29
MARATHON OIL | 2017
PROXY STATEMENT
The following table shows the targets and weightings established by the Committee and the performance achieved during 2016.
|
|
|
|
|
|
Critical Capability
|
Weight (%)
|
Performance Measure
|
Target
|
Performance
Achieved
|
Operational Excellence
|
15
|
TRIR
(1)
|
0.52
|
0.35
|
Serious Event Rate
(2)
|
0.36
|
0.33
|
25
|
Production, MBOEPD
(3)
|
340
|
342
|
SCO Production, MBPD
(4)
|
44
|
46
|
Financial Stewardship
|
40
|
Cash Costs, $/BOE
(5)
|
9.19
|
8.66
|
F & D Cost, $/BOE Reserve
(6)
|
17.25
|
10.74
|
20
|
EBITDAX, $/BOE
(7)
|
8.09
|
13.08
|
(1) Calculated according to the same formula as the Occupational Safety and Health Administration (“OSHA”) Recordable Incident Rate by dividing (a) the total number of OSHA recordable incidents multiplied by 200,000 by (b) the total number of hours worked. This metric includes both Company employees and contractors, and applies to Company-operated properties only.
(2) Comprised of the total number of significant and critical severity events (as defined in the Company’s Event Reporting and Management Standard) and exposure hours, calculated by dividing (a) the number of events multiplied by 200,000 by (b) total exposure hours. This metric applies to Company-operated properties only.
(3) Represents our North America E&P and International E&P segments available for sale, adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures. This metric excludes Libya.
(4) Calculated as net synthetic crude oil production (bitumen after royalties and upgrading, excluding blend-stocks), adjusted for price, business climate, acquisitions and divestitures.
(5) Includes lease operating expense, above field expense, and general and administrative, adjusted for foreign exchange rates, legal settlements, and acquisitions and divestitures. Production denominator is recorded sales adjusted for pricing effects of PSCs, catastrophic events, changes in business climate, acquisitions and divestitures. This metric excludes Libya and Oil Sands Mining.
(6) Calculated by dividing (a) capital expenditures and cash exploration expenditures adjusted for foreign exchange rate, capitalized interest and capitalized asset retirement obligations from our North America E&P, International E&P and Oil Sands Mining segments by (b) reserves excluding dispositions and price related changes. This metric excludes Libya.
(7) Earnings before interest, taxes, depreciation, amortization, and exploration adjusted for special items. Production denominator is recorded sales adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures. This metric excludes Libya and Oil Sands Mining.
2016 ORGANIZATIONAL AND STRATEGIC PERFORMANCE
After assessing the Company’s financial and operational performance, the Committee evaluated the organizational and strategic performance achievements, representing 30% of the total bonus award opportunity. For 2016, the Committee more clearly defined the Company’s qualitative objectives and adopted five metrics to measure organizational and strategic performance: (1) no additional net debt, (2) achievement of our sales target for non-core assets, (3) improvement of one-year relative TSR, (4) resource additions, and (5) no significant spills to the environment.
These metrics are evaluated by the Committee to determine whether they have been achieved, but there are generally no threshold or weighting guidelines. We achieved positive results on all of these metrics except resource replacement.
MARATHON OIL | 2017
PRO
XY STATEMENT
30
Upon review of these qualitative outcomes, the Committee concluded that the Company had achieved overall performance at target expectations.
2016 INDIVIDUAL PERFORMANCE
Although our annual bonus program applies a framework and uses goals and formulas, the Committee maintains discretion to adjust individual cash bonuses to recognize critical performance factors and accomplishments that may not have been fully considered in the performance score calculation. In evaluating our NEOs’ contributions during 2016, the Committee considered each NEO’s specific contribution to our Company’s key achievements, including those discussed under “Compensation Discussion and Analysis—Executive Summary.” Following this consideration, the Committee determined to make no individual adjustments to the NEOs’ 2016 bonuses, except with respect to Mr. Wagner. In recognition of Mr. Wagner’s strategic performance in his current role and as interim Chief Financial Officer, the Committee determined that Mr. Wagner’s payout would be paid above target at 110%.
ANNUAL CASH BONUS PAYOUTS EARNED FOR 2016
Taking into consideration the Company’s quantitative performance, the Company’s qualitative organizational and strategic performance and individual performance, the Committee determined to assess overall performance under the 2016 bonus program at 100% of target.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary as of
December 31, 2016
|
Bonus Target
|
Target Bonus Opportunity
|
Percent of Target Achieved
|
Actual Bonus Payout
|
Mr. Tillman
|
|
$1,050,000
|
|
|
125%
|
|
$1,312,500
|
|
|
100%
|
$1,312,500
|
|
Mr. Wagner
|
|
$415,000
|
|
|
75%
|
|
$311,250
|
|
|
110%
|
$342,380
|
|
Mr. Little
|
|
$600,000
|
|
|
85%
|
|
$510,000
|
|
|
100%
|
$510,000
|
|
Ms. Kerrigan
|
|
$575,000
|
|
|
85%
|
|
$488,750
|
|
|
100%
|
$488,750
|
|
Ms. Krajicek
|
|
$400,000
|
|
|
75%
|
|
$300,000
|
|
|
100%
|
$300,000
|
|
Note: Due to the timing of their separation from the Company, Messrs. Sult and Robertson were not eligible for a 2016 annual cash bonus payment.
LONG-TERM INCENTIVES
Long-term incentive, or LTI, awards align the interests of NEOs and stockholders over the long term. These awards assist NEOs in establishing and maintaining significant equity ownership and place a meaningful portion of compensation at risk based on our common stock price performance. Long-term incentives also encourage retention through continued service requirements and are intended to represent the largest portion of the NEOs’ total direct compensation.
The Committee awards LTIs based on an intended award value that reflects competitive market data, each NEO’s performance and each NEO’s intended target total compensation. The 2016 intended award value for NEOs was allocated 50% to performance units, 20% to stock options and 30% to restricted stock.
Each year, the Committee grants LTI awards at its regularly scheduled February meeting, the date of which is generally set at least one year in advance. The grant date for such awards is generally the meeting date; however, for awards approved after market close, the grant date is the next trading day. The actual LTI value realized by each NEO depends on the price of the underlying shares of common stock at the time of vesting or exercise, and in the case of performance units, our TSR relative to that of the companies in our Peer Group.
31
MARATHON OIL | 2017
PROXY STATEMENT
2016 LONG-TERM INCENTIVE AWARDS
After considering competitive market data, the demand for talent, cost considerations and the performance of the Company and the NEOs, the Committee awarded LTIs to each NEO consistent with our normal grant timeline. These grants had a grant date of February 24, 2016. Effective October 1, 2016, the Committee also made an interim award to Mr. Little in conjunction with his acceptance of the role of Executive Vice President, Operations. This interim award of restricted stock had an intended value of $600,000, which is one times his base salary, and is not included in the amount shown for Mr. Little below.
In further recognition of the prevailing economic environment, significantly reduced commodity prices, and the impact on Company stock price, management recommended and the Committee approved a 25% reduction in the grant-date value of NEO restricted stock awards.
The table below lists the originally intended grant-date LTI value for each NEO, and the reduced grant-date value that reflects the decrease in restricted stock value. The Committee’s methodologies to deliver intended LTI values are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table. See the Grants of Plan-Based Awards Table for additional detail about each LTI award.
|
|
|
|
Total 2016 LTI Awards Intended Value
|
Name
|
Annual Target
|
Reduced Grant
|
Mr. Tillman
|
$7,650,000
|
$7,076,250
|
Mr. Wagner
|
$1,000,000
|
$925,000
|
Mr. Little
|
$2,200,000
|
$2,035,000
|
Ms. Kerrigan
|
$2,000,000
|
$1,850,000
|
Ms. Krajicek
|
$750,000
|
$693,750
|
Mr. Sult
|
$2,300,000
|
$2,127,500
|
Mr. Robertson
|
$2,200,000
|
$2,035,000
|
PERFORMANCE UNITS
The Committee believes that a performance unit program based on TSR relative to peer companies aligns pay and Company performance. The industry peers selected for each performance cycle generally match the industry peers comprising the prevailing Peer Group used for compensation benchmarking. TSR is determined by adding the sum of stock price appreciation or reduction per share, plus cumulative dividends per share for the performance period, and dividing that total by the beginning stock price per share. For purposes of this calculation, the beginning and ending stock prices are the averages of the closing stock prices for the month immediately preceding the beginning and ending dates of the performance period. If the TSR at the end of the performance period is negative, the payout percentage is capped at 100% regardless of ranking. The Committee has discretion to reduce the final payment associated with any performance unit award. Performance units, when earned, are paid in cash.
2016 PERFORMANCE UNITS
In February 2016, the Committee awarded the NEOs performance units that will vest based on relative TSR for the three-year performance period ending December 31, 2018. The value of each underlying unit tracks the price of a share of our common stock. The percentage of units earned ranges from 0% to 200% of the units granted. When the award is settled, NEOs will receive dividend equivalents paid in cash for a number of shares equal to the number of units granted, multiplied by the payout percentage. Dividend equivalents accrue and are paid based on performance at the end of the performance period. Earned awards are paid in cash shortly after the completion of the performance period with the final cash value impacted both by relative TSR rank and our common stock price. In the event that any companies in our Peer Group undergo a change in corporate capitalization or a
MARATHON OIL | 2017
PRO
XY STATEMENT
32
corporate transaction during the performance period, the Committee may evaluate whether such company will be replaced in the Peer Group. The Committee has designated Southwestern Energy, Continental Resources and Concho Resources as replacement companies (in that order). The payout percentages for each ranking are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MRO TSR Ranking
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
13
|
Payout (% of Target)
|
200%
|
183%
|
167%
|
150%
|
133%
|
117%
|
100%
|
83%
|
67%
|
50%
|
0%
|
0%
|
0%
|
2015 PERFORMANCE UNITS
The performance units granted in February 2015 have a performance period end date of December 31, 2017 and follow the same payout percentages based on ranking as the 2016 performance units (listed above). See the Outstanding Equity Awards at 2016 Fiscal Year-End Table for information about the estimated payouts of the 2015 performance units.
2014 PERFORMANCE UNITS
The performance units granted in February 2014 had a performance period end date of December 31, 2016. The payout percentages for each ranking are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MRO TSR Ranking
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
Payout (% of Target)
|
200%
|
182%
|
164%
|
145%
|
127%
|
109%
|
91%
|
73%
|
54%
|
0%
|
0%
|
0%
|
For the performance period, we ranked eleventh out of twelve companies. In January 2017, the Committee determined that there would be no final payout for the 2014 Performance Units.
STOCK OPTIONS
Stock options provide a direct link between officer compensation and the value delivered to stockholders. The Committee believes that stock options are inherently performance-based, as option holders only realize compensation if the value of our stock increases following the grant date.
Stock options granted according to our normal annual grant timeline generally have a three-year pro-rata vesting period and a maximum term of ten years. Additional information on these awards, including the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table.
RESTRICTED STOCK
The Committee awards restricted stock for diversification of the LTI award mix, for consistent alignment between executives and stockholders, and for retention purposes. Restricted stock provides recipients with the opportunity for capital accumulation and a more predictable long-term incentive value than is provided by performance units or stock options.
Restricted stock awarded according to our normal annual grant schedule typically vests in full on the third anniversary of the grant date. Prior to vesting, restricted stock recipients have the right to vote and receive dividends on the restricted shares.
OTHER BENEFITS
PERQUISITES
We offer limited perquisites to our NEOs. We believe these perquisites are reasonable, particularly because the cost of these benefits constitutes a small percentage of each NEO’s total compensation. The Committee assesses these perquisites at least annually as part of its total competitive review. We do not provide any tax gross-ups on
33
MARATHON OIL | 2017
PROXY STATEMENT
these perquisites. The perquisites provided to our NEOs include reimbursement for certain tax, estate, and financial planning services up to $15,000 per year, an enhanced annual physical examination, limited personal use of Company aircraft and a Company-provided car service for our CEO. Our NEOs also participate in the health, retirement and other benefit plans generally available to our U.S. employees.
See the “All Other Compensation” column of the Summary Compensation Table and the footnotes following the Summary Compensation Table for additional details concerning the perquisites provided to our NEOs in 2016.
RETIREMENT BENEFITS
We offer our NEOs the opportunity to provide for retirement through four plans.
|
|
•
|
Marathon Oil Company Thrift Plan (“Thrift Plan”) – A tax-qualified 401(k) plan.
|
|
|
•
|
Retirement Plan of Marathon Oil Company (“Retirement Plan”) – A tax-qualified defined benefit pension plan.
|
|
|
•
|
Excess Benefit Plan (“Excess Plan”) – A nonqualified plan allowing employees to accrue benefits above the tax limits, with components attributable to both the Retirement Plan and the Thrift Plan.
|
|
|
•
|
Marathon Oil Company Deferred Compensation Plan (“Deferred Compensation Plan”) – A nonqualified plan that grows when an NEO accrues benefits above the tax limits in the Thrift Plan or when an NEO defers a portion of his or her compensation.
|
Benefits payable under our qualified and nonqualified plans are described in more detail in “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
We also sponsor retiree medical plans for a broad-based group of employees, including the NEOs. The Committee has determined that providing these arrangements plays a meaningful role in attracting and retaining qualified employees and executives.
SEVERANCE BENEFITS
Our NEOs do not have employment agreements entitling them to any special executive severance payments, other than the change in control termination benefits described below. The Board may exercise discretion to make severance payments to executives on a case-by-case basis. We have a policy requiring that our Board seek stockholder approval or ratification of certain severance agreements, including agreements providing change in control benefits for senior executive officers that would require payment of cash severance benefits exceeding 2.99 times the officer’s salary plus the most recent annual cash bonus paid.
We believe change in control benefits are necessary to attract and retain talent within our industry, ensure continuity of management in the event of a change in control and provide our NEOs with the security to make decisions that are in the best interests of our stockholders. Our change in control benefits are described in more detail under “Potential Payments upon Termination or Change in Control.”
STOCK OWNERSHIP REQUIREMENTS AND ANTI-HEDGING & ANTI-PLEDGING POLICIES
All of our officers who are “executive officers” for purposes of Section 16 of the Exchange Act are subject to our stock ownership requirements, which are intended to reinforce the alignment of interests between our officers and stockholders. The stock ownership requirements are as follows:
MARATHON OIL | 2017
PRO
XY STATEMENT
34
|
|
•
|
CEO – six times base salary;
|
|
|
•
|
Executive Vice Presidents – four times base salary; and
|
|
|
•
|
Vice Presidents – two times base salary.
|
Executive officers have five years from their respective appointment dates to achieve the designated stock ownership level. The Committee reviews each executive officer’s progress toward the requirements on at least an annual basis to determine whether the market value of shares, including the value of unvested shares not subject to performance conditions, satisfies our requirements. Executive officers who do not hold the required level of stock ownership are expected to hold the shares they receive upon vesting of restricted stock or exercise of stock options (after payment of exercise prices and after taxes) until they have met their requirement. Each NEO other than Ms. Kerrigan is currently within the five year window.
To ensure that they bear the full risks of stock ownership, officers are prohibited from engaging in hedging transactions related to our stock. Officers are also prohibited from pledging or creating a security interest in any shares of our common stock they hold, including shares in excess of the applicable ownership requirement.
TAX CONSIDERATIONS
The Committee considers the tax effects to the Company and the NEOs when making executive compensation decisions to deliver compensation in a tax-efficient manner. However, the Committee’s priority is to provide performance-based and competitive compensation. Therefore, some compensation paid to NEOs is not deductible due to the limitations of Section 162(m) of the Internal Revenue Code.
As required under Section 162(m), our stockholders approved the material terms of performance goals for awards to NEOs, which are contained in our 2012 and 2016 Incentive Compensation Plans. These performance goals include both financial and operational measures. For purposes of qualifying annual cash bonus payments to our NEOs as “performance-based compensation” under Section 162(m) in 2016, we used both financial and operational goals to establish maximum potential payment amounts. The determination of actual annual cash bonus payments for NEOs is described above under “Annual Cash Bonus.” Performance units and stock options are also performance-based compensation for purposes of Section 162(m).
35
MARATHON OIL | 2017
PROXY STATEMENT
EXECUTIVE COMPENSATION
The following table summarizes the total compensation for each NEO for the years shown.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
(1)
($)
|
Stock
Awards
(2)
($)
|
Option
Awards
(2)
($)
|
Non‑
Equity
Incentive
Plan
Compensation
(3)
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(4)
($)
|
All
Other
Compensation
(5)
($)
|
Total
($)
|
Lee M. Tillman
|
2016
|
1,050,000
|
0
|
4,597,472
|
|
1,205,640
|
1,312,500
|
208,156
|
246,323
|
8,620,091
|
President and Chief Executive Officer
|
2015
|
1,050,000
|
500,000
|
6,299,598
|
|
1,755,082
|
1,181,250
|
234,292
|
256,619
|
11,276,841
|
2014
|
1,036,346
|
500,000
|
4,301,154
|
|
3,466,985
|
1,706,250
|
249,489
|
237,843
|
11,498,067
|
Patrick J. Wagner
|
2016
|
386,846
|
0
|
600,985
|
|
157,600
|
342,380
|
55,810
|
64,965
|
1,608,586
|
Interim Chief Financial Officer and Vice President, Corporate Development and Strategy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. Mitchell Little
|
2016
|
529,615
|
0
|
1,931,409
|
|
346,720
|
510,000
|
254,057
|
79,582
|
3,651,383
|
Executive Vice President, Operations
|
2015
|
500,000
|
0
|
1,725,931
|
|
480,845
|
425,000
|
706,766
|
79,275
|
3,917,817
|
2014
|
423,558
|
0
|
1,239,418
|
|
594,342
|
552,500
|
1,101,270
|
64,064
|
3,975,152
|
Sylvia J. Kerrigan
|
2016
|
575,000
|
0
|
1,201,956
|
|
315,200
|
488,750
|
241,587
|
117,565
|
2,940,058
|
Executive Vice President, General Counsel and Secretary
|
2015
|
575,000
|
0
|
1,725,931
|
|
480,845
|
439,880
|
78,002
|
113,647
|
3,413,305
|
2014
|
575,000
|
0
|
1,167,467
|
|
941,042
|
1,918,739
|
879,494
|
112,435
|
5,594,177
|
Catherine L. Krajicek
|
2016
|
371,442
|
0
|
450,738
|
|
118,200
|
300,000
|
65,805
|
41,158
|
1,347,343
|
Vice President, Conventional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Sult
|
2016
|
514,615
|
0
|
1,382,254
|
|
362,480
|
0
|
79,867
|
79,608
|
2,418,824
|
Former Executive Vice President and Chief Financial Officer
|
2015
|
600,000
|
0
|
1,984,827
|
|
552,973
|
459,000
|
107,638
|
104,720
|
3,809,158
|
2014
|
600,000
|
0
|
1,290,384
|
|
1,040,099
|
663,000
|
117,093
|
136,800
|
3,847,376
|
Lance W. Robertson
|
2016
|
358,961
|
0
|
1,322,155
|
|
346,720
|
0
|
49,643
|
68,619
|
2,146,098
|
Former Vice President, Resource Plays
|
2015
|
510,000
|
0
|
1,725,931
|
|
480,845
|
390,150
|
60,154
|
107,754
|
3,274,834
|
2014
|
458,019
|
0
|
1,239,418
|
|
594,342
|
563,550
|
70,054
|
78,735
|
3,004,118
|
(1) For Mr. Tillman, this column includes installments of the cash sign-on bonus he received in connection with the commencement of his employment with us in August 2013: $2,000,000 in 2013 and $500,000 in each of 2014 and 2015.
(2) This column reflects the aggregate grant date fair values calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. Assumptions used in the calculation of these amounts are included in footnote 21 to our consolidated financial statements in our annual reports on Form 10-K for the years ended December 31, 2016 and December 31, 2015 and footnote 20 to our consolidated financial statements in our annual reports on Form 10-K for the year ended December 31, 2014. For 2014, 2015 and 2016, the Stock Awards column also includes the grant date fair value of the share-denominated performance units granted in February 2014, February 2015 and February 2016 respectively, which ultimately will be settled in cash. The value ultimately realized by the officers upon the actual vesting of the awards may or may not be equal to this determined value, as these awards are subject to market conditions and have been valued based on an assessment of the market conditions as of the grant date. See the “Grants of Plan-Based Awards Table” and “Long-Term Incentive Awards” for further detail on our performance unit program.
(3) This column reflects annual cash bonus payments, determined by the Compensation Committee and paid in the following February respectively, pursuant to the Company’s Annual Cash Bonus Plan. These awards are discussed in further detail under “Annual Cash Bonus.” The amounts shown in this column also reflect the vested value of performance units earned by our NEOs during the performance period that ended on December 31, 2014. In 2013, we changed the design of our
MARATHON OIL | 2017
PRO
XY STATEMENT
36
performance units which resulted in reporting performance unit values in the Stock Awards column as of the date granted instead of Non-Equity Incentive column as of the date earned. This means an NEO could show performance unit values in both columns during the overlapping 3 year vesting period. For 2014, the only NEO whose performance unit value appears in both columns is Ms. Kerrigan.
(4) This column reflects the annual change in accumulated benefits under our retirement plans. See “Post-Employment Benefits” for more information about our defined benefit plans and the assumptions used in calculating these amounts. No deferred compensation earnings are reported in this column because our non-qualified deferred compensation plans do not provide above-market or preferential earnings.
(5) The following table describes each component of the All Other Compensation column for 2016 in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
Name
|
Personal
Use of
Company
Aircraft
(a)
($)
|
Company
Physicals
(b)
($)
|
Tax &
Financial
Planning
(c)
($)
|
Miscellaneous
Perks
(d)
($)
|
Company Contributions to Defined
Contribution
Plans
(e)
($)
|
Matching
Contributions
(f)
($)
|
Total All
Other
Compensation
($)
|
Lee M. Tillman
|
0
|
2,917
|
15,000
|
62,219
|
156,187
|
10,000
|
246,323
|
Patrick J. Wagner
|
0
|
2,917
|
3,950
|
0
|
44,798
|
13,300
|
64,965
|
T. Mitchell Little
|
0
|
2,917
|
2,250
|
0
|
66,823
|
7,592
|
79,582
|
Sylvia J. Kerrigan
|
0
|
2,917
|
18,606
|
0
|
71,042
|
25,000
|
117,565
|
Catherine L. Krajicek
|
0
|
2,917
|
15,000
|
0
|
23,241
|
0
|
41,158
|
John R. Sult
|
0
|
2,917
|
15,000
|
0
|
61,691
|
0
|
79,608
|
Lance W. Robertson
|
0
|
2,917
|
9,616
|
0
|
52,438
|
3,648
|
68,619
|
(a) While limited personal use of the company aircraft is permitted for NEOs, no NEO used the aircraft for this purpose in 2016.
(b) All regular employees in the United States, including our NEOs, are eligible to receive annual physical and wellness incentives. However, officers may receive an enhanced physical under the executive physical program. This column reflects the average incremental cost of the executive physical program over the employee physical program. Due to Health Insurance Portability and Accountability Act confidentiality requirements, we do not disclose actual use of this program by individual officers.
(c) This column reflects reimbursement for professional advice related to tax, estate, and financial planning. The maximum annual benefit is $15,000, and reimbursements are attributed to the calendar year in which services are performed. Due to processing delays, the actual amount reimbursed to an officer may exceed $15,000 in a given year.
(d) This column reflects access to a Company-provided car service for Mr. Tillman as business needs dictate. This benefit is offered to Mr. Tillman to allow the efficient use of his time and to provide safe transportation given the demands of his role, including travel, after hours/weekend obligations and extended work hours. We provide access to this benefit because we believe that the cost is outweighed by the convenience, increased safety and efficiency that it offers.
(e) This column reflects amounts contributed by us under the Thrift Plan and related non-qualified deferred compensation plans. See “Post-Employment Benefits” and “Nonqualified Deferred Compensation” for more information about the non-qualified plans.
(f) The amounts shown represent contributions made on behalf of the NEOs under our matching gifts programs for approved not-for-profit charities.
37
MARATHON OIL | 2017
PROXY STATEMENT
GRANTS OF PLAN‑BASED AWARDS IN 2016
The following table provides information about all plan-based long-term incentive awards (stock options, restricted stock, and performance units) granted to each named executive officer during 2016. The awards listed in the table were granted under either the 2012 or 2016 Incentive Compensation Plan (the “2012 Plan” or the “2016 Plan”) and are described in more detail in “Compensation Discussion and Analysis.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non‑Equity
Incentive Plan Awards
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
|
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying Options
(#)
|
Exercise
or Base
Price of
Option Awards
($)
|
Grant Date
Fair Value
of Stock
and Option Awards
(3)
($)
|
Name
|
Type of Award
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Lee M. Tillman
|
Annual Cash Bonus
|
|
0
|
1,312,500
|
2,625,000
|
|
|
|
|
|
|
0
|
|
Performance
Units
(1)
|
2/24/2016
|
|
|
|
219,576
|
439,151
|
878,302
|
|
|
|
3,170,670
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
612,000
|
7.22
|
1,205,640
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
197,618
|
|
|
1,426,802
|
Patrick J. Wagner
|
Annual Cash Bonus
|
|
0
|
311,250
|
622,500
|
|
|
|
|
|
|
0
|
|
Performance Units
(1)
|
2/24/2016
|
|
|
|
28,703
|
57,406
|
114,812
|
|
|
|
414,471
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
80,000
|
7.22
|
157,600
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
25,833
|
|
|
186,514
|
T. Mitchell Little
|
Annual Cash Bonus
|
|
0
|
510,000
|
1,020,000
|
|
|
|
|
|
|
0
|
|
Performance
Units
(1)
|
2/24/2016
|
|
|
|
63,146
|
126,292
|
252,584
|
|
|
|
911,828
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
176,000
|
7.22
|
346,720
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
56,832
|
|
|
410,327
|
|
Restricted
Stock
(2)
|
10/1/2016
|
|
|
|
|
|
|
38,536
|
|
|
609,254
|
Sylvia J. Kerrigan
|
Annual Cash Bonus
|
|
0
|
488,750
|
977,500
|
|
|
|
|
|
|
0
|
|
Performance Units
(1)
|
2/24/2016
|
|
|
|
57,406
|
114,811
|
229,622
|
|
|
|
828,935
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
160,000
|
7.22
|
315,200
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
51,665
|
|
|
373,021
|
Catherine L. Krajicek
|
Annual Cash Bonus
|
|
0
|
300,000
|
600,000
|
|
|
|
|
|
|
0
|
|
Performance
Units
(1)
|
2/24/2016
|
|
|
|
21,527
|
43,054
|
86,108
|
|
|
|
310,850
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
60,000
|
7.22
|
118,200
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
19,375
|
|
|
139,888
|
John R. Sult
|
Annual Cash Bonus
|
|
0
|
0
|
0
|
|
|
|
|
|
|
0
|
|
Performance Units
(1)
|
2/24/2016
|
|
|
|
66,017
|
132,033
|
264,066
|
|
|
|
953,278
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
184,000
|
7.22
|
362,480
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
59,415
|
|
|
428,976
|
Lance W. Robertson
|
Annual Cash Bonus
|
|
0
|
0
|
0
|
|
|
|
|
|
|
0
|
|
Performance
Units
(1)
|
2/24/2016
|
|
|
|
63,146
|
126,292
|
252,584
|
|
|
|
911,828
|
|
Stock Options
|
2/24/2016
|
|
|
|
|
|
|
|
176,000
|
7.22
|
346,720
|
|
Restricted Stock
|
2/24/2016
|
|
|
|
|
|
|
56,832
|
|
|
410,327
|
MARATHON OIL | 2017
PRO
XY STATEMENT
38
(1) Performance units, discussed under “Long-Term Incentive Awards,” are denominated as an equivalent of one share of our common stock and, if earned, are paid in cash.
(2) Reflects interim award, granted to Mr. Little in October 2016 to recognize the recently-increased scope of his position, that vests on the third anniversary of the grant date.
(3) The amounts shown in this column reflect the total grant date fair values of stock options, restricted stock, and performance units calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. The Black-Scholes value used for the stock options granted on February 24, 2016 was $1.97. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. Valuation assumptions used in the calculation of these amounts are included in footnote 21 to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2016. See “Long-Term Incentive Awards” for more information about restricted stock, stock options, and stock-based performance unit awards.
OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR-END
The following table provides information about the unexercised stock options (vested and unvested) and unvested restricted stock held by each NEO as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Number of Securities
Underlying
Unexercised
Options
|
|
|
Restricted Stock/Units
|
Equity Incentive Plan Awards
(Performance Units)
|
Name and
Grant Date
|
Exercisable
(#)
|
Unexercisable
(1)
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(2)
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
(3)
($)
|
Number of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested
(4)
(#)
|
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
(5)
($)
|
Lee M. Tillman
|
|
|
|
|
|
|
|
|
8/15/2013
|
229,886
|
0
|
34.65
|
|
8/15/2023
|
|
|
|
|
2/25/2014
|
220,126
|
110,063
|
34.03
|
|
2/25/2024
|
|
|
|
|
2/25/2015
|
85,530
|
171,061
|
29.06
|
|
2/25/2025
|
|
|
|
|
2/24/2016
|
0
|
612,000
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
535,542
|
893,124
|
|
|
|
|
|
|
|
|
|
|
|
321,041
|
5,557,220
|
|
|
2014
|
|
|
|
|
|
|
84,262
|
0
|
2015
|
|
|
|
|
|
|
135,487
|
1,172,640
|
2016
|
|
|
|
|
|
|
439,151
|
7,601,704
|
Patrick J. Wagner
|
|
|
|
|
|
|
|
|
5/9/2014
|
37,922
|
18,961
|
35.91
|
|
5/9/2024
|
|
|
|
|
2/25/2015
|
11,716
|
23,434
|
29.06
|
|
2/25/2025
|
|
|
|
|
2/24/2016
|
0
|
80,000
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
49,638
|
122,395
|
|
|
|
|
|
|
|
|
|
|
|
52,870
|
915,180
|
|
|
2015
|
|
|
|
|
|
|
18,560
|
160,637
|
2016
|
|
|
|
|
|
|
57,406
|
993,698
|
39
MARATHON OIL | 2017
PROXY STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Number of Securities
Underlying
Unexercised
Options
|
|
|
Restricted Stock/Units
|
Equity Incentive Plan Awards
(Performance Units)
|
T. Mitchell Little
|
|
|
|
|
|
|
|
|
5/30/2007
|
7,661
|
0
|
38.25
|
|
5/30/2017
|
|
|
|
|
5/28/2008
|
5,908
|
0
|
32.06
|
|
5/28/2018
|
|
|
|
|
5/25/2011
|
18,947
|
0
|
33.06
|
|
5/25/2021
|
|
|
|
|
8/31/2011
|
2,309
|
0
|
26.92
|
|
8/31/2021
|
|
|
|
|
2/28/2012
|
5,009
|
0
|
35.06
|
|
2/28/2022
|
|
|
|
|
2/26/2013
|
33,700
|
0
|
32.86
|
|
2/26/2023
|
|
|
|
|
2/25/2014
|
37,736
|
18,868
|
34.03
|
|
2/25/2024
|
|
|
|
|
2/25/2015
|
23,433
|
46,866
|
29.06
|
|
2/25/2025
|
|
|
|
|
2/24/2016
|
0
|
176,000
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
134,703
|
241,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,522
|
2,380,506
|
|
|
2014
|
|
|
|
|
|
|
|
14,445
|
0
|
2015
|
|
|
|
|
|
|
|
37,120
|
321,274
|
2016
|
|
|
|
|
|
|
|
126,292
|
2,186,115
|
Sylvia J. Kerrigan
|
|
|
|
|
|
|
|
|
5/30/2007
|
8,568
|
0
|
38.25
|
|
5/30/2017
|
|
|
|
|
5/28/2008
|
6,679
|
0
|
32.06
|
|
5/28/2018
|
|
|
|
|
5/27/2009
|
14,991
|
0
|
18.32
|
|
5/27/2019
|
|
|
|
|
2/24/2010
|
48,499
|
0
|
18.28
|
|
2/24/2020
|
|
|
|
|
2/23/2011
|
62,786
|
0
|
30.81
|
|
2/23/2021
|
|
|
|
|
2/28/2012
|
65,300
|
0
|
35.06
|
|
2/28/2022
|
|
|
|
|
2/26/2013
|
64,100
|
0
|
32.86
|
|
2/26/2023
|
|
|
|
|
2/25/2014
|
59,748
|
29,875
|
34.03
|
|
2/25/2024
|
|
|
|
|
2/25/2015
|
23,433
|
46,866
|
29.06
|
|
2/25/2025
|
|
|
|
|
2/24/2016
|
0
|
160,000
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
354,104
|
236,741
|
|
|
|
|
|
|
|
|
|
|
|
85,373
|
1,477,807
|
|
|
2014
|
|
|
|
|
|
|
22,871
|
0
|
2015
|
|
|
|
|
|
|
37,120
|
321,274
|
2016
|
|
|
|
|
|
|
114,811
|
1,987,378
|
Catherine Krajicek
|
|
|
|
|
|
|
|
|
5/28/2008
|
3,530
|
0
|
32.06
|
|
5/28/2018
|
|
|
|
|
5/27/2009
|
4,315
|
0
|
18.32
|
|
5/27/2019
|
|
|
|
|
5/26/2010
|
9,021
|
0
|
19.03
|
|
5/26/2020
|
|
|
|
|
5/25/2011
|
10,065
|
0
|
33.06
|
|
5/25/2021
|
|
|
|
|
8/31/2011
|
7,392
|
0
|
26.92
|
|
8/31/2021
|
|
|
|
|
2/28/2012
|
5,491
|
0
|
35.06
|
|
2/28/2022
|
|
|
|
|
8/31/2012
|
7,304
|
0
|
27.82
|
|
8/31/2022
|
|
|
|
|
4/8/2013
|
6,467
|
0
|
32.84
|
|
4/8/2023
|
|
|
|
|
10/7/2013
|
6,633
|
0
|
34.72
|
|
10/7/2023
|
|
|
|
|
4/7/2014
|
13,029
|
6,515
|
34.90
|
|
4/7/2024
|
|
|
|
|
2/25/2015
|
5,858
|
11,717
|
29.06
|
|
2/25/2025
|
|
|
|
|
2/24/2016
|
0
|
60,000
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
79,105
|
78,232
|
|
|
|
|
|
|
|
|
|
|
|
31,858
|
551,462
|
|
|
2015
|
|
|
|
|
|
|
9,280
|
80,318
|
2016
|
|
|
|
|
|
|
43,054
|
745,265
|
(1) All stock options listed in this column vest in one-third increments on each anniversary of the grant date.
MARATHON OIL | 2017
PRO
XY STATEMENT
40
(2) This column reflects the number of shares of unvested restricted stock held by our NEOs on December 31, 2016.
|
|
|
|
|
|
Name
|
Grant Date
|
|
# of Unvested Shares
|
Vesting Date
|
Lee M. Tillman
|
2/25/2014
|
|
42,131
|
2/25/2017
|
|
2/25/2015
|
|
81,292
|
2/25/2018
|
|
2/24/2016
|
|
197,618
|
2/24/2019
|
|
|
Total:
|
321,041
|
|
Patrick J. Wagner
|
5/9/2014
|
|
14,030
|
5/9/2017
|
|
5/9/2014
|
|
1,871
|
5/9/2017
|
|
2/25/2015
|
|
11,136
|
2/25/2018
|
|
2/24/2016
|
|
25,833
|
2/24/2019
|
|
|
Total:
|
52,870
|
|
T. Mitchell Little
|
2/25/2014
|
|
7,223
|
2/25/2017
|
|
7/30/2014
|
|
12,659
|
7/30/2017
|
|
2/25/2015
|
|
22,272
|
2/25/2018
|
|
2/24/2016
|
|
56,832
|
2/24/2019
|
|
10/1/2016
|
|
38,536
|
10/1/2019
|
|
|
Total:
|
137,522
|
|
Sylvia J. Kerrigan
|
2/25/2014
|
|
11,436
|
2/25/2017
|
|
2/25/2015
|
|
22,272
|
2/25/2018
|
|
2/24/2016
|
|
51,665
|
2/24/2019
|
|
|
Total:
|
85,373
|
|
Catherine L. Krajicek
|
4/6/2014
|
|
1,590
|
4/6/2017
|
|
10/28/2014
|
|
5,325
|
10/28/2017
|
|
2/25/2015
|
|
5,568
|
2/25/2018
|
|
2/24/2016
|
|
19,375
|
2/24/2019
|
|
|
Total:
|
31,858
|
|
(3) This column reflects the aggregate value of all shares of unvested restricted stock held by each NEO on December 31, 2016, using the December 31, 2016 closing stock price of $17.31. Upon normal retirement, unvested shares are forfeited.
(4) This column represents the number of outstanding share-based performance units. The awards granted in 2014 have a performance period of January 1, 2014 to December 31, 2016. The awards granted in 2015 have a performance period of January 1, 2015 to December 31, 2017. The awards granted in 2016 have a performance period of January 1, 2016 to December 31, 2018.
(5) The 2014 payouts are shown as actual amounts and reflect a 0% payout based on a completed performance period and a closing share price of $17.75 on January 25, 2017, the date the Committee approved the 2014 performance unit payout. The 2015 estimated payouts are currently tracking at a 0% payout based on performance as of December 31, 2016. Market Value shown reflects a payout at threshold (50%) and uses the December 31, 2016 closing stock price of $17.31. The 2016 estimated payouts are currently tracking at a 67% payout based on performance as of December 31, 2016. Market Value shown reflects a payout at target (100%) and uses the December 31, 2016 closing stock price of $17.31. These estimated payouts are not necessarily indicative of the actual payout at the end of the performance period.
41
MARATHON OIL | 2017
PROXY STATEMENT
OPTION EXERCISES AND STOCK VESTED IN 2016
The following table provides information about the value realized by the NEOs on option award exercises and restricted stock vesting during 2016.
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of Shares
Acquired on
Exercise
(#)
|
Value Realized on
Exercise
(1)
($)
|
Number of Shares
Acquired on
Vesting
(#)
|
Value Realized on
Vesting
(2)
($)
|
Lee M. Tillman
|
0
|
0
|
91,727
|
1,368,567
|
Patrick J. Wagner
|
0
|
0
|
1,871
|
21,741
|
T. Mitchell Little
|
0
|
0
|
19,243
|
227,404
|
Sylvia J. Kerrigan
|
0
|
0
|
11,300
|
89,270
|
Catherine L. Krajicek
|
0
|
0
|
4,076
|
47,362
|
John R. Sult
|
0
|
0
|
0
|
0
|
Lance W. Robertson
|
0
|
0
|
10,647
|
101,816
|
(1) This column reflects the actual pre-tax income realized by NEOs upon exercise of stock options, which, in each case, is the fair market value of the shares on the exercise date less the grant price.
(2) This column reflects the actual pre-tax income realized by NEOs upon vesting of restricted stock, which, in each case, is the fair market value of the shares on the vesting date.
POST-EMPLOYMENT BENEFITS
Marathon Oil offers NEOs the opportunity to save for retirement as follows:
|
|
•
|
Marathon Oil Company Thrift Plan (“Thrift Plan”): A tax-qualified 401(k) plan that currently provides for company matching contributions of up to 7% of eligible earnings.
|
|
|
•
|
Retirement Plan of Marathon Oil Company (“Retirement Plan”): A tax qualified defined benefit pension plan.
|
|
|
•
|
Excess Benefit Plan (“Excess Plan”): A nonqualified plan. The defined benefit portion allows participants to accrue benefits above the defined benefit tax limits, and the defined contribution portion allows participants to accrue benefits above the defined contribution tax limits.
|
|
|
•
|
Marathon Oil Company Deferred Compensation Plan (“Deferred Compensation Plan”): A nonqualified plan allowing participants to defer a portion of their compensation and accrue benefits above the Thrift Plan tax limits.
|
All plans have a three-year vesting requirement for company contributions. All NEOs have met the vesting requirement.
See “Nonqualified Deferred Compensation” below for additional information on the Deferred Compensation Plan and the defined contribution portion of the Excess Plan.
MARATHON OIL | 2017
PRO
XY STATEMENT
42
RETIREMENT PLAN
In general, all regular full-time and part-time employees in the United States are eligible to participate in the Retirement Plan as of their date of hire.
Benefit accruals are determined under a cash-balance formula, under which plan participants receive pay credits each year equal to a percentage of eligible compensation based on their plan points. Plan points equal the sum of a participant’s age and cash-balance service. Participants with fewer than 50 points receive a 7% pay credit percentage; participants with 50 to 69 points receive a 9% pay credit percentage; and participants with 70 or more points receive an 11% pay credit percentage. Participants are also credited with interest at a rate based on the 30-year Treasury rate with a 3.00% minimum, which in 2016 was 3.00%.
For 2016, Mr. Little and Ms. Kerrigan received a pay credit equal to 11% of compensation. Ms. Krajicek and Messrs. Tillman, Wagner and Sult received pay credits equal to 9% of compensation, and Mr. Robertson received a pay credit equal to 7% of compensation.
Participants who began employment prior to January 1, 2010 also have a portion of their benefit calculated under a legacy final average pay formula, which is referred to as the Legacy formula. Mr. Little, Ms. Kerrigan and Ms. Krajicek are the only NEOs with a Legacy benefit. Up to 37.5 years of participation may be recognized under the formula, and only service earned prior to January 1, 2010 is recognized. Eligible earnings under the Retirement Plan primarily include base salary and annual cash bonuses (including Thrift Plan deferrals but excluding amounts deferred under our nonqualified Deferred Compensation Plan). Long-term incentive compensation is not included. Final average pay was frozen as of July 6, 2015, but vesting service and age continue to be updated under the Legacy formula.
The monthly benefit under the Legacy formula is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
|
1.6%
|
x
|
Final Average Pay
|
x
|
Years of Participation
|
]
|
-
|
[
|
1.33%
|
x
|
Estimated Primary SS Benefit
|
x
|
Years of Participation
|
]
|
Normal retirement age under the Retirement Plan is age 65. However, retirement-eligible participants are able to retire and receive an unreduced benefit under the Legacy formula upon reaching age 62. Retirement Plan benefits include various annuity options and a lump sum distribution option. Participants are eligible for early retirement subsidies under the Legacy formula upon reaching age 50 and completing ten years of vesting service. Each of Mr. Little, Ms. Kerrigan and Ms. Krajicek are eligible for early retirement subsidies.
We have not granted years of service in addition to the service recognized under the terms of our qualified retirement plans (applicable to a broad-based group of employees) to any NEO for purposes of retirement benefit accruals.
EXCESS PLAN – DEFINED BENEFIT PORTION
The Excess Plan for certain highly compensated employees, including our NEOs, provides benefits that participants would have received under our tax-qualified Retirement Plan but for certain Internal Revenue Code limitations. Eligible compensation under the Excess Plan includes deferred compensation contributions made by NEOs. The Excess Plan also provides an enhancement for officers based on the three highest bonuses earned during their last ten years of employment, instead of the consecutive bonus formula in place for non-officers. Distributions under the Excess Plan are paid in a lump sum following separation from service.
43
MARATHON OIL | 2017
PROXY STATEMENT
PENSION BENEFITS TABLE
The following table shows the actuarial present value of accumulated benefits payable to each NEO under the Retirement Plan and the defined benefit portion of the Excess Plan as of December 31, 2016. These values have been determined using actuarial assumptions consistent with those used in our financial statements.
|
|
|
|
|
|
Name
|
Plan Name
|
Number of Years of Credited Service
(1)
(#)
|
Present Value of Accumulated Benefit
(2)
($)
|
Payments During Last Fiscal Year
($)
|
Lee M. Tillman
|
Retirement Plan
|
3.42
|
91,815
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
3.42
|
635,368
|
0
|
Patrick J. Wagner
|
Retirement Plan
|
2.83
|
66,672
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
2.83
|
72,505
|
0
|
T. Mitchell Little
|
Retirement Plan
|
29.58
|
1,155,014
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
29.58
|
3,033,462
|
0
|
Sylvia J. Kerrigan
|
Retirement Plan
|
19.67
|
669,148
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
19.67
|
3,017,027
|
0
|
Catherine L. Krajicek
|
Retirement Plan
|
9.33
|
267,206
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
9.33
|
318,385
|
0
|
John R. Sult
|
Retirement Plan
|
3
|
87,269
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
3
|
234,110
|
0
|
Lance W. Robertson
|
Retirement Plan
|
4.92
|
86,520
|
0
|
|
Marathon Oil Company Excess Benefit Plan
|
4.92
|
181,674
|
0
|
(1) Represents the number of years the NEO has participated in the plan. However, Plan Participation Service, used to calculate each participant’s benefit under the Legacy formula, was frozen as of December 31, 2009.
(2) Assuming a discount rate of 4.024%, a lump sum interest rate of 1.524%, the RP2000 combined healthy mortality table weighted 75% male and 25% female, a lump sum election rate of 100% for the non‑qualified plan and 90% for the qualified plan, and retirement at age 62 or the age at measurement date, if older.
NONQUALIFIED DEFERRED COMPENSATION
We offer certain employees, including our NEOs, the opportunity to accrue benefits equal to the Company matching contributions they would have received under the Thrift Plan but for certain Internal Revenue Code limitations. Officers generally accrue these benefits in the Deferred Compensation Plan, while other employees accrue such benefits in the defined contribution portion of the Excess Plan. Both plans have a three year vesting requirement for Company contributions. All NEOs have met the vesting requirement. Distributions from the Deferred Compensation Plan and the Excess Plan are paid as a lump sum following separation from service.
DEFERRED COMPENSATION PLAN
The Deferred Compensation Plan is an unfunded, nonqualified plan into which a participant may elect to defer up to 20% of his or her salary and bonus each year. One NEO, Mr. Wagner, elected to defer compensation for 2016. Participants are fully vested in their own deferrals under the plan. Additionally, participants can receive company contributions into the plan equal to the maximum potential matching contribution under the Thrift Plan after they have reached defined contribution accruals under the Thrift Plan in excess of tax limits.
The investment options available under the Deferred Compensation Plan generally mirror the core investment options available under the Thrift Plan, except for Marathon Oil common stock, which is not available under the Deferred Compensation Plan.
MARATHON OIL | 2017
PRO
XY STATEMENT
44
EXCESS PLAN – DEFINED CONTRIBUTION PORTION
Prior to becoming eligible for participation in the Deferred Compensation Plan, NEOs may have received defined contribution accruals under the Excess Plan. These contributions were available after a participant’s Thrift Plan contributions were limited due to tax requirements and equaled the matching contribution that participants would have received under the Thrift Plan but for limits imposed by tax law. Defined contribution accruals in the Excess Plan are credited with interest equal to that paid in the “Marathon Oil Stable Value Fund” option of the Marathon Oil Company Thrift Plan. The annual rate of return on this option for 2016 was 2.05%.
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table shows each NEO’s accumulated benefits under our nonqualified savings and deferred compensation plans for 2016.
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Executive
Contributions
in Last Fiscal
Year
($)
|
Registrant
Contributions
in Last Fiscal
Year
(1)
($)
|
Aggregate
Earnings
in Last
Fiscal Year
($)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance at
Last Fiscal
Year End
($)
|
Lee M. Tillman
|
Deferred Compensation
|
0
|
137,637
|
37,708
|
0
|
549,919
|
Patrick J. Wagner
|
Deferred Compensation
|
62,555
(2)
|
26,248
|
16,250
|
0
|
214,090
|
T. Mitchell Little
|
Deferred Compensation
|
0
|
48,273
|
12,198
|
0
|
195,286
|
|
Excess Benefit Plan
|
0
|
0
|
1,365
|
0
|
67,630
|
Sylvia J. Kerrigan
|
Deferred Compensation
|
0
|
52,492
|
11,921
|
0
|
613,378
|
|
Excess Benefit Plan
|
0
|
0
|
892
|
0
|
44,295
|
Catherine L. Krajicek
|
Deferred Compensation
|
0
|
19,526
|
853
|
0
|
54,759
|
|
Excess Benefit Plan
|
0
|
0
|
3,664
|
0
|
181,543
|
John R. Sult
|
Deferred Compensation
|
0
|
43,141
|
15,740
|
0
|
220,107
|
Lance W. Robertson
|
Deferred Compensation
|
27,311
(3)
|
33,888
|
32,955
|
0
|
333,899
|
|
Excess Benefit Plan
|
0
|
0
|
419
|
0
|
20,759
|
(1) The amounts shown in this column are also included in the All Other Compensation column of the Summary Compensation Table.
(2) Of the amount shown, $25,313 is due to Mr. Wagner’s election to defer a portion of his 2015 bonus, which was payable in 2016. The remaining amount reflects compensation from 2016 that he elected to defer.
(3) The amount shown is due to Mr. Robertson’s election to defer a portion of his 2015 bonus, which was payable in 2016.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
As a matter of policy, we do not enter into employment, severance, or change in control agreements with our NEOs. Rather, we provide an Executive Change in Control Severance Benefits Plan, which is described in more detail below.
RETIREMENT OR SEPARATION
Upon retirement or separation, our NEOs are entitled to receive their vested benefits that have accrued under our broad-based and executive benefit programs. For more information see “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
If an NEO retires, meaning the NEO separates employment after attaining age 50 with at least ten years of vesting service, unvested stock options granted prior to July 30, 2014 become immediately vested while unvested stock
45
MARATHON OIL | 2017
PROXY STATEMENT
options granted July 30, 2014 and later are forfeited. Unvested restricted stock awards are forfeited upon retirement (except in the case of mandatory retirement at age 65). Unvested performance units are forfeited upon retirement unless the NEO has worked more than half of the performance period, in which case awards may be vested on a prorated basis at the Committee’s discretion. Of the NEOs, only Mr. Little, Ms. Kerrigan and Ms. Krajicek are currently retirement eligible.
DEATH OR DISABILITY
In the event of death or disability, our NEOs (or the beneficiary or estate, as defined by the plan terms) would be entitled to vested benefits accrued under our broad-based and executive benefits programs. Long-term incentive awards would immediately vest in full upon the death of an NEO, with performance units vesting at the target level. In the event of disability, long-term incentive awards would continue to vest as if the NEO remained actively employed for up to 24 months during the period of disability.
CHANGE IN CONTROL
To encourage our NEOs to continue their dedication to their assigned duties where a change in control of the Company is under consideration, our Executive Change in Control Severance Benefits Plan (the “Change in Control Plan”) provides severance benefits if employment is terminated under certain circumstances following a change in control or during a potential change in control.
Under the Change in Control Plan, a change in control will have occurred if:
|
|
•
|
any person not affiliated with Marathon Oil acquires 20% or more of the voting power of our outstanding securities;
|
|
|
•
|
our Board no longer has a majority comprised of (1) individuals who were directors on the effective date of the plan and (2) new directors (other than directors who join our Board in connection with an election contest) approved by two-thirds of the directors then in office who (a) were directors on the effective date of the plan or (b) were themselves previously approved by our Board in this manner;
|
|
|
•
|
we merge with another company and, as a result, our stockholders hold less than 50% of the surviving entity’s voting power immediately after the transaction;
|
|
|
•
|
our stockholders approve a plan of complete liquidation of Marathon Oil; or
|
|
|
•
|
we sell all or substantially all of our assets.
|
In addition, our Change in Control Plan provides severance benefits to executives who are terminated following the occurrence of specified events (defined in the Plan as a potential change in control) that suggest that a change in control is likely to occur.
If an NEO is terminated without cause or resigns for good reason following a change in control or during a potential change in control, he or she will be entitled to the following:
|
|
•
|
a cash payment of up to three times the sum of the NEO’s current salary on the termination date plus the average bonus awarded to the NEO in the three years before the termination or change in control (or during the period of employment if less than three years);
|
|
|
•
|
life and health insurance benefits for up to 36 months after termination, at the lesser of the current cost or the active employee cost;
|
|
|
•
|
an additional three years of service credit and three years of age credit for purposes of retiree health and life insurance benefits;
|
|
|
•
|
a cash payment equal to the difference between the amount receivable under our defined contribution plan and the amount which would have been received if the NEO’s savings had been fully vested;
|
MARATHON OIL | 2017
PRO
XY STATEMENT
46
|
|
•
|
a cash payment equal to the actuarial equivalent of the difference between the amounts receivable by the NEO under the final average pay formula in our pension plans and the amounts which would be payable if (a) the NEO had an additional three years of participation service credit, (b) the NEO’s final average pay would be the higher of salary at the time of the change in control event or termination plus his or her highest annual bonus from the preceding three years, (c) for purposes of determining early retirement commencement factors, the NEO had three additional years of vesting service credit and three additional years of age, and (d) the NEO’s pension had been fully vested; and
|
|
|
•
|
a cash payment equal to the difference between the amount receivable under our defined benefit plan and the amount which would have been received if the NEO’s savings had been fully vested.
|
These benefits are not payable if the termination is for cause or due to mandatory retirement, death, disability or resignation (other than for good reason) by the NEO.
The program includes no provisions to reimburse or “gross up” tax obligations following a change in control.
Immediately upon a change in control or upon an NEO’s termination of employment during a potential change in control, unvested stock options and restricted stock vest in full. If a change in control occurs prior to the end of a performance period, unvested performance units vest in full as follows:
|
|
•
|
performance units granted prior to 2015 vest at the target level; and
|
|
|
•
|
performance units granted after 2014 will vest at the applicable performance percentage based on Marathon Oil’s actual relative TSR ending on the day immediately prior to the date of the change of control.
|
The Change in Control Plan will continue in effect during a potential change in control period and for two years after a change in control.
We have a policy that our Board will seek stockholder approval or ratification of any severance agreement for a senior executive officer (other than agreements under our Change in Control Plan) that generally requires payment of cash severance benefits exceeding 2.99 times a senior executive officer’s salary plus the most recent annual cash bonus paid.
The following tables assume a termination date or change in control date of December 31, 2016, the last business day of 2016. The value of the equity awards (accelerated vesting of restricted stock awards, stock options and performance unit awards) was calculated using the December 31, 2016 closing market price for our common stock ($17.31). The value of performance unit awards assumes that the 2015 and 2016 Performance Units would vest and be paid out at target.
Payments upon a Change in Control without Termination of Employment
|
|
|
Name
|
Accelerated Vesting of LTI
($)
|
Lee M. Tillman
|
21,679,284
|
Patrick J. Wagner
|
3,037,352
|
T. Mitchell Little
|
6,985,008
|
Sylvia J. Kerrigan
|
5,722,132
|
Catherine L. Krajicek
|
2,062,764
|
47
MARATHON OIL | 2017
PROXY STATEMENT
Payments upon a Change in Control or Potential Change of Control Followed by Termination of Employment with Good Reason or by the Company without Cause
|
|
|
|
|
|
|
|
|
|
Name
|
Accelerated
Vesting of LTI
($)
|
Severance
Payment
(1)
($)
|
Health and Welfare Benefits
(2)
($)
|
Retirement
Enhancement
(3)
($)
|
Total
Payments
($)
|
Lee M. Tillman
|
21,679,284
|
7,912,500
|
|
100,879
|
0
|
|
29,692,663
|
|
Patrick J. Wagner
|
3,037,352
|
1,863,759
|
|
76,737
|
0
|
|
4,977,848
|
|
T. Mitchell Little
|
6,985,008
|
1,876,749
|
|
105,339
|
1,737,309
|
|
10,704,405
|
|
Sylvia J. Kerrigan
|
5,722,132
|
3,199,500
|
|
115,007
|
2,405,708
|
|
11,442,347
|
|
Catherine L. Krajicek
|
2,062,764
|
1,876,749
|
|
287,467
|
525,477
|
|
4,752,457
|
|
(1) The severance payments for each of Messrs. Tillman and Little and Ms. Kerrigan exceed 2.99 times the sum of base salary plus bonus paid in 2015, and are thus subject to stockholder approval or reduction. The amounts shown are maximum amounts, assuming that stockholder approval is obtained.
(2) Reflects the approximate incremental value of continued coverage and enhanced subsidy for retiree medical coverage assuming (a) a continued election of the officer’s current level of coverage for the three years immediately following termination of employment, and then (b) an election of mid-level health plan coverage for the former officer and spouse, regardless of current plan participation and coverage level, and (c) the former officer and spouse cease to be covered when the former officer attains age 85.
(3) Retirement benefits included in these amounts were calculated using the following assumptions: individual life expectancies using the RP2000 Combined Healthy Table weighted 75% male and 25% female; a discount rate of 1.00% for NEOs who are retirement eligible (taking into account the additional three years of age and service credit); and a lump sum form of benefit.
MARATHON OIL | 2017
PRO
XY STATEMENT
48
TRANSACTIONS WITH RELATED PERSONS
We have written procedures for monitoring, reviewing, approving or ratifying related person transactions. We will enter into or ratify related person transactions only when the Board, acting through the Corporate Governance and Nominating Committee, determines that the related person transaction is in the best interests of the Company and its stockholders. The primary features of these procedures are:
|
|
•
|
Each director and executive officer must submit a list of his or her immediate family members, each listed individual’s employer and job title, each firm, corporation or other entity in which such individual is a director, executive officer, partner or principal or in a similar position or in which such person has a five percent or greater beneficial ownership interest, and any profit, non-profit charitable or trade organization for which such individual is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
|
|
|
•
|
The Company maintains a list, to the extent the information is publicly available, of five percent beneficial owners, including (a) if the owner is an individual, the same information requested of directors and executive officers as noted above, and (b) if the owner is a firm, corporation or other entity, a list of principals or executive officers of the firm, corporation or entity.
|
|
|
•
|
The Corporate Governance and Nominating Committee considers the facts and circumstances of each related person transaction and determines whether to approve it.
|
|
|
•
|
Any pending or ongoing related person transaction is submitted to the Corporate Governance and Nominating Committee or Committee Chair, which will consider all of the relevant facts and circumstances. Based on the conclusions reached, the Corporate Governance and Nominating Committee or the Committee Chair evaluates all options, including ratification, amendment or termination of the related person transaction.
|
|
|
•
|
The Corporate Governance and Nominating Committee annually reviews any previously approved or ratified related person transaction with a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Committee determines whether it is in the best interests of the Company and its stockholders to continue, modify or terminate the transaction.
|
During 2016, there were no transactions in excess of $120,000 between the Company and a related person in which the related person had a direct or indirect material interest.
49
MARATHON OIL | 2017
PROXY STATEMENT