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2019 Say on Pay Outcomes in Oil & Gas Continue to Trail General Industry

Several oil & gas companies had a rough proxy season in 2019, with overall lukewarm shareholder support for executive pay programs in the industry.

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While many companies received kudos from investors for the addition of returns-oriented incentive metrics, others struggled to demonstrate pay-for-performance alignment or continued to make aggressive pay actions despite lackluster shareholder returns in 2018. In this posting, we take a look…

Long-Term Incentives and Stock Ownership Ensure Alignment with Shareholders

Annual incentive metrics serve an important purpose: communicate a company’s priorities and provide incremental annual feedback on performance.

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Much of the commentary on energy industry pay programs has focused on annual bonus metrics. Annual incentives are easier to analyze because the payouts are clearly disclosed each year in the Summary Compensation Table, and those payments can communicate how…

The BP Shareholder Vote: A Cautionary Tale

Despite using the "correct" process, BP shareholders still took issue with the company's compensation programs.

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Compensation is often more about the message than the money. BP’s recent shareholder vote offered some valuable lessons for other energy companies about sending the right messages to shareholders when commodity prices impact business results. On April 14th, nearly 60%…

Proposed Pay for Performance Disclosures May Actually Help

Benefits of the proposed disclosures include a standardized methodology for realizable pay and additional data that will facilitate shareholder analysis.

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The SEC recently proposed rules outlining a new CD&A disclosure coming out of Dodd-Frank (see Meridian Alert here) – these rules require disclosure of the link between performance and compensation “actually paid”. While the proposed disclosures will likely require a…

The Real Problem with the CEO Pay Ratio

SEC issued proposed rules on the CEO pay ratio rule are still no closer to finding out what’s going to be in the final rules, when they will be issued, or when they will be effective.

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It’s been more than a year since the SEC issued proposed rules on the CEO pay ratio rule, and we are still no closer to finding out what’s going to be in the final rules, when they will be issued,…

The Line Between Ownership and Compensation

Cheniere Energy’s recent challenges offer interesting lessons in understanding the differences between “ownership” and “compensation”.

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Cheniere Energy’s recent challenges offer interesting lessons in understanding the differences between “ownership” and “compensation”. Cheniere has faced notable public challenges to its executive compensation program, including the withdrawal of an incentive plan proposal to shareholders and failed Say on…

Looking for Shareholder Value Drivers

Analyzing Common Annual Bonus Metrics to Predict Shareholder Value

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Annual incentive metrics should be key drivers of long-term shareholder value. Most energy companies include this in their philosophy statements, and it sounds straightforward. But what are the drivers of long-term shareholder value? The answer to that question obviously varies…

Shareholders Will Likely Feel the Pain of Proposed Tax Reforms

Changes Intended to Address Executive Compensation Will Likely Have a Larger Effect on Shareholders

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As noted in a recent Meridian Client Update, a comprehensive draft proposal to reform the Internal Revenue Code (IRC) was released in February by the Chairman of the House Ways and Means Committee. Among the proposed reforms is the elimination…

Compensation Implications of CEO Transitions

Executive Compensation Plays an Important Role in Planning for CEO Transitions

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It’s no secret that CEO succession and transition planning has become an increasingly hot topic in the boardroom and a focus of outside investors. Board committees responsible for succession planning are including this topic as a part of the ongoing…

What if there were no annual bonuses?

Removing Annual Bonuses Could Help Companies Avoid Time-Consuming Discussions

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Each February, boards and management spend thousands of hours on their annual bonus programs. Energy companies in particular can struggle to evaluate annual performance in what is inherently a long-term business. Arguing over an incremental handful of bonus points can…

Commodity Price Impact on Evaluating Performance

How to Manage Pay for Performance Measures in a Volatile Commodity Market

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Commodity prices can have a significant effect on share price and also on financial performance measures used by energy companies. This makes paying for performance at energy companies challenging because commodity price volatility can create misalignment between management efforts, management…

Using Realizable Pay to Test Pay and Performance Alignment

Testing the Link Between Pay and Performance Can Help Firms in Many Ways

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With the calendar year completed, many of our energy clients are taking this opportunity to test the long-term historical link of pay and performance. This historical analysis serves a few purposes: Helping the compensation committee understand whether they have an…

Stock Options—Too early to administer last rites?

Companies are Gradually Doing Away with Stock Options in Favor Of Performance Shares

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In a recent Wall Street Journal article “Last Gasp for Stock Options?” the author takes a pretty grim view on the future of stock options. Is this really a bold new claim or is it old news? To be sure,…

Benchmark the Role, Pay the Person

Use Market Data to Make Informed Pay Decisions

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Many energy companies are preparing to review market benchmark data in the next few months. When used correctly, market benchmark data provides a valuable tool to help make informed pay decisions, but should not be used without appropriate context. Below…

Finding a New Leader

Important Considerations When Hiring a New CEO

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Our last post offered several possible compensation and governance trends that may accompany leadership changes in the energy industry. This post provides some considerations in developing a new CEO’s compensation package to help steer clear of unwanted scrutiny from shareholders…

Changing the Guard

Five Potential Trends From Energy Leadership Adjustments

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Energy companies have hired or promoted a spate of new CEOs, with a dozen or more new incumbents or openings in the upstream sector alone. What compensation and governance trends might this concentrated wave of new leadership create over the…

What Do This Year’s Bonus Payouts Look Like?

CEO Payouts for Energy Companies in the S&P 500 Varied Considerably

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This is a question we hear frequently this time of year — and now that many of the 2013 proxy statements have been filed, we thought we’d share our insights on CEO bonus payouts. We focused on S&P 500 CEOs…

2013 Proxy Disclosure Trends: Pay-for-Performance

Notable Pay-for-Performance Disclosures Made By Energy Companies This Year

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The 2013 proxy season is now in full swing, with dozens of energy industry companies having filed their latest proxy. One of the areas of significant attention this year is pay-for-performance disclosure. So far in 2013, we’ve already seen some…