UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. )
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Schlumberger
SCHLUMBERGER N.V. (Schlumberger Limited)(SCHLUMBERGER LIMITED)
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March [ ] , 2016
NOTICE OF 2016 ANNUAL GENERAL MEETING OF STOCKHOLDERS
Notice of 2017 Annual General Meeting of Stockholders
April 5, 2017
10:00 a.m. Curaçao time
Avila Beach Hotel, Penstraat 130, Willemstad, Curaçao
ITEMS OF BUSINESS
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| 1. | Elect the | |
2. | Approve, on an advisory basis, our executive compensation. | ||
3. | Conduct an advisory vote on the frequency of future advisory votes on executive compensation. | ||
4. | |||
5. | |||
6. | Approve | ||
7. | |||
Such other matters as may properly be brought before the meeting.
RECORD DATE
February 15, 2017
PROXY VOTING
Your vote is very important. Whether or not you plan to attend the annual general meeting in person, please (i) sign, date and promptly return the enclosed proxy card in the enclosed envelope, or (ii) grant a proxy and give voting instructions by telephone or internet, so that you may be represented at the meeting. Voting instructions are provided on your proxy card or on the voting instruction card provided by your broker.
Brokers cannot vote for Items 1, 2, 3, 6 or 7 without your instructions.
March , 2017
By order of the Board of Directors,
ALEXANDER C. JUDEN
Secretary
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of Stockholders to Be Held on April 6, 2016:
This proxy statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and our 2015 Annual Report to Stockholders, are available free of charge on our website at http://investorcenter.slb.com.
Alexander C. Juden
Secretary
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of Stockholders to Be Held on April 5, 2017: This proxy statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and our 2016 Annual Report to Stockholders, are available free of charge on our website at http://investorcenter.slb.com. |
General Information | 5 | |
March , 2017
Agenda Item | Board recommendation | |||||
Item 1 | Election of 12 director nominees named in this proxy statement. | FOR | ||||
Item 2 | Approval of the advisory resolution to approve executive compensation. | FOR | ||||
Item 3 | Advisory vote on the frequency of future votes on executive compensation. | ONE YEAR | ||||
Item 4 | Approval of the Company’s Consolidated Balance Sheet as at December 31, 2016, its Consolidated Statement of Income for the year ended December 31, 2016, and the declarations of dividends by our Board in 2016. | FOR | ||||
Item 5 | Approval of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017. | FOR | ||||
Item 6 | Approval of the adoption of our 2017 Schlumberger Omnibus Stock Incentive Plan. | FOR | ||||
Item 7 | Approval of the Amendment and Restatement of our Schlumberger Discounted Stock Purchase Plan. | FOR | ||||
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March , 2016
This proxy statement is furnished in connection with the solicitation by the Board of Directors (the “Board”) of Schlumberger Limited (Schlumberger N.V.) (“Schlumberger” or the “Company”) of proxies to be voted at its 20162017 annual general meeting of stockholders, which will be held at the Avila Beach Hotel, Penstraat 130, Willemstad, Curaçao, on Wednesday, April 6, 20165, 2017 beginning at 10:00 a.m., Curaçao time. time, and at any postponement(s) or adjournment(s) thereof.
To gain admittance to the meeting, stockholders of record and beneficial owners as of the close of business on the record date for the meeting, February 17, 2016,15, 2017, must present a passport or other government-issued identification bearing a photograph and, for beneficial owners, proof of ownership as of the record date, such as the top half of the proxy card or voting instruction card that was sent to you with this proxy statement.
The approximate mailing date of this proxy statement is March , 2016.2017. Business at the meeting iswill be conducted in accordance with the procedures determined by the Chairman of the meeting and is generallywill be limited to matters properly brought before the meeting by or at the direction of theour Board of Directors or by a stockholder in accordance with specified requirements requiring advance notice and disclosure of relevant information.stockholder.
The Schlumberger 2015
We are providing our 2016 Annual Report to Stockholders is provided concurrently with this proxy statement, and stockholdersstatement. Stockholders should refer to its contents in considering agenda Item 3.
Items to be Voted on at the Annual General Meeting
The agenda for the 2016 annual general meeting includes the following items:4.
Each stockholder of record at the close of business on the record date, February 17, 2016,15, 2017, is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on with respect to each share registered in the stockholder’s name. A stockholder of record is a person or entity who held shares on that dateregisteredin its name on the records of Computershare Trust Company, N.A. (“Computershare”), Schlumberger’s stock transfer agent. Persons who held shares on the record date through a broker, bank or other nominee are referred to asbeneficialowners.
Shares cannot be voted at the meeting unless the owner of record is present in person or is represented by proxy. Schlumberger is incorporated in Curaçao and, as required by Curaçao law, meetings of stockholders are held in Curaçao. Because many stockholders cannot personally attend the meeting, it is necessary that a large number be represented by proxy.
Shares Outstanding
On February 17, 2016,15, 2017, there were[ ]shares of Schlumberger common stock outstanding and entitled to vote.
Quorum
Holders of at least one-half of the outstanding shares entitling the holders thereof to vote at the meeting must be present in person or by proxy to constitute a quorum for the taking of any action at the meeting.
Votes Required to Adopt Proposals
To be elected, director nominees must receive a majority of votes cast (the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee). Approval of each of the other matters on the agenda also requires the affirmative vote of the majority of votes cast with the exception of Item 5 (approval of amendments to Articles of Incorporation), which must receive the support of a majority of the Company’s shares outstanding and entitled to vote at the annual general meeting to be approved.
Effect of Abstentions and Broker Non-Votes
Abstentions and proxies submitted by brokers that do not indicate a vote because they do not have discretionary voting authority and have not received instructions from thebeneficialowner of the shares as to how to vote on a proposal (so-called “broker non-votes”) will be considered as present for quorum purposes. If a quorum is not present at the meeting, the Board may call a second general meeting of stockholders, at which the quorum requirement will not apply.
Schlumberger Limited2017 Proxy Statement | 5 |
Votes Required to Adopt Proposals
To be elected, director nominees must receive a majority of votes cast (the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee). Approval of each of the other matters on the agenda also requires the affirmative vote of the majority of votes cast.
Effect of Abstentions and Broker Non-Votes
Brokers holding shares must vote according to specific instructions they receive from thebeneficialowners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion. However, the New York Stock Exchange (the “NYSE”) precludes brokers from exercising voting discretion on other proposals without specific instructions from the beneficial owner, as follows:
Discretionary Items. Under NYSE rules, brokers will have discretion to vote on Items 3 (approval of financial statements and dividends), 4 (appointment of independent registered public accounting firm) 5 (approval of amendments to Articles of Incorporation) or 6 (approval of the number of directors) without instructions from thebeneficialowners.
Nondiscretionary Items. Brokers cannot vote on Items 1 (election of directors), 2 (advisory vote to approve executive compensation), or 7 (approval of French Sub
• | Discretionary Items.Under NYSE rules, brokers will have discretion to vote on both Item 4 (approval of financial statements and dividends) and Item 5 (appointment of independent registered public accounting firm) without instructions from thebeneficialowners. |
• | Nondiscretionary Items.Brokers cannot vote on Items 1 (election of directors), 2 (advisory vote to approve executive compensation), 3 (advisory vote on the frequency of future advisory votes on executive compensation), 6 (adoption of 2017 Schlumberger Omnibus Incentive Plan) or 7 (approval of the amendment and restatement of the Schlumberger Discounted Stock Purchase Plan) without instructions from thebeneficialowners. Therefore, if your shares are held in “street name” by a broker and you do not instruct your broker how to vote on the election of directors or the advisory vote to approve executive compensation, your broker willnotbe able to vote for you on those matters. |
Abstentions and broker non-votes doare not affectconsidered as votes cast and will not be counted in determining the outcome of the vote on the election of directors or on any of the other proposals, other thanexcept that for purposes of satisfying NYSE rules, abstentions are counted in the denominator for determining the total votes cast on Item 5 (approval of amendmentsItems 6 and 7.
How to Articles of Incorporation), where they have the effect of a vote against the proposal.Vote
Stockholders with shares registered in their names with Computershare and participants who hold shares in the Schlumberger Discounted Stock Purchase Plan may authorize a proxy:
by the internet at the following internet address: http://www. proxyvote.com; | |
telephonically by calling 1-800-690-6903; or | |
by completing and mailing their proxy card. |
The internet and telephone voting facilities for stockholders of record will close at 11:59 p.m. Eastern time on Tuesday, April 12, 2016.4, 2017. The internet and telephone voting procedures have been designed to authenticate stockholders and to allow you to vote your shares and to confirm that your instructions have been properly recorded.
A number of banks and brokerage firms participate in programs that also permit beneficial stockholders to direct their vote by the internet or telephone. If you are a beneficial owner whose shares are held in an account at a bank or brokerage firm that participates in such a program, you may direct the vote of those shares by the internet or telephone by following the instructions on the voting form.
By providing your voting instructions promptly, you may save the Company the expense of a second mailing.
All shares entitled to vote and represented by properly executed proxies received prior to the meeting and not revoked will be voted at the meeting in accordance with your instructions. If you are a stockholder with shares registered in your name with Computershare and you submit a properly executed proxy card but do not direct how to vote on each item, the persons named as proxies will vote as the Board recommends on each proposal.
Changing Your Vote or Revoking Your Proxy
If you are a stockholder of record, you can change your vote or revoke your proxy at any time by timely delivery of a properly executed, later-dated proxy (including an internet or telephone vote) or by voting by ballot at the meeting. If you hold shares through a broker, bank or other nominee, you must follow the instructions of your broker, bank or other nominee to change or revoke your voting instructions.
Schlumberger Limited2017 Proxy Statement | 6 |
ITEM 1. ELECTION OF DIRECTORSElection of Directors
All of our directors are elected annually at our annual general meeting of stockholders. Our stockholders are requested to elect 1012 nominees to the Board, of Directors, each to hold office until the next annual general meeting of stockholders and until a director’s successor is elected and qualified or until a director’s death, resignation or removal. Each of the nominees is now a director and was previously elected by theour stockholders at the 20152016 annual general meeting. meeting, except for Mr. Lund, who was appointed by the Board in June 2016 to serve as a director based upon the recommendation of the Nominating and Governance Committee of the Board, and Mr. Galuccio, who was identified by Mr. Kibsgaard as a director nominee and who is not currently a director.
All of the nominees for election have consented to being named in this proxy statement and to serve if elected. If any nominee is unable or unwilling to serve, the Board of Directors may designate a substitute nominee. If the Board designates a substitute nominee, proxies may be voted for that substitute nominee. The Board knows of no reason why any nominee will be unable or unwilling to serve if elected.
Having exceeded the normal retirement age of 70 under our Corporate Governance Guidelines, Tony Isaac, our former chairman of the Board, retired at our 2015 annual general meeting.
Shares represented by properly executed proxies will be voted, if authority to do so is not withheld, for the election of each of the 1012 nominees named below. Votes may not be cast for a greater number of persons than the number of director nominees named in this proxy statement.
Required Vote
Each director nominee must receive a majority of the votes cast to be elected.If you hold your shares in “street name,” please be aware that brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
Recommendation of the Board
The Board of Directors Recommends a Vote FOR
The Board of Directors Recommends a VoteFORAll Nominees. |
The Board believes that each director nominee possesses the qualities and experience that the Nominating and Governance Committee believes that nominees should possess, as described in detail below in the section entitled “Corporate Governance—Director Nominations.”Nominations” beginning on page 16. The Board seeks out, and the Board is comprised of, individuals whose background and experience complement those of other Board members. The nominees for election to the Board, together with biographical information furnished by each of them and information regarding each nominee’s director qualifications, are set forth below.
There are no family relationships among executive officers and directors of the Company.
Director Nominees
Schlumberger Limited2017 Proxy Statement | 7 |
Peter L.S. Currie
Lead Independent Director President, Currie Capital LLC Director Since2010 Age60 Other Current Public Boards:None | Board Committees • Nominating and Governance, Chair • Compensation | |||
Former Public Directorships Held During the Past 5 Years • New Relic, Inc. • Twitter, Inc. | Other Experience and Education • Former director of several privately-held companies • Former Chief Financial Officer of public companies • President of Board of Trustees at Phillips Academy • MBA from Stanford University |
PETER L.S. CURRIE 59, has been a director of the Company since 2010 and is the Board’s Lead Independent Director. Since April 2004, he has been President of Currie Capital LLC, a private investment firm.firm, since April 2004. Mr. Currie iswas the lead independent director at Twitter, Inc., where he chairschaired both theits audit committee and theits nominating and governance committee, having served on its board sincefrom November 2010.2010 to May 2016. He also servesserved on the board of directors of New Relic, Inc. (since(from March 2013)2013 to August 2016), where he chairschaired its audit committee and iswas a member of its compensation committee. Mr. Currie previously also served on the boards of directors of Clearwire Corporation, CNET Networks, Inc., Safeco Corporation, and Sun Microsystems, Inc.,
Relevant Skills and is a director at several privately-held companies. He is also President of the board of trustees of Phillips Academy. Expertise
Mr. Currie brings to the Board strong financial and operational expertise as a result of his extensive board and committee experience at both public and privately-held companies; experience as chief financial officer of two public companies (McCaw Cellular Communications Inc. and Netscape Communications Corp.)Communications); and experience in senior operating positions in investment banking, venture capital and private equity.
Miguel M. Galuccio
Former Chairman & New Director Nominee Age48 Other Current Public Boards:None | Board Committees • None | |||
Former Directorships Held During thePast 5 Years • None | Other Experience and Education • BS in Petroleum Engineering from Technological Institute of Buenos Aires • Schlumberger training and product line expertise • Latin America energy policy expertise |
MIGUEL GALUCCIO was the Chairman and Chief Executive Officer of YPF (Yacimientos Petrolíferos Fiscales), Argentina’s national oil company, from May 2012 to March 2016. From 1999 to 2012, he was an employee of Schlumberger and held a number of international positions, his last being President, Schlumberger Production Management (SPM). Prior to his employment at Schlumberger, he served in various executive positions at YPF and its subsidiaries, including YPF International, from 1994 to 1999.
Relevant Skills and Expertise
Mr. Galuccio brings to the Board strong leadership and operational expertise from his experience as the chairman and chief executive officer of Argentina’s national oil company, which under his leadership became the largest producer of shale oil globally outside of North America. Mr. Galuccio has valuable insight into the domestic and international energy policies of Argentina, Mexico, Venezuela, Ecuador and other countries worldwide that are strategically important to Schlumberger. He has had extensive experience negotiating with Schlumberger customers in Latin America, Russia and China, including global energy companies and national oil companies and expects to remain an active participant in the oil and gas exploration and production industry as a principal and operator. Mr. Galuccio has a deep understanding of the Schlumberger culture, as well as a deep knowledge of Latin America, both of which will be of great value to the Board.
Schlumberger Limited2017 Proxy Statement | 8 |
V. Maureen Kempston Darkes
Retired Group Vice President and President Latin America, Africa and Middle East, General Motors Corporation Director Since2014 Age68 | Board Committees • Audit, Chair • Finance | |||
Other Current Public Boards:Enbridge Inc., Brookfield Asset Management Inc., Balfour Beatty plc, and Canadian National Railway Company | ||||
Former Public Directorships Held During thePast 5 Years • None | Other Experience and Education • International operations • Product liability and execution expertise • Bachelor of Law Degree, University of Toronto Faculty of Law |
V. MAUREEN KEMPSTON DARKES 67, retired, has been a director of the Company since 2014. She was Group Vice President and President Latin America, Africa and Middle East, of General Motors Corporation (“GM”), an automotive manufacturer, from January 2002 until her retirement in December 2009, and was a member of its Automotive Strategy Board until her retirement from GM. Ms. Kempston Darkes has been a director of Enbridge Inc., a leading energy transportation and distribution company, since November 2010, and is a member of its corporate social responsibility committee, its safety and reliability committee and its human resources and compensation committee. She also is a member of the board of directors of Brookfield Asset Management Inc., a global asset management company (since April 2008), where she chairs the risk management committee and is a member of the management resources and compensation committee; Balfour Beatty plc, an infrastructure services company (since July 2012), where she chairs the safety and sustainability committee and is a member of both the nomination and the remuneration committees; and Canadian National Railway Company (since 1995), where she chairs the environment, safety and security committee, and is a member of the corporate governance and nominating committee, finance committee, audit committee and the strategic planning committee.
Relevant Skills and Expertise
Ms. Kempston Darkes brings to the Board extensive automotive industry experience, aswhich is particularly relevant to the Company as it continues to focus on improving product reliability and execution, as well asand has proven leadership abilities and experience in Latin America, Africa and the Middle East. The Board also benefits greatly from Ms. Kempston Darkes’ audit committee experience and financial expertise.
Paal Kibsgaard
Chairman and Chief Executive Officer Director Since2011 Age49 Other Current Public Boards:None | Board Committees • None | |||
Former Public Directorships Held During thePast 5 Years • None | Other Experience and Education • Qualified petroleum engineer • Master’s Degree from Norwegian Institute of Technology • Director of privately-held company |
PAAL KIBSGAARD 48, has been a director of the Company since 2011 and Chairman of the board of directorsBoard since April 2015, and has served as Chief Executive Officer of the Company since August 2011. He was the Company’s Chief Operating Officer from February 2010 to July 2011, and President of the Reservoir Characterization Group from May 2009 to February 2010. Prior to that, Mr. Kibsgaard served as Vice President, Engineering, Manufacturing and Sustaining, from November 2007 to May 2009, and as Vice President of Personnel from April 2006 to November 2007. Mr. Kibsgaard has been with the Company since 1997, and began his career as a reservoir engineer. He has held numerous operational and administrative management positions within the Company in the Middle East, Europe and the U.S.
Relevant Skills and Expertise
As a result of his service in various global leadership positions in the Company, he brings to the Board a unique operational perspective and thorough knowledge of the Company’s operational activities worldwide. The Board believes that Mr. Kibsgaard’s service as Chairman and Chief Executive Officer is an important link between management and the Board, enabling the Board to perform its oversight function with the benefit of his perspectives on the Company’s business.
Schlumberger Limited2017 Proxy Statement | 9 |
Nikolay Kudryavtsev
Rector, Moscow Institute of Physics and Technology Director Since2007 Age66 Other Current Public Boards:None | Board Committees • Audit • Finance • Science and Technology | |||
Former Public Directorships Held During thePast 5 Years • None | Other Experience and Education • Prior Chair, Molecular Physics • PhD in physics and mathematics, Moscow Institute of Physics and Technology • Member, Russian Academy of Sciences |
NIKOLAY KUDRYAVTSEV 65, has been a director of the Company since 2007. Since June 1997, he has been the Rector of the Moscow Institute of Physics and Technology. Mr. KudryavtsevTechnology since June 1997. He has also been chairman of the Board of Rectors of the City of Moscow and Moscow Region since 2012, and was elected Vice President of the Russian Rectors Union in 2014.
Relevant Skills and Expertise
Mr. Kudryavtsev brings to the Board valuable management and finance experience, as well as deep scientific and technological expertise. This provides the Board with valuable insight regarding the Company, its products and current technology, as well as the future technological needs of the Company and the industry. Mr. Kudryavtsev also provides the Board with a particularly valuable Russian vantage point, which is useful for both the development of the Company’s business and an understanding of the needs of the Company’s population of Russian employees. The Board is aided immensely by Mr. Kudryavtsev’s sensitivity to Russian culture and risk at the field level.
Helge Lund
Former Chief Executive Officer, BG Group plc Director Since2016 Age54 Other Current Public Boards:None | Board Committees • Audit • Finance | |||
Former Public Directorships Held During thePast 5 Years • Nokia • Novo Nordisk | Other Experience and Education • Director of a privately-held company • BA in Economics from Norwegian School of Economics & Business Administration • MBA from NSEAD • Norwegian Energy Policy Expertise |
HELGE LUND was appointed to the Board in June 2016, upon the recommendation of the Nominating and Governance Committee. He was the Chief Executive Officer of BG Group from March 2, 2015 through February 15, 2016. From August 16, 2004 to October 15, 2014, he was the Chief Executive Officer of Statoil, a leading oil and gas company. Prior to Statoil, he served as President and Chief Executive Officer of Aker Kvaerner, an industrial conglomerate with operations on oil and gas, engineering and construction, pulp and paper and shipbuilding. He served on the board of directors for Nokia from 2011 through 2014, and on the board of directors of Novo Nordisk from 2014 to 2015.
Relevant Skills and Expertise
Mr. Lund brings to the board strong leadership and operational expertise from his experience as the chief executive officer of several public companies as well as of a national oil company. Mr. Lund also provides valuable insight into the developing domestic and international energy policies of Norway and the intricacies of negotiating with global energy companies. He also has extensive experience dealing with global energy institutions such as the Organization of the Petroleum Exporting Countries and the International Energy Agency and with navigating various opportunities in the oil and gas industry, including acquisition targets and other business opportunities.
Schlumberger Limited2017 Proxy Statement | 10 |
Michael E. Marks
Managing Partner, Riverwood Capital, LLC Director Since2005 Age66 Other Current Public Boards:GoPro, Inc. | Board Committees • Compensation, Chair • Audit | |||
Former Public Directorships Held During thePast 5 Years • SanDisk Corp. | Other Experience and Education • Former Chief Executive Officer of a public company • Director of several privately-held companies • MBA from Harvard Business School |
MICHAEL E. MARKS 65, has been a director of the Company since 2005. He has been a Managing Partner of Riverwood Capital, LLC, a private equity firm, since March 2007. Mr. Marks has been a director of SanDisk, a memory products company, since 2003 and became its Chairman in 2011. He also chairs its nominating and governance committee. Mr. Marks is the lead independent director at GoPro, Inc., a consumer camera company, and is the chair of its compensation and leadership committee and a member of its nominating and governance and its compensation and leadership committees. From 1991 to 2008,committee. Mr. Marks served as a director at Flextronics, Inc.from 2003 to 2011 and as Chairman from 2011 until 2016 of San Disk Corp., a leading producer of advanced electronic manufacturing services, andmemory products company, when it was its Chief Executive Officer from January 1994 to January 2006. From 2006 to 2008, he was Chairman of the Board of Flextronicsacquired. Mr. Marks previously served on the boards of directors of Flextronics Inc., Sun Microsystems and Calix,Calix.
Relevant Skills and is a director at several privately-held companies. Expertise
Mr. Marks brings to the Board his familiarity with world-class manufacturing from the field level to the
boardroom based on his experience as CEO at Flextronics, a large, diversified global corporation with many of the same issues that Schlumberger faces. As a former chief executive and as a public company director at various other companies, Mr. Marks has been involved in succession planning, compensation, employee management and the evaluation of acquisition opportunities. Mr. Marks’ significant experience as a director at various technology-driven companies, as well as his finance and mergers and acquisitions experience, are especially relevant to Schlumberger’s technology-oriented business and growth strategy.
Indra K. Nooyi
Chairman and Chief Executive Officer, PepsiCo, Inc. Director Since2015 Age61 Other Current Public Boards:Pepsico, Inc. | Board Committees • Audit • Finance | |||
Former Public Directorships Held During thePast 5 Years • None | Other Experience and Education • Current Chief Executive Officer of a public company • Board of Trustees, the World Economic Forum • Member, MIT Presidential CEO Advisory Board • M.B.A., Indian Institute of Management • Master of Public and Private Management, Yale University |
INDRA K. NOOYI 60, has been a director of the Company since April 2015. She is the Chairman and Chief Executive Officer of PepsiCo, Inc., a global food and beverage company. She was named President and CEO in 2006, and assumed the additional role of Chairman of PepsiCo’s Boardboard of Directorsdirectors in 2007. She was elected to PepsiCo’s Boardboard of Directorsdirectors and became President and Chief Financial Officer in 2001, after serving as Senior Vice President and Chief Financial Officer since 2000. Mrs. Nooyi also served as PepsiCo’s Senior Vice President, Corporate Strategy and Development from 1996 until 2000, and as PepsiCo’s Senior Vice President, Strategic Planning from 1994 until 1996. She serves on several non-profit boards of directors and is a member of the Temasek Americas Advisory Panel, an investment company owned by the government of Singapore.
Relevant Skills and Expertise
The Board believes that it benefits greatly from Mrs. Nooyi’s proven leadership as Chairman and CEO of a global public company. The Board also believes that herPepsiCo, Inc. Mrs. Nooyi’s expertise in developing and directing corporate strategy and finance, mergers and acquisitions, and organizational and talent management enables her to make valuable contributions to the Board.
Schlumberger Limited2017 Proxy Statement | 11 |
Lubna S. Olayan
Chief Executive Officer and Deputy Chairperson, Olayan Financing Company Director Since2011 Age61 | Board Committees • Nominating and Governance • Finance | |||
Other Current Public Boards:Alawwal Bank, Rolls Royce Group plc and Akbank | ||||
Former Public Directorships Held During thePast 5 Years • WPP plc | Other Experience and Education • Current Chief Executive Officer • Trustee, King Abdullah University of Science and Technology and Cornell University • Member, Harvard Global Advisory Council • Serves on Boards of Various Non-governmental and Educational Organizations • M.B.A., Indiana University |
LUBNA S. OLAYAN 60, has been a director of the Company since 2011. She is the Chief Executive Officer and deputy chairperson of Riyadh-based Olayan Financing Company, the holding entitycompany for The Olayan Group’s operations in the Kingdom of Saudi Arabia and the Middle East. Ms. Olayan is a Principal and a Boardboard member of Olayan Investments Company Establishment, the parent company of The Olayan Group, a private multinational enterprise with diverse commercial and industrial operations in the Middle East and an actively managed portfolio of international investments. Since December 2004, she has been a director of Saudi HollandiAlawwal Bank, becoming the first woman to join the board of a Saudi publicly-listed company. She was elected Vice Chairman in January 2014 and is a member of its executive committee and its nomination and remuneration committee. Ms. Olayan is a non-executive director and member of numerous international advisory boards, such as Rolls Royce Group plc and Akbank. Ms. Olayan also serves on the boards of various non-governmental organizations, as well as of various educational institutions, including King Abdullah University of Science and Technology. Ms. Olayan served as a non-executive director of WPP plc, a multinational communication services company, from March 2005 to June 2012, and was a member of its nomination committee.
Relevant Skills and Expertise
Ms. Olayan brings to the Board extensive business experience in Saudi Arabia and the Middle East and a deep understanding of those areas, which are critical to the Company and enable her to make valuable contributions to the Board. The Board benefits from her proven leadership abilities, extensive CEO experience and expertise in corporate finance, international banking, distribution and manufacturing. Ms. Olayan also brings a critical international perspective on business and global best practices. Ms. Olayan’s service on the boards of trustees of Cornell University and of King Abdullah University of Science and Technology, and her connections to the scientific community and experience in university relations also are of great value to Schlumberger and its efforts in technology leadership and employee recruiting and retention.
Leo Rafael Reif
President, Massachusetts Institute of Technology Director Since2007 Age66 Other Current Public Boards:Arconic Inc. | Board Committees • Compensation • Nominating and Governance • Science and Technology, Chair | |||
Former Public Directorships Held During thePast 5 Years • Alcoa, Inc. | Other Experience and Education • Fellow, The Institute for Electrical and Electronic Engineers • Doctorate in electrical engineering, Stanford University • Member of the American Academy of Arts and Sciences • Board of Trustees, The World Economic Forum |
LEO RAFAEL REIF 65, has been a director of the Company since 2007. Since July 2012, Mr. Reif has been President of the Massachusetts Institute of Technology (“MIT”), having been MIT’s since July 2012, and its Provost, Chief Academic Officer and Chief Budget Officer from August 2005 to July 2012. Mr. Reif was head of theMIT’s Electrical Engineering and Computer Science Department at MIT from September 2004 to July 2005, and an Associate Department Head for Electrical Engineering in theMIT’s Department of Electrical Engineering and Computer Science at MIT from January 1999 to August 2004. Mr. Reif joined the board of directors of Alcoa, Inc. in 2015, and remained on its board until resigning in November 2016 as part Alcoa’s public spin-off of Arconic Inc., a leading provider of precision-engineered products and solutions. In connection with the spin-off, Mr. Reif joined the board of directors of Arconic Inc. in November 2016.
Relevant Skills and Expertise
Mr. Reif brings to the Board valuable management and finance expertise. As a scientist, he has deep scientific and technological expertise about the Company’s products and current technology, as well as about anticipated future technological needs of the Company and the industry. The Board values Mr. Reif’s connections to the U.S. scientific community, as well as his expertise in university relations and collaborations, which are of high importance to Schlumberger and its efforts in technology leadership and employee retention. Mr. Reif provides the Board with a critical U.S. scientific perspective, which is of immense value in the oversight of the Company’s strategy.
Schlumberger Limited2017 Proxy Statement | 12 |
Tore I. Sandvold
Executive Chairman Sandvold Energy AS Technology Director Since2004 Age69 | Board Committees • Finance, Chair • Nominating and Governance | |||
Other Current Public Boards:Rowan Companies plc and Teekay Corporation | ||||
Former Public Directorships Held During thePast 5 Years • Misen Energy AB | Other Experience and Education • Former Chief Executive Officer • Director, Lambert Energy Advisory Ltd. • Director, Energy Policy Foundation of Norway • Chairman of Njord Gas Infrastructure • M.S. and M.B.A., University of Wisconsin |
TORE I. SANDVOLD 68, has been a director of the Company since 2004. He has been executive Chairman of Sandvold Energy AS, an advisory company in the oil and energy industry, since September 2002. Mr. Sandvold is a director of Rowan Companies plc (since 2013), a provider of international and domestic contract drilling services, where he serves on its audit committee and its health, safety and environment committee. He has also been a member, since 2003, of the board of directors of Teekay Corporation, a leading provider of international crude oil and petroleum product transportation services, where he serves on its nominating and governance committee. From 1990 to 2001, Mr. Sandvold served as Director General of the Norwegian Ministry of Oil & Energy, with overall responsibility for Norway’s national and international oil and gas policy. From 2001 to 2002, he was executive Chairman of Petoro AS, the Norwegian state-owned oil company. He also served as Chairman of Misen Energy AB, a Swedish upstream oil and gas company from December 2011 to November 2014, and was its acting Chief Executive Officer from September 2012 to May 2014. Mr. Sandvold is also a member of the boards of directors of Lambert Energy Advisory Ltd; Njord Gas Infrastructure,
Relevant Skills and Energy Policy Foundation of Norway. Expertise
Mr. Sandvold brings to the Board approximately 40 years of experience working in the area of energy policy for approximately 40 years,, and he has broad experience in developing domestic and international energy policies for Norway as a career civil servant. He also has extensive experience dealing with global energy institutions such as the Organization of the Petroleum Exporting Countries and the International Energy Agency, and in negotiating with global energy companies. Mr. Sandvold has finance experience and a solid understanding of business opportunities, both as concerns acquisition targets and the industry in general.
Henri Seydoux
Chairman and Chief Executive Officer, Parrot S.A. Director Since2009 Age56 Other Current Public Boards:Parrot S.A. | Board Committees • Finance • Nominating and Governance • Science and technology | |||
Former Public Directorships Held During thePast 5 Years • None | Other Experience and Education • Current Chief Executive Officer • Technology leadership • Entrepreneurial and management expertise • Director of privately-held company |
HENRI SEYDOUX 55, has been a director of the Company since 2009. Since 1994, he has been Chairman and Chief Executive Officer of Parrot S.A., a global wireless products manufacturer.manufacturer, since 1994. Mr. Seydoux is an entrepreneur with great initiative. He founded Parrot S.A. in 1994 as a private company and took it public in 2007. AsHe serves on the board of directors of Sigfox, a privately-held global communications service provider for the Internet.
Relevant Skills and Expertise
Mr. Seydoux, as the chief executive of a dynamic and innovative technology company, Mr. Seydoux brings to the Board entrepreneurial drive and management skills. He also has family ties to the founding Schlumberger brothers, and having grown up in the Schlumberger family culture, is well placed to see that the Company continues its historical commitment to Schlumberger’s core values. His service on the Board addresses the Company’s need to preserve the Company’s unique culture and history while fostering innovation.
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CORPORATE GOVERNANCECorporate Governance
Governance Framework—Highlights
The following are some highlights of our corporate governance practices and policies:
Board Independence; Committees Structure
• | All of our director nominees are independent of the Company and management, except for our CEO. This is substantially above the NYSE requirement that a majority of directors be independent. |
• | All independent directors meet regularly in executive session. |
• | Only independent directors serve on our Audit, Compensation, Finance, Nominating and Governance and Science and Technology Committees. |
Majority Voting; Stockholder Authority
• | We have a majority vote standard for uncontested director elections. |
• | All of our directors are elected annually. We do not have a staggered board. |
• | One or more stockholders representing 10% or more of outstanding shares can call a special stockholders meeting. |
Executive Stock Ownership Guidelines
We have executive stock ownership guidelines, designed to align executive and stockholder interests. For a description of the guidelines applicable to our executive officers and other senior members of management, see “Compensation Discussion and Analysis—Executive Stock Ownership Guidelines.”
Risk OversightGuidelines” starting on page 47.
Risk Oversight | |
Board of Directors | Oversees the CEO and other members of our senior management team; oversees assessment ofmajor risks facing the Company. |
Audit Committee | Reviews and assesses financial reporting risk. It also reviews all significant finance-relatedviolations of Company policies brought to its attention, and annually reviews and assessesfinance-related violations. |
Finance Committee | Oversees finance-related risks on a quarterly basis and recommends guidelines to controlpension and other investments, banking relationships and currency exposures. |
Compensation Committee | Reviews and assesses the Company’s overall compensation program and its effectivenessat linking executive pay to performance, aligning the interests of our executives and ourstockholders and providing for appropriate incentives. |
Nominating and Governance Committee | Oversees compliance-related risk and the Company’s Ethics and Compliance Program. |
Hedging and Pledging Policies
Our directors and executive officers are prohibited from hedging their ownership of Schlumberger stock. Furthermore, our directors and executive officers are prohibited from pledging their Schlumberger stock.
Political Contributions
Schlumberger is politically neutral, and has a long-standing policy prohibiting the contribution(set forth in Schlumberger’s code of Schlumberger fundsconduct entitled The Blue Print and The Blue Print in Action (our “Code of Conduct”)) against making financial or assetsin-kind contributions to political parties or organizations,candidates, even when permitted by law. Our policy prohibits the use of Company funds or their leaders,assets for political purposes, including for contributions to any political party, candidate or committee, whether Federal, state or local. As a result of the Company’s policy of political neutrality, Schlumberger does not maintain a political action committee, nor does it contribute to candidatesany third-party political action committees or other political entities organized under Section 527 of the Internal Revenue Code.
Schlumberger Limited2017 Proxy Statement | 14 |
In 2016, the Center for any public office.
Corporate Governance Guidelines
Schlumberger is committed to adhering to sound principles of corporate governance and has adopted corporate governance guidelines that the Board believes are consistent with Schlumberger’s values, and that promote the effective functioning of the Board, its committees and the Company. Our Board periodically, and at least annually, reviews and revises, as appropriate, our Corporate Governance Guidelines to ensure that they reflect the Board’s corporate governance objectives and commitments. Our Corporate Governance Guidelines are on our website at http://www.slb.com/about/guiding_principles/corpgovernance/corpgov_guidelines.aspx.
Schlumberger’s Corporate Governance Guidelines provide that at least a majority of the Board will consist of independent directors. This standard reflects the NYSE corporate governance listing standards.
Our Board has adopted director independence standards, which can be found in Attachment A to our Corporate Governance Guidelines, and which meet or exceed the independence requirements in the NYSE listing standards. Based on the review and recommendation by the Nominating and Governance Committee, the Board of Directors has determined that each current director and director nominee listed above under “Election of Directors” is “independent” under the listing standards of the NYSE and our director independence standards, except Mr. Kibsgaard, who is our CEO and therefore does not qualify as independent. The Board also previously determined that Tony Isaac, who served as director until the 2015 annual general meeting and did not stand for re-election, and K. Vaman Kamath, who served as a director through July 2015, were independent.
In addition to the Board-level standards for director independence, each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE’s listing standards and SEC rules, and each member of the Compensation Committee meets the heightened independence standards for compensation committee members under NYSE listing standards adopted in 2013, which Schlumberger implemented in advance of the required compliance date.
Transactions Considered in Independence Determinations. The Board’s independence determinations included a review of transactions that occurred since the beginning of 2013 with entities associated with the independent directors or members of their immediate family. In making its independence determinations, the Board considered that Mr. Currie, Mr. Isaac, Mr. Kamath,Galuccio, Ms. Kempston Darkes, Mr. Kudryavtsev, Mr. Lund, Mr. Marks, Ms. Nooyi, Ms. Olayan, Mr. Reif and Mr. Sandvold each have served as directors, executive officers, trustees, outside consultants or advisory board members at companies and universities that have had commercial business relationships with the Company, all of which were ordinary course commercial transactions involving significantly less than 1% of either entity’s annual revenues. The Board also considered that the Company made charitable contributions in 20152016 to The Massachusetts Institute of Technology, of which Mr. Reif is the President, of approximately $330,000,$276,000, relating to educational grants and sponsored fellowships, for which Mr. Reif received no personal benefit. This amount was significantly less than the greater of $1 million or 2% of the university’s consolidated gross revenues for any of the past three years.
We believe that Board tenure diversity is important and directors with many years of service provide the Board with a deep knowledge of our company, while newer directors lend fresh perspectives. The chart below reflects the Board tenure of our current directors.
Under our Corporate Governance Guidelines, non-executive directors are eligible to be nominated or renominated to the Board up to their 70thbirthday, and executive directors are eligible to be nominated or renominated up to their 65thbirthday, after which directors may no longer be nominated or renominated to the Board. Our Board may waive this policy on a case-by-case basis on the recommendation of the Nominating and Governance Committee if it deems a waiver to be in the best interest of the Company.
Diversified Director Tenure
Schlumberger Limited2017 Proxy Statement | 15 |
The Nominating and Governance Committee believes that nominees should, in the judgment of the Board, be persons of integrity and honesty, be able to exercise sound, mature and independent business judgment in the best interests of our stockholders as a whole, be recognized leaders in business or professional activity, have background and experience that will complement those of other Board members, be able to actively participate in Board and Committee meetings and related activities, be able to work professionally and effectively with other Board members and Schlumberger management, be available to remain on the Board long enough to make an effective contribution and have no material relationship with competitors, customers or other third parties that could present realistic possibilities of conflict of interest or legal issues.
The Nominating and Governance Committee also believes that the Board should include appropriate expertise and reflect gender, cultural and geographical diversity, in light of the entire Board’s current composition and range of diversity. Schlumberger has approximately 95,000100,000 employees worldwide, representing more than 140 nationalities, and values gender, cultural and geographical diversity in its directors as well. Three of the Company’s 1012 director nominees are women. Of the 1012 director nominees, four are citizens of the United States of America; twothree are citizens of Norway; and one director nominee is a citizeneach of each ofArgentina, Canada, France, Russia, and Saudi Arabia.
The Company’s
Board Diversity Highlights: | ||
3 | director nominees are women | |
8 | director nominees are non-US citizens | |
Our very diverse Board also evidences the Board’s commitment to have directors who represent countries where Schlumberger operates. In addition, the exceptionally broad and diverse experience of Board members is in keeping with the goal of having directors whose background and experience complement those of other directors. The Nominating and Governance Committee’s evaluation of director nominees takes into account their ability to contribute to the Board’s diversity, and the Nominating and Governance Committee annually reviews its effectiveness in balancing these considerations in the context of its consideration of director nominees.
Applying the criteria above, the Nominating and Governance Committee recommends to the Board the number and names of persons to be proposed by the Board for election as directors at the annual general meeting of stockholders. In obtaining the names of possible nominees, the Nominating and Governance Committee makes its own inquiries and will receive suggestions from other directors, management, stockholders and other sources, and its process for evaluating nominees identified in unsolicited recommendations from security holders is the same as its process for recommendations from other sources. From time to time, the Committee retains executive search and board advisory consulting firms to assist in identifying and evaluating potential nominees. During 2015,2016, the Committee retainedused the services of New York-based RusselRussell Reynolds Associates, a third-party executive search firm, for this purpose. Consideration of new Board candidates typically involves a series of internal discussions, review of information concerning candidates, and interviews with selected candidates. Board members typically suggest candidates for nomination to the Board. Our CEO suggested both Mr. Lund and Mr. Galuccio as prospective Board candidates.
The Nominating and Governance Committee must first consider all potential director nominees before theythose candidates are contacted by other Company directors or officers as possible nominees and before they are formally considered by the full Board. The Nominating and Governance Committee will consider nominees recommended by stockholders who meet the eligibility requirements for submitting stockholder proposals for inclusion in the next proxy statement and submit their recommendations in writing to:
Chair, Nominating and Governance Committee
c/o Secretary, Schlumberger Limited
5599 San Felipe, 17th 17thFloor
Houston, Texas 77056
by the deadline for such stockholder proposals referred to at the end of this proxy statement. Unsolicited recommendations must contain all of the information that would be required in a proxy statement soliciting proxies for the election of the candidate as a director, a description of all direct or indirect arrangements or understandings between the recommending security holder and the candidate, all other companies to which the candidate is being recommended as a nominee for director, and a signed consent of the candidate to cooperate with reasonable background checks and personal interviews, and to serve as a director of the Company, if elected.
Board Adoption of Proxy Access
Although we have not received a shareholder proposal requesting a proxy access bylaw, we proactively adopted proxy access bylaw provisions in January 2017. These provisions permit a stockholder, or a group of up to 20 stockholders, owning at least three percent (3%) of the Company’s outstanding common stock, for at least three (3) years, to include two (2) director nominees, or 20% of the current Board, whichever is greater, in our proxy for the AGM, beginning with our 2018 annual general meeting.
The amendments made to the By-Laws also address “advance notice” requirements. These require stockholders to notify us within a certain window each year of any stockholder proposals for any annual general meeting, and to provide additional information. For more information, please review the full text of our bylaws as filed with the SEC.
Schlumberger Limited2017 Proxy Statement | 16 |
The Board recognizes that one of its key responsibilities is to evaluate and determine an appropriate board leadership structure so as to ensureprovide for independent oversight of management. The Board believes that there is no single, generally accepted board leadership structure that is appropriate for all companies, and that the right
structure may vary for a single company as circumstances change. As such, our independent directors consider the Board’s leadership structure at least annually, and may modify this structure from time to time to best address the Company’s unique circumstances and advance the best interests of all stockholders, as and when appropriate.
In
From 2011 the independent members of the Board determined, based on its annual consideration of the Board’s leadership structure, that the separation of the roles of Chairman of the Board and CEO and appointment of an independent, non-executive Chairman ofto 2015, the Board was an appropriate board leadership structure at that time. Accordingly, the independent membersled by a non-executive chairman of the Board appointed Tony Isaac as the independent, non-executive Chairman of the Board in April 2012, and Mr. Isaac served in this capacity until the 2015 annual general meeting.
Board. In connection with Mr. Isaac’s plannedthe chairman’s retirement from the Board in 2015, the independent members of the Board gave thoughtful consideration to the Board’s leadership structure and determined that recombining the Chairman and CEO positions under the leadership of Mr. Kibsgaard upon Mr. Isaac’sthe chair’s retirement was in the best interests of the Company and theits stockholders. This determination was based on the Board’s strong belief that, as the individual with primary responsibility for managing the Company’s day-to-day operations and with extensive knowledge and understanding of the Company, Mr. Kibsgaard is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues and to focus the Board’s attention on the issues of greatest importance to the Company and its stockholders. Furthermore, combining the roles of Chairman and CEO in Mr. Kibsgaard creates a clear line of authority that promotes decisive and effective leadership, both within and outside the Company. In making this judgment, the Board took into account its evaluation of Mr. Kibsgaard’s performance as CEO and as a currentthen-current member of the Board, his positive relationships with the other directors, and the strategic perspective he would bring to the role of Chairman.
In connection with its decision to recombine the roles of Chairman and CEO under Mr. Kibsgaard, the Board recognized the importance of having a board structure that would continue to promote the appropriate exercise of independent judgment by the Board. Thus, the Board appointed Peter Currie lead independent director, who was selected by and from the independent directors, and who has the following leadership authority and responsibilities:
Roles and Responsibilities of Our Lead Independent Director | |||
In connection with its decision to recombine the roles of Chairman and CEO under Mr. Kibsgaard, the Board recognized the importance of having a board structure that would continue to promote the appropriate exercise of independent judgment by the Board. Thus, the Board appointed Peter Currie as its lead independent director, who was selected by and from the independent directors, and who has the following leadership authority and responsibilities: | |||
• | approve agendas for all Board meetings, in coordination with the Chairman and CEO; | ||
• | approve meeting schedules to assure that there is sufficient time for discussion of all agenda items, in coordination with the Chairman and CEO; | ||
• | preside at all Board meetings at which the Chairman is not present, including executive sessions of the independent directors; | ||
• | authority to call meetings of the Board of Directors in executive session; | ||
• | provide feedback to the Chairman and CEO, as appropriate, from executive sessions of the Board; | ||
• | facilitate discussions, outside of scheduled Board meetings, among the independent directors on key issues concerning senior management; | ||
• | assist the Board, the Nominating and Governance Committee and the officers of the Company in implementing and complying with the Board’s Corporate Governance Guidelines; | ||
• | foster Board leadership on matters of governance where independence is required, and monitor and improve Board effectiveness; | ||
• | serve as a liaison between the independent directors and the Chairman and CEO, in consultation with the other directors; | ||
• | lead the independent directors’ discussions of succession planning and evaluation of the performance of the CEO; | ||
• | be available for consultation and direct communication with stockholders; and | ||
• | perform such additional duties and responsibilities as the Board or the independent directors may from time to time determine. | ||
In considering its leadership structure, the Board also took into account that Schlumberger’s current governance practices provide for strong independent leadership, active participation by independent directors and
independent evaluation of, and communication with, many members of senior management. These governance practices are reflected in our Corporate Governance Guidelines and our various committee charters, which are available on our website. The Board believes that its risk oversight programs, discussed immediately below, are effective under a variety of board leadership frameworks and therefore do not materially affect the Board’s choice of leadership structure.
Schlumberger Limited2017 Proxy Statement | 17 |
The Board’s Role in Risk Oversight
The role that the Board fulfills in risk oversight is
As set outforth in our Corporate Governance Guidelines. TheGuidelines, the Board assesses major risks facing the Company and options for their mitigation, in order to promote the Company’s stockholders’ and other stakeholders’ interests in the long-term health and the overall success of the Company and its financial strength.
The full Board is actively involved in overseeing risk management for the Company. It does so in part through its oversight of the Company’s Executive Risk Committee (the “ERC”) comprised of more than half a dozen top executives of the Company from various functions, each of whom supervises day-to-day risk management throughout the Company. The ERC is not a committee of the Board. The ERC ensures that the Company identifies all potential material risks facing the Company and implements appropriate mitigation measures. The Company’s risk identification is performed annually at two levels: the ERC performs a corporate-level risk mapping exercise, which involves the CEO and several other members of senior management, and while maintaining oversight, delegates operational (field-level) risk assessment and management to the Company’s various Areas, Technologies and Functions and to its Research, Engineering, Manufacturing and Sustaining organization. To the extent that the ERC identifies recurring themes from the operational risk mapping exercises, they are acted on at the corporate level. Members of the ERC meet formally at least once a year, and more frequently on an ad hoc basis, to define and improve the risk mapping process, and to review and monitor the results of those exercises and those that have been delegated. The ERC reports directly to the CEO and to the full Board, and annually presents to the full Board a comprehensive report as to its risk mapping efforts for that year.
In addition, each of our Board committees considers the risks within its areas of responsibility. For example, the Finance Committee considers finance-related risks on a quarterly basis and recommends guidelines to control cash, pension and other investments, banking relationships and currency exposures. The Compensation Committee reviews and assesses the Company’s overall compensation program and its effectiveness at linking executive pay to performance, aligning the interests of our executives and our stockholders and providing for appropriate incentives. The Nominating and Governance Committee oversees governance- and compliance-related risks and reviews and discusses the Company’s Ethics and Compliance Program’s quarterly statistical report and the various allegations, disciplinary actions and training statistics brought to its attention. The Audit Committee reviews and assesses risks related to financial reporting. The Audit Committee also discusses all significant finance-related violations of Company policies brought to its attention from time to time, and once per yearannually reviews a summary of all finance-related violations. Additionally, the outcome of the Company’s Audit Risk assessment is presented to the Audit Committee annually; this assessment identifies internal controls risks and drives the internal audit plan for the coming year. All significant violations of the Company’s Code of Conduct and related corporate policies are reported to the Nominating and Governance Committee and (if finance-related) to the Audit Committee, and, when appropriate, are reported to the full Board. Once a year, the Deputy General Counsel,Director of Compliance delivers to the full Board a comprehensive Annual Compliance Report. The risks identified within the Ethics and Compliance Program are incorporated into the ERC’s enterprise risk management program described above.
Meetings of the Board of Directors and its Committees
During 2015,2016, the Board of Directors held fivefour meetings. Schlumberger has an Audit, a Compensation, a Nominating and Governance, a Finance, and a Science and Technology Committee. During 2015,2016, the Audit Committee met fourfive times; the Compensation Committee met four times; the Finance Committee met four times; the Nominating and Governance Committee met four times; and the Science and Technology Committee met two times.
Each of our current directors attended 100% of the meetings of the Board and the committees on which he or she served in 20152016 (held during the period he or she served).
From time to time between meetings, Board and committee members confer with each other and with management and independent consultants regarding relevant issues, and representatives of management may meet with such consultants on behalf of the relevant committee.
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Members of the Committees of the Board of Directors as of February
MEMBERS OF THE COMMITTEES OF THE BOARD OF DIRECTORS AS OF FEBRUARY 1, 20162017
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Audit | Compensation | and Governance | Finance | Technology | ||||||
Name of Director | Committee | Committee | Committee | Committee | Committee | |||||
Peter L.S. Currie* | ||||||||||
V. Maureen Kempston Darkes | ||||||||||
Paal Kibsgaard | ||||||||||
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Helge Lund | ||||||||||
Michael E. Marks | ||||||||||
Indra K. Nooyi | ||||||||||
Lubna S. Olayan | ||||||||||
Leo Rafael Reif | ||||||||||
Tore I. Sandvold | ||||||||||
Henri Seydoux | ||||||||||
* Lead independent director. | ||||||||||
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* Lead independent director.
Audit Committee
The Audit Committee consists of threefive directors, each of whom meets the independence and other requirements of the NYSE’s listing standards.standards and SEC rules (including the heightened requirements that apply to audit committee members). The Audit Committee assists the Board in its oversight of the accounting and financial reporting process of the Company, including the audit of the Company’s financial statements and the integrity of the Company’s financial statements, legal and regulatory compliance, the independent registered public accounting firm’s qualifications, independence, performance and related matters, and the performance of Schlumberger’sthe Company’s internal audit function.
The authority and responsibilities of the Audit Committee include the following:
• | recommend for stockholder approval the independent registered public accounting firm to audit the accounts of the Company for the year; |
• | evaluate the independence and qualification of the Company’s independent registered public accounting firm; |
• | review with the Company’s independent registered public accounting firm the scope and results of its audit, and any audit issues or difficulties and management’s response; |
• | discuss the Company’s annual audited financial statements and quarterly unaudited financial statements with management and the Company’s independent registered public accounting firm; |
• | review with management, the internal audit department and the independent registered public accounting firm the adequacy and effectiveness of the Company’s disclosure and internal control procedures, including any material changes or deficiencies in such controls; |
• | discuss with management the Company’s risk assessment and risk management policies; |
• | discuss the Company’s earnings press releases with management, as well as the type of financial information and earnings guidance, if any, provided to analysts; |
• | review the Company’s financial reporting and accounting standards and principles, significant changes in such standards or principles or in their application and the key accounting decisions affecting the Company’s financial statements; |
• | review with the internal audit department the status and results of the Company’s annual internal audit plan, assessments of the adequacy and effectiveness of internal controls, and the sufficiency of the department’s resources; |
• | establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters, as well as for confidential submission by employees, and others, if requested, of concerns regarding questionable accounting or auditing matters; |
• | review material relevant related party transactions governed by applicable accounting standards; and |
• | oversee the preparation of an annual audit committee report for the Company’s annual proxy statement. |
The Company’s independent registered public accounting firm is accountable to the Audit Committee. The Audit Committee pre-approves all engagements, including the fees and terms for the integrated audit of the Company’s consolidated financial statements.
The Board of Directors has determined that each Committee member has sufficient knowledge in financial and auditing matters to serve on the Committee. In addition, the Board of Directors has determined that Mr. Kamath, who was a director in 2015, qualifiedMessrs. Marks and Currie, as well as Mrs. Nooyi, currently qualifieseach qualify as an “audit committee financial expert” under applicable SEC rules. The Audit Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/audit_committee.aspx.
Schlumberger Limited2017 Proxy Statement | 19 |
Compensation Committee
The Compensation Committee consists of four directors, each of whom meets the independence requirements of the NYSE’s listing standards.standards (including the heightened requirements that apply to compensation committee members). The purposes of the Compensation Committee are to assist Schlumberger’sour Board of Directors in discharging its responsibilities with regard to executive compensation; periodically review non-executive directors’ compensation; oversee Schlumberger’sthe Company’s general compensation philosophy;philosophy, policy and programs; serve as the administrative committee under Schlumberger’sthe Company’s stock plans; and prepare the annual Compensation Committee Report required by the rules of the SEC.
The authority and responsibilities of the Compensation Committee include the following:
monitor and review the Company’s overall compensation and benefits program design to assess such programs’ continued competitiveness and consistency with established Company compensation
• | annually review and approve the objectives, evaluate the performance, and review and recommend the compensation of the Company’s Chief Executive Officer (“CEO”) to the Board’s independent directors, meeting in executive session. |
• | review and approve the evaluation process and compensation structure for the Company’s executive officers and approve their compensation, including base salary, annual cash incentive and long-term incentives; |
• | select appropriate peer companies against which the Company’s executive compensation is compared; |
• | review incentive compensation and equity-based plans, and advise management and the Board on the design and structure of the Company’s compensation and benefits programs and policies, and to approve changes thereto, or to recommend changes to the Board, as the Committee determines appropriate; |
• | administer and make awards under the Company’s stock plans, and review and approve annual stock allocation under those plans; |
• | review and approve or recommend to the Board, as appropriate, any employment or severance contracts or arrangements with executive officers; |
• | monitor trends and best practices in, and periodically review and assess the adequacy of, director compensation and stock ownership policies, and recommend changes to the Board as it deems appropriate in accordance with the Company’s Corporate Governance Guidelines; |
• | monitor and review the Company’s overall compensation and benefits program design to assess such programs’ continued competitiveness and consistency with established Company compensation philosophy, corporate strategy and objectives, linkage of pay to performance, and alignment with stockholder interests, including any material risks of such programs; |
• | review and make recommendations to the Board regarding people-related strategies and initiatives, such as recruitment, retention and diversity management; |
• | establish and administer stock ownership policies for executive officers and other key position holders; |
• | assess the results of the Company’s most recent advisory vote on executive compensation; |
• | review and discuss with the Company’s management the Compensation Discussion and Analysis required to be included in the Company’s annual proxy statement; |
• | produce a Compensation Committee Report to be included in the Company’s annual proxy statement; and |
• | be directly responsible for the appointment, compensation and oversight of the work of any consultants and other advisors retained by the Compensation Committee. |
The Compensation Committee may delegate specific responsibilities to one or more individual committee members to the extent permitted by law, regulation, NYSE listing standards and Schlumberger’s governing documents. The design and day-to-day administration of all compensation and benefits plans and related policies, as applicable to executive officers and other salaried employees, are handled by teams of the Company’s human resources, finance and legal department employees.
Nominating and Governance Committee
The Nominating and Governance Committee consists of five directors, each of whom meets the independence requirements of the NYSE’s listing standards.
The authority and responsibilities of the Nominating and Governance Committee include the following:
• | lead the search for individuals qualified to become members of the Board; |
• | evaluate the suitability of potential nominees for membership on the Board; |
• | recommend to the Board the number and names of director nominees at the next annual general meeting of stockholders and to propose director nominees to fill any vacancies on the Board; |
• | annually review the qualifications and criteria taken into consideration in the evaluation of potential nominees for membership on the Board; |
• | consider the resignation of a director who has changed his or her principal occupation or employer, and inform the Board as to whether or not the Nominating and Governance Committee recommends that the Board accept the resignation; |
• | assist the Board with its determination of the independence of its members; |
• | monitor trends, changes in law and NYSE listing standards, as well as best practices in corporate governance, and to periodically review the Company’s Corporate Governance Guidelines and recommend changes as it deems appropriate in those guidelines, in the corporate governance provisions of the Company’s By-Laws and in the policies and practices of the Board in light of such trends, changes and best practices as appropriate; |
• | consider issues involving “related person transactions” with directors and similar issues, including approval or ratification of any such transactions as appropriate; |
Schlumberger Limited2017 Proxy Statement | 20 |
• | periodically review the Company’s Ethics and Compliance Program including significant compliance allegations with the Company’s General Counsel or Director of Compliance, and oversee the Company’s Code of Conduct and policies and procedures for monitoring compliance; |
• | oversee the annual evaluation of Board effectiveness and report to the Board; |
• | annually review and make recommendations to the Board regarding its process for evaluating the effectiveness of the Board and its committees; |
• | annually review and make recommendations to the Board regarding new director orientation and director continuing education on governance issues; |
• | annually recommend to the Board committee membership and chairs, and review periodically with the Board committee rotation practices; |
• | approve the membership of any Schlumberger executive officer on another listed company’s board, and receive timely information from non-employee directors of any new listed company board to which they have been nominated for election as director and of any change in their status as director on any other listed company board; |
• | advise the Board on succession planning; and |
• | periodically review the Board’s leadership structure, and recommend changes to the Board as appropriate, including the appointment and duties of the lead independent director. |
The Nominating and Governance Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/nomgov_committee.aspx.
Finance Committee
The Finance Committee consists of six directors, each of whom meets the independence requirements of the NYSE’s listing standards. The Finance Committee advises the Board and management of the Company on various matters, including dividends, financial policies and the investment of funds.
The authority and responsibilities of the Finance Committee include the following:
• | recommend investment and derivative guidelines for the cash and currency exposures of the Company and its subsidiaries; |
• | review the actual and projected financial situation and capital needs of the Company as needed, regarding: |
– | the capital structure of the Company, including the levels of debt and equity, the sources of financing and equity and the Company’s financial ratios and credit rating policy; | |
– | the Company’s dividend policy; and | |
– | the issuance and repurchase of Company stock; |
• | review the insurance principles and coverage of the Company and its subsidiaries, as well as financing risks, including those associated with currency and interest rates; |
• | oversee the investor relations and stockholder services of the Company; |
• | review the financial aspects of any acquisitions submitted to the Board and, as delegated to the Finance Committee by the Board, review and approve any acquisitions covered by such delegation; |
• | review the administration of the employee benefit plans of the Company and the performance of fiduciary responsibilities of the administrators of the plans; and |
• | function as the Finance Committee for pension and profit-sharing trusts as required by U.S. law. |
The Finance Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/ guiding_principles/corpgovernance/finance_committee.aspx.
Science and Technology Committee
The Science and Technology Committee advises the Board and management on matters involving the Company’s research and development programs.
The authority and responsibilities of the Science and Technology Committee include the following:
• | review, evaluate and advise the Board and management regarding the long-term strategic goals and objectives and the quality and direction of the Company’s research and development programs; |
• | review and advise the Board and management on the Company’s major technology positions and strategies relative to emerging technologies and changing market requirements; |
• | monitor and evaluate trends in research and development, and recommend to the Board and management emerging technologies for building the Company’s technological strength; |
• | recommend approaches to acquiring and maintaining technology positions; |
• | advise the Board and management on the scientific aspects of major acquisitions and business development transactions; and |
• | assist the Board with its oversight responsibility for enterprise risk management in areas affecting the Company’s research and development. |
The Science and Technology Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/ tech_committee.aspx.
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Role of the Independent Consultant.Executive Compensation Consultant
The Compensation Committee has retained Pay Governance LLC (“Pay Governance”) as its independent consultant with respect to executive compensation matters. Pay Governance reports only to, and acts solely at the direction of, the Compensation Committee. Schlumberger’s management does not direct or oversee the activities of Pay Governance with respect to the Company’s executive compensation program. Pay Governance prepares compensation surveys for review by the Compensation Committee at its October meeting. One of the purposes of the October meeting is to assess compensation decisions made in January of that year in light of comparative data to date; another purpose of the October meeting is to prepare for the annual executive officer compensation review the following January.
Pay Governance works with the Company’s executive compensation department to compare compensation paid to the Company’s executive officers with compensation paid for comparable positions at companies included in the compensation surveys conducted by Pay Governance at the direction of the Compensation Committee. Pay Governance and the Company’s executive compensation department also compile annual compensation data for each executive officer. The Compensation Committee has also instructed Pay Governance to prepare an analysis of each named executive officer’s compensation. The Compensation Committee has also retained Pay Governance as an independent consulting firm with respect to non-employee director compensation matters. Pay Governance prepares an analysis of competitive non-employee director compensation levels and market trends using the same two main peer groups as those used in the executive compensation review.
The Compensation Committee has assessed the independence of Pay Governance pursuant to SEC rules and has concluded that its work did not raise any conflict of interest that would prevent Pay Governance from independently representing the Compensation Committee.
Procedure for Determining Executive Compensation; Role of Management.Management
The Compensation Committee evaluates all elements of executive officer compensation each January, after a review of achievement of financial and personal objectives with respect to the prior year’s results. The purpose is to determine whether any changes in the officer’s compensation are appropriate. The CEO does not participate in the Compensation Committee’s deliberations with regard to his own compensation. At the Compensation Committee’s request, the CEO reviews with the Compensation Committee the performance of the other executive officers, but no other executive officer has any input in executive compensation decisions. The Compensation Committee gives substantial weight to the CEO’s evaluations and recommendations because he is particularly able to assess the other executive officers’ performance and contributions to the Company. The Compensation Committee
independently determines each executive officer’s mix of total direct compensation based on the factors described in “Compensation Discussion and Analysis—Framework for Setting Executive Compensation in 2015—2016—Relative Size of Direct Compensation Elements.” Early in the calendar year, financial and personal objectives for each executive officer are determined for that year. The Compensation Committee may, however, review and adjust compensation at other times as the result of new appointments or promotions during the year.
The following table summarizes the approximate timing of significant compensation events:
|
| |
Establish Company financial objectives | January of each fiscal year for current | |
due to the low industry visibility. | ||
Establish CEO personal objectives | Early in the first quarter of the fiscal year for current year | |
Perform competitive assessment to determine how Schlumberger’s compensation decisions compared to decisions made by companies included in the compensation surveys | October of each fiscal year for current year | |
Independent compensation consultant provides analysis for the Compensation Committee to evaluate executive compensation | October of each year for compensation in the following fiscal year | |
Evaluate Company and executive performance (achievement of objectives established in previous fiscal year) and recommend incentive compensation based on those results | Results approved in January of each fiscal year for annual cash incentive compensation with respect to prior year. The incentive earned in prior fiscal year is paid in February of the current fiscal | |
year | ||
Review and recommend executive base salary and determine equity-based grants | January of each fiscal year for base salary for that year and for equity-based grants |
The Compensation Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/compensation_committee.aspx.
Nominating and Governance Committee
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The Nominating and Governance Committee consists of four directors, each of whom meets the independence requirements of the NYSE’s listing standards. The authority and responsibilities of the Nominating and Governance Committee include the following:
The Nominating and Governance Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/nomgov_committee.aspx.
Finance Committee
The Finance Committee advises the Board and management on various matters, including dividends, financial policies and the investment of funds. The authority and responsibilities of the Finance Committee include the following:
The Finance Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/finance_committee.aspx.
Science and Technology Committee
The Science and Technology Committee advises the Board and management on matters involving the Company’s research and development programs. The authority and responsibilities of the Science and Technology Committee include the following:
The Science and Technology Committee operates pursuant to a written charter, which is available on the Company’s website at http://www.slb.com/about/guiding_principles/corpgovernance/tech_committee.aspx.
The Board has established a process for all interested parties, including stockholders and other security holders, to send communications, other than sales-related communications, to one or more of its members, including to the independent or non-management directors as a group. Interested parties may contact the Board or any Schlumberger director (including the Chairman of the Board) by writing to them at the following address:
Schlumberger Limited
Schlumberger Limited All such communications will be forwarded to the Board member or members specified. |
5599 San Felipe, 17th Floor
Houston, Texas 77056
All such communications will be forwarded to the Board member or members specified.
Director Attendance at Annual General Meeting
The Board’s policy regarding director attendance at the annual general meeting of stockholders is that directors are welcome, but not required, to attend, and that the Company will make all appropriate arrangements for directors who choose to attend. Tony IsaacV. Maureen Kempston Darkes attended theour annual general meeting of stockholders in 2015.2016.
Policies and Procedures for Approval of Related Person Transactions
In January 2007, the Board formally adopted a written policy with respect to “related person transactions” to document procedures pursuant to which such transactions are reviewed, approved or ratified. Under SEC rules, “related persons” include any director, executive officer, director nominee, or greater than 5% stockholder of the Company since the beginning of the previous fiscal year, and their immediate family members. The policy applies to any transaction in which:
• | the Company is a participant; |
• | any related person has a direct or indirect material interest; and |
• | the amount involved exceeds $120,000, but excludes any transaction that does not require disclosure under Item 404(a) of SEC Regulation S-K. |
The Nominating and Governance Committee, with assistance from the Company’s Secretary and General Counsel, is responsible for reviewing and, where appropriate, approving or ratifying any related person transaction involving Schlumberger or its subsidiaries and related persons. The Nominating and Governance Committee approves only those related person transactions that are in, or are not inconsistent with, the best interests of the Company and its stockholders.
Since the beginning of 2015,2016, there were no related person transactions under the relevant standards.
Schlumberger has adopted a Codecode of Conduct thatconduct entitled The Blue Print and The Blue Print in Action, which applies to all of its directors, officers (including its chief executive officer, chief financial officer, chief accounting officer, controller and any person performing similar functions) and employees. Our CodeTogether, these documents describe the purpose, ambition and mindset of Conduct isthe Company and expectations for its employees. Both documents are located at www.slb.com/about/codeofconduct.aspx.
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ITEM 2. | Advisory Resolution to Approve Executive Compensation |
ITEM 2. ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION
We are asking our stockholders to approve, on an advisory basis, the Company’s executive compensation as reported in this proxy statement. As described below in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee has structured our executive compensation program to achieve the following key objectives:
• | to attract, motivate and retain talented executive officers; |
• | to motivate progress toward Company-wide financial and personal objectives while balancing rewards for short-term and long-term performance; and |
• | to align the interests of our executive officers with those of stockholders. |
We urge stockholders to read the “Compensation Discussion and Analysis” beginning on page 2026 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 46 through 62,57 and 58, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has contributed to the Company’s recent and long-term success.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 20162017 annual general meeting of stockholders:
RESOLVED, that the stockholders of Schlumberger Limited (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 20162017 annual general meeting of stockholders.
This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors.our Board. Although non-binding, theour Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
The Board of Directors has adopted a policy providing for an annual “say-on-pay” advisory vote. Unless the Board of Directors modifies its policy on the frequency of holding “say-on-pay” advisory votes, the next “say-on-pay” advisory vote will occur in 2017.
Required Vote
A majority of the votes cast is required to approve this Item 2.
If you hold your shares in “street name,” please note that brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
Recommendation
The Board of Directors Recommends a VoteFORItem 2.
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ITEM 3. | Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation |
Pursuant to Section 14A of the BoardExchange Act, we are asking our stockholders to vote on whether future advisory votes on executive compensation of the nature reflected in Item 2 above should occur every year, every two years or every three years.
After careful consideration, our Board recommends that future advisory votes on executive compensation occur every year (annually). We believe that an annual advisory vote on executive compensation is the most appropriate option for us because it will allow our shareholders to provide more frequent, direct input on our compensation policies and practices, and the resulting compensation for our named executive officers. Shareholders will have the opportunity to consider our most recent compensation decisions and focus on increasing long-term shareholder value, and to provide feedback to us in a timely way. The Board also believes an annual advisory shareholder vote promotes corporate transparency and accountability for the Compensation Committee.
In making this recommendation, the Board took into account that a majority of the votes cast at our 2011 Annual General Meeting of Stockholders voted in favor of holding an annual advisory votes on executive compensation. In addition, we are aware of the significant interest in executive compensation matters by investors and the general public, and value and encourage constructive dialogue with our stockholders on these matters. We understand that our stockholders may have different views as to what is the best approach for Board of Directors, and we look forward to hearing from our stockholders on this Proposal.
This advisory resolution is non-binding on our Board. Although we currently believe that holding an advisory vote on executive compensation every year would reflect the right balance of considerations in the normal course, we will continue to periodically reassess that view and can provide for an advisory vote on executive compensation on a less frequent basis if long-term stability in our compensation program or other circumstances suggest that such a vote frequency would be more appropriate.
Required Vote
A majority of the votes cast is required to approve this Item 3.Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
The Board of Directors Recommends a Vote FOR Item 2.to Conduct Future Advisory Votes on Executive Compensation EveryONE YEAR.
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COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis
The following Compensation Discussion and Analysis (“CD&A”) describes Schlumberger’s compensation policies and practices as they relate to our executive officers identified in the Summary Compensation Table below (the “named executive officers”officers,” or the “NEOs”). The purpose of the CD&A is to explain what the elements of compensation are; why ourthe Compensation Committee selects these elements; and how the Compensation Committee determines the relative size of each element of compensation. Included inBased on engagement with our stockholders over the past year, we have expanded this CD&A are decisions madeto address in 2015 affecting 2015 base salaries and long-term equity incentives (“LTIs”), as well as annual cash incentive awards earned in 2015 but paid in early 2016.greater detail certain matters discussed with our stockholders.
2015
Overview
Schlumberger delivered strong financial results despite2016 was another difficult year for our industry as the difficult operating environment throughoutlongest and deepest industry downturn in 30 years continued through the oilyear. Our customers cut their exploration and gas industryproduction (“E&P”) spending by more than 65% from 2014, as the U.S. land rig count collapsed more than 80% from 2014, and the global offshore rig count fell more than 30% from 2014. This led to a significant revenue and net income decline in 2015. Highlights of2016. However, our 2015 performance include:management took decisive action to successfully navigate the sharp downturn amid very low operational visibility, and positioned the company for long-term growth and success.
Despite this exceedingly difficult environment, we had full-year revenueoutperformed our main competitors in 2016 in a number of $35.5 billion despite the worst industry downturn since the mid-1980’s;
2016 was also a year of tremendous positive change for us, highlighted by our management’s proactive efforts in mitigating the downturn; and
Schlumberger management also took several other key operational, strategic, and economic measures in 2015 to continue to better position the Companyuniquely for the long-term. Schlumberger achieved the following goals, among others, many of which were aligned with our executives’ personal objectives:
We finished 2016 poised to outperform in a new industry landscape through our series of transformational initiatives to improve global productivity, increase manufacturing efficiency, reduce fixed costsfundamental strengths: our best-in-class employees; our technology advantage; and streamline the Company, all to leverage both our size and breadthgeographic reach.
Our 2016 Say-on-Pay Vote; Stockholder Outreach; Enhancements and Changes
Prior to 2016, we received very high levels of stockholder support for our executive compensation program. For example, we received stockholder support of 96.6%, 97.1% and 96.1% in 2015, 2014 and 2013, respectively. In 2016, however, 64.4% of the votes cast voted in favor of our offerings to generate a further competitive advantage;
We determined that we should better understand our customer non-productive time rate by 23%, the largest annual improvement we have ever achieved;
Relative Stock Price Results
Asopinions. Senior members of the end of 2015, despite the intense decline in customer capital expenditures and the sharpest decline in land activity since 1986, our management team has positioned Schlumberger very strongly overengaged in stockholder outreach discussions at the past three yearsdirection of our Compensation Committee and our Board.
As part of our stockholder outreach efforts, we contacted 40 of our largest stockholders, representing more than 52% of our outstanding common stock, to obtain their views on our executive compensation program. We met with 22 of our largest stockholders, representing approximately 40% of our outstanding common stock.
Based on our stockholders’ feedback, as well as our strong performance relative to market conditionsour oil industry peer group, and other participantsour Compensation Committee’s recognition of the need to motivate our officers in every part of the business cycle, our industry. The graphCompensation Committee approved a number of significant changes to our executive compensation as described below, showsincluding changes to our long-term incentive program. Some of these changes were implemented in 2016 and the significant percentage changerest will be implemented in 2017. Although these prospective changes are summarized here, the market pricefull impact of our commonthese decisions will be reflected in 2017 pay and next year’s proxy statement.
Schlumberger Limited2017 Proxy Statement | 26 |
Long-Term Incentive (“LTI”) Equity Awards
WHAT WE HEARD | WHAT WE DID | |||
• | Many stockholders we engaged with disapproved of the Compensation Committee’s exercise of discretion when it awarded our executives 100% payout under the performance stock unit (“PSU”) awards that vested in 2016, when the actual performance results called for an 81% payout. | • | No Discretion. The Compensation Committee exercised no discretion with regard to the 2014 PSUs that were to vest in January 2016, and our executives received no payout under those awards when we failed to reach target performance. | |
• | Some stockholders preferred a relative metric, rather than an absolute metric, in our performance-based equity awards. Other stockholders urged us to consider the use of a relative metric in addition to an absolute metric. | • | Diversity of Performance Metrics. We changed the performance metric for PSUs granted in January 2016 from an absolute Return on Capital Employed (“ROCE”) metric to a ROCE metric that is relative to the ROCE performance of a number of key comparator companies in oilfield services. | |
• | While some stockholders said that they considered stock options to be performance-based compensation, a majority of our stockholders we engaged with did not. | • | For 2017, a Move to 100% Performance-Based Equity. In January 2017, the Compensation Committee approved a significant change in the mix of our LTI equity awards, from 50% stock options and 50% performance based equity awards, to 100% performance-based equity awards, effective for 2017 compensation. | |
• | Also for 2017, we introduced PSUs with payouts contingent on achievement of a two-year target based on absolute free cash flow as a percentage of income, excluding charges and credits. These PSUs will be subject to a mandatory one-year hold period and will vest only upon expiration of the hold period. This new award replaces the stock options granted in prior years and constitutes 50% of our NEOs’ 2017 LTI compensation, and is in addition to the relative ROCE metric that applies to other PSUs issued in January 2017. | |||
Annual Cash Incentive
WHAT WE HEARD | WHAT WE DID | |||
• | Many stockholders said the disclosure of our NEOs’ personal objectives was opaque. As a result, the achievement of those goals appeared to be based on the Compensation Committee’s subjective determination. | • | Better Disclosure of NEO Cash Incentive Achievement. We have enhanced our disclosure in this CD&A of our NEOs’ 2016 key personal objectives, including quantifiable operational objectives. | |
• | Some stockholders expressed concern that using two six-month earnings per share (“EPS”) targets for our annual incentives did not result in rigorous performance standards being applied to our executives. | • | Full-Year EPS Targets. In January 2017, the Compensation Committee approved full-year EPS targets for 2017, and expects to continue that practice in the future. | |
• | No Discretion. We did not meet the minimum EPS target for the first half of 2016, and the Compensation Committee did not exercise discretion. As a result, our executives received no payout with respect to EPS performance for the first half of 2016. | |||
• | Many of our stockholders said they wanted additional disclosure on the results of our performance against our competitors in connection with the relative performance incentive (“RPI”) of the annual cash incentive program. | • | Better Disclosure of Relative Performance. We have provided enhanced disclosure in this CD&A of the results of our performance against our RPI comparator companies by specific geographic area. |
Overview of Compensation Decisions for 2016
We delivered strong financial results in 2016 despite the WTIunprecedented industry downturn that began in 2014 and continued in 2016. For example, the price of crude oil collapsed from a high of $108 per barrel in 2014 to less than $27 per barrel in early 2016. This resulted in a precipitous decline in our customers’ E&P spending in 2016, which in turn had a negative effect on activity and the Philadelphia Oil Service Sector (“OSX”) over the last three years.pricing for our products and services. As a consequence, both our revenue and net income declined in 2016. In that environment, we were forced to reduce our employee base by 50,000. Despite these headwinds, we outperformed our main competitors in our most important financial measures, as detailed below in “—2016 Business Overview.”
Schlumberger Limited2017 Proxy Statement | 27 |
Schlumberger’s stock price increased
While our results of operations were negatively affected by 70% between December 31, 2012the highly depressed oil prices, market uncertainty and June 30, 2014, compared to an increase of 14% for the WTI price of crude oil and an increase of 41% for the OSX over the same period. We then maintainedother factors beyond our gains relative to these two market indicators, as our stock price declined only 40% between June 30, 2014 and December 31, 2015, compared to a decrease of 64% for the WTI price of crude oil and a decrease of 49% for the OSX over the same period. Oil prices ultimately reached a 12-year low in December 2015.
Executive Compensation Program Overview
Schlumberger is the world’s largest oilfield services company and the only such company included in the S&P 100 Index. The Company’s success in delivering strong long-term stockholder returns and financial and operational results is a result of attracting, developing and retaining the best talent globally. A highly competitive compensation package is critical to this objective and, to this end,control, the Compensation Committee seekscontinued to target total direct compensation (i.e., base salary plus annual cash incentives plus LTI awards)focus on strengthening the link between pay and performance; retaining and motivating our top executives; and appropriately rewarding our executives for outperforming our NEOscompetitors in this industry downturn and other executive officers at or very close to the 75th percentile of the Company’s two main executive compensation comparator groups.increasing long-term stockholder value. In the view ofthis context, and as more fully discussed elsewhere in this CD&A, the Compensation Committee approved the 75th percentile isfollowing actions in 2016:
• | Payout of the EPS component of the annual cash incentive for the first six months of 2016 was zero, and payout for the second six-month period of 2016 was 160% of target. Payout of the RPI component of the annual cash incentive was 100%. These combined for a payout of 90% of the financial half of the 2016 annual cash incentive, well below the maximum potential payout. |
• | We held 2016 LTI grant values flat for all NEOs. |
• | We held 2016 base salaries flat for all NEOs, except to adjust for foreign currency fluctuations. |
• | We increased the target annual cash incentive range for Mr. Al Mogharbel from 75% to 100%, to maintain pay equity among our Group presidents. |
• | We changed the performance measure for the three-year PSUs granted in January 2016 from an absolute ROCE metric to a relative ROCE metric as compared to the average ROCE of key comparator companies in oilfield services. |
• | We made one-time grants of 15,000 three-year restricted stock units (“RSUs”) to each of Messrs. Belani, Schorn and Al Mogharbel to recognize their outstanding performance during the market downturn and for retention purposes amid the exceptional competition for our executive talent. |
The Compensation Committee retains the flexibility to set elements of target compensation at higher percentiles based on strong business performance, for retention, for key skills in critical demand, and for positions that are of high internal value. Elements2016 Business Overview
Highlights of our executives’ total direct compensation and actual payments may also be below our main comparator groups’ median as a result2016 performance include:
Our Free Cash Flow:
• | We had industry-leading free cash flow in 2016. We had cash flow from operations of $6.3 billion in 2016, which resulted in $2.5 billion free cash flow. Our free cash flow was double the free cash flow that was generated by our top two competitors combined. |
• | We were able to return $3.4 billion to our stockholders in 2016 through cash dividends and share repurchases. |
• | We invested $1 billion in 2016 for research and engineering, and continued our strategic acquisitions for long-term growth. |
Free Cash Flow(1)
Industry-Leading Pretax Income Margin:
• | We delivered superior financial results by maintaining positive pretax income margin. |
• | This added to our continued industry-leading margins throughout the downturn. |
Pretax Income Margin(2)
(1) | Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, or superior to, cash flow from operations. Please see the reconciliation in Appendix A to this proxy statement. Exceptional payments were excluded from free cash flow for Baker Hughes and Halliburton, including the payment and receipt of the Baker Hughes and Halliburton termination fee, and payments by Halliburton related to the settlement of litigation regarding the Macando incident. This presentation is consistent with how our management evaluates relative performance. |
(2) | Pretax income margin excluding charges and credits is a non-GAAP measure. We calculate pretax income margin excluding charges and credits as a ratio, the numerator of which is income from continuing operations before taxes excluding certain charges and credits, and the denominator of which is revenue. We believe that the exclusion of certain charges and credits from income from continuing operations before taxes better enables management to compare its underlying operational profitability period-over-period to that of the Company’s peers, which could otherwise be masked by the excluded items. This presentation is consistent with how our management evaluates relative performance. |
Schlumberger Limited2017 Proxy Statement | 28 |
Our Relative Return on Capital Employed:
• | We maintained the highest ROCE of the major oilfield service companies in 2016. |
• | We continued to produce positive ROCE throughout the downturn, while two of our three major competitors had negative ROCE during that period. |
Return on Capital Employed at Fiscal Year End(3)
Our Acquisition of our pay-for-performance philosophy, as discussed below.
• | In April 2016, we closed our $15 billion acquisition of Cameron, a leading provider of flow equipment products, systems and services. |
• | The acquisition was accretive to our earnings and cash flow one quarter after we closed the transaction. |
• | The transaction positions us for long-term technology-led growth and creates the industry’s first complete drilling and production system fully enabled by our unique expertise in instrumentation data processing, software optimization and system integration. |
• | Cameron became our fourth business Group and generated $4.2 billion in revenue in 2016. We were able to recognize $269 million in synergies in 2016 as a result of the acquisition. |
INTEGRATED DRILLING SYSTEMS INTEGRATED PRODUCTION SYSTEMS
Our Executive Compensation Best Practices
The following is a summary of some of our executive compensation practices and policies that demonstrate important aspects of our culture and values.policies.
WHAT WE DO | WHAT WE DON’T DO | |
Pay for Performance.Beginning in 2017, our executive officers’ equity-based compensation is 100% in the form of performance-based equity awards. At-risk Pay. A significant portion of our executive pay is at risk. For our CEO, 87% of his 2016 compensation was at risk. Clawbacks. We have a compensation recovery, or “clawback,” policy that allows our Board to recoup performance-based cash awards in specified instances. Executive Stock Ownership Guidelines. To further enhance the link between the interests of our stockholders and our executives, our CEO must own our stock valued at 6 times his annual base salary; our executive vice presidents and CFO must own at least 3 times their base salary; and all other executive officers must own at least 2 times their base salary. | No gross-ups on excise taxes. No hedging or pledging by directors or executive officers of their ownership of Schlumberger stock. No automatic acceleration upon a change in control. Our named executive officers have no employment, severance or change-in-control agreements. Our named executive officers receive only very limited perquisites and do not participate in any executive pension or insurance plans, other than those generally available to employees. |
Framework for Setting Executive Compensation in 2016
Executive Compensation Philosophy and Goals
Our compensation program is designed so that the higher an executive’s position in the Company, the larger the proportion of compensation that is contingent on long-term stock price performance, the Company’s financial performance and individual performance, described as “at-risk” compensation. The Company believes that having a significant portion of executive compensation at-risk more closely aligns the interests of its executives with the long-term interests of Schlumberger and its stockholders. Accordingly,
(3) | We believe that ROCE, a non-GAAP measure, is a good indicator of long-term company and management performance. ROCE represents the profitability of our capital employed in our business compared with that of our peers. We calculate ROCE as a ratio, the numerator of which is income from continuing operations, excluding charges and credits, plus after-tax interest expense, and the denominator of which is average total equity plus total debt. This presentation is consistent with how our management evaluates relative performance. |
Schlumberger Limited2017 Proxy Statement | 29 |
our named executive officers receive a greater percentage of their compensation through at-risk pay is in the form of long-term equity compensation that is at risk, in ordertied to alignCompany performance than our other executives.
In reviewing and evaluating our executive compensation with the Company’s business strategy and create long-term stockholder value. Schlumberger’s long-term incentive program focuses executives on longer-term operating performance and stockholder results.
Summary of Executive Compensation Practices We Do Not Engage in
The following is a summary of some of the executive compensation practices we do not engage in.
Overview of Compensation Decisions for 2015
The Compensation Committee continued to focus on strengthening the link between pay and performance to retain and motivate our top executives through a year that was marked by upstream capital expenditure spending cuts that resulted in significantly lower E&P investment levels. As a result, and as more fully discussed elsewhere in this CD&A,2016 say-on-pay voting results, the Compensation Committee took the following actions in 2015:
Executive Compensation Philosophy
In keeping with the Company’s pay-for-performance culture, Schlumberger’s long-standing compensation philosophy is to pay senior executives and other professional-level employees for performance that is evaluated against personal and Company financial goals as described below in the section entitled “—Annual Cash Incentive Decisions for 2015.” Schlumberger’s compensation program is driven by the need to recruit, develop, motivate and retain top talent, both in the short-term and long-term, by establishing compensation that is competitive and by promoting the Company’s values of people, technology and profitability. philosophy:
• | The pay of our named executive officers and other senior executives should be strongly linked to performance that is evaluated against personal and Company financial goals, as described below in the section entitled “Elements of Total Direct Compensation; 2016 Decisions—Annual Cash Incentive Decisions for 2016” beginning on page 34. |
• | Our compensation program should enable us to recruit, develop, motivate and retain top global talent, both in the short-term and long-term, by establishing compensation that is competitive and by promoting the Company’s values of people, technology and profitability; |
• | LTI equity awards should encourage the creation of long-term stockholder value, align our executives’ compensation with the stock price returns of our stockholders, and incentivize our executives to achieve strategic and financial goals that support our long-term performance and leadership position in our industry; and |
• | our executives should be required to hold stock acquired through equity-based awards and stock ownership guidelines that align their interests with those of our other stockholders. |
Promotion from within the Company is a key principle at Schlumberger, and all executive officers, includingof the named executive officers have reached their current positions through career development with the Company. Schlumberger sees diversity of its workforce as both a very important part of its cultural philosophy and a business imperative, as it enables the Company to serve clients anywhere in the world. Schlumberger believes that its use of a consistent approach to compensation at all levels irrespective of nationality is a strong factor in achieving a diverse workforce comprising top global talent.
Schlumberger’s compensation program is designed so that the higher an executive’s position in the Company, the larger the proportion of compensation that is contingent on strong long-term stock price performance, the Company’s financial performance and/or individual performance, described as “at-risk” compensation. The Company believes that having a significant portion of executive compensation at-risk more closely aligns the interests of its executives with the long-term interests of Schlumberger and its stockholders. Accordingly, our named executive officers receive a greater percentage of their compensation through at-risk pay tied to Company performance than our other executives.
Schlumberger’s executive compensation program consists of three primary elements, comprising our executives’ total direct compensation:
These elements allow the Company to remain competitive and attract, retain and motivate top executive talent with current and potential future financial rewards. At the same time, this relatively simple compensation program is applied and communicated consistently to our exempt employees of more than 140 nationalities operating in approximately 85 countries.
Framework for Setting Executive Compensation in 2015
Executive Compensation Goals
In establishing executive compensation, Schlumberger believes that:
Management of Executive Compensation
The Compensation Committee reviews and recommends our chief executive officer’s compensation to the independent members of the Board of Directors and reviews and approves the compensation of our other executive officers. The specific duties and responsibilities of the Compensation Committee are described in the section of this proxy statement entitled “Corporate Governance—Board Committees—Compensation Committee” above.
Role of Compensation Consultant
The Compensation Committee has engaged the independent executive compensation consulting firm of Pay Governance LLC with respect to executive compensation matters. For more information on this engagement, see the section of this proxy statement entitled “Corporate Governance—Board Committees—Compensation Committee” above.
Relative Size of Direct Compensation Elements
The Compensation Committee reviews the elements of total direct compensation for the NEOs throughout the year, to evaluate whether each element of direct compensation remains at levels that are competitive with companies in Schlumberger’s two main peer groups described below. The Compensation Committee relies on its own judgment in making these compensation decisions after its review of external market practices of companies comprising the two peer groups, including the size and mix of direct compensation for executives in those companies. The Compensation Committee seeks to achieve an appropriate balance between annual cash rewards that encourage achievement of annual financial and non-financial objectives, and LTI awards that encourage positive long-term stock price performance, with a greater emphasis on LTI awards for more senior executives. However, the Compensation Committee does not aim to achieve a specific target of cash versus equity-based compensation.
While external market data provide important guidance in making decisions on executive compensation, the Compensation Committee does not set compensation based on market data alone. When determining the size and mix of each element of an NEO’s total direct compensation, the Compensation Committee also considers the following factors:
Based on market data provided by Pay Governance, the charts below show the average percentage of 2015 base salary, target cash incentive and 2015 LTI compensation established by the Compensation Committee in January 2015 for the NEOs who served throughout 2015, in comparison to the Company’s two main comparator groups. The charts demonstrate that Schlumberger’s pay mix generally aligns with that of both peer groups, though Schlumberger provides a slightly higher proportion of at-risk LTI compensation. This data is based on target opportunity levels and will differ from the total compensation figures shown in the Summary Compensation Table.
The Compensation Committee may, at its discretion, modify an NEO’s mix of base pay, annual cash incentive and LTIs, or otherwise adjust an NEO’s total compensation, to best fit his or her specific circumstances. For example, the Committee may award more cash and not award an LTI grant to an executive officer that is approaching retirement. This provides more flexibility to the Committee to compensate executive officers appropriately as they near retirement, when they may only be able to partially fulfill the five-year vesting required for stock options or retire prior to the end of a three-year performance period for PSUs. The Committee may also increase the size of stock option grants to an executive officer if the total number of career stock options granted does not adequately reflect the executive’s current position and level of responsibility within the Company, after a review of external market practice and the other factors described above.
Pay-for-Performance Relative to the Oil Industry Peer Group
As part of the Compensation Committee’s annual review of our executive compensation program, the Committee in July 20152016 the Committee directed Pay Governance to prepare a comparative pay-for-performance assessment against companies in our oil industry peer group as identified in the “Peersection entitled “Other Aspects of our Executive Compensation Framework—Peer Group Companies and Benchmarking” section below.Companies” beginning on page 42. The comparative assessment examined the degree of alignment between our NEOs’ compensation and our performance relative to these companies as measured by total shareholder return (“TSR”) and EPS,diluted earnings per share from continuing operations, excluding charges and credits (“adjusted EPS”), each on a one-year (2014)basis (2015), a three-year basis (2013-2015), and a three-year (2012-2014)five-year basis (2011-2015), and in bothall cases ending on December 31, 2014.2015. TSR reflects share price appreciation, adjusted for dividends and stock splits. EPS represents diluted earnings per share from continuing operations, excluding charges and credits.
For its one-year analysis,each of those time periods, the Compensation Committee reviewed the actual cash incentive paid in 2014 tototal realizable compensation of our CEO against actual cash incentive paid in 2014 tothat of other CEOs in companies comprising the oil industry peer group. It then separately reviewed cash incentive paid to Schlumberger’s other named executive officers for 2014 against cash incentive paid over the same period to non-CEO named executive officers in companies comprising the oil industry peer group. The Committee deemed it appropriate to restrict its review to the cash incentive component of total direct compensation for purposes of the one-year analysis, given the relatively short period under review.
For its three-year analysis, the Compensation Committee reviewed the 2012-2014 total realizable compensation of Schlumberger’s CEO against other CEOs in companies comprising the oil industry peer group.
It then separately reviewed Schlumberger’s other executive officers against otherthat of executive officers inat other companies comprising the oil industry peer group; however, information regarding total realizable compensation of the second- throughsecond-through fifth-highest paid officers at the non-United States companies that are included in the oil industry peer group (e.g., BG Group, BP plc, Eni SpA, Royal Dutch Shell and Total) was not available. As a result, our NEOs’ total realizable compensation (other than that of our CEO) was compared only against total realizable compensation of named executive officers at US-incorporated companies in the oil industry peer group (for which data was available).
The Compensation Committee included a review of five-year data because it believed it provided more insight into pay over a complete industry cycle and thus enabled the Committee to assess pay versus performance in the long term.
“Total realizable compensation” for the three-yeareach period consisted of the following:
• | actual base salary paid;
CEO Realizable Compensation and our Performance
The disparity between Schlumberger’s one-year and five-year performance and total realizable compensation is due to several years of underwater options and no payout from the three-year PSUs awarded in 2014, and little or no expected payout of PSUs awarded in 2015.
While our 2015 TSR was in the 50thpercentile of the oil industry peer group, our CEO’s total 2015 realizable compensation was only in the 11thpercentile and that of our other NEOs was only in the 12thpercentile. The Competition for our Executive Talent
A primary consideration of the Compensation Committee
Our Compensation Committee believes that the 75thpercentile is an appropriate level to target because of Schlumberger’s leading position in the oilfield services industry; because competition for our executive talent in the oil and gas industry is exceptionally fierce; and because our executives are very highly sought after, not only by our direct oilfield service competitors but also by other leading companies. Changes in senior management at other companies in 2016 also caused increased competition for our talent, as was the case with the merger transaction between Halliburton and Baker Hughes that was pending at the time compensation decisions for 2016 were made but that ultimately failed. In approving this target level and when setting compensation in 2016, the Compensation Committee considered that many current and former senior executive officers of leading companies in the energy industry have previously served as senior executives at Schlumberger. For example, former senior Schlumberger executives either have been, or are, senior executives at the following competitors and customers:
The Compensation Committee retains the flexibility to set elements of target compensation at higher percentiles based on strong business performance, for retention, for key skills in critical demand, and for positions that are of high internal value. Elements of our executives’ total direct compensation and actual payments may also be below our main comparator groups’ median as a result of our pay-for-performance philosophy, as discussed below. CEO Realized Pay In the course of the Compensation Committee’s review of our executive compensation program, the Committee noted that for the past several years, our named executive officers’ realized pay was, in general, substantially less than the total compensation as reported in our proxy statements for each such executive (his “reported pay”). We discussed this important topic with stockholders during our engagement efforts in 2016. “At risk” compensation refers to LTI awards and the annual cash incentive We calculate “realized pay” for a given year by adding together:
To illustrate this point, the chart below shows the actual compensation delivered to our CEO from 2012 to 2016, and demonstrates that his realized pay was significantly lower than his reported pay for all but one year during this period. Most of the compensation of our CEO, like that of all of our other NEOs, was “at risk,” and for 2016, 87% of his compensation was at risk. CEO: Reported Pay vs. Realized Pay As this chart shows, our CEO’s realized pay was 30.3%, 35.4%, 102.3%, 48.6%, and 62.3% of his reported pay for years 2012, 2013, 2014, 2015 and 2016, respectively. Our CEO’s 2014 realized pay was nearly that of his 2014 reported pay because he exercised stock options in 2014, some of which were
Pay Mix and Internal Pay Equity Review In January The Compensation Committee also reviewed internal pay equity in October Elements of Total Direct Compensation; 2016 Decisions Base Salary Base salary is the fixed portion of an executive’s annual cash compensation, which provides some stability of income since the other compensation elements are variable and not guaranteed. On appointment to an executive officer position, base salary is set at a level that is competitive with base salaries in the applicable comparator groups for that position and takes into account other factors described below. Base salaries for each executive officer position are compared annually with similar positions in the applicable peer groups. Base salary changes for executive officers, except the CEO, are recommended by the CEO and subject to approval by the Compensation Committee, taking into account:
The base salary of the CEO is reviewed by the Compensation Committee in executive session and recommended by the Compensation Committee to the independent members of our Board for approval, based on the same criteria as above. In addition to periodic reviews based on the factors described above, the Compensation Committee may adjust an executive officer’s base salary during the year if the executive officer is promoted or if there is a significant change in his or her responsibilities. In this situation, the CEO (in the case of executive officers other than himself) and the Compensation Committee carefully consider these new responsibilities, external pay practices, retention considerations and internal pay equity, as well as past performance and experience. Base salary may also be reduced, such as when an executive officer moves to a position of lesser responsibility in the Company. Alternatively, base salary can be frozen for a number of years until it falls in line with comparable positions in the applicable compensation peer groups. Base Salary Decisions in 2016 The Compensation Committee carried out a review of the compensation of each of our executive officers in January 2016. Upon review of comparative market data for the applicable comparator groups, and taking into consideration that most of our NEOs were already positioned competitively from a market perspective, the Compensation Committee determined to maintain salaries at their current levels for all of our NEOs. In July of 2016, in response to the significant devaluation of the British pound, the Compensation Committee approved a change in the currency used to establish compensation for executive officers based in London and Paris to U.S. dollars. The Committee based its decision on the need to protect against further currency fluctuations that would negatively and unfairly affect their compensation. As a result, the base salary of Mr. Schorn was reset to $800,000, which was the target amount approved by the Compensation Committee in July 2013. Annual Cash Incentive The Company pays annual performance-based cash incentives to its executives to foster a results-driven, pay for performance culture and to align their interests with those of Schlumberger’s stockholders. The Compensation Committee selects performance-based measures that it believes strike a balance between motivating an executive to increase operating results in the near-term and driving profitable
long-term Company growth and value for stockholders. Incentive cash payments are made each February according to the achievement of both personal and Company financial objectives. One half of Schlumberger’s potential cash incentive payout is based on the achievement of pre-established personal objectives, while the other half is based on the Company’s achievement of pre-established financial goals. The financial half of the annual cash incentive for NEOs has an incremental financial element, which means that the maximum incentive opportunity can be up to 300% of target with respect to the financial part, based on achievement of superior financial results. This enhanced incentive applies to the CEO and our other executive officers. The personal half of the incentive cash payment has no positive incremental element, meaning the maximum payout with respect to this half of the target annual cash incentive is 100% of target. Under this approach, the maximum incentive opportunity based on both financial and personal objectives combined cannot exceed 200% of target. The Compensation Committee reviews and recommends to the independent directors of the Board the financial objectives for the CEO and reviews and approves the financial objectives for the other executive officers. The Compensation Committee believes that, with regard to financial targets or financial performance goals, it is important to establish criteria that, while very difficult to achieve in an uncertain global economy, are realistic. When considering the Company’s operating results for purposes of the financial portion of the annual cash incentive, the Compensation Committee has the discretion to decide whether to take into account unusual or infrequent charges or gains, depending on the nature of the item. The Compensation Committee exercises its discretion when it believes that executives and other employees would be inappropriately penalized by, or would inappropriately benefit from, these items. The Compensation Committee approves the personal objectives for the CEO and assesses his performance against those objectives in determining his annual cash incentive award, subject to final approval by the independent directors of the Board. The CEO approves the personal objectives for the other executive officers, including the other NEOs, and assesses each such officer’s performance against their pre-determined objectives, subject to final approval of the Committee. Annual Cash Incentive Decisions for 2016 The Compensation Committee increased the target annual cash incentive percentage for only one of our NEOs in 2016, Mr. Al Mogharbel, from 75% to 100%. The Committee approved this increase so that all of our Group Presidents would have the same target annual cash incentive opportunity as of January 2016. As a result, the 2016 target annual cash incentive for our CEO was 150% of his base salary, and 100% of base salary for the other NEOs. Financial Objectives Consistent with prior years, the financial half of the NEOs’ 2016 annual cash incentive was based equally on achievement of (i) diluted earnings per share from continuing operations, excluding charges and credits (“adjusted EPS”)1, targets and (ii) the RPI criteria. 2016 Adjusted EPS Targets The Compensation Committee selected adjusted EPS as an absolute measure upon which to base half of the financial portion of the annual cash incentive because it is the primary absolute basis on which we set our performance expectations for the year. It is also consistent with the manner in which we present adjusted EPS in our earnings announcements and presentations to investors. We believe that consistent adjusted EPS growth leads to long-term stockholder value; and adjusted EPS is the metric most widely used by investors and analysts to evaluate the performance of Schlumberger. The process used to set annual adjusted EPS targets starts with a review of plans and projections following bottom-up planning from the field, which considers factors such as:
In light of the continued low industry visibility in early 2016, the Compensation Committee determined at its January 2016 meeting to divide the adjusted EPS component of the financial half of our annual cash incentive program into two six-month periods for 2016, as it did in 2015. As a result, the Compensation Committee approved adjusted EPS targets for the six-month period from January 1 through June 30 at its January 2016 meeting, and approved adjusted EPS targets for the six-month period from July 1 through December 31 at its July 2016 meeting. The Compensation Committee approved the following adjusted EPS performance targets and corresponding payouts for the first six-month period of 2016:
The Compensation Committee approved the following adjusted EPS performance targets and corresponding payouts for the second half of 2016:
For adjusted EPS results between any two targets, the payout is prorated. No cash incentive is paid if the minimum adjusted EPS target is not met for the applicable six-month period. The Compensation Committee approved these targets based on the continued deterioration of market conditions, reflected in the lowest activity to date in the second quarter of 2016, management’s continued low visibility as to when customer spending would meaningfully improve, and its awareness that pricing concessions granted to customers during the downturn would not be recovered immediately, thereby limiting adjusted EPS gains. Based on the shareholder feedback that we received through the shareholder engagement program described beginning on page 26 in the section entitled “Our 2016 Say-on-Pay Vote; Stockholder Outreach; Enhancements and Changes,” in January 2017 the Compensation Committee approved an annual adjusted EPS target for 2017 rather than two semi-annual targets. The Compensation Committee expects to continue using annual adjusted EPS targets for the foreseeable future. 2016 Adjusted EPS Results Schlumberger’s adjusted EPS was $0.62 for the six-month period from January 1, 2016 to June 30, 2016, while the loss per share on a GAAP basis was $1.26 for the same period, reflecting $2.9 billion of pretax charges attributable to workforce reductions and an incentivized leave of absence program, impairments of fixed assets, inventory, and multiclient seismic data, and merger and integration charges related to the Cameron acquisition.(1) Schlumberger’s adjusted EPS was $0.52 for the six-month period from July 1, 2016 to December 31, 2016, while the loss per share on a GAAP basis was $0.02, reflecting $912 million of pretax charges attributable to workforce reductions, facility closure costs, write-downs of assets, merger and integration charges related to the Cameron acquisition, contract termination costs, the devaluation of certain foreign currencies and other items associated with publicly reported market conditions.(1) As in prior years, the Compensation Committee evaluated performance based on adjusted EPS, consistent with the manner in which the Company presents adjusted EPS in its earnings announcements and presentations to investors. Furthermore, the Committee believed that the $2.9 billion of pretax charges in the first half of 2016 and the $912 million of pretax charges in the second half of 2016 resulted in earnings per share on a GAAP basis that did not reflect Schlumberger’s operating trends and arose from actions that management took in order to proactively address the industry downturn, expenses related to the Cameron acquisition and other events outside of management control. Based on these results, the Compensation Committee approved a payout of zero for the first half of 2016 and 160% of target for the second of 2016, resulting in a combined percentage of 80% of target for the adjusted EPS component of the annual cash incentive. 2016 Relative Performance Incentive (RPI) The RPI component of the 2016 annual cash incentive is based on our year-over-year performance in each of our four geographic areas as compared against the relative performance of Halliburton and Baker Hughes in their corresponding publicly reported geographic areas, measured by:
The Compensation Committee believes that the RPI cash incentive component:
The Compensation Committee selected Halliburton and Baker Hughes as our RPI comparator companies for 2016 because we believe they are the only oilfield service companies that resemble us in terms of scale, scope and nature of business operations, and because we and our investors believe these two companies constitute our main global business competitors. The performance of our RPI comparator companies for purposes of calculating relative performance is derived from their reported company results. The RPI payout, if any, to our NEOs is based on the sum of our overall rankings achieved in each of our four geographic areas worldwide, comparing changes in year-over-year revenue and margins in each geographic area against that of our two RPI comparator companies. The best performance achievable by us in each geographic area is an overall ranking of “1,” meaning that we achieved the best revenue and margin performance overall in a geographic area as compared against our two RPI comparator companies; conversely, the worst performance achievable by us in a given geographic area is an overall ranking of “3.” Thus, our best overall possible achievement in all geographic areas combined for a given year is “4” — being the sum of overall “1” rankings in each geographic area — which would require that our performance equal or exceed that of our two RPI comparator companies in both financial performance criteria
for all four geographic areas. Conversely, our worst overall possible achievement in all geographic areas would be “12,” which would require that our two RPI comparator companies outperform us in all four geographic areas as described above. The following table illustrates how a hypothetical overall ranking would be determined for three companies in North America, taking into account their year-over-year relative performance in both revenue and margin change:
In this example, Company B ranked highest in revenue change in the area, and second-highest in margin performance, for a raw score of 3 (sum of “1” and “2” scores). Company C, meanwhile, ranked second-highest in revenue and highest in margin performance, for a raw score of 3 (sum of “2” and “1” scores). Company A, meanwhile, performed behind both Company B and C in both categories, for a raw score of 6 (sum of “3” scores in both categories). Thus, Company B and C tied for the best overall area rank — “1”— because each achieved the lowest total raw score of “3.” The Compensation Committee approved the following performance payout matrix in January 2016:
The Compensation Committee may increase the total RPI payout to a maximum of 300% upon an RPI achievement of 4, being the highest achievement level attainable, as the Compensation Committee deems appropriate. The Compensation Committee also may increase or decrease the total RPI payout to take into account such factors as overall Company performance, extraordinary items affecting financial results or such other factors as the Compensation Committee deems appropriate. 2016 RPI Results Our 2016 RPI results were as follows:
Based on the RPI Performance Payout Matrix above, we achieved an RPI result in 2016 of 7, corresponding to a total RPI payout of 100% of target, which was approved by the Compensation Committee. Personal Objectives Fifty percent of an executive’s annual cash incentive opportunity is tied to achievement of personal objectives that are specific to each executive officer position and may relate to:
any other business priorities. The award for the personal half of the annual cash incentive opportunity was based on the specific results each named executive officer achieved, as approved by the Compensation Committee. Personal objectives are established at the start of the fiscal year. At the end of the fiscal year, the Compensation Committee evaluates the performance of the CEO against his personal objectives, taking into account performance for the just-completed fiscal year versus predefined commitments for the fiscal year; unforeseen financial, operational and strategic issues of the Company; and any other information it determines is relevant, subject to approval by the independent directors of the Board. The CEO evaluates the performance of the other NEOs in a similar way, subject to approval by the Compensation Committee of the Board.
2016 Annual Cash Incentive as a Percentage of Base Salary
Long-Term Equity Incentives Long-term equity incentives make up the largest portion of compensation for our NEOs. They are designed to give NEOs and other high-value employees a longer-term stake in the Company, provide incentives for the creation of sustained stockholder value, act as long-term retention and motivation tools, and directly tie employee and stockholder interests over the longer term. In January 2016 (as in 2015) our NEOs and other executive officers received 50% of their target LTI compensation in the form of three-year PSUs and 50% in the form of stock options. For the 2016 PSU grants, the Committee established performance goals using a new relative performance measurement based on our ROCE as compared to key comparator companies in oilfield services to determine payouts, as more fully discussed below under “— New 2016 PSU Performance Measure and Goals.” The 2014 and 2015 PSU grants used an absolute ROCE performance measure. Awards of PSUs are currently limited to our NEOs and other senior executive officers. The PSUs granted in 2016 will become earned and vested at the end of the three-year performance period ending December 31, 2018, contingent on achievement of pre-determined performance targets, and will convert to shares of our common stock after the expiration of the performance period and certification by our Compensation Committee of performance. No shares will vest under the PSUs if we do not achieve a pre-established threshold performance level. No dividends will accrue or be paid on any PSUs during the performance period. Stock options vest ratably in equal installments over five years. How We Determined 2016 Long-Term Equity Awards The value of an LTI grant to our executives increases with the level of an executive’s responsibility at the Company, and for the CEO and our other NEOs is the largest element of their total direct compensation package. In determining the value of LTI awards granted to executive officers, the Compensation Committee (in approving the CEO’s grant) and the CEO (in recommending grants for the other NEOs)
first considers market data on the LTI value for the most comparable positions in the Company’s two main comparator groups, as well as several other factors, which may include:
The Compensation Committee determined the target dollar value of LTI awards for our NEOs in 2016 at its January meeting, based on the relevant factors above, allocating the target dollar value 50% in PSUs and 50% in stock options. For 2016 compensation, the target number of PSUs awarded to an NEO was determined by dividing 50% of the total target LTI value by the estimated grant date fair value of a PSU; the number of options awarded was determined by dividing 50% of the total target LTI value by the estimated grant date fair value using the Black-Scholes formula. The actual grant date fair value of each grant, computed in accordance with applicable accounting standards, is disclosed in the Grants of Plan-Based Awards for Fiscal Year 2016 table below. The tables below detail the estimated grant date fair value and number of PSUs and stock options granted in 2016 to the NEOs. LTI Grants for 2016 The Compensation Committee approved (and in the case of Mr. Kibsgaard, our Chairman and CEO, the independent members of the Board approved) the following awards for the NEOs in January 2016. The Compensation Committee, based on its review of comparator peer group data, determined to hold LTI grant values flat in 2016 for all of our NEOs. The following table shows the grant values of the NEOs’ 2016 annual LTI awards and the year-over-year percentage change between the two amounts.
No 2016 Payout under Three-Year PSUs Granted in 2014 In January 2014, our Compensation Committee granted three-year PSUs to our NEOs and conditioned payout based on the Company’s achievement of absolute ROCE against goals over the applicable performance period. In January 2017, the Compensation Committee determined the results of the three-year performance period for the 2014 PSUs, relative to the performance criteria established at that time. We achieved average annual ROCE of 10.4% for the period 2014-2016, representing achievement below threshold. As a result, the Compensation Committee determined that no shares would vest under the 2014 PSUs, and our NEOs received no payout award. New 2016 PSU Performance Measure and Goals In January 2016, the Compensation Committee set goals for the 2016 PSUs based on the ROCE of the Company as compared to the average ROCE of a group of key comparator companies in oilfield services over the three-year performance period. ROCE is a measure of the efficiency of our capital employed and is a comprehensive indicator of long-term Company and management performance. We selected a ROCE metric that is relative because we believe it is better suited to the cyclical nature of our industry, and because it allows us to directly compare how we deploy our capital as against key comparator companies in oilfield services. Our selection of ROCE as the performance metric for the 2016 PSUs is also consistent with our strategic direction and transformation initiatives. Furthermore, ROCE measures performance in a way that is tracked and understood by investors. The Compensation Committee believes that tying a part of our senior executives’ LTI pay to our efficiency goals and comparing them to that of key comparator companies in oilfield services will motivate our executives to continue to be innovative despite our strong leadership role in the industry. The Compensation Committee also believes that improvements in efficiency through innovation will increase revenue and improve margins through our continued focus on pricing and cost control.
We calculate ROCE as a ratio, the numerator of which is (a) income from continuing operations, excluding charges and creditsplus (b) after-tax net interest expense, and the denominator of which is (x) stockholders’ equity, including noncontrolling interests (average of beginning and end of each quarter in the year),plus (y) net debt (average of beginning and end of each quarter in the year). The Compensation Committee has the discretion to adjust the Company’s income from continuing operations to take into account the effect of significant impacts or activities that are not representative of underlying business operations, such as acquisitions, divestitures, asset impairments and restructurings. Furthermore, the Compensation Committee evaluates, and may adjust for, the effect of acquisitions or divestments on a case-by-case basis for purposes of the ROCE calculation. In January 2016, the Compensation Committee selected Halliburton, Weatherford, National Oilwell Varco and FMC Technologies as the group of competing oilfield services companies for the 2016 PSUs. The Committee excluded Baker Hughes at that time because of its pending merger with Halliburton. In July 2016, the Compensation Committee approved the addition of Baker Hughes to this group, following the failure of the proposed Baker Hughes – Halliburton merger. In addition, the Committee approved the inclusion of TechnipFMC in lieu of FMC, subject to the completion of the Technip – FMC merger. The performance period for the 2016 PSUs began on January 1, 2016 and ends on December 31, 2018. Vesting is conditioned upon the Company’s achievement of a pre-determined threshold of relative annual ROCE of no less than 600 basis points (“bps”) below the average of the comparator group for the performance period. If the relative ROCE achieved is less than or equal to 600 bps below the average of the competitor group, no shares will vest. In calculating this achievement, the Committee will certify the average ROCE for each of the Company and for the comparator group as a whole over the three-year performance period. The number of PSUs that will vest and convert to shares as of the vesting date can range from 0% to 250% of the number of PSUs awarded. In no event will payout exceed 250%. The percentage achieved will depend on our performance compared to that of our competitors during the performance period as illustrated in the following table. At the end of the measurement period, the Compensation Committee will certify the relative ROCE achieved and will determine the percentage of target shares earned based on the table below.
2016 Exceptional Restricted Stock Unit Grants At its July 2016 meeting, the Compensation Committee considered the need to retain certain key individuals, including three NEOs, to recognize their outstanding performance during the market downturn and for retention purposes amid the exceptional competition for our executive talent. At that meeting, and as a result of the foregoing considerations, the Compensation Committee approved exceptional grants of 15,000 RSUs to each of Messrs. Belani, Al Mogharbel and Schorn, which will all vest in July 2019, subject to their continued employment with us through that date. Changes in 2017 Long-Term Incentive Compensation Since the introduction of PSUs in 2013 and through 2016, our NEOs have received 50% of their target LTI compensation in the form of three-year PSUs and 50% in the form of stock options. In January 2017, the Compensation Committee, taking into consideration stockholder feedback, approved a significant change to our LTI award mix, with the result that our executives received 100% of their 2017 LTI awards in the form of performance-based equity awards. Fifty percent of the PSU grants are in the form of three-year PSUs, using relative ROCE as the performance measure, as in 2016. The other 50% of the PSU grants are in the form of PSUs with a cumulative two-year performance period based on absolute free cash flow as a percentage of net income, excluding charges and credits. Any PSUs earned will be in the form of restricted stock subject to a mandatory one-year hold period, and will vest contingent on continued employment with the company at the conclusion of the one-year hold period. We believe this hold period will foster retention of our executive talent and better align the interests of our executives with that of our stockholders. The Compensation Committee approved the change to the LTI mix based on the following factors:
Other Aspects of our Executive Compensation Framework Peer Group Companies The Compensation Committee considers The Company has two main executive compensation peer groups, the oil industry and general industry peer groups (our “main comparator groups”). The survey data prepared by Pay Governance summarize the compensation levels and practices of our
The Compensation Committee’s selection criteria for companies comprising the
The Compensation Committee, with the assistance of Pay Governance, annually reviews specific criteria and recommendations regarding companies to add to or remove from the comparator groups. As a general matter, the Company selects suitable comparator companies such that companies in each of our two main comparator groups, at the median, approximate Schlumberger’s estimated revenue in the then-current year and its then-current market capitalization. The Compensation Committee modifies the peer group criteria as appropriate while seeking a satisfactory degree of stability, to provide a consistent basis for comparison. A challenge facing the Company in determining the companies appropriate for inclusion in our two main comparator groups for Higher-Revenue Oil Industry Peer Group The higher-revenue oil industry peer group comprises companies in the oilfield services, The Compensation Committee includes E&P companies in this peer group based on a number of factors. First, because Schlumberger is significantly larger than all of its direct competitors in the oilfield services industry in terms of revenue and market capitalization, the Compensation Committee believes that the addition of E&P companies provides a more appropriate and complete comparator group. In addition, the Compensation Committee believes that the inclusion of E&P companies is appropriate because market consolidation has reduced the number of direct competitors in the oilfield services industry, thus increasing the prominence of E&P companies as competitors for executive talent. In July
As a result of the foregoing:
The following companies
General Industry Peer Group
The Compensation Committee considers data from the The general industry peer group provides data of large companies with significant international operations, and supplements the compensation data from the oil industry peer group, whose companies are closer to Schlumberger in industry type but have widely varying revenue sizes. The general industry peer group:
In July
The following companies comprised the general industry peer group effective for relevant
Additional Peer Groups for Select Positions
The Compensation Committee
These two additional peer groups serve as As a result, the Compensation Committee believed that it was appropriate, when reviewing and setting the compensation of our EVP Technology and other select executives for In addition, the Compensation Committee determined that it was appropriate to compare the compensation of our EVP Technology against that of the top R&D executives at other companies in the S&P 500 with R&D expenditures, at the median, very close to Schlumberger’s R&D expenditures. The Compensation Committee applies the Lower-Revenue Oil Industry Peer Group
Among our NEOs, the lower-revenue oil industry In
R&D Focused Peer Group — Similar R&D Expenditures The R&D-focused peer group
In October 2014, the Compensation Committee
Relative Size of Direct Compensation Elements Schlumberger’s executive compensation program consists of three primary elements, comprising our executives’ total direct compensation:
These elements allow the Company to remain competitive and attract, retain and motivate top executive talent with current and potential future financial rewards. At the same time, this relatively simple compensation program is applied and communicated consistently to our exempt employees of
While external market data provide important guidance in making decisions on executive
The charts below show the
Based on market data provided by Pay Governance, Schlumberger’s pay mix generally aligns with that of both of our main comparator groups. The Compensation Committee may, at its discretion, modify the CEO’s, or any other NEO’s mix of base pay, annual cash incentive and LTIs, or otherwise adjust an NEO’s total compensation, to best fit his specific circumstances. This provides flexibility to the Compensation Committee to compensate NEOs appropriately as they near retirement, when they might not receive any LTI awards for their final years of service. The Compensation Committee may also increase the size of an LTI award to an NEO if the aggregate career LTI awards granted does not adequately reflect the executive’s current position and level of responsibility within the Company, taking into account external market practices and the other factors described above. Management of Executive Compensation The Compensation Committee reviews and recommends our CEO’s compensation to the independent members of the Board
Role of The Compensation Committee
22.
Long-Term Equity Awards — Granting Process The Compensation Committee is responsible for granting long-term equity-based compensation under our stock option and omnibus incentive plans. The Compensation Committee approves a preliminary budget for equity-based grants for the following year at each October The regular Board
Annual grants of equity-based awards to the NEOs, Important Factors in Understanding Schlumberger’s
Our equity incentive plans do not permit the following:
Executive Stock Ownership Guidelines The Compensation Committee and management believe strongly in linking executive long-term rewards to stockholder value.
All executives subject to the The guidelines provide that executives have five years to satisfy the ownership requirements. After the five-year period, executives who have not met their minimum stock ownership requirement must retain 100% of the net shares acquired upon stock option exercises and any PSU and RSU vesting until they achieve their required ownership level. Stock ownership for the purpose of these guidelines does not include shares underlying vested or unvested stock options, unvested RSUs or unvested PSUs. As of December 31, 2016 all of our NEOs are in compliance with our stock ownership guidelines. Other Executive Benefits and Policies Prohibition on Speculation in Schlumberger Stock Schlumberger’s insider trading policy prohibits executives from speculating in the Company’s stock, which includes,
Retirement Benefits In line with Schlumberger’s aim to encourage long-term careers with the Company and to promote retention, retirement plans are provided, where possible, for all employees, including named executive officers, according to local market practice. Schlumberger considers longer-term benefit plans to be an important element of the total compensation package. The pension plans provide for lifetime benefits upon retirement after a specified number of years of service and take into account local practice with respect to retirement ages. They are designed to complement but not be a substitute for local government plans, which may vary considerably in terms of the replacement income they provide, and other Company sponsored savings plans. Employees may participate in multiple retirement plans in the course of their career with the Company or its subsidiaries, in which case they become entitled to a benefit from each plan based upon the benefits earned during the years of service related to each plan. The qualified plans are funded through cash contributions made by the Company and its subsidiaries based on actuarial valuations and/or regulatory requirements. Some of the Schlumberger U.S. retirement plans are non-qualified plans that provide an eligible employee with additional retirement savings opportunities that cannot be achieved with tax-qualified plans due to limits on annual compensation that can be taken into account or annual benefits that can be provided under qualified plans. Officers and other employees in the United States whose compensation exceeds the qualified plan limits are eligible to participate in non-qualified excess benefit programs for 401(k), profit-sharing and pension, whereby they receive correspondingly higher benefits. Employees and executive officers assigned outside the United States are entitled to participate in the applicable plans of the country where they are assigned, including supplemental plans where available. Retirement Practices The Company has a practice of phased retirement, which, at the discretion of the Company, may be offered to executive officers (other than the CEO) the Company in particular areas of expertise while refraining from joining a competitor. In these circumstances, the Company maintains pension contributions and other benefits such as medical and insurance, and the executive officer continues to vest in previously granted stock Other Benefits Schlumberger seeks to provide benefit plans, such as medical coverage and life and disability insurance, on a country-by-country basis in line with market conditions. Where the local practice is considered to be less than the Schlumberger minimum standard, the Company generally offers this Schlumberger standard. Executive officers are eligible for the same benefit plans provided to other employees, including medical coverage and life and disability insurance as well as supplemental plans chosen and paid for by employees who wish additional coverage. There are no special insurance plans for our named executive officers. Limited Perquisites Schlumberger provides only minimum perquisites to its named executive officers, which No Employment Agreements or Other Arrangements Our named executive officers do not have employment, severance or change-in-control
Recoupment of Performance-Based Cash Awards On the recommendation of the Compensation Committee in July 2006,
Section 162(m) of the Internal Revenue Code limits the deductibility of certain compensation expenses in excess of $1,000,000 per individual covered employee. The Company’s equity incentive plans are intended to provide stock options that qualify as performance-based compensation for purposes of Section 162(m) so that stock options are not expected to be subject to the $1 million limitation. PSUs are also intended to meet the requirements for qualified performance-based compensation exempt from the deduction limitations of Section 162(m). The Compensation Committee believes that the lost deduction on
The Compensation Committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis included in this proxy statement. Based on that review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. SUBMITTED BY THE COMPENSATION COMMITTEE OF THE SCHLUMBERGER BOARD OF DIRECTORS
2016 Summary Compensation Table The following table sets forth the compensation paid by the Company and its subsidiaries for the fiscal year ended December 31,
The NEOs may never realize any value from these stock options and, to the extent that they do, the amounts realized may have no correlation to the amounts reported above.
Grants of Plan-Based Awards for Fiscal Year The following
Outstanding Equity Awards at Fiscal Year-End The following table provides information regarding unexercised stock options outstanding and outstanding PSU and RSU awards for each of our NEOs as of December 31,
Option Exercises and Stock Vested for Fiscal Year The following table sets forth certain information with respect to stock options exercised,
Stock Awards (Columns (d) and (e)) The following table provides details of the stock awards vested and value realized in
Pension Benefits for Fiscal Year Schlumberger maintains the following pension plans for its named executive officers and other employees, which provide for lifetime pensions upon retirement, based on years of service:
The following table and narrative disclosure set forth certain information with respect to pension benefits payable to the named executive officers.
Tax-Qualified Pension Plans The SLB Pension Plan, the STC Pension Plan and the SLB USAB Pension Plan are all U.S. tax-qualified pension plans. The SLB Pension Plan and the STC Pension Plan have substantially identical terms. The SLB USAB Pension Plan, the material terms of which are described below, has similar, but not identical, terms. Employees may participate in any one of these plans in the course of their careers with Schlumberger, in which case they become entitled to a pension from each such plan based upon the benefits accrued during the years of service related to such plan. These plans are funded through cash contributions made by the Company and its subsidiaries based on actuarial valuations and regulatory requirements. Benefits under these plans are based on an employee’s admissible compensation (generally base salary and cash incentive) for each year in which an employee participates in the plan, and the employee’s length of service with Schlumberger. Since January 1, 1989, the benefit earned under the SLB Pension Plan and the STC Pension Plan has been 1.5% of admissible compensation for service prior to the employee’s completion of 15 years of active service and 2% of admissible compensation for service after completion of 15 years of active service. Since 2009, the benefit earned under the SLB USAB Pension Plan has been 3.5% of admissible compensation for all service. Normal retirement under these plans is at age 65; however, early retirement with a reduced benefit is possible at age 55 or as early as age 50 with 20 years of service. Additionally, under the “rule of 85,” an employee or executive officer who terminates employment after age 55 and whose combined age and service is 85 or more, is eligible for retirement with an unreduced pension. Messrs. Ayat and Belani are eligible for retirement with an unreduced pension under the rule of 85. The benefits are usually paid as a lifetime annuity.
In 2004, we amended the SLB Pension Plan and the STC Pension Plan Schlumberger Supplementary Benefit Plans—Nonqualified Pension The SLB Supplementary Plan and the STC Supplementary Plan each provide non-tax-qualified pension benefits. Each of these plans, which have substantially identical terms, provides an eligible employee with benefits equal to the benefits that the employee is unable to receive under the applicable qualified pension plan due to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), limits on (i) annual compensation that can be taken into account under qualified plans and (ii) annual benefits that can be provided under qualified plans. The retirement age under nonqualified pension plans is the same as under the tax-qualified pension plans. These benefits are subject to forfeiture if the employee leaves the Company or its subsidiaries before the age of 50 with five years of service, engages in certain dishonest acts or has violated a confidentiality arrangement involving the Company or its affiliates. Messrs. Ayat and Belani are eligible for retirement with an unreduced pension under the rule of 85, described above. Nonqualified plan benefits are paid to an employee upon separation from service, provided the employee has attained the age of 55, or if earlier, the age of 50 with 20 years of service. Payment is made as a joint and survivor annuity, if married; otherwise, payment is made as a life-only annuity. Payment to key employees is delayed six months following separation from service. These nonqualified plan benefits are payable in cash from the Company’s general assets and are intended to qualify as “excess benefit plans” exempt from certain requirements of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”). French Supplementary Pension Plan Effective January 2006, the Company adopted the SLB French Supplementary Plan for exempt employees in France. The plan complements existing national plans and provides a pension beginning after age 60 when an employee retires from Schlumberger and is eligible for a French state pension under the current rules at the time of retirement. The benefit is equivalent to 1.5% of admissible compensation (generally base salary and cash incentive) above the earnings cap for fewer than 15 years of service and 2% of admissible compensation for more than 15 years of service. No employee contributions are required or permitted. The benefit is paid as a lifetime annuity. If an eligible employee were to leave the Company before the minimum age of 60 to receive his or her French pension, then the employee would not receive a benefit under the plan. If the eligible employee is terminated after age 55, is not subsequently employed and is otherwise entitled to a French pension, then the employee would receive a benefit under the plan. The Company does not grant and does not expect to grant extra years of credited service under the supplementary pension plans to named executive officers. International Staff Pension Plan Recognizing the need to maintain a high degree of mobility for certain of the Company’s employees who otherwise would be unable to accumulate any meaningful pension because they are required to work in many different countries, the Company maintains the SLB International Staff Pension Plan for such employees. All of the Company’s named executive officers have either been in the SLB International Staff Plan at some time during their career prior to becoming an executive officer or are in the plan because of their current assignment. This plan provides for a lifetime annuity upon retirement based on a specified number of years of service. The plan is funded through cash contributions made by the Company or its subsidiaries, along with mandatory contributions by employees. Prior to January 2010, benefits under this plan were based on a participant’s admissible compensation (base salary, geographical or rotational coefficient, as applicable, and cash incentive) for each year in which the employee participated in the plan and the employee’s length of service. The benefit earned up to December 31, 2009 is 2.4% of admissible compensation prior to completion of 15 years of service, and 3.2% of admissible compensation for each year of service after 15 years. Following the completion of 20 years of service, the benefit earned with respect to the first 15 years of service is increased to 3.2%. Benefits are payable upon normal retirement age, at or after age 55, or upon early retirement with a reduction, at or after age 50 with 20 years of service. Messrs. Ayat and Belani are eligible for normal retirement with no reduction. Since January 1, 2010, the benefit earned has been equal to 3.5% of admissible compensation regardless of an employee’s years of service. Benefits earned on or after this date are payable upon normal retirement age, at or after age 60, or upon early retirement with a reduction, at or after age 55.
Nonqualified Deferred Compensation for Fiscal Year The following table and narrative disclosure set forth certain information with respect to nonqualified deferred compensation payable to the NEOs.
SLB Supplementary Benefit Plan—Non-Qualified Profit Sharing The SLB Supplementary Plan provides certain non-tax-qualified defined contribution benefits for eligible employees, including named executive officers. Schlumberger Technology Corporation maintains the STC Supplementary Plan with substantially identical terms. The SLB Supplementary Plan and the STC Supplementary Plan provide an eligible employee with discretionary Company profit sharing contributions that are not permissible under the applicable tax-qualified plan due to Code limits on (1) annual compensation that can be taken into account under the qualified plan and (2) annual benefits that can be provided under the qualified plan. These nonqualified plan benefits are credited with earnings and losses as if they were invested in the qualified plan, with the same employee investment elections as the qualified plan. An employee forfeits all rights under the non-qualified plans if the employee terminates employment before completing four years of service, engages in certain dishonest acts or has violated a confidentiality arrangement involving the Company or its affiliates. These nonqualified plan benefits are paid in a lump-sum payment following the end of the year in which the employee terminates active service, or the employee can elect to receive payment in installments of five or ten years following the termination of service. If the employee dies before full payment of these benefits, the unpaid benefits are paid in a lump sum to the beneficiaries designated under the applicable qualified plan. Payment to key employees is delayed six months following separation from service. SLB Restoration Savings Plan The SLB Restoration Savings Plan, a non-qualified deferred compensation plan, provides certain defined contribution benefits for the named executive officers and other eligible employees. The SLB Restoration Savings Plan allows an eligible employee to defer compensation (and receive an associated employer match) that the employee cannot defer under the applicable tax-qualified plan because of Code limits on the amount of compensation that can be taken into account.
An eligible employee may elect in advance to defer a percentage (from 1% to 50%) of his or her compensation (generally base salary and cash incentive) over the Code annual compensation limits. The election cannot be changed during the year. The Company makes an annual matching contribution with respect to each employee’s deferrals for a year, if the employee is still employed by the Company or an affiliate on the last day of the year. For employees who participate in a Schlumberger pension plan, the amount of the matching contribution is equal to one-half of the first 6% deferred by the employee in profitable years. For employees who do not participate in a Schlumberger pension plan, the matching contribution is 100% of the first 6% deferred by the employee. The match is made each payroll period and is not contingent on profitability of the Company. Employees’ accounts are credited with earnings, calculated to mirror the earnings of the relevant funds under the Schlumberger Master Profit Sharing Trust as chosen by the employee. If the employee is eligible for the SLB Savings and Profit Sharing Plan, matching contributions and related earnings vest based on the employee’s years of service, as follows:
If the employee is eligible for the SLB Savings and Profit Sharing Plan for U.S. Taxpayers Employed Abroad, matching contributions and related earnings vest based on the employee’s years of service, as follows:
An employee’s account fully vests on his or her death, his or her 60th birthday or plan termination. An employee’s vested account balance is paid in a single lump sum (subject to tax withholding) following the participant’s death, qualifying disability, retirement or other qualifying termination of employment or the employee can elect to receive payment in installments of five or ten years for contributions made after June 30, SLB International Staff Profit-Sharing Plan Schlumberger maintains the SLB International Staff Profit-Sharing Plan, which provides for an annual employer contribution based on admissible compensation (base salary, geographical or rotational coefficient, as applicable, and cash incentive). Amounts allocated to the participants’ accounts share in investment gains and/or losses of the trust fund and are generally distributed in a lump sum upon the satisfaction of certain conditions on termination of employment. Benefits earned under the SLB International Staff Profit-Sharing Plan will be forfeited upon a determination by the SLB International Staff Profit-Sharing Plan’s administrator that the employee’s separation from service was due to Potential Payments Upon Termination or Change in Control for Fiscal Year No Additional Payments Upon Termination or Change in Control Our named executive officers generally receive the same benefits as our other employees. As is the case with other compensation arrangements, any differences are generally due to local (country-specific) requirements. In line with this practice, our named executive officers do not have employment agreements, “golden parachutes” or change in control All salaried employees who receive stock options, and all senior executives who receive PSUs and RSUs, are subject to the same terms and conditions in the event of a termination or change in Phased Retirement Schlumberger has a practice of phased retirement, which may be offered to executive officers (other than the CEO) approaching retirement, at the discretion of the Company. See “Compensation Discussion and Analysis—
Termination of Employment Stock This section summarizes the consequences for NEOs and other employees under our stock option plans and standard form of stock option award agreement in the event an option holder’s employment terminates.
Notwithstanding the vesting and exercisability provisions described above, an option holder may forfeit his or her right to exercise stock options, and may have certain prior option exercises rescinded, if such holder engages in “detrimental activity” within one year after termination of employment (or five years after termination of employment in the event of retirement or disability). If an optionee dies following termination of employment, but during the period in which the optionee would otherwise be able to exercise the option, then the person entitled under the option holder’s will or by the applicable laws of descent and distribution will be entitled to exercise the option until the earlier of (i) 60 months following the date of the optionee’s termination of employment or (ii) the expiration of the original term. Death following termination of employment will not result in any additional vesting, so that the option will be exercisable to the extent provided in the matrix above based on the circumstances of the optionee’s termination of employment. PSUs This section summarizes the consequences for NEOs holding PSUs granted under the Company’s 2010 Omnibus Stock Incentive Plan and 2013 Omnibus Stock Incentive Plan and subject to the Company’s standard form of three-year PSU award, in the event the PSU holder’s employment terminates. PSUs are treated as follows upon the holder’s termination of employment with the Company and its subsidiaries prior to the vesting date (i.e., the three-year anniversary of the grant date).
For these purposes “retirement” is defined as termination of employment with the Company and all subsidiaries either at or after (i) age 60 and completion of at least 25 years of service with the Company and all subsidiaries or (ii) age of 55 and completion of at least 20 years of service with the Company and all subsidiaries subject to the approval of the compensation committee; “special retirement” is defined as termination of employment with the Company and all subsidiaries either at or after (i) age 55 or (ii) age 50 and completion of at least 10 years of service with the Company and all subsidiaries; and “disability” is defined as a disability (whether physical or mental impairment) which totally and permanently incapacitates the holder from any gainful employment in any field which the holder is suited by education, training, or experience, as determined by the Compensation Committee. Change in Control Stock Pursuant to Schlumberger’s stock option plans and standard form of stock option award agreement (other than awards issued under the 2010 Omnibus Stock Incentive Plan and the 2013 Omnibus Stock Incentive Plan), in the event of any reorganization, merger or consolidation wherein Schlumberger is not the surviving corporation, or upon the liquidation or dissolution of Schlumberger, all outstanding stock option awards will, unless alternate provisions are made by Schlumberger in connection with the reorganization, merger or consolidation for the assumption of such awards, become fully exercisable and vested, and all holders will be permitted to exercise their options for 30 days prior to the cancellation of the awards as of the effective date of such event. Under both the 2010 Omnibus Stock Incentive Plan and the 2013 Omnibus Stock Incentive Plan, the Compensation Committee retains the discretion to adjust outstanding awards in the event of corporation transactions and outstanding options may be, but are not required to be, accelerated upon such a transaction. The following table sets forth the intrinsic value of the unvested stock options held by each named executive officer as of December 31,
If Schlumberger merges or consolidates with another entity and is the surviving entity, then a holder of stock options granted pursuant to Schlumberger’s stock options plans will be entitled to receive, upon exercise or vesting, in lieu of the number of shares with respect to which the award is exercisable or vested, the number and class of shares of stock or other securities that the holder would have been entitled to receive under the terms of such merger or consolidation if, immediately prior to such event, such holder had been the holder of record of the number of shares of Schlumberger common stock equal to the number of shares as to which such award is then exercisable or vested. PSUs Under Schlumberger’s 2010 Omnibus Stock Incentive Plan and the 2013 Omnibus Stock Incentive Plan, in the event of a merger, consolidation, acquisition of property or stock, separation, spinoff, reorganization or liquidation, The following table sets forth the value of the unvested PSUs at target held by each NEO as of December 31,
Retirement Plans Schlumberger’s pension plans and non-qualified deferred compensation plans include the same terms and conditions for all participating employees in the event of a termination or change in control. Other than the Schlumberger Restoration Savings Plan, none of Schlumberger’s non-qualified plans provide for the accelerated payment of benefits upon a change in control. For more information on these plans, see the Pension Benefits for Fiscal Year The following table sets forth the amounts as of December 31,
Retiree Medical Subject to satisfying certain age, service and contribution requirements, most U.S. employees are eligible to participate in a retiree medical program. Generally, this program provides comprehensive medical, prescription drug and vision benefits for retirees and their dependents until attaining age 65. Historically, for Schlumberger employees who turned age 40 prior to 2014, and excluding those employees who became Schlumberger employees as a result of the Smith acquisition, retiree medical benefits continue beyond age 65, at which time Medicare becomes primary and the Schlumberger plan becomes secondary, paying eligible charges after Medicare has paid. However, effective April 1, 2015, participants who reach age 65 will no longer continue in Schlumberger medical coverage after reaching age 65, but instead will receive a monthly contribution to a health reimbursement arrangement that can be used to purchase Medicare supplemental coverage and pay other tax-deductible expenses.
Non-employee directors receive an annual cash retainer of $100,000 plus an additional annual fee of $10,000 for membership on a committee. The chair of each committee receives an additional annual fee of $20,000 in lieu of the additional annual fee of $10,000 for committee membership. Beginning in 2016, Mr. Currie began receiving an additional $50,000 annually, as the lead independent director for the Board. Directors who are employees of Schlumberger do not receive compensation for serving on the Board. Additionally, Schlumberger’s current practice is to grant each newly-appointed or elected non-employee director (including non-employee directors re-elected at the AGM) shares of Schlumberger common stock each April. Effective Although Schlumberger’s Directors Stock and Deferral Plan provides that annual stock awards to non-employee directors may be in the form of shares of common stock, shares of restricted common stock or restricted stock units, Schlumberger’s practice has been to issue only shares of common stock. Schlumberger directors have never received restricted common stock or restricted stock units as director compensation.
The following table provides information on Schlumberger’s compensation for non-employee directors in
Director Stock Ownership Guidelines The Board believes that ownership of Schlumberger stock by Board members aligns their interests with the interests of the Company’s stockholders. Accordingly, the Board has established a guideline that each non-employee Board member must, within five years of joining the Board, own at least 10,000 Schlumberger common shares or restricted stock units. As of December 31,
Following completion of the audit procedures performed by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, the following are submitted to the Company’s stockholders for approval pursuant to Schlumberger’s Articles of Incorporation:
These items are included in Required Vote A majority of the votes cast is required for the approval of the financial results as set forth in the financial statements and of the declaration of dividends by the Board
The Board of Directors Recommends a VoteFORItem
PricewaterhouseCoopers LLP has been selected by the Audit Committee as the independent registered public accounting firm to audit the annual financial statements of the Company for the year ending December 31, A representative of PricewaterhouseCoopers LLP is expected to attend Fees Paid to PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP has billed the Company and its subsidiaries the fees set forth in the table below for:
The Audit Committee considers the provision of services by PricewaterhouseCoopers LLP not related to the audit of the Company’s annual financial statements and Audit Committee’s Pre-Approval Policy and Procedures The Audit Committee pre-approves all services provided to the Company and its subsidiaries by Schlumberger’s independent registered public accounting firm. The Audit Committee has adopted a schedule for annual approval of the audit and related audit plan, as well as approval of other anticipated Required Vote A majority of the votes cast is required to approve this Item Brokers have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will vote on this proposal in its
The Board of Directors Recommends a VoteFOR
During The Company’s independent registered public accounting firm provided the Audit Committee with the written disclosures and Based on the foregoing reviews and discussions, the Audit Committee recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31,
We are requesting that our stockholders vote in favor of the adoption of the 2017 Schlumberger Omnibus Stock Incentive Plan (the “2017 Incentive Plan”). Our Board of Directors approved the 2017 Incentive Plan on January 19, 2017, subject to stockholder approval. Most of our competitors employ a wide range of incentive instruments. We currently grant only stock options, performance share units, and occasionally restricted stock units covering shares of common stock to certain executives, including the named executive officers. Approval of the 2017 Incentive Plan would provide for 30 million additional shares for us to grant long-term incentives to its employees and would provide for continued flexibility with regard to award types and the terms and conditions of awards. In order to continue to attract and retain valuable employees, we are seeking approval of the 2017 Incentive Plan to provide (i) additional shares issuable to employees and (ii) continued flexibility in the types and terms of incentive instruments that we issue in order to remain competitive. In addition, as of December 31, 2016, there were only 19,247,231 shares available in the aggregate for grants under our 2008 Stock Incentive Plan, our 2010 Incentive Plan and our 2013 Incentive Plan. The 2017 Incentive Plan provides for the grant to our employees of stock options, cash, stock appreciation rights, and stock awards, which may include restricted stock or restricted stock units. A stock option gives the holder the right to purchase a specified number of shares of stock, at a fixed exercise price, in the future. Stock appreciation rights give the holder the right to receive a payment, in cash or shares of stock, equal to the fair market value of a specified number of shares of stock on the date the right is exercised over a specified strike price. Restricted stock is common stock that is restricted or subject to forfeiture provisions. Restricted stock units are units evidencing the right to receive shares of common stock that are restricted or subject to forfeiture provisions. In order for awards under the 2017 Incentive Plan to be eligible to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the material terms of the performance goals under which compensation may be paid must be disclosed to and approved by the Company’s stockholders every five years. The material terms include (i) the employees eligible to receive compensation, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goals. Each of these aspects is discussed below, and approval of the 2017 Incentive Plan will constitute approval of the material terms of the performance goals. Required Stockholder Vote A majority of the votes cast is required for approval of the 2017 Incentive Plan, except that for purposes of satisfying NYSE rules, abstentions are counted in the denominator for determining the total votes cast on this Item.Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Summary of the 2017 Incentive Plan The following summary of some major features of the 2017 Incentive Plan is subject to the specific provisions contained in the full text of the 2017 Incentive Plan, which is attached to this proxy statement as Appendix B. Purpose of the 2017 Incentive Plan The purpose of the 2017 Incentive Plan is to:
Summary of Key Terms The following is a summary of the key provisions of the 2017 Incentive Plan.
Stock Options Vesting The Compensation Committee will determine at the time of grant when each stock option will vest. The Compensation Committee’s current practice is to grant options that vest in five equal annual installments beginning on the first anniversary of the grant date, except where local conditions dictate a different vesting schedule. Exercise Price The exercise price of stock options granted under the 2017 Incentive Plan may not be less than the fair market value (the mean between the high and low sales prices on the New York Stock Exchange on the grant date) of the common stock on the date of grant. As of February [ ], 2017, the mean between the high and low sales prices of Schlumberger common stock on the New York Stock Exchange was $[ ]per share. Option Term The option term may not be longer than 10 years.
Payment of Purchase Price The purchase price to be paid upon exercise of a stock option may be paid, subject to the rules established by the Compensation Committee, as follows:
Stock options also may be exercised through “cashless exercise” procedures approved by the Compensation Committee involving a broker or dealer approved by the Compensation Committee. Schlumberger may require, prior to issuing common stock under the 2017 Incentive Plan, that the participant remit an amount in cash, or authorize withholding of common stock in connection with the option exercise, sufficient to satisfy tax withholding requirements. Termination of Employment The 2017 Incentive Plan grants the Compensation Committee broad discretion to designate the treatment of stock options following an option holder’s termination of employment with Schlumberger or any of its subsidiaries. However, the Compensation Committee currently expects that the consequences of termination of employment on outstanding stock options will be consistent with past stock options awards. The following table and paragraph following the table summarize the Compensation Committee’s past practice with regards to treatment of stock options in the event an option holder’s employment terminates.
If an optionee dies following termination of employment, but during the period in which the optionee would otherwise be able to exercise the option, then the person entitled under the option holder’s will or by the laws of descent and distribution will be entitled to exercise the option until the earlier of
Death or disability following termination of employment will not result in any additional vesting, so that the option will be exercisable to the extent provided in the matrix above based on the circumstances of the optionee’s termination of employment.
Stock Appreciation Rights Awards may also be in the form of rights to receive a payment, in cash or common stock, equal to the fair market value or other specified value of a number of shares of common stock on the rights exercise date over a specified strike price (“stock appreciation rights”). All stock appreciation rights granted under the 2017 Incentive Plan must have a grant price per share that is not less than the fair market value of a share of common stock on the date of grant and a term of no more than 10 years. Stock Awards The terms, conditions and limitations applicable to grants of restricted stock and restricted stock units will be determined by our Compensation Committee. Restricted stock and restricted stock units will be subject to a restriction period totaling at least three years from the grant date (the vesting, lapse, or termination of which may be no more rapid in combination than pro rata over three years), except that the Compensation Committee may provide for earlier vesting upon a change of control or termination of employment by reason of death, disability or retirement. Furthermore, up to 1.75 million shares of stock may be issued as restricted stock or restricted stock units having a restriction period of three years or less. Cash Awards Awards may also be in the form of grants denominated in cash. The terms, conditions and limitations applicable to any cash awardsgranted pursuant to the 2017 Incentive Plan will be determined by the Compensation Committee. Performance Awards At the discretion of the Compensation Committee, any of the above-described employee awards may be made in the form of a performance award. A performance award is an award that is subject to the attainment of one or more performance goals. The terms, conditions and limitations applicable to any performance award will be determined by the Compensation Committee. The 2017 Incentive Plan permits, but does not require, the Compensation Committee to structure any performance award made to a named executive officer as performance-based compensation. At the discretion of the Compensation Committee, certain awards under the 2017 Incentive Plan may be intended to qualify as performance-based compensation under Section 162(m) of the Code. Section 162(m) of the Code generally limits the deductibility for federal income tax purposes of annual compensation paid to a company’s executive officers to $1 million per covered executive in a taxable year. The Compensation Committee and the Board of Directors may take deductibility and nondeductibility of compensation into account but retain the discretion to authorize the payment of potentially nondeductible amounts. In making qualified performance awards, the Compensation Committee may base a performance goal on one or more of the following business criteria that may be applied to the participant, one or more business units, divisions or sectors of Schlumberger, or Schlumberger as a whole, or by comparison with a peer group of companies:
Performance goals need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses.
Clawback The award agreement may provide that an employee granted an award may forfeit his or her right to such award or be required to return common stock or cash received as a result of the exercise or vesting of an award if such holder engages in “detrimental activity” (as defined by the Compensation Committee in the award agreement under the 2017 Incentive Plan) during or following termination of employment. Under Schlumberger’s current standard terms for stock options grants, forfeiture may occur due to detrimental activity within one year after termination of employment (or five years after termination of employment in the event of retirement or disability). Transferability Unless otherwise determined by the Compensation Committee in an award agreement, no award will be assignable or otherwise transferable. Any attempted assignment of an award will be void. Administration The Compensation Committee will administer the 2017 Incentive Plan. The Compensation Committee has full power and authority to:
The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the 2017 Incentive Plan or in any award in the manner and to the extent the Compensation Committee deems necessary or desirable to further the purposes of the 2017 Incentive Plan or to avoid unanticipated consequences or address unanticipated events (including any temporary closure of a stock exchange on which the Schlumberger’s common stock is traded, disruption of communications or natural catastrophe) deemed by the Compensation Committee to be inconsistent with the purposes of the 2017 Incentive Plan or any award agreement, provided that no such action shall be taken absent stockholder approval to the extent required by the 2017 Incentive Plan. The Compensation Committee may, subject to applicable law, grant awards to persons outside the United States under such terms and conditions as may, in its judgment, be necessary or advisable to comply with the laws of the applicable foreign jurisdictions and, to that end, may establish sub-plans, modified option exercise procedures and other terms and procedures. Except with respect to matters related to awards to executive officers or other awards intended to qualify as qualified performance-based compensation under Section 162(m), the Compensation Committee may delegate to the Chief Executive Officer and to other senior officers of Schlumberger or to such other committee of the Board of Directors its duties under the 2017 Incentive Plan pursuant to such conditions or limitations as the Compensation Committee may establish. Amendment or Termination The Board of Directors or the Compensation Committee may amend, modify, suspend or terminate the 2017 Incentive Plan for the purpose of addressing any changes in legal requirements or for any other lawful purpose, except that:
Additionally, no stock option or stock appreciation right may be repriced, replaced, regranted through cancellation or modified without stockholder approval (except in connection with a change in Schlumberger’s capitalization) if the effect would be to reduce the exercise price for the shares underlying such stock option or stock appreciation right.
Adjustments In the event of any subdivision or consolidation of shares or other capital readjustment, or the payment of a stock dividend or other increase or reduction of the number of shares of our common stock outstanding without compensation therefor in money, services or property, then the number of shares subject to the 2017 Incentive Plan and the 2017 Incentive Plan limits in the number of shares subject to awards granted to an individual participant in any calendar year will be proportionally adjusted and the number of shares of common stock with respect to which outstanding awards or other property subject to an outstanding award granted under the Incentive Plan will:
In the event of any corporate merger, consolidation, acquisition of property or stock, separation, spinoff, reorganization or liquidation, the Board of Directors may make certain adjustments to awards as it deems equitable, including, providing for the substitution of a new award (or other arrangement) or the assumption of the award, prior to the transaction providing for the acceleration of the vesting and exercisability of or the lapse of restrictions with respect to the award, and cancelling any outstanding award in exchange for cash in an amount deemed by the Board to be equal to the fair market value of the award. Consistent with past practice, we currently expect that any award agreement documenting an award under the 2017 Incentive Plan will not contain a contractual right to an automatic acceleration upon a change in control. Rather, we expect that any acceleration of vesting of an award in connection with a transaction would be made only where (i) a transaction results in a change in control of Schlumberger and (ii) in connection with such transaction the outstanding awards are not assumed by Schlumberger’s successor. U.S. Federal Income Tax Consequences The following discussion of tax consequences relates only to U.S. federal income tax matters. The tax consequences of participating in the 2017 Incentive Plan may vary according to country of participation. Also, the tax consequences of participating in the 2017 Incentive Plan may vary with respect to individual situations and it should be noted that income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local and foreign tax laws. Stock Options and Stock Appreciation Rights Some of the options issued under the 2017 Incentive Plan are intended to constitute “incentive stock options” within the meaning of Section 422 of the Code, while other options granted under the 2017 Incentive Plan are non-qualified stock options. The Code provides for tax treatment of stock options qualifying as incentive stock options that may be more favorable to employees than the tax treatment accorded non-qualified stock options. Generally, upon the exercise of an incentive stock option, the optionee will recognize no income for U.S. federal income tax purposes, although the optionee may subsequently recognize income if the shares are disposed of prior to the holding period described below. The difference between the exercise price of the incentive stock option and the fair market value of the stock at the time of purchase is an item of tax preference that may require payment of an alternative minimum tax. On the sale of shares acquired by exercise of an incentive stock option (assuming that the sale does not occur within two years following the date of grant of the option or within one year following the date of exercise), any gain will be taxed to the optionee as long-term capital gain. Except with respect to death or permanent and total disability (in which case the optionee has one year to exercise and obtain incentive stock option treatment), an optionee has three months after termination of employment in which to exercise an incentive stock option and retain incentive stock option tax treatment at exercise. An option exercised more than three months after an optionee’s termination of employment, including termination due to retirement, cannot qualify for the tax treatment accorded incentive stock options. Such option would be treated as a non-qualified stock option instead. In contrast, upon the exercise of a non-qualified option, the optionee recognizes taxable income (subject to withholding) in an amount equal to the difference between the fair market value of the shares on the date of exercise and the exercise price. Upon any sale of such shares by the optionee, any difference between the sale price and the fair market value of the shares on the date of exercise of the non-qualified option will be treated generally as capital gain or loss. Participants will not realize taxable income upon the grant of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant will recognize ordinary income (subject to withholding by Schlumberger) in an amount equal to the cash or fair market value of the shares of stock received on the date of exercise of the stock appreciation right. The participant will generally have a tax basis in any shares of stock received on the exercise of a stock appreciation right that equals the fair market value of such shares on the date of exercise. Subject to the limitations discussed below, Schlumberger will be entitled to a deduction for U.S. federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by the participant under the foregoing rules.
Subject to the discussion below under “Certain Tax Code Limitations on Deductibility,” under rules applicable to U.S. corporations, no deduction is available to the employer corporation upon the grant or exercise of an incentive stock option (although a deduction may be available if the employee sells the shares so purchased before the applicable holding period expires), whereas, upon exercise of a non-qualified stock option or stock appreciation right, the employer corporation is entitled to a deduction in an amount equal to the income recognized by the employee. A non-U.S. corporation, such as Schlumberger, is entitled to deductions only to the extent allocable to “effectively connected income” which is subject to U.S. federal income tax. Stock Awards A participant generally will not have taxable income upon the grant of stock awards, such as restricted stock or restricted stock units. Instead, he or she will recognize ordinary compensation income in the first taxable year in which his or her interest in the stock underlying the award becomes either (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture. In general, a participant will recognize ordinary compensation income in an amount equal to the fair market value of the stock when it first becomes transferable or is no longer subject to a substantial risk of forfeiture, unless the participant makes an election to be taxed on the fair market value of the stock underlying the award when it is received. An employee will be subject to withholding for federal, and generally for state and local, income taxes at the time the employee recognizes income under the rules described above with respect to an award of restricted stock or restricted stock units. The tax basis of a participant in the stock received will equal the amount recognized by the employee as compensation income under the rules described in the preceding paragraph, and the employee’s holding period in such shares will commence on the date income is so recognized. Upon later disposition of stock received that has been held for the requisite holding period, the employee will generally recognize capital gain or loss equal to the difference between the amount received in the disposition and the amount previously recognized as compensation income. Subject to the discussion below under “Certain Tax Code Limitations on Deductibility,” Schlumberger will be entitled to a deduction for U.S. federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by the participant under the foregoing rules to the extent the deduction is allocable to “effectively connected income” which is subject to U.S. federal income tax. Certain Tax Code Limitations on Deductibility Section 162(m) of the Code provides that certain compensation received in any year by a “covered employee” in excess of $1 million is non-deductible by Schlumberger for federal income tax purposes. Section 162(m) provides an exception, however, for “qualified performance-based compensation.” The Compensation Committee may determine to designate awards granted to “covered employees” as qualified performance-based compensation. However, the Compensation Committee may award compensation that is or may become non-deductible, and expects to consider whether it believes such grants are in the best interest of Schlumberger, balancing tax efficiency with long-term strategic objectives. Code Section 409A Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (1) the timing of payment, (2) the advance election of deferrals, and (3) restrictions on the acceleration of payment. Failure to comply with Section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% penalty on the participant on such deferred amounts included in the participant’s income. Schlumberger intends to structure awards under the 2017 Incentive Plan in a manner that is designed to be exempt from or comply with Section 409A. Code Section 457A Section 457A of the Code has significantly changed the rules applicable to deferred compensation paid to U.S. persons by certain foreign corporations and other entities. We expect that stock options, stock-settled stock appreciation rights, restricted stock and restricted stock units granted under the 2017 Incentive Plan will be exempt from Section 457A. However, stock appreciation rights that may be settled in cash may be subject to Section 457A, as well as cash awards or stock units that are not paid within one year after vesting. Section 457A requires that any compensation paid under a deferred compensation plan of a nonqualified entity must be included in the participant’s income at the time such amounts are no longer subject to a substantial risk of forfeiture. Therefore, stock appreciation rights that may be settled in cash as well as cash awards or stock units that are not paid within one year after vesting may result in income inclusion upon vesting, even though the participant has not exercised the stock appreciation right or received delivery of cash or shares of stock at that time. Schlumberger currently intends to grant awards that are exempt from Section 457A.
Equity Compensation Plan Information The table below sets forth the following information as of December 31, 2016 for all equity compensation plans approved and not approved by our stockholders.
Equity compensation plans approved by Schlumberger stockholders include the 2013 Schlumberger Omnibus Incentive Plan; the 2010 Schlumberger Omnibus Stock Incentive Plan; the French Sub Plan under the 2010 Schlumberger Omnibus Stock Incentive Plan, as amended; the Schlumberger Discounted Stock Purchase Plan, as amended; the Schlumberger 2004 Stock and Deferral Plan for Non-Employee Directors; the Schlumberger 2008 Stock Incentive Plan, as amended; the Schlumberger 2005 Stock Incentive Plan, as amended; the Schlumberger 2001 Stock Option Plan, as amended; and the Schlumberger 1998 Stock Option Plan, as amended. The Board of Directors Recommends a VoteFORItem 6.
We are requesting that our stockholders vote in favor of approving an amendment and restatement of the Schlumberger Discounted Stock Purchase Plan (as amended, the “DSPP”), that would increase the number of shares available for purchase under the DSPP by 18 million shares. The proposed amendment and restatement of the DSPP was approved by the Board as of January 1, 2016, subject to approval by our stockholders. No other changes are being made to the DSPP. The DSPP was originally approved by the Board and our stockholders in 1988. In 1998, in 2010 and in 2013, the DSPP was amended and restated with the approval of our stockholders. The DSPP was amended and restated in 2013 only to increase the number of shares authorized for issuance under the DSPP by 22,000,000. The following summary of certain major features of the DSPP is subject to the specific provisions contained in the full text of the DSPP, which is attached to this proxy statement as Appendix C. Required Vote A majority of the votes cast is required for approval of the DSPP, except that for purposes of satisfying NYSE rules, abstentions are counted in the denominator for determining the total votes cast on this Item.Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Purpose of the DSPP and Proposed Amendment and Restatement The DSPP is designed to encourage and assist all employees of Schlumberger and its subsidiaries to acquire an equity interest in Schlumberger through the purchase of common stock. The proposed amendment and restatement is designed to allow an additional 18 million shares to be granted pursuant to the DSPP, which will insure that a sufficient number of shares will be available under the DSPP for future purchase periods. A total of 7,222,641 shares currently remain available for purchase under the DSPP; during 2016, a total of 3,111,813 shares were purchased under the DSPP. If the proposed amendment and restatement is approved, an aggregate of 25,222,641 shares will be available for purchase under the DSPP. The DSPP is intended to constitute an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986 (the “Code”). Administration The DSPP is administered by a committee of at least three persons appointed by the Board (the “DSPP Committee”). The DSPP Committee has the full power and authority to:
Key Terms The following is a summary of the key provisions of the DSPP Plan.
U.S. Federal Income Tax Consequences to Schlumberger and to Participants The following discussion of tax consequences relates only to U.S. federal income tax matters. The tax consequences of participating in the DSPP may vary according to country of participation. Also, the tax consequences of participating in the DSPP may vary with respect to individual situations and it should be noted that income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local and foreign tax laws. The DSPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. Amounts withheld from pay under the DSPP are taxable income to participants in the year in which the amounts otherwise would have been received, but the participants will not be required to recognize additional income for federal income tax purposes either at the time the employee is deemed to have been granted a right to purchase common stock (on the first day of a purchase period) or when the right to purchase common stock is exercised (on the last day of the purchase period). If the participant holds the common stock purchased under the DSPP for at least two years after the first day of the purchase period in which the common stock was acquired (the “Enrollment Date”) and for at least one year after the date that the common stock is purchased (the “Exercise Date”), when the participant disposes of the common stock he or she will recognize as ordinary income an amount equal to the lesser of:
If the participant disposes of the common stock within two years after the Enrollment Date or within one year after the Exercise Date, he or she will recognize ordinary income equal to the fair market value of the Common Stock on the Exercise Date in which the common stock was acquired less the amount paid for the common stock. The ordinary income recognition pertains to any disposition of common stock acquired under the DSPP (such as by sale, exchange or gift). Upon disposition of the common stock acquired under the DSPP, any gain realized in excess of the amount reported as ordinary income will be reportable by the participant as a capital gain, and any loss will be reportable as a capital loss. Capital gain or loss will be long-term if the employee has satisfied the holding periods requirement described above or, in any event, if the employee has held the common stock for at least one year. Otherwise, the capital gain or loss will be short-term. If the participant satisfies the statutory holding periods, described above, for common stock purchased under the DSPP, we will not receive any deduction for federal income tax purposes. If the participant does not satisfy the holding periods, we will be entitled to a deduction in an amount equal to the amount that is considered ordinary income taxable to the participant. We are entitled to a compensation expense deduction under Section 162 of the Code only to the extent that ordinary income is realized by the participant as a result of a disqualifying disposition. Plan Benefits Since participation in the plan is voluntary and we are unable to predict the future value of our common stock, we cannot currently determine the benefits or amounts that will be received in the future by any person or group under the DSPP. The following table sets forth the number of shares purchased under the DSPP during 2016 by our Chief Executive Officer, the other named executive officers, executive officers as a group and all employees as a group, other than executive officers.
The Board of Directors Recommends a VoteFORItem 7.
Security Ownership by Certain Beneficial Owners The following table sets forth information as of December 31, For each entity included in the table below, percentage ownership is calculated by dividing the number of shares reported as beneficially owned by such entity by the
Security Ownership by Management The following table sets forth information known to Schlumberger with respect to beneficial ownership of the Company’s common stock as of January 31, Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated in the footnotes to the table below and subject to applicable community property laws, to Schlumberger’s knowledge the persons named in the table below have sole voting and investment power with respect to the securities listed. None of the shares are subject to any pledge. The number of shares beneficially owned by each person or group as of January 31, For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the
As of January 31,
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s executive officers and directors, among others, to file an initial report of ownership of Schlumberger common stock on Form 3 and reports of changes in ownership on Form 4 or Form 5. Persons subject to Section 16 are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file. The Company believes, based solely on a review of the copies of such forms in its possession and on written representations from reporting persons, that
Stockholder Proposals for In order for a stockholder proposal to be considered for inclusion in the proxy statement for the
For stockholder proposals to be introduced for consideration at our 2018 annual general meeting of stockholders other than pursuant to Rule 14a-8 and for stockholder candidates to be nominated for election as directors other than pursuant to our proxy access bylaw provisions, notice generally (unless the date of our 2018 annual general meeting is moved as stated in our By-Laws) must be delivered to the Secretary of the Company at our executive offices in Houston, Texas, not later than 120 days nor earlier than 150 days before the first anniversary of the date of the 2017 annual general meeting of shareholders. Accordingly, any such notice must be received no earlier than November 6, 2017, and no later than December 6, 2018, and must otherwise satisfy the requirements of our By-Laws. Under the rules Other Matters Stockholders may obtain a copy of Schlumberger’s most recent Form 10-K filed with the SEC, including financial statements and schedules thereto, without charge by writing to the The Company will pay the cost of furnishing proxy material to all stockholders and of soliciting proxies by mail and telephone. D. F. King & Co., Inc. has been retained by the Company to assist in the solicitation of proxies for a fee estimated at $15,500 plus reasonable expenses. Directors, officers and employees of the Company may also solicit proxies for no additional compensation. The Company will reimburse brokerage firms, fiduciaries and custodians for their reasonable expenses in forwarding the solicitation material to beneficial owners. The Board Please sign, date, and return the accompanying proxy in the enclosed envelope at your earliest convenience. By order of the Board of Directors,
Alexander C. Juden Secretary Houston, Texas
February 10, 2017
Reconciliation of Non-GAAP Financial Measures
Schlumberger Limited Free Cash Flow Reconciliation Schlumberger income from continuing operations, excluding charges & credits WesternGeco restructuring Currency devaluation loss in Venezuela Workforce reduction Impairment of SPM project Schlumberger income from continuing operations, as reported
Schlumberger 2017 Omnibus Stock Incentive Plan
qualified Performance Awards, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Awards made pursuant to this Plan shall be determined by the Committee to the extent permitted by Section 162(m).
SCHLUMBERGER LIMITED
Schlumberger Discounted Stock Purchase Plan (As Amended and Restated Effective as of January 19, 2017)
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