Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
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ConocoPhillips
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Table of Contents
Table of Contents
A Message from Our Chairman and Chief Executive
Officer and Lead Director
March 30, 2020
DEAR FELLOW STOCKHOLDERS,
On behalf of the Board of Directors (the “Board”)
and the Executive Leadership Team, we are pleased to invite you to participate in the 2020 Annual Meeting of Stockholders (the
“Annual Meeting”). Due to the information and guidance currently available surrounding the emerging public health impact
of the coronavirus outbreak (COVID-19) and to be consistent with our SPIRIT Values, we have made the decision that this year’s
Annual Meeting will be virtual only. The health and well-being of our employees, stockholders and partners are of the utmost importance
to us. This does not represent a change in our stockholder engagement philosophy and we remain committed to return to an in-person
meeting next year.
The Annual Meeting will be held on Tuesday, May 12, 2020, at 9:00
a.m. Central Daylight Time. It will be conducted via live webcast. You will be able to participate online at www.virtualshareholdermeeting.com/COP2020
and may submit questions both before and during the meeting and will also be able to vote your shares electronically (other
than shares held through our employee benefit plans, which must be voted prior to the meeting). The attached Notice of the 2020
Annual Meeting of Stockholders and Proxy Statement provide information on how to join the meeting online and about the business
we plan to conduct.
Transforming the business
In the aftermath of the significant industry downturn in 2016,
ConocoPhillips launched a “new order” value proposition anchored in two fundamental premises. The first premise was
that our industry faced an outlook of lower, more volatile commodity prices driven largely by new supplies. The second premise
was that our industry faced a flight of sponsorship by investors unless financial returns improved. Beginning in 2016, we took
these two premises head on when we reset our value proposition and transformed our business model to focus on what matters most
to our value creation – disciplined capital allocation, free cash flow generation, returns on capital, returns of capital
and responsible execution. Since we launched the new value proposition three years ago, our goal has been clear: to deliver superior
returns to stockholders through cycles. Our principles and strategic priorities were designed to satisfy this goal.
Guided by our foundational principles and priorities for
capital allocation
Our value proposition reset was guided by our foundational principles,
which are focusing on returns, maintaining a strong balance sheet, growing cash from operations and generating peer-leading distributions
to stockholders. Consistent with these principles, we allocated capital according to the following five clear strategic priorities:
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Investing capital to sustain production while paying our existing dividend. |
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Growing our dividend annually at a competitive rate. |
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Reducing debt and targeting an “A” -rated balance sheet. |
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Returning more than 30 percent of our cash from operations to stockholders annually. |
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Disciplined investing to expand cash from operations, but not at the expense of financial returns. |
Delivering on our value proposition
We continue to believe our principles and priorities are the right
ones for this business and we have delivered strong performance over the past few years that affirm our value proposition. We have
significantly transformed ConocoPhillips by improving the underlying drivers of our
S |
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SAFETY
No task is so important that we can’t take the time to do it safely. A safe company is
a successful company.
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PEOPLE
We respect one another. We recognize that our success depends upon the capabilities and inclusion
of our employees. We value different voices and opinions.
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INTEGRITY
We are ethical and trustworthy in our relationships with internal and external stakeholders.
We keep our promises.
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RESPONSIBILITY
We are accountable for our actions. We care about our neighbors in the communities where we operate.
We strive to make a positive impact across our operations.
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INNOVATION
We anticipate change and respond with creative solutions. We are responsive to the changing needs
of the industry. We embrace learning. We are not afraid to try new things.
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TEAMWORK
We have a “can do” attitude that inspires top performance from everyone. We encourage
collaboration. We celebrate success. We win together.
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Table of Contents
business and positioning our company as a leader within the exploration
and production (“E&P”) sector. Key performance highlights over the last three years include:
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> | Portfolio high-grading and optimization through $19 billion of strategic asset dispositions. |
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> | Debt reduction of ~$12 billion and single-A rated by all credit rating agencies. |
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> | Returned ~44% of our net cash provided by operating activities to stockholders through dividends and share repurchases. |
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> | Increased the size of the resource base with below $40/BBL WTI cost of supply and reduced the average cost of supply of these
resources to below $30/BBL WTI. |
We believe that the actions we took over the past few years gave
us a competitive advantage across price cycles with resilience to lower prices and upside exposure to higher prices. In late 2019,
we communicated a 10-year plan to the marketplace that satisfied our strategic objectives at a reference price of $50/BBL WTI.
Recently, global oil markets have weakened significantly, but we still believe we are well positioned within the industry to react
and adapt, as necessary, to the current downturn. As we evaluate and navigate the current downturn, we will be guided by our strategic
priorities and to building on our competitive position.
Performance with purpose
At ConocoPhillips we believe we have an important role to play
in safely finding and delivering energy to the world, and we are committed to doing so in a way that works for all stakeholders
– our investors, our workforce, our neighbors and our partners. We take accountability for strong financial and operational
execution, but we also take accountability for our greater responsibilities. For us, performance means more than just numbers.
Over the past three years, we have invested significant time and effort into establishing a leadership position on environmental,
social and governance (“ESG”) matters. Key elements of our progress include:
Engaging with our investors. We continued our active investor
outreach in 2019, meeting with stockholders representing approximately 30% of our shares outstanding to discuss a variety of topics,
including strategy and value proposition, corporate governance, executive compensation, human capital management, culture, and
sustainability. The input we received continues to be incorporated into our Board’s deliberations and decision making. For
example, our Board and management team recognize we compete against the broad market for investor attention, so we are adding the
S&P Total Return Index to our performance peer group for 2020.
Celebrating our workforce. Our progress and continued success
could not be achieved without the efforts of our more than 10,000 employees. Their commitment and dedication made our transformation
possible. We are proud to have a workforce that is diverse, inclusive, has the skills for the future and is highly engaged. At
ConocoPhillips, we take pride in having a strong culture based on our SPIRIT Values of Safety, People, Integrity, Responsibility,
Innovation and Teamwork.
Being a good neighbor. We are widely recognized as a leader
in environmental performance and disclosure. External recognition includes our standing in the S&P 500 ESG Index and the Dow
Jones Sustainability Index. We take a leadership stance on ESG issues with support from an engaged and diverse Board. We are particularly
proud to have been the first E&P company to set a greenhouse gas emissions intensity reduction target and we are monitoring
progress toward that target.
Partnering to advance innovation: Consistent with our core
value of innovation at ConocoPhillips, we are in partnership with some of the most innovative companies in Silicon Valley and the
top three global cloud leaders. We are implementing robotic process automation in our back-office functions, advancing artificial
intelligence, and advancing machine and deep learning for emissions monitoring and seismic advancements. In addition, we use predictive
analytics across our operations and planning processes. We understand that digital technology will be a differentiator within the
industry and we are committed to being on the forefront of this important frontier.
Your input is valued and your vote is very important
We strongly believe that regular engagement with all of our stakeholders
- stockholders, employees, customers, suppliers, advocacy groups, governments and communities – is critical to our long-term
success. The Annual Meeting is another opportunity for stockholders to express views on matters relating to ConocoPhillips’
business, and we hope you will participate.
Whether or not you plan to participate in the Annual Meeting,
and no matter how many shares you own, we encourage you to vote promptly. Prior to the meeting, you may sign and return your proxy
card, use telephone or Internet voting, or visit the Annual Meeting website at www.conocophillips.com/annualmeeting to register
your vote. Instructions on how to vote begin on page 111.
We look forward to sharing more about our company and your company
during the Annual Meeting on May 12.
Thank you for your continued support.
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Ryan M. Lance |
Robert A. Niblock |
Chairman and Chief Executive Officer |
Lead Director |
Table of Contents
Notice of 2020 Annual Meeting of Stockholders
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Date
Tuesday, May 12, 2020
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Time
9:00 a.m. (CDT)
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Location
Online at www.virtualshareholdermeeting.com/ COP2020
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Record Date
March 16, 2020
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Participate in the Future of ConocoPhillips—Vote Now
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Online
Use your smartphone or computer. www.proxyvote.com
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Phone Call
Dial (800) 690-6903
toll-free 24/7.
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Mail
Cast your ballot, sign your proxy card and send by mail in the
enclosed postage-paid envelope.
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Annual Meeting
You may participate in the Annual Meeting and vote electronically.
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Proposals Requiring Your Vote
Purpose |
Board
Recommendation |
Page |
1. |
Election
of 13 Directors |
FOR each nominee |
34 |
2. |
Ratification
of Independent Registered Public Accounting Firm |
FOR |
47 |
3. |
Advisory
Approval of the Compensation of our Named Executive Officers |
FOR |
49 |
Only stockholders of record at the close of business on March 16,
2020 will be entitled to receive notice of, and to vote at, the Annual Meeting. A list of stockholders entitled to vote at the
Annual Meeting will be available for inspection by any stockholder at our offices in Houston, Texas during ordinary business hours
for a period of 10 days prior to the meeting. This list will also be available for stockholders to view online at the time of the meeting.
Visit our Annual Meeting website at www.conocophillips.com/annualmeeting to learn more about our Annual Meeting, review and download this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”), submit questions in advance of the Annual Meeting, and sign up for electronic delivery of materials for future annual meetings.
March 30, 2020
By Order of the Board of Directors
Kelly B. Rose
Corporate Secretary
Your vote is very important to us and to our business. Even if
you plan to participate in the Annual Meeting, please vote right away. For more information on voting, please see “Available
Information and Questions and Answers About the Annual Meeting and Voting” beginning on page
110.
Important Notice Regarding the Availability of Proxy Materials
for the 2020 Annual Meeting of Stockholders to be Held on May 12, 2020: This Proxy Statement and our 2019 Annual Report are available
at www.conocophillips.com/annualmeeting.
Table of Contents
Proxy Summary
This summary highlights information contained elsewhere in this
Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire
Proxy Statement carefully before voting. For more complete information regarding ConocoPhillips’ 2019 performance, please
review our Annual Report.
About ConocoPhillips
COMPANY OVERVIEW
Headquartered in Houston, Texas, ConocoPhillips had operations
and activities in 17 countries, $71 billion of total assets, and approximately 10,400 employees as of December 31, 2019. Production
excluding Libya averaged 1,305 thousand barrels of oil equivalent per day (“MBOED”) in 2019, and proved reserves were
5.3 billion barrels of oil equivalent (“BBOE”) as of December 31, 2019. Our key focus areas include safely operating
producing assets, executing major developments, and exploring for new resources in promising areas. Our portfolio includes resource-rich
unconventional plays in North America; lower-risk conventional assets in North America, Europe, Asia, and Australia; several liquefied
natural gas developments; and an inventory of global conventional and unconventional exploration prospects.
Across our 17 countries of operations, more
than 10,000 people work in a truly integrated way to find and produce oil and natural gas.
Global Operations and Activities |
Employees |
2019 Production* |
2019 Proved Reserves |
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17
Countries as of Dec. 31, 2019
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~10,400
as of Dec. 31, 2019
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1,305
MBOED
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5.3
Billion BOE
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* Production excludes Libya.
Table of Contents
Proxy Summary
CONTINUED STRONG EXECUTION OF OUR VALUE PROPOSITION IN 2019
In late 2016, ConocoPhillips launched a unique value proposition
aimed at delivering superior returns to stockholders through price cycles by maintaining disciplined capital allocation
and responsible execution. The value proposition was based on a view that our business, while opportunity-rich, is also mature,
capital-intensive, and cyclical. To succeed, we believed that it was necessary to focus on returns, maintain a strong balance sheet,
grow cash from operations, and generate peer-leading distributions to stockholders. Our value proposition is underpinned by these
principles and as a result, management set forth clear strategic priorities specifying how cash flows from the business were to
be allocated.
Our strategic priorities in 2019 reflect a recommitment to those
we first laid out three years ago:
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Invest enough capital to sustain production and pay existing dividend; |
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Grow dividend annually; |
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Maintain ‘A’ credit rating; |
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Return > 30 percent of cash from operations to stockholders annually; and |
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Disciplined investment to expand cash from operations. |
We have aligned our strategy with the reality that our business
is mature, capital-intensive and cyclical.
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> | Because the business is mature, we stay disciplined and allocate capital to deliver strong free cash flow and returns on,
and of, capital. In 2019, our combined share repurchases as well as dividend payments represented a return of 43% of CFO2
to stockholders, all of which was funded from free cash flow. |
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> | We have a world-class, diverse, low cost of supply portfolio, and optimize our investments to lower our capital intensity.
Our portfolio is diversified both geologically and geographically. Since launching our value proposition in late 2016, we have
grown our resource base with a cost of supply below $40 per barrel West Texas Intermediate. |
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> | We address the cyclical nature of our business by maintaining a low cash breakeven price and maintaining financial strength.
Our capital program can be funded at what we believe is a peer-leading cash flow breakeven price and we maintain a balance
sheet with a leverage ratio of net debt to CFO2 of less than one turn. We strive to be resilient to lower prices, while
retaining full upside to higher prices. |
Building on successful years in 2017 and 2018, ConocoPhillips
achieved several important milestones in 2019, as shown below:
2019 Highlights - Continued Delivering on
Our Value Proposition
Financials |
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Strategy |
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Operations |
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Portfolio |
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> $7.2B
earnings, $6.40 EPS; $4.0B adjusted earnings1, $3.59 adjusted EPS1
> $11.1B
cash provided by operating activities, $11.7B CFO2; $5B free cash flow1
> Ending
cash3 of $8.4B
> Reduced
asset retirement obligations (“ARO”) by $2.3B primarily resulting from dispositions4
> Achieved
11% ROCE1
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> Returned
~43% of CFO2 to stockholders
> Paid
$1.5B in dividends; increased quarterly dividend by 38%
> Repurchased
$3.5B of shares; increased authorization by $10B to $25B in early 2020
> Continued
ESG leadership
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> Delivered
underlying production growth of 5%5
> Grew
Lower 48 Big 3 production by 22%
> Started
GMT-2 construction; sanctioned Tor II and Malikai Phase 2
> Progressed
exploration/ appraisal in Alaska and Montney
> Achieved
a new company record in safety performance with 0.14 total recordable rate (“TRR”)
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> Generated
$3B of disposition proceeds; $2B of dispositions pending6
> Completed
acquisitions in Lower 48, Alaska and Argentina
> Awarded
new Indonesia production sharing contract
> 100%
total reserve replacement; 117%organic replacement7
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1 |
Adjusted earnings, adjusted EPS, free cash flow and return on capital employed (“ROCE”) are non-GAAP measures.
Further information related to these measures as well as reconciliations to the nearest GAAP measure are included on Appendix
A. |
2 |
2019 cash provided by operating activities is $11.1B. Excluding operating working capital change of ($0.6B), cash from
operations is $11.7B. Cash from operations (“CFO”) is a non-GAAP measure and is further defined on Appendix A. |
Table of Contents
Proxy Summary
3 |
Ending cash includes cash, cash equivalents, and restricted cash totaling $5.4B and
short-term investments of $3.0B. Restricted cash was $0.3B. |
4 |
$2.3B reduction in ARO includes both closed and pending dispositions, of which $741 million was
classified as held for sale as of December 31, 2019. |
5 |
Underlying production excludes Libya and the impact of closed asset dispositions and acquisitions. |
6 |
Pending dispositions as of December 31, 2019 include assets for which we have entered into sales
agreements, including Australia-West, Niobrara, and Waddell Ranch in the Lower 48. These dispositions are subject to closing
adjustments, as well as regulatory and other approvals. The Niobrara and Waddell Ranch dispositions closed in the first quarter
of 2020, and the Australia-West disposition is expected to close in early 2020. |
7 |
Reserve replacement is a ratio representing the change in proved reserves, net of production,
divided by current year production. Organic reserve replacement is a ratio representing the change in proved reserves, net
of production and excluding acquisitions and dispositions, divided by current year production. Further information and calculation
of these measures are included in Other Measures on Appendix A. |
Importantly, we delivered these milestones while operating safely
and continuing to drive our leadership position in ESG matters. We maintained our ongoing practice of engaging with stockholders
throughout 2019 and received consistent feedback that our disciplined, returns-focused strategy is the right one for our business
and that our disclosures were addressing the things that our stockholders care about most.
INDUSTRY-LEADING TRANSFORMATION
Since 2016, we have transformed our company by improving drivers
across all aspects of the business. The chart below describes the highlights of this three-year transformation:
3-Year Highlights - Improving Underlying Performance & Transforming Our Business
Financials |
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Strategy |
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Operations |
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Portfolio |
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> $31.1B cash
provided by operating activities, $31B CFO; $13.1B free cash flow1
> Reduced debt
by ~$12B
> Single-A
rated by all credit agencies
> Finished
1st in performance peer group for 2017-2019 TSR2
> Finished
1st in performance peer group for 3-year Adjusted ROCE and Adjusted CROCE improvement3
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> Returned
~44% of CFO1 to stockholders
> Paid over
$4B in dividends; increased quarterly dividend by 68%
> Authorization
for share repurchase program at $25B; repurchased $9.5B of shares
> Named to
the S&P 500 Index and Dow Jones Sustainability Index
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> Improvements
in incidents, spills, process safety and TRR
> Grew Lower
48 Big 3 production by 54%
> Achieved
major project startups in Alaska, Norway, and China; sanctioned GMT-2, Tor II and, Malikai Phase 2
> Successful
exploration in Alaska, Norway, and Malaysia; added resources in Canada’s Montney
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> Strengthened
portfolio with ~$19B of asset sales to optimize the portfolio
> Acquired
bolt-on interests and acreage in Alaska, Canada and Lower 48
> 23% total
reserve replacement; 143% organic replacement4
> Grew <$40/BBL
WTI CoS resource base; reduced average CoS to <$30/BBL WTI5
> Awarded new
Indonesia production sharing contract
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1 |
CFO and free cash flow are non-GAAP measures. Further information about these measures, as well as a reconciliation to the nearest GAAP measure can be found in Appendix A. |
2 |
Total Shareholder Return (“TSR”) is calculated on the 20-day average methodology. Further information about this measure can be found in “Compensation Discussion & Analysis – Corporate Performance Criteria”, beginning on page 68. |
3 |
Adjusted ROCE and Adjusted cash return on capital employed (“CROCE”) are non-GAAP measures. Further information and calculation of these measures can be found in “Compensation Discussion & Analysis – Corporate Performance Criteria”, beginning on page 68. |
4 |
Reserve replacement is a ratio representing the change in proved reserves, net of production, divided by production for the period. Organic reserve replacement is a ratio representing the change in proved reserves, net of production and excluding acquisitions and dispositions, divided by production for the period. Further information and calculation of these measures are included in Other Measures on Appendix A. |
5 |
Cost of supply (“CoS”) is the West Texas Intermediate equivalent price that generates a 10% return on a point forward and fully-burdened basis. |
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Proxy Summary
Importantly, our three-year performance has been recognized by
the market. While the sector experienced ongoing volatility, ConocoPhillips’ three-year TSR outperformed our performance
peers and the energy sector, generally.
For the three years ended December 31, 2019, TSR was 11.3%.
* |
TSR in this chart is calculated using the closing price on December 30, 2016 and the closing price on December 31, 2019 and assumes
common stock dividends paid during the stated period are reinvested. |
Stockholder Engagement
ConocoPhillips understands the importance of maintaining a robust
stockholder engagement program. During 2019, ConocoPhillips continued this long-standing practice. Executives and management from
our human resources, legal, investor relations, government affairs, and sustainable development groups routinely engaged with
stockholders. When appropriate, directors also met with stockholders on a variety of topics, including strategy and value proposition,
corporate governance, executive compensation, human capital management, culture, climate change, and sustainability. We spoke
with representatives from our top institutional investors, mutual funds, public pension funds, labor unions, and socially responsible
funds to hear their views on these important topics. Overall, investors expressed strong support for ConocoPhillips. We believe
our regular stockholder engagement was productive and provided an open exchange of ideas and perspectives for both ConocoPhillips
and our stockholders. For more information, see “Stockholder Engagement and Board Responsiveness” beginning
on page 17 and “2019 Say on Pay Vote Result, Stockholder Engagement, and Board
Responsiveness” beginning on page 53.
Table of Contents
Proxy Summary
Director Nominees
The Board recommends a vote FOR each
of the 13 nominees listed below.
All of the nominees are currently serving as directors. All directors,
other than the CEO, are independent.
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Director |
Committee
Memberships |
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Nominees |
Principal
Occupation |
Age* |
Since |
EC |
AFC |
HRCC |
DAC |
PPC |
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Charles E. Bunch |
Former Chairman and Chief Executive Officer, PPG Industries, Inc. |
70 |
2014 |
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Caroline Maury Devine |
Former President and Managing Director of a Norwegian affiliate of ExxonMobil |
69 |
2017 |
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John V. Faraci |
Former Chairman and Chief Executive Officer, International Paper Company |
70 |
2015 |
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Jody Freeman |
Archibald Cox Professor of Law, Harvard Law School |
56 |
2012 |
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Gay Huey Evans OBE |
Chairman, London Metal Exchange |
65 |
2013 |
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Jeffrey A. Joerres |
Former Executive Chairman and Chief Executive Officer, ManpowerGroup Inc. |
60 |
2018 |
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Ryan M. Lance |
Chairman and Chief Executive Officer, ConocoPhillips |
57 |
2012 |
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Admiral William H. McRaven |
Retired U.S. Navy Four-Star Admiral (SEAL) |
64 |
2018 |
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Sharmila Mulligan |
Chief Strategy Officer, Alteryx |
54 |
2017 |
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Arjun N. Murti |
Senior Advisor, Warburg Pincus |
50 |
2015 |
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Robert A. Niblock
Lead Director |
Former Chairman, President and Chief Executive Officer, Lowe’s Companies, Inc. |
57 |
2010 |
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David T. Seaton |
Former Chairman and Chief Executive Officer, Fluor Corporation |
58 |
2020 |
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R.A. Walker |
Former Chairman and Chief Executive Officer, Anadarko Petroleum Corporation |
63 |
2020 |
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* As of March 30, 2020 |
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Executive Committee (“EC”) |
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Audit and Finance Committee (“AFC”) |
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Human Resources and Compensation Committee (“HRCC”) |
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Committee on Directors’ Affairs (“DAC”) |
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Public Policy Committee (“PPC”) |
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Red indicates Chair |
Table of Contents
Proxy Summary
BOARD REFRESHMENT AND DIVERSITY
The Committee on Directors’ Affairs regularly evaluates the
size and composition of the Board and continually assesses whether the composition appropriately relates to ConocoPhillips’
strategic needs, which change as our business environment evolves. When conducting its review of the appropriate skills and qualifications
desired of directors, the Committee on Directors’ Affairs considers diversity of age, skills, gender, and ethnicity. As shown
below, the Board balances its commitment to maintaining institutional knowledge with the need for fresh perspectives that board
refreshment and director succession planning provide.
Director Nominee Tenure Diversity
Director Nominee Gender Diversity |
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Gender Diversity in Board Leadership Roles |
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Director Nominee Age Diversity |
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Diversity of Board Skills and Experience
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CEO or
senior officer |
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Financial
reporting |
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Industry |
CEO or senior officer experience demonstrates a practical understanding of organizations, processes, strategy, risk, and risk management. |
Financial reporting, audit knowledge, and experience in capital markets, both debt and equity, are critical to ConocoPhillips’ success. |
Industry experience provides valuable perspective on issues specific to our business within the energy industry. |
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Global |
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Regulatory/
government |
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Environmental/
sustainability |
Global business or international experience provides valued perspectives on how well we grow our businesses outside the United States. |
Regulatory/government experience offers valuable insight into how the energy industry is heavily regulated and directly affected by governmental actions and decisions. |
Environmental/sustainability experience ensures that strategic business essentials and long-term value creation for stockholders are achieved with a responsible, sustainable business model. |
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Technology |
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Public company
board service |
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Human capital
management |
Technology expertise adds exceptional value to our Board as we increasingly utilize our global data assets to monitor and optimize our operations. |
Public company board service experience supports our goals of strong board and management accountability, transparency, and protection of stockholder interests. |
Human capital management experience is essential for effective oversight on matters such as culture, succession planning, development and retention. |
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Table of Contents
Proxy Summary
Governance Highlights
Our Board oversees the development and execution of our strategy.
We have robust governance practices and procedures that support our strategy. To maintain and enhance independent oversight, our
Board is focused on its composition and effectiveness and has implemented a number of measures for continuous improvement.
The measures outlined below align our corporate governance structure
with our strategic objectives and enable the Board to effectively communicate and execute our culture of compliance and rigorous
risk management.
Comprehensive, Integrated Governance Practices
> Our
Board is committed to regular renewal and refreshment. We are continuously focused on the director recruitment and selection process.
As a result, we have an experienced and diverse group of nominees. See “How Are Nominees Selected?” beginning
on page 34.
> Our
Board’s thorough onboarding and director education processes complement this recruitment process.
|
> Our
independent Lead Director’s robust duties are set forth in our Corporate Governance Guidelines.
> Our
independent directors meet privately in executive session at each regularly scheduled Board meeting.
> Our
Board reviews CEO and senior management succession and development plans at least annually and assesses candidates during Board
and committee meetings and in less formal settings.
|
> Our
Board and committees conduct intensive and thoughtful annual evaluations, including self-evaluations and peer assessments. See
“Board and Committee Evaluations” on page 23.
> Our
directors provide feedback on Board and committee effectiveness, including areas such as Board composition and the Board/management
succession-planning process.
> Our
Board regularly assesses its leadership structure.
> Our
Board’s decision-making is informed by input from stockholders.
|
The governance
best practices we
have adopted
support these
general principles: |
|
|
> Annual
election of all directors
> Long-standing
commitment to sustainability
> Stock
ownership guidelines for directors and executives
> Independent
Audit and Finance, Human Resources and Compensation, Directors’ Affairs and Public Policy committees
> Transparent
public policy engagement
> Prohibition
on pledging and hedging for all employees |
> Proxy
access
> Active
stockholder engagement
> Independent
Board except our CEO
> Executive
sessions of independent directors held at each regularly scheduled Board meeting
> Independent
Lead Director
> Majority
vote standard in uncontested elections
> Clawback
Policy |
Table of Contents
Proxy Summary
Executive Compensation
2019 COMPENSATION PROGRAM STRUCTURE
Each year the Human Resources and Compensation Committee (the “HRCC”),
advised by its independent compensation consultant and informed by feedback from stockholders, undertakes a rigorous process to
set and review executive compensation. The HRCC believes a substantial portion of our executive compensation should be equity-based
and focused on rewarding long-term performance and furthermore, that this approach most closely aligns the interests of our top
executives with those of our stockholders.
The four primary elements of our executive compensation program are
designed to provide a target total value for compensation that is competitive with our peers and attracts and retains the talented
executives necessary to manage a large and complex company like ConocoPhillips. The following chart summarizes the principal components
of our executive compensation program and the performance drivers of each element.
2019 Element of Pay |
Overview |
Key Benchmarks/Performance Measures |
Annual
Salary
|
Fixed cash compensation to attract and retain executives and balance
at-risk compensation
Range: Salary grade minimum /
maximum |
> Benchmarked to compensation reference group median; adjusted for experience, responsibility, performance, and potential |
Variable Cash Incentive
Program (“VCIP”)
|
Variable annual cash compensation to motivate and reward executives
for achieving annual goals and strategic milestones that are critical to our strategic priorities
Range: 0% - 200% of target for
corporate performance, inclusive of individual adjustments |
> Health,
Safety, and Environmental (20%)
> Operational
(20%)
> Financial
—Absolute and Relative Adjusted ROCE/CROCE (20%)
> Strategic
Milestones (20%)
> Relative
TSR (20%)
> Measured
over a one-year performance period and aligned with our strategic priorities |
Long-Term Incentive Program (“LTIP”) |
|
|
Variable long-term equity-based compensation to motivate
and reward executives for achieving multi-year strategic priorities
Granted at beginning of three-year performance period with
final cash payout following the conclusion of the performance period based on HRCC assessment of progress toward pre-established
corporate performance metrics and stock price on the settlement date
Range: 0% - 200% of total target
award, inclusive of corporate performance adjustments |
> Relative
TSR (50%)(3)
> Financial
– Relative Adjusted ROCE/CROCE (30%)(3)
> Strategic
Objectives (20%)(3)
> Measured
over a three-year performance period and aligned with our strategic priorities
> Stock
price |
Long-term equity-based compensation designed to encourage
executive retention while incentivizing absolute performance that is aligned with stockholder interests
Annual award settles in cash on 3rd anniversary of grant date based
on the stock price on the settlement date(2)
Range: 0% - 100% of target |
> Stock
price
> Vest
in three years |
(1) |
Prior to the 2018 equity grants, the LTIP consisted of the performance share program
weighted at 60% and the stock option program weighted at 40%. Effective with equity grants in 2018, the HRCC approved replacing
stock options with three-year, time-vested restricted stock units at a weight of 35% and increasing the weighting of performance
shares to 65%. |
(2) |
Beginning with 2020 grants, Executive Restricted Stock Unit grants will be settled in shares
rather than cash to provide additional common stock ownership through the Company’s executive compensation programs,
and better align with market practice. |
(3) |
Performance share programs commencing prior to 2019, including PSP 17, include Strategic Objectives as a PSP measure;
however, effective with performance share programs commencing in 2019, Strategic Objectives has been eliminated as a performance
measure from the PSP and the weighting of relative TSR has increased from 50% to 60% and relative Financial (Adjusted ROCE/CROCE)
has increased from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now
be determined solely on a formulaic basis. |
Table of Contents
Proxy Summary
COMPENSATION AND GOVERNANCE PRACTICES
Management and the HRCC believe pay and performance are best aligned
through a rigorous review process of our executive compensation programs. This process, which is described under the heading “HRCC Annual Compensation Cycle” on page 63, consists of benchmarking against our peers,
completing four distinct performance reviews, incorporating stockholder feedback, and seeking the assistance of an independent
third-party compensation consultant.
In connection with this ongoing review and based on feedback received
through our stockholder outreach program, the HRCC maintains what it believes are best practices for executive compensation. Below
is a summary of those practices.
WHAT WE DO
|
Pay for Performance: We align executive compensation with corporate and individual performance on both a short-term and long-term basis. The majority of our target total direct compensation for employees who are a senior vice president or higher, executives who report directly to the CEO, or any other employee considered an officer under Section 16(b) of the Securities Exchange Act of 1934 (“Senior Officers”) is variable incentive compensation. Actual total direct compensation varies based on the extent of achievement of, among other things, safety, operational, and financial performance, and strategic goals, as well as stock performance and individual performance. |
|
Stock Ownership Guidelines: Our Stock Ownership Guidelines require executives to own stock or have an interest in restricted stock units valued at a multiple of base salary, ranging from 1.8 times base salary for lower level executives to six times base salary for the CEO. Each director is expected to own stock in the amount of the aggregate annual equity grants he or she received during his or her first five years on the Board. All of our Named Executive Officers and current directors meet or exceed these requirements. |
|
Mitigation of Risk: Our compensation plans have provisions designed to mitigate undue risk, including caps on the maximum level of payouts, clawback provisions, varied performance measurement periods, and multiple performance metrics. In addition, the Board, the HRCC, and management perform an annual risk assessment to identify potential undue risk created by our incentive plans. |
|
Clawback Policy: Executives’ incentive compensation is subject to a clawback that applies in the event of certain financial restatements. This is in addition to provisions contained in our award documents that, if an executive engages in any activity we determine is detrimental to ConocoPhillips, permit us to suspend the right to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted. |
|
Independent Compensation Consultant: The HRCC retained Frederic W. Cook & Co., Inc. (“FW Cook”) to serve as its independent executive compensation consultant. During 2019, FW Cook provided no other services to ConocoPhillips. |
|
Double Trigger: Beginning with awards granted pursuant to long-term incentive programs in 2014, equity awards do not vest in the event of a change in control unless there is also a qualifying termination of employment. |
|
Limited Payouts: The HRCC has implemented caps on all executive incentive programs. In 2019, the HRCC approved reducing the cap on the annual incentive program from 250% of target to 200% for the Executive Leadership Team, which includes the Named Executive Officers. Payouts under the Performance Share Program are limited to 200% of the total target award. |
WHAT WE DON’T DO
|
No Excise Tax Gross Ups for Future Change in Control Plan Participants: In 2012, we eliminated excise tax gross ups for future participants in our Change in Control Severance Plan. |
|
No Current Payment of Dividend Equivalents on Unvested Long-Term Incentives: Dividend equivalents on unvested restricted stock units awarded under the long-term incentive programs are only paid out to the extent that the underlying award is ultimately earned. |
|
No Repricing of Underwater Stock Options: Our plans do not permit us to reprice, exchange, or buy out underwater options without stockholder approval. |
|
No Pledging, Hedging, Short Sales, or Derivative Transactions: Company policies prohibit all of our employees from pledging, hedging, or trading in derivatives of ConocoPhillips stock. |
|
No Employment Agreements for Our Named Executive Officers: All compensation for our Named Executive Officers is established by the HRCC. |
Table of Contents
Table of Contents
Table of Contents
Sustainability
Our Approach
ConocoPhillips recognizes the importance of delivering energy to
the world and we are committed to demonstrating leadership in the production of natural gas and oil by being competitive both financially
and with our environmental and social performance. As we manage through the uncertainty of the energy transition, natural gas and
oil will still be in demand in a 2-degree world and flexibility and resilience will be required to ensure that supply. Our governance
structure is designed to ensure that management of sustainability-related risks and opportunities throughout the organization is
incorporated into our strategic and operating decisions. Our governance model extends from the Board’s Public Policy Committee,
through the executive team, to leaders and internal subject matter experts.
Operated assets and major projects are examined through our sustainable
development (“SD”) risk management process against the physical, social and political settings of our operations to
ascertain potential risks. Sustainability-related risks are identified for climate change, water, biodiversity and stakeholder
engagement, and action plans for each priority risk include line-of-sight goals for business units and key functions.
Sustainable Development Risk Management
Table of Contents
Sustainability
MANAGING CLIMATE-RELATED RISKS
Our comprehensive governance framework provides Board and management
oversight of our climate-related risk processes and mitigation plans as outlined in our Managing Climate-Related Risks report.
Our integrated management system approach to identify, assess, characterize, and manage climate-related risks links directly to
the enterprise risk management process, which includes an annual review by executive leadership and the Board.
We use scenarios in our strategic planning process to:
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> |
gain a better understanding of external factors that impact our business; |
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> |
test the robustness of our strategy across different business environments; |
|
> |
communicate risks appropriately; and |
|
> |
adjust prudently to changes in the business environment. |
We also have a long-term target to reduce our greenhouse gas emissions
intensity which will be reviewed in 2020 as part of our ongoing governance. This goal demonstrates our commitment to greenhouse
gas emissions reductions and managing climate-related risks and issues throughout the business. It also ensures that appropriate
risk management discussions occur throughout the lifecycles of our assets.
MANAGING LOCAL WATER RISKS
Access to water is essential to the communities and ecosystems near
our operations and to our ability to produce natural gas and oil. Fresh water is a limited resource in regions experiencing water
scarcity, and local availability may be affected in the future by physical effects of climate change, such as droughts. Although
access to water and water scarcity are issues of global importance, we manage water risks and mitigate potential impacts to water
resources locally, taking into account the unique social, economic, and environmental conditions of each basin or offshore marine
area.
MANAGING LOCAL BIODIVERSITY RISKS
Biodiversity, which is the variety of terrestrial and marine plant
and animal species, is important to maintaining ecosystem health and is an aspect of human well-being. Every basin or marine area
has a unique combination of habitats, plant, and animal species. We address potential impacts to areas with biological or cultural
significance through the use of the Mitigation Hierarchy, which includes four prioritized steps: (1) Avoid; (2) Minimize; (3) Restore;
and (4) Offset.
ENGAGING STAKEHOLDERS
Active stakeholder engagement and dialogue is an integral part of
our sustainability commitment and is how we go about implementing or “operationalizing” our commitment to human rights,
including indigenous peoples’ rights, and our commitment to the communities where we operate. For each of our assets, we
develop a stakeholder engagement plan that identifies those who can influence or be affected by our activities and outlines how
we will engage with them to build long-term value for both ConocoPhillips and our stakeholders.
RECOGNITION
Notable ESG achievements in 2019 include:
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> |
Named to the Dow Jones Sustainability Index for the 13th consecutive year, ranked as the highest energy company in North
America; |
|
> |
Rated “AA” by MSCI, the second highest possible score; |
|
> |
Achieved a score of 89.1/100 from Sustainalytics; |
|
> |
Received the best possible score of “1” on both environmental and social metrics from ISS QualityScore; and
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|
> |
Achieved a B rating for CDP, which is above the industry and North American average. |
To learn more about sustainable development at ConocoPhillips,
please view our Sustainability Report on our website under “Company Reports and Resources.”
Table of Contents
Corporate Governance Matters
The Committee on Directors’ Affairs and our Board annually
review our governance structure, taking into account changes in Securities and Exchange Commission (the “SEC”) and
New York Stock Exchange (the “NYSE”) rules, as well as current best practices. Our Corporate Governance Guidelines
address the matters shown below, among others.
> Director qualifications;
> Director responsibilities;
> Board committees;
> Director access
to officers, employees, and independent advisors; |
> Director compensation
and stock ownership requirements;
> Director orientation
and continuing education; |
> Chief Executive
Officer evaluation and management succession planning; and
> Board performance
evaluations. |
The Corporate Governance Guidelines are posted on our website under
“Investors > Corporate Governance” and are available in print upon request (see “Available Information
and Questions and Answers about the Annual Meeting and Voting” beginning on page 110).
Stockholder Engagement and Board Responsiveness
ConocoPhillips is committed to engaging in constructive and meaningful
conversations with stockholders and to building and managing long-term relationships based on mutual trust and respect. The Board
values the input and insights of our stockholders and believes that consistent and effective Board-stockholder communication strengthens
the Board’s role as an active, informed, and engaged fiduciary.
BOARD OVERSIGHT OF ENGAGEMENT
In an effort to continuously improve ConocoPhillips’ governance
processes and communications, the Committee on Directors’ Affairs has adopted Board and Shareholder Communication and Engagement
Guidelines. Recognizing that director attendance at the annual meeting provides stockholders with a valuable opportunity to communicate
with Board members, we expect directors to attend. In 2019, all of the directors standing for re-election participated in the annual
meeting. We anticipate that all of the director nominees will attend the Annual Meeting in May. We also support an open and transparent
process for stockholders and other interested parties to contact the Board in between annual meetings as noted under “Communications with the Board of Directors” on page 20.
The Board-Driven Stockholder Engagement Process
Deliberate, assess, and prepare
The Board regularly assesses and monitors investor sentiment, stockholder
voting results, and trends in governance, executive compensation, human capital management, culture, regulatory, environmental,
social, and other matters. With that foundation, the Board identifies and prioritizes potential topics for stockholder engagement.
Reach out and engage
Management regularly meets with stockholders to actively solicit
input on a range of issues and reports stockholder views to our Board. With management’s assistance, and when appropriate,
members of the Board will engage in dialogue with stockholders, which clarifies and deepens the Board’s understanding of
stockholder concerns and provides stockholders with insight into our Board’s processes.
Evaluate and respond
Stockholder input informs our Board’s ongoing process of continually
improving governance and other practices. Specifically, the Board and management regularly review stockholder input to evaluate
any identified issues and concerns. The Board responds, as appropriate, with continued discussion with stockholders and enhancements
to policy, practices, and disclosure.
Table of Contents
Corporate Governance Matters
ONGOING ENGAGEMENT AND BOARD REPORTING
Executives and management from ConocoPhillips’ human resources,
legal, investor relations, government affairs, and sustainable development groups and, when appropriate, directors meet with stockholders
regularly on a variety of topics. Management provides reports to the Board and its committees regarding the key themes and results
of these conversations, including typical investor concerns and questions, emerging issues, and pertinent corporate governance
matters.
In 2019, we actively reached out to investors owning more than 50
percent of our stock to invite them to participate in in-depth discussions with our engagement team. We gained valuable feedback
during these discussions, which was shared with the Board and its relevant committees.
By the Numbers: Stockholder Engagement in Spring
and Fall 2019
BOARD RESPONSIVENESS
Our Board is committed to constructive engagement with investors.
We regularly evaluate and respond to the views expressed by our stockholders. This dialogue has led to enhancements in our corporate
governance, environmental, social, and executive compensation activities that the Board believes are in the best interest of ConocoPhillips
and our stockholders.
To better communicate with our stockholders, ConocoPhillips has formed
a Governance Leadership Team, which is an engagement team comprised of management and internal subject matter experts on strategy,
governance, compensation, compliance, human capital management, and environmental and social issues, to lead a comprehensive, year-round
stockholder engagement program.
The Governance Leadership Team that spearheaded our 2019 outreach
efforts consisted of the following members of ConocoPhillips management: Ellen R. DeSanctis, Senior Vice President, Corporate Relations;
Mark Keener, Vice President, Investor Relations; Heather Sirdashney, Vice President, Human Resources; Brian Pittman, General Manager,
Compensation and Benefits; Shannon B. Kinney, Deputy General Counsel, Governance, Corporate, and Employment and Chief Compliance
Officer; Lloyd Visser, Global Head, Sustainable Development; and James Viray, Director, Stakeholder Engagement & Social
Responsibility. In some instances, our Lead Director, Robert A. Niblock, also participated in the stockholder meetings.
Table of Contents
Corporate Governance Matters
In these meetings, we discussed our strategy and value proposition,
corporate governance, executive compensation, human capital management, culture, climate change, and sustainability. In 2019, the
feedback received from our stockholders on these and other topics was overwhelmingly positive.
What We Learned from Our Meetings
with Stockholders |
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> |
Stockholders were interested in our governance and performance on sustainable development
risk management and provided positive feedback on our continued leadership in sustainability initiatives and disclosures |
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> |
Stockholders commended the changes to our compensation programs and appreciated the improved
disclosures regarding targets, target setting and results in response to stockholders’ previously expressed desire for
increased transparency |
|
> |
Stockholders were interested in how our Board and senior management attract and retain top-tier
talent and appreciated learning more about how we are engaging our workforce for feedback to consistently improve as an organization
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> |
Stockholders were interested in our process for refreshment of our Board and applauded the
gender diversity and composition of our Board |
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> |
Stockholders appreciated the opportunity to meet with our Governance Leadership Team and members of our Board for open
discussion and to directly ask management questions |
|
Changes Informed by Stockholder
Input |
As part of our continued commitment to constructive engagement with our stockholders, we devote a meaningful amount of time to discussing the views voiced by our stockholders and share such input with our Board and its committees, where applicable, for their consideration. Our dialogue has led to the following changes: |
|
> |
Published our Managing Climate-Related Risks report |
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> |
Joined the Climate Leadership Council to participate in the ongoing dialogue about carbon
pricing and framing the issues in alignment with our principles |
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> |
Continued transparency around targets and results for our annual and long-term incentive programs
(see pages 71-79) |
|
> |
Beginning in 2019, capped the annual incentive payout at 200% of target, inclusive of individual
adjustments, for the Executive Leadership Team, including Named Executive Officers (previously capped at 250%) |
|
> |
Effective with the annual incentive and performance share programs commencing in 2020, added
the S&P 500 Total Return Index* to the performance peer group, broadening the performance benchmark beyond industry peers
to further align executive pay with long-term stockholder interests |
|
> |
Adopted a percentile-based payout matrix to determine formulaic payouts of relative metrics
in performance-based programs (see page 71), while in prior years, the relative payout
matrix was based on the Company’s rank among performance peers |
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> |
Beginning with 2020 grants, Executive Restricted Stock Unit grants will be settled in shares
rather than cash to provide additional common stock ownership through the Company’s executive compensation programs,
and better align with market practice |
|
> |
Effective with performance share programs commencing in 2019, eliminated the Strategic Objectives
performance measure from the Performance Share Program and increased the weighting of relative TSR from 50% to 60% and relative
Financial metrics (Adjusted ROCE/CROCE) from 30% to 40%, eliminating discretion in determining payouts under the LTIP, which
will now be determined solely on a formulaic basis |
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> |
Provided additional disclosures regarding our commitment to culture and human capital management
(see page 25) |
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> |
Elected two new directors to our Board with extensive industry experience |
* |
Relative TSR metrics only |
Table of Contents
Corporate Governance Matters
Communications with the Board of Directors
Stockholders and interested parties may write or call our Board by
contacting our Corporate Secretary as provided below:
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Write to: |
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Call: |
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Email: |
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Annual Meeting
Website: |
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ConocoPhillips Board of Directors c/o Corporate Secretary ConocoPhillips P.O. Box 4783 Houston, TX 77210-4783 |
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(281) 293-3030 |
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boardcommunication@ conocophillips.com |
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www.conocophillips.com/ annualmeeting |
Relevant communications will be distributed to the full Board or
to individual directors, as appropriate. The Corporate Secretary will not forward business solicitations, or advertisements, junk
mail and mass mailings, new product suggestions, product complaints, product inquiries, resumes and other forms of job inquiries,
surveys, or communications that are unduly hostile, threatening, illegal, or similarly unsuitable. Any communication that is filtered
out is available to any director upon request.
Board Leadership Structure
|
Board Overview |
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>
>
> |
Chairman of the Board and Chief Executive Officer: Ryan M. Lance
Lead Director: Robert A. Niblock
Active engagement by all directors |
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>
> |
12 of our 13 director nominees are independent
All members of the Audit and Finance Committee, Human Resources and Compensation Committee, Committee
on Directors’ Affairs, and Public Policy Committee are independent |
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CHAIRMAN AND CEO ROLES
ConocoPhillips believes that independent board oversight is an essential
component of strong corporate performance and enhances stockholder value. A combined position of Chairman and CEO is only one element
of our leadership structure, which also includes an independent Lead Director and active non-employee directors. Furthermore, each
of the Audit and Finance, Human Resources and Compensation, Directors’ Affairs, and Public Policy committees is made up entirely
of independent directors. While the Board retains the authority to separate the positions of Chairman and CEO if it deems appropriate
in the future, the Board believes the combined role of Chairman and CEO is currently effective. Combining these roles places one
person in a position to guide the Board in setting priorities for ConocoPhillips and in addressing the risks and challenges we
face. The Board believes that, while its independent directors bring a diversity of skills and perspectives to the Board, Mr. Lance,
by virtue of his day-to-day involvement in managing ConocoPhillips, is best suited to perform this unified role.
The Board believes there is no single organizational model that is
the best and most effective in all circumstances. As a result, the Board periodically considers whether the offices of Chairman
and CEO should be combined and who should serve in such capacities. The Board will continue to reexamine its corporate governance
policies and leadership structures on an ongoing basis to ensure that they continue to meet our needs.
INDEPENDENT DIRECTORS
The Board believes its current structure and processes encourage
the independent directors to be actively involved in guiding the work of the Board. The Chairs of the Board’s committees
establish their agendas and review their committee materials in advance of meetings, conferring with other directors and members
of management as each deems appropriate. Moreover, each director is authorized to suggest agenda items and to raise matters that
are not on the agenda at Board and committee meetings.
Table of Contents
Corporate Governance Matters
Our Corporate Governance Guidelines require the independent directors
to meet in executive session at every meeting. Additionally, if the offices of Chairman and CEO are held by the same person, a
lead director must be selected from among the non-employee directors. Robert A. Niblock currently serves as Lead Director.
Our Lead Director presides at executive sessions of the independent
directors. Each executive session may include a discussion of the performance of the Chairman and CEO, matters concerning the relationship
of the Board with the Chairman and CEO and other members of senior management, and such other matters as the independent directors
deem appropriate. No formal action of the Board is taken at these meetings, although the independent directors may subsequently
recommend matters for consideration by the full Board. The Board may invite guest attendees for the purpose of making presentations,
responding to questions by the directors, or providing counsel on specific matters within their areas of expertise. In addition
to chairing the executive sessions, the Lead Director manages the discussion with our CEO following the independent directors’
executive sessions, extensively participates in the discussion of CEO performance, and ensures that the Board’s self-assessments
are conducted annually.
Board Independence
The Corporate Governance Guidelines contain director independence
standards that are consistent with the standards set forth in the NYSE Listed Company Manual to assist the Board in determining
the independence of ConocoPhillips’ directors. The Board has determined that each director, except Mr. Lance, meets the standards
regarding independence set forth in the Corporate Governance Guidelines and is free of any material relationship with ConocoPhillips
(either directly or indirectly as a partner, stockholder, or officer of an organization that has a relationship with ConocoPhillips).
In making such determination, the Board specifically considered the fact that many of our directors may be directors, retired officers,
and stockholders of companies with which we conduct business. In addition, some of our directors may serve as employees of, or
consultants or advisors to, companies that do business with ConocoPhillips and its affiliates. In all cases, the Board determined
that the nature of the business conducted and the interest of the director by virtue of such position were immaterial both to ConocoPhillips
and to the director.
In recommending that each non-employee director be found independent,
our Board, with input from the Committee on Directors’ Affairs, considered relationships that, while not constituting related-party
transactions in which a director had a direct or indirect material interest, nonetheless involved transactions between ConocoPhillips
and a company with which a director is affiliated, whether through employment status or by virtue of serving as a director. Included
in the Committee’s review were the following transactions, which occurred in the ordinary course of business. In all instances,
it was determined that the nature of the business conducted and the dollar amounts involved were immaterial, both to ConocoPhillips
and the relevant counterparty, and fell within independence standards set forth in the ConocoPhillips Corporate Governance Guidelines
and the NYSE Listed Company Manual.
Director |
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Matters Considered |
Charles E. Bunch |
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Ordinary course business transactions with Marathon Petroleum Corporation |
Caroline Maury Devine |
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Ordinary course business transactions with Technip and FMC Technologies Inc. |
John V. Faraci |
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Ordinary course business transactions with International Paper Co., Royal Bank of Canada, U.S. Steel Corporation, and
the National Fish and Wildlife Foundation |
Gay Huey Evans OBE |
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Ordinary course business transactions with Standard Chartered PLC and the Financial Reporting Council |
Jeffrey A. Joerres |
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Ordinary course business transactions with Johnson Controls International plc |
William H. McRaven |
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Ordinary course business transactions with The University of Texas System |
Arjun N. Murti |
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Ordinary course business transactions with RS Energy Group Inc. |
Robert A. Niblock |
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Ordinary course business transactions with Lowe’s Companies, Inc. |
David T. Seaton |
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Ordinary course business transactions with The Mosaic Company, the American Petroleum Institute and the Business Roundtable |
R.A. Walker |
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Ordinary course business transactions with Anadarko Petroleum Corporation, BOK Financial Corporation and CenterPoint Energy
Corporation |
Table of Contents
Corporate Governance Matters
Related Party Transactions
In accordance with SEC rules, we maintain a policy on related party
transactions (“Related Party Transaction Policy”), which requires the Audit and Finance Committee to review all known
Reportable Related Party Transactions. A Reportable Related Party Transaction is a transaction, arrangement or relationship (or
series of similar transactions, arrangements or relationships) in which:
> |
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We (or one of our subsidiaries) was, is or will be a participant; |
> |
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The aggregate amount involved exceeds $120,000 in any fiscal year; and |
> |
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Any person who is, or at any time since the beginning of the Company’s last fiscal year
was, an executive officer, director, director nominee or holder of at least 5% of our equity securities (each a “Covered
Person”), or any of such person’s immediate family members had, has or will have a direct or indirect material
interest. |
In accordance with the Related Party Transaction Policy, Covered
Persons are required to identify affiliations or relationships that they or their immediate family members have that could reasonably
be expected to give rise to a Reportable Related Party Transaction. Based on this information, our legal staff, in consultation
with the finance team, performs the necessary diligence to determine whether a Reportable Related Party Transaction exists. Upon
determining that a transaction was, is, or will be a Reportable Related Party Transaction, the General Counsel presents all relevant
facts and circumstances to the Audit and Finance Committee, which reviews transactions for materiality and determines whether the
transaction is in the best interest of ConocoPhillips, before either approving, ratifying, or disapproving it. In making its decision,
the Audit and Finance Committee considers whether the transaction is on terms comparable to those that could be obtained in arm’s
length dealings with an unrelated third party and the extent of the Covered Person’s interest in the transaction, taking
into account the conflicts of interest provisions of ConocoPhillips’ Code of Business Ethics and Conduct and such other factors
as it believes are relevant.
The Audit and Finance Committee approved or ratified the following
transaction:
We employ Cameron Smith, son-in-law of William L. Bullock,
Jr., our President, Asia Pacific & Middle East, in a non-executive position. The aggregate value of the compensation paid to
Mr. Smith during fiscal year 2019 was approximately $210,057, consisting of salary, annual incentive (earned in fiscal 2019 and
paid in fiscal 2020), and restricted stock units. In addition, Mr. Smith received the standard benefits provided to other non-executive
ConocoPhillips employees for his services during fiscal year 2019.
Table of Contents
Corporate Governance Matters
Board and Committee Evaluations
Each year, the Board performs a rigorous full Board evaluation, and
each director performs a self-evaluation and an evaluation of each of his or her peers. Generally, the evaluation process described
below is managed by the Corporate Secretary’s office with oversight by the Committee on Directors’ Affairs. However,
the Committee on Directors’ Affairs periodically retains an independent third party to manage the evaluation process to ensure
it remains as thorough and transparent as possible.
In addition to participating in the full Board evaluation, members
of each committee also complete a detailed questionnaire annually to evaluate how well the committee is operating and to suggest
improvements. Each committee’s Chair summarizes the responses and reviews them with the members of his or her respective
committee.
The Committee on Directors’ Affairs reviews these evaluation
processes annually and develops any changes it deems necessary to maintain best practices.
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Corporate Governance Matters
Board Risk Oversight
While our management team is responsible for the day-to-day management
of risk, the Board has broad oversight responsibility for our risk-management programs. In this role, the Board is responsible
for ensuring that the risk-management processes designed and implemented by management are functioning as intended and that necessary
steps are taken to foster a culture of prudent decision-making throughout the organization.
In order to maintain effective Board oversight across the entire
enterprise, the Board delegates to individual committees certain elements of its oversight function, as shown below. In addition,
the Board delegates authority to the Audit and Finance Committee to manage the risk oversight efforts of the various committees.
As part of this authority, the Audit and Finance Committee regularly discusses ConocoPhillips’ enterprise risk-management
policies and facilitates appropriate coordination among committees to ensure that our risk-management programs are functioning
properly. The Board receives regular updates from its committees on individual categories of risk, including strategy, reputation,
operations, climate change, people, technology, investment, political, legislative, regulatory, and market, and receives a report
periodically from the Chair of the Audit and Finance Committee about oversight efforts and coordination.
The Board exercises its oversight function with respect to all material
risks to ConocoPhillips, which are identified and discussed in our public filings with the SEC.
Code of Business Ethics and Conduct
ConocoPhillips has adopted a worldwide Code of Business Ethics and
Conduct, which applies to all directors, officers, and employees. The Code of Business Ethics and Conduct is designed to help resolve
ethical issues in an increasingly complex global business environment and covers topics such as conflicts of interest, insider
trading, competition and fair dealing, discrimination and harassment, confidentiality, payments to government personnel, anti-boycott
laws, U.S. embargos and sanctions, compliance procedures, employee complaint procedures, expectations for supervisors, internal
investigations, use of social media, and money laundering. In accordance with good corporate governance practices, we periodically
review and revise the Code of Business Ethics and Conduct as necessary.
The Code of Business Ethics and Conduct is posted on our website
under “Investors > Corporate Governance.” Any amendments to the Code of Business Ethics and Conduct or waivers
of it for our directors and executive officers will be posted on our website promptly to the extent required by law. Stockholders
may request printed copies of our Code of Business Ethics and Conduct by following the instructions located under “Available Information and Questions and Answers About the Annual Meeting and Voting” beginning on page
110.
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Corporate Governance Matters
Commitment to our Culture
We believe our performance is not merely about what we do, but how
we do it. The way we do our work is what sets us apart and drives our performance. We run our business under a set of guiding principles
we call our SPIRIT Values – Safety, People, Integrity, Responsibility, Innovation, and Teamwork. These set the tone for how
we behave with all our stakeholders, internally and externally. They are shared by everyone in our organization, distinguish us
from competitors, and are a source of pride.
We know that our people are one of our greatest assets. Our reputation
and integrity require that each employee, officer, director, and those working on our behalf maintain personal responsibility for
ethical business conduct. We respect one another and have created an inclusive environment that reflects the different backgrounds,
experiences, ideas, and perspectives of our employees. We recognize that a strong corporate culture is critical to our long-term
success. Senior management is influential in defining and shaping our corporate culture and sets the expectations and tone for
an ethical work environment. Our Board also provides valuable oversight in assessing and monitoring our corporate culture. ConocoPhillips
has a longstanding commitment to ensuring respectful, fair, and non-discriminatory treatment for all employees and maintaining
a workforce that is free from all forms of unlawful conduct.
Policies & Training |
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Board Oversight |
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Internal Resources |
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Investigative Processes |
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> Code of Business Ethics and Conduct; mandatory annual
attestations completed by all employees
> Equal Employment Opportunity and Affirmative Action
Policies/Programs
> Workplace Harassment Prevention Training required
for all employees |
|
> Audit and Finance Committee provides oversight to
Global Compliance & Ethics (“GC&E”) organization
> Five in-person Committee/Board meetings throughout
the year
> Compliance program activity, key metrics and aggregate
investigative updates shared with the Audit and Finance Committee |
|
> Multiple avenues to seek guidance or report workplace
ethical concerns
> Ethics Helpline, accessible by phone or online
> Employees can also report to Supervisor, Human Resources
representatives, or directly to GC&E |
|
> Fair and confidential investigative processes conducted
by an independent investigator
> Anonymous reporting always available, zero tolerance
for retaliation
> GC&E reviews all investigation summaries and
recommendations to ensure global consistency |
Human Capital Management
We depend on our employees to successfully execute our differential
strategy and we value their contributions. Their focus on accountability and performance enables us to safely find and deliver
energy to the world. Effectively engaging, developing, retaining, and rewarding our more than 10,000 employees is a priority for
our executives, and for the Board, which provides oversight to elements of our human capital management. We understand and believe
that an engaged workforce is a powerful determinant of business success, and in 2019 we launched a multi-year effort to solicit
feedback from our employees via an employee survey we called “Perspectives.” In our first Perspectives survey, we had
86% employee participation and achieved a satisfaction score that was 5 points higher than general industry and 11 points higher
than our energy peers who used the same platform. Based on survey results, leaders across the company took responsibility for developing
action plans for their areas of accountability to respond to employee feedback. We track progress on the action plans and expect
to resurvey our employees in 2020.
COMPENSATION PROGRAMS
The Human Resources and Compensation Committee oversees many of our
employee compensation programs. Our compensation programs are competitive with local markets and are generally comprised of a base
pay rate, the annual Variable Cash Incentive Program, and for eligible employees, the Restricted Stock Unit Program. From the CEO
to the front-line worker, every employee participates in our annual incentive program, which aligns employee compensation with
ConocoPhillips’ success on critical performance metrics and also recognizes individual performance. Our Restricted Stock
Unit Program is designed to attract and retain employees, reward performance, and align employee interest with stockholders by
encouraging stock ownership. Compensation programs for our top executives are described beginning on page 51.
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Corporate Governance Matters
DIVERSITY AND INCLUSION
The Human Resources and Compensation Committee oversees diversity
and inclusion (“D&I”) across the entire organization. Three areas guide our actions and drive progress: (1) leadership
accountability; (2) employee awareness; and (3) processes and programs. D&I is a critical part of our culture. We have established
governance supporting D&I efforts within ConocoPhillips. In 2019, we named a D&I Champion (a member of our Executive Leadership
Team) and formed a global D&I Council with responsibility for advocating, advising and serving as ambassadors on D&I across
the company. Leaders around the world are accountable for having local D&I plans and meet regularly to discuss challenges,
opportunities, best practices and progress. We actively monitor diversity statistics on a global basis and publicly report representation
of women and minorities in leadership roles. Our disability accommodation policy is available to all employees and accessible in
more than one way. Employees have access to training resources such as unconscious bias training, as well as networking and support
opportunities with employee resource groups. These groups raise awareness about important D&I topics and help influence greater
awareness of diversity and inclusion.
To sustain progress, we link our efforts to our daily activities,
including:
> |
Educating managers on inclusive hiring practices; |
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> |
Conducting immersive D&I training for senior leaders and influencers; |
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> |
Working with a strategic job board partner to connect with individuals and veterans with disabilities that want to find
employment with an inclusive employer; |
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> |
Ensuring diversity of internal and external candidate slates; and |
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> |
Creating balanced interview teams to mitigate any unconscious bias. |
We also apply our high standards for diversity and inclusion throughout
our supply chain by identifying and facilitating opportunities to utilize products and services from businesses owned by women
and minorities. We have recently expanded our supplier diversity program to support the inclusion and utilization of suppliers
that are service-disabled veteran-owned businesses.
TALENT DEVELOPMENT
Talent development is overseen by our Committee on Directors’
Affairs and the Human Resources and Compensation Committee. We recognize that in order to deliver on our strategy, we need to have
a skilled, engaged and aligned workforce. We seek to attract, develop, and retain employees through a combination of on-the-job
learning, formal training, and regular feedback and mentoring. Talent Management Teams guide employee development and career progression
by skills and location. We recently introduced a new performance management program focused on increased objectivity, credibility
and transparency. The new program includes broad stakeholder feedback, frequent real-time recognition and the introduction of a
new ‘how’ rating to assess behaviors to ensure they are in line with our guiding principles. ConocoPhillips has identified
leadership competencies that provide a common baseline of knowledge, skills, abilities, and behaviors to support employee performance,
growth, and success. All employees have access to a voluntary 360-feedback tool to receive feedback on their strengths and opportunities
relative to these competencies. We offer training on a broad range of technical and professional skills, from petrotechnical data
analytics to communication skills.
HEALTH AND WELL-BEING
We work to ensure our global benefits are competitive, inclusive,
aligned with company culture, and allow our employees to meet their individual needs and the needs of their families. We provide
flexible work schedules and competitive time off, including parental leave policies in many locations. Beginning in 2020, our U.S.
parental leave benefit increased from 2 weeks to 6 weeks, and we extended the increased benefit to U.S. employees who became new
parents (birth mothers, non-birth parents, adoptive parents) in 2019. Combined with our maternity benefit (8 weeks), new birth
mothers are eligible for up to 14 weeks of paid leave in 2020. It is important that we help families focus on this most important
job.
Our global wellness programs include biometric screenings and fitness
challenges designed to educate and promote a healthy lifestyle. All employees have access to our employee assistance program, and
many of our locations offer custom programs to support mental well-being. Retirement and savings benefit plans are intended to
support employees’ financial futures and are competitive with local markets.
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Corporate Governance Matters
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Compensation Programs
Oversight by HRCC |
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Diversity & Inclusion
Oversight by HRCC |
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Talent Development
Oversight by DAC/HRCC |
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Health & Well-being |
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> Compensation programs reward and drive performance
> Annual incentive links individual and company performance
> Long-term incentives align with interest of stockholders
> Global equitable pay practices
|
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> Inclusion efforts focus on leadership/metrics, education and programs/processes
> All leadership candidate lists are diverse
> Inclusion resource center; unconscious bias training
> Active employee network groups with 5,000+ members (e.g., Black Employee Network, Women’s Network)
|
|
> Robust succession planning for future leaders
> Multi-year leadership development plan
> Talent Management Teams shepherd employee development
> Annual performance management process; 360 feedback
|
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> Competitive global benefits informed by external market practices and employee needs
> Physical and mental well-being programs
> Global biometric screenings and fitness challenges
> Flexible work schedules and competitive time-off
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External Recognition |
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> Human Rights Campaign’s Corporate Equality Index: Perfect score
> Forbes America’s Best Employers for Diversity
> Forbes World’s Best Employers
> FORTUNE’s 2020 World’s Most Admired Companies
|
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Executive Succession Planning and Leadership Development
Succession planning and leadership development are top priorities
for the Board and management. On an ongoing basis, the Board, with oversight by the Committee on Directors’ Affairs, plans
for succession to the role of CEO and other senior management positions. The Human Resources and Compensation Committee assists
in succession planning, as necessary, and reviews and makes recommendations to the Board regarding people strategies and leadership
development initiatives. To assist the Board, the CEO periodically reports on individual senior executives’ potential to
succeed to the position of CEO and provides an assessment of potential successors to other key positions.
Public Policy Engagement
Legislators and regulators govern all aspects of our industry and
can have considerable influence on our success. Accordingly, senior leadership and our Board encourage involvement in activities
that advance ConocoPhillips’ goals. As a company, we engage in activities that include lobbying, making contributions to
candidates and political organizations from our corporate treasury and our employee political action committee, and participating
in trade associations.
The Board’s Public Policy Committee has approved policies and
guidelines to help ConocoPhillips maintain alignment with our SPIRIT Values and policy principles and compliance with local, state,
and federal laws that govern corporate involvement in activities of a political or public policy nature. The Public Policy Committee
also approves the budget for political contributions and monitors compliance with these plans. In addition, all of these activities
are carefully managed by our Government Affairs division in an effort to yield the best business result for ConocoPhillips and
to satisfy the various reporting requirements. To learn more about our political contribution activity and view our disclosures
related to candidates, political organizations, and trade associations, please visit “About Us > Sustainability Approach > Policies and Positions” at www.conocophillips.com.
Table of Contents
Corporate Governance Matters
Board Meetings and Committees
The Board met five times in 2019. Each director attended at least
75% of the aggregate of the Board and applicable committee meetings held in 2019.
The Board has five standing committees: (1) the Executive Committee;
(2) the Audit and Finance Committee; (3) the Human Resources and Compensation Committee; (4) the Committee on Directors’
Affairs; and (5) the Public Policy Committee. The Board determined that all of the members of the Audit and Finance Committee,
the Human Resources and Compensation Committee, the Committee on Directors’ Affairs, and the Public Policy Committee are
independent directors within the meaning of SEC regulations, the listing standards of the NYSE, and ConocoPhillips’ Corporate
Governance Guidelines. Each committee, other than the Executive Committee, conducts an annual self-evaluation as described under
“Board and Committee Evaluations” on page 23. The charters for our standing
committees can be found on ConocoPhillips’ website at www.conocophillips.com under “Investors > Corporate
Governance > Committees.” Stockholders may request printed copies of these charters by following the instructions
under “Available Information and Questions and Answers About the Annual Meeting and Voting” beginning on page
110.
The committee memberships and respective primary responsibilities
of each committee, as well as the number of meetings each committee held in 2019, are shown below.
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Executive |
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|
2019 meetings | 4
Ryan M. Lance | Chair
Charles E. Bunch
John V. Faraci
Jody Freeman
Robert A. Niblock |
|
|
Primary responsibilities
> Exercises
the authority of the full Board between Board meetings on all matters other than: (1) those matters expressly
delegated to another committee of the Board; (2) the adoption, amendment, or repeal of any of our By-Laws; and (3)
matters that cannot be delegated to a committee under statute or our Certificate of Incorporation or By-Laws. |
|
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Audit and Finance |
|
|
|
|
|
|
2019 meetings | 10
John V. Faraci | Chair
Gay Huey Evans OBE
William H. McRaven
Sharmila Mulligan
David T. Seaton
R.A. Walker |
|
|
Primary responsibilities
> Discusses with management, the independent auditors,
and the internal auditors the integrity of ConocoPhillips’ accounting policies, internal controls, financial statements,
financial reporting practices, and select financial matters, including our capital structure, complex financial transactions,
financial risk management, retirement plans, and tax planning.
> Reviews the qualifications, independence, and performance
of our independent auditors and the qualifications and performance of our internal auditors and chief compliance officer.
> Reviews our compliance with legal and regulatory
requirements and corporate governance, including our Code of Business Ethics and Conduct.
> Discusses with management and the chief compliance
officer the implementation and effectiveness of the Company’s global compliance and ethics program.
> Maintains open and direct lines of communication
with the Board and our management, internal auditors, independent auditors, and the global compliance and ethics organization.
> Assists the Board in fulfilling its oversight of
enterprise risk management, particularly with regard to: (1) market-based risks; (2) financial reporting; (3) effectiveness
of information systems and cybersecurity; and (4) commercial trading.
> Reviews, and coordinates the review by other committees
of, significant corporate risk exposures and steps management has taken to monitor, control, and report such exposures. |
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Corporate Governance Matters
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Human Resources
and Compensation |
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|
2019 meetings | 7
Charles E. Bunch | Chair
John V. Faraci
Jeffrey A. Joerres
William H. McRaven
Sharmila Mulligan
Arjun N. Murti |
|
|
Primary responsibilities
> Oversees our executive compensation policies, plans,
programs, and practices and reviews our retention strategies.
> Assists the Board in discharging its responsibilities
relating to the fair and competitive compensation of our executives and other key employees.
> Together with the Lead Director, annually reviews
the performance of the CEO.
> Annually reviews and determines compensation for
the CEO and our Senior Officers.
> Reviews and makes recommendations to the Board regarding
people strategies and initiatives, such as leadership development, cultural and diversity and inclusion management.
> Assists the Board in fulfilling its oversight of
enterprise risk management, particularly risks in connection with compensation programs and practices and retention strategies. |
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Directors’ Affairs |
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2019 meetings | 5
Robert A. Niblock | Chair
Charles E. Bunch
C. Maury Devine
Jody Freeman
Jeffrey A. Joerres
Arjun N. Murti |
|
|
Primary responsibilities
> Selects and recommends director candidates to be
submitted for election at the Annual Meeting and to fill any vacancies on the Board.
> Recommends committee assignments to the Board.
> Reviews and recommends to the Board compensation
and benefits policies for non-employee directors.
> Monitors the orientation and continuing education
programs for directors.
> Conducts an annual assessment of the qualifications
and performance of the Board and each of the directors.
> Reviews and reports to the Board annually on the
succession-planning process for the CEO and senior management.
> Assists the Board in fulfilling its oversight of
enterprise risk management, particularly risks in connection with governance policies and procedures. |
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Public Policy |
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2019 meetings | 5
Jody Freeman | Chair
C. Maury Devine
Gay Huey Evans OBE
Robert A. Niblock
David T. Seaton
R.A. Walker |
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Primary responsibilities
> Advises the Board on current and emerging domestic
and international public policy issues.
> Assists the Board in developing and reviewing policies
and budgets for charitable and political contributions.
> Reviews and makes recommendations to the Board on,
and monitors compliance with, policies, programs, and practices with regard to health, safety, environmental protection,
government relations, and similar matters.
> Assists the Board in fulfilling its oversight of
enterprise risk management, particularly risks in connection with social, political, safety, and environmental, operational
integrity, and public policy aspects of our business and the communities where we operate. |
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Table of Contents
Corporate Governance Matters
Non-Employee Director Compensation
Our non-employee director compensation program consists primarily
of an equity component and a cash component.
OBJECTIVES AND PRINCIPLES
The Board’s goal in designing director compensation is to provide
a competitive package that will enable us to attract and retain highly-skilled individuals with relevant experience to oversee
ConocoPhillips’ strategic direction. Our compensation program also reflects the time and talent required to serve on the
board of a complex, multinational corporation. The Board seeks to provide sufficient flexibility in the form of compensation to
meet directors’ varying needs while ensuring that a substantial portion of compensation is linked to the long-term success
of ConocoPhillips.
Compensation for non-employee directors is reviewed annually by the
Committee on Directors’ Affairs and set upon approval by the Board. Compensation for non-employee directors has remained
unchanged since 2013. At that time, the Board approved the current levels of compensation after a recommendation from the Committee
on Directors’ Affairs, which had undertaken a review with an independent compensation consultant.
In 2019, for the fourth year in a row, the Committee on Directors’
Affairs met with a second independent compensation consultant to review the non-employee director compensation program and to determine
whether to recommend any changes to that program. These reviews included comparisons of director compensation levels with, and
examined trends in director compensation, at the compensation reference group and the Fortune 50 – 150 companies.
See “Process for Determining Executive Compensation — Peers and Benchmarking” beginning on page
64. In connection with these reviews, the consultant noted that our director compensation program was within the limits
set out in the stockholder-approved 2014 Omnibus Stock and Performance Incentive Plan under which director awards are made. All
four years, the Board agreed with the recommendation of the Committee on Directors’ Affairs that no change in director compensation
was warranted.
EQUITY COMPENSATION
Non-employee directors receive an annual grant of restricted stock
units with an aggregate value of $220,000 on the date of grant. The restricted stock units are fully vested at grant and are credited
with dividend equivalents in the form of additional restricted stock units, but they cannot be sold or otherwise transferred.
Prior to each annual grant, a director may elect the schedule on
which the restrictions will lapse. When restrictions lapse, a director will receive unrestricted shares of ConocoPhillips stock
in exchange for his or her restricted stock units. Regardless of the schedule a director elects, all restrictions on a director’s
restricted stock units will lapse in the event of the director’s retirement, disability, or death, or upon a change in control
of ConocoPhillips, unless the director has elected to defer receipt of the shares until a later date. Directors forfeit the units
if, before restrictions lapse (and prior to any change in control), the Board finds sufficient cause for forfeiture.
Restricted stock units granted to directors who are not residents
of the United States may have modified terms in accordance with applicable laws and tax rules. Thus, the restricted stock units
granted to Mr. Norvik, who served as a director until his retirement effective May 14, 2019, had slightly different terms responsive
to the tax laws of his home country (Norway); the most notable difference is that the restrictions lapsed only in the event of
retirement, death, or loss of position, including upon a change in control.
CASH COMPENSATION
In 2019, each non-employee director received $115,000 annual cash
compensation, as well as the following additional cash compensation based upon their respective committee assignments:
> |
Lead Director—$35,000 |
|
|
> |
Chair of the Audit and Finance Committee—$25,000 |
|
|
> |
Chair of the Human Resources and Compensation Committee—$20,000 |
|
|
> |
Chair of any other committee—$10,000 |
|
|
> |
All other Audit and Finance Committee members—$10,000 |
|
|
> |
All other Human Resources and Compensation Committee members—$7,500 |
|
|
> |
All other committee members—$5,000 |
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Corporate Governance Matters
This cash compensation is payable in monthly installments. Each director
may elect, on an annual basis, to receive all or part of his or her cash compensation in unrestricted stock or in restricted stock
units or to have the amount credited to a deferred compensation account. Any such unrestricted stock or restricted stock units
will be issued on the last business day of each month and valued using the average of the high and the low market prices of ConocoPhillips
common stock on such date. The restricted stock units issued in lieu of cash compensation are subject to the same restrictions
as the annual restricted stock units described under “Equity Compensation” on page
30.
The Board has approved modifications of the compensation for directors
who are taxed under the laws of other countries. In 2019, Mr. Norvik, a Norwegian director, was the only director to receive compensation
subject to such modification. Mr. Norvik, who served as a director until his retirement effective May 14, 2019, received compensation
that would otherwise have been received as cash only as restricted stock units. Restricted stock units issued to Mr. Norvik were
subject to the same restrictions as the annual restricted stock unit grants described under “Equity Compensation”
on page 30.
DEFERRAL OF COMPENSATION
Directors can elect to defer their cash compensation into the Deferred
Compensation Plan for Non-Employee Directors of ConocoPhillips (“Director Deferral Plan”). Deferred amounts are deemed
to be invested in various mutual funds and similar investment choices, including ConocoPhillips common stock, selected by the director
from a prescribed list. Mr. Norvik (from Norway) could not defer cash compensation.
MATCHING GIFT PROGRAM
All active and retired directors are eligible to participate in the
ConocoPhillips Matching Gift Program. This program provides a dollar-for-dollar match of a gift of cash or securities (up to a
maximum of $10,000 annually per donor for active directors and $5,000 annually per donor for retired directors) to tax-exempt charities
and educational institutions, excluding religious, political, fraternal, or athletic organizations. The Board believes the Matching
Gift Program is consistent with ConocoPhillips’ commitment to social responsibility.
OTHER COMPENSATION
We provide transportation or reimburse the cost of transportation
when a director travels on ConocoPhillips business, including to attend meetings of the Board or a committee. From time to time,
spouses and other guests of directors may be invited to attend certain meetings at the request of the Board. The Board believes
this creates a collegial environment that enhances the effectiveness of the Board. If spouses or other guests are invited to attend
meetings, ConocoPhillips reimburses directors for the out-of-pocket cost of the additional travel and related incidental expenses.
Any such reimbursement is treated by the Internal Revenue Service as taxable income to the applicable director. Directors do not
receive gross-ups to compensate for the resulting income taxes.
STOCK OWNERSHIP
Each director is expected to own ConocoPhillips stock in the amount
of the aggregate annual equity grants received during his or her first five years on the Board. Directors are expected to reach
this level of target ownership within five years of joining the Board. Actual shares of stock, restricted stock, or restricted
stock units, including deferred stock units, may be counted in satisfying the stock ownership guidelines. The holdings of each
of our directors currently meet or exceed these guidelines.
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Corporate Governance Matters
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
Name |
|
Fees
Earned or
Paid in
Cash(1) |
|
Stock
Awards(2)(3) |
|
Option
Awards |
|
Non-Equity
Incentive Plan
Compensation |
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
on Earnings |
|
All Other
Compensation(4) |
|
Total |
C.E. Bunch |
|
$135,833 |
|
$220,016 |
|
$— |
|
$— |
|
$— |
|
$10,000 |
|
$365,849 |
C.M. Devine |
|
126,667 |
|
220,016 |
|
— |
|
— |
|
— |
|
10,000 |
|
356,683 |
J.V. Faraci |
|
147,860 |
|
220,016 |
|
— |
|
— |
|
— |
|
10,000 |
|
377,876 |
J. Freeman |
|
130,000 |
|
220,016 |
|
— |
|
— |
|
— |
|
— |
|
350,016 |
G. Huey Evans |
|
130,000 |
|
220,016 |
|
— |
|
— |
|
— |
|
14,200 |
|
364,216 |
J.A. Joerres |
|
130,000 |
|
220,016 |
|
— |
|
— |
|
— |
|
— |
|
350,016 |
W.H. McRaven |
|
132,500 |
|
220,016 |
|
— |
|
— |
|
— |
|
— |
|
352,516 |
S. Mulligan |
|
132,500 |
|
220,016 |
|
— |
|
— |
|
— |
|
— |
|
352,516 |
A.N. Murti |
|
128,333 |
|
220,016 |
|
— |
|
— |
|
— |
|
— |
|
348,349 |
R.A. Niblock |
|
156,888 |
|
220,016 |
|
— |
|
— |
|
— |
|
10,000 |
|
386,904 |
H.J. Norvik
(retired)(5) |
|
69,957 |
|
220,016 |
|
— |
|
— |
|
— |
|
23,840 |
|
313,813 |
(1) |
Reflects 2019 annual cash compensation of $115,000 payable to each non-employee director. In 2019,
non-employee directors serving in specified committee positions also received the following additional cash compensation: |
> |
Lead Director—$35,000 |
|
> |
All other Audit and Finance Committee members—$10,000 |
|
|
|
|
|
> |
Chair of the Audit and Finance Committee—$25,000 |
|
> |
All other Human Resources and Compensation Committee members—$7,500 |
|
|
|
|
|
> |
Chair of the Human Resources and Compensation Committee—$20,000 |
|
> |
All other committee members—$5,000 |
|
|
|
|
|
> |
Chair of any other committee—$10,000 |
|
|
|
|
Amounts shown include prorated amounts attributable to committee reassignments, which may occur during the year. Amounts
shown in the Fees Earned or Paid in Cash column include any amounts that were voluntarily deferred to the Director
Deferral Plan, received in ConocoPhillips common stock, or received in restricted stock units. Messrs. Faraci and Norvik received
100% of their cash compensation in restricted stock units in 2019, and Mr. Niblock received 60% of his cash compensation in
restricted stock units in 2019, with an aggregate grant date fair value as shown in the table. All other directors received
their cash compensation in cash or deferred such amounts into the Director Deferral Plan. |
|
|
(2) |
Amounts represent the aggregate grant date fair value of stock awards granted under our non-employee director compensation
program. On January 15, 2019, each non-employee director received a 2019 annual grant of restricted stock units with an aggregate
value of $220,000 based on the average of the high and low price for our common stock, as reported on the NYSE, on the grant
date. These grants are made in whole shares, with fractional share amounts rounded up, resulting in a grant of shares with
a value of $220,016 to each person who was a director on January 15, 2019. |
|
|
(3) |
The following table reflects, for each director, the aggregate number of stock awards outstanding as of December 31, 2019: |
Name |
|
Number of
Deferred Shares
or Units of Stock |
C.E. Bunch |
|
22,019 |
C.M. Devine |
|
7,243 |
J.V. Faraci |
|
29,951 |
J. Freeman |
|
22,232 |
G. Huey Evans |
|
25,868 |
J.A. Joerres |
|
4,348 |
W.H. McRaven |
|
3,395 |
S. Mulligan |
|
7,243 |
A.N. Murti |
|
30,292 |
R.A. Niblock |
|
56,309 |
H.J. Norvik (retired) |
|
— |
Table of Contents
Corporate Governance Matters
The following table lists delivery of director stock awards in 2019:
Name |
|
Number of Shares
Acquired on
Award Delivery |
|
Value Realized
Upon Award
Delivery |
C.E. Bunch |
|
— |
|
$ — |
C.M. Devine |
|
— |
|
— |
J.V. Faraci |
|
— |
|
— |
J. Freeman |
|
3,335 |
|
222,487 |
G. Huey Evans |
|
— |
|
— |
J.A. Joerres |
|
— |
|
— |
W.H. McRaven |
|
— |
|
— |
S. Mulligan |
|
— |
|
— |
A.N. Murti |
|
— |
|
— |
R.A. Niblock |
|
— |
|
— |
H.J. Norvik (retired) |
|
82,687 |
|
5,068,387 |
(4) |
The following table reflects, for each director, the items contained in All Other Compensation.
None of the directors, other than Mr. Norvik as described below, had aggregate personal benefits or perquisites of $10,000
or more in value. |
Name |
|
Tax
Reimbursement
Gross-Up(a) |
|
Retirement
Gifts(b) |
|
Matching Gift
Amounts(c) |
|
Total |
C.E. Bunch |
|
$ — |
|
$ — |
|
$10,000 |
|
$10,000 |
C.M. Devine |
|
— |
|
— |
|
10,000 |
|
10,000 |
J.V. Faraci |
|
— |
|
— |
|
10,000 |
|
10,000 |
J. Freeman |
|
— |
|
— |
|
— |
|
— |
G. Huey Evans |
|
— |
|
— |
|
14,200 |
|
14,200 |
J.A. Joerres |
|
— |
|
— |
|
— |
|
— |
W.H. McRaven |
|
— |
|
— |
|
— |
|
— |
S. Mulligan |
|
— |
|
— |
|
— |
|
— |
A.N. Murti |
|
— |
|
— |
|
— |
|
— |
R.A. Niblock |
|
— |
|
— |
|
10,000 |
|
10,000 |
H.J. Norvik (retired) |
|
7,341 |
|
16,499 |
|
— |
|
23,840 |
(a) |
The amounts shown are for payments by ConocoPhillips relating to certain taxes incurred by the director
for imputed income. These occurred when a retirement presentation was made to Mr. Norvik upon his retirement from the Board.
ConocoPhillips has a practice of making gift presentations to its retiring directors, especially those of long service. The
fair value of the retirement presentation was imputed to Mr. Norvik’s income. In such circumstances, if a director is
imputed income in accordance with applicable tax laws, ConocoPhillips generally will reimburse the director for the resulting
increased tax costs. All such tax reimbursements have been included above, regardless of whether the corresponding perquisite
or personal benefit is required to be reported pursuant to SEC rules and regulations. |
|
|
(b) |
The amounts shown are the fair value for a retirement presentation and costs for Mr. Norvik’s spouse to travel to
attend his retirement event. ConocoPhillips has a practice of making gift presentations to its retiring directors, especially
those of long service. |
|
|
(c) |
ConocoPhillips maintains a Matching Gift Program under which we match certain gifts by directors to charities and educational
institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3)
of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries.
For active directors, the program matches up to $10,000 in each program year. Administration of the program can cause us to
pay more than $10,000 in a single fiscal year due to a lag in processing claims. The amounts shown are for the actual payments
by ConocoPhillips in 2019. Mr. Lance is eligible for the Matching Gift Program as an executive rather than as a director.
Information on the value of matching gifts for Mr. Lance is provided in the Summary Compensation Table on page
85 and the notes to that table. |
(5) |
Mr. Norvik retired from the Board effective May 14, 2019. The amounts in the table above include his prorated compensation
reflecting the portion of 2019 that he served as a director. |
Table of Contents
Item 1: Election of Directors and Director Biographies
What am I Voting On?
You are voting on a proposal to elect the 13 nominees named in
this Proxy Statement to one-year terms as ConocoPhillips directors.
WHAT IS THE MAKEUP OF THE BOARD OF DIRECTORS AND HOW OFTEN ARE
THE MEMBERS ELECTED?
Our Board currently has 13 members. Directors are elected at the
annual stockholder meeting each year. Any vacancy on the Board created between annual stockholder meetings (if, for example, a
current director resigns or the size of the Board is increased) may be filled by a majority vote of the remaining directors then
in office. Any director appointed to fill a vacancy would hold office until the next election.
Under our Corporate Governance Guidelines, directors generally may
not stand for re-election after they reach the age of 72.
WHAT IF A NOMINEE IS UNABLE OR UNWILLING TO SERVE?
All director nominees have consented to serve. However, should a
director become unable or unwilling to serve before the date of the Annual Meeting and the Board does not elect to reduce the size
of the Board, shares represented by proxies may be voted for a substitute nominated by the Board.
HOW ARE DIRECTORS COMPENSATED?
Please see our discussion of non-employee director compensation beginning
on page 30.
HOW ARE NOMINEES SELECTED?
The Committee on Directors’ Affairs regularly evaluates the
size and composition of the Board and continually assesses whether the composition appropriately relates to ConocoPhillips’
strategic needs, which change as the business environment evolves. We seek director candidates who possess the highest personal
and professional ethics, integrity, and values and who are committed to representing the long-term interests of all ConocoPhillips’
stakeholders.
The chart below shows our process for identifying and integrating
new directors.
How We Select New Board
Members
Table of Contents
Item 1: Election of Directors and Director Biographies
Our Corporate Governance Guidelines contain director independence
standards consistent with the standards prescribed in the NYSE Listed Company Manual and provide that, at all times, at least a
substantial majority of the Board must meet those standards. The Committee on Directors’ Affairs also seeks to ensure that
the Board reflects a range of talents, ages, skills, personal attributes, and expertise—particularly in the areas of leadership
and management, financial reporting, issues specific to oil- and gas-related industries, both domestic and international markets,
public policy and government regulation, technology, public company board service, human capital management and environmental and
sustainability matters —sufficient to provide sound and prudent guidance with respect to ConocoPhillips’ strategic
needs. The Board seeks to maintain a diverse membership and also requires that its members be able to dedicate the time and resources
necessary to ensure the diligent performance of their duties, including attending Board and applicable committee meetings. To that
end, the Committee on Directors’ Affairs considers the number of other boards on which each candidate already serves. Directors
should advise the Chair of the Board and the Chair of the Committee on Directors’ Affairs in advance of accepting an invitation
to serve on another public company board.
The following are some of the key qualifications and skills the Committee
on Directors’ Affairs considered in evaluating the director nominees. The chart on the next page shows how these qualifications
and skills are distributed among our nominees. The individual biographies beginning on page 38 provide
additional information about how each nominee’s specific experiences, qualifications, and skills align with and further the
strategic direction of ConocoPhillips.
CEO or senior
officer. We believe that directors with CEO or senior officer experience provide valuable insights. These
individuals have a demonstrated record of leadership and a practical understanding of organizations, processes, strategy,
risk and risk management, and the methods to drive change and growth. Through their service as top leaders at other
companies, they also bring valuable perspectives on common issues affecting large and complex organizations. |
Financial reporting. We measure operating and strategic
performance by reference to financial targets. In addition, accurate financial reporting and robust auditing are critical
to ConocoPhillips’ success. Accordingly, we seek to have a number of directors who could qualify as audit committee
financial experts (as defined by SEC rules), and we expect all of our directors to be financially knowledgeable. We also believe
it is important to have knowledge and experience in capital markets, both debt and equity, given our position as a large publicly-traded
company. |
Industry. We seek to have directors with significant
experience in the energy industry. These directors have valuable perspective on issues specific to our business. |
|
|
|
|
|
|
Global. As a global energy company, our future success depends, in part,
on how well we grow our businesses outside the United States. Directors with global business or international experience provide
valued perspectives on our operations. |
Regulatory/government. The perspectives of directors who have experience
within the regulatory field are important. The energy industry is heavily regulated and directly affected by governmental
actions and decisions, and we believe that directors with government experience offer valuable insight in this regard. |
Technology. Experience or expertise in information technology helps
us pursue and achieve our business objectives. Leadership and understanding of technology, cybersecurity risk, cloud computing,
scalable data analytics, and big data technologies add exceptional value to our Board as we increasingly utilize our global
data assets to monitor and optimize our operations. |
|
|
|
|
|
|
Public company board service. ConocoPhillips aspires to the highest
standards of corporate governance and ethical conduct. Service on the boards and board committees of other large, publicly-traded
companies provides an understanding of corporate governance practices and trends and insights into: (1) board management;
(2) relations between the board, the CEO, and senior management; (3) agenda setting; and (4) succession planning.
We believe this experience supports our goals of strong board and management accountability, transparency, and protection
of stockholder interests. |
Human capital management. We could not execute our differential strategy
without employees, which is why we value directors with experience in effectively engaging, developing, retaining and rewarding
employees. |
Environmental/sustainability. We adhere to robust operating standards
and procedures that have delivered a proven track record. Our sustainable development approach is integrated into ConocoPhillips’
planning and decision making. We believe this experience strengthens the Board’s oversight and ensures that strategic
business essentials and long-term value creation for stockholders are achieved with a responsible, sustainable business model
which fosters a stable and healthy environment for tomorrow and proactively addresses stakeholder interests. |
Table of Contents
Item 1: Election of Directors and Director Biographies
NOMINEE SKILLS MATRIX |
|
|
|
|
Nominee
Skills |
|
Nominees and Primary Occupation |
Other Current U.S. Public
Company Directorships |
Dir. Since |
Age |
Ind. |
|
|
|
|
|
|
|
|
|
|
|
Charles E. Bunch
Former Chairman and Chief Executive Officer, PPG Industries, Inc. |
> PNC Financial
Services Group
> Marathon Petroleum
Corporation
> Mondelẽz International,
Inc. |
2014 |
70 |
|
|
|
|
|
|
|
|
|
|
|
|
Caroline Maury Devine
Former President and Managing Director of a Norwegian affiliate of ExxonMobil |
> John
Bean Technologies Corporation
> Valeo |
2017 |
69 |
|
|
|
|
|
|
|
|
|
|
|
|
John V. Faraci
Former Chairman and Chief Executive Officer, International Paper Company |
> PPG Industries,
Inc.
> United States
Steel Corporation
> United Technologies
Corporation |
2015 |
70 |
|
|
|
|
|
|
|
|
|
|
|
|
Jody Freeman
Archibald Cox Professor of Law, Harvard Law School |
|
2012 |
56 |
|
|
|
|
|
|
|
|
|
|
|
|
Gay Huey Evans OBE
Chairman, London Metal Exchange |
|
2013 |
65 |
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Joerres
Former Executive Chairman and Chief Executive Officer, ManpowerGroup Inc. |
> The Western
Union Company
> Artisan Partners
Asset Management Inc. |
2018 |
60 |
|
|
|
|
|
|
|
|
|
|
|
|
Ryan M. Lance
Chairman and Chief Executive Officer, ConocoPhillips |
|
2012 |
57 |
|
|
|
|
|
|
|
|
|
|
|
|
Admiral William H. McRaven
Retired U.S. Navy Four-Star Admiral (SEAL) |
|
2018 |
64 |
|
|
|
|
|
|
|
|
|
|
|
|
Sharmila Mulligan
Chief Strategy Officer, Alteryx |
|
2017 |
54 |
|
|
|
|
|
|
|
|
|
|
|
|
Arjun N. Murti
Senior Advisor, Warburg Pincus |
|
2015 |
50 |
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Niblock
Former Chairman, President, and Chief Executive Officer,
Lowe’s Companies, Inc. |
> Lamb Weston |
2010 |
57 |
|
|
|
|
|
|
|
|
|
|
|
|
David T. Seaton
Former Chairman and Chief Executive Officer, Fluor Corporation |
> The Mosaic Company |
2020 |
58 |
|
|
|
|
|
|
|
|
|
|
|
|
R.A. Walker
Former Chairman and Chief Executive Officer, Anadarko Petroleum Corporation |
> BOK Financial Corporation |
2020 |
63 |
|
|
|
|
|
|
|
|
|
|
Table of Contents
Item 1: Election of Directors and Director Biographies
Generally, the Committee on Directors’ Affairs identifies candidates
through business and organizational contacts of the directors and management, though third-party search firms occasionally assist
as well. Stockholders are also welcome to recommend director candidates for consideration. If you wish to recommend a candidate
for nomination to the Board, please follow the procedures described under “Submission of Future Stockholder Proposals
and Nominations” on page 109 for nominations made directly by a stockholder. Candidates
recommended by stockholders are evaluated on the same basis as all other candidates.
After the 2019 Annual Meeting of Stockholders, at which eleven of
the current nominees for directors were elected, the Committee on Directors’ Affairs recommended and the Board concurred
in electing Mr. David T. Seaton and Mr. R.A. Walker to the Board effective March 2, 2020. Both Mr. Seaton and Mr. Walker were identified
as part of the Committee on Directors’ Affairs regular process for identifying potential director nominees. Both were identified
by a recommendation from members of management.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?
Each nominee requires the affirmative vote of a majority of the votes
cast at the Annual Meeting; the number of votes cast “for” a director must exceed the number of votes cast “against”
that director. In a contested election (if the number of nominees exceeded the number of directors to be elected), directors would
be elected by a plurality of the shares represented at the meeting and entitled to vote on the election of directors.
WHAT IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF THE
VOTES CAST?
If a nominee who is serving as a director is not elected at the Annual
Meeting and no one else is elected in place of that director, then, under Delaware law, the director continues to serve on the
Board as a “holdover director.” However, under our By-Laws, a holdover director is required to tender a resignation
to the Board. The Committee on Directors’ Affairs then would consider the resignation and recommend to the Board whether
to accept or reject it or whether some other action should be taken. The Board would then make a decision, without participation
by the holdover director. The Board is required to disclose publicly (by a news release, filing with the SEC, or other broadly
disseminated means of communication) its decision regarding the tendered resignation and the rationale behind that decision within
90 days from the date the election results are certified.
Table of Contents
Item 1: Election of Directors and Director Biographies
WHO ARE THIS YEAR’S DIRECTOR NOMINEES?
The following 13 directors are standing for election to hold
office until the 2021 Annual Meeting of Stockholders. Each of the director nominees is a current director.
Former Chairman and Chief Executive Officer, PPG Industries, Inc. |
Age: 70
Director Since: May 2014
ConocoPhillips Committees:
Human Resources
and Compensation
Committee (Chair)
Committee on
Directors’ Affairs
Executive Committee
Other current U.S. public
company directorships:
> PNC Financial Services Group
> Marathon
Petroleum Corporation
> Mondelēz International, Inc.
|
Mr. Bunch served as Chairman and Chief Executive Officer
of PPG Industries, Inc. from July 2005 to August 2015 and Executive Chairman from September 2015 to September 2016. He
was President and Chief Operating Officer of PPG from July 2002 until he was elected President and Chief Executive Officer
in March 2005 and Chairman and Chief Executive Officer in July 2005. Before becoming President and Chief Operating Officer,
he was Executive Vice President of PPG from 2000 to 2002 and Senior Vice President, Strategic Planning and Corporate Services
of PPG from 1997 to 2000. Mr. Bunch was with PPG for more than 35 years prior to his retirement, holding positions in
finance and planning, marketing, and general management in the United States and Europe. He currently serves on the boards
of PNC Financial Services Group, Marathon Petroleum Corporation, and Mondelẽz International, Inc. He previously
served as a director of H.J. Heinz Company; as chairman of the Federal Reserve Bank of Cleveland, the National Association
of Manufacturers, and the American Coatings Association; and as a member of the University of Pittsburgh’s board
of trustees.
Skills and Qualifications:
The Board values Mr. Bunch’s experience as a director and CEO in a highly-regulated industry, as
well as his management and finance experience. Additionally, Mr. Bunch has a strong background in management development and compensation.
His international business experience with global issues facing a large, multinational public company enables him to provide the
Board with valuable operational and financial expertise.
CEO or senior officer
Financial reporting
Global
Regulatory/government
Public company
board service
Human capital management
|
Former President and Managing Director of a Norwegian affiliate of ExxonMobil |
Age: 69
Director Since: October
2017
ConocoPhillips Committees:
Committee
on
Directors’ Affairs
Public Policy Committee
Other current U.S. public
company directorships:
> John Bean Technologies
Corporation
> Valeo
|
Ms. Devine served as President and Managing Director of a Norwegian affiliate of ExxonMobil from 1996 to 2000 and, since 1988, held various corporate positions in Mobil Corporation and was responsible for shareholder relations and governance issues, as well as international government relations with an emphasis on Vietnam, Indonesia, Nigeria, and Russia.
Ms. Devine previously served the U.S. government for 15 years in positions on the White House Domestic Policy Staff, in the U.S. Embassy in Paris, and in the Drug Enforcement Administration. She is currently a member of the Council on Foreign Relations.
In addition to current positions on the boards of John Bean Technologies Corporation and Valeo, Ms. Devine previously served on the boards of Det Norske Veritas, FMC Technologies, Inc., Technip and the Nominating Committee of Petroleum Geo-Services ASA. She is a former Fellow at Harvard University’s Belfer Center for Science and International Affairs.
Skills and Qualifications:
Ms. Devine’s broad range of expertise in international affairs within the industry, as well as her government experience and service on other public company boards, are very valuable. Her senior officer experience demonstrates an understanding of organizations and the ability to deliver results.
CEO or senior officer
Financial reporting
Industry
Global
Regulatory/government
Public company board service
Environmental/ sustainability
Human capital management
|
Table of Contents
Item 1: Election of Directors and Director
Biographies
Former Chairman and Chief Executive Officer, International Paper Company |
Age: 70
Director Since: January 2015
ConocoPhillips Committees:
Audit
and Finance
Committee (Chair)
Human
Resources and
Compensation Committee
Executive Committee
Other current U.S. public
company directorships:
> PPG Industries,
Inc.
> United States
Steel Corporation
> United Technologies
Corporation
|
Mr. Faraci
served as Chairman and Chief Executive Officer of International Paper Company from 2003 until his
retirement in 2014. He spent his career of more than 40 years at International Paper, also serving as the
company’s Chief Financial Officer and in various other financial, planning and management positions. Mr.
Faraci serves on the board of directors for PPG Industries, Inc., United States Steel Corporation and United
Technologies Corporation. He is a trustee of the American Enterprise Institute, Denison University, and
the National Fish and Wildlife Foundation. He is also an operating partner with Advent International and
a member of the RBC Capital Markets Advisory Council.
Skills and Qualifications:
The Board values Mr. Faraci’s experience as a director and
CEO. His international business experience at a large public company enables him to provide the Board with valuable operational
and financial expertise and an informed management perspective on global business issues.
CEO or senior officer
Financial reporting
Global
Public company
board service
Environmental/
sustainability
Human capital management
|
Archibald Cox Professor of Law, Harvard Law School |
Age: 56
Director Since: July 2012
ConocoPhillips Committees:
Public
Policy
Committee (Chair)
Committee on
Directors’ Affairs
Executive Committee
|
Ms. Freeman
is the Archibald Cox Professor of Law at Harvard Law School and founding director of the Harvard
Law School Environmental and Energy Law and Policy Program. She is a nationally renowned scholar
of administrative law and environmental law, and an expert on federal energy regulation and climate
change.
Ms. Freeman
formerly served as Counselor for Energy and Climate Change in the White House from 2009 to
2010 and as an independent consultant to the National Commission on the Deepwater Horizon Oil Spill
and Offshore Drilling in 2010.
Ms. Freeman
has served as a member of the Administrative Conference of the United States, which advises the
government on regulatory innovation. She currently serves on the Advisory Council of the Electric Power
Research Institute.
Ms. Freeman is a Fellow of the American College of Environmental
Lawyers, and a member of the American Academy of Arts and Sciences and a member of the Council on Foreign Relations.
Skills and Qualifications:
Ms. Freeman’s expertise in environmental and energy law
and policy and her unique experiences in shaping federal environmental and energy policy, especially in matters critical to ConocoPhillips’
operations, enable her to provide valuable insight into our policies and practices.
Industry
Regulatory/government
Environmental/sustainability
|
Table of Contents
Item 1: Election of Directors and Director Biographies
Chairman, London Metal Exchange |
Age: 65
Director Since: March 2013
ConocoPhillips Committees:
Audit and Finance
Committee
Public Policy Committee
|
Ms. Huey Evans is Chairman of the Board of Directors of the London
Metal Exchange and a member of Her Majesty’s Treasury Board, Sub-Committee, and Nominations Committee. She is also a non-executive
director of Standard Chartered PLC and Itau BBA International Limited. She also currently serves as Trustee of the Beacon Awards,
which celebrate British philanthropy; a Trustee of Wellbeing of Women, where she is Chair of the Investment Committee; and a Senior
Advisor of Chatham House. She was Vice Chairman, Investment Banking and Investment Management at Barclays Capital from 2008 to
2010. She was previously head of governance of Citi Alternative Investments (EMEA) from 2007 to 2008 and President of Tribeca Global
Management (Europe) Ltd. from 2005 to 2007, both part of Citigroup. From 1998 to 2005, she was director of the markets division
and head of the capital markets sector at the U.K. Financial Services Authority. She previously held various senior management
positions with Bankers Trust Company in New York and London. Ms. Huey Evans previously served on the boards of Aviva plc, The London
Stock Exchange Group plc., and Falcon Private Wealth Ltd.
Skills and Qualifications:
Ms. Huey Evans’ in-depth knowledge of, and insight
into, global capital markets from her extensive experience in the international financial services industry brings valuable
expertise to ConocoPhillips’ businesses.
Financial reporting
Public
company
board service
Regulatory/government
Global
|
Former Executive Chairman and Chief Executive Officer, ManpowerGroup Inc. |
Age: 60
Director Since: July 2018
ConocoPhillips Committees:
Human
Resources and
Compensation Committee
Committee on
Directors’ Affairs
Other current U.S. public
company directorships:
> The
Western Union
Company
> Artisan
Partners Asset
Management Inc.
|
Mr. Joerres served as Chief Executive Officer of ManpowerGroup
Inc. from 1999 to 2014, as Chairman of the Board from 2001 to 2014, and as Executive Chairman from May 2014 to December
2015. Mr. Joerres joined ManpowerGroup in 1993 and served as Vice President of Marketing and Senior Vice President of
European Operations and Marketing and Major Account Development.
He currently serves on the boards of The Western Union
Company and Artisan Partners Asset Management Inc. He previously served as a director of Johnson Controls International
plc and Artisan Funds, Inc. Additionally, Mr. Joerres is on the board of the Green Bay Packers, Boys and Girls Clubs of
Milwaukee, BMO Harris Bradley Center, and Kohler Co. He is a minority owner in the Milwaukee Bucks. Mr. Joerres is a former
director and Chairman of the Federal Reserve Bank of Chicago.
Skills and Qualifications:
Mr. Joerres’s extensive global leadership and human
capital management experience and substantial involvement on both public and private boards enable him to provide guidance
to the Board with respect to ConocoPhillips’ people and operations.
CEO or senior officer
Financial reporting
Global
Regulatory/government
Public company
board service
Human capital management
|
Table of Contents
Item 1: Election of Directors and Director Biographies
Chairman and Chief Executive Officer, ConocoPhillips |
Age: 57
Director Since: April 2012
ConocoPhillips Committees:
Executive Committee
(Chair)
|
Mr. Lance was appointed Chairman and Chief Executive
Officer in May 2012, having previously served as Senior Vice President, Exploration and Production—International
since May 2009. Prior to that he served as President, Exploration and Production—Asia, Africa, Middle East and Russia/Caspian
since April 2009. Mr. Lance previously served as President, Exploration and Production—Europe, Asia, Africa and
the Middle East from September 2007 to April 2009. From February 2007 to September 2007, he served as Senior Vice President,
Technology, and, prior to that, Mr. Lance served as Senior Vice President, Technology and Major Projects beginning in
2006. He served as President, Downstream Strategy, Integration and Specialty Businesses from 2005 to 2006.
Skills and Qualifications:
Mr. Lance’s service as Chairman and Chief Executive
Officer of ConocoPhillips makes him well qualified to serve both as a director and Chairman of the Board. Mr. Lance’s
extensive experience in the industry as an executive in our exploration and production businesses, and as the global representative
of ConocoPhillips, make his service as a director invaluable.
CEO or senior officer
Industry
Global
Regulatory/government
Environmental/
sustainability
Human capital management
|
|
Admiral William H. McRaven |
|
|
|
Retired U.S. Navy Four-Star Admiral (SEAL) |
Age: 64
Director Since: October 2018
ConocoPhillips Committees:
Audit
and
Finance Committee
Human
Resources and
Compensation Committee
|
William H. McRaven is a retired U.S. Navy Four-Star Admiral (SEAL) and the former Chancellor of the University of Texas System. During his time in the military, he commanded special operations forces at every level, eventually taking charge of all U.S. Special Operations. His military career included combat during Desert Storm and both the Iraq and Afghanistan wars. As the Chancellor of the University of Texas System from January 2014 until May 2018, he led one of the nation’s largest and most respected systems of higher education, with over 230,000 students and 100,000 faculty, staff, and healthcare professionals.
Admiral McRaven is a recognized national authority on U.S. foreign policy and has advised Presidents George W. Bush and Barack Obama and other U.S. leaders on defense issues. He currently serves on the Council on Foreign Relations and the National Football Foundation.
Skills and Qualifications:
Admiral McRaven’s international, logistical, and administrative experience brings valuable expertise on global business issues and government relations to the Board.
CEO or senior officer
Financial reporting
Global
Regulatory/government
Human capital management
|
Table of Contents
Item 1: Election of Directors and Director Biographies
Chief Strategy Officer, Alteryx |
Age: 54
Director Since: July 2017
ConocoPhillips Committees:
Audit
and
Finance Committee
Human
Resources and
Compensation Committee |
Ms. Mulligan is the Chief Strategy Officer at Alteryx.
She joined Alteryx in April 2019 through the company’s acquisition of ClearStory Data, where she served as Founder
and Chief Executive Officer since its inception in September 2011. From 2009 to 2011, Ms. Mulligan served as Executive
Vice President for Aster Data Systems, Inc. until its acquisition by Teradata Corporation. Prior to Aster Data, Ms. Mulligan
was a Vice President of Software Solutions for HP Inc. Prior to HP, Ms. Mulligan was Executive Vice President of Products
and Marketing at Opsware Inc. from 2002 until its eventual acquisition by HP in 2007. Prior to Opsware Inc., Ms. Mulligan
led Product Management and held Vice President positions at Netscape Communications, Microsoft, and General Magic. Ms.
Mulligan is on the board of Lattice Engines, Inc. and an advisor to, and investor in, numerous enterprise software and
consumer technology companies.
Skills and Qualifications:
Ms. Mulligan’s experience in cloud computing, scalable data analytics, and a broad range
of big data technologies plus Internet of Things and Artificial Intelligence innovation adds exceptional value to the
Board. Her experience as a CEO enables her to provide the Board with beneficial strategic leadership qualities.
CEO or senior officer
Human capital management
Financial reporting
Technology
|
Senior Advisor, Warburg Pincus |
Age: 50
Director Since: January 2015
ConocoPhillips Committees:
Human
Resources and
Compensation Committee
Committee on
Directors’ Affairs
|
Mr. Murti is Senior Advisor at Warburg Pincus. He previously
served as a Partner at Goldman Sachs from 2006 to 2014. Prior to becoming Partner, he served as Managing Director from
2003 to 2006 and as Vice President from 1999 to 2003. During his time at Goldman Sachs, Mr. Murti worked as a sell-side
equity research analyst covering the energy sector. He was co-director of equity research for the Americas from 2011 to
2014. Previously, Mr. Murti held equity analyst positions at JP Morgan Investment Management from 1995 to 1999 and at
Petrie Parkman from 1992 to 1995.
Skills and Qualifications:
Mr. Murti brings to the Board a deep understanding
of financial oversight and accountability with his experience as a Partner at Goldman Sachs. He has spent more than 25
years in the financial services industry with an extensive focus, both domestic and global, on the energy industry. This
experience provides the Board valuable insight into financial management and analysis.
Financial reporting
Industry
Global
|
Table of Contents
Item 1: Election of Directors and Director
Biographies
|
Robert A. Niblock, Lead Director |
|
|
|
Former Chairman, President, and Chief Executive Officer, Lowe’s Companies, Inc. |
Age: 57
Director Since: February 2010
ConocoPhillips Committees:
Committee
on Directors’
Affairs (Chair)
Public Policy Committee
Executive Committee
Other current U.S. public
company directorships:
> Lamb Weston
|
Mr. Niblock served as Chairman of the Board and Chief Executive Officer of Lowe’s Companies, Inc. from January 2005 until July 2018 and as President of Lowe’s from 2011 until July 2018, after having served in that role from 2003 to 2006. Mr. Niblock became a member of the board of directors of Lowe’s when he was named Chairman- and CEO-elect in 2004. Mr. Niblock joined Lowe’s in 1993 and during his career with the company, he also served as Vice President and Treasurer, Senior Vice President, and Executive Vice President and CFO. Before joining Lowe’s, Mr. Niblock had a nine-year career with accounting firm Ernst & Young. Mr. Niblock served as a member of the board of directors of the Retail Industry Leaders Association from 2003 until 2018 and served as its Secretary from 2012 until 2018. He previously served as its chairman in 2008 and 2009 and as vice chairman in 2006 and 2007.
Skills and Qualifications:
The Board values his experience as a CEO and in financial reporting matters. Mr. Niblock’s experience as a CEO of a large public company allows him to provide the Board with valuable operational and financial expertise.
CEO or senior officer
Human capital management
Financial reporting
Public company board service
|
Former Chairman and Chief Executive Officer, Fluor Corporation |
Age: 58
Director Since: March
2020
ConocoPhillips Committees:
Audit
and Finance
Committee
Public Policy Committee
Other current U.S. public
company directorships:
> The Mosaic
Company
|
Mr. Seaton is the former Chairman and Chief Executive
Officer of Fluor Corporation. He became CEO and joined Fluor’s board of directors in February 2011, and was elected
to the role of Chairman of the board in February 2012. Mr. Seaton held numerous positions in both operations and sales
globally since joining the company in 1985.
Mr. Seaton serves on the board of directors of The
Mosaic Company and the National Association of Manufacturers. He has served in leadership positions of numerous business
associations, including the Business Roundtable, the International Business Council, the American Petroleum Institute
and the U.S.-Saudi Arabian Business Council. In 2011, he was appointed by the U.S. Secretary of Energy to serve as a
member of the National Petroleum Council.
Mr. Seaton is currently the Chairman of the National
Board of Governors of the Boys and Girls Clubs of America, and previously served in leadership positions for the Boys
and Girls Clubs of America and United Way of Greater Dallas.
Skills and Qualifications:
As a former CEO of a multinational engineering and construction
company, Mr. Seaton brings valuable experience and expertise in operational and financial matters. The Board believes
Mr. Seaton’s international business experience with global issues facing a large, multinational public company make
him well qualified to serve as a member of the Board.
CEO or senior officer
Financial reporting
Industry
Global
Regulatory/government
Public company
board service
Human capital management
|
Table of Contents
Item 1: Election of Directors and Director Biographies
Former Chairman and Chief Executive Officer, Anadarko Petroleum Corporation |
Age: 63
Director Since: March
2020
ConocoPhillips Committees:
Audit
and Finance
Committee
Public Policy Committee
Other current U.S. public
company directorships:
> BOK Financial
Corporation
|
Mr. Walker is currently a Senior Advisor to Crane Capital.
He previously served as Chairman and Chief Executive Officer (CEO) of Anadarko Petroleum Corporation until August of 2019,
when the company was purchased by Occidental Petroleum. He joined Anadarko in 2005 as Senior Vice President and Chief
Financial Officer, later serving as President and Chief Operating Officer, before becoming CEO in 2012. Prior to his time
at Anadarko, he worked in the oil and gas industry, investment and commercial banking, and as an institutional investor.
Skills and Qualifications:
In addition to his former role as Chairman and CEO
of Anadarko, Mr. Walker has significant energy industry, commercial and investment banking and asset management experience,
as well as technology, regulatory, governmental and international business experiences. He has served on and chaired numerous
boards of public and private companies, industry trade associations and philanthropic organizations bringing a broad range
of experience and expertise to the Board.
CEO or senior officer
Financial reporting
Industry
Global
Regulatory/government
Public company
board service
Human capital management
Technology
|
FOR |
|
The Board recommends you vote FOR
each nominee standing for election as director. |
Table of Contents
Audit and Finance Committee Report
The Audit and Finance Committee (the “Audit Committee”)
assists the Board in fulfilling its responsibility to provide independent, objective oversight for ConocoPhillips’ financial
reporting functions and internal control systems.
The Audit Committee currently consists of six non-employee directors.
The Board has determined that each member of the Audit Committee satisfies the requirements of the NYSE as to independence and
financial literacy. The Board has determined that at least one member, John V. Faraci, is an audit committee financial expert
as defined by the SEC.
The responsibilities of the Audit Committee are set forth in the
written charter adopted by the Board and last amended on October 4, 2019. The charter is available on our website at www.conocophillips.com
under “Investors > Corporate Governance.”
The Audit Committee’s responsibilities include:
> Discussing
with management, the independent auditors, and the internal auditor the integrity of ConocoPhillips’ accounting
policies, internal controls, financial statements, financial reporting practices, and select financial matters, including
capital structure, complex financial transactions, financial risk management, retirement plans, and tax planning;
> Reviewing,
and coordinating the review by other committees of, significant corporate risk exposures and steps management has taken
to monitor, control, and report such exposures;
>
Reviewing the qualifications, independence, and performance of our independent auditors and the qualifications
and performance of our internal auditors and chief compliance officer;
>
Reviewing ConocoPhillips’ overall direction and compliance with legal and regulatory requirements and
internal policies, including our Code of Business Ethics and Conduct;
>
Assisting the Board in fulfilling its oversight of enterprise risk management, particularly with respect to: (1)
market-based risks; (2) financial reporting; (3) effectiveness of information systems and cyber-security; and (4) commercial
trading;
>
Discussing with management and the chief compliance officer the implementation and effectiveness of our global
compliance and ethics program; and
>
Maintaining open and direct lines of communication with the Board and management, our Compliance and Ethics
Office, the internal auditors, and the independent auditors.
|
Management is responsible for preparing ConocoPhillips’ financial
statements in accordance with generally accepted accounting principles, or GAAP, and for developing, maintaining, and evaluating
our internal controls over financial reporting and other control systems. The independent registered public accountant is responsible
for auditing the annual financial statements prepared by management, assessing the internal control over financial reporting, and
expressing an opinion with respect to each.
One of the Audit Committee’s primary responsibilities is to
assist the Board in its oversight of the integrity of ConocoPhillips’ financial statements. The following report summarizes
certain of the Audit Committee’s activities in this regard for 2019.
Review with Management. The
Audit Committee reviewed and discussed with management the audited consolidated financial statements included in ConocoPhillips’
Annual Report on Form 10-K for the year ended December 31, 2019, which included a discussion of the quality—not
just the acceptability—of the accounting principles, the reasonableness of significant judgments, and the clarity of the
disclosures. The Audit Committee also discussed management’s assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2019, included in the financial statements.
Discussions with Internal Audit.
The Audit Committee reviewed ConocoPhillips’ internal audit plan and discussed the results of internal audit activity
throughout the year. ConocoPhillips’ General Auditor met with the Audit Committee at every in-person meeting in 2019 and
was available to meet without management present at each of these meetings.
Table of Contents
Audit and Finance Committee Report
Discussions with the Independent
Registered Public Accounting Firm. The Audit Committee met throughout the year with Ernst & Young LLP
(“EY”), ConocoPhillips’ independent registered public accounting firm, including meeting with EY at each in-person
meeting; EY was also available to meet without management present at each of these meetings. The Audit Committee has discussed
with EY the matters required to be discussed by standards of the Public Company Accounting Oversight Board, or PCAOB. The Audit
Committee has received the written disclosures and the letter from EY required by PCAOB rules and has discussed with EY its independence
from ConocoPhillips. In addition, the Audit Committee considered the non-audit services EY provides to ConocoPhillips and concluded
that EY’s independence has been maintained.
Recommendation to the ConocoPhillips
Board of Directors. Based on its review and discussions noted above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in ConocoPhillips’ Annual Report on Form 10-K for the year
ended December 31, 2019.
THE CONOCOPHILLIPS AUDIT AND FINANCE COMMITTEE
John V. Faraci, Chair
Gay Huey Evans OBE
William H. McRaven
Sharmila Mulligan
David T. Seaton
R.A. Walker
Table of Contents
Item 2: Proposal to Ratify the Appointment of Ernst & Young LLP
What am I Voting On?
The Audit Committee has appointed EY to serve as ConocoPhillips’
independent registered public accounting firm for fiscal year 2020. You are voting on a proposal to ratify such appointment.
WHAT ARE THE AUDIT COMMITTEE’S RESPONSIBILITIES WITH RESPECT
TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM?
The Audit Committee is directly responsible for the appointment,
compensation, retention, and oversight of the independent registered public accounting firm retained to audit our financial statements
and has the authority to determine whether to retain or terminate the independent auditor.
The Audit Committee reviews the experience and qualifications of
the senior members of the independent auditor’s team and is directly involved in the appointment of the lead audit partner.
Neither the lead audit partner nor the reviewing audit partner performs audit services for ConocoPhillips for more than five consecutive
fiscal years. The Audit Committee also is responsible for determining and approving the audit engagement fees and other compensation
associated with retaining the independent auditor.
The Audit Committee has evaluated the qualifications, independence,
and performance of EY and believes that continuing to retain EY to serve as our independent registered public accounting firm is
in the best interest of ConocoPhillips’ stockholders.
WHAT SERVICES DOES THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM PROVIDE?
Audit services of EY for fiscal year 2019 included an audit of our
consolidated financial statements, an audit of the effectiveness of our internal control over financial reporting, and services
related to periodic filings made with the SEC. Additionally, EY provided certain other services as described below.
HOW MUCH WAS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PAID FOR 2019 AND 2018?
EY’s fees for professional services totaled $13.8 million
for 2019 and $14.5 million 2018. EY’s fees for professional services included the following:
> Audit Fees—fees
for audit services, which related to the fiscal year consolidated audit, the audit of the effectiveness of internal controls, quarterly
reviews, registration statements, comfort letters, statutory and regulatory audits, and related accounting consultations, were
$12.6 million for 2019 and $12.9 million for 2018.
> Audit-Related Fees—fees
for audit-related services, which consisted of audits in connection with benefit plan audits, other subsidiary audits, special
reports, asset dispositions, and related accounting consultations, were $1.1 million for 2019 and $1.4 million for 2018.
> Tax Fees—fees
for tax services, which consisted of tax compliance services and tax planning and advisory services, were $0.1 million for
2019 and $0.2 million for 2018.
> All Other Fees—fees
for other services were negligible in 2019 and 2018.
|
Table of Contents
Item 2: Proposal to Ratify the Appointment of Ernst & Young LLP
The Audit Committee has considered whether the non-audit services
provided to ConocoPhillips by EY impaired EY’s independence and concluded they did not.
WHO REVIEWS THESE SERVICES AND FEES?
The Audit Committee has adopted a pre-approval policy that provides
guidelines for the audit, audit-related, tax, and other non-audit services that EY may provide to ConocoPhillips. The policy (1) identifies
the guiding principles that must be considered by the Audit Committee in approving services to ensure that EY’s independence
is not impaired; (2) describes the audit, audit-related, tax, and other services that may be provided and the non-audit services
that are prohibited; and (3) sets forth pre-approval requirements for all permitted services. Under the policy, all services
to be provided by EY must be pre-approved by the Audit Committee. The Audit Committee has delegated authority to review and approve
services to its Chair. Any such approval must be reported to the entire Audit Committee at the next scheduled Audit Committee meeting.
WILL A REPRESENTATIVE OF ERNST & YOUNG BE PRESENT AT
THE MEETING?
One or more representatives of EY will be present at the Annual Meeting.
The representative(s) will have an opportunity to make a statement and will be available to respond to appropriate questions from
stockholders.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?
Approval of this proposal requires the affirmative vote of a majority
of the shares present and entitled to vote on the proposal. If the appointment of EY is not ratified, the Audit Committee will
reconsider the appointment.
FOR |
|
The Audit and Finance Committee recommends you vote FOR the ratification of the appointment of Ernst & Young LLP as ConocoPhillips’ independent registered public accounting firm for fiscal year 2020. |
Table of Contents
Item 3: Advisory Approval of Executive Compensation
What am I Voting On?
Stockholders are being asked to vote on the following advisory
resolution:
RESOLVED, that the stockholders approve the compensation of ConocoPhillips’
Named Executive Officers as described in the “Compensation Discussion and Analysis” section and in the tabular
disclosures regarding Named Executive Officer compensation (together with the accompanying narrative disclosures) in this Proxy
Statement.
ConocoPhillips is providing stockholders with the opportunity to
vote on an advisory resolution, commonly known as “Say on Pay,” considering approval of the compensation of ConocoPhillips’
Named Executive Officers.
The Human Resources and Compensation Committee, which is responsible
for the compensation of our executive officers, has overseen the development of a compensation program designed to attract, retain,
and motivate executives who enable us to achieve our strategic and financial goals. The “Compensation Discussion and Analysis”
and the tabular disclosures regarding Named Executive Officer compensation, together with the accompanying narrative disclosures,
explain the trends in compensation and application of our compensation philosophies and practices for the years presented.
The Board believes that ConocoPhillips’ executive compensation
program aligns the interests of our executives with those of our stockholders. Our compensation program is guided by the philosophy
that ConocoPhillips’ ability to responsibly deliver energy and provide sustainable value is driven by superior individual
performance. The Board believes we must offer competitive compensation to attract and retain experienced, talented, and motivated
employees. In addition, the Board believes employees in leadership roles within the organization are motivated to perform at their
highest levels when performance-based pay constitutes a significant portion of their compensation. The Board believes that our
philosophy and practices have resulted in executive compensation decisions that are aligned with company and individual performance,
are appropriate in value, and have benefited ConocoPhillips and its stockholders.
WHAT IS THE EFFECT OF THIS RESOLUTION?
Because your vote is advisory, it will not be binding upon the Board.
However, the Human Resources and Compensation Committee and the Board will take the outcome of the vote into account when considering
future executive compensation arrangements.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?
Approval of this proposal requires the affirmative vote of a majority
of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal.
FOR |
|
The Board recommends you vote FOR the advisory approval of the compensation of ConocoPhillips’ Named Executive Officers. |
Table of Contents
Role of the Human Resources and Compensation Committee
Authority and Responsibilities
The Human Resources and Compensation Committee (the “HRCC”)
is responsible for providing independent, objective oversight for ConocoPhillips’ executive compensation programs, and for
determining the compensation of our Senior Officers. Our internal guidelines define a Senior Officer as an employee who is a senior
vice president or higher, any executive who reports directly to the CEO, or any other employee considered an officer under Section 16(b)
of the Securities Exchange Act of 1934. As of December 31, 2019, ConocoPhillips had 14 active Senior Officers. In addition,
the HRCC acts as administrator of the compensation programs and certain of the benefit plans for Senior Officers and as an avenue
of appeal for current and former Senior Officers disputing compensation or certain benefits. Finally, the HRCC assists the Board
in overseeing the integrity of ConocoPhillips’ executive compensation practices and programs described in the “Compensation Discussion and Analysis” beginning on page 51.
A complete listing of the authority and responsibilities of the HRCC
is set forth in the written charter adopted by the Board and last amended on December 7, 2018, which is available on our website
at www.conocophillips.com under “Investors > Corporate Governance.”
Members
The HRCC currently consists of six members. All members must meet
the independence requirements for “non-employee” directors under the Securities Exchange Act of 1934, for “independent”
directors under the NYSE Listed Company Manual, and for “outside” directors under the Internal Revenue Code. The members
of the HRCC and the member to be designated as Chair are reviewed and recommended annually by the Committee on Directors’
Affairs to the full Board.
Meetings
The HRCC holds regularly scheduled meetings in association with each
regular Board meeting and meets by teleconference between such meetings as necessary. In 2019, the HRCC had seven meetings. The
HRCC reserves time at each regularly scheduled meeting to review matters in executive session with no members of management or
management representatives present except as specifically requested by the HRCC. Additionally, the HRCC meets with the Lead Director
at least annually to evaluate the performance of the CEO. More information regarding the HRCC’s activities at such meetings
appears in the “Compensation Discussion and Analysis” beginning on page 51.
Continuous Improvement
The HRCC is committed to a process of continuous improvement in exercising its responsibilities. To that end, the HRCC: |
|
>
Routinely receives training regarding best practices for executive compensation;
>
With the assistance of management and consultants, independent compensation consultants, and, when deemed appropriate,
independent legal counsel, regularly reviews its responsibilities and governance practices in light of ongoing changes
in the legal and regulatory arena and trends in corporate governance; |
|
> Annually reviews
its charter and proposes any desired changes to the Board;
>
Annually conducts an assessment of its performance that evaluates the effectiveness of its actions and seeks ideas
to improve its processes and oversight; and
>
Regularly reviews and assesses whether our executive compensation programs are having the desired effects without
encouraging an inappropriate level of risk. |
Table of Contents
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material
elements of the compensation of our Named Executive Officers (“NEOs”) and describes the objectives and principles underlying
ConocoPhillips’ executive compensation programs, the compensation decisions we have recently made under those programs, and
the factors we considered in making those decisions.
In 2019, our NEOs included the following:
Ryan M. Lance
Chairman and Chief Executive Officer |
|
Donald E. Wallette, Jr.
Executive Vice President and Chief Financial Officer |
|
Matthew J. Fox
Executive Vice President and Chief Operating Officer |
|
|
|
|
|
Kelly B. Rose
Senior Vice President, Legal, General Counsel, and Corporate Secretary |
|
William L. Bullock, Jr.
President, Asia Pacific and Middle East |
|
|
Our executive compensation philosophy is focused on linking pay with performance. It is designed to reflect appropriate governance practices, align with the needs of our business, and maintain a strong link between executive pay and successful execution of our strategy. |
For
an overview of ConocoPhillips and our operations, see page 5 of our Proxy Summary |
Table of Contents
Compensation Discussion and Analysis
Executive Overview
2019 COMPENSATION PROGRAM STRUCTURE
Each year the HRCC, advised by its independent compensation consultant
and informed by feedback from stockholders, undertakes a rigorous process to establish and review executive compensation. The HRCC
believes a substantial portion of our executive compensation should be equity-based and focused on rewarding long-term performance
and furthermore, that this approach most closely aligns the interests of our top executives with those of our stockholders.
The four primary elements of our executive compensation program are
designed to provide a target total value for compensation that is competitive with our peers and attracts and retains the talented
executives necessary to manage a large and complex company like ConocoPhillips. The following chart summarizes the principal components
of our executive compensation program and the performance drivers of each element.
2019 Element of Pay |
|
Overview |
|
Key Benchmarks/Performance Measures |
Annual |
|
|
|
|
Salary
|
|
Fixed cash compensation to attract and retain executives and balance at-risk compensation
Range: Salary grade minimum / maximum |
|
> Benchmarked to compensation reference group median; adjusted for experience, responsibility, performance, and potential |
Variable Cash Incentive Program (“VCIP”)
|
|
Variable annual cash compensation to motivate and reward executives for achieving annual goals and
strategic milestones that are critical to our strategic priorities
Range: 0% - 200% of target for corporate performance,
inclusive of individual adjustments |
|
> Health, Safety,
and Environmental (20%)
> Operational
(20%)
> Financial
— Absolute and Relative Adjusted ROCE/CROCE (20%)
> Strategic
Milestones (20%)
> Relative TSR
(20%)
> Measured over
a one-year performance period and aligned with our strategic priorities |
Long-Term Incentive Program (“LTIP”) |
|
|
|
|
|
|
Variable long-term equity-based compensation to motivate and reward executives for achieving multi-year
strategic priorities
Granted at beginning of three-year performance period with final cash payout following the conclusion
of the performance period based on HRCC assessment of progress toward pre-established corporate performance metrics and
stock price on the settlement date
Range: 0% - 200% of total target award, inclusive of corporate performance
adjustments |
|
> Relative TSR (50%)(3)
> Financial – Relative Adjusted ROCE/CROCE
(30%)(3)
> Strategic Objectives (20%)(3)
> Measured over a three-year performance period
and aligned with our strategic priorities
> Stock price |
|
Long-term equity-based compensation designed to encourage executive retention while incentivizing
absolute performance that is aligned with stockholder interests
Annual award settles in cash on 3rd anniversary of grant date based on the stock price on the settlement
date(2)
Range: 0% - 100% of target |
|
> Stock price
> Vest in three years |
(1) |
Prior to the 2018 equity grants, the LTIP consisted of the
performance share program weighted at 60% and the stock option program weighted at 40%. Effective with equity grants in 2018,
the HRCC approved replacing stock options with three-year, time-vested restricted stock units at a weight of 35% and increasing
the weighting of performance shares to 65%. |
|
|
(2) |
Beginning with 2020 grants, Executive Restricted Stock Unit grants will
be settled in shares rather than cash to provide additional common stock ownership though the Company’s executive compensation
programs, and better align with market practice. |
|
|
(3) |
Performance share programs commencing prior to 2019, including PSP 17,
include Strategic Objectives as a PSP measure; however, effective with performance share programs commencing in 2019, Strategic
Objectives has been eliminated as a performance measure from the PSP and the weighting of relative TSR has increased from
50% to 60% and relative Financial (Adjusted ROCE/CROCE) has increased from 30% to 40%. This change eliminates discretion
for determining payouts under the LTIP, which will now be determined solely on a formulaic basis. |
Table of Contents
Compensation Discussion and Analysis
2019 SAY ON PAY VOTE RESULT, STOCKHOLDER ENGAGEMENT, AND BOARD
RESPONSIVENESS
ConocoPhillips regularly engages in dialogue with stockholders to
continue to reinforce our understanding of stockholder views regarding our compensation programs. The Board and the HRCC value
these discussions and also encourage stockholders to provide feedback about our executive compensation programs as described on
page 20 under “Communications with the Board of Directors.”
Strong Say On Pay Support In 2019
We continue to remain committed to our stockholder engagement as
we value our stockholders’ input on our executive compensation programs. We were pleased with the results of the 2019 Say
on Pay vote, which received support of stockholders representing approximately 92% of our outstanding stock. We remain committed
to ongoing dialogue with stockholders and other stakeholders to obtain their input on key matters and inform our management and
Board about the issues that our stockholders tell us matter most to them.
Stockholder Engagement In 2019
Aligned with our commitment to ongoing stockholder engagement, ConocoPhillips
maintains a Governance Leadership Team, which is an engagement team comprised of management and internal subject-matter experts
on strategy, governance, compensation, compliance, human capital management, and environmental and social issues, to lead a comprehensive,
year-round stockholder engagement program.
The Governance Leadership Team that spearheaded our 2019 outreach
efforts consisted of the following members of ConocoPhillips management: Ellen R. DeSanctis, Senior Vice President, Corporate Relations;
Mark Keener, Vice President, Investor Relations; Heather Sirdashney, Vice President, Human Resources; Brian Pittman, General Manager,
Compensation and Benefits; Shannon B. Kinney, Deputy General Counsel, Governance, Corporate, and Employment and Chief Compliance
Officer; Lloyd Visser, Global Head, Sustainable Development; and James Viray, Director, Stakeholder Engagement & Social Responsibility.
In some instances, our Lead Director, Robert A. Niblock, also participated in the stockholder meetings. In these meetings, we discussed
our strategy and value proposition, corporate governance, executive compensation, human capital management, culture, climate change,
and sustainability.
By the Numbers: Stockholder Engagement in Spring and Fall 2019
In 2019, the feedback received from our stockholders
was overwhelmingly positive. Stockholders commended the continuing changes to our compensation programs as being very responsive
to stockholder concerns previously expressed and appreciated the increased disclosures regarding our programs.
Stockholders were generally very satisfied with the level of disclosure in our proxy
statement in 2019. |
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Compensation Discussion and Analysis
Changes for 2019 and 2020
Our pay programs continually evolve to incorporate stockholder feedback,
market best practices, and performance and retention considerations. Additionally, we strive to continue to clarify and simplify
our compensation-related disclosure while providing thorough and meaningful details of our process. We have made the following
changes to our pay programs and disclosure:
2019
Changes: |
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> |
Capped the annual incentive payout at 200% of target, inclusive of individual adjustments, for the Executive Leadership Team, including Named Executive Officers (previously capped at 250%) |
> |
Adopted a percentile-based payout matrix to determine formulaic payouts of relative metrics in performance-based programs (see page 71), while in prior years, the relative payout matrix was based on the Company’s rank among performance peers |
> |
Effective with performance share programs commencing in 2019, eliminated the Strategic Objectives performance measure from PSP and increased the weighting of relative TSR from 50% to 60% and relative Financial metrics (Adjusted ROCE/CROCE) from 30% to 40% |
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This change eliminates discretion for determining payouts
under the LTIP, which will now be determined solely on a formulaic basis. |
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2020 Changes: |
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> |
Beginning with 2020 grants, Executive Restricted Stock Unit grants will be settled in shares instead of cash to provide additional common stock ownership through the Company’s executive compensation programs, and better align with market practice |
> |
Effective with the annual incentive and performance share programs commencing in 2020, added the S&P 500 Total Return Index* to the performance peer group, broadening the performance benchmark beyond industry peers and further aligning executive pay with long-term stockholder interests |
* |
Relative TSR metrics only. |
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Compensation Discussion and Analysis
CONTINUED STRONG EXECUTION OF OUR VALUE PROPOSITION IN 2019
In late 2016, ConocoPhillips launched a unique value proposition
aimed at delivering superior returns to stockholders through price cycles by maintaining disciplined capital allocation
and responsible execution. The value proposition was based on a view that our business, while opportunity-rich, is also mature,
capital-intensive, and cyclical. To succeed, we believed that it was necessary to focus on returns, maintain a strong balance sheet,
grow cash from operations, and generate peer-leading distributions to stockholders. Our value proposition is underpinned by these
principles and as a result, management set forth clear strategic priorities specifying how cash flows from the business were to
be allocated.
Our strategic priorities in 2019, reflect a recommitment to those
we first laid out three years ago:
1 |
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Invest enough capital to sustain production and pay existing dividend; |
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Grow dividend annually; |
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Maintain ‘A’ credit rating; |
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Return > 30 percent of cash from operations to stockholders annually; and |
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Disciplined investment to expand cash from operations. |
We have aligned our strategy with the reality that our business is
mature, capital-intensive and cyclical.
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> |
Because the business is mature, we stay disciplined and allocate capital to deliver strong free cash flow and returns on, and of, capital. In 2019, our combined share repurchases as well as dividend payments represented a return of 43% of CFO2 to stockholders, all of which was funded from free cash flow. |
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> |
We have a world-class, diverse, low cost of supply portfolio, and optimize our investments to lower our capital intensity. Our portfolio is diversified both geologically and geographically. Since launching our value proposition in late 2016, we have grown our resource base with a cost of supply below $40 per barrel West Texas Intermediate. |
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> |
We address the cyclical nature of our business by maintaining a low cash breakeven price and maintaining financial strength. Our capital program can be funded at what we believe is a peer-leading cash flow breakeven price and we maintain a balance sheet with a leverage ratio of net debt to CFO2 of less than one turn. We strive to be resilient to lower prices, while retaining full upside to higher prices. |
Building on successful years in 2017 and 2018, ConocoPhillips achieved
several important milestones in 2019, as shown below:
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2019 Highlights – Continued Delivering on Our Value Proposition
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> $7.2B earnings, $6.40 EPS; $4.0B adjusted
earnings1, $3.59 adjusted EPS1
> $11.1B cash provided by operating activities,
$11.7B CFO2; $5B free cash flow1
> Ending cash3 of $8.4B
> Reduced asset retirement obligations (“ARO”)
by $2.3B primarily resulting from dispositions4
> Achieved 11% ROCE1 |
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> Returned ~43% of CFO2 to stockholders
> Paid $1.5B in dividends; increased quarterly
dividend by 38%
> Repurchased $3.5B of shares; increased authorization
by $10B to $25B in early 2020
> Continued ESG leadership
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> Delivered underlying production growth of
5%5
> Grew Lower 48 Big 3 production by 22%
> Started GMT-2 construction; sanctioned Tor
II and Malikai Phase 2
> Progressed exploration/ appraisal in Alaska
and Montney
> Achieved a new company record in safety performance
with 0.14 total recordable rate (“TRR”) |
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> Generated $3B of disposition proceeds; $2B
of dispositions pending6
> Completed acquisitions in Lower 48, Alaska
and Argentina
> Awarded new Indonesia production sharing contract
> 100% total reserve replacement; 117% organic
replacement7 |
1 |
Adjusted earnings, adjusted EPS, free cash flow and return on capital employed (“ROCE”)
are non-GAAP measures. Further information related to these measures as well as reconciliations to the nearest GAAP measure
are included on Appendix A. |
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2 |
2019 cash provided by operating activities is $11.1B. Excluding operating working capital change of ($0.6B), cash from
operations is $11.7B. Cash from operations (“CFO”) is a non-GAAP measure and is further defined on Appendix A. |
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Compensation Discussion and Analysis
3 |
Ending cash includes cash, cash equivalents, and restricted cash totaling $5.4B and short-term investments of $3.0B. Restricted
cash was $0.3B. |
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4 |
$2.3B reduction in ARO includes both closed and pending dispositions, of which $741 million was classified as held for
sale as of December 31, 2019. |
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5 |
Underlying production excludes Libya and the impact of closed asset dispositions and acquisitions. |
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6 |
Pending dispositions as of December 31, 2019 include assets for which we have entered into sales agreements, including
Australia-West, Niobrara, and Waddell Ranch in the Lower 48. These dispositions are subject to closing adjustments, as well
as regulatory and other approvals. The Niobrara and Waddell Ranch dispositions closed in the first quarter of 2020 and the
Australia-West disposition is expected to close in early 2020. |
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7 |
Reserve replacement is a ratio representing the change in proved reserves, net of production, divided by current year
production. Organic reserve replacement is a ratio representing the change in proved reserves, net of production and excluding
acquisitions and dispositions, divided by current year production. Further information and calculation of these measures are
included in Other Measures on Appendix A. |
Importantly, we delivered these milestones while operating safely
and continuing to drive our leadership position in ESG matters. We maintained our ongoing practice of engaging with stockholders
throughout 2019 and received consistent feedback that our disciplined, returns-focused strategy is the right one for our business
and that our disclosures were addressing the things that our stockholders care about most.
INDUSTRY-LEADING TRANSFORMATION
Since 2016, we have transformed our company by improving drivers
across all aspects of the business. The chart below describes the highlights of this three-year transformation:
3-Year Highlights – Improving Underlying Performance & Transforming Our Business
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> $31.1B
cash provided by operating activities, $31B CFO; $13.1B free cash flow1
> Reduced
debt by ~$12B
> Single-A
rated by all credit agencies
> Finished
1st in performance peer group for 2017-2019 TSR2
> Finished
1st in performance peer group for 3-year Adjusted ROCE and Adjusted CROCE improvement3 |
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> Returned
~44% of CFO1 to stockholders
> Paid
over $4B in dividends; increased quarterly dividend by 68%
> Authorization
for share repurchase program at $25B; repurchased $9.5B of shares
> Named
to the S&P 500 Index and Dow Jones Sustainability Index |
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> Improvements
in incidents, spills, process safety and TRR
> Grew
Lower 48 Big 3 production by 54%
> Achieved
major project startups in Alaska, Norway, and China; sanctioned GMT-2, Tor II and, Malikai Phase 2
> Successful
exploration in Alaska, Norway, and Malaysia; added resources in Canada’s Montney |
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> Strengthened
portfolio with ~$19B of asset sales to optimize the portfolio
> Acquired
bolt-on interests and acreage in Alaska, Canada and Lower 48
> 23%
total reserve replacement; 143% organic replacement4
> Grew
<$40/BBL WTI CoS resource base; reduced average CoS to <$30/BBL WTI5
> Awarded
new Indonesia production sharing contract |
1 |
CFO and free cash flow are non-GAAP measures. Further information about these measures, as well as
a reconciliation to the nearest GAAP measure can be found in Appendix A. |
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2 |
Total Shareholder Return (“TSR”) is calculated on the 20-day average methodology. Further information about
this measure can be found in “Compensation Discussion & Analysis – Corporate Performance Criteria”,
beginning on page 68. |
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3 |
Adjusted ROCE and Adjusted cash return on capital employed (“CROCE”) are non-GAAP measures. Further information
and calculation of these measures can be found in “Compensation Discussion & Analysis – Corporate Performance Criteria”, beginning on page 68. |
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4 |
Reserve replacement is a ratio representing the change in proved reserves, net of production, divided by production for
the period. Organic reserve replacement is a ratio representing the change in proved reserves, net of production and excluding
acquisitions and dispositions, divided by production for the period. Further information and calculation of these measures
are included in Other Measures on Appendix A. |
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5 |
Cost of supply (“CoS”) is the West Texas Intermediate equivalent price that generates a 10% return on a point
forward and fully-burdened basis. |
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Compensation Discussion and Analysis
Importantly, our three-year performance has been recognized by the
market. While the sector experienced ongoing volatility, ConocoPhillips’ three-year TSR outperformed our performance peers
and the energy sector, generally.
For the three years ended December 31, 2019, TSR was 11.3%.
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Total Shareholder Return* – 3 Year |
* |
TSR in this chart is calculated using the closing price on December 30, 2016 and the closing price
on December 31, 2019 and assumes common stock dividends paid during the stated period are reinvested. |
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Compensation Discussion and Analysis
EXECUTIVE COMPENSATION – STRATEGIC ALIGNMENT
Our executive compensation programs are designed to align compensation
with ConocoPhillips’ disciplined, returns-focused strategy and with the long-term interests of our stockholders. Our goal
to deliver superior returns to stockholders through price cycles is tied to the five strategic cash flow allocation priorities
discussed under “Continued Strong Execution of our Value Proposition in 2019” beginning on page
55. Our compensation metrics are directly tied to our strategic priorities, which provide comprehensive and integrated
support for our value proposition. The following diagram maps each metric to our strategic priorities. We believe this demonstrates
clear alignment between our strategic priorities for value creation and executive compensation.
(1) |
Performance share programs commencing prior to 2019, including
PSP 17, include Strategic Objectives as a PSP measure; however, effective with performance share programs commencing in 2019,
Strategic Objectives has been eliminated as a performance measure from the PSP and the weighting of relative TSR has increased
from 50% to 60% and relative Financial (Adjusted ROCE/CROCE) has increased from 30% to 40%. This change eliminates discretion
for determining payouts under the LTIP, which will now be determined solely on a formulaic basis. |
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Compensation Discussion and Analysis
PAY FOR PERFORMANCE
Our executive compensation programs align pay with performance
that advances our strategic priorities and interests of stockholders. As shown below, approximately 90 percent of the CEO’s
2019 target pay and approximately 83 percent of the other NEOs’ 2019 target pay was performance-based. Stock-based, long-term
incentives make up the largest portion of performance-based pay.
In 2019, the HRCC increased Mr. Lance’s LTIP target awards
by $1 million (see the Grants of Plan-Based Awards Table on page 89). This was the
first increase in Mr. Lance’s overall direct target compensation since 2013. In reaching its decision, the HRCC considered
Mr. Lance’s tenure, his overall performance, the performance of ConocoPhillips during his tenure as CEO and the relative
positioning of target compensation for Mr. Lance as compared to the market median of the compensation reference group. Mr. Lance’s
salary and VCIP target remain unchanged and the increase to his LTIP target awards had no pension impact.
2019 Target Compensation for CEO
2019 Average Target Compensation for Other
NEOs
2019 COMPENSATION METRIC HIGHLIGHTS
Executive compensation in 2019 reflects performance during both
our short- and long-term incentive program periods. Performance highlights in 2019 include:
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HSE |
Operational |
Financial |
Continuous improvement on all HSE metrics versus prior year; however, a serious incident at a drilling location resulted
in fatal injuries to a contractor; best-in-class among integrated and independent peers; achieved a new record with lowest
workforce TRR on record; implemented numerous impactful enterprise initiatives and recognized as HSE industry leader |
Achieved Production, Capital, Operating and Overhead Costs targets while maintaining strong performance with development
and major project milestones |
Achieved target absolute Adjusted ROCE and absolute Adjusted CROCE; finished in the 98th and 95th percentile for Adjusted
ROCE and Adjusted CROCE, respectively, based on absolute results relative to performance peers |
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Strategic Milestones |
TSR* |
Exceeded stockholder distributions target – distributed ~43% of CFO to stockholders; achieved strategic
milestones on dispositions ahead of target; delivered slightly above target underlying production growth at 9.7% on a per
debt-adjusted share basis; maintained differential leadership in financial, environmental and social performance through continuous
improvement of sustainable development risk management |
One-year TSR finished in the 65th percentile; outperforming the majority of our performance peers |
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* |
Consistent with market practice, measuring TSR performance for compensation purposes is based on
a 20-trading day simple average prior to the beginning of a period of time and a 20-trading day simple average prior to the
end of the stated period and assumes common stock dividends paid during the stated period are reinvested. |
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Compensation Discussion and Analysis
See “Continued Strong Execution of our Value Proposition in 2019” on page 55 and “Process for Determining Executive Compensation” beginning on page 62 for a description of how our executive compensation metrics are designed
to align compensation with ConocoPhillips’ disciplined, returns-focused strategy. Also see “2019 Executive Compensation Analysis and Results” beginning on page 71 for a discussion and analysis of payout
decisions.
Philosophy and Principles of our Executive Compensation Program
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Our Goals |
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Our goals are to attract, retain, and motivate high-quality employees and to maintain high standards of principled leadership
so we can responsibly deliver energy to the world and provide sustainable value for our stakeholders, now and in the future. |
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Our Philosophy –
Pay for Performance |
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We believe that:
> Our
ability to responsibly deliver energy and provide sustainable value is driven by superior individual performance;
> A
company must offer competitive compensation to attract and retain experienced, talented, and motivated employees;
> Employees
in leadership roles are motivated to perform at their highest levels when performance-based pay is a significant portion
of their compensation; and
> The
use of judgment by the HRCC plays an important role in establishing increasingly challenging corporate performance criteria
to align executive compensation with company performance.
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Our Strategic Principles |
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To achieve our goals, we implement
our philosophy through the following principles:
> Establish
target compensation levels that are competitive with the companies that we compete against for executive talent;
> Create
a strong link between executive pay and successful execution of our strategy;
> Encourage
prudent risk-taking by our executives;
> Motivate
performance using compensation to reward specific individual accomplishments;
> Retain
talented individuals;
> Maintain
flexibility to better respond to the cyclical energy industry; and
> Integrate
all elements of compensation into a comprehensive package that aligns goals, efforts, and results throughout the organization.
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Components of Executive Compensation
The four primary elements of our executive compensation program
are designed to provide a target total value for compensation that is competitive with our peers and attracts and retains the
talented executives necessary to manage a large and complex organization such as ConocoPhillips.
BASE SALARY
Base salary is a central component of compensation for all of
our salaried employees. Management, with the assistance of Mercer, its outside compensation consultant, thoroughly examines the
scope and complexity of jobs throughout ConocoPhillips and benchmarks the competitive compensation practices for such jobs. As
a result of this work, management has developed a compensation structure that assigns all positions specific salary grades. For
our executives, the base salary midpoint increases as the salary grade increases, but at a lesser rate than the overall target
incentive compensation percentages increase. The result is a higher percentage of at-risk compensation as an executive’s
salary grade rises.
Base salary is important to give employees financial stability
for personal planning purposes. There are also motivational and reward aspects to base salary, as base salary can be changed to
account for considerations such as assigned roles, responsibilities and duties, experience, individual performance, and time in
position. We set base salaries to be competitive within our compensation reference group and, for certain staff positions, Fortune
50-150 Industrials, taking into account responsibilities and duties, individual performance, and time in position. See “Process for Determining Executive Compensation—Peers and Benchmarking” beginning on page
64 for a discussion of our position benchmarking exercise.
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Compensation Discussion and Analysis
PERFORMANCE-BASED PAY PROGRAMS
Annual
Incentive
All of our employees throughout the world—including our
executives—participate in our annual incentive program, called the Variable Cash Incentive Program (“VCIP”).
It is our primary vehicle for recognizing company, business unit, and individual performance for the prior year. We believe that
having an annual “at risk” compensation element gives all employees a financial stake in the achievement of our business
objectives and motivates them to use their best efforts to ensure the achievement of those objectives. We also believe that all
participating employees can have the opportunity to establish and achieve their specified goals within one year.
The base VCIP award is weighted equally for corporate and business
unit performance for most employees, but the Executive Leadership Team, which includes the NEOs, only participates in the corporate
performance component. See “Process for Determining Executive Compensation—Corporate Performance Criteria” beginning
on page 68 for details regarding performance criteria. The HRCC has discretion to adjust base
awards up or down depending on individual performance. For all NEOs other than the CEO, this decision is based on the input of
the CEO, and, for the CEO, this is based on the HRCC’s evaluation of the CEO, conducted jointly with the Lead Director.
The final award, inclusive of any adjustments, may not exceed 200 percent of the target.
Long-Term Incentives
Our primary long-term incentive compensation programs for executives
are the Performance Share Program (“PSP”) and the Executive Restricted Stock Unit Program, which replaced the Stock
Option Program effective with equity grants made in 2018. The HRCC approved replacing stock options with three-year, time-vested
restricted stock units under the Executive Restricted Stock Unit Program in response to stockholder feedback and to be consistent
with market trends. In addition, the HRCC increased the weighting of the long-term incentive award in the form of performance-based
restricted stock units under the PSP from 60 percent to 65 percent and assigned a weight of 35 percent to the Executive Restricted
Stock Unit Program. Approximately 54 of our current employees participate in these programs.
Performance Share Program
The PSP rewards executives based on ConocoPhillips’ performance
over a three-year period. Each year, the HRCC establishes performance metrics and targets for a new three-year performance period.
Thus, performance results in any given year are considered in three overlapping performance periods. We believe use of a multi-year
performance period helps to focus management on longer-term results. PSP award targets are set in shares at the beginning of the
performance period, and actual cash payouts based on the HRCC’s evaluation of performance are calculated using our stock
price after the conclusion of the three-year performance period. Thus, the value of the performance shares is tied to stock price
performance throughout the performance period.
Targets for participants whose salary grades are changed during
a performance period are prorated to align incentive levels with the individual’s current level of responsibility. Changes
in salary not accompanied by a change in salary grade do not affect the existing targets.
At the end of the performance period, the final award may not
exceed 200 percent of the total target award (the initial target award set in restricted stock units, at the beginning of the
performance period, together with reinvested dividend equivalents during the performance period). The final award is determined
by the HRCC following several detailed reviews of company performance. Final awards are based on the HRCC’s evaluation of
ConocoPhillips’ performance relative to the pre-established performance metrics and targets (discussed under “Process
for Determining Executive Compensation—Performance Criteria”). The HRCC reviews and determines compensation for
the CEO and considers input from the CEO with respect to the other NEOs.
In December 2018, the HRCC approved additional changes to the
PSP. Effective with performance share programs commencing in 2019, the Strategic Objectives performance measure was eliminated
from the PSP, the weighting of relative TSR increased from 50 percent to 60 percent and the weighting of relative Financial metrics
(Adjusted ROCE/CROCE) increased from 30 percent to 40 percent. This change eliminates discretion for determining payouts under
the LTIP, which will now be determined solely on a formulaic basis.
Executive Restricted Stock Unit Program
Effective in 2018, in response to stockholder feedback and consistent
with market trends, the HRCC implemented the Executive Restricted Stock Unit Program in place of the Stock Option Program. Like
the PSP, the Executive Restricted Stock Unit Program is designed to reward our executive officers for long-term share performance
and encourage executive retention while incentivizing
Table of Contents
Compensation Discussion and Analysis
absolute performance that is aligned with stockholder interests.
The units vest three years following the date of grant, which is competitive with industry peers. Awards granted in 2018 and 2019
will be settled in cash; however, beginning with awards granted in 2020, awards will be settled in shares of common stock, which
will provide additional common stock ownership through our executive compensation programs and better align with market practice.
The combination of the PSP and the Executive Restricted Stock
Unit Program, along with our Stock Ownership Guidelines described under “Executive Compensation Governance—Alignment of Interests—Stock Ownership and Holding Requirements” on page 82, provides
a comprehensive package of long-term compensation incentives for our executives that align their interests with those of our long-term
stockholders.
Stock Option Program
Per the approval of our HRCC, the Stock Option Program was discontinued
effective with equity grants made in 2018 and was replaced with the Executive Restricted Stock Unit Program. The practice under
the Stock Option Program was to set option exercise prices no lower than the fair market value of ConocoPhillips stock at the
time of the grant. Because an option’s value is derived solely from an increase in our stock price, options only reward
recipients if the value of our stock appreciates. Options granted in 2017 have three-year vesting provisions and are exercisable
for a period of ten years following the grant date in order to incentivize our executives to increase ConocoPhillips’ stock
price over the long term.
Off-Cycle Awards
ConocoPhillips may make awards outside the PSP or the Executive
Restricted Stock Unit Program. Currently, off-cycle awards are generally granted to certain incoming executives for one or more
of the following reasons: (1) to induce an executive to join ConocoPhillips (occasionally replacing compensation the executive
will lose by leaving the prior employer); (2) to induce an executive of an acquired company to remain with ConocoPhillips for
a certain period of time following the acquisition; or (3) to provide a pro rata equity award to an executive who joins ConocoPhillips
during an ongoing performance period that the executive is ineligible to participate in under the standard PSP or Executive Restricted
Stock Unit Program provisions. In these cases, the HRCC has sometimes approved a shorter period for restrictions on transfers
of restricted stock units than those issued under the PSP or Executive Restricted Stock Unit Program. Any off-cycle awards to
Senior Officers must be approved by the HRCC.
Process for Determining Executive Compensation
Our executive compensation programs take into account market-based
compensation for executive talent; internal pay equity among our employees; ConocoPhillips’ past practices; corporate, business
unit, and individual results; and the talents, skills, and experience that each individual executive brings to ConocoPhillips.
Our NEOs each serve without an employment agreement. All compensation for these officers is set by the HRCC as described below.
RISK ASSESSMENT
ConocoPhillips has considered the risks associated with each
of its executive and broad-based compensation programs and policies. As part of the analysis, we considered the performance measures
we use, as well as the different types of compensation, varied performance measurement periods, and extended vesting schedules
utilized under each incentive compensation program. As a result of this review, management concluded the risks arising from our
compensation policies and practices are not reasonably likely to have a material adverse effect on ConocoPhillips. As part of
the Board’s oversight of ConocoPhillips’ risk management programs, the HRCC conducts a similar review with the assistance
of its independent compensation consultant. The HRCC agrees with management’s conclusion that the risks arising from our
compensation policies and practices are not reasonably likely to have a material adverse effect on ConocoPhillips.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
The HRCC annually reviews and determines compensation for the
CEO and for each of the NEOs. This comprehensive and ongoing process begins in February, when performance targets and target compensation
are established for the upcoming year, and final incentive program payouts for the preceding year are evaluated and approved.
During this process, illustrated in the diagram on the following page, the HRCC makes critical decisions on competitive compensation
levels; program design; performance targets; corporate, business unit, and individual performance; and appropriate pay adjustments
necessary to reflect short- and long-term performance.
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Compensation Discussion and Analysis
Compensation decisions reflect input from the HRCC’s independent
consultant and ConocoPhillips’ consultant, stockholders, and management. Among other things, the HRCC considers annual benchmark
data provided by the consultants, dialogue with our largest stockholders, and four in-depth management reviews of ongoing corporate
performance. This comprehensive and rigorous process allows the HRCC to make informed decisions and adjust compensation positively
or negatively, although VCIP, PSP, and Executive Restricted Stock Unit awards may never exceed 200 percent, 200 percent, and 100
percent of the total target award, respectively.
HRCC ANNUAL COMPENSATION CYCLE
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Compensation Discussion and Analysis
MANAGEMENT
ConocoPhillips’ Human Resources department supports the
HRCC in the execution of its responsibilities and manages the development of the materials for each committee meeting, including
market data, individual and company performance metrics, and compensation recommendations. The CEO considers performance and makes
individual recommendations to the HRCC on base salary, annual incentive, and long-term equity compensation with respect to Senior
Officers, including all NEOs other than himself. The HRCC reviews, discusses, modifies, and approves, as appropriate, these recommendations.
No member of the management team, including the CEO, has a role in determining his or her own compensation.
COMPENSATION CONSULTANTS
The HRCC has the sole authority to retain a compensation consultant
to assist in the evaluation of the compensation of the CEO and the Senior Officers and has sole authority to approve such consultant’s
fees and other retention terms and to terminate such consultant. Similarly, the HRCC has authority to retain, terminate, and obtain
advice and assistance from external legal, accounting, or other advisors and consultants.
The HRCC retained FW Cook to serve as its independent executive
compensation consultant in 2019. The HRCC has adopted specific guidelines for its outside compensation consultants, which (1)
require that work done by such consultants other than at the direction of the HRCC be approved in advance by the HRCC; (2) require
the HRCC to conduct a review to determine if it is advisable to replace the independent consultant after a period of five years;
and (3) prohibit ConocoPhillips from employing any individual who worked on our account for a period of one year after that individual
leaves the employ of the independent consultant. FW Cook has provided an annual attestation of its compliance with our guidelines.
Separately, management retained Mercer to, among other things,
assist it in compiling compensation data, conducting analyses, providing consulting services, and supplementing internal resources
for market analysis.
The HRCC considered whether any conflict of interest exists
with either FW Cook or Mercer in light of SEC rules. The HRCC assessed the following factors relating to each consultant in its
evaluation: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s
total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest;
(4) any business or personal relationships between the individual consultants involved in the engagement and a member of the HRCC;
(5) any ConocoPhillips stock owned by the individual consultants involved in the engagement; and (6) any business or personal
relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement.
Both FW Cook and Mercer provided the HRCC with appropriate assurances addressing such factors. Based on this information, the
HRCC concluded that the work of the consultants did not raise any conflict of interest. The HRCC also took into consideration
all factors relevant to FW Cook’s independence from management, including those specified in Section 303A.05(c) of the NYSE
Listed Company Manual, and determined that FW Cook is independent and performs no other services for ConocoPhillips.
PEERS AND BENCHMARKING
We compete for the best talent with our industry peers and with
the broader market. Accordingly, the HRCC regularly reviews the market data, pay practices, and compensation ranges among both
energy industry peers and general industry companies to ensure that we continue to offer competitive executive pay programs. Our
peer groups are reviewed regularly by the HRCC and updated as appropriate. To properly benchmark compensation and measure performance,
ConocoPhillips has two peer groups, a compensation reference group and a performance peer group. We source peer company data from
compensation consultant surveys and public disclosures.
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Compensation Discussion and Analysis
Setting Target Compensation – Compensation
Reference Group
Compensation Reference Group and Methodology
The HRCC regularly assesses the market competitiveness of our
executive compensation program based on data from a compensation reference group. The compensation reference group is made up
of 12 energy industry companies and 12 similarly sized general industry companies that are comparable to ConocoPhillips in terms
of size, scope, and compensable factors. This reference group was selected because the companies, as a whole, represent organizations
of similar size, scale, complexity and global reach as ConocoPhillips. Accordingly, in analyzing the appropriate composition of
the reference group that would help inform 2019 target compensation decisions, the HRCC considered the following criteria:
(1) |
companies with which we compete for business opportunities and executive talent; |
(2) |
companies with significant operations and capital investments, medium- and long-term project investment cycles, and complex
global operations; |
(3) |
size, including revenues, assets, and market capitalization; and |
(4) |
industry focus, particularly companies in the energy
industry. |
|
|
|
|
Compensation Reference Group |
|
|
|
|
|
|
|
|
|
|
|
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> 3M Company |
|
> Exxon Mobil Corporation* |
|
> Merck & Co., Inc. |
|
|
> Bristol-Myers Squibb Company |
> General Dynamics Corporation |
|
> Northrop Grumman Corporation |
|
|
> Anadarko Petroleum Corporation* |
> Honeywell International Inc. |
|
> Occidental Petroleum Corporation* |
|
|
> Apache Corporation* |
|
> Halliburton Company* |
|
> Phillips 66* |
|
|
> Caterpillar Inc. |
|
> Johnson & Johnson |
|
> Pfizer Inc. |
|
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> Chevron Corporation* |
|
> Lockheed Martin Corporation |
|
> Raytheon Company |
|
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> Cummins Inc. |
|
> Marathon Oil Corporation* |
|
> Schlumberger N.V.* |
|
|
> Devon Energy Corporation* |
|
> Marathon Petroleum Corporation* |
|
> Valero Energy Corporation* |
|
|
|
|
|
|
|
* Energy industry companies |
|
|
|
|
|
|
|
|
|
|
The data is used to assess the competitive market value for
executive jobs, assess pay practices, validate targets for pay programs, test the compensation strategy, observe trends, and provide
a general competitive foundation for decision making. Our compensation reference group had 2018 annual revenues ranging from $5.8 billion
to $279.3 billion and median revenues of $34.5 billion (for 2018, we had revenues of $37.5 billion) and year-end
2018 market cap ranging from $10.0 billion to $346.1 billion and median market cap of $46.5 billion (for 2018,
we had a market cap of $71.8 billion).
Mercer gathers and performs an analysis of market data for
each NEO, comparing each of their individual components of compensation, as well as total compensation, to that of the
compensation reference group. This competitive analysis consists of comparing the market data of each of the pay elements and
total compensation at the 25th, 50th, and 75th percentiles of the compensation reference group to compensation for each of
our NEOs. Total compensation for each NEO is structured to target market competitive pay levels at approximately the 50th
percentile in base salary and short- and long-term incentive opportunities, taking into account responsibilities and duties,
experience, individual performance, and time in position. The HRCC’s independent consultant, FW Cook, reviews and
independently advises on the conclusions reached as a result of this benchmarking. In reviewing 2019 target compensation for
the CEO, the HRCC considered Mr. Lance’s tenure, his overall
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Compensation Discussion and Analysis
performance, the performance of ConocoPhillips during his tenure
as CEO and the relative positioning of target compensation for Mr. Lance as compared to the market median of the compensation
reference group. Based on these considerations and Mr. Lance’s strong execution of the company’s disciplined returns-focused
value proposition, the HRCC increased Mr. Lance’s LTIP target awards for 2019 by $1 million (see the Grants of Plan-Based Awards Table on page 88-89). This was the first increase in Mr. Lance’s overall target
direct compensation since 2013.
Measuring Performance—Performance Peer
Group
Our performance peer group is used to evaluate relative business
results in both our annual incentive and performance share programs. This includes both relative TSR and relative Adjusted ROCE/CROCE.
The HRCC believes our performance is best measured against both large independent E&P companies with diverse portfolios and
the largest publicly-held, international, integrated oil and gas companies that we compete against in our business operations.
We believe that our performance peer group is representative of the companies that investors use for relative performance comparisons.
The tables below show the performance peer group that was established
for evaluating both relative TSR and relative Adjusted ROCE/CROCE for the periods indicated.
|
|
Performance Peer Group for 2019 VCIP |
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> Anadarko Petroleum Corporation* |
|
> EOG Resources, Inc. |
|
> Noble Energy, Inc. |
|
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> Apache Corporation |
|
> Exxon Mobil Corporation |
|
> Occidental Petroleum Corporation |
|
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> Chevron Corporation |
|
> Hess Corporation |
|
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> Devon Energy Corporation |
|
> Marathon Oil Corporation |
|
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Performance Peer Group for PSP 17 |
|
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PSP performance period running from January 2017 through December 2019 |
|
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> Anadarko Petroleum Corporation* |
> Devon
Energy Corporation |
|
> Occidental
Petroleum Corporation |
|
|
> Apache Corporation |
|
> Exxon Mobil Corporation |
|
> Royal Dutch Shell
plc |
|
|
> BP plc |
|
> Marathon Oil Corporation |
|
> Total SA |
|
|
> Chevron Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
In August 2019, Occidental Petroleum Corporation acquired Anadarko Petroleum Corporation. Each of Occidental
Petroleum Corporation and Anadarko Petroleum Corporation were in our performance peer group during the respective performance
periods; after the acquisition, we retained only the combined company for the full performance period. |
Effective for the annual incentive and performance share programs
commencing in 2020, the S&P 500 Total Return Index will be added to the performance peer group (for relative TSR metrics only),
which will broaden the performance benchmark beyond industry peers. The HRCC believes that adding the index to the performance
peer group is appropriate because the index reflects the companies that we compete with for capital in the broader market. Additionally,
the inclusion of the index as a performance peer further aligns executive pay with long-term stockholder interests as we will
be required to outperform both industry peers and a market-based index to receive a maximum payout.
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Compensation Discussion and Analysis
INTERNAL PAY EQUITY
We believe our compensation structure provides a framework for
an equitable compensation ratio among our executives, with higher targets for jobs involving greater duties and responsibilities.
Our compensation program is designed so that the individual target level rises as salary grade level increases, with the portion
of performance-based compensation rising as a percentage of total targeted compensation. One result of this structure is that
an executive’s actual total compensation as a multiple of the total compensation of his or her subordinates will increase
in periods of above-target performance and decrease in times of below-target performance. The HRCC reviews the compensation of
Senior Officers periodically to ensure the equitable compensation of officers with similar levels of responsibilities.
DEVELOPING PERFORMANCE MEASURES
We believe our performance measures appropriately reflect the
performance of ConocoPhillips consistent with our strategy as an independent E&P company. Specifically, the HRCC has approved
a balance of metrics, some that measure performance relative to our peer group and some that measure progress in executing our
strategic milestones and objectives. We have selected multiple metrics, as described herein, because we believe no single metric
is sufficient to capture the performance we are seeking to drive. Moreover, reliance on any metric in isolation is unlikely to
promote the well-rounded executive performance necessary to enable us to achieve long-term success. It is for this reason that
metrics are assessed in tandem, rather than each with a separate weighting and threshold. The HRCC reassesses performance metrics
periodically to confirm that they remain appropriate.
SETTING INCREASINGLY CHALLENGING TARGETS
Targets for each metric are set in accordance with our rigorous
internal budget. The HRCC believes that increasingly challenging performance metrics best assess ConocoPhillips’ performance
relative to its strategy as an independent E&P company. Increasingly challenging targets can mean year-over-year performance
target increases for safety, efficiency, emission reductions, unit cost targets, and margins. However, it can also mean the same
or lower performance targets, recognizing the changing commodity price environment. For example, delivering flat production targets
following significant capital and operating cost reductions or establishing production targets below those set in prior years
after significant asset dispositions would be considered “increasingly challenging.”
PERFORMANCE CRITERIA
We use corporate performance criteria in determining individual
payouts for our NEOs. The HRCC considers all the elements described below before making a final determination. In response to
stockholder feedback and consistent with our strategy and focus as an independent E&P company, the HRCC approved certain measures
for VCIP and PSP and the weight assigned to each measure. This is reflected in the charts below.
* |
Performance share programs commencing prior to 2019, including PSP 17, include Strategic Objectives
as a PSP measure; however, effective with performance share programs commencing in 2019, Strategic Objectives has been eliminated
as a performance measure from the PSP and the weighting of relative TSR has increased from 50% to 60% and relative Financial
(Adjusted ROCE/CROCE) has increased from 30% to 40%. This change eliminates discretion for determining payouts under the
LTIP, which will now be determined solely on a formulaic basis. |
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Compensation Discussion and Analysis
Corporate Performance Criteria
We utilize multiple measures of performance in our compensation
programs to ensure that no single aspect of performance is driven in isolation. The HRCC approved compensation metrics that are
consistent with our strategic cash flow allocation priorities and, therefore, align with our goal to deliver superior returns
to stockholders through price cycles. See “Continued Strong Execution of our Value Proposition in 2019” beginning
on page 55 for a discussion of our value proposition and strategic priorities. The HRCC determines
the ultimate payout of our programs based on how well ConocoPhillips performs against targets set for these metrics. The compensation
metrics and how they align with our strategic priorities and desired outcomes are described below.
(1) |
Performance share programs commencing prior to 2019, including PSP 17, include Strategic Objectives
as a PSP measure; however, effective with performance share programs commencing in 2019, Strategic Objectives has been eliminated
as a performance measure from the PSP and the weighting of relative TSR has increased from 50% to 60% and relative Financial
(Adjusted ROCE/CROCE) has increased from 30% to 40%. This change eliminates discretion for determining payouts under the
LTIP, which will now be determined solely on a formulaic basis. |
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Compensation Discussion and Analysis
Health, Safety, and Environmental (VCIP and PSP)
Everything we do depends on safely executing our business plans
and operating to high standards of HSE stewardship. We view this as our fundamental license to operate. We have a comprehensive
HSE program across our entire company, which includes criteria for process and personal safety. We include relative Total Recordable
Rate and absolute Process Safety Events in our compensation metrics to reinforce our commitment to be an industry leader in HSE,
drive continuous HSE improvement, and provide accountability for HSE at all levels of the organization, including among our senior
leaders.
Total Recordable Rate is a measure of the rate of recordable
injury cases in a year. Process Safety Events refers to the control of process hazards in a facility with the potential to impact
people, property, or the environment. This includes the prevention, control, and mitigation of unintentional releases of hazardous
material or energy from primary containment. We invest significant resources and provide focused attention to continually improve
our safety culture and performance across the entire company.
Operational (VCIP only)
As an E&P company, strong operational performance is essential
for delivering on our commitments to stockholders. Our operational compensation metrics include absolute targets for Production,
Capital, Operating and Overhead Costs, and Operational Milestones.
Our primary source of revenue and cash flow is the sale of our
produced oil and gas. Therefore, we set an annual Production target, and we measure the achievement of production results against
the approved target. Importantly, our annual Production target is tied to annual targets for Capital, Operating and Overhead Costs,
and Operational Milestones. This is designed to ensure that we do not inadvertently incentivize actions, such as growing at all
costs, that are misaligned with our strategic priorities. Effective capital and operating cost management also helps us achieve
a low cost of supply portfolio in support of our returns-focused strategy. The Operational targets are also designed to create
alignment within our workforce around delivering business plans while maintaining discipline. Our Operational Milestones are intended
to drive a focus on key actions or decisions that support delivery of our plan.
Financial (VCIP and PSP)
The Financial metrics in our compensation programs strongly
align with our returns-focused strategy and are core to delivering our value proposition of superior returns through cycles. Furthermore,
based on observation and analysis, we believe that our Financial compensation metrics also strongly correlate to total shareholder
returns and, thus, value creation for stockholders. We include Adjusted ROCE and Adjusted CROCE in both our VCIP and PSP programs
to ensure that we maintain financial discipline and balance short- and long-term performance.
For VCIP, our Financial compensation measure includes Adjusted
ROCE and Adjusted CROCE, relative to peers, as well as absolute targets for both Adjusted ROCE and Adjusted CROCE. For PSP, our
Financial compensation measure includes Adjusted ROCE and Adjusted CROCE, relative to peers. An evaluation of our absolute performance
is an important component of the Financial measure as it demonstrates how we performed against targets set in accordance with
our rigorous internal budget. An evaluation of performance relative to peers is an important component of the Financial measure,
as it ensures rigor in the target and that the results are commensurate with our performance against our performance peer group.
These relative metrics are measured from third quarter to third quarter for the relevant period for VCIP and PSP since full-year
peer data is not publicly available at the time the HRCC makes its annual assessment of performance. For the purposes of establishing
comparability in assessing our performance relative to peers, Adjusted ROCE and Adjusted CROCE as used for our Financial compensation
metrics will differ from that of ROCE and CROCE as calculated for other periodic reporting.
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Compensation Discussion and Analysis
Each of the Financial metrics is described in more detail below:
Adjusted Return on Capital
Employed (“ROCE”) – ROCE is an important metric for ensuring that ConocoPhillips is efficiently
allocating capital. We believe that ROCE is a strong indicator of long-term share price performance, but it should also be included
in short-term compensation metrics to reinforce discipline and a focus on profitability.
We adjust ROCE to remove the impact of non-operational results
and special items that are unusual or nonrecurring. We calculate Adjusted ROCE as follows:
adjusted earnings plus after-tax interest
expense plus minority interest |
÷ |
average capital employed
(total equity plus total debt) |
Adjusted Cash Return on Capital
Employed (“CROCE”) – Similar to ROCE, CROCE measures ConocoPhillips’ performance in efficiently
allocating capital. However, while ROCE is based on adjusted earnings, CROCE is based on cash flow. This is relevant because it
measures the ability of our capital investments to generate and expand cash flow consistent with our value proposition.
We also adjust CROCE to remove the impact of non-operational
results and special items that are unusual or nonrecurring. We calculate Adjusted CROCE as follows:
adjusted earnings plus after-tax interest
expense plus minority interest plus depreciation,
depletion and amortization (DD&A) |
÷ |
average capital employed
(total equity plus total debt) |
Strategic Milestones and Objectives (VCIP and pre-2019 PSP)
Delivering on our value proposition requires that we take actions
and steward the business in ways that are not exclusively operational or financial in nature. Our Strategic Milestones and Objectives
represent specific actions that are critical to implementing our strategy and aligning our workforce. Strategic Milestones are
set annually for VCIP, and, prior to the 2019 performance share program, Strategic Objectives were also included for each three-year
PSP period. These metrics provide a direct link from our stated strategy to metrics in the compensation plans.
Relative Total Shareholder Return (VCIP and PSP)
We believe our Operational and Financial measures and Strategic
Milestones and Objectives have a strong, positive correlation to TSR in our sector. Thus, as we pursue these measures, we expect
to achieve superior returns to stockholders; TSR is the best overall indicator of our success. By integrating compensation metrics
with strategic priorities, we believe we are strongly aligned with stockholder interests across time periods and through cycles.
We believe it is important to include TSR in both VCIP and PSP
because it is the most tangible, visible measure of the value we have created for stockholders during the relevant period. However,
TSR has a stronger weighting in the PSP to more closely align with stockholder performance benchmarks and to discourage short-term
actions over long-term value creation.
TSR represents the percentage change in stock price from the
beginning to the end of a stated period, plus the percentage impact from common stock dividends paid during the stated period
assuming dividends are reinvested into the stock. Consistent with market practice, we calculate TSR for compensation purposes
based on a 20-trading day simple average prior to the beginning of a period and a 20-trading day simple average prior to the end
of the stated period.
We measure TSR relative to our performance peer group to mitigate
the influence of sector-wide factors, such as commodity price volatility, on our stock price.
Table of Contents
Compensation Discussion and Analysis
2019 Executive Compensation Analysis and Results
The following is a discussion and analysis of the decisions the HRCC
made regarding our NEOs in 2019.
BASE SALARY
The HRCC reviews base salary annually for each of the NEOs. Base
salary for the CEO has remained unchanged since March 2013. In consideration of his broad scope of responsibilities as Chief Financial
Officer, which includes commercial, acquisitions and divestitures, and information technology, the HRCC approved a promotion for
Mr. Wallette effective January 1, 2019. For the other NEOs, adjustments were made to remain competitive with the market and appropriately
maintain internal pay equity.
The table below shows the base salary for each NEO earned during
the years ended 2018 and 2019:
Name | |
12/31/2018 | | |
12/31/2019 | |
R.M. Lance | |
$ | 1,700,000 | | |
$ | 1,700,000 | |
D.E. Wallette, Jr. | |
| 985,444 | | |
| 1,070,064 | |
M.J. Fox | |
| 1,241,000 | | |
| 1,297,893 | |
K.B. Rose | |
| 241,938 | (1) | |
| 768,700 | |
W.L. Bullock, Jr. | |
| 669,950 | | |
| 717,380 | |
(1) |
Ms. Rose was appointed as Senior Vice President, Legal, General Counsel, and Corporate Secretary on
September 4, 2018. The amount in the table above for 2018 includes the base salary she earned during the portion of that year
she served as an executive officer. Ms. Rose had an annualized salary of $735,000 in 2018. |
PERFORMANCE-BASED PROGRAMS
Actual awards earned under our performance-based programs can range
from zero to 200 percent of the initial award. In determining performance-based compensation awards for our NEOs for performance
periods concluding at the end of 2019, the HRCC began by assessing overall company performance. To that end, the HRCC considered
the performance reviews throughout and after the performance period ended to assess the degree of difficulty in achieving absolute
performance targets and the extent to which such targets were achieved. The HRCC adopted a percentile-based matrix to formulaically
evaluate the results of the relative TSR and Financial metrics and made a payout determination for the absolute performance metrics
under our two performance-based compensation programs (VCIP and PSP).
The HRCC followed the matrix below in making its determination of
payouts for the relative financial metrics (Adjusted ROCE/ CROCE) and TSR in the VCIP and PSP programs:
Annual Incentive—Variable Cash Incentive
Program (VCIP)
All of our employees are eligible for VCIP. The VCIP payout for our
Executive Leadership Team, including the NEOs, is calculated using the following formula. The HRCC has the sole authority to determine
the corporate performance payout based on its assessment of our performance against our metrics.
Eligible Earnings |
X |
Target Percentage for the Salary Grade |
X |
Corporate Performance Payout |
± |
Any Individual Performance Adjustment |
Note: |
VCIP awards for all other employees are based on a combination of corporate performance and business
unit performance. The maximum VCIP payout for the Executive Leadership Team is 200% of target, inclusive of individual adjustments. |
Table of Contents
Compensation Discussion and Analysis
VCIP
Corporate Performance |
|
We incorporate a balance of metrics into our annual incentive program that
align with delivering our value proposition and maintaining competitiveness versus our performance peer group. Our program
includes both line-of-sight and strategic metrics, as well as both absolute and relative metrics. We do not believe that a
single metric is sufficient for driving the behaviors or performance we seek. Therefore, we carefully consider and select
a combination of metrics that best ensures accountability across the organization for both short- and longer-term business
success. The HRCC routinely reviews and reassesses the VCIP performance metrics to confirm that they remain appropriate for
driving desired performance outcomes. |
|
In December 2018, the HRCC approved the five corporate performance measures
by which it would judge corporate performance for the 2019 VCIP payout. The corporate measures were: HSE; Operational; Financial;
Strategic Milestones; and TSR. Each of the performance measures was assigned an equal weight. |
|
The HRCC determines the ultimate payout
of our programs based on the extent to which ConocoPhillips achieves the targets established under the five corporate
performance measures set forth above. These measures directly correspond to our strategic cash flow allocation
priorities, which support our goal to deliver superior returns to stockholders through price cycles. See “Executive Compensation – Strategic Alignment” on page 58 and “Process for Determining Executive Compensation — Performance Criteria” beginning on page
67. |
|
Setting Targets for 2019 |
|
The HRCC reviews and approves targets for the performance metrics annually.
The process begins with our rigorous internal budget, which is set each year across the organization and then approved by
our Board. For setting VCIP targets, the outputs from the internal budget are reviewed for alignment with the value proposition,
as well as degree of difficulty. The HRCC believes that targets should reflect a reasonable chance of achievability, but also
be challenging. Significant effort is invested to ensure that the metrics and targets reflect both a desire for continuous
improvement and a realistic assessment of changes in the market environment or our portfolio. |
|
For relative Financial and TSR metrics, the HRCC has established a matrix for
assessing payout. See page 71. In the case of HSE, Operational, Financial (absolute),
and Strategic Milestones metrics, the HRCC does not believe either a matrix or a threshold-maximum approach is appropriate
given the significant volatility of the business in any given year and the influence of non-operated activities in which ConocoPhillips
has limited control. For these, the HRCC relies on a rigorous and transparent review process with management and exercises
its judgment based on its knowledge of the business to assess degree of difficulty and determine the appropriate payout (see
HRCC Review Process below). In our 2019 outreach, stockholders commended several aspects of the improved disclosures
in our proxy statement regarding our programs. We believe stockholders were generally very satisfied with the level of disclosure
around our process; and we have continued our transparency around targets and results. |
|
With regard to HSE, Operational, Financial (absolute) and Strategic Milestones,
the HRCC set targets as follows: |
|
HSE |
We target top-quartile performance relative to our peers for Total Recordable
Rate and absolute continuous improvement for Process Safety Events. We target being an industry leader in HSE in an effort
to drive continuous HSE improvement and provide accountability for HSE at all levels of the organization, including among
our senior leaders. |
|
Production |
The target was set at 1,325 MBOED, which represented the midpoint of the initial
guidance range provided to the marketplace in late 2018 of 1,300-1,350 MBOED. The guidance excluded Libya, as well as adjustments
for dispositions. On this adjusted basis, the Production target represented underlying growth of approximately five percent,
consistent with the operating plan outlined to the marketplace. The HRCC considered the target to be increasingly challenging
when balanced with the Operating and Overhead Costs target and Capital target (see next page). |
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Compensation Discussion and Analysis
Operating and Overhead Costs |
The target was set at $6.1 billion, which excluded adjustments for expected
2019 acquisitions and dispositions and was consistent with the operating plan outlined to the marketplace. The target represented
an improvement in unit operating costs versus 2018. While higher production generally means higher costs overall, ConocoPhillips
remains focused on growing the most profitable volumes to improve margins, grow cash flow, and generate strong financial returns. |
|
Capital |
The target was set at $6.1 billion, which excluded adjustments for expected
2019 acquisitions and dispositions and was consistent with the operating plan outlined to the marketplace. The Capital target
was flat compared to full-year 2018 capital expenditures, excluding acquisition costs. |
|
Operational Milestones |
In the Lower 48, milestones included executing the Big 3 unconventional development
program (Eagle Ford, Permian, Bakken). In Europe, milestones included achieving first production from Brodgar H4 and executing
triennial shutdowns at J-Area and GEA within their required timeframes. In Canada, milestones included successfully flowing
hydrocarbons through Montney Gas Plant 1. In Australia West, milestones included securing a backfill for DLNG and completing
the Barossa FEL-3 program. In Malaysia there were milestones for achieving first gas to PFLNG1 and executing KBB brownfield
modifications and tie-in scope. Finally, there were two exploration milestones, with the first related to progressing evaluations
of seven key growth opportunities and the second related to capturing resources through acreage access in key focus areas
that improve the depth, quality, and flexibility of the portfolio. |
|
Strategic Milestones |
Our Strategic Milestones included delivering strategic dispositions; returning
at least 30 percent of cash from operations to stockholders; delivering our value proposition through growing production per
debt-adjusted share at least 8 percent annually; and establishing a system for setting and monitoring emissions reduction
targets. |
|
Financial |
Absolute targets for Adjusted ROCE and Adjusted CROCE were set in accordance
with the budget and strategic plans and approved by the HRCC. |
|
The HRCC believes these targets, which aligned with external guidance provided
in late 2018 and early 2019, were challenging and consistent with ConocoPhillips’ disciplined, returns-focused strategy. |
|
HRCC Review Process |
|
In determining award payouts under VCIP, the HRCC met four times with management
to review progress and performance against the approved metrics. The first and second reviews occurred during 2019 and were
designed to provide the HRCC with information concerning the ongoing performance of ConocoPhillips. The third review with
the HRCC in early February 2020 focused on the detailed final results for each performance metric relative to the targets,
a degree of difficulty discussion, and an explanation of normalization adjustments back to the budget. The final review in
mid-February 2020 focused on a summary of the results for each performance metric and deliberation and determination of the
final payout by the HRCC. This process allows the HRCC to consider results, degree of difficulty, and normalization adjustments
in one meeting and make informed payout decisions in a separate meeting. Results for Production, Operating and Overhead Costs,
and Capital, as applicable, are normalized to account for acquisitions and dispositions (e.g., sale of exploration
and production assets in the United Kingdom), foreign exchange rates, commodity price-related adjustments of actuals to targets
and related tax and production-sharing contract impacts, and items beyond the control of management (e.g., production
impacts from natural disasters, although none were material in 2019). This allows the HRCC to measure results against targets
on a consistent basis and measure management performance so there is no benefit or detriment to executive compensation for
these items. The normalization adjustments are reviewed by and discussed with the HRCC. |
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Compensation Discussion and Analysis
2019 Results |
|
HSE (absolute & relative) |
We saw continuous improvement on all HSE metrics versus 2018; however, a serious
incident at a drilling location resulted in fatal injuries to a contractor. After a thorough investigation we incorporated
learnings into how we work – globally. In other HSE-related performance, we achieved a new record low Total Recordable
Rate, which benchmarks best-in-class relative to our performance peers with an improved ranking compared to 2018. We reduced
the significant high-risk event rate, and the number of Tier 1 Process Safety Events, Lost Workday Cases and hydrocarbon spills
compared to 2018. We continue to be recognized as an industry leader. Multiple external ESG recognitions included: |
|
> ConocoPhillips being named
to the Dow Jones Sustainability Index for the thirteenth year, ranked as the highest energy company in North America; |
> Received the best possible
score of “1” on ISS’s E&S QualityScore, and second highest score of “AA” from MSCI; |
> Our operations in Canada were
celebrated by the local community and the Chamber of Commerce for their sustainability efforts with the Faster Forests program
and its relationship with the indigenous people, respectively; |
> Our Indonesia operations received
recognition from the Government of Indonesia for strong environmental performance via the BLUE PROPER award; and |
> Our Marine group received both
the Devlin Safety and Environmental Achievement Awards from the American Chamber of Shipping. |
|
Despite experiencing a contractor fatality, because of the otherwise exceptional
performance in HSE this year, the HRCC determined an above target payout was warranted. |
|
Operational (absolute) |
Our operating performance resulted in
adjusted Production of 1,325 MBOED, which was in line with the 2019 VCIP target and midpoint of our early
2019 external guidance. Production was driven by higher than expected performance in the Lower 48 unconventionals, which
offset production challenges in other business units. We achieved our Operating and Overhead Costs target
of $6.1 billion, reflecting our ongoing focus on driving cost efficiencies across our portfolio in service to higher
financial returns. Our Capital spending of $6.1 billion, adjusted for 2019 acquisitions, dispositions and
approved scope changes, was also in line with our 2019 VCIP target. We also achieved or exceeded all of our Operational
Milestones (see Setting Targets for 2019 above) with the exception of the start-up of the Montney Gas
Plant in Canada, which was impacted due to a third-party pipeline delay. Aside from the third-party delay in Canada, all
other Operational metrics met or exceeded expectations. In considering the results of these interdependent operational
metrics, the HRCC determined a target payout was warranted. |
|
Financial (absolute and relative) |
We outperformed on our Financial metrics. On an absolute basis, we slightly
exceeded our 2019 targets; however, on a relative basis, our financial returns results finished near the top. Our absolute
Adjusted ROCE relative to peers and our absolute Adjusted CROCE relative to peers were in the 98th percentile and 95th percentile,
respectively. Our strong operational performance helped drive these results. The HRCC determined a target payout was warranted
on the absolute metrics and followed the matrix on page 71 for the relative financial
metrics. The HRCC then averaged the payout amounts to arrive at the final above target payout for the Financial metrics. |
|
Strategic Milestones (absolute) |
We met or exceeded expectations on all of the milestones. We completed the
sale of our U.K. assets for $2.7 billion (prior to customary adjustments), and entered into agreements to sell our Australia
West and Niobrara assets for $1.8 billion (subject to customary adjustments), delivering on our strategic dispositions. We
exceeded our goal of returning cash from operations to stockholders by increasing our dividend by 38 percent and repurchasing
$3.5 billion in shares. In total, we returned ~43 percent of cash from operations via the dividend and buybacks. We achieved
production per debt-adjusted share growth of 9.7 percent, which slightly exceeded our milestone. Finally, we had a record
number of emission reduction projects submitted by business units and are now in the process of integrating business unit
emissions targets with our long-range plan. The HRCC determined an above target payout was warranted given ConocoPhillips’
continued execution of our returns-focused strategy resulting in outperformance of all Strategic Milestones metrics. |
|
TSR |
We ended at the 65th percentile in TSR compared to our performance peers. Based
on the 20-day average methodology, TSR for 2019 was 1.1 percent, outperforming the majority of our independent peers and exceeding
the total peer and independent averages. We continue to focus on driving superior returns to stockholders, which is the driver
behind adding the S&P 500 Total Returns Index into our performance peer group commencing with the 2020 programs. The HRCC
followed the matrix on page 71 in making its determination of the payout for this
relative TSR metric. |
|
These results reflect a strong positive response to the strategy we launched
in late 2016 that we continue to execute. The HRCC believes that the resulting 132 percent corporate performance payout reflects
ConocoPhillips’ overall strong performance in 2019. |
Table of Contents
Compensation Discussion and Analysis
The following table describes the details of what the HRCC considered
as the quantitative and qualitative performance measures and summarizes the payout decisions:
Metric Category |
|
Category
Weighting |
|
Metric |
|
VCIP Target |
|
VCIP Results & Performance Summary |
|
Payout |
|
Weighted
Payout |
HSE |
|
|
|
Total Recordable Rate
(“TRR”) (relative) |
|
Top-quartile performance and industry leader |
|
Achieved a new record in safety with lowest workforce TRR on record; ranked Best-in-Class and recognized as HSE industry leader, but a serious incident resulted in fatal injuries to a contractor |
|
120% |
|
24% |
|
|
|
|
Process Safety Events
(“PSE”) |
|
Continuous Improvement |
|
A 30% reduction in incidents with only one Tier 1 process safety event (a 75% reduction from last year) |
|
|
Operational(1) |
|
|
|
Production (MBOED) |
|
1,325 |
|
Operating performance in line with target producing 1,325 MBOED; challenges in certain BUs were offset by better than expected performance in others |
|
100% |
|
20% |
|
|
|
|
Capital ($B) |
|
$6.1 |
|
Delivered capital scope within target of $6.1B |
|
|
|
|
|
|
Operating and Overhead Costs ($B) |
|
$6.1 |
|
Managed operating and overhead costs to $6.1B, reflective of our ongoing focus on driving cost efficiencies across our portfolio |
|
|
|
|
|
|
Operational Milestones |
|
See Operational Milestones discussed on page 73. |
|
Achieved or exceeded all operational milestones, except for the start-up of the Montney Gas Plant in Canada, which was impacted due to a third-party pipeline delay |
|
|
Financial(2) |
|
|
|
Adjusted ROCE
(absolute and relative to peers) |
|
Internal
target and outperform peers |
|
Slightly exceeded internal absolute target (100% per HRCC); finished 2nd in peer group (98th percentile; 200% payout per matrix) |
|
150% |
|
30% |
|
|
|
|
Adjusted CROCE
(absolute and relative to peers) |
|
Internal target and outperform peers |
|
Slightly exceeded internal absolute target (100% per HRCC); finished 2nd in peer group (95th percentile; 200% payout per matrix) |
|
|
Strategic Milestones(3) |
|
|
|
Return of CFO to Stockholders |
|
At least 30% |
|
Stockholder distributions exceeded target; distributed ~43% of CFO to stockholders by increasing the dividend by 38% (paying $1.5B in dividends) and completing $3.5B in share repurchases |
|
150% |
|
30% |
|
|
|
|
Strategic Dispositions |
|
Deliver by target date |
|
Completed sale of U.K. assets and entered into agreements to sell assets in Australia West and Niobrara |
|
|
|
|
|
|
Production/Year-end Debt Adjusted Share CAGR |
|
8% |
|
Delivered underlying production growth of 9.7% on a per debt-adjusted share basis, exceeding target |
|
|
|
|
|
|
Setting and monitoring emissions reductions targets |
|
Establish integrated management and governance system |
|
Received emission reduction projects from BUs and integrating the internal BU emissions targets and plans with the Company’s long-range plan |
|
|
TSR |
|
|
|
Total shareholder return (relative to peers) |
|
Outperform peers |
|
Finished 4th in peer group (65th percentile; 142% payout per matrix) with absolute TSR of +1.1% based on 20-day average methodology; maintained positive TSR and outperformed total peer and independent peer averages |
|
142% |
|
28% |
|
|
|
|
|
|
|
|
Total Payout 132% |
(1) |
Operating and overhead costs include production and operating expenses; selling, general, and administrative
expenses; and controllable exploration general and administrative expenses, geological and geophysical, and lease rental and
other expenses, adjusted to remove the impact of special items that are unusual or nonrecurring. Operating and Overhead Costs
results and the absolute metric results for Production and Capital are adjusted to normalize, as applicable, for acquisitions
and dispositions (e.g., the U.K. asset sale, which is the primary component for this category), foreign exchange rates,
price, and related tax and production-sharing contract impacts, and items beyond the control of management (e.g., production
impacts from natural disasters, although none were material in 2019). Actual 2019 production was 1,305 MBOED, excluding Libya.
Actual operating and overhead costs and capital for 2019 were $6.1B and $6.6B, respectively. |
(2) |
For relative metrics, adjustments for material, nonrecurring special items (e.g., gains on dispositions, impairments)
are made to company results to determine Adjusted ROCE/CROCE, and we also use disclosed material adjustments made by peers
when measuring relative results for these metrics. Adjusted earnings (loss) that are part of the Adjusted ROCE/CROCE calculations
is a non-GAAP financial measure. A reconciliation to GAAP and a discussion of the usefulness and purpose of adjusted earnings
(loss) can be found on Appendix A. |
(3) |
2019 cash provided by operating activities is $11.1B. Excluding operating working capital change of $0.6B, CFO is $11.7B.
CFO is a non-GAAP measure and is further defined on Appendix A. Production per debt-adjusted share growth is calculated on
an underlying production basis using ending period debt divided by ending share price plus ending shares outstanding. Underlying
production excludes Libya and the impact of closed asset dispositions and acquisitions. Further information is included on
Appendix A. |
Table of Contents
Compensation Discussion and Analysis
VCIP Individual Performance Adjustments
An important design element of the program is the HRCC’s ability
to make individual adjustments for each NEO in recognition of the individual’s personal leadership and contribution to ConocoPhillips’
financial and operational success during the year. All of the NEOs made significant contributions under the strong leadership of
the Board and CEO. The HRCC approved the following individual performance adjustments:
> |
Mr. Wallette received a positive 10 percent adjustment as a percentage of his target award for delivering
exceptional financial results through strong management of the balance sheet and debt, the stock buyback program, strong commercial
results and his leadership in completed and pending strategic dispositions in the U.K. and Australia West. |
|
|
> |
Ms. Rose received a positive 10 percent adjustment as a percentage of her target award for her leadership in ConocoPhillips
corporate governance, her role in the recovery of funds owed to the company from the Venezuela ICSID arbitration tribunal
case, and in completed and pending strategic dispositions in the U.K. and Australia West. |
|
|
> |
Mr. Bullock received a positive 10 percent adjustment as a percentage of his target award for his role in the new 20-year
Corridor Block production sharing contract extension in Indonesia, strong execution to progress the Barossa-DLNG backfill
project, and the pending strategic disposition in Australia West. |
The calculation of the 2019 VCIP award for each NEO is summarized
below:
Name | |
2019
Eligible Earnings | | |
Target
VCIP | | |
Corporate
Payout | | |
Individual
Performance Adjustment(1) | | |
Total
Payout | |
R.M. Lance | |
$ | 1,700,000 | | |
| 160 | % | |
| 132 | % | |
| — | | |
$ | 3,590,400 | |
D.E. Wallette, Jr. | |
| 1,070,064 | | |
| 115 | % | |
| 132 | % | |
| 10 | % | |
| 1,747,415 | |
M.J. Fox | |
| 1,297,893 | | |
| 115 | % | |
| 132 | % | |
| — | | |
| 1,970,202 | |
K.B. Rose | |
| 768,700 | | |
| 89 | % | |
| 132 | % | |
| 10 | % | |
| 971,483 | |
W.L. Bullock, Jr. | |
| 717,380 | | |
| 83 | % | |
| 132 | % | |
| 10 | % | |
| 845,504 | |
(1) |
The value of the individual performance adjustment is calculated as a percentage of target value. |
Long-Term Incentive: Performance Share Program
(PSP)
The PSP is designed to motivate senior leadership worldwide to execute
their duties in a way that not only achieves ConocoPhillips’ approved strategy but also closely aligns senior leadership
with long-term stockholder interests. Approximately 54 of our current employees participate in the PSP. Grants made in 2019 for
PSP 19 are summarized in note 3 of the Summary Compensation Table on page 86.
Table of Contents
Compensation Discussion and Analysis
PSP 17 Performance
In 2017, the HRCC approved performance metrics for the PSP performance
period running from January 2017 through December 2019. The PSP uses staggered three-year performance periods, with PSP 17 using
three corporate performance measures: (1) relative Total Shareholder Return, which is weighted 50 percent; (2) relative Financial,
which is weighted 30 percent; and (3) Strategic Objectives, which is weighted 20 percent.
The HRCC considered ConocoPhillips’ overall performance based
on the PSP 17 performance measures set forth above, which, similar to VCIP, directly correspond to our strategic priorities and
support our goal to deliver superior returns to stockholders through price cycles. See “Executive Overview—Executive Compensation – Strategic Alignment” on page 58 and “Process for Determining Executive Compensation—Performance Criteria” beginning on page 67.
HRCC Review Process
In determining award payouts under PSP 17, the HRCC met several times
with management throughout the performance period to review progress and performance against the approved metrics. The review with
the HRCC in early February 2020 focused on the detailed final results for each performance metric and a degree of difficulty discussion.
The final review in mid-February 2020 focused on a summary of the results for each performance metric and deliberation and determination
of the final payout by the HRCC. This process allows the HRCC to consider results and degree of difficulty in one meeting and make
informed payout decisions in a separate meeting.
2017 – 2019 Results
TSR
We finished 1st in TSR (100th percentile) based on the 20-day
average methodology, significantly outperforming all of our independent and integrated performance peers. The HRCC followed the
matrix on page 71 in making its determination of the payout for this relative TSR metric.
Financial
We also outperformed all of our performance peers on our
Financial metrics. Our strong financial returns results were 1st (100th percentile) relative to our performance peers for both
Adjusted ROCE absolute improvement and Adjusted CROCE absolute improvement. Our strategic accomplishments helped drive these exceptional
results. The HRCC followed the matrix on page 71 in making its determination of the payout
for these relative Financial metrics.
Strategic Objectives
Our Strategic Objectives are aligned with our strategic
priorities and support our goal to deliver superior returns to stockholders through price cycles. The objectives were considered
against several metrics, including: executing the accelerated value proposition strategy by reducing debt, returning CFO to stockholders,
completing strategic dispositions to high-grade our portfolio; reducing the cost of supply of our resource base; improving financial
returns; enhancing our culture and workforce engagement; undertaking external engagement; and improving our HSE performance.
We exceeded our Strategic Objectives targets on all fronts:
|
> |
Executed on our accelerated value proposition and strategic priorities by: |
|
> |
Reducing debt by $12 billion, exceeding debt level reduction target by $5 billion; |
|
|
|
|
> |
Being single A-rated by all credit agencies; |
|
|
|
|
> |
Exceeding distribution target of 20-30 percent CFO to stockholders by returning ~44 percent of CFO through dividends and
share repurchases; |
|
|
|
|
> |
Exceeding asset disposition program target by closing ~$19 billion of asset sales to optimize the portfolio; and |
|
|
|
|
> |
Increasing the quarterly dividend by 68 percent over the three-year performance period. |
|
|
|
|
> |
Increased the size of the resource base with below $40/BBL WTI cost of supply while decreasing the average cost of supply of this resource base to below 30/BBL WTI. |
|
|
|
|
Table of Contents
Compensation Discussion and Analysis
|
> |
Advanced employee engagement and focused external engagement on issues and stakeholders critical for success by: |
|
> |
Delivering our first global employee engagement survey in six years during 2019 and developing targeted action plans with
the results; |
|
|
|
|
> |
Advancing our diversity and inclusion (D&I) strategy by appointing a D&I Champion, establishing a D&I Council
and developing a D&I dashboard; |
|
|
|
|
> |
Joining the Climate Leadership Council; and |
|
|
|
|
> |
Hosting our Analyst & Investor Meeting in November 2019 to lay out our 10-year plan and reaffirm our commitment
to a disciplined, returns-focused strategy. |
|
> |
HSE: Three-year improvements in significant incidents, process safety and TRR; however, a serious incident at a drilling
location in 2019 resulted in fatal injuries to a contractor. |
The HRCC determined an above target payout was warranted given ConocoPhillips’
exceptional execution of our strategy during the performance period.
These results reflect a strong positive response to our strategy.
The HRCC believes we are executing the right strategy and recognizes the leadership and commitment our executives displayed during
the performance period. We outperformed on all our metrics. The HRCC believes that a 196 percent payout reflects ConocoPhillips’
overall strong performance during the 2017-2019 performance period.
Table of Contents
Compensation Discussion and Analysis
The HRCC believes there is a strong alignment between stockholder
interests and executive compensation. The following table describes the details of which the HRCC considered as quantitative and
qualitative performance measures and summarizes the payout decisions for PSP 17:
Metric Category(1) |
Category
Weighting |
Metric |
PSP Results & Performance Summary |
Payout |
Weighted
Payout |
TSR |
|
Total shareholder
return (relative
to peers) |
1st in peer group (100th percentile; 200% payout per matrix) for 2017-2019 based
on 20-day average methodology; outperformed three-year peer average |
200% |
100% |
Financial(2) |
|
Adjusted ROCE (absolute improvement relative to peers) |
1st in peer group (100th percentile; 200% payout per matrix) |
200% |
60% |
Adjusted CROCE
(absolute improvement
relative to peers) |
1st in peer group (100th percentile; 200% payout per matrix) |
Strategic Objectives(3) |
|
Execute on the accelerated value proposition strategy |
Reduced gross debt by $12B, exceeding debt level target by $5B; single A-rated by all
credit agencies; exceeded distribution target to stockholders by returning ~45% of CFO through dividends and share
repurchases; exceeded asset disposition program target and optimized the portfolio with ~$19B of completed strategic
asset sales |
180% |
36% |
Reduce cost of supply and advance strategy for organic resource development and exploration |
Increased the size of the resource base with <$40/BBL WTI cost of supply and reduced the average cost of supply of
these resources to <$30/BBL WTI |
Improve three-year HSE performance |
Three-year improvements in significant incidents, process safety and TRR; however, a serious incident at a drilling location
resulted in fatal injuries to a contractor in 2019 |
Enhance internal
organizational aspect and undertake external engagement goals |
Advanced organization and focused on external engagement issues and stakeholders critical for success |
|
|
|
Total Payout |
196% |
(1) |
Ongoing performance share programs commencing prior to 2019 contain Strategic Objectives as a PSP measure;
however effective with performance share programs commencing in 2019 Strategic Objectives has been eliminated as a performance
measure and the weighting of relative TSR has increased from 50% to 60% and Financial – relative Adjusted ROCE/CROCE
has increased from 30% to 40%. This change eliminates discretion for determining payouts under the LTIP, which will now
be determined solely on a formulaic basis. |
|
|
(2) |
Adjustments for material, nonrecurring special items (e.g., gains on dispositions, impairments) are made to company results
to determine Adjusted ROCE/CROCE, and we also use disclosed material adjustments made by peers when measuring relative results
for these metrics. Adjusted earnings (loss) in the Adjusted ROCE/CROCE calculations is a non-GAAP financial measure. A reconciliation
to GAAP and a discussion of the usefulness and purpose of adjusted earnings (loss) can be found on Appendix A. |
|
|
(3) |
CFO is a non-GAAP measure. Further information about this measure, as well as a reconciliation to the nearest GAAP measure
can be found in Appendix A. Cost of supply is the West Texas Intermediate equivalent price that generates a 10% return on
a point forward and fully-burdened basis. |
PSP award targets are set in shares at the beginning of the performance
period, and actual payouts are made in cash based on the HRCC’s evaluation of performance and are calculated using our stock
price after the conclusion of the three-year program. Thus, the value of the performance shares is tied to stock price performance
throughout the performance period, further demonstrating the strong alignment between executive incentive compensation and stockholder
interests. The calculation of the PSP 17 payout for each NEO is noted in note 3 to the Summary Compensation Table on page
86. There were no individual performance adjustments awarded for PSP 17.
Table of Contents
Compensation Discussion and Analysis
Long-Term Incentive: Executive Restricted Stock
Unit Program
All 2019 awards under the Executive Restricted Stock Unit Program
were made at target. Approximately 54 of our current employees participate in this program. The 2019 grants to NEOs can be found
in note 3 of the Summary Compensation Table on page 85.
Other Executive Compensation and Benefits
OTHER COMPENSATION AND PERSONAL BENEFITS
In addition to our four primary compensation components, we provide
our NEOs a limited number of benefits as described below. Some benefits, such as executive life insurance coverage and nonqualified
benefit plans, are provided for competitive reasons. Other benefits are designed primarily to promote a healthy work/life balance,
to provide opportunities for developing business relationships, and to personalize our social responsibility programs.
Comprehensive Security Program—Because
our executives face personal safety risks in their roles as representatives of a global E&P company, our Board has adopted
a comprehensive security program for our executives.
Personal Entertainment—ConocoPhillips
executives participate in community, university and philanthropic organizations at the request of the Company. We also purchase
tickets to various cultural, charitable, civic, entertainment, and sporting events for business development and relationship-building
purposes, as well as to maintain our involvement in communities where we operate. Occasionally, our employees, including our executives,
make personal use of tickets that would not otherwise be used for business purposes. We believe these tickets offer an opportunity
to expand our networks at a very low or no incremental cost to ConocoPhillips.
Tax Gross-Ups—Certain
of the personal benefits received by our executives are deemed by the Internal Revenue Service to be taxable income to the individual.
When we determine that such income is incurred for purposes more properly characterized as company business than personal benefit,
we provide further payments to the executive to reimburse the cost of including the item in the executive’s taxable income.
Most often, these tax gross-up payments are provided for travel by a family member or other personal guest to attend a meeting
or function at our request in furtherance of company business, such as Board meetings, company-sponsored events, and industry and
association meetings where spouses or other guests are expected to attend.
Executive Life Insurance—We
provide life insurance policies and death benefits for all of our U.S.-based salaried employees (at no cost to the employee) with
a face value approximately equal to the employee’s annual salary. For each of our executives, we maintain an additional life
insurance policy (at no cost to the executive) with a value equal to the executive’s annual salary. In addition to these
two plans, we also provide our executives the option of purchasing group variable universal life insurance or term life insurance
in an amount up to eight times their respective annual salaries. We believe that making additional insurance available for purchase
at their own expense is valued by our executives and can be provided at no cost to ConocoPhillips.
Defined Contribution Plans—In
addition to the ConocoPhillips Savings Plan, which is our qualified defined contribution plan for U.S.-based employees, we maintain
the nonqualified defined contribution plans listed below for our executives. These plans allow deferred amounts to grow tax-free
until distributed, while enabling ConocoPhillips to use the money for the duration of the deferral period for general corporate
purposes. These types of plan are common among our competitors and we believe the lack of such plans would put ConocoPhillips at
a disadvantage in attracting and retaining talented executives.
|
> |
Voluntary Deferred Compensation Plans—The purpose of our voluntary nonqualified deferred
compensation plans is to allow executives to defer a portion of their salary and incentive compensation so that such amounts are
not immediately taxable. |
|
|
|
|
> |
Make-Up Plans—The purpose of our nonqualified defined contribution make-up plans is
to provide benefits that an executive would otherwise lose due to limitations imposed by the Internal Revenue Code on high-income
participants in qualified plans. |
Further information on these plans is provided under Nonqualified Deferred Compensation beginning on page 96.
Table of Contents
Compensation Discussion and Analysis
Defined Benefit Plans—In
addition to the ConocoPhillips Retirement Plan, which is our qualified defined benefit plan for U.S.-based employees, we also maintain
nonqualified defined benefit plans for our executives. The primary purpose of these plans is to provide benefits that an executive
would otherwise lose due to limitations imposed by the Internal Revenue Code on high-income participants in qualified plans. The
only such arrangement under which our NEOs are entitled to benefits of this type is the Key Employee Supplemental Retirement Plan.
This type of plan is common among our competitors and we believe the lack of such a plan would put ConocoPhillips at a disadvantage
in attracting and retaining talented executives. Further information on this plan is provided under Pension Benefits beginning
on page 93.
SEVERANCE PLANS AND CHANGES IN CONTROL
We maintain plans to address severance of our executives in certain
circumstances as described under Executive Severance and Changes in Control beginning on page
98. Plans of this nature are common within the industry; our plans are designed to aid ConocoPhillips in attracting and
retaining executives. Under each of our severance and change-in-control severance plans, the executive must terminate from service
with ConocoPhillips in order to receive severance pay.
Executives who began participation in the change-in-control severance
plan after the spinoff of Phillips 66 in 2012 are not eligible for excise tax gross-ups under the plan. Executives who had been
participants in the plan prior to the spinoff may receive excise tax gross-ups. The HRCC chose to grandfather the gross-up provision
for certain participants because, in the event of a change in control, the provisions of our performance share program prior to
the spinoff left those participants with the potential of a large excise tax. The HRCC determined it would be unfair should this
burden suddenly be shifted to the participants. The post-spinoff design of the PSP reduced the potential tax impact to participants.
In 2013, the HRCC amended the change-in-control severance plan to
limit single trigger vesting of equity awards to awards not assumed by an acquirer and for program periods that began prior to
2014. Awards assumed by an acquirer made with regard to later program periods under the PSP, Executive Restricted Stock Unit Program,
or the Stock Option Program will only vest upon the occurrence of both a change-in-control event and termination of employment
of the employee (usually called a “double trigger”).
BROADLY AVAILABLE PLANS
Our NEOs are eligible to participate in the same basic benefits package
as our other U.S. salaried employees. This includes expatriate benefits; relocation services; medical, dental, vision, life, and
accident plans; health savings accounts; and flexible spending arrangements for health care and dependent care expenses.
Table of Contents
Compensation Discussion and Analysis
Executive Compensation Governance
ALIGNMENT OF INTERESTS—STOCK OWNERSHIP AND HOLDING REQUIREMENTS
We place a premium on aligning the interests of our executives with
those of our stockholders. Our Stock Ownership Guidelines require executives to hold equity valued at a multiple of base salary,
ranging from 1.8 times base salary for lower-level executives to six times base salary for the CEO. Employees have five years from
the date they become subject to the Stock Ownership Guidelines to comply. Holdings counted toward the guidelines include: (1) shares
of stock owned individually, jointly, or in trusts controlled by the employee; (2) restricted stock and restricted stock units;
(3) shares owned in qualified savings or stock ownership plans, whether vested or not; (4) stock or units in nonqualified deferred
compensation plans, whether vested or not; and (5) annual PSP target awards when approved by the HRCC. Employees subject to the
guidelines who have not reached the required level of stock ownership are expected to hold shares received upon vesting or earn-out
of restricted stock, restricted stock units, or performance shares (net of shares for taxes), and shares received upon exercise
of stock options (net of shares tendered or withheld for payment of exercise price and shares for taxes), so they meet their requirement
in a timely manner. The multiple of equity held by each of our NEOs currently exceeds our established guidelines.
CLAWBACK POLICY
The HRCC has approved a clawback policy providing that ConocoPhillips
will recoup any incentive compensation (cash or equity) paid or payable to any executive to the extent such recoupment is required
or contemplated by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”),
the Sarbanes-Oxley Act, or any other applicable law or listing standards. This clawback policy allows the Board to recoup compensation
paid in the event of certain business circumstances, including a financial restatement. The policy operates in addition to provisions
already contained in our award documents supporting grants under the PSP, the Executive Restricted Stock Unit Program, the Stock
Option Program, and other compensation programs using company equity. Those documents permit the Board to suspend rights to exercise,
refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine
is detrimental to ConocoPhillips, including acts of misconduct (such as embezzlement, fraud, theft, or disclosure of confidential
information) or other acts that harm our business, reputation, or employees, as well as misconduct that results in ConocoPhillips
having to prepare an accounting restatement. If the SEC adopts final rules regarding clawback requirements under the Dodd-Frank
Act, we will review our policies and plans and, if necessary, amend them to comply with the new mandates. To date, no NEOs have
been subject to any clawbacks.
ANTI-PLEDGING AND ANTI-HEDGING
Pursuant to our insider trading policy, ConocoPhillips directors,
officers and all other employees are prohibited from pledging company stock, holding company stock in a margin account or entering
into hedging transactions, including the use of financial instruments such as prepaid variable forwards, equity swaps, collars
and exchange funds. This policy, together with the Stock Ownership Guidelines discussed above, helps ensure that our NEOs and other
Senior Officers remain subject to the risks, as well as the rewards, of stock ownership.
EQUITY GRANT PRACTICES
When the HRCC awards Performance Share Units, Executive Restricted
Stock Units, options, or other equity grants to the NEOs, the fair market value of the units or the exercise price of the options
or other equity is determined based on an average of the stock’s high and low prices on the date of grant (or the preceding
business day, if the markets are closed on the date of grant). Since 2016, to determine the target number of awards, we use an
average of the closing prices on the ten trading days preceding the date of grant. Grants of Performance Share Units, Executive
Restricted Stock Units, and option grants are generally made at the HRCC’s February meeting (the date of which is determined
at least a year in advance) or, in the case of new hires, on the date of commencement of employment or the date of HRCC approval,
whichever is later.
Table of Contents
Compensation Discussion and Analysis
STATUTORY AND REGULATORY CONSIDERATIONS
In designing, implementing, and determining compensation under our
compensation programs, we act in accordance with our compensation philosophy and believe that attracting, retaining, and motivating
our employees with compensation programs that support long-term value creation is in the best interests of our stockholders. However,
we also take into account the various tax, accounting, and disclosure rules associated with various forms of compensation. We have
reviewed and considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code and designed
deferred compensation programs with the intent that they comply with or are exempt from Section 409A of the Internal Revenue Code.
We generally seek to preserve tax deductions for executive compensation. Nonetheless, ConocoPhillips has awarded compensation that
is not fully tax deductible when the HRCC believes that doing so is in the best interest of our stockholders, and ConocoPhillips
reserves the right to do so in the future. The HRCC has been informed that the exemption from Section 162(m)’s deduction
limit for performance-based compensation has been repealed through the 2017 Tax Cuts and Jobs Act adopted on December 22, 2017
(the “2017 Tax Act”), effective for taxable years beginning after December 31, 2017. Under the 2017 Tax Act, compensation
paid to any “covered employee” in excess of $1 million will not be deductible, unless it qualifies for transition relief
applicable to certain arrangements in place as of November 2, 2017. Generally, a “covered employee” under Section 162(m)
is any employee who has served (i) for tax years after December 31, 2017, as our CFO or (ii) for tax years after December 31, 2016,
as our CEO or other NEO. The rules and regulations promulgated under Section 162(m) are complicated and may change from time to
time, and the scope of the transition relief under the 2017 Tax Act repealing Section 162(m)’s performance-based exemption
from the deduction limit is uncertain. As such, there is no guarantee that compensation in excess of $1 million paid to our “covered
employees” pursuant to any of our compensation programs will ultimately be deductible by ConocoPhillips. Notwithstanding
the repeal of the exemption for “performance-based compensation,” the HRCC intends to maintain its commitment to structuring
our executive compensation programs in a manner to align pay with performance.
Tax-Based Program Criteria
Certain of our incentive programs were designed to conform to the
requirements of Section 162(m) of the Internal Revenue Code, as in effect prior to the 2017 Tax Act, which allowed for deductible
compensation in excess of $1 million if certain conditions, including the attainment of pre-established performance criteria, are
met. We designed the PSP to meet these previously existing requirements for deductibility of these items of compensation. Maximum
payments for the performance period under PSP are set, but they are subject to downward adjustment through the application of the
generally applicable methodology for PSP awards previously discussed, effectively establishing a ceiling for PSP payments to each
NEO.
For the PSP, the criteria for the 2017-2019 performance period required
that ConocoPhillips meet one of the following measures before any award could be made to a NEO:
(1) |
Among the top seven of eleven specified companies in total shareholder return; |
(2) |
Reserve additions of at least 600 MMBOE; |
(3) |
Cash from operations (excluding changes in non-cash working capital) of at least $13.5 billion; or |
(4) |
Controllable operating and overhead costs (adjusted for special items) of $23.0 billion or less. |
For the 2017-2019 PSP performance period, the specified companies
for comparison were initially ConocoPhillips, ExxonMobil, Royal Dutch Shell, Chevron, Total, BP, Occidental, Anadarko, Devon, Apache,
and Marathon Oil. Anadarko was removed following its merger with Occidental in 2019 and replaced with Equinor (formerly known as
Statoil), which was identified as a substitute peer at the beginning of the performance period for 162(m) purposes.
The performance criteria for this purpose are set by the HRCC and
may change from year to year, although the criteria must come from a list of possible criteria set forth in the stockholder-approved
2014 Omnibus Stock and Performance Incentive Plan. The award ceilings are also set by the HRCC each year, although they may not
exceed limits set in the applicable Omnibus Stock and Performance Incentive Plan. The HRCC is responsible for determining whether
the criteria are met after each performance period ends.
While this design was initially intended to preserve deductibility,
the HRCC reserves the right to grant non-deductible compensation, and there is no guarantee that compensation payable pursuant
to any of our compensation programs will ultimately be deductible.
Table of Contents
Human Resources and Compensation Committee Report
Review with Management. The HRCC has reviewed and discussed
the “Compensation Discussion and Analysis” presented in this Proxy Statement with members of management.
Discussion with Independent Executive Compensation Consultant.
The HRCC has discussed with FW Cook, an independent executive compensation consulting firm, ConocoPhillips’ executive compensation
programs, as well as specific compensation decisions made by the HRCC. FW Cook was retained directly by the HRCC, independent of
management. The HRCC has received written disclosures from FW Cook confirming no other work has been performed for ConocoPhillips
by FW Cook, has discussed with FW Cook its independence from ConocoPhillips, and believes FW Cook to have been independent of management.
Recommendation to the ConocoPhillips Board of Directors. Based
on its review and discussions noted above, the HRCC recommended to the Board that the “Compensation Discussion and Analysis”
be included in ConocoPhillips’ Proxy Statement on Schedule 14A (and, by reference, included in ConocoPhillips’
Annual Report on Form 10-K for the year ended December 31, 2019).
THE CONOCOPHILLIPS HUMAN RESOURCES AND COMPENSATION
COMMITTEE
Charles E. Bunch, Chair
John V. Faraci
Jeffrey A. Joerres
William H. McRaven
Sharmila Mulligan
Arjun N. Murti
Human Resources and Compensation Committee Interlocks
and Insider Participation
During the year ended December 31, 2019, none of our executive officers
served as (1) a member of the compensation committee (or other board committee performing equivalent functions or, in the absence
of any such committee, the entire board) of another entity, one of whose executive officers served on our HRCC, (2) a director
of another entity, one of whose executive officers served on our HRCC, or (3) a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of any such committee, the entire board) of another entity,
one of whose executive officers served as one of our directors. In addition, no member of the HRCC (1) was an officer or employee
of ConocoPhillips or any of our subsidiaries during the year ended December 31, 2019; (2) was formerly an officer or employee of
ConocoPhillips or any of our subsidiaries; or (3) had any other relationship requiring disclosure under applicable rules.
Table of Contents
Executive Compensation Tables
The following tables and accompanying narrative disclosures
provide information concerning total compensation paid to the Chief Executive Officer and the other Named Executive Officers of
ConocoPhillips for 2019. Please also see our discussion of the relationship between the “Compensation Discussion and Analysis” to these tables under “2019 Executive Compensation Analysis and Results” beginning on page
71. The data presented in the tables that follow include amounts paid to the Named Executive Officers by ConocoPhillips
or any of its subsidiaries for 2019.
Summary Compensation Table
The Summary Compensation Table below reflects amounts
earned with respect to 2019 and, with regard to non-equity incentive plan compensation, for the performance period ending in 2019.
The table does not include the cost of benefits that are generally available to our U.S.-based salaried employees, such as our
medical, dental, vision, life, and accident plans, disability, and health savings accounts and flexible spending account arrangements
for health care and dependent care expenses. All of our Named Executive Officers are U.S.-based salaried employees.
Name and Principal Position | |
Year | |
Salary(1) | |
Bonus(2) | |
Stock Awards(3) | |
Option Awards(4) | |
Non-Equity Incentive Plan Compensation(5) | |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(6) | |
All Other Compensation(7) | |
Total |
|
R.M. Lance | |
2019 | |
$1,700,000 | |
$ |
— | |
$12,738,872 | |
$ |
— | |
$3,590,400 | |
$11,711,492 | |
$622,980 | |
$30,363,744 |
|
Chairman and Chief | |
2018 | |
1,700,000 | |
|
— | |
11,006,296 | |
|
— | |
4,868,800 | |
5,458,358 | |
372,816 | |
23,406,270 |
|
Executive Officer | |
2017 | |
1,700,000 | |
|
— | |
6,993,660 | |
|
4,652,424 | |
4,596,800 | |
3,578,653 | |
327,393 | |
21,848,930 |
|
D.E. Wallette, Jr. | |
2019 | |
1,070,064 | |
|
— | |
5,818,856 | |
|
— | |
1,747,415 | |
5,438,238 | |
133,186 | |
14,207,759 |
|
Executive Vice President | |
2018 | |
985,444 | |
|
— | |
3,563,725 | |
|
— | |
1,763,945 | |
3,849,980 | |
109,403 | |
10,272,497 |
|
and Chief Financial Officer | |
2017 | |
961,400 | |
|
— | |
2,264,449 | |
|
1,506,438 | |
1,720,906 | |
2,935,282 | |
109,606 | |
9,498,081 |
|
M.J. Fox | |
2019 | |
1,297,893 | |
|
— | |
5,888,807 | |
|
— | |
1,970,202 | |
729,315 | |
148,098 | |
10,034,315 |
|
Executive Vice President | |
2018 | |
1,241,000 | |
|
— | |
5,189,837 | |
|
— | |
2,554,599 | |
258,291 | |
150,731 | |
9,394,458 |
|
and Chief Operating Officer | |
2017 | |
1,241,000 | |
|
— | |
3,297,776 | |
|
2,194,020 | |
2,625,956 | |
438,163 | |
149,519 | |
9,946,434 |
|
K.B. Rose | |
2019 | |
768,700 | |
|
— | |
2,456,127 | |
|
— | |
971,483 | |
82,524 | |
100,220 | |
4,379,054 |
|
Senior Vice President, Legal, General | |
2018 | |
241,938 | |
|
200,000 | |
3,583,832 | |
|
— | |
342,366 | |
12,849 | |
26,031 | |
4,407,016 |
|
Counsel & Corporate Secretary | |
2017 | |
— | |
|
— | |
— | |
|
— | |
— | |
— | |
— | |
— |
|
W.L. Bullock, Jr. | |
2019 | |
717,380 | |
|
— | |
2,349,060 | |
|
— | |
845,504 | |
2,795,020 | |
602,066 | |
7,309,030 |
|
President, Asia Pacific & Middle East | |
2018 | |
— | |
|
— | |
— | |
|
— | |
— | |
— | |
— | |
— |
|
| |
2017 | |
— | |
|
— | |
— | |
|
— | |
— | |
— | |
— | |
— |
|
|
|
(1) |
Includes any amounts that were voluntarily deferred under the Key Employee Deferred Compensation Plan. |
(2) |
Amounts shown represent a payment made in cash as an inducement in connection with the hiring of Ms. Rose in 2018. Our
primary short-term incentive compensation arrangement for salaried employees (the Variable Cash Incentive Program or “VCIP”)
has performance measures established by the HRCC, and communicated to employees, including the Named Executive Officers, at
a time when the outcome of the performance is substantially uncertain, with regard to the 2019 performance period. The HRCC
must determine the level of achievement with regard to such performance measures before there is any payout to Named Executive
Officers. Because of this process, amounts paid under the VCIP are shown in the Non-Equity Incentive Plan Compensation
column of the table, rather than the Bonus column. |
Table of Contents
Executive Compensation Tables
(3) |
Amounts shown represent the aggregate grant date fair value of awards made under the Performance Share
Program (“PSP”) during each of the years indicated and under the Executive Restricted Stock Unit Program in 2018
and 2019, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section
of Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2019 Annual Report on Form 10-K for
a discussion of the relevant assumptions used in this determination. A detailed breakdown of 2019 awards in the Stock Awards
column of the Summary Compensation Table is below: |
|
|
Grants Made in 2019 | |
PSP | |
Executive Restricted Stock Unit Program | |
|
|
Name | |
Shares (#) | |
Value | |
Shares (#) | |
Value | |
Total Value |
|
R.M. Lance | |
120,182 | |
$8,280,239 | |
64,714 | |
$4,458,633 | |
$12,738,872 |
|
D.E. Wallette, Jr. | |
61,028 | |
4,150,090 | |
24,221 | |
1,668,766 | |
5,818,856 |
|
M.J. Fox | |
57,382 | |
3,953,476 | |
28,090 | |
1,935,331 | |
5,888,807 |
|
K.B. Rose | |
23,171 | |
1,596,424 | |
12,478 | |
859,703 | |
2,456,127 |
|
W.L. Bullock, Jr. | |
22,916 | |
1,578,855 | |
11,179 | |
770,205 | |
2,349,060 |
|
| |
| |
| |
| |
| |
|
|
|
No off-cycle awards were granted to any of the Named Executive Officers during 2017 or 2019. The amounts
shown for awards from the PSP relate to the respective three-year performance periods that began in each of the years presented.
Performance periods under the PSP generally are three years. As a new performance period has begun each year since the program
commenced, there are three overlapping performance periods ongoing at any time. |
|
The amounts shown for 2017 include the full target for PSP 17 for the January 2017—December 2019 performance period,
as well as any incremental targets set during 2017 with regard to any ongoing performance period as a result of promotions
(of which there were none in 2017). The amounts shown for 2018 include the full initial target for PSP 18 for the January
2018—December 2020 performance period, as well as any incremental targets set during 2018 with regard to any ongoing
performance period as a result of promotions (of which there were none in 2018). For Ms. Rose, the amounts shown also include
pro-rata grants for her hire in September 2018 for participation in the PSP and Executive Restricted Stock Unit Program. The
amounts shown for 2019 include the full initial target for PSP 19 for the January 2019—December 2021 performance period,
as well as any incremental targets set during 2019 with regard to any ongoing performance period as a result of promotions
(Mr. Wallette was promoted in 2019). |
|
Amounts are shown at target for each year since it is most probable at the setting of the target for the applicable performance
periods that targets will be achieved. If payout was made at maximum levels for company performance the amounts shown would
double from the targets shown, although the value of the actual payout would be dependent upon the stock price at the time
of the payout. If payout was made at minimum levels, the amounts would be reduced to zero. No adjustment is made to the target
shown for prior years based upon any change in probability after the target is set. Changes to targets resulting from promotion
or demotion of a Named Executive Officer are shown as awards in the year of the promotion or demotion, even though the awards
may relate to a program period that began in an earlier year. |
|
The grant date fair values of the target awards for PSP 17 (January 2017-December 2019) appear in the table in 2017. Actual
payouts with regard to the targets for PSP 17 were approved by the HRCC at its February 2020 meeting. Pursuant to that approval,
payouts were made in February 2020 (with values shown at fair market value on the date of settlement) to the Named Executive
Officers as follows: Mr. Lance, 293,910 units valued at $17,359,794; Mr. Wallette, 103,274 units valued at $6,099,879; Mr.
Fox, 138,590 units valued at $8,185,818; Ms. Rose, 27,360 units valued at $1,616,018; and Mr. Bullock, 48,647 units valued
at $2,873,335. These amounts do not appear in the Summary Compensation Table. Under the terms and conditions of the
awards, participants were able to make elections prior to the beginning of the performance period to defer all or a portion
of the award value into the Key Employee Deferred Compensation Plan. See also the section on Nonqualified Deferred Compensation beginning on page 96 for further information. |
|
For performance share programs beginning in 2012 and later, and Executive Restricted Stock Units granted before 2020,
settlement will be made in cash rather than unrestricted shares. For target awards for program periods beginning in 2013 and
later, the escrow period ends shortly after the end of the performance period, except that in the cases of termination due
to death, layoff, or retirement, or after disability or a change in control, the escrow period ends upon the occurrence of
the exceptional termination event although the timing of settlement remains unchanged. For programs beginning prior to 2013,
the employee may have elected, prior to the beginning of the performance period, to defer the lapsing of restrictions until
after separation. For programs beginning in 2013 and later, the employee may elect, prior to the beginning of the performance
period, to have some or all of the settlement value deferred into the Key Employee Deferred Compensation Plan. |
(4) |
Amounts represent the dollar amount recognized as the aggregate grant date fair value as determined in accordance with
FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 18 in the Notes to Consolidated Financial
Statements in ConocoPhillips’ 2019 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this
determination. All such options were awarded under the Stock Option Program. Options awarded to Named Executive Officers under
the Stock Option Program generally vest in three equal annual installments beginning on the first anniversary of the date
of grant and expire ten years after the date of grant. However, if a Named Executive Officer has attained the early retirement
age of 55 with five years of service, the value of the options granted is expensed in the year of grant or over the number
of months until the executive attains age 55 with five years of service. Option awards were made in February of each year
at a regularly-scheduled meeting of the HRCC. Occasionally, option awards were also made at other times, such as when an individual
commences employment. In determining the number of shares to be subject to these option grants, the HRCC used a Black-Scholes-Merton-based
methodology to value the options. In 2017, the HRCC approved the discontinuation of the Stock Option Program for 2018 and
later years. No stock option grants were made to Named Executive Officers in 2018 or 2019. |
(5) |
Includes amounts paid under the VCIP and VCIP amounts that were voluntarily deferred to the Key Employee Deferred Compensation
Plan. See the section on Nonqualified Deferred Compensation beginning on page 96 for
further information. See also note 2 above. |
(6) |
Amounts represent the actuarial increase in the present value of the Named Executive Officer’s benefits under all
pension plans maintained by ConocoPhillips determined using interest rate, discount rate, and mortality rate assumptions consistent
with those used in ConocoPhillips’ financial statements. |
Table of Contents
Executive Compensation Tables
|
Interest Rates and Discount Rates - |
|
Interest rate assumption changes have a significant impact on the pension values, with periods of lower interest rates
having the effect of increasing the actuarial values reported and vice versa. With interest rates reaching historic
lows in 2019 this significantly increased the projected value of Mr. Lance’s pension. The discount rate assumptions
and discount periods from the assumed retirement age to current age used in determining the present value may also have a
significant impact on the pension values, with lower discount rates having the effect of increased actuarial values reported
and vice versa, and shorter discount periods having the effect of increased actuarial values reported and vice versa.
The assumed discount rate used for 2019 decreased approximately 1%. |
|
Final Average Pay and Service Credit - |
|
The years of service credited and increases to compensation are also factors in the benefit accrual. Each additional year
of service credit and pay increases will generally result in an increase in the actuarial values reported. This applies to
each of the Named Executive Officers other than Mr. Fox and Ms. Rose, who are not final average earnings titles of ConocoPhillips’
U.S. pension plans. See Pension Benefits beginning on page 93 of this Proxy Statement
for further information. |
(7) |
As discussed in “Compensation Discussion and Analysis” beginning on page 51 of
this Proxy Statement, ConocoPhillips provides its executives with a number of compensation and benefit arrangements. The table
below reflects amounts earned in 2019 under those arrangements. We have excluded the cost of benefits that are generally available
to our U.S.-based salaried employees, such as our medical, dental, vision, life, and accident plans, disability, and health
savings and flexible spending account arrangements. All of our Named Executive Officers are U.S.-based salaried employees.
All Other Compensation includes the following amounts, which were determined using actual cost paid by ConocoPhillips unless
otherwise noted: |
|
|
Name | |
Personal Use of Company Aircraft(a) | |
Business- Related Use of Company Aircraft(b) | |
Home Security and Other Security Related Costs(c) | |
Executive Group Life Insurance Premiums(d) | |
Tax Reimbursement Gross-Up(e) | |
Meetings, Events & Presentations Reimbursement(f) | |
Matching Gift Program(g) |
| Expatriate(h) | |
Matching Contributions Under the Tax-Qualified Savings Plans(i) | |
Company Contributions to Non- Qualified Defined Contribution Plans(j) | |
Total |
R.M. Lance | |
$142,026 | |
$194,483 | |
$383 | |
$12,689 | |
$19,852 | |
$85,547 | |
$15,000 |
| $ |
— | |
$25,200 | |
$127,800 | |
$622,980 |
D.E. Wallette, Jr. | |
— | |
— | |
383 | |
7,987 | |
8,848 | |
19,662 | |
— |
| |
— | |
$25,200 | |
71,106 | |
133,186 |
M.J. Fox | |
— | |
— | |
383 | |
9,688 | |
6,299 | |
1,918 | |
13,000 |
| |
— | |
$25,200 | |
91,610 | |
148,098 |
K.B. Rose | |
— | |
— | |
— | |
5,738 | |
508 | |
24,791 | |
— |
| |
— | |
$25,200 | |
43,983 | |
100,220 |
W.L. Bullock, Jr. | |
— | |
79,372 | |
— | |
5,355 | |
914 | |
4,915 | |
10,000 |
| |
436,946 | |
$25,200 | |
39,364 | |
602,066 |
|
|
(a) |
ConocoPhillips’ Comprehensive Security Program requires that the CEO, Mr. Lance, fly on company
aircraft unless the Global Security Department determines that other arrangements represent an acceptable risk. Amounts represent
the approximate incremental cost to ConocoPhillips for personal use of the aircraft, including travel for any family member
or personal guest. Approximate incremental cost has been determined by calculating the variable costs for each aircraft during
the year, dividing that amount by the total number of miles flown by that aircraft, and multiplying the result by the miles
flown for personal use during the year. However, where there were identifiable costs related to a particular trip—such
as airport landing fees or food and lodging for aircraft personnel who remained at the location of the personal trip—those
amounts are separately determined and included in the table above. The amounts shown include incremental costs associated
with flights to the hangar or other locations without passengers (commonly referred to as “deadhead” flights)
arising from the non-business use of the aircraft by a Named Executive Officer. |
(b) |
ConocoPhillips executives participate in community, university, and philanthropic organizations at the request of the
Company. In some cases, company aircraft are used to support these activities. When these activities are considered as not
integrally and directly related to the performance of the executive’s duties, we include the aggregate cost to the Company
in this column. The same guidelines for determining approximate incremental cost as discussed in note (a) are used in determining
these amounts. |
(c) |
The use of a home security system is required as part of ConocoPhillips’ Comprehensive Security Program for certain
executives and employees, including the Named Executive Officers, based on risk assessments made by our Global Security Department.
Amounts shown represent the approximate incremental cost to ConocoPhillips for the installation and maintenance of the home
security systems with features required by our security program in excess of the cost of a “standard” system typical
for homes in the neighborhoods where the Named Executive Officers reside. Each Named Executive Officer pays the cost of the
“standard” system personally. In addition, amounts shown reflect other security costs, primarily related to transportation
and protection services provided under our Comprehensive Security Program if a risk assessment indicated that enhanced procedures
were warranted when an executive attended certain public events. |
(d) |
The amounts shown reflect the incremental cost of premiums paid by ConocoPhillips for executive group life insurance (coverage
equal to two times annual salary) versus the cost of basic life insurance provided to non-executive employees (coverage equal
to annual salary). In addition, certain employees, including the Named Executive Officers, are eligible to purchase group
variable universal life insurance policies at no incremental cost to ConocoPhillips. |
(e) |
The amounts shown are for payments by ConocoPhillips relating to certain taxes incurred by the employee. These taxes arise
primarily when ConocoPhillips requests family members or other guests to accompany the employee to a function, and, as a result,
the employee is deemed to make a personal use of company assets (for example, when a spouse accompanies an employee on a company
aircraft). ConocoPhillips believes such expenses are appropriately characterized as a business expense, and, if the employee
has imputed income in accordance with the applicable tax laws, ConocoPhillips will generally reimburse any increased tax costs. |
Table of Contents
Executive Compensation Tables
(f) |
The amounts in this column represent the cost of presentations made to employees and their spouses
at Company meetings or events, reimbursements for the cost of spousal and other guests attendance at such meetings or events,
and the aggregate incremental cost of any other personal benefits or perquisites not integrally and directly related to the
performance of the executive’s duties arising from such presentations, meetings or events, primarily food, drink and
transportation. |
(g) |
ConocoPhillips maintains a Matching Gift Program, under which certain gifts by employees to qualified educational or charitable
institutions are matched. For executives, the program matches up to $10,000 with regard to each program year. Administration
of the program can cause us to pay more than the limit in a single fiscal year due to a lag in processing claims. The amounts
shown are for the actual payments by ConocoPhillips during the year. |
(h) |
Mr. Bullock was previously assigned in Singapore. These amounts reflect net expatriate benefits under our standard policies
for such service outside of the United States, and these amounts include payments for increased tax costs related to such
expatriate assignments and benefits. Amounts shown in the table above also reflect amended tax equalization and similar payments
under our expatriate services policies that were made to and from, or on behalf of, the Named Executive Officer that were
paid or received during 2019, but apply to earnings of prior years, but which were unknown or not capable of being estimated
with any reasonable degree of accuracy in prior years. These amounts are returned to the Company when they are known or received
through the tax reporting and filing process. |
(i) |
Under the terms of its tax-qualified defined contribution plans, ConocoPhillips makes matching contributions and allocations
to the accounts of its eligible employees, including the Named Executive Officers. |
(j) |
Under the terms of its nonqualified defined contribution plans, ConocoPhillips makes contributions to the accounts of
its eligible employees, including the Named Executive Officers. See the narrative, table, and notes to the Nonqualified Deferred Compensation section beginning on page 96 for further information. |
Grants of Plan-Based Awards Table
The Grants of Plan-Based Awards Table shows participation
by the Named Executive Officers in the incentive compensation arrangements described below.
The columns under the heading Estimated Future Payouts Under
Non-Equity Incentive Plan Awards show information regarding VCIP. The amounts shown in the table are those applicable to the
2019 program year, using a minimum of zero and a maximum of 200 percent of VCIP target for each participant; the amounts shown
do not represent actual payouts for that program year. Actual payouts for the 2019 program year were made in February 2020 and
are shown in the Summary Compensation Table on page 85 under the Non-Equity Incentive
Plan Compensation column. Awards are eligible to be voluntarily deferred.
The columns under the heading Estimated Future Payouts Under
Equity Incentive Plan Awards show information regarding PSP. The amounts shown in the table are those set for 2019 compensation
tied to the 2019 through 2021 program period and do not represent actual payouts for that program year. These awards accrue dividend
equivalents that are reinvested in further restricted stock units and paid upon the applicable vesting of the underlying award.
Awards are eligible to be voluntarily deferred. For the 2019 program year under the PSP, the HRCC set the targets and granted
awards at the regularly scheduled February 2019 meeting of the HRCC.
The All Other Stock Awards column reflects awards granted
under the Executive Restricted Stock Unit Program. The Executive Restricted Stock Unit Program awards shown were granted on the
same day the target was approved, vest at the end of a three-year period, and accrue dividend equivalents that are reinvested
in further restricted stock units and paid upon the applicable vesting of the underlying award. Awards granted in 2019 are eligible
to be voluntarily deferred. For the 2019 program year under the Executive Restricted Stock Unit Program, the HRCC set the targets
and granted awards at the regularly scheduled February 2019 meeting of the HRCC.
Table of Contents
Executive Compensation Tables
| |
| |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | |
Estimated Future Payouts Under Equity Incentive Plan Awards(3) | |
All Other Stock Awards: Number of Shares of Stock or | |
All Other Option Awards: Number of Securities Underlying | |
Exercise or Base Price Of Options Awards Average | |
Exercise or Base Price Of Options Awards Closing | |
Grant Date Fair Value of Stock and |
Name | |
Grant Date(1) | |
Threshold ($) | |
Target ($) | |
Maximum ($) | |
Threshold (#) | |
Target (#) | |
Maximum (#) | |
Units(4) (#) | |
Options (#) | |
Price ($Sh) | |
Price ($Sh) | |
Options Awards(5) |
R.M. Lance | |
| |
$ — | |
$2,720,000 | |
$5,440,000 | |
— | |
— | |
— | |
— | |
— | |
$ — | |
$ — | |
$ — |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
120,182 | |
240,364 | |
— | |
— | |
— | |
— | |
8,280,239 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
64,714 | |
— | |
— | |
— | |
4,458,633 |
D.E. Wallette, Jr. | |
| |
— | |
1,230,574 | |
2,461,148 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
4,138 | |
8,276 | |
— | |
— | |
— | |
— | |
280,097 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
7,412 | |
14,824 | |
— | |
— | |
— | |
— | |
461,082 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
49,478 | |
98,956 | |
— | |
— | |
— | |
— | |
3,408,911 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
24,221 | |
— | |
— | |
— | |
1,668,766 |
M.J. Fox | |
| |
— | |
1,492,577 | |
2,985,154 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
57,382 | |
114,764 | |
— | |
— | |
— | |
— | |
3,953,476 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
28,090 | |
— | |
— | |
— | |
1,935,331 |
K.B. Rose | |
| |
— | |
684,143 | |
1,368,286 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
23,171 | |
46,342 | |
| |
— | |
— | |
— | |
1,596,424 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
12,478 | |
— | |
— | |
— | |
859,703 |
W.L. Bullock, Jr. | |
| |
— | |
595,425 | |
1,190,850 | |
— | |
— | |
— | |
— | |
— | |
— | |
— | |
— |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
22,916 | |
45,832 | |
— | |
— | |
— | |
— | |
1,578,855 |
| |
2/14/2019 | |
— | |
— | |
— | |
— | |
— | |
— | |
11,179 | |
— | |
— | |
— | |
770,205 |
|
|
(1) |
The grant date shown is the date on which the HRCC approved the target awards or, in the case of prorated
promotional awards under the PSP, the effective date of the promotion or, in the case of Mr. Wallette, on the date of the
HRCC meeting when his promotion effective January 1, 2019, was approved. |
(2) |
Threshold and maximum awards are based on the program provisions under VCIP. Actual awards earned can range from zero
to 200 percent of the target awards for corporate performance inclusive of adjustments for individual performance. Amounts
reflect estimated cash payouts under VCIP after the close of the performance period. The estimated amounts are calculated
based on the applicable annual target and base salary for each Named Executive Officer in effect for the 2019 performance
period, including any salary increases during the year. While the program terms would also automatically adjust for salary
decreases, these are not reflected in the table above. If threshold levels of performance are not met, then the payout can
be zero. The HRCC also retains the authority to make awards under VCIP at its discretion. Actual payouts under VCIP for 2019
are based on actual base salaries earned in 2019 and are reflected in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table on page 85. |
(3) |
Threshold and maximum awards under the PSP are based on the program provisions. Actual awards earned under the PSP can
range from zero to 200 percent of the initial awards. Messrs. Wallette, Fox and Bullock received an additional 10% initial
award for PSP 19 (2019-2021) in recognition of their continued execution of the disciplined returns-focused value proposition. |
(4) |
This reflects awards for the Executive Restricted Stock Unit Program. Executive Restricted Stock Unit awards can only
be adjusted downward. |
(5) |
For equity incentive plan awards, these amounts represent the grant date fair value at target level under PSP as determined
pursuant to FASB ASC Topic 718 and reflected in the Stock Awards column in the Summary Compensation Table on
page 85. Actual value realized upon vesting of the PSP or Executive Restricted Stock Unit
awards depends on market prices at the time of settlement for such awards. See the “Employee Benefit Plans”
section of Note 18 in the Notes to Consolidated Financial Statements in ConocoPhillips’ 2019 Annual Report on Form
10-K for a discussion of the relevant assumptions used in this determination. |
Table of Contents
Executive Compensation Tables
Outstanding Equity Awards at Fiscal Year End
The Outstanding Equity Awards at Fiscal Year End table
is used to show equity awards measured in ConocoPhillips stock held by the Named Executive Officers. The following table reflects
outstanding stock option awards and unvested and unearned stock awards (both time-based and performance contingent) as of December
31, 2019 assuming a market value of $65.03 per share (the closing stock price of the company’s common stock on December
31, 2019).
| |
Option Awards(1) | |
Stock Awards(4) |
Name | |
Number of Securities Underlying Unexercised Options (#) Exercisable(2) | |
Number of Securities Underlying Unexercised Options (#) Unexercisable(3) | |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#) | |
Option Exercise Price | |
Option Expiration Date | |
Number of Shares or Units of Stock That Have Not Vested (#) | |
Market Value of Shares or Units of Stock That Have Not Vested | |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights That Have Not Vested (#)(10) | |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units, or Other Rights That Have Not Vested |
R.M. Lance | |
87,174 | |
— | |
— | |
$53.4700 | |
02/10/2021 | |
— | |
$ — | |
— | |
$ — |
| |
105,098 | |
— | |
— | |
54.8000 | |
02/09/2022 | |
— | |
— | |
— | |
— |
| |
584,900 | |
— | |
— | |
58.0775 | |
02/05/2023 | |
— | |
— | |
— | |
— |
| |
569,400 | |
— | |
— | |
65.4630 | |
02/18/2024 | |
— | |
— | |
— | |
— |
| |
607,000 | |
— | |
— | |
69.2450 | |
02/17/2025 | |
— | |
— | |
— | |
— |
| |
819,900 | |
— | |
— | |
33.1250 | |
02/16/2026 | |
— | |
— | |
— | |
— |
| |
337,866 | |
168,934 | |
— | |
49.7550 | |
02/14/2027 | |
— | |
— | |
— | |
— |
| |
— | |
— | |
— | |
— | |
— | |
637,895 | (5) |
41,482,325 | |
262,677 | |
17,081,856 |
D.E. Wallette, Jr. | |
34,407 | |
— | |
— | |
53.4700 | |
02/10/2021 | |
| |
— | |
| |
— |
| |
42,322 | |
— | |
— | |
54.8000 | |
02/09/2022 | |
| |
— | |
| |
— |
| |
128,500 | |
— | |
— | |
58.0775 | |
02/05/2023 | |
| |
— | |
— | |
— |
| |
167,600 | |
— | |
— | |
65.4630 | |
02/18/2024 | |
| |
— | |
— | |
— |
| |
178,700 | |
— | |
— | |
69.2450 | |
02/17/2025 | |
| |
— | |
— | |
— |
| |
241,400 | |
— | |
— | |
33.1250 | |
02/16/2026 | |
| |
— | |
— | |
— |
| |
109,400 | |
54,700 | |
— | |
49.7550 | |
02/14/2027 | |
— | |
— | |
— | |
— |
| |
— | |
— | |
— | |
— | |
— | |
208,567 | (6) |
13,563,112 | |
103,434 | |
6,726,324 |
M.J. Fox | |
21,783 | |
— | |
— | |
54.8000 | |
02/09/2022 | |
— | |
— | |
— | |
— |
| |
162,134 | |
— | |
— | |
58.0775 | |
02/05/2023 | |
— | |
— | |
— | |
— |
| |
268,500 | |
— | |
— | |
65.4630 | |
02/18/2024 | |
— | |
— | |
— | |
— |
| |
286,200 | |
— | |
— | |
69.2450 | |
02/17/2025 | |
— | |
— | |
— | |
— |
| |
386,600 | |
— | |
— | |
33.1250 | |
02/16/2026 | |
— | |
— | |
— | |
— |
| |
159,333 | |
79,667 | |
— | |
49.7550 | |
02/14/2027 | |
— | |
— | |
— | |
— |
| |
| |
| |
| |
| |
| |
206,713 | (7) |
13,442,562 | |
124,589 | |
8,102,002 |
K.B. Rose | |
— | |
— | |
— | |
— | |
— | |
37,116 | (8) |
2,413,685 | |
46,165 | |
3,002,109 |
W.L. Bullock | |
20,546 | |
— | |
| |
53.4700 | |
02/10/2021 | |
— | |
— | |
— | |
— |
| |
24,441 | |
— | |
— | |
54.8000 | |
02/09/2022 | |
— | |
— | |
— | |
— |
| |
37,600 | |
— | |
— | |
58.0775 | |
02/05/2023 | |
— | |
— | |
— | |
— |
| |
39,500 | |
— | |
— | |
65.4630 | |
02/18/2024 | |
— | |
— | |
— | |
— |
| |
45,200 | |
— | |
— | |
69.2450 | |
02/17/2025 | |
— | |
— | |
— | |
— |
| |
81,000 | |
— | |
— | |
33.1250 | |
02/16/2026 | |
— | |
— | |
— | |
— |
| |
47,466 | |
23,734 | |
— | |
49.7550 | |
02/14/2027 | |
— | |
— | |
— | |
— |
| |
— | |
— | |
— | |
— | |
— | |
83,041 | (9) |
5,400,151 | |
48,972 | |
3,184,658 |
|
|
(1) |
All options shown in the table have a maximum term for exercise of ten years from the grant date. Under
certain circumstances, the terms for exercise may be shorter, and, in certain circumstances, the options may be forfeited
and cancelled. All awards shown in the table have associated restrictions on transferability. |
(2) |
The options shown in this column vested and became exercisable in 2019 or prior years (although under certain termination
circumstances, the options may still be forfeited). Options become exercisable in one-third increments on the first, second,
and third anniversaries of the grant date. |
(3) |
Represents the final one-third vesting of the February 14, 2017 grant, which became exercisable on February 14, 2020. |
(4) |
Stock awards made to the Named Executive Officers in 2019 include: (a) long-term incentive awards paid out under the PSP;
(b) long-term time-vested awards under the Executive Restricted Stock Unit Program; or (c) pursuant to elections made by a
Named Executive Officer to receive cash compensation in the form of restricted stock units. Stock awards shown in the columns
entitled Number of Shares or Units of Stock That Have Not Vested and Market Value of Shares or Units of Stock That
Have Not Vested continue to have restrictions upon transferability. Stock awards shown reflect the closing price of ConocoPhillips
common stock ($65.03), as reported on the NYSE, on December 31, 2019, the last trading day of 2019. |
Table of Contents
Executive Compensation Tables
|
Amounts above include PSP awards for the performance period that ended in December 2019 (PSP 17), shown
at target. At its February 11, 2020, meeting, the HRCC approved final payout levels for the Named Executive Officers with
regard to that performance period, as follows: Mr. Lance, 293,910 units; Mr. Wallette, 103,274 units; Mr. Fox, 138,590 units;
Ms. Rose, 27,360 units; and Mr. Bullock, 48,647 units; see note 3 of the Summary Compensation Table. Under the PSP,
stock awards are made in the form of restricted stock units or restricted stock, the former having been used in the most recent
awards. The terms and conditions of both are substantially the same, requiring restriction on transferability until separation
from employment, although for performance periods beginning after 2008 and before 2013, restrictions will lapse five years
from the anniversary of the grant date unless the employee has elected prior to the beginning of the performance period to
defer the lapsing of such restrictions until separation from employment. For performance periods beginning after 2012, restrictions
will lapse three years after the grant and will be settled in cash. Except in cases where the five-year provision applies,
forfeiture is expected to occur if the separation is not the result of death, disability, layoff, retirement after the executive
has reached the age of 55 with five years of service, or after a change in control, although the HRCC has the authority to
waive forfeiture. Restricted stock awards have voting rights and pay dividends. Restricted stock unit awards have no voting
rights. Restricted stock units granted under PSP prior to 2018 pay dividend equivalents, but no dividend equivalents are paid
or accrued for awards made under the PSP until after the applicable performance period has ended. Restricted stock units granted
under PSP in 2018 and later accrue dividend equivalents that, during the performance period, are reinvested in further restricted
stock units. Dividend equivalents, if any, on restricted stock units held are paid in cash or credited to each officer’s
account in the form of additional stock units. Neither pays dividends or dividend equivalents at preferential rates, and dividend
equivalents are paid at the same time as dividends for each quarter. Restricted stock held by the Named Executive Officers
prior to November 17, 2001, was converted to restricted stock units prior to the completion of the merger of Conoco Inc. and
Phillips Petroleum Company, with the original restrictions still in place. Awards for ongoing performance periods under the
PSP (PSP 18 (January 2018 - December 2020) and PSP 19 (January 2019 - December 2021)) are shown at target levels in the columns
entitled Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested and Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested. There is
no assurance that these awards will be granted at, below, or above target after the end of the relevant performance periods,
as the determination of whether to make an actual grant and the amount of any actual grant for Named Executive Officers is
within the discretion of the HRCC. |
|
Amounts above also include Executive Restricted Stock Unit Program awards granted in February 2018 and 2019. Under the
Executive Restricted Stock Unit Program, stock awards are made in the form of restricted stock units. The terms and conditions
of those units require restriction on transferability, which lapse three years from the anniversary of the grant date. Forfeiture
is expected to occur at separation from service if the separation is not the result of death, disability, layoff, retirement
after the executive has reached the age of 55 with five years of service, or after a change in control, although the HRCC
has the authority to waive forfeiture. Upon lapse of restrictions for awards granted in 2018 and 2019, settlement is made
in cash, although the executive had the ability to elect to defer the value into an account in the Key Employee Deferred Compensation
Plan. Restricted stock unit awards have no voting rights. Dividend equivalents, if any, on restricted stock units held are
reinvested in further restricted stock units. Dividend equivalents are paid at the same time and the same rate as dividends
for each quarter, not at a preferential rate. Awards under the Executive Restricted Stock Unit Program are shown in the columns
entitled Number of Shares or Units of Stock That Have Not Vested. |
|
Amounts above also include, in the case of Ms. Rose, an award of restricted stock units made at the beginning of employment
with the Company as an off-cycle make-up award for which restrictions lapse three years from the grant date and which pays
dividend equivalents in cash at the same time and at the same rate as dividends are paid on Company common stock. |
|
Amounts also include restricted stock and restricted stock unit awards granted with respect to prior periods. The plans
and programs under which such grants were made provide that awards made in the form of restricted stock and restricted stock
units be held in such form until the recipient retires (with respect to awards made before 2009) or the earlier of eight years
or retirement (with respect to awards made from 2009 through 2012), with the possible election to hold until retirement, or
three years (with regard to awards made in 2013 or later), with payouts for the last to be made in cash (unless voluntarily
deferred to an account in the Key Employee Deferred Compensation Plan). If such awards immediately vested upon completion
of the relevant performance period as is more typical for restricted stock programs, the amounts reflected in this column
would be zero for awards made in years prior to 2012. |
(5) |
Includes 7,287 restricted shares for LTIP VIII—PSP I initial payout, for which restrictions lapse at retirement;
3,502 restricted stock units for LTIP VIII—LTIP IX, for which restrictions lapse at retirement; 106,204 restricted stock
units related to grants for PSP I final payout—PSP VI, for which restrictions lapse following separation from service;
39,850 restricted stock units related to grants for PSP VIII, for which restrictions lapse five years from grant date; 31,939
restricted stock units related to grants for PSP VIII Tail; Mr. Lance elected to defer lapsing of restrictions for PSP VIII
and PSP VIII Tail until separation of service, and 162,965 restricted stock units related to grants for PSP X, for which restrictions
lapse five years from grant date of final approved award and that will be settled in cash; 72,469 restricted stock units related
to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that
will be settled in cash; 63,725 restricted stock units related to the grant of Executive Restricted Stock Units in 2019, for
which restrictions lapse three years from the grant date and that will be settled in cash; and 149,954 restricted stock units
related to grants for the PSP 17 target award. The actual payouts with regard to the targets for PSP 17 were approved by the
HRCC at its February 2020 meeting, and, pursuant to that decision, Mr. Lance received a payout of 293,910 units. Restrictions
on the PSP 17 award lapsed on February 20, 2020, and the award settled in cash, although the employee may have elected, prior
to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred
Compensation Plan. For certain awards, Mr. Lance has voluntarily elected to defer the lapsing of restrictions until separation
from service, and those awards continue to appear in the table. Subsequent elections may also impact the final timing of the
payout of these awards. Restrictions lapsed on 162,965 restricted stock units related to PSP X on February 18, 2020. |
(6) |
Includes 31,099 restricted stock units related to grants for PSP I final payout—PSP VI, for which restrictions lapse
following separation from service; 6,133 restricted stock units related to grants for PSP IX, for which restrictions lapse
five years from grant date; 27,552 restricted stock units related to grants for PSP IX Tail; Mr. Wallette elected to defer
lapsing of restrictions for PSP IX and PSP IX Tail until separation of service, 43,777 restricted stock units related to grants
for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash;
23,464 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse
three years from grant date and that will be settled in cash; 23,850 restricted stock units related to the grant of Executive
Restricted Stock Units in 2019, for which restrictions lapse three years from grant date and that will be settled in cash;
and 52,691 restricted stock units related to grants for the PSP 17 target award. The actual payouts with regard to the targets
for the PSP 17 award were approved by the HRCC at its February 2020 meeting, and, pursuant to that decision, Mr. Wallette
received a payout of 103,274 units. Restrictions on the PSP 17 award lapsed on February 20, 2020, and the award settled in
cash, although the employee may have elected, prior to the beginning of the performance period, to have some or all of the
settlement deferred into the Key Employee Deferred Compensation Plan. Subsequent elections may also impact the final timing
of the payout of these awards. Restrictions lapsed on 43,777 restricted stock units related to PSP X on February 18, 2020. |
Table of Contents
Executive Compensation Tables
(7) |
Includes 74,172 restricted stock units related to grants for PSP X, for which restrictions lapse five
years from grant date of final approved award and that will be settled in cash; 34,172 restricted stock units related to the
grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that will
be settled in cash; 27,660 restricted stock units related to the grant of Executive Restricted Stock Units in 2019, for which
restrictions lapse three years from the grant date and that will be settled in cash; and 70,709 restricted stock units related
to grants for the PSP 17 target award. The actual payouts with regard to the targets for PSP 17 were approved by the HRCC
at its February 2020 meeting, and, pursuant to that decision, Mr. Fox received 138,590 units. Restrictions on the PSP 17 award
lapsed on February 20, 2020, and the award settled in cash, although the employee may have elected, prior to the beginning
of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan.
Restrictions lapsed on 74,172 restricted stock units related to PSP X on February 18, 2020. |
(8) |
Includes 6,482 restricted stock units related to the grant of Executive Restricted Stock Units in 2018, for which restrictions
lapse three years from the program grant date and will be settled in cash; 12,760 restricted stock units related to the grant
of Executive Restricted Stock Units in 2019, for which restrictions lapse three years from the program grant date and will
be settled in cash; a make-up grant of 3,915 restricted stock units as an inducement to join ConocoPhillips, for which restrictions
lapse three years from the grant date and that will be settled in cash; and 13,959 restricted stock units related to grants
for the PSP 17 target award. The actual payouts with regard to the targets for PSP 17 were approved by the HRCC at its February
2020 meeting, and, pursuant to that decision, Ms. Rose received 27,360 units. Restrictions on the PSP 17 award lapsed on February
20, 2020, and the award settled in cash. |
(9) |
Includes 24,356 restricted stock units related to grants for PSP I final payout—PSP VI, for which restrictions lapse
following separation from service; 11,970 restricted stock units related to grants for PSP X, for which restrictions lapse
five years from grant date of final approved award and that will be settled in cash; 10,887 restricted stock units related
to the grant of Executive Restricted Stock Units in 2018, for which restrictions lapse three years from grant date and that
will be settled in cash; 11,008 restricted stock units related to the grant of Executive Restricted Stock Units in 2019, for
which restrictions lapse three years from grant date and that will be settled in cash; and 24,820 restricted stock units related
to grants for the PSP 17 target award. The actual payouts with regard to the targets for the PSP 17 award were approved by
the HRCC at its February 2020 meeting, and, pursuant to that decision, Mr. Bullock received a payout of 48,647 units. Restrictions
on the PSP 17 award lapsed on February 20, 2020, and the award settled in cash, although the employee may have elected, prior
to the beginning of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred
Compensation Plan. Subsequent elections may also impact the final timing of the payout of these awards. Restrictions lapsed
on 11,970 restricted stock units related to PSP X on February 18, 2020. |
(10) |
Reflects potential stock awards under ongoing performance periods for the PSP for the performance periods beginning January
2018 (Mr. Lance, 139,778 target units; Mr. Wallette, 52,838 target units; Mr. Fox, 65,910 target units; Ms. Rose, 22,470 target
units; and Mr. Bullock, 25,538 target units) and January 2019 (Mr. Lance, 122,899 target units; Mr. Wallette, 50,596 target
units; Mr. Fox, 58,679 target units; Ms. Rose, 23,695 target units; and Mr. Bullock, 23,434 target units). There is no assurance
that these awards will be granted at, below, or above target after the end of the relevant performance periods because determination
of whether to make an actual grant to, and the amount of any actual grant for, Named Executive Officers is within the discretion
of the HRCC. |
Option Exercises and Stock Vested
The Option Exercises and Stock Vested table is
used to show equity awards measured in ConocoPhillips stock where there was an option exercised by, or a stock award that vested
to, a Named Executive Officer during 2019.
| |
Option Awards | |
Stock Awards(1) |
Name | |
Number of Shares Acquired on Exercise (#) | |
Value Realized upon Exercise | |
Number of Shares Acquired on Vesting (#) | |
Value Realized Upon Vesting |
R.M. Lance | |
— | |
$ — | |
520,313 | (2) |
$36,223,766 |
D.E. Wallette, Jr. | |
— | |
— | |
118,273 | (3) |
8,222,275 |
M.J. Fox | |
— | |
— | |
238,655 | (4) |
16,613,955 |
K.B. Rose | |
— | |
— | |
— | |
— |
W.L. Bullock, Jr. | |
25,628 | |
673,313 | |
68,088 | (5) |
4,719,098 |
|
|
(1) |
Includes restricted stock units for the Executive Restricted Stock Unit Program award in 2019 for which
restrictions were lapsed in order to satisfy required tax withholding. |
(2) |
Includes restricted stock units for PSP IX Tail for which restrictions lapsed following the fifth anniversary of the grant
date of the final approved award and PSP XIV, for which restrictions lapsed following the third anniversary of the grant date.
PSP IX Tail and PSP XIV were settled in cash, although the employee may have elected, prior to the beginning of the performance
period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Also includes restricted
stock and restricted stock units for LTIP VIII and LTIP IX with regard to which the HRCC approved the cancellation of shares
and 1,335 units in favor of the creation of an account with a similar value in the Key Employee Deferred Compensation Plan.
See note 2 to the Nonqualified Deferred Compensation table on page 97. |
(3) |
Includes restricted stock units for PSP XIV, for which restrictions lapsed following the third anniversary of the grant
date. PSP XIV was settled in cash, although the employee may have elected prior to the beginning of the performance period,
to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. Mr. Wallette elected to continue
to hold the restricted stock units for PSP IX Tail. |
(4) |
Includes restricted stock units for PSP IX Tail for which restrictions lapsed following the fifth anniversary of the grant
date of the final approved award and PSP XIV, for which restrictions lapsed following the third anniversary of the grant date.
PSP IX Tail and PSP XIV were settled in cash, although the employee may have elected, prior to the beginning of the performance
period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan. |
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Executive Compensation Tables
(5) |
Includes restricted stock units for PSP IX Tail for which restrictions lapsed following the fifth anniversary
of the grant date of the final approved award and PSP XIV, for which restrictions lapsed following the third anniversary of
the grant date. PSP IX Tail and PSP XIV were settled in cash, although the employee may have elected, prior to the beginning
of the performance period, to have some or all of the settlement deferred into the Key Employee Deferred Compensation Plan.
Also includes restricted stock units for PSP I final payout—PSP VI, PSP X and the Executive Restricted Stock Unit Program
award in 2018 for which restrictions were lapsed in order to satisfy required tax withholding. |
Pension Benefits
ConocoPhillips maintains several defined benefit plans for eligible
employees. With regard to U.S.-based salaried employees, the defined benefit plan that is qualified under the Internal Revenue
Code is the ConocoPhillips Retirement Plan (“CPRP”). Effective January 1, 2019, the CPRP was closed to new hires and
rehires who will instead receive an enhanced benefit under the ConocoPhillips Savings Plan.
The CPRP is a non-contributory plan that is funded through a
trust. The CPRP consists of eight titles, each one corresponding to a different pension formula and having numerous other differences
in terms and conditions. Employees are eligible for current participation in only one title (although an employee may also have
a frozen benefit under one or more other titles), and eligibility is based on heritage company and date of hire. Of the Named
Executive Officers, Messrs. Lance and Wallette (having been employees of Phillips Petroleum Company) are eligible for, and vested
in, benefits under Title I of the CPRP, Mr. Bullock (having been an employee of Conoco Inc.) is eligible for, and vested in, benefits
under Title IV of the CPRP, and Mr. Fox is eligible for, and vested in, benefits under Title II of the CPRP. Ms. Rose is eligible
for, but has not yet completed the required three years of service to vest in, benefits under Title II. Under Title I and Title
IV, employees become vested in benefits after five years of service. Under Title II, employees become vested in their benefits
after three years of service. Titles I, II, and IV allow the employee to elect the form of benefit payment from among several
annuity types or a single sum payment option, but all of the options are actuarially equivalent.
Title I and Title IV provide a final average earnings type of
pension benefit for eligible employees payable at normal or early retirement. Under Title I, normal retirement occurs upon termination
on or after age 65; early retirement can occur at age 55 with five years of service (or if laid off during or after the year in
which the participant reaches age 50). Under Title IV, normal retirement occurs upon termination on or after age 65; early retirement
can occur at age 50 with ten years of service. Under Title I, early retirement benefits are reduced by five percent per year for
each year before age 60 that benefits are paid, but for benefits that commence at or after age 60, the benefit is unreduced. Under
Title IV, early retirement benefits are reduced by five percent per year for each year from age 50 to age 57 that benefits are
paid before age 60 and four percent per year for each year from age 57 that benefits are paid before age 60, but for benefits
that commence at or after age 60, the benefit is unreduced. Messrs. Lance, Wallette and Bullock were eligible for early retirement
at the end of 2019 under the terms of Title I or Title IV, as applicable.
Retirement benefits under Title I and Title IV are calculated
as the product of 1.6 percent times years of credited service multiplied by the final annual eligible average compensation. For
Title I, final annual eligible average compensation is calculated using the three highest consecutive years in the last ten years
before retirement. For Title IV, final annual eligible average compensation is calculated using the higher of the highest consecutive
36 months of compensation or the highest non-consecutive three years of compensation. In both cases, such benefits are reduced
by the product of 1.5 percent of the annual primary Social Security benefit multiplied by years of credited service. The formula
below illustrates how the retirement benefits are calculated. For purposes of the formula, “pension compensation”
denotes the final annual eligible average compensation described above.
Eligible pension compensation generally includes salary and
annual incentive compensation. However, under Title I, if an eligible employee receives layoff benefits from ConocoPhillips, eligible
pension compensation includes the annualized salary for the year of layoff, rather than actual salary, and years of credited service
are increased by any period for which layoff benefits are calculated. Furthermore, foreign service as an employee of Phillips
Petroleum Company through 1991 is counted as time and a quarter when determining the service element in the benefit formula under
Title I. Among the Named Executive Officers, only Mr. Wallette had any time credited for such foreign service. (The notes to the
table on page 95 provide further detail on that credited service.)
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Benefits under Title II are based on monthly pay and interest
credits to a cash balance account created on the first day of the month after a participant’s hire date. Pay credits are
equal to a percentage of total salary and annual incentive compensation. Participants whose combined age and years of service
total less than 44 receive a six percent pay credit, those whose combined age and years of service total 44 through 65 receive
a seven percent pay credit, and those whose combined age and years of service total 66 or more receive a nine percent pay credit.
Normal retirement age is 65, but participants may receive their vested benefit upon termination of employment at any age. In 2019,
Mr. Fox was eligible for the nine percent pay credit, while Ms. Rose was eligible for the seven percent pay credit.
Eligible pension compensation under the CPRP is limited in accordance
with the Internal Revenue Code. In 2019, that limit was $280,000. The Internal Revenue Code also limits the annual benefit (expressed
as an annuity) available under the CPRP. In 2019, that limit was $225,000 (reduced actuarially for ages below 62).
In addition to participation in the U.S.-based plans as described
above, Mr. Fox is a participant in the ConocoPhillips UK Pension Plan (the “UK Plan”), a defined benefit pension plan
that is funded through a trust, with regard to the time he was on the U.K. payroll. The UK Plan is a U.K. registered plan with
Her Majesty’s Revenue and Customs. The UK Plan consists of two sections: the ConocoPhillips section and the Heritage Conoco
section. The ConocoPhillips section is contributory. The Heritage Conoco section is non-contributory. Mr. Fox is vested in, and
will be eligible for, a benefit as a deferred vested participant in the Heritage Conoco section. Mr. Fox is retirement eligible,
having reached age 55. The UK Plan provides a final average earnings type of pension benefit for eligible employees payable at
normal pension age or early retirement upon approval by the Principal Employer of the UK Plan. Under the provisions of the UK
Plan, a member is entitled to receive their full benefits upon attainment of normal pension age (60 in the case of a Heritage
Conoco member) subsequent to termination. Early retirement may occur after termination after reaching age 55, but results in reduced
benefits for each year prior to age 60 that benefits are paid. In general, retirement benefits are calculated as the product of
1.75 percent times years of credited service times final pensionable salary. Final pensionable salary is generally basic annual
salary plus pensionable allowances earned in the 12 months before active membership in the UK Plan ceased. The UK Plan allows
participants to choose between taking a full annuity or a tax-free cash lump sum of up to 25 percent of the value of the benefit
and a reduced annuity. Both choices are actuarially equivalent, and the lump sum is capped at 25 percent of the lifetime allowance.
As a registered pension plan, there is an annual limit on the
amount of pension savings that benefit from tax relief (the “Annual Allowance”). Since Mr. Fox is a deferred member
of the plan and his pension does not increase during any pension input period by more than the relevant percentage, he did not
have any pension savings subject to the Annual Allowance. In addition, a lifetime allowance is imposed. The standard lifetime
allowance for the current tax year is £1.06 million, although a participant may apply for fixed or individual protection
at a higher level under certain circumstances. If the total value of U.K.-registered pension benefits exceeds a participant’s
lifetime allowance, legislation dictates the excess will incur a tax penalty at the time of distribution.
ConocoPhillips also maintains several nonqualified pension plans.
These are funded through our general assets, although we also maintain trusts of the type generally known as “rabbi trusts”
that may be used to pay benefits under the nonqualified pension plans. The trusts and the funds held in them are assets of ConocoPhillips.
In the event of bankruptcy, participants would be unsecured general creditors. The plan available to the Named Executive Officers
is the ConocoPhillips Key Employee Supplemental Retirement Plan (“KESRP”). This plan is designed to replace benefits
that would otherwise not be received due to limitations contained in the Internal Revenue Code that apply to qualified plans.
The two such limitations that most frequently impact the benefits to employees are the limit on compensation that can be taken
into account in determining benefit accruals and the maximum annual pension benefit. In 2019, the former limit was set at $280,000,
while the latter was set at $225,000. The KESRP determines a benefit without regard to such limits, and then reduces that benefit
by the amount of benefit payable from the related qualified plan (in this case, the CPRP). Thus, in operation the combined benefits
payable from the related plans for an eligible employee equal the benefit that would have been paid if there had been no limitations
imposed by the Internal Revenue Code. For participants in Title I of the CPRP for the KESRP final annual eligible average compensation
is calculated using the three highest annual amounts for salary and VCIP in the last ten calendar years before retirement plus
the year of retirement. For participants in Title II and Title IV of the CPRP, calculations for KESRP are made on the same basis
as for the CPRP. Benefits under the KESRP are generally paid in a single sum at the later of age 55 or six months after separation
from service. When payments do not begin until after retirement, interest at then current six-month Treasury-bill rates, under
most circumstances, will be credited on the delayed benefits. Distribution may also be made upon a determination of death or disability.
Certain foreign service as an employee of Phillips Petroleum Company is counted as time and a quarter when determining the service
element in the benefit formula under the KESRP. Among the Named Executive Officers, only Mr. Wallette had any time credited
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for such foreign service. (The notes to the table below provide
further detail on that credited service.) Each of the Named Executive Officers is eligible for, and is vested in, the KESRP, other
than Ms. Rose, who is eligible for, but not yet vested in, the KESRP.
Mr. Lance was an employee of ARCO Alaska, which was acquired
by Phillips Petroleum Company in 2000. A special provision applies in calculating pension benefits for such employees under Title
I. First, we calculate a benefit under the Title I formula using service with both ARCO and ConocoPhillips, subtracting from the
result the value of the benefit under the ARCO plan through the time of the acquisition (for which the BP Retirement Accumulation
Plan remains liable, after the acquisition of ARCO by BP and certain plan mergers). Next, we calculate a benefit under the Title
I formula using only service with ConocoPhillips. We compare the results of the two methods, and the employee receives the larger
benefit. For Mr. Lance, that calculation currently provides a larger benefit under the first method. The table reflects that benefit,
showing only the value payable from the plan of ConocoPhillips, not from the BP Retirement Accumulation Plan.
Mr. Fox was previously an employee of Conoco (U.K.) Limited,
which merged with a Phillips subsidiary in 2002, at the merger of Conoco Inc. and Phillips Petroleum Company. In 2003, Mr. Fox
transferred from the U.K. payroll to the U.S. payroll and thus earned a deferred vested pension benefit in the ConocoPhillips
UK Pension Plan. As an employee on the U.S. payroll, Mr. Fox became a participant in CPRP Title II. The time served as a participant
in the UK Plan is taken into account when determining his Title II benefit in the CPRP and his KESRP benefit. Furthermore, Mr.
Fox left ConocoPhillips in 2010 and returned in 2012. Mr. Fox is not credited with any service during the period he was employed
elsewhere. However, pursuant to the terms of the KESRP, his benefit earned prior to his separation from service in 2010 was previously
distributed.
Except where otherwise noted, assumptions used in calculating
the present value of accumulated benefits in the table are found in Note 18 in the Notes to Consolidated Financial Statements
in ConocoPhillips’ 2019 Annual Report on Form 10-K.
Name | |
Plan Name | |
Number or Years of Accumulated Benefit | |
Present Value of Accumulated Benefit(1) | |
Payments During Last Fiscal Year |
R.M. Lance | |
Title I - ConocoPhillips Retirement Plan | |
36 | |
$ 1,606,174 | |
$ — |
| |
ConocoPhillips Key Employee | |
36 | |
48,171,849 | |
— |
| |
Supplemental Retirement Plan | |
| |
| |
|
D.E. Wallette, Jr.(2) | |
Title I - ConocoPhillips Retirement Plan | |
39 | |
2,619,325 | |
— |
| |
ConocoPhillips Key Employee | |
39 | |
23,563,218 | |
— |
| |
Supplemental Retirement Plan | |
| |
| |
|
M.J. Fox(3) | |
Title II - ConocoPhillips Retirement Plan | |
34 | |
446,405 | |
— |
| |
ConocoPhillips UK Pension Plan | |
20 | |
1,601,637 | |
— |
| |
ConocoPhillips Key Employee | |
34 | |
2,033,578 | |
— |
| |
Supplemental Retirement Plan | |
| |
| |
|
K.B. Rose(4) | |
Title II - ConocoPhillips Retirement Plan | |
1 | |
33,981 | |
— |
| |
ConocoPhillips Key Employee | |
1 | |
61,392 | |
— |
| |
Supplemental Retirement Plan | |
| |
| |
|
W.L. Bullock, Jr. | |
Title IV - ConocoPhillips Retirement Plan | |
33 | |
1,681,912 | |
— |
| |
ConocoPhillips Key Employee | |
33 | |
7,846,297 | |
— |
| |
Supplemental Retirement Plan | |
| |
| |
|
|
|
(1) |
The eligible pension compensation, as defined on pages 93-95, used
to calculate the present value of the accumulated benefit for U.S. plans in this column as of December 31, 2019, for each
Named Executive Officer is: Mr. Lance, $6,394,756; Mr. Wallette, $2,587,492; Mr. Fox, $3,852,492; Ms. Rose, $1,111,066; and
Mr. Bullock, $1,452,903. Mr. Fox’s UK pension benefit and eligible pension compensation of $110,074 was converted to
U.S. dollars at an exchange rate per British Pound Sterling of $1.3260 as of December 31, 2019. |
(2) |
Includes additional credited service for Mr. Wallette of 7.25 months related to foreign service prior to 1992, when the
credit was discontinued. |
(3) |
Mr. Fox became an employee of ConocoPhillips on January 1, 2012. Prior to joining ConocoPhillips, Mr. Fox was an employee
of Nexen Inc. None of the benefits earned by Mr. Fox as an employee of Nexen are included in the table. The service credited
to Mr. Fox does not include his time of service with Nexen. However, prior to his service at Nexen, Mr. Fox was an employee
of ConocoPhillips and ConocoPhillips UK. Mr. Fox’s service shown in the table includes that prior service with ConocoPhillips,
in accordance with the standard terms and conditions of the applicable plans. Under Title II, and related provisions in the
KESRP, Mr. Fox received pay credits equal to nine percent of his pension compensation in 2019, since his combined age and
years of service exceed 65. See the narrative above for a discussion of this feature. For these purposes, years of service
would include total years of service with ConocoPhillips, which, in Mr. Fox’s case, are 34. |
(4) |
Ms. Rose became an employee of ConocoPhillips on September 4, 2018. Under Title II, and related provisions in the KESRP,
Ms. Rose received pay credits equal to seven percent of her pension compensation in 2019, since her combined age and years
of service was 54. See the narrative above for a discussion of this feature. For these purposes, years of service would include
total years of service with ConocoPhillips, which, in Ms. Rose’s case, is 1. |
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Nonqualified Deferred Compensation
ConocoPhillips maintains several nonqualified deferred compensation
plans for its eligible employees in addition to the plans discussed in the Pension Benefits section beginning on page
93. Those available to the Named Executive Officers are briefly described below.
The Key Employee Deferred Compensation Plan of ConocoPhillips
(“KEDCP”) is a nonqualified deferral plan that permits certain key employees to voluntarily defer base salary and
VCIP (or other similar annual incentive compensation program payments that would otherwise be received in subsequent years). Amounts
payable from the PSP for performance periods ending in 2015 or later also may be deferred to the KEDCP. Amounts payable from the
Executive Restricted Stock Unit Program for awards granted in 2018 and 2019 also may be deferred to the KEDCP. The KEDCP permits
eligible employees to defer compensation of up to 100 percent of PSP, VCIP, and 2018 and 2019 Executive Restricted Stock Units
and up to 50 percent of base salary. Each of the Named Executive Officers is eligible to participate in, and is fully vested in,
the KEDCP.
Under the KEDCP, for amounts deferred and vested after December
31, 2004, and before December 31, 2020, the default distribution option is to receive a lump sum to be paid at least six months
after separation from service. For amounts deferred and vested after December 31, 2020, the default distribution option is to
receive a lump sum to be paid at least one year after separation from service. Participants may elect to defer payments from one
to five years after separation from service, and to receive annual, semiannual, or quarterly payments for a period of up to 15
years. For elections that set a date certain for payment, the distribution will begin in the calendar quarter following the date
requested and will be paid out on the distribution schedule elected by the participant. For amounts deferred prior to January
1, 2005, a one-time revision of the ten annual installment payments schedule is allowed from 365 days to no later than 90 days
prior to retirement at age 55 or above or within 30 days after being notified of layoff in the calendar year in which the employee
is age 50 or above. Participants may receive distributions in one to 15 annual installments, two to 30 semi-annual installments,
or four to 60 quarterly installments.
The Defined Contribution Make-Up Plan of ConocoPhillips (“DCMP”)
is a nonqualified restoration plan under which ConocoPhillips makes employer contributions that cannot be made in the qualified
ConocoPhillips Savings Plan—a defined contribution plan of the type often referred to as a 401(k) plan—due to certain
voluntary reductions of salary under the KEDCP or due to limitations imposed by the Internal Revenue Code. For 2019, the Internal
Revenue Code limited the amount of compensation that could be taken into account in determining a benefit under the ConocoPhillips
Savings Plan to $280,000. Employees make no contributions to the DCMP. Each of the Named Executive Officers is eligible to participate
in, and is fully vested in, the DCMP.
Under the DCMP, amounts vested after December 31, 2004, and
before December 31, 2020, will be distributed as a lump sum six months after separation from service, or, at a participant’s
election, in one to 15 annual installments, two to 30 semi-annual installments, or four to 60 quarterly installments, beginning
no earlier than one year after separation from service. Amounts vested after December 31, 2020, will be distributed as a lump
sum one year after separation from service, or, at a participant’s election, in one to 15 annual installments, two to 30
semi-annual installments, or four to 60 quarterly installments, beginning no earlier than one year after separation from service.
For amounts vested prior to January 1, 2005, participants may, from 365 days to no later than 90 days prior to termination or
within 30 days after being notified of layoff in the calendar year in which the employee is age 50 or above, indicate a preference
to defer the value into an account under the KEDCP.
Each participant directs investments of the individual accounts
set up for that participant under either the KEDCP or the DCMP. Participants may make changes in the investments as often as daily.
All ConocoPhillips defined contribution nonqualified deferred compensation plans allow investment of deferred amounts in a broad
range of mutual funds or other market-based investments, including ConocoPhillips stock. As market-based investments, none of
these provide above-market return.
Since each executive participating in each plan chooses the
investment vehicle or vehicles and may change allocations, the return on the investment will depend on how well the underlying
investment fund performs during the period the executive chose it as an investment vehicle. The aggregate performance of each
such investment is reflected in the Nonqualified Deferred Compensation Table under the column Aggregate Earnings in Last Fiscal
Year.
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Benefits due under each of the plans discussed above are paid
from ConocoPhillips’ general assets, although we also maintain trusts of the type generally known as “rabbi trusts”
that may be used to pay benefits under the plans. The trusts and the funds held in them are assets of ConocoPhillips. In the event
of bankruptcy, participants would be unsecured general creditors.
Name | |
Applicable Plan(1) | |
Beginning Balance | |
Executive Contributions in Last FY(2) | |
Registrant Contributions in Last FY(3) | |
Aggregate Earnings in Last FY(4) | |
Aggregate Withdrawals/ Distributions | |
Aggregate Balance at Last FYE(5) |
R.M. Lance | |
Defined Contribution | |
$1,773,253 | |
$ — | |
$127,800 | |
$ 125,290 | |
$ — | |
$ 2,026,343 |
| |
Make-Up Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
| |
Key Employee Deferred | |
4,996,796 | |
5,642,825 | |
— | |
577,701 | |
— | |
11,217,322 |
| |
Compensation Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
D.E. Wallette, Jr. | |
Defined Contribution | |
608,354 | |
— | |
71,106 | |
102,734 | |
— | |
782,194 |
| |
Make-Up Plan of | |
| |
| |
| |
| |
| |
|
| |
ConocoPhillips | |
| |
| |
| |
| |
| |
|
| |
Key Employee Deferred | |
11,958,483 | |
— | |
— | |
2,491,074 | |
— | |
14,449,557 |
| |
Compensation Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
M.J. Fox | |
Defined Contribution | |
658,668 | |
— | |
91,610 | |
19,171 | |
— | |
769,449 |
| |
Make-Up Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
| |
Key Employee Deferred | |
— | |
— | |
— | |
— | |
— | |
— |
| |
Compensation Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
K.B. Rose | |
Defined Contribution | |
— | |
— | |
43,983 | |
275 | |
— | |
44,258 |
| |
Make-Up Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
| |
Key Employee Deferred | |
— | |
— | |
— | |
— | |
— | |
— |
| |
Compensation Plan of | |
| |
| |
| |
| |
| |
|
| |
ConocoPhillips | |
| |
| |
| |
| |
| |
|
W.L. Bullock, Jr. | |
Defined Contribution | |
272,308 | |
— | |
39,364 | |
19,878 | |
— | |
331,550 |
| |
Make-Up Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
| |
Key Employee Deferred | |
286,654 | |
— | |
— | |
8,050 | |
— | |
294,704 |
| |
Compensation Plan | |
| |
| |
| |
| |
| |
|
| |
of ConocoPhillips | |
| |
| |
| |
| |
| |
|
|
|
(1) |
Our primary defined contribution deferred compensation programs for executives (KEDCP and DCMP) make
a variety of investments available to participants. As of December 31, 2019, there were a total of 83 investment options,
17 of which were the same as those available in ConocoPhillips’ primary tax-qualified defined contribution plan for
employees (the ConocoPhillips Savings Plan, a 401(k) plan) and 66 of which were other mutual fund options approved by an administrator
designated by the relevant plan. |
(2) |
Reflects deferrals by the Named Executive Officer under the KEDCP in 2019. For Mr. Lance, this column reflects $93,417
in a deferred LTIP VIII and IX payout covering the performance periods of 2000 through 2002 and 2002 through 2004 respectively
and $5,549,408 in a deferred PSP XIV payout covering performance period 2016 through 2018. |
(3) |
Reflects contributions by ConocoPhillips under the DCMP relating to wages earned in 2019 (included in the All Other
Compensation column of the Summary Compensation Table on page 85 for 2019).
Of this amount, the following amounts were contributed in January 2020, relating to company contributions on 2019 service:
for Mr. Lance, $25,500; for Mr. Wallette, $16,051; for Mr. Fox, $19,639; for Ms. Rose, $11,632; and for Mr. Bullock, $10,839.
In addition to the amounts shown relating to 2019, contributions by ConocoPhillips under the DCMP in earlier years (included
in the All Other Compensation column of the Summary Compensation Table for those respective years) were as follows:
in 2018 for Mr. Lance, $142,500; for Mr. Wallette, $71,044; for Mr. Fox, $96,600; and for Ms. Rose $0; in 2017 for Mr. Lance,
$128,700; for Mr. Wallette, $62,226; and for Mr. Fox, $87,390. |
(4) |
None of these earnings are included in the Summary Compensation Table for 2019. Aggregate earnings reflect the
net impact of investment gains and losses and, consequently, may be a negative amount. |
(5) |
Reflects contributions by our Named Executive Officers, contributions by ConocoPhillips, and earnings on balances prior
to 2019; plus, contributions by our Named Executive Officers, contributions by ConocoPhillips, and earnings for 2019, less
any distributions (shown in the appropriate columns of this table, with amounts that are included in the Summary Compensation
Table for 2019 shown in notes 2, 3 and 4 above). This also includes contributions by ConocoPhillips made in January 2020,
allocated to 2019. See note 3 above. |
Table of Contents
Executive Compensation Tables
Executive Severance and Changes in Control
Salary and other compensation for our Named Executive Officers
is set by the HRCC, as described in the “Compensation Discussion and Analysis” beginning on page
51 of this Proxy Statement. These officers may participate in ConocoPhillips’ employee benefit plans and programs
for which they are eligible, in accordance with their terms. The amounts earned by the Named Executive Officers for 2019 appear
in the various Executive Compensation Tables beginning on page 85 of this Proxy
Statement.
Each of our Named Executive Officers is expected to receive
amounts earned while employed unless the executive voluntarily resigns prior to becoming retirement-eligible or is terminated
for cause. Such amounts include:
> |
VCIP compensation earned during the fiscal year; |
> |
Grants pursuant to the PSP for the most-recently completed performance period and ongoing performance periods in which
the executive participated for at least one year; |
> |
Previously granted restricted stock and restricted stock units; |
> |
Vested stock option grants under the Stock Option Program; |
> |
Amounts contributed and vested under our defined contribution plans; and |
> |
Amounts accrued and vested under our retirement plans. |
While normal retirement age under our benefit plans is 65, early
retirement provisions allow benefits at earlier ages if vesting requirements are met, as discussed in the sections of this Proxy
Statement titled Pension Benefits and Nonqualified Deferred Compensation. For our compensation programs (VCIP, Stock
Option Program, Executive Restricted Stock Unit Program, and PSP), early retirement is generally defined to be termination at
or after the age of 55 with five years of service. As of December 31, 2019, each of our Named Executive Officers had met the early
retirement criteria with the exception of Ms. Rose, who joined the Company in September 2018. In addition, specific severance
arrangements for executive officers, including the Named Executive Officers, are provided under two severance plans: (1) the
ConocoPhillips Executive Severance Plan (“CPESP”), which is available to a limited number of senior executives; and
(2) the ConocoPhillips Key Employee Change in Control Severance Plan (“CICSP”), which is also available to a
limited number of senior executives but only upon a change in control. These arrangements are described below. Executives are
not entitled to participate in both plans as a result of a single event. For example, executives receiving benefits under the
CICSP would not be entitled to benefits potentially payable under the CPESP relating to the event giving rise to benefits under
the CICSP.
CONOCOPHILLIPS EXECUTIVE SEVERANCE PLAN
The CPESP covers executives in salary grades generally corresponding
to vice president and higher, and the CICSP is incorporated by reference to Exhibit 10.23 to the Annual Report of ConocoPhillips
on Form 10-K for the year ended December 31, 2013; File No. 001-32395. Under the CPESP, if ConocoPhillips terminates the employment
of a plan participant other than for cause, as defined in the plan, upon executing a general release of liability and, if requested,
an agreement not to compete with ConocoPhillips, the participant will be entitled to:
> |
A lump-sum cash payment equal to one-and-a-half or two times the sum of the employee’s base salary
and current target VCIP; |
> |
A lump-sum cash payment equal to the present value of the increase in pension benefits that would result from the crediting
of an additional one-and-a-half or two years to the employee’s number of years of age and service under the applicable
pension plan; |
> |
A lump-sum cash payment equal to ConocoPhillips’ cost of certain welfare benefits for an additional one-and-a-half
or two years; |
> |
Continuation in eligibility for a pro rata portion of the annual VCIP for which the employee is eligible in the year of
termination; and |
> |
Treatment as a layoff under our various compensation and equity programs. Generally, layoff treatment will allow executives
to retain awards previously made and continue their eligibility under ongoing ConocoPhillips programs. Thus, actual program
grants of restricted stock or restricted stock units would vest, and the executive would remain eligible for awards attributable
to ongoing performance periods under the PSP in which the executive had participated for at least one year. |
Table of Contents
Executive Compensation Tables
ConocoPhillips may amend or terminate the CPESP at any time.
Amounts payable under the CPESP will be offset by any payments or benefits that are payable to the severed employee under any
other plan, policy, or program of ConocoPhillips relating to severance, and amounts may also be reduced in the event of willful
and bad faith conduct demonstrably injurious to ConocoPhillips, monetarily or otherwise, or, if required by law to be “clawed
back,” such as may be the case in certain circumstances under the Sarbanes-Oxley Act or the Dodd-Frank Act.
CONOCOPHILLIPS KEY EMPLOYEE CHANGE IN CONTROL SEVERANCE PLAN
The CICSP covers executives in salary grades generally corresponding
to vice president and higher, and the CICSP is incorporated by reference to Exhibit 10.21 to the Annual Report of ConocoPhillips
on Form 10-K for the year ended December 31, 2013; File No. 001-32395. Under the CICSP, if within two years after a “change
in control” of ConocoPhillips, the employment of a participant is terminated by ConocoPhillips other than for cause, or
by the participant for good reason (as such terms are defined in the plan), upon executing a general release of liability, the
participant will be entitled to:
> |
A lump-sum cash payment equal to two or three times the sum of the employee’s base salary and
the higher of current target VCIP compensation or the previous two years’ average VCIP compensation; |
> |
A lump-sum cash payment equal to the present value of the increase in pension benefits that would result from crediting
an additional two or three years to the employee’s number of years of age and service under the applicable pension plan;
|
> |
A lump-sum cash payment equal to ConocoPhillips’ cost of certain welfare benefits for an additional two or three
years; |
> |
Continuation in eligibility for a pro rata portion of the annual VCIP compensation for which the executive is eligible
in the year of termination; and |
> |
If necessary, a gross-up payment sufficient to compensate the executive for the amount of any excise tax imposed on payments
made under the plan or otherwise pursuant to Section 4999 of the Internal Revenue Code and for any taxes imposed on this additional
payment, although if the applicable payments are not more than 110 percent of the “safe harbor” amount under Section
280G of the Internal Revenue Code, the payments are “cut back” to the safe harbor amount rather than a gross-up
payment being made. Executives who became participants in the plan after the spinoff in 2012 (including Ms. Rose) are not
eligible for this gross-up payment. All other NEOs (including Mr. Bullock) were participants in the plan prior to the spinoff
in 2012. |
Upon a change in control, with respect to awards granted prior
to or attributable to performance periods prior to January 1, 2014, each participant’s equity awards will vest, and any
applicable restrictions will lapse. With respect to awards granted after December 31, 2013, attributable to performance periods
beginning on or after January 1, 2014, that are assumed, or substituted for, by an acquirer, accelerated vesting will occur only
following both a change in control and a termination of employment. Termination of employment includes involuntary termination
for cause or voluntary termination for good reason. Participants will continue to be able to exercise stock options for their
remaining terms, but exercisability of stock options will not be accelerated. No distributions are made with respect to restricted
stock units until after the participant separates from service.
After a change in control, the CICSP may not be amended or terminated
if such amendment would be adverse to the interests of any eligible employee, without the employee’s written consent. Amounts
payable under the plan will be offset by any payments or benefits that are payable to the severed employee under any other plan,
policy, or program of ConocoPhillips relating to severance, and amounts may also be reduced in the event of willful and bad faith
conduct demonstrably injurious to ConocoPhillips, monetarily or otherwise, or if required by law to be “clawed back,”
such as may be the case in certain circumstances under the Sarbanes-Oxley Act or the Dodd-Frank Act.
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Executive Compensation Tables
QUANTIFICATION OF SEVERANCE PAYMENTS
Each of our NEOs is expected to receive amounts earned during
his or her period of employment unless he or she voluntarily resigns prior to becoming retirement-eligible or is terminated for-cause.
The following tables reflect the amount of incremental compensation payable in excess of the items listed above to each of our
Named Executive Officers in the event of involuntary not-for-cause termination, termination following a change-in-control (“CIC”)
(either involuntarily without cause or for good reason), and in the event of the death or disability of the executive. The amounts
shown below assume that such termination was effective as of December 31, 2019, and thus include amounts earned through such time,
and are estimates of the amounts that would be paid out to the executives upon their termination. The actual amounts to be paid
out can only be determined at the time of an executive’s separation from ConocoPhillips. In the event of a for-cause termination,
the HRCC can suspend the right to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted
if a NEO engages in any activity determined to be detrimental to ConocoPhillips. In addition, the NEO’s incentive compensation
is subject to a clawback policy. See page 82 for more information about the clawback policy.
Executive Benefits and Payments Upon Termination | |
Involuntary Not-for-Cause Termination (Not CIC) | | |
Involuntary or Good Reason Termination (CIC) | | |
Death | | |
Disability | |
R.M. Lance* | |
| | | |
| | | |
| | | |
| | |
Base Salary | |
$ | 3,400,000 | | |
$ | 5,100,000 | | |
$ | — | | |
| $— | |
Short-term Incentive | |
| 5,440,000 | | |
| 14,198,401 | | |
| — | | |
| — | |
Variable Cash Incentive Program | |
| — | | |
| — | | |
| — | | |
| — | |
January 2017 - December 2019 (performance period) | |
| — | | |
| — | | |
| — | | |
| — | |
January 2018 - December 2020 (performance period) | |
| — | | |
| 3,029,919 | | |
| — | | |
| — | |
January 2019 - December 2021 (performance period) | |
| — | | |
| 5,328,065 | | |
| — | | |
| — | |
Other Restricted Stock/Units | |
| — | | |
| — | | |
| — | | |
| — | |
Stock Options/SARs: | |
| | | |
| | | |
| | | |
| | |
Unvested and Accelerated | |
| — | | |
| — | | |
| — | | |
| — | |
Incremental Pension | |
| 3,593,608 | | |
| 3,348,018 | | |
| — | | |
| — | |
Post-employment Health & Welfare | |
| 88,873 | | |
| 143,235 | | |
| — | | |
| — | |
Life Insurance | |
| — | | |
| — | | |
| 3,400,100 | | |
| — | |
280G Tax Gross-up | |
| — | | |
| 11,704,301 | | |
| — | | |
| — | |
| |
$ | 12,522,481 | | |
$ | 42,851,939 | | |
$ | 3,400,100 | | |
| $— | |
| |
| | |
| | |
| | |
| |
Executive Benefits and Payments Upon Termination | |
Involuntary Not-for-Cause Termination (Not CIC) | | |
Involuntary or Good Reason Termination (CIC) | | |
Death | | |
Disability | |
D.E. Wallette, Jr.* | |
| | | |
| | | |
| | | |
| | |
Base Salary | |
$ | 2,140,128 | | |
$ | 3,210,192 | | |
$ | — | | |
| $— | |
Short-term Incentive | |
| 2,461,148 | | |
| 5,227,277 | | |
| — | | |
| — | |
Variable Cash Incentive Program | |
| — | | |
| — | | |
| — | | |
| — | |
January 2017 - December 2019 (performance period) | |
| — | | |
| — | | |
| — | | |
| — | |
January 2018 - December 2020 (performance period) | |
| — | | |
| 1,145,346 | | |
| — | | |
| — | |
January 2019 - December 2021 (performance period) | |
| — | | |
| 2,193,523 | | |
| — | | |
| — | |
Other Restricted Stock/Units | |
| — | | |
| — | | |
| — | | |
| — | |
Stock Options/SARs: | |
| | | |
| | | |
| | | |
| | |
Unvested and Accelerated | |
| — | | |
| — | | |
| — | | |
| — | |
Incremental Pension | |
| 855,718 | | |
| 855,718 | | |
| — | | |
| — | |
Post-employment Health & Welfare | |
| 80,025 | | |
| 120,037 | | |
| — | | |
| — | |
Life Insurance | |
| — | | |
| — | | |
| 2,140,200 | | |
| — | |
280G Tax Gross-up | |
| — | | |
| 5,118,236 | | |
| — | | |
| — | |
| |
$ | 5,537,019 | | |
$ | 17,870,329 | | |
$ | 2,140,200 | | |
| $— | |
* See notes beginning on page 102
Table of Contents
Executive Compensation Tables
Executive Benefits and Payments Upon Termination | |
Involuntary Not-for-Cause Termination (Not CIC) | | |
Involuntary or Good Reason Termination (CIC) | | |
Death | | |
Disability | |
M.J. Fox* | |
| | | |
| | | |
| | | |
| | |
Base Salary | |
$ | 2,618,544 | | |
$ | 3,927,816 | | |
$ | — | | |
| $— | |
Short-term Incentive | |
| 3,011,326 | | |
| 7,770,833 | | |
| — | | |
| — | |
Variable Cash Incentive Program | |
| — | | |
| — | | |
| — | | |
| — | |
January 2017 - December 2019 (performance period) | |
| — | | |
| — | | |
| — | | |
| — | |
January 2018 - December 2020 (performance period) | |
| — | | |
| 1,428,701 | | |
| — | | |
| — | |
January 2019 - December 2021 (performance period) | |
| — | | |
| 2,543,934 | | |
| — | | |
| — | |
Other Restricted Stock/Units | |
| — | | |
| — | | |
| — | | |
| — | |
Stock Options/SARs: | |
| | | |
| | | |
| | | |
| | |
Unvested and Accelerated | |
| — | | |
| — | | |
| — | | |
| — | |
Incremental Pension | |
| 437,172 | | |
| 642,768 | | |
| — | | |
| — | |
Post-employment Health & Welfare | |
| 77,161 | | |
| 122,294 | | |
| — | | |
| — | |
Life Insurance | |
| — | | |
| — | | |
| 2,618,600 | | |
| — | |
280G Tax Gross-up | |
| — | | |
| 5,941,856 | | |
| — | | |
| — | |
| |
$ | 6,144,203 | | |
$ | 22,378,202 | | |
$ | 2,618,600 | | |
| $— | |
| |
| | | |
| | | |
| | | |
| | |
Executive Benefits and Payments Upon Termination | |
Involuntary Not-for-Cause Termination (Not CIC) | | |
Involuntary or Good Reason Termination (CIC) | | |
Death | | |
Disability | |
K.B. Rose* | |
| | | |
| | | |
| | | |
| | |
Base Salary | |
$ | 1,550,880 | | |
$ | 2,326,320 | | |
$ | — | | |
$ | — | |
Short-term Incentive | |
| 1,380,284 | | |
| 2,070,426 | | |
| — | | |
| — | |
Variable Cash Incentive Program | |
| 684,143 | | |
| 684,143 | | |
| 684,143 | | |
| 684,143 | |
January 2017 - December 2019 (performance period) | |
| 1,779,221 | | |
| 1,779,221 | | |
| 1,779,221 | | |
| 1,779,221 | |
January 2018 - December 2020 (performance period) | |
| 834,994 | | |
| 1,461,239 | | |
| 834,994 | | |
| 834,994 | |
January 2019 - December 2021 (performance period) | |
| 513,624 | | |
| 1,540,871 | | |
| 513,624 | | |
| 513,624 | |
Other Restricted Stock/Units | |
| 1,505,930 | | |
| 1,505,930 | | |
| 1,505,930 | | |
| 1,505,930 | |
Stock Options/SARs: | |
| | | |
| | | |
| | | |
| | |
Unvested and Accelerated | |
| — | | |
| — | | |
| — | | |
| — | |
Incremental Pension | |
| 381,095 | | |
| 473,759 | | |
| 92,316 | | |
| 92,316 | |
Post-employment Health & Welfare | |
| 124,062 | | |
| 189,134 | | |
| — | | |
| — | |
Life Insurance | |
| — | | |
| — | | |
| 1,550,900 | | |
| — | |
280G Tax Gross-up | |
| — | | |
| — | | |
| — | | |
| — | |
| |
$ | 8,754,233 | | |
$ | 12,031,043 | | |
$ | 6,961,128 | | |
$ | 5,410,228 | |
* See notes beginning on page 102
Table of Contents
Executive Compensation Tables
Executive Benefits and Payments Upon Termination | |
Involuntary Not-for-Cause Termination (Not CIC) | | |
Involuntary or Good Reason Termination (CIC) | | |
Death | | |
Disability | |
W.L. Bullock, Jr.* | |
| | | |
| | | |
| | | |
| | |
Base Salary | |
$ | 1,445,136 | | |
$ | 2,167,704 | | |
$ | — | | |
| $— | |
Short-term Incentive | |
| 1,199,462 | | |
| 2,749,514 | | |
| — | | |
| — | |
Variable Cash Incentive Program | |
| — | | |
| — | | |
| — | | |
| — | |
January 2017 - December 2019 (performance period) | |
| — | | |
| — | | |
| — | | |
| — | |
January 2018 - December 2020 (performance period) | |
| — | | |
| 553,582 | | |
| — | | |
| — | |
January 2019 - December 2021 (performance period) | |
| — | | |
| 1,015,942 | | |
| — | | |
| — | |
Other Restricted Stock/Units | |
| — | | |
| — | | |
| — | | |
| — | |
Stock Options/SARs: | |
| | | |
| | | |
| | | |
| | |
Unvested and Accelerated | |
| — | | |
| — | | |
| — | | |
| — | |
Incremental Pension | |
| 1,339,169 | | |
| 1,601,450 | | |
| — | | |
| — | |
Post-employment Health & Welfare | |
| 49,499 | | |
| 74,248 | | |
| — | | |
| — | |
Life Insurance | |
| — | | |
| — | | |
| 1,445,200 | | |
| — | |
280G Tax Gross-up | |
| — | | |
| 2,961,780 | | |
| — | | |
| — | |
| |
$ | 4,033,266 | | |
$ | 11,124,220 | | |
$ | 1,445,200 | | |
| $— | |
* See notes below
As discussed in the narrative preceding the tables above, the
amounts shown indicate the difference in compensation arising from the stated type of termination in comparison to a voluntary
resignation. A Named Executive Officer who voluntarily resigns before reaching the retirement age and service threshold contained
in those equity awards and compensation programs (age 55 with 5 years of service) would not earn awards for ongoing performance
periods under the VCIP, the PSP, the Executive Restricted Stock Unit Program, or the Stock Option Program, and would lose prior
awards under the PSP and the Executive Restricted Stock Unit Program (or other restricted stock or restricted stock units) and
stock options. For a Named Executive Officer who has reached the retirement age and service threshold in those programs, a voluntary
resignation would be deemed a retirement, and thus would not typically lose those awards. However, before the awards are actually
delivered as cash or stock (including upon the exercise of an option), the awards remain at risk, even for a Named Executive Officer
who has reached the age and service threshold. If ConocoPhillips were to invoke the detrimental activity clause, amounts that
would normally be paid in connection with a voluntary resignation to a Named Executive Officer who had reached the age and service
threshold would instead be forfeited.
* |
Notes Applicable to All Termination Tables—Benefits that would be available generally
to all or substantially all salaried employees on the U.S. payroll are not included in the amounts shown above. In preparing
the tables, we made the following assumptions: |
|
|
|
> |
Base Salary—In the event of an involuntary not-for-cause termination not related to a
change in control (“regular involuntary termination”), the amount reflects two times base salary. In the event
of an involuntary or good reason termination related to a change in control (“CIC termination”), the amount reflects
three times base salary. |
|
> |
Short-Term Incentives—In the event of a regular involuntary termination, the amount reflects two times the
current VCIP target. In the event of a CIC termination, the amount reflects three times the current VCIP target or three times
the average of the prior two VCIP payouts, whichever is greater. |
|
> |
Variable Cash Incentive Program—In the event of a regular involuntary termination or a CIC termination, the
amount reflects the employee’s pro rata current VCIP target. Targets for VCIP are for a full year and are pro rata for
the Named Executive Officers based on time spent in their respective positions. |
|
> |
Restricted Stock and Restricted Stock Units—For the performance periods related to PSP, amounts for the January
2017—December 2019 period reflect actual payout units that were awarded in February 2020, except in the event of a CIC
termination, the amounts reflect the higher of target or actual payout, as the award cannot be reduced following a change
in control. Amounts for other ongoing PSP performance periods are shown at target, including any adjustments for promotion
or demotion made since the target awards were granted. For awards under the Executive Restricted Stock Unit Program or made
as off-cycle awards, amounts reflect actual units granted. For restricted stock and restricted stock units awarded under PSP
and Executive Restricted Stock Unit Program or as off-cycle awards, amounts reflect the closing price of ConocoPhillips common
stock on December 31, 2019, as reported on the NYSE ($65.03). |
Table of Contents
Executive Compensation Tables
|
> |
Stock Options—For stock options where the December 31, 2019, ConocoPhillips common stock
price was higher than the option exercise price, the amounts reflect the intrinsic value as if the options had been exercised
on December 31, 2019, but only regarding the options the executive would have retained for the specific termination event.
For options with an exercise price higher than the December 31, 2019, ConocoPhillips common stock price, the amounts reflect
a zero intrinsic value regarding the options the executive would have retained for the specific termination event. |
|
> |
Incremental Pension Values—The amounts reflect the single sum, discounted to a present value, of the increment
due to an additional two years of age and service with associated pension compensation in the event of a regular involuntary
termination (three years in the event of a CIC termination), regardless of whether the value is provided directly through
a defined benefit plan or through the relevant severance plan. |
|
> |
280G Tax Gross-up—Each Named Executive Officer (other than Ms. Rose) is entitled, under the CICSP, to an
associated “excise tax gross-up” to the extent any CIC payment triggers the golden parachute excise tax provisions
under Section 4999 of the Internal Revenue Code (within certain limitations). While this provision does not apply to any employee
who began participation in the plan following the spinoff, all of the Named Executive Officers (other than Ms. Rose) were
participants in the plan at that time. It is assumed that a CIC event will not trigger acceleration of any Phillips 66 equity
awards granted as part of the equity conversion upon the spinoff. The following material assumptions were used to estimate
excise taxes and associated tax gross-ups: |
|
|
|
|
> |
Options are valued using a Black-Scholes-Merton-based option methodology; |
|
> |
PSP 17 awards are treated as earned awards that would be subject to time-vesting conditions only given the performance
measurement period closed on December 31, 2019; |
|
> |
Parachute payments for time-vested stock options, restricted stock and restricted stock units are valued using Treas.
Reg. Section 1.280G-1 Q&A 24(b) or (c) as applicable; and |
|
> |
Calculations assume certain performance-based pay such as PSP awards still in an ongoing performance period and pro rata
VCIP payments are reasonable compensation for services rendered prior to the CIC based on the portion of the performance period
that would have elapsed through December 31, 2019. |
Table of Contents
CEO Pay Ratio
ConocoPhillips’ compensation and benefits philosophy and
the overall structure of our compensation and benefit programs are designed to reward all employees who contribute to our success.
We strive to ensure the compensation of every employee reflects their talents, skills, responsibilities, and experience and is
competitive within our peer group. Compensation and benefits are benchmarked and set to be market-competitive in the employees’
home payroll country. Under rules adopted pursuant to the Dodd-Frank Act, ConocoPhillips is required to calculate and disclose
the total compensation paid to its median employee, as well as the ratio of total compensation paid to the median employee as
compared to the total compensation paid to the CEO. The paragraphs that follow describe our methodology and the resulting CEO
pay ratio.
The ratio of pay of the CEO compared to that of the median employee
was approximately 163 to one in 2019. The annual total compensation of the CEO was $30,381,543. The estimated median of the annual
total compensation of all ConocoPhillips employees other than the CEO, as represented by the annual total compensation of a median
employee, was $186,334. The compensation of the CEO and the median employee were determined using the same rules we followed in
preparing the Summary Compensation Table on page 85, except the compensation of the
CEO and median employee were adjusted to include non-discriminatory health and welfare benefits totaling $17,799 and $15,549,
respectively.
ConocoPhillips had approximately 10,500 employees worldwide
(including intermittent and temporary employees) as of the determination date (December 31, 2019). To identify the “median
employee,” we excluded employees from eight countries, representing in total approximately 2.5% of employees worldwide.
After excluding such employees and the CEO, we determined the pay ratio using the remaining approximately 10,232 employees. The
chart below shows the countries from which employees were excluded and the approximate number of employees from each such country.
Payroll Country Excluded | |
Number of Employees Excluded |
China | |
83 |
Malaysia | |
63 |
Timor Leste | |
38 |
Singapore | |
33 |
Qatar | |
22 |
Colombia | |
14 |
Libya | |
9 |
Japan | |
5 |
For the remaining employees, we used a consistently applied
compensation measure that management believes reasonably reflects the annual compensation of employees and includes elements of
compensation distributed widely among employees. Those elements were base salary, overtime, annual incentive compensation (VCIP)
at target, equity awards, and certain country-specific allowances. We used data as of December 31, 2019, to identify ConocoPhillips
employees and to determine the consistently applied compensation measure for those employees. Data not denominated in U.S. dollars
was converted to U.S. dollars using an average monthly conversion rate for each denomination during 2019. Data came from ConocoPhillips’
payroll records. We did not make any adjustments to the data to account for differences in cost of living in any of the countries
in which we have employees.
The SEC rules for identifying the median employee and calculating
the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to
apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Accordingly,
the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different
employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating
their own pay ratios.
Table of Contents
Stock Ownership
Holdings of Major Stockholders
The following table sets forth information regarding persons
whom we know to be the beneficial owners of more than five percent of our issued and outstanding common stock (as of the date
of such stockholders’ Schedule 13G filings with the SEC):
| |
Common Stock |
Name and Address | |
Number of Shares | |
Percent of Class |
|
The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 | |
88,821,603 | |
8.09 |
% |
BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10055 | |
79,259,064 | |
7.2 |
% |
|
|
(1) |
Based on a Schedule 13G/A filed with the SEC on February 12, 2020, by The Vanguard Group, on behalf
of itself, Vanguard Fiduciary Trust Company, and Vanguard Investments Australia, Ltd. |
(2) |
Based on a Schedule 13G/A filed with the SEC on February 5, 2020, by BlackRock Inc., on behalf of itself, BlackRock Life
Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust
Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock
Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, FutureAdvisor, Inc., BlackRock
Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment
Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Asset Management North
Asia Limited, BlackRock (Singapore) Limited, and BlackRock Fund Managers Ltd. |
Table of Contents
Stock Ownership
Securities Ownership of Officers and Directors
The following table sets forth the number of shares of our common
stock beneficially owned as of March 3, 2020, unless otherwise noted, by each ConocoPhillips director, each Named Executive Officer,
and all of our current directors and executive officers as a group. Together these individuals beneficially own less than one
percent of our common stock. The table also includes information about stock options, restricted stock, and restricted and deferred
stock units credited to the accounts of our directors and executive officers under various compensation and benefit plans. For
purposes of this table, shares are considered to be “beneficially” owned if the person, directly or indirectly, has
sole or shared voting or investment power with respect to such shares. In addition, a person is deemed to beneficially own shares
if that person has the right to acquire such shares within 60 days of March 3, 2020.
| |
Number of Shares or Units |
Name | |
Total Common Stock Beneficially Owned | | |
Restricted/ Deferred Stock Units(1) | | |
Options Exercisable Within 60 Days(2) | |
C.E. Bunch | |
| 3,429 | | |
| 25,631 | | |
| — | |
C.M. Devine | |
| — | | |
| 10,727 | | |
| — | |
J.V. Faraci | |
| — | | |
| 34,104 | | |
| — | |
J. Freeman | |
| 3,334 | | |
| 25,846 | | |
| — | |
G. Huey Evans OBE | |
| — | | |
| 29,514 | | |
| — | |
J.A. Joerres | |
| — | | |
| 7,807 | | |
| — | |
W.H. McRaven | |
| — | | |
| 6,845 | | |
| — | |
S. Mulligan | |
| — | | |
| 10,727 | | |
| — | |
A.N. Murti | |
| 19,000 | | |
| 33,977 | | |
| — | |
R.A. Niblock | |
| — | | |
| 60,380 | | |
| — | |
D.T. Seaton | |
| 100 | | |
| — | | |
| — | |
R.A. Walker | |
| — | | |
| — | | |
| — | |
R.M. Lance | |
| 109,636 | | |
| 329,295 | (3) | |
| 3,280,272 | |
D.E. Wallette, Jr. | |
| 54,926 | | |
| 112,512 | (4) | |
| 957,029 | |
M.J. Fox | |
| 73,472 | | |
| 62,372 | (5) | |
| 1,364,217 | |
K.B. Rose | |
| — | | |
| — | | |
| — | |
W.L. Bullock, Jr. | |
| 22,193 | | |
| 47,678 | (6) | |
| 319,487 | |
Directors and Executive Officers as a Group (22 Persons) | |
| 315,293 | | |
| 820,664 | | |
| 6,451,210 | |
|
|
(1) |
Includes restricted or deferred stock units that may be voted or sold only upon passage of time. |
(2) |
Includes beneficial ownership of shares of common stock that may be acquired within 60 days of March 3, 2020, through
stock options awarded under compensation plans. |
(3) |
Includes 169,322 units that are expected to settle in cash. Does not include 410,153 target performance share units that
are subject to performance adjustment and vesting to the extent that certain performance objectives are achieved. Does not
include 78,176 units underlying the 2020 Executive Restricted Stock Unit grant that are subject to time vesting beyond 60
days from March 3, 2020. |
(4) |
Includes 75,280 units that are expected to settle in cash. Does not include 161,823 target performance share units that
are subject to performance adjustment and vesting to the extent that certain performance objectives are achieved. Does not
include 28,140 units underlying the 2020 Executive Restricted Stock Unit grant that are subject to time vesting beyond 60
days from March 3, 2020. |
(5) |
Includes 62,372 units that are expected to settle in cash. Does not include 196,013 target performance share units that
are subject to performance adjustment and vesting to the extent that certain performance objectives are achieved. Does not
include 34,432 units underlying the 2020 Executive Restricted Stock Unit grant that are subject to time vesting beyond 60
days from March 3, 2020. |
(6) |
Includes 22,086 units that are expected to settle in cash. Does not include 77,223 target performance share units that
are subject to performance adjustment and vesting to the extent that certain performance objectives are achieved. Does not
include 13,573 units underlying the 2020 Executive Restricted Stock Unit grant that are subject to time vesting beyond 60
days from March 3, 2020. |
Table of Contents
Equity Compensation Plan Information
The following table sets forth information about ConocoPhillips’
common stock that may be issued under all existing equity compensation plans as of December 31, 2019:
Plan category | |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(2) | | |
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | |
Number of Securities Remaining Available for Future Issuance | |
Equity compensation plans approved by security holders(1) | |
| 30,137,788 | (3) | |
| $54.11 | | |
| 19,398,164 | (4) |
Equity compensation plans not approved by security holders | |
| — | | |
| — | | |
| — | |
Total | |
| 30,137,788 | | |
| $54.11 | | |
| 19,398,164 | |
|
|
(1) |
Includes awards issued from the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,
which was approved by stockholders on May 13, 2014, the 2011 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,
which was approved by stockholders on May 11, 2011, the 2009 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,
which was approved by stockholders on May 13, 2009, and the 2004 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,
which was approved by stockholders on May 5, 2004. After approval of the 2014 Omnibus Stock and Performance Incentive Plan
of ConocoPhillips, no additional awards may be granted under the 2011, the 2009 or the 2004 Omnibus Stock and Performance
Incentive Plans of ConocoPhillips. |
(2) |
Excludes 441,691 restricted stock units payable in common stock on a one-for-one basis, credited to stock unit accounts
under our deferred compensation arrangements. These awards, which were excluded from the above table, were issued from the
1998 Stock and Performance Incentive Plan of ConocoPhillips, the 1998 Key Employee Stock Performance Plan of ConocoPhillips,
the 2002 Omnibus Securities Plan of Phillips Petroleum Company, the Omnibus Securities Plan of Phillips Petroleum Company,
the 1993 Burlington Resources Inc. Stock Incentive Plan, the Burlington Resources Inc. 1997 Employee Stock Incentive Plan,
the Burlington Resources Inc. 2002 Stock Incentive Plan, and the Burlington Resources Inc. 2000 Stock Option Plan for Non-Employee
Directors. Upon consummation of the merger of Conoco and Phillips, all outstanding options to purchase and restricted stock
units payable in common stock of Conoco and Phillips were converted into options to purchase or rights to receive shares of
ConocoPhillips common stock. Likewise, upon the acquisition of Burlington Resources, Inc., all outstanding options to purchase
and restricted stock units payable in common stock of Burlington Resources, Inc. were converted into options or rights to
receive shares of ConocoPhillips common stock. No additional awards may be granted under the aforementioned plans. |
(3) |
Includes an aggregate of 281,531 restricted stock units issued in payment of annual awards and dividend equivalents which
were reinvested with regard to existing awards received annually and restricted stock units issued in payment of dividend
equivalents with regard to fees that were deferred in the form of stock units under our deferred compensation arrangements
for non-employee members of the Board of Directors of ConocoPhillips, or assumed in connection with the merger for services
performed as a non-employee member of the Board of Directors for either Conoco Inc. or Phillips Petroleum Company. Also includes
268,686 restricted stock units issued in payment of dividend equivalents reinvested with respect to certain special awards
made to a retired Named Executive Officer. Dividend equivalents were credited under the 2004 Omnibus Stock and Performance
Incentive Plan during the time period from May 5, 2004, to May 12, 2009, under the 2009 Plan during the time period from May
13, 2009, to May 10, 2011, under the 2011 Omnibus Stock and Performance Incentive Plan during the time period from May 11,
2011, to May 12, 2014, and thereafter under the 2014 Omnibus Stock and Performance Incentive Plan. Also includes 3,915 restricted
stock units, eligible for cash dividend equivalents, that were issued as a special award in lieu of a bonus as a make-up award
in conjunction with the hiring of an executive; the restrictions lapse on the third anniversary of the grant date. In addition,
4,445,732 restricted stock units that are eligible for cash dividend equivalents were issued to U.S. and U.K. payroll employees
residing in the United States or the United Kingdom at the time of the grant; 1,714,311 restricted stock units that are not
eligible for cash dividend equivalents due to legal restrictions to non-U.S. or non-U.K. payroll employees and U.S. or U.K.
payroll employees residing in countries other than the United States or United Kingdom at the time of the grant. Both types
of award vest on the third anniversary of the grant date. In addition, 12,152 restricted stock units that are eligible for
cash dividend equivalents were issued to employees, in lieu of a bonus, as a retention award; the restrictions lapse on the
second anniversary of the grant date. Also includes, 46,936 restricted stock units that are not eligible for cash dividend
equivalents and which vest in three equal annual installments beginning on the first anniversary of the grant date were issued
to employees on the U.S., U.K., and other payrolls. Also includes 394,836 restricted stock units issued to executives on February
10, 2006, 310,771 restricted stock units issued to executives on February 8, 2007, 307,357 restricted stock units issued to
executives on February 14, 2008, 151,491 restricted stock units issued to executives on February 12, 2009, 75,790 restricted
stock units issued to executives on February 12, 2010, and 187,668 restricted stock units issued to executives on February
10, 2011. These restricted stock units have no voting rights, are eligible for cash dividend equivalents, and have restrictions
on transferability that last until separation of service from the Company. Also includes 240,206 and 356,705 restricted stock
units issued to executives on February 9, 2012, and April 4, 2012, respectively. These units have no voting rights, are eligible
for dividend equivalents, and have restrictions on transferability with a default of five years from the grant date, or if
elected, until separation from service. Also includes 42,099 restricted stock units issued to executives on February 5, 2013,
and 66,211 restricted stock units issued to executives on February 18, 2014. These units have no voting rights, are eligible
for dividend equivalents, have restrictions on transferability with a default of five years from the grant date, or if elected,
until separation of service, and may be settled in cash. Also includes 500,964 restricted stock units issued to executives
on February 17, 2015. These units have no voting rights, are eligible for dividend equivalents, have restrictions on transferability
with a default of five years from the grant date, or if elected, until separation of service, and may be settled in cash. |
Table of Contents
Equity Compensation Plan Information
|
Also includes 774,154 restricted stock units issued to executives on February 14, 2017. These units
have no voting rights, are not eligible for cash dividend equivalents while in the performance period, have restrictions on
transferability with a default of three years from the grant date, or if elected, until separation of service and may be settled
in cash. Also includes 1,012,134 restricted stock units issued to executives on February 13, 2018 and subsequent dividend
equivalent units under the Performance Share Program and Executive Restricted Stock Unit Program. These units have no voting
rights, are eligible for dividend equivalents units, have restrictions on transferability during the three-year performance
or restriction period, or if elected, until separation of service and may be settled in cash. Also includes 903,942 restricted
stock units issued to executives on February 14, 2019 and subsequent dividend equivalent units under the Performance Share
Program and Executive Restricted Stock Unit Program. These units have no voting rights, are eligible for dividend equivalents
units, have restrictions on transferability during the three-year performance or restriction period, or if elected, until
separation of service, and may be settled in cash. Further included are 18,040,197 non-qualified stock options with a term
of 10 years, which become exercisable in three equal annual installments beginning on the first anniversary of the grant date.
Included among these amounts are awards granted to employees who are no longer employed by ConocoPhillips, including those
who became employees of Phillips 66 at the spinoff, but who continue to hold awards denominated in ConocoPhillips equity. |
(4) |
The securities remaining available for issuance may be issued in the form of stock options, stock appreciation rights,
stock awards, stock units, and performance shares. Under the 2014 Omnibus Stock and Performance Incentive Plan, no more than
40,000,000 shares of common stock may be issued for incentive stock options (99,329 have been issued with 19,398,164 available
for future issuance). Securities remaining available for future issuance take into account outstanding equity awards made
under the 2014 Omnibus Stock and Performance Incentive Plan, the 2011 Omnibus Stock and Performance Incentive Plan, the 2009
Omnibus Stock and Performance Incentive Plan, the 2004 Omnibus Stock and Performance Incentive Plan, and prior plans of predecessor
companies as set forth in note 2. |
Table of Contents
Submission of Future Stockholder Proposals and
Nominations
Rule 14A-8 Stockholder Proposals
Under SEC rules, if you want us to include a proposal in our
proxy statement for the 2021 Annual Meeting of Stockholders, our Corporate Secretary must receive the proposal by November 30,
2020. Any such proposal should comply with the requirements of Rule 14a-8 promulgated under the Securities Exchange Act.
Proxy Access Nominations
Under our proxy access By-Law, a stockholder or a group of up
to twenty stockholders, owning at least three percent of our stock continuously for at least three years and complying with the
other requirements set forth in the By-Laws, may nominate up to two individuals (or 20 percent of the Board, if greater) for election
as a director at an annual meeting and have those nominees included in our proxy statement. Any proxy access nomination notice
for our 2021 proxy statement must be delivered to the Corporate Secretary between October 31, 2020, and November 30, 2020.
Other Proposals/Nominations Under the Advance Notice By-Law
Under our By-Laws and as SEC rules permit, stockholders must
follow certain procedures to nominate a person for election as a director (other than proxy access nominations) at an annual or
special meeting or to introduce an item of business at an annual meeting.
These procedures require proposing stockholders to submit the
proposed nominee or item of business by delivering a notice to the Corporate Secretary. Assuming our 2020 Annual Meeting convenes
as currently scheduled, we must receive notices for the 2021 Annual Meeting between January 12, 2021 and February 11, 2021.
How to Reach our Corporate Secretary
Any notice or request that you wish to deliver to our Corporate
Secretary should be sent to the following address: Corporate Secretary, ConocoPhillips, P.O. Box 4783, Houston, TX 77210-4783.
As required by Article II of our By-Laws, a notice of a proposed
nomination must include information about the nominating stockholder(s) and the nominee, as well as a written consent of the proposed
nominee to serve if elected. A notice of a proposed item of business must include a description of and the reasons for bringing
the proposed business to the meeting, any material interest of the stockholder in the business, and certain other information
about the stockholder. You can obtain a copy of ConocoPhillips’ By-Laws by writing the Corporate Secretary or on our website
under “Investors > Corporate Governance.”
Table of Contents
Available Information and Questions and Answers
About the Annual Meeting and Voting
Available Information
SEC rules require us to provide an annual report to stockholders
who receive this Proxy Statement. Additional printed copies of the annual report, as well as our Corporate Governance Guidelines,
Code of Business Ethics and Conduct, charters for each of our Board committees, and our Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, including the financial statements and the financial statement schedules, are available without
charge to stockholders upon written request to the ConocoPhillips Shareholder Relations Department, P.O. Box 2197, Houston, Texas
77252-2197 or via our website at www.conocophillips.com. We will furnish the exhibits to our Annual Report upon payment
of our copying and mailing expenses.
Attending the Annual Meeting
HOW CAN I ATTEND THE ANNUAL MEETING?
You are entitled to participate in the Annual Meeting only if
you were a ConocoPhillips stockholder at the close of business on March 16, 2020 or if you hold a valid proxy. You will be able
to participate in the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/COP2020.
You also will be able to vote your shares electronically at the Annual Meeting (other than shares held through our employee benefit
plans, which must be voted prior to the meeting).
To participate in the Annual Meeting, you will need the 16-digit
control number included on your Notice of Internet Availability, on your proxy card or on the instructions that accompanied your
proxy materials.
The Annual Meeting webcast will begin promptly at 9:00 a.m.,
Central Daylight Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:30 a.m.,
Central Daylight Time, and you should allow ample time for the check-in procedures.
WHY IS THIS ANNUAL MEETING ONLY VIRTUAL?
Due to the information and guidance currently available surrounding
the emerging public health impact of the coronavirus outbreak (COVID-19), this year’s Annual Meeting will be virtual only.
The health and well-being of our employees, stockholders and partners are of the utmost importance to us. This does not represent
a change in our stockholder engagement philosophy and we remain committed to return to an in-person meeting next year.
You will be able to attend the Annual Meeting online and submit
your questions during the meeting by visiting the www.virtualshareholdermeeting.com/COP2020. You will also be able to vote
your shares electronically at the Annual Meeting (other than shares held through our employee benefit plans, which must be voted
prior to the meeting).
WHAT IF DURING CHECK-IN TIME OR DURING THE MEETING I HAVE
TECHNICAL DIFFICULTIES OR TROUBLE ACCESSING THE VIRTUAL MEETING WEBSITE?
We will have technicians ready to assist you with any technical
difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during
the check in or meeting time, please call: 1-800-586-1548 (US) or 303-562-9288 (International).
WHAT IS THE ANNUAL MEETING WEBSITE AND HOW CAN I ACCESS IT?
All stockholders can visit the Annual Meeting website at www.conocophillips.com/annualmeeting.
On our Annual Meeting website, you can vote your proxy, submit questions in advance of the Annual Meeting, view a live video webcast of the Annual Meeting, access copies of our Proxy Statement and Annual Report and other information about ConocoPhillips, and elect to view future proxy statements and annual reports online instead of receiving paper copies in the mail.
Table of Contents
Available Information and Questions and Answers About the Annual
Meeting and Voting
Stockholders of Record and Beneficial Stockholders: Know
Which One You Are
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER
OF RECORD AND AS A BENEFICIAL STOCKHOLDER?
If your shares are registered directly in your name with Computershare
Trust Company, N.A., our registrar and transfer agent, you are considered a stockholder of record with respect to those shares.
If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” or “street
name” holder of those shares.
WHAT IS A BROKER NON-VOTE?
Brokers may use their discretion to vote shares held in street
name on matters considered “routine” under NYSE rules. Brokers may not vote shares held in street name on non-routine
matters unless they have received voting instructions from the beneficial owners. Shares that are not voted on non-routine matters
are called broker non-votes.
Who Can Vote and How
WHO IS ENTITLED TO VOTE?
You may vote if you were the record owner of ConocoPhillips
common stock as of the close of business on March 16, 2020. Each share of common stock is entitled to one vote. As of March 16,
2020, we had 1,076,859,925 shares of common stock outstanding and entitled to vote.
HOW DO I VOTE?
Stockholders of Record: You can either vote electronically
during the meeting or by proxy. If you vote by proxy, you still are entitled (but not required) to participate in the meeting.
Even if you plan to participate in the meeting, we encourage you to vote your shares in advance.
This Proxy Statement, the accompanying proxy card, and our 2019
Annual Report are being made available to stockholders online at www.proxyvote.com.
Vote your shares as follows. In all cases, have your proxy card
in hand.
Beneficial Stockholders: If you hold your ConocoPhillips
stock in street name, your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please
follow the directions on your proxy card or voting instruction card carefully. Please provide your voting instructions so your
vote can be counted on all matters to be considered at the meeting.
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By Mailing Your Proxy Card |
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By Telephone (800) 690-6903 |
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By Internet Using Your Computer |
If you elected to receive a hard copy of your proxy materials, fill out the enclosed proxy card, date and sign it, and
return it in the enclosed postage paid envelope. |
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Dial toll-free 24/7 |
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Visit 24/7
www.proxyvote.com |
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This year’s Annual Meeting will be held entirely
online to support the health and well-being of our employees, stockholders and partners in the midst of the coronavirus
outbreak (COVID-19). Stockholders may participate in the Annual Meeting by visiting the following website:
www.virtualshareholdermeeting.com/COP2020
To participate in the Annual Meeting, you will need
the 16-digit control number included on your Notice of Internet Availability, on your proxy card or on the instructions
that accompanied your proxy materials.
|
Table of Contents
Available Information and Questions and Answers About the Annual
Meeting and Voting
HOW DO I VOTE IF I HOLD MY STOCK THROUGH CONOCOPHILLIPS’
EMPLOYEE BENEFIT PLANS?
If you hold your stock through ConocoPhillips’ employee
benefit plans, you must do one of the following:
|
> |
Vote online (instructions are in the email sent to you or on the notice and access form); |
|
> |
Vote by telephone (instructions are on the notice and access form); or |
|
> |
If you received a hard copy of your proxy materials, fill out the enclosed voting instruction card, date and sign it,
and return it in the enclosed postage-paid envelope. |
You will receive a separate voting instruction card for each
employee benefit plan under which you hold stock. Please pay close attention to the deadline for returning your voting instruction
card to the plan trustee. Different plans may have different deadlines.
WHAT IF I AM A STOCKHOLDER OF RECORD AND RETURN MY PROXY
BUT DO NOT VOTE FOR SOME OF THE MATTERS LISTED ON MY PROXY CARD?
If you return a signed proxy card without indicating your vote,
your shares will be voted “FOR” each of the director nominees listed on the card, “FOR” the ratification
of Ernst & Young LLP as ConocoPhillips’ independent registered public accounting firm, and “FOR” the
approval of the compensation of our Named Executive Officers.
WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY AND
DO NOT PARTICIPATE IN THE ANNUAL MEETING?
If you are a record owner and do not provide a proxy or vote
your shares during the meeting, your shares will not be voted.
If you hold your shares in street name, your broker has the
authority to vote your shares for certain routine matters even if you do not provide voting instructions. This year, only the
ratification of Ernst & Young LLP as our independent registered public accounting firm for 2020 is considered a routine
matter. If you do not give your broker instructions on how to vote your shares on other matters, the broker cannot vote on those
proposals, resulting in a broker non-vote.
As more fully described on your proxy card, if you hold your
shares through certain ConocoPhillips employee benefit plans and do not vote your shares, your shares (along with all other shares
in the plan for which votes are not cast) may be voted pro rata by the trustee in accordance with the votes directed by other
participants in the plan.
HOW ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED?
Abstentions and broker non-votes are counted in determining
whether a quorum is present. Otherwise, broker non-votes will have no effect on the vote for any proposal. In contrast, abstentions
will have the same effect as a vote “AGAINST” a proposal.
CAN I CHANGE MY VOTE?
You can change your vote at any time before the polls close
at the Annual Meeting. You can do this by:
|
> |
Voting again by telephone or over the Internet prior to 11:59 p.m. EDT on May 11, 2020; |
|
> |
Signing another proxy card with a later date and returning it to us prior to the meeting; or |
|
> |
Voting again during the meeting. |
WHO COUNTS THE VOTES?
We have hired Broadridge Financial Solutions, Inc. to count
the votes represented by proxies and cast by ballot, and Jim Gaughan of GaughanADR has been appointed to act as Inspector of Election.
WHEN WILL THE VOTING RESULTS BE ANNOUNCED?
We will announce the preliminary voting results during the Annual
Meeting. We will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four business
days following the meeting.
WILL MY VOTE BE CONFIDENTIAL?
All stockholder proxies, ballots, and tabulations that identify
stockholders will be maintained in confidence. No such document will be available for examination, and the identity and vote of
any stockholder will not be disclosed, except as necessary to meet legal requirements and to allow the inspectors of election
to certify the results of the vote. Occasionally, stockholders provide written comments on their proxy card that may be forwarded
to management.
Table of Contents
Available Information and Questions and Answers About the Annual
Meeting and Voting
Business to Take Place at the Meeting
HOW MANY VOTES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?
In order for us to hold our meeting, holders of a majority of
our outstanding shares of common stock as of March 16, 2020 must be present at the meeting. This is referred to as a quorum. Your
shares are counted as present at the Annual Meeting if you participate in the meeting and vote electronically, or if you properly
return a proxy by Internet, telephone, or mail.
WHAT ARE MY VOTING CHOICES FOR EACH OF THE PROPOSALS TO BE
VOTED ON AT THE 2019 ANNUAL MEETING OF STOCKHOLDERS AND HOW DOES THE BOARD RECOMMEND I VOTE MY SHARES?
|
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1 |
Election of Directors |
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> vote in favor of all nominees;
> vote in favor of specific nominees;
> vote against all nominees;
> vote against specific nominees;
For information, see page 34.
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> abstain from voting with respect to all nominees; or
> abstain
from voting with respect to specific nominees.
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The Board recommends you vote FOR each nominee standing
for election as director. |
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FOR |
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2 |
Ratification of Independent Registered Public
Accounting Firm |
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> vote
in favor of the ratification;
> vote
against the ratification; or
> abstain
from voting on the ratification.
For information, see page 47.
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The Audit and Finance Committee recommends you vote FOR the
ratification. |
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FOR |
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3 |
Advisory Approval of the Compensation of the Named Executive Officers |
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> vote
in favor of the advisory proposal;
> vote
against the advisory proposal; or
> abstain
from voting on the advisory proposal.
For information, see page 49.
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The
Board recommends you vote FOR the advisory approval of executive
compensation. |
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FOR |
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WHICH PROPOSALS TO BE VOTED ON AT THE MEETING ARE CONSIDERED
“ROUTINE” AND WHICH ARE “NON-ROUTINE”?
The ratification of Ernst & Young LLP as our independent
registered public accounting firm for 2020 is the only routine matter to be presented at the Annual Meeting, and the only matter
on which brokers may vote on behalf of beneficial owners who have not provided voting instructions.
All other matters to be presented at the Annual Meeting are
non-routine. Brokers will not be allowed to vote on these other proposals without specific voting instructions from beneficial
owners.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH OF THE PROPOSALS?
Each of the director nominees and all proposals submitted require
the affirmative “FOR” vote of a majority of those shares present or represented by proxy at the meeting and entitled
to vote on the proposal.
COULD OTHER MATTERS BE DECIDED AT THE ANNUAL MEETING?
We are not aware of any other matters to be presented at the
meeting. If any matters are properly brought before the Annual Meeting, the individuals named in your signed proxy are authorized
to vote in accordance with their best judgment.
Table of Contents
Available Information and Questions and Answers About the Annual
Meeting and Voting
IS THERE A POLICY ABOUT ATTENDANCE BY DIRECTORS AT THE ANNUAL
MEETING?
Directors are expected to attend the Annual Meeting of Stockholders.
All of the individuals who were seeking re-election attended the 2019 Annual Meeting of Stockholders.
Proxies
WHO IS SOLICITING MY PROXY?
The Board of Directors of ConocoPhillips is soliciting your
proxy to vote at the 2020 Annual Meeting of Stockholders.
HOW CAN I REVOKE MY PROXY?
You can revoke your proxy by sending written notice of revocation
to our Corporate Secretary so that it is received prior to the close of business on May 11, 2020.
WHAT IS THE COST OF THIS PROXY SOLICITATION?
Our directors, officers, and employees may solicit proxies by
mail, by email, by telephone, or in person. Those individuals will receive no additional compensation for solicitation activities.
We will request banking institutions, brokerage firms, custodians, trustees, nominees, and fiduciaries to forward solicitation
materials to the beneficial owners of common stock held of record by those entities, and we will, upon request, reimburse reasonable
forwarding expenses. We will pay the costs of preparing, printing, assembling, and mailing the proxy materials used in the solicitation
of proxies. In addition, we have hired Alliance Advisors to assist us in soliciting proxies, which it may do by mail, telephone,
or in person. We anticipate paying Alliance Advisors a fee of $20,000, plus expenses.
Ways to Get our Proxy Statement and Annual Report
HOW CAN I ACCESS CONOCOPHILLIPS’ PROXY MATERIALS AND
ANNUAL REPORT ELECTRONICALLY?
This Proxy Statement, the accompanying proxy card, and our 2019
Annual Report are being made available to stockholders online at www.proxyvote.com.
Most stockholders can elect to view future proxy statements
and annual reports online instead of receiving paper copies in the mail. If you are a record owner of ConocoPhillips stock, you
can choose this option and save us the cost of producing and mailing these documents by following the instructions on your proxy
card or those provided when you vote by telephone or over the Internet. If you hold your ConocoPhillips stock in street name,
please refer to the information provided by your broker for instructions on how to elect to view future proxy statements and annual
reports electronically.
If you choose to view future proxy statements and annual reports
electronically, you will receive a Notice of Internet Availability next year in the mail containing the applicable Internet address.
Your choice will remain in effect unless you change it; you do not have to elect Internet access each year. If you change your
mind and would like to receive paper copies of our proxy statements and annual reports, you can request both by phone at (800)
579-1639, by email at sendmaterial@proxyvote.com, and online at www.proxyvote.com. You will need the 16-digit control
number located on your Notice of Internet Availability to request a package. You will also have an opportunity to request future
proxy statements and annual reports by mail.
WHY DID MY HOUSEHOLD RECEIVE A SINGLE SET OF PROXY MATERIALS?
SEC rules permit us to deliver a single copy of an annual report
and proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the
same family. This benefits both you and ConocoPhillips, as it eliminates duplicate mailings and reduces our printing and mailing
costs. Each stockholder will continue to receive a separate proxy card or voting instruction card.
Your household may have received a single set of proxy materials
this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by phone at (800) 579-1639,
online at www.proxyvote.com, by email at sendmaterial@proxyvote.com, or by writing to ConocoPhillips, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
If you hold your stock in street name, you may receive some
duplicate mailings. Certain brokers will eliminate duplicate account mailings on request. You may need to contact your broker
directly if you want to discontinue duplicate mailings to your household.
Table of Contents
Important Information Concerning the ConocoPhillips
Annual Meeting
Online check-in begins: 8:30 a.m., Central Daylight Time
Meeting begins: 9:00 a.m., Central Daylight Time
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ConocoPhillips stockholders as of the close of business on March 16, 2020, the record date for the
Annual Meeting, are entitled to participate in the Annual Meeting on May 12, 2020. |
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Due to the emerging health crisis of the coronavirus outbreak (COVID-19), the Annual Meeting will be a completely virtual
meeting of stockholders, which will be conducted via live webcast. |
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You will be able to participate in the Annual Meeting of Stockholders online and submit your questions during the meeting
by visiting www.virtualshareholdermeeting.com/COP2020. You will able to vote your shares electronically at the Annual
Meeting (other than shares held through our employee benefit plans, which must be voted prior to the meeting). |
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We encourage you to access the meeting prior to the start time. Please allow ample time for online check-in, which will
begin at 8:30 a.m., Central Daylight Time. The webcast starts at 9:00 a.m., Central Daylight Time. |
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> |
To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability,
on your proxy card or on the instructions that accompanied your proxy materials. |
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Visit our Annual Meeting website at www.conocophillips.com/annualmeeting in advance of the Annual meeting where
you can submit questions to management and also access copies of our Proxy Statement and Annual Report. |
THANK YOU FOR YOUR INTEREST AND SUPPORT – YOUR VOTE
IS IMPORTANT!
Table of Contents
Appendix A
Non-GAAP Financial Measures
RETURN ON CAPITAL EMPLOYED (ROCE)
Return on capital employed (ROCE) is calculated as a ratio,
the numerator of which is net income plus after-tax interest expense and excluding after-tax interest income, and the denominator
of which is average total equity plus average total debt adjusted for average cash, cash equivalents, restricted cash and short-term
investments. Net income is adjusted for non-operational or special item impacts. The company believes this measure is meaningful
as it provides insight into the profitability and capital efficiency of the average capital employed over the long-term.
CASH FROM OPERATIONS (CFO)
Cash from operations (CFO) is calculated by removing the impact
from operating working capital from cash provided by operating activities. The company believes that the non-GAAP measure CFO
is useful to investors to help understand changes in cash provided by operating activities excluding the timing effects associated
with operating working capital changes across periods on a consistent basis and with the performance of peer companies in a manner
that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of
the factors and trends affecting ConocoPhillips’ business and performance.
ADJUSTED EARNINGS
Adjusted Earnings is calculated by removing the impact of special
items from reported earnings. Special items are items that management believes are unusual or nonrecurring and not indicative
of our core operating results or business outlook over the long term. Management believes adjusted earnings is useful to investors
in evaluating our operating results, understanding our operating trends across periods on a consistent basis and providing comparability
with the performance of peer companies.
ADJUSTED EPS
Adjusted EPS is a measure of the company’s diluted net
earnings per share excluding special items. Special items are items that management believes are unusual or nonrecurring and not
indicative of our core operating results or business outlook over the long term. Management believes adjusted earnings per share
is useful to investors in evaluating our operating results, understanding our operating trends across periods on a consistent
basis and providing comparability with the performance of peer companies.
FREE CASH FLOW
Free cash flow is cash provided by operating activities excluding
operating working capital in excess of capital expenditures and investments. Free cash flow is not a measure of cash available
for discretionary expenditures since the company has certain non-discretionary obligations such as debt service that are not deducted
from the measure. The company believes this non-GAAP measure is useful to investors as it provides insight into the company’s
ability to fund its capital expenditures and investments from the cash provided by operating activities excluding operating working
capital changes.
NET DEBT
Net debt is total debt net of cash, cash equivalents and short-term
investments. The Company uses this liquidity measure to determine their obligation that would not be satisfied using existing
cash and other highly liquid financial assets.
Table of Contents
Appendix A
NON-GAAP RECONCILIATIONS
Reconciliation of Return on Capital Employed
(ROCE)
$ Millions, Except as Indicated
| |
For the Year Ended | |
| |
12/31/2019 | |
Numerator | |
| | |
Net Income Attributable to ConocoPhillips | |
| 7,189 | |
Adjustment to exclude special items | |
| (3,153 | ) |
Net income attributable to noncontrolling interests | |
| 68 | |
After-tax interest expense | |
| 637 | |
After-tax interest income | |
| (119 | ) |
ROCE Earnings | |
| 4,622 | |
Denominator | |
| | |
Average total equity(1) | |
| 33,713 | |
Average total debt(2) | |
| 14,930 | |
Average total cash(3) | |
| (7,352 | ) |
Average capital employed | |
| 41,291 | |
ROCE (percent) | |
| 11.2 | % |
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(1) |
Average total equity is the average of beginning and ending total equity by quarter |
(2) |
Average total debt is the average of beginning and ending long-term debt and short-term debt by quarter |
(3) |
Average total cash is the average of beginning and ending cash, cash equivalents, restricted cash and short-term investments. |
Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow
$ Millions, Except as Indicated
| |
For the Year Ended | | |
For the Year Ended | | |
For the Year Ended | |
| |
12/31/2017 | | |
12/31/2018 | | |
12/31/2019 | |
Net Cash Provided by Operating Activities | |
| 7,077 | | |
| 12,934 | | |
| 11,104 | |
Adjustments: | |
| | | |
| | | |
| | |
Net operating working capital changes | |
| 15 | | |
| 635 | | |
| (579 | ) |
Cash from operations | |
| 7,062 | | |
| 12,299 | | |
| 11,683 | |
Capital expenditures and investments | |
| (4,591 | ) | |
| (6,750 | ) | |
| (6,636 | ) |
Free Cash Flow | |
| 2,471 | | |
| 5,549 | | |
| 5,047 | |
Reconciliation of Earnings to Adjusted Earnings
and EPS to Adjusted EPS
$ Millions, except as indicated
| |
For the Year Ended | |
| |
12/31/2019 | |
| |
Pre-tax | | |
Income tax | | |
After-tax | | |
Per share of common stock (dollars) | |
Consolidated | |
| | | |
| | | |
| | | |
| | |
Earnings (loss) | |
| | | |
| | | |
| 7,189 | | |
| 6.40 | |
Adjustments: | |
| | | |
| | | |
| | | |
| | |
Net (gain) loss on asset sales | |
| (1,880 | ) | |
| (348 | ) | |
| (2,228 | ) | |
| (1.98 | ) |
Unrealized (gain) loss on CVE shares | |
| (649 | ) | |
| — | | |
| (649 | ) | |
| (0.58 | ) |
Unrealized (gain) loss on FX derivative | |
| 33 | | |
| (5 | ) | |
| 28 | | |
| 0.02 | |
Pending claims and settlements | |
| (378 | ) | |
| (4 | ) | |
| (382 | ) | |
| (0.34 | ) |
Recognition of deferred income | |
| (297 | ) | |
| 62 | | |
| (235 | ) | |
| (0.21 | ) |
Impairments | |
| 682 | | |
| (156 | ) | |
| 526 | | |
| 0.47 | |
Deferred tax adjustment | |
| — | | |
| (178 | ) | |
| (178 | ) | |
| (0.16 | ) |
Alberta tax rate change | |
| — | | |
| (25 | ) | |
| (25 | ) | |
| (0.02 | ) |
Malaysia Deepwater tax incentive | |
| — | | |
| (164 | ) | |
| (164 | ) | |
| (0.15 | ) |
Pension settlement expense | |
| 45 | | |
| (9 | ) | |
| 36 | | |
| 0.03 | |
Qatar deferred tax adjustment | |
| 118 | | |
| — | | |
| 118 | | |
| 0.11 | |
Adjusted earnings (loss) | |
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| | | |
| 4,036 | | |
| 3.59 | |
Table of Contents
Appendix A
Other Measures
RESOURCES
Based on the Petroleum Resources Management System, a system
developed by industry that classifies recoverable hydrocarbons into commercial and sub-commercial to reflect their status at the
time of reporting. Proved, probable and possible reserves are classified as commercial, while remaining resources are categorized
as sub-commercial or contingent. The company’s resource estimate includes volumes associated with both commercial and contingent
categories. The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible
reserves. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K and other reports and filings
with the SEC.
COST OF SUPPLY
Cost of supply is the WTI equivalent price that generates a
10 percent after-tax return on a point-forward and fully burdened basis. Fully burdened includes capital infrastructure,
foreign exchange, price-related inflation, G&A and carbon tax (if currently assessed). If no carbon tax exists for the asset,
it is not included in this metric. All barrels of resources are discounted at 10 percent.
LEVERAGE RATIO
Leverage ratio is calculated as net debt divided by cash from
operations. The company believes this is useful to investors as a measure of the company’s ability to pay its balance sheet
debt net of cash and cash equivalents, also referred to as net debt, with its cash from operations. Net debt and cash from operations
are non-GAAP measures defined in this Appendix.
PRODUCTION GROWTH PER DEBT-ADJUSTED SHARE
Production per debt-adjusted share is calculated on an underlying
production basis using ending period debt divided by ending share price plus ending shares outstanding. Underlying production
excludes Libya and closed dispositions and acquisitions. The company believes that production per debt-adjusted share is useful
to investors as it provides a consistent view of production on a total equity basis by converting debt to equity and allows for
comparisons across peer companies.
TOTAL RESERVE REPLACEMENT
Total reserve replacement is a ratio representing the change
in proved reserves, net of production, divided by current year production. The company believes that total reserve replacement
is useful to investors to help understand how changes in proved reserves, net of production, compare with our current year production.
ORGANIC RESERVE REPLACEMENT
Organic reserve replacement is a ratio representing the change
in proved reserves, net of production and excluding acquisitions and dispositions, divided by current year production. We believe
that organic reserve replacement is useful to investors to help understand how changes in proved reserves, net of production,
compare with our current year production, excluding the impacts of acquisitions and dispositions.
Table of Contents
Appendix A
2019 Reserves Replacement
MMBOE, except as indicated
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As of Year-end 2019 | |
End of 2018 | |
| 5,263 | |
End of 2019 | |
| 5,262 | |
Change in reserves | |
| (1 | ) |
Production(1) | |
| 512 | |
Change in reserves excluding production(1) | |
| 511 | |
2019 total reserve replacement ratio | |
| 100 | % |
Production(1) | |
| 512 | |
Purchases(2) | |
| (2 | ) |
Sales(2) | |
| 88 | |
Changes in reserves excluding production(1), purchases(2) and sales(2) | |
| 597 | |
2019 organic reserve replacement ratio | |
| 117 | % |
Three-Year Reserves Replacement
MMBOE, except as indicated
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As of Year-end 2019 | |
End of 2016 | |
| 6,424 | |
End of 2019 | |
| 5,262 | |
Change in reserves | |
| (1,162 | ) |
Production(1) | |
| 1,513 | |
Change in reserves excluding production(1) | |
| 351 | |
Three-Year total reserve replacement ratio | |
| 23 | % |
Production(1) | |
| 1,513 | |
Purchases(2) | |
| (292 | ) |
Sales(2) | |
| 2,100 | |
Changes in reserves excluding production(1), purchases(2) and sales(2) | |
| 2,159 | |
Three-Year organic reserve replacement ratio | |
| 143 | % |
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(1) |
Production includes fuel gas and Libya |
(2) |
Purchases refers to acquisitions and sales refers to dispositions |
Table of Contents
Stockholder Information
Annual Meeting
The ConocoPhillips Annual Meeting of Stockholders will
be held:
Tuesday, May 12, 2020
Online at: www.virtualshareholdermeeting.com/COP2020
Notice of the meeting and proxy materials are being
sent to all stockholders.
Direct Stock Purchase and Dividend
Reinvestment Plan
The ConocoPhillips Investor Services Program is a direct
stock purchase and dividend reinvestment plan that offers stockholders a convenient way to buy additional shares and reinvest
their common stock dividends. Purchases of company stock through direct cash payment are commission free. Please call
Computershare to request an enrollment package:
Toll-free number: 800-356-0066
You may also enroll online at www.computershare.com/investor.
Registered stockholders can access important investor
communications online and sign up to receive future stockholder materials electronically by following the enrollment instructions.
Principal and Registered Offices
925 N. Eldridge Parkway
Houston, TX 77079
251 Little Falls Drive
Wilmington, DE 19808
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Stock Transfer Agent and Registrar
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
www.computershare.com
Information Requests
For information about dividends and certificates, or
to request a change of address form, stockholders may contact:
Computershare
P.O. Box 30170
College Station, TX 77842-3170
Toll-free number: 800-356-0066
Outside the U.S.: 201-680-6578
TDD for hearing impaired: 800-231-5469
TDD outside the
U.S.: 201-680-6610
www.computershare.com/investor
Personnel in the following offices can also answer investors’
questions about the company:
Institutional Investors:
ConocoPhillips Investor Relations
16930 Park Row Drive
Houston, TX 77084
281-293-5000
investor.relations@conocophillips.com
Individual Investors:
ConocoPhillips Shareholder Relations
P.O. Box 2197
Houston, TX 77252-2197
281-293-6800
shareholder.relations@conocophillips.com
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Compliance and Ethics
For guidance, or to express concerns or ask questions
about compliance and ethics issues, call ConocoPhillips’ Ethics Helpline toll-free at 877-327-2272, available 24
hours a day, seven days a week. The ethics office also may be contacted via email at ethics@conocophillips.com,
the Internet at www.conocophillips.ethicspoint.com or by writing:
Attn: Corporate Ethics Office
ConocoPhillips
P.O. Box 2197
Houston, TX 77252-2197
Copies of Proxy Statement and Annual
Report
Copies of this Proxy Statement and the 2019 Annual Report,
as filed with the U.S. Securities and Exchange Commission, are available for free by making a request on the company’s
website, calling 918-661-3700 or writing:
ConocoPhillips Reports
B-17 Plaza Office Building
315 S. Johnstone Ave.
Bartlesville, OK 74004
Website
www.conocophillips.com
The site includes resources of interest to investors,
including news releases and presentations to securities analysts; copies of ConocoPhillips’ annual reports and proxy
statements; reports to the U.S. Securities and Exchange Commission; and data on ConocoPhillips’ health, safety,
and environmental performance.
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Table of Contents
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ConocoPhillips 2019 Notable Recognitions
and Achievements
> Named to
the Dow Jones Sustainability Index for 13th year
> Recognized
by the Government of Indonesia for strong environmental performance via the BLUE PROPER award
> Received
top sustainability scores; Received best possible score of “1” on ISS’s E&S Quality Score and second-best
score of “AA” from MSCI
> FORTUNE’s
2020 World’s Most Admired Companies
> Forbes
Best Employers for Diversity
> Marine
received both the Devlin Safety and Environmental Achievement Awards from the American Chamber of Shipping
> Received
perfect score on Human Right’s Campaign’s Corporate Equality Index
> Operations
in Canada celebrated by the local community for its relationship with the indigenous people
> Forbes
World’s Best Employers
> Selected
for first ever S&P 500 ESG Index
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EXPLORE CONOCOPHILLIPS
Fact Sheets
The ConocoPhillips Fact Sheets provide detailed operational
updates for each of the company’s six segments. The Fact Sheets are updated annually and are available at www.conocophillips.com/factsheets.
Sustainability Report
Our annual Sustainability Report provides details on
priority reporting issues for the company, a letter from our CEO and key environmental, social and governance metrics. The report is updated in June and is available on our
website at www.conocophillips.com/susdev.
Managing Climate-Related Risks Report
Our Managing Climate-Related Risks Report includes a
letter from our CEO and details on our governance framework, risk management approach, strategy, and key metrics and targets
for climate-related issues. The report is available on our website at www.conocophillips.com/ climatechange.
2019 Analyst & Investor Meeting
During 2019 ConocoPhillips conducted an Analyst &
Investor Meeting that presented an overview of the company’s 10-year strategic plan. A slide deck and transcript
are available on our website at www.conocophillips.com/ investorpresentations.
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Table of Contents