for restoration of Company contributions to the Qualified Plan or the Supplemental Plan that were reduced due to the deferral of compensation under the Deferred Compensation Plan. |
(c) | The amount shown is for dividend equivalents earned on the performance stock unit awards granted in 2015, which vested in 2018. |
(d) | Includes tax preparation and financial counseling ($24,629) and excess liability insurance. |
(e) | Includes tax preparation and financial counseling and excess liability insurance. |
(f) | Includes tax preparation and financial counseling and excess liability insurance. |
(g) | Includes tax preparation and financial counseling ($14,083) and excess liability insurance. |
(h) | Includes tax preparation and financial counseling and excess liability insurance. |
(6) | Mr. Kerns was not an NEO in 2017 or 2016. Compensation paid for years in which the executive was not an NEO are not disclosed in the SCT. |
CALIFORNIA RESOURCES CORPORATION 58
2019 PROXY STATEMENT |
Executive Compensation Tables
The table below summarizes the following plan-based awards granted in 2018 to our NEOs: Annual Incentive Awards, Restricted Stock Unit Awards (RSU), Performance Stock Unit Awards (PSU), and Stock Option Awards (Options).
|
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| Exercise |
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| Grant Date |
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| All Other |
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| or Base |
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| Fair Value |
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| |||
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| Estimated Future Payouts |
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| Estimated Future Payouts |
|
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| Stock Awards: |
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| Price of |
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| of Stock and |
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| ||||||||||||||||||||||||
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| Under Non-Equity Incentive |
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| Under Equity Incentive |
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| Number of |
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| Option |
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| Option |
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| ||||||||||||||||||||||||
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| Plan Awards |
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| Plan Awards |
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| Shares or Units |
|
|
|
| Awards |
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| Awards |
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| ||||||||||||||||||||||||
Name / Type of |
| Grant |
|
| Threshold |
|
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| Target |
|
|
| Maximum |
|
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| Threshold |
|
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| Target |
|
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| Maximum |
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| ||||||
Grant |
| Date |
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
|
| (# Shares) |
|
|
| (# Shares) |
|
|
| (# Shares) |
|
|
|
| (# Shares) |
|
|
|
| ($) |
|
|
|
| ($) |
|
| |||||||||
Todd A. Stevens |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive(1) |
|
|
|
| $ | 16,074 |
|
|
| $ | 962,500 |
|
|
| $ | 1,925,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113,414 |
|
|
|
|
|
|
|
|
|
| $ | 2,080,013 |
|
|
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 35,442 |
|
|
|
| 141,767 |
|
|
|
| 283,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,600,007 |
|
|
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 51,897 |
|
|
|
| $ | 20.17 |
|
|
|
| $ | 520,008 |
|
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive(1) |
|
|
|
| $ | 10,020 |
|
|
| $ | 600,000 |
|
|
| $ | 1,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 41,440 |
|
|
|
|
|
|
|
|
|
| $ | 760,010 |
|
|
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,950 |
|
|
|
| 51,800 |
|
|
|
| 103,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 950,012 |
|
|
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,963 |
|
|
|
| $ | 20.17 |
|
|
|
| $ | 190,009 |
|
|
Darren Williams |
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive(1) |
|
|
|
| $ | 6,764 |
|
|
| $ | 405,000 |
|
|
| $ | 810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,901 |
|
|
|
|
|
|
|
|
|
| $ | 420,004 |
|
|
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,157 |
|
|
|
| 28,626 |
|
|
|
| 57,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 525,001 |
|
|
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,480 |
|
|
|
| $ | 20.17 |
|
|
|
| $ | 105,010 |
|
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive(1) |
|
|
|
| $ | 5,511 |
|
|
| $ | 330,000 |
|
|
| $ | 660,000 |
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,992 |
|
|
|
|
|
|
|
|
|
| $ | 440,013 |
|
|
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,498 |
|
|
|
| 29,990 |
|
|
|
| 59,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 550,017 |
|
|
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,979 |
|
|
|
| $ | 20.17 |
|
|
|
| $ | 110,010 |
|
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive(1) |
|
|
|
| $ | 5,344 |
|
|
| $ | 320,000 |
|
|
| $ | 640,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,082 |
|
|
|
|
|
|
|
|
|
| $ | 460,004 |
|
|
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,839 |
|
|
|
| 31,353 |
|
|
|
| 62,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 575,014 |
|
|
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,478 |
|
|
|
| $ | 20.17 |
|
|
|
| $ | 115,010 |
|
|
(1) | Payout of annual incentive ranges from 0% to 200% of target. Threshold amounts shown at 1.67% of target, calculated based on threshold payout of the lowest weighted performance metric under the award. |
(2) | The amounts shown represent the estimated grant date fair value of the full number of units granted as computed in accordance with FASB ASC Topic 718, as more fully described in Note 11 to Consolidated Financial Statements in CRC’s Form 10-K for the year ended December 31, 2018. These units become non-forfeitable ratably over the three-year period beginning on the grant date. |
(3) | Payout under the PSU Awards ranges from 0% to 200% of target based on performance during the three-year period from January 1, 2018 through December 31, 2020. The threshold amount is shown at 25% of target, calculated based on threshold payout under one of the two performance metrics under the award. The PSU Awards will vest on February 20, 2021. |
(4) | The Option Awards have an exercise price that is 10% higher than the price on the grant date. The |
CALIFORNIA RESOURCES CORPORATION 59
2019 PROXY STATEMENT |
Executive Compensation Tables
Outstanding Equity Awards at December 31, 2018
The table below sets forth the outstanding equity awards held as of December 31, 2018 by our named executive officers, including Performance Stock Unit Awards (PSU), Restricted Stock Unit Awards (RSU) and Stock Option Awards (Options).
|
|
|
| Option Awards | Stock Awards |
| ||||||||||||||||||||||||||||||||||
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| Equity |
| ||
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| Incentive |
| ||
|
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| Plan |
| ||
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|
| Equity | Awards: |
| ||||||
|
|
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| Incentive | Market or |
| ||||||
|
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| Number |
|
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| Plan | Payout |
| ||||||||||
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|
|
|
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| of |
|
|
|
|
| Awards: | Value of |
| ||||||||||
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares | Market | Number of | Unearned |
| ||||||||||||||
|
|
|
| Number of | Number of |
|
|
|
|
|
|
|
| or Units | Value of | Unearned | Shares, |
| ||||||||||||||||||||||
|
|
|
| Securities | Securities |
|
|
|
|
|
|
|
| of Stock | Shares or | Shares, Units | Units or |
| ||||||||||||||||||||||
|
|
|
| Underlying | Underlying |
|
|
|
|
|
|
|
| That | Units That | or Other | Other Rights |
| ||||||||||||||||||||||
|
|
|
| Unexercised | Unexercised | Option | Option | Have Not | Have Not | Rights That | That Have |
| ||||||||||||||||||||||||||||
Name / Type | Grant | Options (#) | Options (#) | Exercise | Expiration | Vested | Vested | Have Not | Not Vested |
| ||||||||||||||||||||||||||||||
of Grant | Date | Exercisable | Unexercisable | Price ($) | Date | (#) | ($)(1) | Vested (#) | ($)(1) |
| ||||||||||||||||||||||||||||||
Todd A. Stevens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 141,767 |
|
|
| $ | 2,415,710 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,458 |
|
|
| $ | 621,244 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 85,061 |
|
|
| $ | 1,449,439 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113,414 |
|
|
| $ | 1,932,575 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 151,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 66,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 51,897 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 51,800 |
|
|
| $ | 882,672 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14,583 |
|
|
| $ | 248,494 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 33,670 |
|
|
| $ | 573,737 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 41,440 |
|
|
| $ | 706,138 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 90,910 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 26,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 18,963 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 28,626 |
|
|
| $ | 487,787 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,026 |
|
|
| $ | 170,843 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,721 |
|
|
| $ | 301,966 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,901 |
|
|
| $ | 390,233 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 60,607 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 18,334 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 10,480 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 29,990 |
|
|
| $ | 511,030 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,937 |
|
|
| $ | 186,366 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,493 |
|
|
| $ | 332,161 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,992 |
|
|
| $ | 408,824 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 51,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 20,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 10,979 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,353 |
|
|
| $ | 534,255 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,562 |
|
|
| $ | 111,816 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,405 |
|
|
| $ | 211,381 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,082 |
|
|
| $ | 427,397 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 36,364 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 12,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 11,478 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The amounts shown represent the
|
(2) | These PSU awards are subject to |
CALIFORNIA RESOURCES CORPORATION 60
2019 PROXY STATEMENT |
Executive Compensation Tables
(4) | One-half of the units vest on each of the following dates: February 12, 2019 and February 12, 2020. |
(5) | One-third of the units vest on each of the following dates: February 20, 2019, February 20, 2020 and February 20, 2021. |
(6) | The exercise price was set at 10% above the closing market price of CRC stock on the grant date, as adjusted for our 1-for-10 reverse stock split on May 31, 2016. Unexercised options expire on November 30, 2021. |
(7) | The exercise price is equal to the closing market price of CRC stock on the grant date, as adjusted for our 1-for-10 reverse stock split on May 31, 2016. Unexercised options expire on August 4, 2022. |
(8) | The exercise price is 10% above the closing market price of CRC stock on the grant date. The unexercisable options become exercisable one-third each on February 20, 2019, February 20, 2020 and February 20, 2021. Unexercised options expire on February 20, 2025. |
Option Exercises and Stock Vested in 2018
The following table summarizes, for our named executive officers, the CRC option and stock awards exercised or vested during 2018.
| Option Awards | Stock Awards | ||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||
Todd A. Stevens |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 184,042 |
|
|
| $ | 5,560,397 |
|
|
Marshall D. Smith |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 80,979 |
|
|
| $ | 2,530,228 |
|
|
Darren Williams |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 60,004 |
|
|
| $ | 1,918,019 |
|
|
Charles F. Weiss |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 53,342 |
|
|
| $ | 1,653,225 |
|
|
Shawn M. Kerns |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 33,569 |
|
|
| $ | 1,046,091 |
|
|
(1) | The amounts shown represent the product of the number of shares |
2018 Nonqualified Deferred Compensation Table
The following table sets forth for 2018 the contributions, earnings, withdrawals and balances under the SSP, SRP II and the DCP in which the named executive officers participated. The named executive officers were fully vested in their respective aggregate balances shown below, which include amounts CRC assumed from Occidental plans in connection with the Spin-off. For additional information relating to these plans, see “Nonqualified Defined Contribution Plans” and “Nonqualified Deferred Compensation Plan,” above.
|
|
|
|
|
|
|
|
|
|
|
|
| Aggregate |
|
|
| ||||||||||||
|
|
|
| Executive | Company | Aggregate | Withdrawals/ | Aggregate | ||||||||||||||||||||
|
|
|
| Contributions | Contributions | Earnings | Distributions | Balance | ||||||||||||||||||||
|
|
|
| in 2018 | in 2018 | in 2018 | in 2018 | at 12/31/2018 | ||||||||||||||||||||
Name |
| Plan |
| ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ||||||||||||||||||||
Todd A. Stevens |
| SSP |
|
| $ | 0 |
|
|
| $ | 357,878 |
|
|
| $ | 41,325 |
|
|
| $ | 0 |
|
|
| $ | 1,313,218 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 57,518 |
|
|
| $ | 0 |
|
|
| $ | 1,252,083 |
|
|
|
| DCP |
|
| $ | 15,200 |
|
|
| $ | 2,888 |
|
|
| $ | 46,004 |
|
|
| $ | 19,887 |
|
|
| $ | 1,003,765 |
|
|
Marshall D. Smith |
| SSP |
|
| $ | 0 |
|
|
| $ | 243,742 |
|
|
| $ | 29,580 |
|
|
| $ | 0 |
|
|
| $ | 927,520 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 876 |
|
|
| $ | 0 |
|
|
| $ | 19,072 |
|
|
Darren Williams |
| SSP |
|
| $ | 0 |
|
|
| $ | 153,967 |
|
|
| $ | 18,244 |
|
|
| $ | 0 |
|
|
| $ | 574,294 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 333 |
|
|
| $ | 0 |
|
|
| $ | 7,250 |
|
|
Charles F. Weiss |
| SSP |
|
| $ | 0 |
|
|
| $ | 135,552 |
|
|
| $ | 15,731 |
|
|
| $ | 0 |
|
|
| $ | 498,444 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 51,274 |
|
|
| $ | 0 |
|
|
| $ | 1,116,173 |
|
|
Shawn M. Kerns |
| SSP |
|
| $ | 0 |
|
|
| $ | 112,686 |
|
|
| $ | 11,684 |
|
|
| $ | 0 |
|
|
| $ | 381,547 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 17,941 |
|
|
| $ | 0 |
|
|
| $ | 390,544 |
|
|
|
| DCP |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 20,400 |
|
|
| $ | 0 |
|
|
| $ | 444,083 |
|
|
(1) | No employee contributions are permitted in
|
(2) | Amounts represent Company 2018 contributions to the SSP and DCP and are reported under “All Other Compensation” in the Summary Compensation Table for 2018. |
CALIFORNIA RESOURCES CORPORATION 61
2019 PROXY STATEMENT |
Executive Compensation Tables
(3) | The amounts reported in this column represent aggregate interest as provided in |
(4) | Distribution made in March 2018 in accordance with |
(5) | The amounts reported in this column reflect the
|
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO.
For 2018, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than our CEO) was $145,578.
The annual total compensation of our CEO, as reported in the Summary Compensation Table on page 57, was $7,734,657.
Based on this information, for 2018 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was reasonably estimated to be 53 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps:
We determined that, as of December 31, 2018 (which is the date we chose to identify our median employee), our employee population consisted of approximately 1,500 individuals with all of these individuals located in the United States (as reported in Item 1, Business, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2019 (our “Annual Report”)). This population consisted of our full-time, part-time, and temporary employees, as we do not have seasonal workers.
We used the total compensation reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for 2018 as a consistently applied compensation measure to identify our median employee. We did not make any assumptions, adjustments, or estimates with respect to the W-2 wages, and we did not annualize the compensation for any employees that were not employed by us for all of 2018. We believe the use of W-2 wages, as applicable, is the most appropriate compensation measure since it includes the total taxable compensation received by our employees in 2018.
We identified our median employee by consistently applying this compensation measure to all of our employees included in our analysis. Since all of our employees, including our CEO, are located in the United States, we did not make any cost of living adjustments in identifying the median employee.
After we identified our median employee, we combined all of the elements of such employee’s compensation for the 2018 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $145,578.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2018 Summary Compensation Table included on page 57 and incorporated by reference under Item 11 of Part III of our Annual Report.
CALIFORNIA RESOURCES CORPORATION 62
We determined that, as of December 31, 2017 (which is the date we chose to identify our median employee), our employee population consisted of approximately 1,450 individuals with all of these individuals located in the United States (as reported in Item 1, Business, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2018 (our “Annual Report”)). This population consisted of our full-time, part-time, and temporary employees, as we do not have seasonal workers.
We used the total compensation reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for 2017 as a consistently applied compensation measure to identify our median employee. We did not make any assumptions, adjustments, or estimates with respect to the W-2 wages, and we did not annualize the compensation for any employees that were not employed by us for all of 2017. We believe the use of W-2 wages, as applicable, is the most appropriate compensation measure since it includes the total taxable compensation received by our employees in 2017.
We identified our median employee by consistently applying this compensation measure to all of our employees included in our analysis. Since all of our employees, including our CEO, are located in the United States, we did not make any cost of living adjustments in identifying the median employee.
After we identified our median employee, we combined all of the elements of such employee’s compensation for the 2017 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $142,136.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table included on page 59 and incorporated by reference under Item 11 of Part III of our Annual Report.
CALIFORNIA RESOURCES CORPORATION 63
Executive Compensation Tables
Potential Payments upon Termination or Change in Control Summary Payments and other benefits payable to named executive officers in various termination circumstances and a change in control are subject to certain policies, plans and agreements. Following is a summary of the material terms of these arrangements. Under our Notice and Severance Pay Plan, employees terminated due to job elimination or relocation who are not offered continued employment by CRC are eligible for up to 12 months of base salary depending on years of service, two months of contributions pursuant to CRC’s qualified and nonqualified savings plans with immediate vesting of any unvested balances, and continued medical and dental coverage for the applicable notice and severance period at the active employee rate. Our Long-Term Incentive Awards have provisions that, in the event of a change in control with a termination in connection with the change in control, provide for the outstanding awards granted under such plan to become fully vested and exercisable unless the plan administrator determines, prior to the occurrence of the event, that benefits will not accelerate. Except as described in this summary and below under “Potential Payments,” we do not have any other agreements or plans that would have required us to provide compensation to our named executive officers in the event of a termination of employment or a change in control. Potential Payments In the discussion that follows, payments and other benefits payable upon various terminations and change in control situations are set out as if the conditions for payments had occurred and the terminations took place on December 31, The following payments and benefits, which are potentially available on a non-discriminatory basis to all full-time salaried employees when their employment terminates, are not included in the amounts shown below: Notice and Severance Pay Plan payments and benefits, payable if the employee’s job is either eliminated or relocated and the employee is not offered continued employment. Life insurance proceeds equal to two times base salary, payable on death as available to all eligible employees. Amounts vested under our plans that are qualified under Section 401(a) of the Code. Amounts vested under the Nonqualified Deferred Compensation arrangements. Payout of unused accrued vacation. CALIFORNIA RESOURCES CORPORATION
Executive Compensation Tables
The following is a summary of the payments and benefits each of our NEOs would have been entitled to receive if the event specified occurred as of December 31,
CALIFORNIA RESOURCES CORPORATION
Director Compensation
Our director compensation program is designed to be consistent with the programs of our peer companies. The following matters were considered important to development of our director compensation program: Market practices of our peer companies targeting a compensation package that is at or below the median of this group. The need to recruit and retain independent directors. For 2018, the cash retainer was reduced and equity award was increased, as described below, to more closely align with the median of our peer companies, while providing a greater portion of the director compensation in shares. The elements of our An annual cash board retainer of An additional annual cash retainer of $100,000 for our Chairman. An additional annual cash retainer of $25,000 for the Lead Independent Director. An additional annual cash retainer of $20,000 for the audit and compensation committee chairpersons and $15,000 for the other committee chairpersons. An annual equity award relating to our common stock equivalent to A stock ownership guideline of five times the annual cash board retainer applies to outside directors and must be attained within five years of election to our Board of Directors. Since the Spin-off occurred on November 30, 2014, the outside directors have until November 30, 2019 or later to meet the target ownership levels.
The following table sets forth the total compensation for
CALIFORNIA RESOURCES CORPORATION 65
Director Compensation
CALIFORNIA RESOURCES CORPORATION
Stock Ownership Information
Security Ownership of Directors, Management and Certain Beneficial Holders The following table sets forth certain information regarding beneficial ownership of common stock as of March
CALIFORNIA RESOURCES CORPORATION 67
Stock Ownership Information; Proposals Requiring Your Vote
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act and related regulations require our Section 16 officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and the NYSE. Section 16 officers, directors and greater than 10% beneficial owners are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of copies of such forms we received, we believe that, during the fiscal year ended December 31,
. Proposals Requiring Your Proposal 1: Election of Directors
In A brief statement about the background and qualifications of each nominee is given above under “Our Board of Directors.” If any nominee for whom you have voted becomes unable to serve, your proxy may be voted for another person designated by our Board or our Board of Directors may determine to reduce the size of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE “FOR” EACH OF THE DIRECTOR NOMINEES IDENTIFIED ABOVE.
Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm The Audit Committee appointed, and the Board of Directors ratified the appointment of, KPMG LLP, independent registered public accounting firm, to audit our financial statements for the year ending December 31, KPMG LLP has served as our independent registered public accounting firm and audited our financial statements beginning with the fiscal year ended December 31, 2014. CALIFORNIA RESOURCES CORPORATION
Proposals Requiring Your Vote
Set forth below are the aggregate fees incurred by us for professional services rendered by KPMG LLP, the independent registered public accounting firm, for the years ended December 31,
The Audit Committee must give prior approval to any management request for any amount or type of service (audit, audit-related and tax services or, to the extent permitted by law, non-audit services) our independent registered accounting firm provides to us. The Audit Committee has established policies and procedures regarding pre-approval of all services provided by the independent registered public accounting firm. The Audit Committee approved or pre-approved all such services for CRC by our independent registered accounting firm in A representative of KPMG LLP is expected to be present at the Annual Meeting and will be offered the opportunity to make a statement if such representative desires to do so and will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” PROPOSAL 2 TO RATIFY THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, KPMG LLP, FOR FISCAL
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation Section 14A of the Securities Exchange Act of 1934, as amended, requires us to provide our stockholders with an advisory (nonbinding) vote on the compensation paid to our named executive officers (sometimes referred to as the “say-on-pay” proposal) as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, accompanying compensation tables and narrative discussion set forth in this proxy statement. Accordingly, you may vote on the following resolution at our Annual Meeting: “RESOLVED, that the compensation paid to the Company’s named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, accompanying compensation tables and narrative discussion, is hereby approved.” This vote is nonbinding. The Board of Directors and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results. CALIFORNIA RESOURCES CORPORATION
Proposals Requiring Your Vote
As described above in detail under the “Compensation Discussion and Analysis” section of this proxy statement, our compensation program is designed to attract and retain talented executives and also to motivate our executives to achieve our designated goals and thereby create a successful company enhancing shareholder value. This advisory, nonbinding say-on-pay vote does not cover director compensation, which is also disclosed in the accompanying compensation tables.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 3 ON THE ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION.
Proposal 4: Approval of the
Background and Purpose Pursuant to the terms of the Existing The Existing LTIP authorizes awards to
On February
CALIFORNIA RESOURCES CORPORATION
Proposals Requiring Your Vote
Set forth in the table below is information regarding awards outstanding and shares of common stock available for grant under the Existing LTIP as of February 28, 2019.
For additional information regarding stock-based awards previously granted, please see Note 11 to Consolidated Financial Statements disclosed in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018. As of February 28, 2019, there were 48,799,261 shares of our common stock outstanding. The closing price per share of our common stock on the New York Stock Exchange as of March 11, 2019 was $21.26. The effective date of the Amended LTIP will be the date of the Annual Meeting if the plan is approved by the stockholders of the Company on such date. If the proposed Amended LTIP is not so approved by our stockholders, then the Existing LTIP will remain in effect in its present form. Summary of Features of the Amended The following is a summary of the
Administration Our Amended LTIP is administered by
The total number of shares of common stock authorized for grant or award under the Existing LTIP is 4,700,000. As of February 28, 2019, the number of shares of common stock available for future grants or awards was approximately 22,922. The Amended Under the Amended LTIP, no more than 7,275,000 shares of common stock may be issued after October 6, 2014 (the original effective date of the CALIFORNIA RESOURCES CORPORATION 71
Proposals Requiring Your Vote Performance-Based Awards that are not
Eligibility Our officers, employees Types of Awards Options and Stock Appreciation Rights An option is the right to purchase shares of common stock at a future date at a specified price. The Amended LTIP provides for two types of options: incentive options and nonstatutory options. An SAR is the right to receive payment of an Subject to the special limitations on incentive options described below, the option price per share of common stock subject to an option and the base price of any SAR will be determined by the Compensation Committee at the time of grant, but, subject to certain adjustments, such option price and base price will not be less than the fair market value of a No options, SARs or other non-full value appreciation awards granted under the Amended LTIP may vest less than one year from the date of grant; provided, however, that up to 5% of the No incentive option may be granted to an individual if, at the time the option is granted, such individual owns stock possessing more than 10% of the total combined voting power
CALIFORNIA RESOURCES CORPORATION 72
Proposals Requiring Your Vote
Restricted Stock Awards Typically, a restricted stock award is an award of a fixed number of shares of common stock
The Compensation Committee may Stock Units Stock units (or phantom share units) are not actual shares of common stock but, rather, represent a right to receive shares of common stock (or the value thereof) upon the satisfaction of certain specified terms and conditions. Stock units are generally credited to a recordkeeping account, and the value of a stock unit is typically based upon the value of an actual share of common stock. Dividend Rights or Equivalents Dividend rights or equivalents are amounts payable in cash or shares of common stock (or additional stock units that may be paid in shares of common stock or cash) equal to the amount of dividends that would have been paid on shares had the shares been outstanding from the date the stock-based award was granted. No dividend equivalents will be granted in connection with stock options, stock appreciation rights or other non-full value appreciation awards granted under the Amended LTIP from and after it becomes effective. In addition, the Amended LTIP provides that dividends on restricted stock and any dividend equivalents on other full-value awards granted from and after the Amended LTIP becomes effective will be subject to restrictions and risk of forfeiture to the same extent as the underlying award with respect to which the dividend or dividend equivalent relates. CALIFORNIA RESOURCES CORPORATION 73
Proposals Requiring Your Vote Subject to the terms of the Amended LTIP and applicable legal requirements, the Compensation Committee may grant other awards that are valued, denominated, paid or otherwise based on or related to common stock. The Compensation Committee will determine all of the terms and conditions of all such awards, including, without limitation, method of delivery, consideration to be paid, the timing and methods of payment, and any performance criteria associated with an award. Cash awards may also be granted as separate awards, or as supplements to any other awards under the Amended LTIP. Performance-Based Awards A “Performance-Based Award” is an award whose grant, vesting, exercisability or payment depends upon the satisfaction of any one or more “Performance Goals.” Performance-Based Awards may be stock-based (payable in common stock only or in cash or common stock) or may be cash-only awards. A Performance-Based Award also includes an option or SAR granted with an exercise or base price not less than fair market value of a share of common stock on the date of grant. The performance period applicable to a Performance-Based Award may be up to 10 years. Performance Goals are established by the Compensation Committee and may consist of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria. The Performance Goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Compensation Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. In addition, subject to any limitations under Section 162(m) of the Code (prior to its amendment in 2017) with respect to awards granted under the Existing LTIP that are intended to constitute “performance-based compensation,” such performance measures may be subject to adjustment by the Compensation Committee for changes in accounting principles, to satisfy regulatory requirements and other specified extraordinary, unusual or infrequent items or events. Each agreement for a performance award will explain (i) the maximum amount that may be earned in the form of cash or shares of common stock, as applicable, (ii) the performance goal or goals and level of achievement that will apply to the award, (iii) the performance period over which performance is measured, and (iv) other terms that the Compensation Committee may determine that are not inconsistent with the Amended LTIP. Prior to the payment of any compensation pursuant to a Performance-Based Award, the Compensation Committee must determine that the applicable performance goal or goals and other material terms of the award have been satisfied. The Compensation Committee also has the authority to reduce or increase the amount payable in cash and the number of shares of common stock to be issued, retained or vested pursuant to a performance award, except no such increase is permitted in the case of awards made under the Existing LTIP that were intended to constitute “performance-based compensation” under Section 162(m) of the Code (prior to its amendment in 2017). Adjustments The Compensation Committee is authorized under the Amended LTIP to make adjustments to awards and their terms and conditions in the event of extraordinary dividends or other extraordinary distributions, reclassifications, recapitalizations, stock splits (including a stock split in the form of a stock dividend), reverse stock splits, reorganizations, mergers, combinations, consolidations, split-ups, spin-offs, repurchases or exchanges, the sale of substantially all of the assets of the Company or any other similar, unusual, infrequent or extraordinary corporate transaction (or event in respect of the common stock). These adjustments may include, among other things: (a) changes to (i) the number and type of shares (or other securities) that thereafter may be made subject to awards (including the specific maxima and numbers of shares and individual award limitations included in the Amended LTIP), (ii) the number, amount and type of shares (or other securities or property) subject to outstanding awards, (iii) the grant, purchase or exercise price of outstanding awards, (iv) the securities, cash or other property deliverable under outstanding awards or (v) the performance goals appropriate to outstanding awards; or (b) making provision for a cash payment or for the substitution or exchange of outstanding awards or the cash, securities or property deliverable to the holder of the award. CALIFORNIA RESOURCES CORPORATION 74
Proposals Requiring Your Vote If the Company recapitalizes, reclassifies its capital stock or otherwise changes its capital structure or another change or event occurs that constitutes an “equity restructuring” pursuant to certain accounting standards (a “recapitalization”), (a) the Compensation Committee will equitably adjust the number and class of shares (or other securities or property) covered by each outstanding award and the terms and conditions, including the exercise price and performance criteria (if any), of such award to equitably reflect such recapitalization and will adjust the number and class of shares (or other securities or property) with respect to which awards may be granted after such recapitalization and (b) the Compensation Committee will make a corresponding and proportionate adjustment with respect to the maximum number of shares Vesting of Grants and Awards Following Change in Control With respect to grants and awards made on or after May 4, 2016, in the event of a
Amendment and Duration of the Amended LTIP Our Board of Directors •increase the maximum number of shares subject to the Amended LTIP; •reduce the exercise price per share covered by options below the price specified in the Amended LTIP; •permit the “re-pricing” of options or SARs, or permit the cancellation of “underwater” options or SARs in return for cash or other consideration; or •amend the Amended LTIP in any other manner if such amendment requires stockholder approval by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the shares may then be Additionally, our Board of Directors No award may be granted under the Amended LTIP on or after the tenth anniversary of the date upon which the plan is approved by our stockholders. United States Federal Income Tax Consequences The
Options granted
CALIFORNIA RESOURCES CORPORATION
Proposals Requiring Your Vote
As a general rule, no federal income tax is imposed on the
Incentive Options No federal income tax is imposed on the participant upon the grant or exercise of an incentive option, except as described below under the caption “Alternative Minimum Tax.” If the Participant does not dispose of shares acquired pursuant to the exercise of an incentive option within two years after the date the option was granted or within one year after exercise, the difference between the option price and the amount realized on a subsequent disposition of the shares would be treated as capital gain or loss. In such event, the Company would not be entitled to any deduction in connection with the grant or exercise of the option or the disposition of the shares so acquired. If, however, a participant disposes of shares acquired pursuant to his exercise of an incentive option prior to the end of the two-year or one-year holding period noted above, the disposition would be treated as a disqualifying disposition. The participant would be treated as having received, at the time of disposition, compensation taxable as ordinary income equal to the excess of the fair market value of the shares at the time of exercise (or, in the case of a sale in which a loss would be recognized, the amount realized on such sale) over the option price, and any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as capital gain. In such event, and subject to the application of Section 162(m) of the Code, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the participant. Payment of Option Price in Stock In the case of a nonstatutory option, if the option price is paid by the delivery of shares of common stock previously acquired by the participant having a fair market value equal to the option price (“Previously Acquired Stock”), gain or loss would not be recognized on the exchange of the Previously Acquired Stock for a like number of shares pursuant to such exercise of the option. The participant’s basis in the number of shares of common stock received equal to the Previously Acquired Stock would be the same as his basis in the Previously Acquired Stock. The participant would, however, be treated as receiving compensation taxable as ordinary income equal to the fair market value on the date of exercise In the
CALIFORNIA RESOURCES CORPORATION
Proposals Requiring Your Vote
A participant who has been granted an SAR will not realize taxable income upon the grant of such award. Upon the exercise of the SAR, a participant will generally recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of (a) the amount of cash and the fair market value of the shares of common stock received, over (b) the base price of the SAR. A participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of an SAR that equals the fair market value of such shares on the date of exercise. Subject to Section 162(m) of the Code, the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules. Restricted Stock A participant who has been granted a restricted stock award will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the applicable restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When the risk of forfeiture with respect to the common stock subject to such award lapses, the participant will realize ordinary income in an amount equal to the fair market value of the shares of common stock at such time over the amount, if any, paid for the shares, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. All dividends and distributions (or the cash equivalent thereof) with respect to a restricted stock award paid to the participant before the risk of forfeiture lapses will also be compensation income to the participant when paid and, subject to Section 162(m) of the Code, deductible as such by the Company. Notwithstanding the foregoing, if allowed under the terms of the award, the holder of a restricted stock award may elect under Section 83(b) of the Code to be taxed at the time of grant of the restricted stock award on the fair market value of the shares of common stock on the date of the award over the amount, if any, paid for such shares, in which case the Company, subject to Section 162(m) of the Code, will be entitled to a deduction at the same time and in the same amount, and there will be no further federal income tax consequences with respect to the restricted stock award when the risk of forfeiture lapses. Such election must be made not later than 30 days after the grant of the restricted stock award to the participant and is irrevocable. All dividends or distributions with respect to a restricted stock award for which such an election has been made and which are paid to the participant before the risk of forfeiture lapses will be taxable as dividend income to the participant when paid and not deductible by the Company. Stock Units A participant who has been granted a stock unit (or phantom share unit) generally will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. At the time of payment, whether a stock unit is paid in cash or shares of common stock, the Participant will have taxable compensation and, subject to the application of Section 162(m) of the Code, the Company will have a corresponding deduction. The measure of such income and deduction, if any, will be the amount of any cash paid and the fair market value of the shares either at the time the stock unit is paid or at the time any restrictions (including restrictions under Section 16(b) of the Exchange Act) subsequently lapse, depending on the nature, if any, of the restrictions imposed on the shares and whether the participant elects to be taxed without regard to any such restrictions. Other Awards The tax treatment of other awards will depend on the particular terms and conditions of the award. As a general rule, at the time the award vests (or, if the award is not subject to a vesting requirement, at the time the award is granted) the participant will recognize taxable income and, subject to the application of Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. A participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the participant to draw upon. CALIFORNIA RESOURCES CORPORATION 77
Proposals Requiring Your Vote Section 162(m) of the Code precludes a public corporation from taking a deduction for compensation in excess of $1 million paid in a taxable year with respect to each of certain of the corporation’s current and former executive officers, including any compensation relating to an award granted under a plan similar to the Amended LTIP. However, certain awards under the Existing LTIP may qualify for an exception to this limitation as compensation intended to constitute “performance-based compensation” prior to the amendment of Section 162(m) of the Code in 2017. Parachute Payment Sanctions Certain provisions in the Amended LTIP or included in an agreement incident to the plan may afford a participant special protections or payments that are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the Company’s assets. To the extent triggered by the occurrence of any such event, these special protections or payments may constitute “parachute payments” which, when aggregated with other parachute payments received by the participant, if any, could result in the participant’s receiving “excess parachute payments” (a portion of which would be allocated to those protections or payments derived from the plan). The Company would not be allowed a deduction for any such excess parachute payments and the participant would be subject to a nondeductible 20% excise tax upon such payments in addition to income tax otherwise owed with respect to such payments. General The Amended LTIP is not qualified under Section 401(a) of the Code. The foregoing summary is for general information only and is intended to summarize the United States federal income tax consequences to participants arising from common transactions under the Amended LTIP. This description is based upon the applicable provisions of the Internal Revenue Code as currently in effect and the Treasury Regulations and proposed Treasury Regulations and Internal Revenue Service rulings thereunder, which are subject to change (possibly retroactively). The tax treatment of a participant in the plan may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed above. In addition, Section 409A of the Code provides that deferred compensation, as defined therein, will be subject to an additional 20% tax unless it meets certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder. Although the Company intends for awards issued under the Amended LTIP to comply with Section 409A of the Code, no assurance can be given that they will. Each participant should consult his or her own tax advisor regarding the specific tax consequences of participation in the plan, including the application of any state, local and foreign tax laws which may differ from the United States federal tax treatment and the effect of other state, local and foreign laws, including community property laws. Clawback To the extent required by applicable law or any applicable securities exchange listing standards, or as otherwise determined by the Board of Directors or the Compensation Committee, awards and amounts paid or payable with respect to awards will be subject to the provisions of any applicable clawback policies or procedures adopted by the Company. The clawback policies or procedures may provide for forfeiture, repurchase and/or recoupment of awards and amounts paid or payable with respect to awards. In addition, the Company reserves the right, without the consent of any participant or beneficiary, to adopt any such clawback policies and procedures, including such policies and procedures that have retroactive effect. Effective November 4, 2015, the Board of Directors adopted the Compensation Recoupment and Clawback Policy, which provides that in the event the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under applicable securities laws, the Company will have the right, as to any “Covered Employee,” to cause the Company to require the reimbursement by the Covered Employee, to the extent permitted by applicable law, of all or a portion of any incentive compensation. The full text of the policy can be found on the Company’s website at www.crc.com. CALIFORNIA RESOURCES CORPORATION 78
Proposals Requiring Your Vote The future awards, if any, that will be made to eligible individuals under the Amended LTIP are subject to the discretion of the Compensation Committee and the Board of Directors, and thus we cannot currently determine the benefits or number of shares subject to awards that may be granted to eligible individuals in the future under the Amended LTIP. Therefore, the New Plan Benefits Table is not provided. Existing Plan Benefits The following Existing LTIP Stock Options
Securities Authorized for Issuance Under Equity Compensation Plans The table below sets forth information relating to the number of shares authorized for issuance
CALIFORNIA RESOURCES CORPORATION 79
Proposals Requiring Your Vote
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 4 TO APPROVE THE
Proposal 5(a), Proposal 5(b) and Proposal 5(c): Approval of Amendments to the Certificate of Incorporation to Change Each Supermajority Stockholder Vote Requirement to a Majority Vote Requirement The Company’s Amended and Restated Certificate of Incorporation, as amended most recently as of May 31, 2016 (the “Charter”), provides in part that: (1) Following the date when CRC’s classified board structure expires pursuant to the terms of the Charter, directors may only be removed at any time (a) for Cause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of CRC entitled to vote generally for the election of directors and (b) without Cause upon the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote generally for the election of directors, in the case of each of (a) and (b), acting at a meeting of the stockholders; (2) CRC’s Amended and Restated Bylaws (the “Bylaws”) may not be altered, amended, restated or repealed by the stockholders except by the vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote thereon; and (3) Any alteration, amendment, repeal or restatement of the Fifth Article, the Sixth Article, the Seventh Article, the Eighth Article, the Tenth Article, the Eleventh Article, the Twelfth Article or the Thirteenth Article of the Charter will require the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote thereon. Our Board of Directors reviews corporate governance practices on a continuing basis. In light of evolving practices and stockholder input, our Board of Directors has determined that it is in the best interests of the Company and its investors to seek to amend the Charter to change each of the supermajority voting requirements to a requirement for an affirmative vote of a majority of outstanding shares. The majority voting requirements will give stockholders enhanced flexibility to change the Company’s governing documents, while ensuring that fundamental changes made by stockholders will be acceptable to the holders of a majority of stockholders. Our Board of Directors will retain the ability to amend the Bylaws. The proposed amendments may, if adopted, make it easier for one or more stockholders to change the Company’s corporate governance and, therefore, make it more difficult for our Board of Directors to protect
other stockholders’ interests. Nevertheless, there are other actions that our Board of Directors can take to protect stockholders’ interests on such occasions. Our Board of Directors is proposing these amendments for the reasons described above. It does not otherwise have any current plans to amend the Bylaws or any of the Charter provisions described below that currently require a supermajority vote, or to take or propose to take any action contemplated by such provisions, except that if Proposal 5(b) passes, then effective at the same time the Charter changes, the Bylaws will be immediately amended to conform the Bylaws to the Charter and to provide that the Bylaws may be amended by stockholders by the affirmative vote of a majority of outstanding shares. The general description of provisions of our Charter and Bylaws and the proposed amendments set forth here and below are qualified in their entirety by reference to the text of Appendices C-1, C-2 and C-3. CALIFORNIA RESOURCES CORPORATION 80
Proposals Requiring Your Vote
The Board recommends that the STOCKholders vote to approve each of the three proposals.
Proposal 5(a): Change the Supermajority Vote Requirement for Stockholders to Remove Directors Without Cause to a Majority Vote Requirement The Fifth Article (Section 3) of the Charter currently requires the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote for the election of directors in order for directors to be removed without Cause by the stockholders following the date when CRC’s classified board structure expires pursuant to the terms of the Charter. If the stockholders approve this Proposal 5(a), then the Fifth Article (Section 3) of the Charter will allow stockholders to remove directors with or without Cause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of CRC generally entitled to vote for the election of directors. Appendix C-1 shows the proposed changes to the Fifth Article (Section 3) of the Charter.
The Board recommends that the STOCKholders vote “for” Proposal 5(a) to Change the Supermajority Vote Requirement for STOCKholders to Remove Directors Without Cause to a Majority Vote Requirement.
Proposal 5(b): Change the Supermajority Vote Requirement for Stockholders to Amend the Bylaws to a Majority Vote Requirement The Eighth Article of the Charter currently provides that the stockholders can amend the Bylaws only by the affirmative vote of the holders of at least 75% of voting power of the outstanding shares of stock of CRC entitled to vote thereon. If the stockholders approve this Proposal 5(b), then the Eighth Article of the Charter will allow stockholders to amend the Bylaws by an affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of CRC entitled to vote thereon. In addition, if the stockholders approve this Proposal 5(b), then effective at the same time the Charter changes, the Bylaws will be immediately amended to conform the Bylaws to the Charter and provide that the Bylaws may be amended by stockholders by the affirmative vote of a majority of outstanding shares. Currently, Section 8.1 of the Bylaws provides that the stockholders can amend the Bylaws only by the affirmative vote of at least 75% in voting power of the outstanding shares of CRC entitled to vote thereon. The Board has amended the Bylaws, contingent and effective upon a filing of a certificate of amendment of the Eighth Article of the Charter with the Secretary of the State of Delaware in accordance with this Proposal 5(b). If the Board’s amendment becomes effective upon the effectiveness of the Charter amendment following
stockholder approval of this Proposal 5(b), the Bylaws will allow stockholders to amend the Bylaws by the affirmative vote of a majority of outstanding shares of stock of CRC entitled to vote thereon. Therefore, if this Proposal 5(b) is approved by the stockholders, all of the supermajority voting requirements in the Charter and Bylaws regarding the amendment of the Bylaws will be replaced with an affirmative vote of a majority of outstanding shares of stock standard. Appendix C-2 shows the proposed changes to the Eighth Article of the Charter. CALIFORNIA RESOURCES CORPORATION 81
Proposals Requiring Your Vote
The Board recommends that the STOCKholders vote “for” Proposal 5(b) to Change the Supermajority Vote Requirement for STOCKholders to Amend the Bylaws to a Majority Vote Requirement.
Proposal 5(c): Change the Supermajority Vote Requirement for Stockholders to Amend Certain Provisions of the The Tenth Article of the Charter currently requires the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC in order for stockholders to amend certain Charter provisions. These are: The Fifth Article, which addresses various provisions regarding the Board, including with respect to the removal of directors (as set forth in Proposal 5(a)); The Sixth Article, which requires stockholders to act by meeting; The Seventh Article, which provides that special meetings of stockholders may only be called by the Chief Executive Officer, the Chairman of the Board or the Board of Directors; The Eighth Article, which addresses amendments to the Bylaws (as set forth in Proposal 5(b)); The Tenth Article, which addresses amendments to the Charter (as set forth in this Proposal 5(c)); The Eleventh Article, which selects the forum for certain disputes; The Twelfth Article, which addresses director interests in certain business opportunities; and The Thirteenth Article, which states that Section 203 of the Delaware General Corporation Law applies to CRC. If the stockholders approve this Proposal 5(c), then the Tenth Article of the Charter will allow stockholders to amend the provisions of the Charter described above by an affirmative vote of the outstanding shares of stock of CRC entitled to vote thereon. Appendix C-3 shows the proposed changes to the Tenth Article of the Charter.
The Board recommends that the STOCKholders vote “for” Proposal 5(c) to Change the Supermajority Vote Requirement for STOCKholders to Amend Certain Provisions of the
to a Majority Vote Requirement.
Therefore, if Proposal 5(a), 5(b) and 5(c) are approved by the stockholders, all of the supermajority voting requirements in the Charter and Bylaws will be replaced with an affirmative vote of a majority of outstanding shares of stock standard. CALIFORNIA RESOURCES CORPORATION 82
General Information
At the close of business on March 11, 2019, the “Record Date” for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting, there were 48,799,261 shares of common stock outstanding, each share of which is entitled to one vote. Common stock is the only class of our outstanding securities entitled to receive notice of and to vote at the Annual Meeting. Our Board of Directors asks you to appoint Todd A. Stevens and William E. Albrecht as your proxy holders (“Proxy Holders”) to vote your shares at the Annual Meeting. You make this appointment by using one of the voting methods described below. Quorum and Discretionary Authority The presence at the Annual Meeting of a majority of shares of our common stock issued and outstanding and entitled to vote, present in person or by proxy, is necessary to constitute a quorum in order to transact business at the Annual Meeting. Your shares are counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions will be counted as present for purposes of determining whether a quorum is present at the Annual Meeting. The Chairman of the Annual Meeting or, if directed by the Chairman of the Annual Meeting, a majority of the shares so represented, may adjourn the Annual Meeting from time to time, whether or not there is a quorum represented, and the Proxy Holders will vote the proxies they have been authorized to vote at the Annual Meeting in favor of such an adjournment. In the event a quorum is present at the Annual Meeting but sufficient votes to approve any of the items proposed by our Board of Directors have not been received, the Chairman of the meeting or the Proxy Holders may propose one or more adjournments of the Annual Meeting to permit further solicitation of proxies. A stockholder vote may be taken on one or more of the proposals in this proxy statement prior to such adjournment if sufficient proxies have been received and it is otherwise appropriate. Our Board of Directors does not know of any other matters that are to be presented for action at the Annual Meeting. However, if other matters properly come before the Annual Meeting, the proxies solicited by the Board of Directors will provide the Proxy Holders with the authority to vote on those matters and nominees in accordance with such persons’ discretion. Where a stockholder has appropriately specified how a proxy is to be voted, it will be voted by the Proxy Holders in accordance with the specification. CALIFORNIA RESOURCES CORPORATION 83
General Information How to Vote Shares Registered in Your Name If you own shares that are registered in your own name, you are a “registered stockholder” and you may attend the Annual Meeting and vote in person. You also may vote by proxy without attending the Annual Meeting in any of the following ways:
For stockholders who have their shares voted by duly submitting a proxy by Internet, telephone or mail, the Proxy Holders will vote all shares represented by such valid proxies in accordance with the stockholders’ instructions. If a stockholder signs and mails a proxy card, but does not indicate how the Proxy Holders should vote, the Proxy Holders will vote in accordance with the Board of Directors’ recommendations as set forth above. If you received more than one Notice of Internet Availability of Proxy Materials, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately vote the shares shown on each Notice of Internet Availability of Proxy Materials that you receive in order for all of your shares to be voted at the Annual Meeting. How to Vote Shares Held in “Street Name” If you hold shares through a brokerage firm, trustee, bank, other financial intermediary or nominee (known as shares held in “street name”), you will receive from that broker, trustee, bank, financial intermediary or other nominee (the “intermediary”) a voting instruction form that will explain how to direct the voting of your shares through the intermediary, which may include the ability to provide voting instructions via the Internet or by telephone. If your shares are held in street name through a brokerage firm that is a member of the NYSE and you want to vote on any of the proposals to be submitted to a vote at the Annual Meeting (except as to Proposal 2), you MUST indicate how you wish your shares to be voted. The broker will vote shares held by you in street name in accordance with your voting instructions, as indicated on your signed voting instruction form or by the instructions you provide via the Internet or by telephone. Absent such instructions, the proxy submitted by the broker with respect to your shares will indicate that the broker is not able to cast a vote with respect to the matter, which is commonly referred to as a “broker non-vote.” Accordingly, if your shares are held in street name, it is important that you provide voting instructions to the broker or other intermediary so that your vote will be counted. Under NYSE rules, Proposal 2 is considered a “routine matter,” and thus a broker is permitted in its discretion to cast a vote on this proposal as to your shares in the event that you do not provide the broker with voting instructions. CALIFORNIA RESOURCES CORPORATION 84
General Information If you hold shares in street name and wish to vote your shares in person at the Annual Meeting, you must first obtain a valid proxy from the intermediary. To attend the Annual Meeting in person (regardless of whether you intend to vote your shares in person at the Annual Meeting), you should follow the instructions under “Attending the Annual Meeting in Person” below. If you received more than one voting instruction form, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately follow the foregoing voting procedures for each voting instruction form that you receive in order for all of your shares to be voted at the Annual Meeting. If you are a registered stockholder, you may revoke your proxy at any time before your shares are voted at the Annual Meeting by: voting again through the Internet or by telephone prior to 11:59 p.m., Eastern Time on May 7, 2019; requesting, completing and mailing in a new paper proxy card, as outlined in the Notice of Internet Availability of Proxy Materials; voting in person at the Annual Meeting by completing a ballot; however, attending the Annual Meeting without completing a ballot will not revoke any previously submitted proxy; or submitting a written notice of revocation to the Corporate Secretary of California Resources Corporation at 27200 Tourney Road, Suite 315, Santa Clarita, California 91355 that is received no later than May 7, 2019. If you are a street-name stockholder and you vote by proxy, you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with that entity’s procedures. Required Vote and Method of Counting Proposal 1. Election of Directors We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. See “Majority Voting for Directors” below. The election of directors involves a matter on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to this item, your broker may not vote your shares with respect to this proposal. In such case, a broker non-vote will occur. Abstentions and broker non-votes are not considered votes cast and will have no effect on the outcome of the election of directors. Proposal 2. Ratification of the Appointment of the Independent Registered Public Accounting Firm The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve Proposal 2. Proposal 2 involves a matter on which a broker (or other nominee) does have “discretionary” authority to vote. Even if you do not instruct your broker how to vote with respect to this item, your broker may vote your shares with respect to this proposal in its discretion. With respect to Proposal 2, a vote of “ABSTAIN” will have the same effect as a vote “AGAINST.” CALIFORNIA RESOURCES CORPORATION 85
General Information Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation; and The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve the recommendations in Proposals 3 and 4. Such proposals involve matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items, your broker may not vote your shares with respect to these proposals. In such case, a broker non-vote will occur. Broker non-votes are not considered and will have no effect on the outcome of Proposals 3 and 4. Abstentions are treated as present or represented and voting and will have the same effect as a vote “AGAINST.” With respect to Proposal 3, while this vote is required by law, it will neither be binding on the Company or the Board of Directors nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, the Company or the Board of Directors. However, the views of our stockholders are important to us, and our Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” including the compensation tables that follow, which discusses in detail how our executive compensation program implements our compensation philosophy. Proposals 5(a), 5(b) and 5(c). Change the Supermajority Vote Requirements to a Majority Vote Requirement for (a) Stockholders to Remove Directors Without Cause; (b) Stockholders to Amend the Bylaws; and (c) Stockholders to Amend Certain Provisions of the Certificate of Incorporation Stockholders will vote on Proposals 5(a), 5(b) and 5(c) separately, and the approval of each proposal is not conditioned on the approval of the other proposals. The affirmative vote of the holders of at least 75% in voting power of the outstanding shares of our stock entitled to vote at the Annual Meeting is required to approve each of Proposals 5(a), 5(b) and 5(c). Such proposals involve matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items, your broker may not vote your shares with respect to these proposals. In such case, a broker non-vote will occur. Abstentions and broker non-votes will have the same effect as votes cast “AGAINST” the approval of these proposals. These charter amendments, if approved, will not be effective until we file certificates of amendment with the Secretary of State of Delaware following the Annual Meeting. We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. In accordance with our Bylaws, in order to be elected as a director, a director nominee must receive more votes cast “FOR” than “AGAINST” his or her election. This policy does not apply if the number of nominees for director exceeds the number of directors to be elected on or after the tenth day preceding the date we first mail the Notice of Annual Meeting, in which case directors shall be elected by a plurality of shares present in person or represented by proxy at the Annual Meeting. Unless the election is by plurality vote as set forth above, if an incumbent nominee for director receives an equal or greater number of votes cast “AGAINST” than votes cast “FOR” his or her election, the nominee shall promptly tender his or her resignation to the Board of Directors. Such director resignation will become effective upon acceptance by the Board of Directors of such resignation based on any factors deemed relevant by the Board of Directors. The foregoing summary is qualified by the terms of our majority voting policy, which are included in our Bylaws. CALIFORNIA RESOURCES CORPORATION 86
General Information Method and Cost of Soliciting and Tabulating Votes The Board of Directors is providing these proxy materials to you in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting. In addition to solicitation by mail, our officers, directors and employees may solicit proxies personally or by telephone, facsimile or electronic means. These officers, directors and employees will not receive any extra compensation for these services. In addition, we will make arrangements with brokerage houses, custodians, nominees and other fiduciaries to send proxy materials to the beneficial owners of our stock, and we will reimburse them for postage and clerical expenses. We will bear the costs of the solicitation, including the cost of the preparation, assembly, printing and, where applicable, mailing of the Notice of Internet Availability of Proxy Materials, the Notice of the 2019 Annual Meeting of Stockholders, this proxy statement, the proxy card and any additional information furnished by us to our stockholders. In addition, we have hired D.F. King & Co., Inc. to assist us in soliciting proxies, which it may do by telephone or in person. We will pay D.F. King & Co. a fee of $7,500, plus expenses. Attending the Annual Meeting in Person Only stockholders of record or their legal proxy holders as of the Record Date or our invited guests may attend the Annual Meeting in person. If you plan to attend the Annual Meeting in person, you must present a valid form of government-issued photo identification, such as a driver’s license or passport. In addition to such personal identification, you will need an admission ticket or proof of ownership of CRC stock to enter the Annual Meeting. If your shares are registered in your name, you will find an admission ticket attached to the notice regarding the internet availability of proxy materials or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership as of the Record Date. No cameras, telephones, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Annual Meeting. No banners, signs, firearms or weapons will be allowed in the meeting room. We reserve the right to inspect all items entering the meeting room. The Annual Meeting will be held at the Bakersfield Marriott at the Convention Center, located at 801 Truxtun Avenue, Bakersfield, California 93301. Notice of Internet Availability of Proxy Materials On March 26, 2019, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders of record and beneficial owners who owned shares of our common stock at the close of business on March 11, 2019. The Notice of Internet Availability of Proxy Materials contained instructions on how to access the proxy materials and vote online. We have made these proxy materials available to you over the Internet or, upon your request, have delivered paper versions of these materials to you by mail, in connection with the solicitation of proxies by our Board of Directors for the Annual Meeting. Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it. CALIFORNIA RESOURCES CORPORATION 87
General Information Stockholder Proposals and Director Nominations Any stockholder who wishes to submit a proposal for inclusion in the proxy material and for presentation at our For proposals that are not submitted for inclusion in our proxy statement under Rule 14a-8, as more specifically provided in our Bylaws, in order for nominations of persons for election to the Board of Directors or a proposal of any other business to be properly brought before the California Resources Corporation 27200 Tourney Road, Suite 315 Santa Clarita, California 91355 Detailed information for submitting recommendations for director nominees is available upon written request to our Corporate Secretary at the address listed above. Householding of Proxy Materials The SEC’s proxy rules permit companies and intermediaries, such as brokers, banks and other nominees, to satisfy delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials to those stockholders. This method of delivery, often referred to as “householding,” helps to reduce the amount of duplicative information that stockholders receive and lowers printing and mailing costs for companies. We are householding proxy materials for stockholders of record in connection with the Annual Meeting unless otherwise notified. We have been notified that certain intermediaries may household proxy materials as well. If you hold your shares of common stock through a broker, bank or other nominee that has determined to household proxy materials, only one set of proxy materials will be delivered to multiple stockholders sharing an address unless you notify your broker, bank or other nominee to the contrary.
We will promptly deliver you a separate copy of the proxy materials for the Annual Meeting if you so request by calling (866) 659-2647 or (718) 921-8124 (for international callers) or you may contact your broker, bank or other nominee to make a similar request. Please contact us or your broker, bank or other nominee directly if you have questions or wish to receive separate copies of our proxy materials in the future. You should also contact us or your broker, bank or other nominee if you wish to request delivery of a single copy if you are currently receiving multiple copies. These options are available to you at any time. CALIFORNIA RESOURCES CORPORATION 88
General Information Our A copy of our Annual Report on Form 10-K for the fiscal year ended December 31,
CALIFORNIA RESOURCES CORPORATION
Annex A Reconciliation of Non-GAAP Measures and Other Information
Reconciliation of Non-GAAP Measures and Other Information Adjusted EBITDAX The following tables present a reconciliation of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measure of adjusted
We define adjusted EBITDAX as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; and other unusual, out-of-period and infrequent
and not as an alternative for, income and liquidity measures calculated in accordance with GAAP. CALIFORNIA RESOURCES CORPORATION A-1
Annex The all-in reserve replacement ratio is calculated for a specified period using the proved oil-equivalent additions from extensions and discoveries, improved recovery, revisions and purchases, divided by oil-equivalent production. There is no guarantee that historical sources of reserves additions will continue as many factors that are fully or partially outside management’s control, including commodity prices, availability of capital and the underlying geology, affect reserves additions. Management uses this measure to
Finding and Development Costs We believe that reporting our finding and development costs can aid investors in their evaluation of our ability to add proved reserves at a reasonable cost but is not a substitute for required GAAP disclosures. Various factors, primarily timing differences and effects of commodity price changes, can cause finding and development costs associated with a particular period’s reserves additions to be imprecise. For example, we will need to make more investments in order to develop the proved undeveloped reserves added during the year and any future revisions may change the actual measure from that presented above. In addition, part of the 2018 costs were incurred to convert proved undeveloped reserves from prior years to proved developed reserves. In our calculations, we have not estimated future costs to develop proved undeveloped reserves added in 2018 or removed costs related to proved undeveloped reserves added in prior periods. Our calculations of finding and development costs may not be comparable to similar measures provided by other companies. We calculate all-in finding and development costs by dividing the costs incurred for the year, including acquisitions, by the amount of oil-equivalent proved reserves added in the same year from improved recovery, extensions and discoveries, performance-related revisions, price-related revisions and purchases.
CALIFORNIA RESOURCES CORPORATION A-2
Annex B Amended and Restated LTIP
CALIFORNIA RESOURCES CORPORATION
The purposes of this Plan are (i) to furnish a significant incentive to the
The Plan as set forth herein constitutes an amendment and restatement of the Company’s Long-Term Incentive Plan as in
“Affiliate” means any corporation, partnership, limited liability company or partnership, association, trust, or other organization which,
“Board” means the Board of Directors of the Company. “Business Combination” means a merger, consolidation, or other reorganization, with or into, or the sale of all or substantially all of the Company’s business and/or assets as an entirety to, one or more entities that are not “Change in Control” means, unless provided otherwise in an award agreement, the
CALIFORNIA RESOURCES CORPORATION
Annex
(c)Any “person” (as such term is used in Sections 13(d) and 14(d) of the
(d)During any period not longer than two consecutive years and beginning no earlier than October 6, 2014, individuals who at the beginning of such period constituted the Board cease to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of such period (including for these purposes, new members whose election or nomination was so approved), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board. Notwithstanding the foregoing, (i) if a Change in Control constitutes a payment event with respect to any award that provides for the deferral of compensation and is subject to the Nonqualified Deferred Compensation Rules, then the transaction or event described in subsection (a), (b), (c) or (d) above with respect to such award must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), and as relates to the holder of such award, to the extent required to comply with the Nonqualified Deferred Compensation Rules and (ii) in no event shall the separation of the Company from Occidental Petroleum Corporation and its Affiliates be a Change in Control.
“Disability” means permanent and total disability as defined in Section 22(e)(3) of CALIFORNIA RESOURCES CORPORATION B-2
Annex B Amended and Restated LTIP “Effective Date” means May 8, 2019, which is the date on which this amendment and restatement was approved by the stockholders of “Eligible Person” means any person who is an officer, employee or consultant of the Company or any Affiliate and
“Fair Market Value” means, as of
“Five Percent Basket” has the meaning set forth in Section 5.5. “ISO” means an incentive stock option qualified under Section 422 of the Code. “Nonqualified Deferred Compensation Rules” means the limitations or requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder. “Performance-Based Award” means any “Performance Goal” means a preestablished targeted level or levels of any one or more Performance Objectives.
“Plan” means
“Prior Plan” has the meaning set forth in Section 1. “Qualifying Options” mean options and stock appreciation rights granted with “Rule 16b-3” means Rule 16b-3 under “Section 162(m)” means Section 162(m) of the CALIFORNIA RESOURCES CORPORATION
Annex
“Shares” mean the Company’s Common Stock, par value $0.01 per share. “Substitute Award” means an award granted in substitution for similar awards held by individuals who become Eligible Persons as a result of a merger, consolidation, acquisition or other “Successor Entity” means the surviving or
3.1AGGREGATE SHARE LIMIT - Subject to 3.2INDIVIDUAL LIMIT - Subject to adjustment as provided in or pursuant to this Section In addition, and
3.3REISSUE OF AWARDS AND SHARES - Awards payable in cash or payable in cash or Shares, including restricted shares, that are forfeited, cancelled, or for any reason do not vest under this Plan, and Shares that are subject to awards that expire or for any reason are terminated, cancelled or fail to vest shall be available for subsequent awards under this Plan. If an award under this Plan is or may be settled only in cash, such 3.4SOURCE OF SHARES DELIVERED UNDER PLAN – The Shares to
CALIFORNIA RESOURCES CORPORATION
Annex
This Plan shall be administered by the Committee. 4.1POWERS OF THE COMMITTEE - Subject to the express provisions of this Plan, the Committee shall be authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan within its delegated authority, including, without limitation, the authority to: (a)adopt, amend and rescind rules, regulations and procedures relating to this Plan and its administration or the awards granted under this Plan and determine the forms and terms of individual awards; (b)determine who is an Eligible Person and to which (c)grant awards to Eligible Persons and determine the terms and conditions of such awards, including but not (d)determine the date of grant of an award, which may be a designated date after but not before the date of the Committee’s action; (e)determine whether (subject to Section 7.2), and the extent to which, adjustments are required pursuant to Section 7 hereof; (f)interpret and construe this Plan and terms and conditions of any award granted hereunder (including under any award agreement) and correct any defect therein, whether before or after the date set forth in Section 5; (g)determine the circumstances under which, consistent with the provisions of Section 8.2, any outstanding award may be amended and make any amendments thereto that the Committee determines are necessary or appropriate; and (h)acquire or settle rights under options, stock appreciation rights or other awards in cash, stock of equivalent value, or other consideration. All authority granted herein shall remain in effect so long as any award remains outstanding under this Plan. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or CALIFORNIA RESOURCES CORPORATION B-5
Annex B Amended and Restated LTIP
4.2SPECIFIC COMMITTEE RESPONSIBILITY AND DISCRETION REGARDING AWARDS - Subject to the express provisions of this Plan, the Committee, in its sole and absolute discretion, shall determine all of the terms and conditions of each award granted under this Plan, which terms and conditions may include, subject to such limitations as the Committee may from time to time impose, among other things, provisions that: (a)permit the recipient of such award to pay the purchase price of the Shares or other property issuable pursuant to such award, or any applicable tax withholding obligation upon such issuance or in respect of such award or Shares, in whole or in part, by any one or more of the following: (i)cash, cash equivalent, or electronic funds transfer, (ii)the delivery of previously owned shares of capital stock of the Company (including shares acquired as or pursuant to awards) or other property, (iii)a reduction in the amount of Shares or other property otherwise issuable pursuant to such award, (iv)a cashless exercise, or (v)any other legal consideration the Committee deems appropriate; (b)are intended to qualify such award as an ISO; (c)accelerate the receipt of benefits pursuant to an award or adjust the exercisability, term (subject to other limits) or vesting schedule of any or all outstanding awards, adjust the number of Shares subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and conditions, pursuant to a termination of employment or an event referenced in Section 7 (in which case the Committee’s discretion shall be exercised in a manner consistent with Section 7) or in other circumstances or upon the occurrence of other events as deemed appropriate by the Committee, by amendment of an outstanding award, by substitution of an outstanding award, by waiver or by other legally valid means (which may result, among other changes, in a greater or lesser number of shares subject to the award, a shorter or longer vesting or exercise period, or, except as provided below, an exercise or purchase price that is higher or lower than the original or prior award), in each case subject to Sections 3, 5.5 and 8.2; provided, however, that in no case (other than an adjustment contemplated by Section 7.2) shall the exercise price of any option or stock appreciation right be reduced by an amendment to the award or a cancellation and re-grant of the award to effect a repricing of the award to a price below the Fair Market Value of the underlying Shares on the grant date of the original option or stock appreciation right unless specific stockholder consent is obtained; (d)authorize (subject to Sections 7, 8, and 10) the conversion, succession or substitution of one or more outstanding awards upon the occurrence of an event of the type described in Section 7 or in other circumstances or upon the occurrence of other events as deemed appropriate by the Committee; and (e)determine the value of and acquire or otherwise settle awards upon termination of employment, upon such terms as the Committee (subject to Sections 7, 8 and 10) deems appropriate. CALIFORNIA RESOURCES CORPORATION B-6
Annex B Amended and Restated LTIP 4.3DELEGATION - Subject to Section 4.5, the Board may delegate different levels of authority to different committees with administrative and grant authority under this Plan, provided that each designated committee granting any awards hereunder shall consist exclusively of a member or members of the Board. A majority of the members of the acting committee shall constitute a quorum. The vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the Committee shall constitute action by the committee. The Committee may delegate authority to grant awards under this Plan for new employees to an officer of the Company who is also a director and may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a subsidiary or to third parties. In addition, subject to the constraints of applicable law, the Committee may from time to time, in its sole discretion, delegate to the Chief Executive Officer of the Company the administration (or interpretation of any provision) of this Plan, and the right to grant awards under this Plan, insofar as such administration (and interpretation) and power to grant awards relates to any person who is not then subject to Section 16 of the Exchange Act (including any successor section to the same or similar effect). Any such delegation may be effective only so long as the Chief Executive Officer of the Company is a member of the Board, and the Committee may revoke such delegation at any time. The Committee may put any conditions and restrictions on the powers that may be exercised by the Chief Executive Officer of the Company upon such delegation as the Committee determines in its sole discretion. Notwithstanding the foregoing, no delegation pursuant to this Section 4.3 shall be made to the extent that such delegation would (i) result in the loss of an exemption under Rule 16b-3(d)(1) for awards granted to Eligible Persons subject to Section 16 of the Exchange Act in respect of the Company or (ii) cause awards made under the Prior Plan that were intended to qualify as “performance-based compensation” under Section 162(m) (prior to its amendment in 2017) to fail to so qualify. 4.4BIFURCATION - Notwithstanding anything to the contrary in this Plan, the provisions of this Plan may at any time be bifurcated by the Board or the Committee in any manner so that provisions of any award agreement (or this Plan) intended or required in order to satisfy the applicable requirements of Rule 16b-3 or other applicable law, to the extent permitted thereby, are applicable only to persons subject to those provisions and to those awards to those persons intended to satisfy the requirements of the applicable legal restriction. 4.5AWARDS TO NON-EMPLOYEE DIRECTORS - Notwithstanding any provision in this Plan to the contrary and without being subject to management discretion, the Board, acting through the non-employee Directors only, shall have the authority, in its sole and absolute discretion, to select non-employee Directors to receive awards other than ISOs under this Plan subject to the limitations of Section 3.2. The Board, acting through the non-employee Directors only shall set the terms of any such awards in its sole and absolute discretion, and the Board, acting through the non-employee Directors only, shall be responsible for administering and construing such awards in substantially the same manner that the Committee administers and construes awards to other Eligible Persons.
5.1TYPE AND FORM OF AWARDS - All awards shall be evidenced in writing (including electronic form), substantially in the form approved by the Committee or its delegate. The types of awards that the Committee may grant include, but are not limited to, any of the following, on an immediate or deferred basis, either singly, or in tandem or in combination with or in substitution for, other awards of the same or another type: (i) Shares, (ii) options (ISOs or nonqualified stock options), stock appreciation rights (including limited stock appreciation rights), restricted stock, stock units, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Shares, upon the passage of time, the occurrence of one or more events, or the satisfaction of Performance Goals or other conditions, or any combination thereof, (iii) any similar securities with a value derived from the value of or related to the Shares or other securities of the Company and/or returns thereon, or (iv) cash. Share-based awards may include (without limitation) stock options, stock purchase rights, stock bonuses, stock units, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents (independently or in tandem with any form of stock grant), dividend rights (independently or in tandem with any form of stock grant), Shares, any of which may be payable in Shares or cash, and may consist of one or more of such features in any combination, as determined by the Committee. CALIFORNIA RESOURCES CORPORATION B-7
Annex B Amended and Restated LTIP 5.2PERFORMANCE-BASED AWARDS - The right of a participant to exercise or receive a grant or settlement of any type of award listed in Section 5.1, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any award subject to performance conditions, except as limited under the Prior Plan in the case of awards made under the Prior Plan that were intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017). (a)Performance Goals Generally. The Performance Goals for Performance-Based Awards shall consist of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 5.2, which level may also be expressed in terms of a specified increase or decrease in the particular criteria compared to a past period. The Committee may determine that Performance-Based Awards shall be granted, exercised and/or settled upon achievement of any one Performance Goal or that two or more of the Performance Goals must be achieved as a condition to grant, exercise and/or settlement of such Performance-Based Awards. Performance Goals may differ for Performance-Based Awards granted to any one participant or to different participants. The Performance Goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. In addition, subject to any limitations under Section 162(m) (prior to its amendment in 2017) with respect to awards granted under the Prior Plan that are intended to constitute “performance-based compensation,” such performance measures may be subject to adjustment by the Committee for changes in accounting principles, to satisfy regulatory requirements and other specified extraordinary, unusual or infrequent items or events. (b)Performance Period. Achievement of Performance Goals in respect of Performance-Based Awards shall be measured over a performance period of up to ten years, as specified by the Committee. (c)Performance-Based Award Pool. The Committee may establish a Performance-Based Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Company in connection with Performance-Based Awards. The amount of such Performance-Based Award pool shall be based upon the achievement of a Performance Goal or Goals during the given performance period, as specified by the Committee in accordance with this Section 5.2. The Committee may specify the amount of the Performance-Based Award pool as a percentage of any of such criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such criteria. (d)Settlement of Performance-Based Awards; Other Terms. After the end of each performance period, the Committee shall determine the amount, if any, of (A) the Performance-Based Award pool, and the maximum amount of the potential Performance-Based Award payable to each Participant in the Performance-Based Award pool, or (B) the amount of the potential Performance-Based Award otherwise payable to each Participant. Settlement of such Performance-Based Awards shall be in cash, Stock, other awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce or increase the amount of a settlement otherwise to be made in connection with such Performance-Based Awards, but may not exercise discretion to increase any such amount payable with respect to an award under the Prior Plan that was intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017). The Committee shall specify the circumstances in which such Performance-Based Awards shall be paid or forfeited in the event of termination of employment by the participant prior to the end of a performance period or settlement of Performance-Based Awards. CALIFORNIA RESOURCES CORPORATION B-8
Annex B Amended and Restated LTIP (e)Written Determinations. All determinations by the Committee as to the establishment of Performance Goals, the amount of any Performance-Based Award pool or potential individual Performance-Based Awards and as to the achievement of Performance Goals relating to and final settlement of Performance-Based Awards under this Section 5.2 shall be certified in writing in the case of any award under the Prior Plan that was intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017). The Committee may not delegate any responsibility relating to such Performance-Based Awards. 5.3CONSIDERATION FOR SHARES - Shares may be issued pursuant to an award for any lawful consideration as determined by the Committee, including, without limitation, services rendered by the recipient of such award, but shall not be issued for less than the minimum lawful consideration. Awards may be payable in cash, stock or other consideration or any combination thereof, as the Committee shall designate in or (except as required by Section 5.2) by amendment to the terms and conditions governing such award. 5.4LIMITED RIGHTS - Except as otherwise expressly authorized by the Committee or this Plan or in the applicable award terms and conditions, a participant will not be entitled to any privilege of stock ownership as to any Shares not actually delivered to and held of record by the participant. Except as described in Section 5.11, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such 5.5OPTION/STOCK APPRECIATION RIGHT PRICING, TERM LIMITS AND VESTING - The purchase price per share of the Shares covered by any option or the base price of any stock appreciation right shall be determined by the Committee at the time of the grant, but, except in the case of a Substitute Award, shall not be less than 100 percent of the Fair Market Value of a Share on the date of grant. No option or stock appreciation right shall be exercisable after the expiration of 10 years from the date of grant. An award may be converted or convertible, notwithstanding the foregoing limits, into or payable in, Shares or another award that otherwise satisfies the requirements of this Plan. No option, stock appreciation right or other non-full value appreciation award granted under this Plan on or after the Effective Date may vest in less than one year from its date of grant. Notwithstanding the foregoing, up to five percent of the available Shares authorized for issuance under this Plan as of the Effective Date may be subject to options, stock appreciation rights or other non-full value appreciation awards that vest (in full or in part) in less than one year from their date of grant (the “Five Percent Basket”). Further, any option, stock appreciation right or other non-full value award granted under this Plan may vest in full or in part upon death or disability of the participant, or upon a Change in Control, and such 5.6SPECIAL LIMITATIONS RELATING TO ISOS - An ISO may be granted only to an individual who is employed by
CALIFORNIA RESOURCES CORPORATION
Annex
5.7TRANSFER RESTRICTIONS - Unless otherwise expressly provided in or permitted by this Section 5.7, by applicable law or by the award terms and conditions (i) all awards are nontransferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (ii) awards shall be exercised only by the holder; and (iii) amounts payable or shares issuable pursuant to an award shall be delivered only to (or for the account of) the holder. No award may be transferred for consideration to a financial institution. 5.7.1Exceptions by Committee Action - The Committee, in its sole discretion, may permit an award to be transferred for estate and/or tax planning purposes and on a basis consistent with the Company’s lawful issue of securities and the incentive purposes of the award and this Plan. Notwithstanding the foregoing, awards intended as ISOs or restricted stock awards for purposes of the Code shall be subject to any and all additional transfer restrictions necessary to preserve their status as ISOs or restricted shares, as the case may be, under the Code. 5.7.2Exclusions - The exercise and transfer restrictions in this Section 5.7 shall not apply to: (a)transfers to the Company, (b)the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution, (c)transfers pursuant to a domestic relations order (if approved or ratified by the Committee), if (in the case of ISOs) permitted by the Code, (d)if the participant has suffered a Disability, permitted transfers to or exercises on behalf of the holder by his or her legal representative, or (e)the authorization by the Committee of “cashless exercise” procedures with third parties who finance or who otherwise facilitate the exercise of awards consistent with applicable laws and the express authorization of the Committee. 5.8TAX WITHHOLDING - The Company and any of its Affiliates are authorized to withhold from any award granted, or any payment relating to an award under this Plan, including from a distribution of Shares, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an award, and to take such other action as the Committee may deem advisable to enable the Company, its Affiliates and participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee. Notwithstanding the foregoing, the Company and its Affiliates may, in their sole discretion and in satisfaction of the foregoing requirement, withhold or permit the participant to elect to have the Company or its Affiliate withhold a sufficient number of Shares that are otherwise issuable to the participant pursuant to an award (or allow the surrender of Shares by the participant to the Company or its Affiliate). The number of Shares that may be so withheld or surrendered shall be limited to the number of Shares that have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the applicable minimum statutory withholding rates for U.S. federal, state, local or non-U.S. income and social insurance taxes and payroll taxes, as determined by the Committee. Notwithstanding the preceding provisions of this Section CALIFORNIA RESOURCES CORPORATION B-10
Annex B Amended and Restated LTIP 5.9CASH AWARDS - The Committee shall have the express authority to pay awards in cash under this Plan, 5.10TERMINATION OF EMPLOYMENT OR SERVICE - If an Eligible Person’s employment with or service to the Company or to any Affiliate terminates for any reason, his or her outstanding awards may thereafter be 5.11DIVIDENDS AND DIVIDEND EQUIVALENTS – No dividend equivalents shall be granted in connection with stock options, stock appreciation rights or other non-full value appreciation awards granted under this Plan on or after
foregoing. The
This amended and restated Plan was adopted by the Board on February 19, 2019, and is subject to approval by the Company’s stockholders at the 2019 annual meeting of the Company’s stockholders. If this amendment and restatement is not so approved by the stockholders, then this amendment and restatement shall be void ab initio, and the Prior Plan shall continue in effect as if this amendment and restatement had not occurred, and any awards previously granted under the Prior Plan shall continue in effect under the terms of the grant and the Prior Plan; provided, further, that thereafter awards may continue to be granted pursuant to the terms of the Prior Plan, as in effect prior to this amendment and restatement and as may be otherwise amended thereafter. This amended and restated Plan shall become effective on the Effective Date if it is approved on such date by the Company’s stockholders, and this Plan shall remain in effect, subject to the right of the Board to terminate CALIFORNIA RESOURCES CORPORATION B-11
Annex B Amended and Restated LTIP
7.1CHANGE IN CONTROL; ACCELERATION AND TERMINATION OF AWARDS - Unless otherwise provided in an award agreement, upon the occurrence of a Change in Control: (a)each option and stock appreciation right shall become immediately exercisable and vested upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event, (b)restricted stock shall immediately vest free of restrictions upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event, (c)each award under Section 5.2 shall become payable to the participant upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event, and the level of achievement of the applicable Performance Goals shall be determined by the Committee, (d)the number of Shares covered by each stock unit account shall be issued to the participant upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event, and (e)any other rights of a participant under any other award will be accelerated to give the participant the benefit intended under any such award upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event. The Committee may override the provisions regarding acceleration in this Section 7.1 and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Committee may approve. Any acceleration of awards shall comply with applicable legal and regulatory requirements, including the Nonqualified Deferred Compensation Rules. If any option or other right to acquire Shares under this Plan has been fully accelerated as required or permitted by this Plan but is not exercised prior to (i) a dissolution of the Company, or (ii) an event described in this Section 7.1 that the Company does not survive, or (iii) the consummation of a Change in Control approved by the Board, such option or right will terminate, subject to any provision that has been expressly made by the Committee or the Board through a plan of reorganization approved by the Board or otherwise for the survival, substitution, assumption, exchange or other settlement of such option or right. 7.2ADJUSTMENTS – 7.2.1ADJUSTMENTS GENERALLY. The following provisions will apply if any extraordinary dividend or other extraordinary distribution occurs in respect of the Shares (whether in the form of cash, Shares, other securities, or other property), or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, repurchase, or exchange of Shares or other securities of the Company, or any similar, unusual, infrequent or extraordinary corporate transaction (or event in respect of the Shares) or a sale of substantially all the assets of the Company as an entirety occurs. The Committee will, in such manner and to such extent (if any) as it deems appropriate and equitable: (a)proportionately adjust any or all of (i) the number and type of Shares (or other securities) that thereafter may be made the subject of awards (including the specific maxima and numbers of shares set forth elsewhere in this Plan and the individual award limitations set forth in Section 3), (ii) the number, amount and type of shares (or other securities or property) subject to any or all outstanding awards, (iii) the grant, purchase, or exercise price of any or all outstanding awards, (iv) the securities, cash or other property deliverable upon exercise of any outstanding awards, or (v) the Performance Goals or Performance Objectives appropriate to any outstanding awards, or CALIFORNIA RESOURCES CORPORATION B-12
Annex B Amended and Restated LTIP (b)in the case of an extraordinary dividend or other distribution, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split-up, exchange, or spin-off, make provision for a cash payment or for the substitution or exchange of any or all outstanding awards or the cash, securities or property deliverable to the holder of any or all outstanding awards based upon the distribution or consideration payable to holders of the Shares of the Company upon or in respect of such event. 7.2.2EQUITY RESTRUCTURING - If the Company recapitalizes, reclassifies its capital stock or otherwise changes its capital structure or another change or event occurs that constitutes an “equity restructuring” pursuant to Accounting Standards Codification Topic 718, Compensation — Stock Compensation, or any successor accounting standard (a “recapitalization”), (a) the Committee shall equitably adjust the number and class of Shares (or other securities or property) covered by each outstanding award and the terms and conditions, including the exercise price and performance criteria (if any), of such award to equitably reflect such recapitalization and shall adjust the number and class of Shares (or other securities or property) with respect to which awards may be granted after such recapitalization and (b) the Committee shall make a corresponding and proportionate adjustment with respect to the maximum number of Shares (or other securities) that may be delivered with respect to awards under this Plan as provided in Section 3, the individual award limitations set forth in Section 3 and the class of Shares (or other securities) available for grant under this Plan.
8.1AUTHORITY OF THE BOARD - Subject to Section 8.2, the Board may amend or terminate this Plan at any 8.2RESTRICTIONS - No amendment or
9.1COMPLIANCE AND CHOICE OF LAW; SEVERABILITY - This Plan, the granting and vesting of awards under this Plan and the issuance and delivery of Shares and/or the payment of money under this Plan or under awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the state of Delaware. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect. 9.2NO RIGHT TO AN AWARD - Neither the adoption of this Plan nor any action of the Board or of the Committee shall be deemed to give any individual any right to be granted an award or any other rights hereunder except as may be evidenced by an award agreement duly executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. 9.3NON-EXCLUSIVITY OF PLAN - Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Shares, under any other plan or authority. CALIFORNIA RESOURCES CORPORATION B-13
Annex B Amended and Restated LTIP
10.1UNFUNDED PLAN - Unless otherwise determined by the Committee, this Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. This Plan shall not establish any fiduciary relationship between the Company or any Affiliate and any participant or other person. To the extent any person holds any rights by virtue of awards granted under this Plan, such rights shall be no greater than the rights of an unsecured general creditor of the Company. 10.2AWARDS NOT COMPENSATION - Unless otherwise determined by the Committee, settlements of awards received by participants under this Plan shall not be deemed a part of a participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan, severance program or severance pay law of any country. 10.3FRACTIONAL SHARES - The Company shall not be 10.4COMPLIANCE WITH SECURITIES LAWS - Nothing herein or in any 10.5CLAWBACK - To the
the requirements of the Nonqualified Deferred Compensation Rules; provided, however, that nothing in this Section
CALIFORNIA RESOURCES CORPORATION
Annex C-1 Proposal 5(a) Amendment to Certificate of Incorporation
Proposal 5(a) Amendment to Certificate of Incorporation Proposed Amendment to the Amended and Restated Certificate of The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016, as proposed to be amended by “Proposal 5(a)—Change the Supermajority Vote Requirement for Stockholders to Remove Directors Without Cause to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs. FIFTH . . . 3. Removal of Directors. Prior to and through the date on which the Classified Board Expiration Time occurs, and subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, if any, any director may be removed only for Cause, upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors, acting at a meeting of the stockholders in accordance with the DGCL, this Amended and Restated Certificate of Incorporation and the bylaws of the Corporation. Upon the Classified Board Expiration Time, any director may be removed at any time, with or without Cause,
CALIFORNIA RESOURCES CORPORATION C-1-1
Annex C-2 Proposal 5(b) Amendment to Certificate of Incorporation
Proposal 5(b) Amendment to Certificate of Incorporation Proposed Amendment to the Amended and Restated Certificate of The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016, as proposed to be amended by “Proposal 5(b)—Change the Supermajority Vote Requirement for Stockholders to Amend the Bylaws to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs. EIGHTH: In furtherance of, and not in limitation of, the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend, restate or repeal the bylaws of the Corporation; provided, however, that, the provisions of this Article Eighth notwithstanding, the bylaws of the Corporation shall not be altered, amended, restated or repealed by the stockholders of the Corporation except by the vote of holders of at least Change to Bylaws Adopted by the Board of Directors, Effective Upon Filing of Certificate of Amendment to the Amended and Restated Certificate of Incorporation To Reflect Amendments Set Forth Above (Proposal 5(b)) SECTION 8.1 Amendments. Subject to the provisions of the Certificate of Incorporation, these Bylaws may be amended, altered or repealed (A) by resolution adopted by a majority of the directors present at any special or regular meeting of the Board at which a quorum is present if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting or (B) at any regular or special meeting of the stockholders upon the affirmative vote of at least
CALIFORNIA RESOURCES CORPORATION C-2-1
Annex C-3 Proposal 5(c) Amendment to Certificate of Incorporation
Proposal 5(c) Amendment to Certificate of Incorporation Proposed Amendment to the Amended and Restated Certificate of The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016, as proposed to be amended by “Proposal 5(c)—Change the Supermajority Vote Requirement for Stockholders to Amend Certain Provisions of the Amended and Restated Certificate of Incorporation to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs. TENTH: Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation (and in addition to any other vote that may be required by law, this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation), the approval by a majority of the directors then in office and the affirmative vote of the holders of a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, in addition to any vote of holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, shall be required to amend, alter, restate or repeal any provision of this Amended and Restated Certificate of Incorporation
CALIFORNIA RESOURCES CORPORATION C-3-1
ANNUAL MEETING OF STOCKHOLDERS OF CALIFORNIA RESOURCES CORPORATION May
ADMISSIONTICKETIf you plan to attend the annual meeting of stockholders, you will not be admitted to the meeting without valid government-issued photo identification (such as a driver’s license or passport) and this admission ticket or other proof of stock ownership as of March
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