DEF 14A 1 clb-def14a_20200520.htm DEF 14A clb-def14a_20200520.htm

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant

Filed by a Party other than the Registrant

 

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

 

Core Laboratories N.V.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 

 


 

CORE LABORATORIES N.V.

Strawinskylaan 913

Tower A, Level 9

1077 XX Amsterdam

The Netherlands

 

 

 

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

To Be Held May 20, 2020

 

 

 

 

 

Dear Shareholder:

You are cordially invited to attend our 2020 annual meeting of shareholders of Core Laboratories N.V. (the "Company"), which will be held at the Hotel Sofitel Legend the Grand Amsterdam, Oudezijds Voorburgwal 197, 1012 EX, Amsterdam, the Netherlands, on Wednesday, May 20, 2020 at 9:00 a.m. Central European Summer Time ("CEST") for the following purposes as proposed by the Board of Supervisory Directors:

1.

To elect two Class I Supervisory Directors to serve under the terms and conditions described within the proxy statement until our annual meeting in 2023 and until their successors shall have been duly elected and qualified;

2.

To appoint KPMG, including its U.S. and Dutch affiliates (collectively, "KPMG") as the Company's independent registered public accountants for the year ending December 31, 2020;

3.

To confirm and adopt our Dutch Statutory Annual Accounts in the English language for the fiscal year ended December 31, 2019, following a discussion of our Dutch Report of the Management Board for that same period;

4.

To approve and resolve the cancellation of our repurchased shares held at 12:01 a.m. CEST on May 20, 2020;

5.

To approve and resolve the extension of the existing authority to repurchase up to 10% of our issued share capital from time to time for an 18-month period, until November 20, 2021, and such repurchased shares may be used for any legal purpose;

6.

To approve and resolve the extension of the authority to issue shares and/or to grant rights (including options to purchase) with respect to our common and preference shares up to a maximum of 10% of outstanding shares per annum until November 20, 2021;

7.

To approve and resolve the extension of the authority to limit or exclude the preemptive rights of the holders of our common shares and/or preference shares up to a maximum of 10% of outstanding shares per annum until November 20, 2021;

8.

To:

 

(a)

approve, on an advisory basis, the compensation philosophy, policies and procedures described in the section entitled Compensation Discussion and Analysis ("CD&A"), and the compensation of Core Laboratories N.V.'s named executive officers as disclosed pursuant to the United States Securities and Exchange Commission's compensation disclosure rules, including the compensation tables;

 

(b)

cast a favorable advisory vote on the remuneration report referred to in Section 2:135b of the Dutch Civil Code for the fiscal year ended December 31, 2019;

 

(c)

adopt the remuneration policy for the Management Board and the Supervisory Board in line with new Dutch legal requirements;

9.

To approve and resolve the amendment and restatement of the Core Laboratories N.V. 2014 Long-Term Incentive Plan (the “LTIP”), the principal purposes of which are to increase the number of shares authorized for issuance thereunder, to extend the term of the LTIP through May 20, 2030, and for other purposes; and

10.

To transact such other business as may properly come before the annual meeting or any adjournment thereof.

The election of Supervisory Board members as described in item no. 1 and the topics covered by item nos. 2 through 8a have largely been presented to and approved by our shareholders at our prior annual meetings. Items 8b and 8c have been added in connection with recent changes to the Dutch Civil Code as a result of the implementation of the revised European shareholder


 

rights directive (Directive (EU) 2017/828) and now also provide for an advisory vote with respect to the remuneration report as referred to in Section 2:135b of the Dutch Civil Code and for the adoption of a remuneration policy for the Management Board and the Supervisory Board in accordance with Section 2:135a in conjunction with Section 2:145 of the Dutch Civil Code. Item no. 9 was last presented to our shareholders in 2014 and was approved that year. All items are being presented to our shareholders as a result of our being organized under the laws of the Netherlands.

Copies of the Dutch statutory annual accounts, the report of the Management Board and the list of nominees for the Supervisory Board will be available for inspection at our offices in the Netherlands, located at Strawinskylaan 913, Tower A, Level 9, 1077 XX Amsterdam, Attention: Mr. Jacobus Schouten, by registered shareholders and other persons entitled to attend our shareholder meetings. Such copies will be available for inspection from the date of this notice until the close of our annual meeting. The proxy materials, including the aforementioned copies, will be posted on www.proxydocs.com/clb and on the Company's website, www.corelab.com.

THE IMPACT OF COVID-19

 

We shall hold the 2020 Annual Meeting, in person. However, we are actively monitoring the coronavirus (COVID-19); and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that foreign, federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at www.proxydocs.com/clb for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.

IF YOU PLAN TO ATTEND IN PERSON:

Attendance at the meeting is limited to shareholders as of the close of business Eastern Daylight Time on April 22, 2020 (and others with a statutory meeting right), Company management and Company advisors. Registration will begin at 8:00 a.m. CEST and the meeting will begin at 9:00 a.m. CEST on May 20, 2020. Each shareholder desiring to attend MUST bring proof of share ownership as of the “day of registration” (“dag van registratie”) as referred to in the Dutch Civil Code (which is April 22, 2020, as described further in the proxy statement) with him/her to the meeting along with a valid form of identification. Examples of proof of share ownership include voting instruction statements from a broker or bank. In addition, you should register with the Company beforehand to indicate your plan to attend. Such registration may be made by contacting the Company's Secretary as described in the proxy statement. Failure to comply with these requirements may preclude you from being admitted to the meeting.

It is important that your shares be represented at the annual meeting regardless of whether you plan to attend. In order to be able to vote at the annual shareholder meeting, you will have to be a record holder of shares (or otherwise a person with voting rights with respect to shares) at the close of business Eastern Daylight Time on April 22, 2020. Please mark, sign, date and return the accompanying proxy card accordingly, vote online or vote by phone, all as described in further detail in the proxy statement. If you are present at the annual meeting and wish to do so, you may revoke your proxy and vote in person.

 

By Order of the Board of Supervisory Directors,

Jan Willem Sodderland

Supervisory Director

Amsterdam, the Netherlands

March 20, 2020



 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF

PROXY MATERIALS FOR THE 2020 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 20, 2020

The Notice of 2020 Annual Meeting of Shareholders and the Proxy Statement for the 2020 Annual Meeting of Shareholders, along with the Company’s Annual Report to Shareholders, is available free of charge at www.proxydocs.com/clb.

 


 

TABLE OF CONTENTS

 

 

Page

ABOUT THE 2020 ANNUAL MEETING OF SHAREHOLDERS

3

 

 

 

OWNERSHIP OF SECURITIES

7

 

 

 

 

Security Ownership by Certain Beneficial Owners and Management

7

 

Section 16(a) Beneficial Ownership Reporting Compliance

8

 

Equity Compensation Plan Information

8

 

Performance Graph

9

 

 

 

INFORMATION ABOUT OUR SUPERVISORY DIRECTORS AND DIRECTOR COMPENSATION

10

 

 

 

 

Board of Supervisory Directors

10

 

Non-Executive Supervisory Director Compensation

15

 

Board Membership

17

 

Board Structure

17

 

Supervisory Director Independence

17

 

Supervisory Board Meetings

18

 

Committees of the Supervisory Board

18

 

Qualifications of Supervisory Directors

19

 

Supervisory Director Nomination Process

20

 

Related Person Transactions

20

 

Compensation Committee Interlocks and Insider Participation

21

 

Communications with Directors; Website Access to Our Corporate Documents

21

 

Dutch Corporate Governance Code

22

 

Risk Assessment of Compensation Policies and Practices

22

 

 

 

CORPORATE GOVERNANCE AND RESPONSIBILITY

23

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

24

 

 

 

 

Introduction

24

 

Executive Summary

24

 

What Guides Our Executive Compensation Program

25

 

2019 Compensation Program Details

28

 

Executive Compensation Policies

32

 

Employment Agreements and Change in Control Agreements

34

 

 

 

INFORMATION ABOUT OUR NAMED EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION

35

 

 

 

 

Named Executive Officers

35

 

Summary Compensation

36

 

All Other Compensation from Summary Compensation Table

36

 

Grants of Plan-Based Awards

37

 

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

37

 

Outstanding Equity Awards at Fiscal Year End

38

 

Exercises and Stock Vested

39

 

Post-Employment Benefit Plans

39

 

Nonqualified Deferred Compensation Plan

40


 

 

Potential Payments Upon Termination or Change in Control

40

 

Employment Agreements

40

 

 

 

COMPENSATION COMMITTEE REPORT

47

 

 

 

AUDIT COMMITTEE REPORT

48

 

 

 

INFORMATION ABOUT OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

50

 

 

 

 

Audit Fee Summary

50

 

 

 

AGENDA ITEMS

51

 

 

 

 

Item 1.  Election of Class I Supervisory Directors

51

 

Item 2.   Appointment of KPMG as our Independent Registered Public Accounting Firm for 2020

51

 

Item 3.   Confirmation and Adoption of Annual Accounts

52

 

Item 4.   Cancellation of Our Repurchased Shares Held at 12:01 A.M. CEST On May 20, 2020

52

 

Item 5.   Extension and Renewal of Existing Authority to Repurchase Shares

53

 

Item 6.   Extension of Authority to Issue Shares of Core Laboratories N.V. until November 20, 2021

53

 

Item 7.   Extension of Authority of Supervisory Board to Limit or Eliminate Preemptive Rights until November 20, 2021

54

 

Items 8(a), (b) and (c).   To Approve, On an Advisory Basis, the Compensation of our Named Executive Officers as Described in the CD&A Section of this Proxy Statement, the Remuneration Report as referred to in Section 2:135b of the Dutch Civil Code and to adopt the Remuneration Policy for the Management Board and the Supervisory Board

55

 

Item 9.   Approval of the Amendment and Restatement of the Core Laboratories N.V. 2014 Long-Term Incentive Plan

 

56

 

Item 10. Other Matters to Be Voted on

62

 

 

 

OTHER PROXY MATTERS

63

 

 

 

 

Information About Our 2021 Annual Meeting: Shareholder Proposals and Shareholder Access

63

 

The Right of Shareholders to Request a Shareholder Meeting

63

 

Shareholders Sharing the Same Address

63

 

Incorporation by Reference

64

 

Other Information

64

 

 

 

PROXY CARD

72

 

 

 


 

CORE LABORATORIES N.V.

Strawinskylaan 913

Tower A, Level 9

1077 XX Amsterdam

The Netherlands

 

PROXY STATEMENT

 

ABOUT THE 2020 ANNUAL MEETING OF SHAREHOLDERS

WHY HAVE I RECEIVED THESE MATERIALS?

This proxy statement and the accompanying proxy card are first being made available to you on the Internet on March 20, 2020, and written notice has been sent to our shareholders in a manner consistent with applicable law. If you receive notice of the materials and desire to request a physical copy of the materials be sent to you, those materials will be mailed to you upon receipt of your request. These materials are being furnished in connection with the solicitation of proxies by and on behalf of the Board of Supervisory Directors of Core Laboratories N.V. ("Core" or the "Company") for use at our 2020 annual meeting of shareholders to be held at the Hotel Sofitel Legend the Grand Amsterdam, Oudezijds Voorburgwal 197, 1012 EX, Amsterdam, the Netherlands, on Wednesday, May 20, 2020 at 9:00 a.m. CEST for the purpose of voting on the proposals described in this proxy statement.

WHY DID I RECEIVE A ONE-PAGE NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PROXY MATERIALS?

As permitted by rules adopted by the United States Securities and Exchange Commission, we are making this proxy statement and our Annual Report on Form 10-K (the "Annual Report") available on the Internet. In order to be able to comply with applicable electronic notification deadlines, we will mail a notice to those who were shareholders as of the close of business Eastern Daylight Time on March 13, 2020, containing instructions on how to access the proxy statement and Annual Report and vote on-line or by phone. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. The proxy materials will be posted on www.proxydocs.com/clb and on the Company's website, www.corelab.com. See the Section below on "WHO IS ENTITLED TO VOTE" for the important dates related to voting the shares.

Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.

WHAT AM I VOTING ON?

You will be voting on the following matters proposed by the Board of Supervisory Directors, with the exception of item 10, which is a discussion item only:

1.

To elect two Class I Supervisory Directors to serve until our annual meeting in 2023 under the terms and conditions described within the proxy statement and until their successors shall have been duly elected and qualified;

2.

To appoint KPMG as our Company's independent registered public accountants for the year ending December 31, 2020;

3.

To confirm and adopt our Dutch Statutory Annual Accounts in the English language for the fiscal year ended December 31, 2019, following a discussion of our Dutch Report of the Management Board for that same period;

4.

To approve and resolve the cancellation of our repurchased shares held at 12:01 a.m. CEST on May 20, 2020;

3


 

5.

To approve and resolve the extension of the existing authority to repurchase up to 10% of our issued share capital from time to time for an 18-month period, until November 20, 2021, and such repurchased shares may be used for any legal purpose;

6.

To approve and resolve the extension of the authority to issue shares and/or to grant rights (including options to purchase) with respect to our common and preference shares up to a maximum of 10% of outstanding shares per annum until November 20, 2021;

7.

To approve and resolve the extension of the authority to limit or exclude the preemptive rights of the holders of our common shares and/or preference shares up to a maximum of 10% of outstanding shares per annum until November 20, 2021;

8.

To:

 

(a)

approve, on an advisory basis, the compensation philosophy, policies and procedures described in the section entitled Compensation Discussion and Analysis ("CD&A"), and the compensation of Core Laboratories N.V.'s named executive officers as disclosed pursuant to the United States Securities and Exchange Commission's compensation disclosure rules, including the compensation tables;

 

(b)

cast a favorable advisory vote on the remuneration report referred to in Section 2:135b of the Dutch Civil Code for the fiscal year ended December 31, 2019;

 

(c)

adopt the remuneration policy for the Management Board and the Supervisory Board in line with new Dutch legal requirements;

9.

To approve and resolve the amendment and restatement of the Core Laboratories N.V. 2014 Long-Term Incentive Plan (the “LTIP”), the principal purposes of which are to increase the number of shares authorized for issuance thereunder, to extend the term of the LTIP through May 20, 2030, and for other purposes; and

10.

To transact such other business as may properly come before the annual meeting or any adjournment thereof.

WHO IS ENTITLED TO VOTE?

We are sending notice of the 2020 annual meeting to those shareholders who hold common shares at the close of business Eastern Daylight Time on March 13, 2020 in order to be able to comply with applicable electronic notification deadlines. As of March 13, 2020, there were 44,444,177 common shares outstanding. Our common shares are the only class of our capital stock outstanding and entitled to notice of and to vote at the annual meeting. Each outstanding common share (issued shares excluding common shares held by the Company) is entitled to one vote.

The March 13, 2020 date only determines who receives the electronic notice and does not determine who has the right to vote at the annual meeting. In order to be able to vote at the annual shareholder meeting, you will have to be a record holder of shares (or otherwise a person with voting rights with respect to shares) at the close of business Eastern Daylight Time on April 22, 2020. This latter date is considered to be the “day of registration” (“dag van registratie”) as referred to in the Dutch Civil Code and only holders of shares (or other persons with voting rights with respect to shares) on such date are entitled to vote. Under Dutch law, this latter date must occur exactly twenty-eight (28) days before the date of the annual meeting.

HOW DO I VOTE BEFORE THE MEETING?

If you are a registered shareholder, meaning that you hold your shares through an account with our transfer agent, Computershare, as of April 22, 2020, you can vote by mail, by completing, signing and returning the accompanying proxy card or you may vote online at www.proxyvote.com or by phone: +1-800-690-6903.

If you hold your shares, as of April 22, 2020, through an account with a bank or broker, you may vote by mail, online or by phone by following the directions that your bank or broker provides.

Given the time of the meeting in the Netherlands, in order for your mailed or on-line vote or vote cast by phone to be counted, it must be received on or before 5:00 p.m. Eastern Daylight Time on Tuesday, May 19, 2020. The official electronic voting results will be those reported by our vote tabulator, Broadridge Financial Solutions, in its final report upon the close of business Eastern

4


 

Daylight Time on May 19, 2020. Any other proxies that are actually received in hand by our Secretary before the polls close at the conclusion of voting at the meeting will be voted as indicated.

MAY I VOTE AT THE MEETING?

If you are a registered shareholder as of April 22, 2020, you may vote your shares at the meeting if you attend in person. If you hold your shares as of April 22, 2020 through an account with a bank or broker, you must obtain a legal proxy from the bank or broker in order to vote at the meeting. Even if you plan to attend the meeting, we encourage you to vote your shares by proxy.

IF YOU PLAN TO ATTEND IN PERSON

Attendance at the meeting is limited to shareholders as of the close of business Eastern Daylight Time on April 22, 2020 (and others with a statutory meeting right), Company management and Company advisors. Registration will begin at 8:00 a.m. CEST and the meeting will begin at 9:00 a.m. CEST on May 20, 2020. Each shareholder desiring to attend MUST bring proof of share ownership as of the "day of registration" (“dag van registratie”) as referred to in the Dutch Civil Code (which is April 22, 2020) with him/her to the meeting along with a valid form of identification. Examples of proof of share ownership include voting instruction statements from a broker or bank. In addition, you should register with the Company beforehand to indicate your plan to attend. Such registration may be made by contacting the Company's Secretary as described further in the proxy statement. Failure to comply with these requirements may preclude you from being admitted to the meeting.

THE IMPACT OF COVID-19

 

We shall hold the 2020 Annual Meeting, in person. However, we are actively monitoring the coronavirus (COVID-19); and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that foreign, federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at www.proxydocs.com/clb for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.

CAN I CHANGE MY MIND AFTER I VOTE?

You may change your vote at any time before the polls close at the conclusion of voting at the meeting. You may revoke your proxy (1) by giving written notice to Mark F. Elvig, Secretary, in care of Core Laboratories LP, 6316 Windfern Road, Houston, Texas 77040, at any time before the proxy is voted, (2) by submitting a properly signed proxy card with a later date, or (3) by voting in person at the annual meeting.

If you hold your shares through an account with a bank or broker, you may revoke your proxy by following the instructions provided to you by your bank or broker, or by obtaining a legal proxy from your bank or broker and voting in person at the annual meeting.

WHAT IF I RETURN MY PROXY CARD BUT DO NOT PROVIDE VOTING INSTRUCTIONS?

Proxies that are signed and returned but do not contain instructions will be voted "FOR" all proposals and in accordance with the best judgment of the named proxies on any other matters properly brought before the meeting.

WHAT VOTE IS REQUIRED?

Under Dutch law and our Articles of Association, there is no specific quorum requirement for our annual meeting and the affirmative vote of a majority of votes cast is required to approve each of the proposals proposed by the Supervisory Board, except that (i) in relation to agenda item nos. 4, 7 and 9, a two-thirds majority of the votes cast is required to approve these proposals in the event less than 50% of the issued share capital is present or represented at the meeting; and (ii) in relation to agenda item 8(c), a majority of three-quarters of the votes cast is required. Our Articles of Association prohibit shareholders from

5


 

acting by written consent, unless such written consent is unanimous and Dutch law does not allow a written consent at a lesser percentage.

Dutch law and our Articles of Association provide that common shares abstaining from voting will count as shares present at the annual meeting but will not count for the purpose of determining the number of votes cast. Broker non-votes will not count as shares present at the annual meeting or for the purpose of determining the number of votes cast. A "broker non-vote" occurs if you do not provide the record holder of your shares (usually a bank, broker, or other nominee) with voting instructions on a matter and the holder is not permitted to vote on the matter without instructions from you under applicable rules of the New York Stock Exchange ("NYSE").

WHO WILL BEAR THE EXPENSE OF SOLICITING PROXIES?

We will bear the cost of preparing and mailing proxy materials as well as the cost of soliciting proxies and will reimburse banks, brokerage firms, custodians, nominees and fiduciaries for their expenses in sending proxy materials to the beneficial owners of our common shares. The solicitation of proxies by the Supervisory Board will be conducted by mail and through the Internet. In addition, certain members of the Supervisory Board, as well as our officers and regular employees may solicit proxies in person, by facsimile, by telephone or by other means of electronic communication. We have retained Okapi Partners LLC to assist in the solicitation of proxies for a fee of $8,500 plus out-of-pocket expenses, which fee and expenses will be paid by the Company. In addition to solicitation of proxies, Okapi Partners LLC may provide advisory services as requested pertaining to the solicitation of proxies.

 

6


 

OWNERSHIP OF SECURITIES

 

Security Ownership by Certain Beneficial Owners and Management

The table below sets forth certain information, as of March 13, 2020, with respect to the common shares beneficially owned by:

 

each person known by us to be the beneficial owner of more than 5% of our outstanding common shares;

 

each currently serving Supervisory Director;

 

each nominee for election as Supervisory Director;

 

each of our named executive officers; and

 

all Supervisory Directors and executive officers as a group (all seven of the current Supervisory Directors and one of the new nominees own shares of Company stock).

 

Name of Beneficial Owner (1)

 

Number of

Common Shares

Beneficially

Owned

 

 

Percentage of

Common Shares

Outstanding (2)

 

Massachusetts Financial Services Company (3)

 

 

4,755,806

 

 

10.70%

 

The Vanguard Group (4)

 

 

4,269,120

 

 

9.61%

 

BlackRock Inc. (5)

 

 

3,180,989

 

 

7.16%

 

EARNEST Partners, LLC (6)

 

 

2,934,116

 

 

6.60%

 

Van Eck Associates Corporation (7)

 

 

2,520,809

 

 

5.67%

 

David M. Demshur

 

 

434,374

 

 

*

 

Christopher S. Hill

 

 

15,138

 

 

*

 

Gregory Barnett

 

 

13,000

 

 

*

 

Lawrence Bruno

 

 

10,799

 

 

*

 

Jan Willem Sodderland

 

 

6,153

 

 

*

 

Margaret Ann van Kempen

 

 

4,398

 

 

*

 

Martha Z. Carnes

 

 

4,200

 

 

*

 

Michael Straughen

 

 

2,256

 

 

*

 

Harvey Klingensmith

 

 

1,000

 

 

*

 

Monique van Dijken Eeuwijk

 

 

 

 

*

 

All Supervisory Directors and executive officers as a group

 

 

491,318

 

 

1.11%

 

* Represents less than 1%.

 

 

 

 

 

 

 

 

 

 

(1)

Unless otherwise indicated, each person has sole voting power and investment power with respect to the common shares listed.

 

(2)

Based on 44,444,177 common shares outstanding as of March 13, 2020.

 

(3)

Based upon an Amendment No. 2 to Schedule 13G filed with the SEC on February 14, 2020, Massachusetts Financial Services Company ("MFS") is deemed to be the beneficial owner of 4,755,806 shares. MFS has sole voting power of 4,623,385 shares and sole dispositive power with respect to all of the shares it is deemed to beneficially own. MFS's current address is 111 Huntington Avenue, Boston, MA 02199.

 

(4)

Based upon an Amendment No. 7 to Schedule 13G filed with the SEC on February 12, 2020, The Vanguard Group is deemed to be the beneficial owner of 4,269,120 shares. The Vanguard Group has sole voting power of 14,814 shares and shared voting power of 12,554 shares and has sole dispositive power with respect to 4,247,925 shares and shared dispositive power with respect to 21,195 shares. The Vanguard Group’s current address is 100 Vanguard Blvd., Malvern, PA 19355.

 

(5)

Based upon an Amendment No. 2 to Schedule 13G filed with the SEC on February 4, 2020, BlackRock, Inc. is deemed to be the beneficial owner of 3,180,989 shares. BlackRock has sole voting power of 3,149,366 shares and sole dispositive power with respect to all of the shares it is deemed to beneficially own. BlackRock's current address is 55 East 52nd Street, New York, NY 10055.

 

(6)

Based upon an Amendment No. 7 to Schedule 13G filed with the SEC on February 7, 2020, EARNEST Partners, LLC is deemed to be the beneficial owner of 2,934,116 shares. EARNEST Partners has sole voting power of 1,860,779 shares and sole dispositive power with respect to all of the shares it is deemed to beneficially own. EARNEST Partner’s current address is 1180 Peachtree Street NE, Suite 2300, Atlanta, GA 30309.

7


 

 

(7)

Based upon Schedule 13G filed with the SEC on February 13, 2020, Van Eck Associates Corporation is deemed to be the beneficial owner of 2,520,809 shares. Van Eck Associates Corporation has sole voting power and sole dispositive power with respect to all of the shares it is deemed to beneficially own. Van Eck Associated Corporation’s current address is 666 Third Ave – 9th Floor, New York, NY 10017.

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Supervisory Directors, named executive officers and persons who own more than 10% of our common shares, among others, to file initial reports of ownership and reports of changes in ownership (Forms 3, 4 and 5) of our common shares with the SEC and the NYSE. Such filers are required by SEC regulations to furnish us with copies of all such forms that they file.

Based solely on its review of reports and written representations that the Company has received, the Company believes that all required Section 16 reports were timely filed during 2019, with the exception of one Form 4 for Supervisory Director Gregory B. Barnett, which was due to be filed in August 2019, but was filed in a Form 5 in January 2020.

 

 

Equity Compensation Plan Information

We have two main incentive plans, our 2014 Long-Term Incentive Plan ("LTIP"), and our 2014 Nonemployee Director Stock Incentive Plan ("Director Plan"), both of which have been approved by our shareholders. The following table shows the balance of shares in each plan that remain available for future issuance and the number of shares that have been awarded, but not yet vested, under each of the equity compensation plans as of December, 31, 2019.

 

 

Number of Common

Shares to be Issued

Upon Exercise of

Outstanding Options,

Warrants and Rights

 

 

Weighted Average

Exercise Price of

Outstanding Options,

Warrants and Rights

 

 

Number of Common

Shares Remaining

Available for Future

Issuance Under Equity

Compensation Plans

 

Equity compensation plans approved by our shareholders

 

 

 

 

 

 

 

 

 

 

 

 

LTIP

 

 

659,298

 

 

 

 

 

 

472,024

 

Director Plan

 

 

10,885

 

 

 

 

 

 

644,509

 

Equity compensation plans not approved by our shareholders

 

 

 

 

 

 

 

 

 

Total

 

 

670,183

 

 

 

 

 

 

1,116,533

 

 

8


 

Performance Graph

The following performance graph compares the performance of our common shares to the Standard & Poor's 500 Index and the Philadelphia Oil Service Index ("OSX") for the period beginning December 31, 2014 and ending December 31, 2019. Core Lab is now an established member of the OSX, which includes a greater concentration of our most direct peers.

The graph assumes that the value of the investment in our common shares and each index was $100 at December 31, 2014 and that all dividends were reinvested. The stockholder return set forth below is not necessarily indicative of future performance. The following graph and related information is "furnished" and shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended (the "Exchange Act") except to the extent that Core Laboratories specifically incorporates it by reference into such filing.

 

 

 

9


 

INFORMATION ABOUT OUR SUPERVISORY DIRECTORS AND DIRECTOR COMPENSATION

Board of Supervisory Directors

Set forth below as of March 13, 2020 is the biographical information for our Supervisory Directors who will serve following the annual meeting and their respective committee assignments following the meeting, including individuals who have been nominated for election as Class I Supervisory Directors. You may vote for each of the nominees, for one of the nominees or for none of the nominees.

Nominees for Class I Supervisory Directors (Term To Expire 2023)

 

 

Monique van Dijken Eeuwijk

 

Proposed member of the Nominating, Governance and Corporate Responsibility Committee

Age:  50

 

Monique G.M. van Dijken Eeuwijk (Dutch nationality, age 50), has over 20 years of experience as a lawyer and board room counsel specialized in (supervisory) laws- and regulations applicable to financial institutions, audit firms, their respective worldwide networks and the national professional services firms of which they form part. Furthermore, she is an expert in the field of data privacy and protection.

Mrs. van Dijken Eeuwijk started her career with Delta Lloyd, a large insurance company and was appointed Company Secretary and subsequently General Counsel of its banking division in 1996. In 2001 she joined NautaDutilh, one of the top 5 law firms in the Netherlands. Within NautaDutilh she was responsible for leading the Benelux Sector Team Professional Services Firms. In 2019 she founded the law firm MGM Regulatory & Governance.

Mrs. van Dijken Eeuwijk’s practice, in particular focuses on advising (i) Supervisory Boards on their various roles and how to execute and demonstrate effective internal supervision and governance, (ii) the Managing Board on (the execution of) strategy; long term value creation, ESG, external supervision and how to deal with external Supervisory Authorities. Next to that she advises and assists the Offices of the General Counsel, the Compliance -, Risk Management – and Legal Departments on supervisory and compliance issues; in creating and enabling the provision of (financial) services and

the processing of (personal) data on a cross border (global) basis.  

Mrs. van Dijken Eeuwijk is appointed as member of the Listed Public Entities Committee of the Royal Dutch Institute of Chartered Accountants.  Furthermore, she holds the position of co-chair of the Dutch Chapter of the global Women Corporate Directors Foundation. She is a member of the Women Interest Group of the International Bar Association, as well as a member of the Dutch Association of Board and Supervisory Board Members. She was also admitted to the ‘Top Women Database’ created by the Dutch Minster of Education, Culture and Science and The Confederation of Netherlands Industry and Employers. She frequently chairs and attends meeting of these various associations and speaks to these groups on a range of topics pertaining to corporate governance, supervision, regulatory law, diversity, ESG, privacy and data protection.

Mrs. van Dijken Eeuwijk also regularly lectures at, amongst other, the Erasmus University, Nyenrode Business University, the Vrije University, the University of Utrecht and Hemingway Professional Governance on aforementioned topics.

Mrs. van Dijken Eeuwijk is a graduate of the University of Amsterdam where she earned a degree in European Studies as well as a degree in Dutch law. She is a member of the Dutch Bar.  She has previously also served, next to her law practice, as the assistant secretary of the Board of Disciplines of Accountants, as a member of the Governance Risk and Compliance Committee of the NBA and was a co-author of the Journal for Accounting Law.

As a result of these professional experiences, Mrs. Van Dijken Eeuwijk possesses particular knowledge and experience advising on corporate governance and ESG matters, including risk management and analysis, that strengthen the Board’s collective qualifications, skills and experience.

Mrs. van Dijken Eeuwijk does not hold any shares in the Company.

 

10


 

Harvey Klingensmith

 

Proposed member of the Nominating, Governance and Corporate Responsibility Committee and the Audit Committee

Age:  67

 

Mr. Klingensmith, a native of Denver, Colorado, retired from executive office at the end of January 2019 after numerous executive leadership positions in the oil and gas industry.  Mr. Klingensmith co-founded and served as Chief Executive Officer and Board member of Ajax Resources LLC (“Ajax”), an exploration and production company focused on oil and gas development in the Permian Basin.  He served as CEO from its founding in July 2015 until October, 2017, and served on the Board until its sale in 2018. As Co-Founder and Chief Executive Officer of Ajax, Mr. Klingensmith was instrumental in successfully putting together the $425 MM financing package necessary to start Ajax; recruited key personnel needed to build and run the business; and executed key business initiatives that resulted in production growth from 2,000 to 18,500 barrels of oil equivalent per day and Ajax’s sale to Diamondback Energy for $1.24 billion.

Mr. Klingensmith was also President of Wyatt Energy LLC (“Wyatt”), a privately held, independent oil and gas exploration and production company based in Houston, Texas, focused on the identification of and investment in unique opportunities in the oil and gas space, from April 2014 through January 2018.  He led this effort simultaneously with his roles at Ajax.

Mr. Klingensmith also co-founded and served as Chief Executive Officer of Spoke Resources Ltd. (“Spoke”), including its predecessor entity Stone Mountain Resources Ltd (“Stone”), from April 2006 through August 2018.  Spoke was a large natural gas production company headquartered in Calgary, Alberta, and had its primary producing asset in NE British Columbia before its sale to Surmont Oil and Gas in 2018. During his tenure at Spoke and Stone, Mr. Klingensmith led efforts to raise capital, headed operations and production growth as well as gained experience with financially distressed companies during Stone’s entry into

receivership and exit as Spoke before its sale to Surmont Oil and Gas in 2018.

Prior to entering the private space Mr. Klingensmith had served as President of El Paso Canada (2002-2004), Senior Vice President Worldwide Exploration for Coastal Oil and Gas (1994-2001), and Vice President of Worldwide Exploration of Maxus Energy (1986-1993). Mr. Klingensmith received dual Bachelor of Science degrees in Geological Engineering and Geophysical Engineering from the Colorado School of Mines in 1975. He is an active member of the Society of Petroleum Engineers, the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. Mr. Klingensmith’s over 40 years of diverse experience in the upstream oil and gas business along with his proven leadership and executive oversight experience make him a valuable addition to our board.

Mr. Klingensmith owns 1,000 shares of the Company’s stock.


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Continuing Class II Supervisory Directors (Term to Expire 2022)

Martha Z. Carnes

 

Supervisory Director since 2016

Proposed Lead Director

Chairman of Audit Committee

Age:  59

Ms. Carnes retired from PricewaterhouseCoopers LLP (“PwC”) in June 2016, where she had a thirty-four year career with the firm. She was an Assurance Partner serving large, publicly traded companies in the energy industry. Ms. Carnes held a number of leadership positions with PwC including the Houston office Managing Partner. She also served as PwC’s Energy and Mining leader for the United States where she led the firm’s energy and mining assurance, tax and advisory practices. In these roles, she was responsible for leading the design and execution of the market and sector strategies, business development, compensation, professional development, succession planning, and client satisfaction. As an Assurance Partner, Ms. Carnes had vast experience with capital markets activities and was the lead audit partner on some of the largest merger and acquisition transactions completed in the energy sector. Ms. Carnes also served as one of PwC’s Risk Management Partners and was PwC’s United States representative on the firm’s Global Communities Board. She is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. Since September 1, 2017, she has served as a director of SunCoke Energy Partners GP LLC, the general partner of SunCoke Energy Partners LP. Since July 2017, Ms. Carnes has also served as a director of Matrix Service Company, a services company that provides engineering, fabrication, infrastructure, construction, and maintenance services primarily to the oil, gas, power, petrochemical, industrial, agricultural, mining and minerals markets, where she chairs the Audit Committee and is a member of the Compensation and Nominations and Governance Committees. Her financial expertise and experience in working with and auditing public companies in the energy industry, and her operational experience at PwC, a professional services firm, allow her to provide important insight to the Company. Following Mr. Sodderland’s retirement from the Supervisory

Board as of the conclusion of the 2020 annual shareholder meeting, Ms. Carnes will become the Lead Director.

Michael Straughen

 

 

Supervisory Director since 2016

Chairman of Compensation Committee and member of the Audit Committee

Age:  70

Following an extensive career in oilfield services, Mr. Straughen retired from executive office at the end of 2014 and now has various non-executive positions. He currently serves on the boards of Glacier, an Aberdeen based offshore services company; the Glasgow based Denholm Oilfield Services Group. He was previously on the board of ASCO, an Aberdeen based logistics support group until June 2019. He was also on the board of GMS PLC, an Abu Dhabi based, but London listed, marine services company for three years until the end of 2016. Mr. Straughen’s last executive position was as an executive director of John Wood Group PLC, the UK’s leading oilfield services business, from 2007 to the end of 2014, where he served as Chief Executive of the Engineering Division, which had revenues of $1.8 billion and 10,000 employees. His responsibilities included P&L performance, HSSE, resourcing, customer relationships, strategy and growth. As an Executive Director of a publicly traded company, he also had responsibilities for corporate governance. From 1982 to 2007, he served in various roles, including as group managing director, with AMEC PLC, an international project management and engineering services provider. Mr. Straughen is a Chartered Engineer, has served on various industry bodies and is a mentor to small businesses. His extensive management experience in the oil and gas sector, as well as his diverse background, enable him to provide valuable insight on management, governance and strategic issues.

12


 

Gregory B. Barnett

 

 

Supervisory Director since 2019

Member of the Compensation Committee and Current Member of the Nominating, Governance and Corporate Responsibility Committee

Age: 58

Gregory B. Barnett is the founder of Envestment Capital, LLC, a privately held company that invests in entrepreneurs, energy and energy technologies, infrastructure and engineered manufacturing. He was founder of EnerCom, Inc., serving as its President from 1994 until 2017 when he sold the firm. EnerCom, Inc. is a management consulting firm serving a global oil and gas client base. In 2016, Forbes Magazine recognized EnerCom in its inaugural list of America’s Best Management Consulting firms. Based in Denver, the company provided client advice and solutions in the areas of strategic marketing, corporate structure and capital markets, corporate valuation, and corporate communication. For the period of 2005 to 2015, he was a founding partner and served as Chief Executive Officer of Strata Capital, Inc. a U.S. broker dealer that advised and raised capital for private oil and gas companies. Since 2013, he has served as an advisor to the executive management team and board of directors of Fortis Energy Services, a private oilfield services company with operating rigs and equipment in the Appalachian and Bakken basins. In 2018, Mr. Barnett was added to the board of directors of Ubiterra, a private oilfield company delivering cloud-based technologies for geosteering, real-time drilling data and seismic storage. From 1988 to 1993, Mr. Barnett served in various management positions, including international accounting and investor relations at Maxus Energy Company, a NYSE-listed company listed on the Forbes 500 list. Between 1981 and 1987, he worked in banking, oil and gas and public accounting. Mr. Barnett earned a Bachelor of Business Administration degree from The University of Texas, Arlington and a Master of Business Administration from Daniels College of Business at the University of Denver. Mr. Barnett’s extensive management and work experience in the global oil and gas sector and his diverse educational background allow him to provide valuable insight on management and strategic issues.


13


 

Continuing Class III Supervisory Directors (Term to Expire 2021)

Lawrence Bruno

 

 

President and Chief Operating Officer

Supervisory Director since 2018

Age: 60

 

On January 1, 2019, Mr. Bruno assumed the position of Chief Operating Officer after becoming the President of the Company on February 1, 2018. As President and Chief Operating Officer, Mr. Bruno has led the Company’s global operations for both of its business segments, Reservoir Description and Production Enhancement. Over the last several years, Mr. Bruno has served as a technical spokesperson for many investor presentations and panels in the oil and gas industry, and has been instrumental in driving the Company’s technology innovation that will continue to be a critical strength in the years to come. Mr. Bruno previously led the Company’s global reservoir-based laboratories within the Company’s Reservoir Description segment, from July 2015 through January 31, 2018. Effective May 20, 2020, at the conclusion of the annual meeting, Mr. Bruno will succeed Mr. David Demshur as the Chairman of the Supervisory Board and Chief Executive Officer. Mr. Bruno has been in the industry for more than 35 years and with the Company for more than 21 years. Prior to being named as President of the Petroleum Services division in July 2015, Mr. Bruno was the General Manager of U.S. Rocks from 1999 to July 2015. Prior to joining the Company, he was employed at an oil and gas service company for 14 years before it was acquired by the Company in 1999. Mr. Bruno received a Master’s of Science degree in Geology in 1987 from the University of Houston.

 

 

Margaret Ann van Kempen

 

 

Supervisory Director since 2012

Member of the Compensation Committee and Chairman of the Nominating, Governance and Corporate Responsibility Committee

Age: 67

Ms. van Kempen has been the owner and managing partner of Van Kempen Public Relations & Public Affairs and Van Kempen Associates since 1997. She has extensive experience in strategic corporate communications and investor relations, with a focus on reputation and issue management. She has provided litigation PR and communications advice on a wide variety of issues in high profile cases in and outside the Netherlands. Her clients cover a range of sectors including banking, M&A, energy, telecommunications, information technology, professional services and fashion. From 1988 to 1995, she was Director European Affairs of Financial Times Television. Before that, she worked in government and semi-government organizations including the Foreign Trade Agency of the Ministry of Economic Affairs. Ms. van Kempen's background in corporate communications and knowledge of strategic investor relations, including her knowledge of such matters in Europe, allow her to provide unique insight to the Company particularly in light of our dual listing on the Euronext Amsterdam Stock Exchange.

 

 

 

 

14


 

Non-Executive Supervisory Director Compensation

The following table sets forth a summary of the compensation we paid to our non-executive Supervisory Directors in 2019. Supervisory Directors who are our full-time employees receive no compensation for serving as Supervisory Directors:

 

Supervisory Director Compensation

for Year Ended December 31, 2019

Name (1)

 

Fee Earned

or Paid in

Cash ($)

 

 

Stock Awards (2)(3)

($)

 

 

Total

($)

 

 

Gregory B. Barnett (4)

 

 

39,500

 

 

 

109,503

 

 

 

149,003

 

Martha Z. Carnes

 

 

98,000

 

 

 

145,337

 

 

 

243,337

 

Charles L. Dunlap (5)

 

 

37,750

 

 

 

 

 

 

37,750

 

Lucia van Geuns (5)

 

 

31,500

 

 

 

 

 

 

31,500

 

Margaret Ann van Kempen

 

 

79,250

 

 

 

145,337

 

 

 

224,587

 

Jan Willem Sodderland (6)

 

 

98,000

 

 

 

145,337

 

 

 

243,337

 

Michael Straughen

 

 

99,000

 

 

 

145,337

 

 

 

244,337

 

 

 

(1)

Messrs. Demshur and Bruno are not included in this table because they received no additional compensation for their service as Directors. The compensation earned by Messrs. Demshur and Bruno in 2019 is shown under "Information About our Named Executive Officers and Executive Compensation--Summary Compensation"

 

(2)

The amounts included in the "Stock Awards" column include the aggregate grant date fair value of the equity-based awards granted under the Restricted Share Award Program during 2019. This value was computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, Compensation--Stock Compensation, by discounting the share price on the date of grant by dividends expected to be paid during the term of the award.  Assumptions used in the calculation of these amounts are included in Note 13 to our audited financial statements for the fiscal year ended December 31, 2019 and are included in our annual report on Form 10-K.

 

(3)

Each of our currently serving non-executive Supervisory Directors had 2,177 restricted stock awards, granted in 2019, and outstanding as of December 31, 2019.

 

(4)

Mr. Barnett was elected at the 2019 annual shareholder meeting.

 

(5)

Mr. Dunlap and Mme. van Geuns were not nominated for re-election to the Board of Supervisory Directors at the 2019 annual shareholder meeting, and did not receive a stock award in 2019.

 

(6)

Mr. Sodderland is not being nominated for re-election to the Board of Supervisory Directors at the 2020 annual shareholders' meeting and, therefore, will no longer serve on the Board of Supervisory Directors, effective as of the conclusion of the 2020 annual shareholder meeting.

 

 

Retainer/Fees

Each non-executive Supervisory Director was paid the following amounts during fiscal 2019:

 

a base annual retainer, payable semiannually in arrears, in the amount of $55,000;

 

an additional annual retainer for the following positions:

 

o

for our Lead Director, an additional $25,000;

 

o

for our Audit Committee chairman, an additional $25,000;

 

o

for our Compensation Committee chairman, an additional $20,000;

 

o

for our Nominating, Governance and Corporate Responsibility Committee ("NGCR Committee") chairman, an additional $12,500;

 

$2,000 per meeting of the Supervisory Board at which the individual was present in person;

 

$2,000 per meeting for each committee meeting at which the individual was present in person; and

 

reimbursement for all out-of-pocket expenses incurred in attending any Supervisory Board or committee meeting.

15


 

Equity-Based Compensation

Effective April 1, 2016, we made a grant of restricted shares to the non-executive Supervisory Directors serving in 2016 in the amount of $150,000, divided by the closing price of the Company's stock on March 31, 2016, rounded upwards to the nearest whole share for a total of 1,335 shares each. The restricted shares vested, without performance criteria, at the end of a three-year vesting period that began on April 1, 2016 and ended on April 1, 2019.

Effective April 1, 2018, we made a grant of restricted shares to the non-executive Supervisory Directors serving in 2018 in the amount of $150,000, divided by the closing price of the Company's stock on March 31, 2018, rounded upwards to the nearest whole share for a total of 1,387 shares each. The restricted shares vested, without performance criteria, at the end of a one-year vesting period that began on April 1, 2018 and ended on March 31, 2019.

Effective April 1, 2019, we made a grant of restricted shares to the non-executive Supervisory Directors serving in 2019 in the amount of $150,000, divided by the closing price of the Company's stock on March 31, 2019, rounded upwards to the nearest whole share for a total of 2,177 shares each. The restricted shares will vest, without performance criteria, at the end of a one-year vesting period that began on April 1, 2019 and will end on March 31, 2020.

Outstanding awards granted to the current non-executive Supervisory Directors require the recipient's continued service as a director (other than termination of service due to death or disability) to the time of vesting for the recipient to receive the shares that would otherwise vest. In the event of an award recipient's death or disability prior to the last day of these vesting periods, his or her restricted shares would vest in accordance with the aforementioned vesting schedules. If an award recipient's service with us terminates (other than due to death or disability) prior to the last day of these vesting periods, his or her restricted shares would be immediately forfeited to the extent not then vested. In the event of a change in control (as defined in the 2014 Nonemployee Director Stock Incentive Plan (the "2014 Director Plan") prior to the last day of the aforementioned vesting periods and while the award recipient is in our service (or in the event of a termination of the award recipient's service upon such change in control), all of the award recipient's restricted shares will vest as of the effective date of such change in control.

Minimum Stock Ownership by Non-Executive Supervisory Directors

The Compensation Committee has established a requirement that non-executive Supervisory Directors must maintain equity ownership of Company stock, determined using the average price of the stock over the immediately preceding five years, in the minimum amount of five times the annual base retainer for the previous year. Non-executive Supervisory Directors will be allowed five years to achieve that minimum equity ownership level. All current Supervisory Directors are in compliance with the Compensation Committee's requirements.

Policy against Insider Trading

The Company has a written policy against insider trading that is applicable to all Supervisory Directors and other persons with access to material, non-public information about the Company. Such policy provides that entering into any derivative transaction which effectively shifts the economic risk of ownership to a third party (e.g., selling the stock short; entering into collars, floors, cap arrangements, or placing the stock on margin; etc.) is not allowed at any time.

2020 Non-Executive Supervisory Director Compensation

Each non-executive Supervisory Director serving in 2020 shall receive the same level of cash compensation in 2020 as received by Supervisory Board members in 2019 and described above under “Retainer/Fees" on page 15 of this proxy statement.

In addition, effective on April 1, 2020, we will award each of our non-executive Supervisory Directors serving after the conclusion of the 2020 annual shareholders' meeting, an amount of restricted shares equal to $150,000 based on the closing price of the Company's stock on March 31, 2020, rounded upwards to the nearest whole share. The restricted shares will vest, without performance criteria, at the end of a one-year vesting period that will begin on April 1, 2020 and will end on April 1, 2021. This award will be subject to an agreement to be signed by each recipient.

 

16


 

Board Membership

The Company has a two-tier board structure consisting of a Management Board and a Supervisory Board, each of which must consist of at least one member under the Company's Articles of Association. Under Dutch law, the Supervisory Board's duties include supervising and advising the Management Board in performing its management tasks. The Supervisory Board currently consists of seven Supervisory Directors in three classes. The Supervisory Directors are expected to exercise oversight of management with the Company's interests in mind.

The Management Board's sole member is Core Laboratories International B.V. ("CLIBV"). As a Managing Director, CLIBV's duties include overseeing the management of the Company, consulting with the Supervisory Board on important matters and submitting certain important decisions to the Supervisory Board for its prior approval. CLIBV receives no remuneration for serving as the Company's Managing Director.

 

Board Structure

 

Mr. Demshur currently serves as the Company's Chief Executive Officer and as Chairman of the Supervisory Board ("Chairman of the Board"). As previously announced, as of the conclusion of the 2020 annual shareholder meeting, Mr. Demshur will retire from the Supervisory Board and also from the position as Chief Executive Officer, and be succeeded by Mr. Bruno in those roles. Given the size of the Company, we believe our stakeholders are well served by having Mr. Demshur and then Mr. Bruno hold the Chief Executive Officer role along with being Chairman of the Board and that this is the most effective leadership structure for us at the present time. We also note that within our industry, the common practice is for the same person to hold both positions. We believe this structure has served us well for many years.

Mr. Sodderland has served as our Lead Director since the 2017 annual meeting. Following Mr. Sodderland’s retirement from the Supervisory Board as of the conclusion of the 2020 annual shareholder meeting, Mme. Carnes will become the Lead Director. The Lead Director has leadership authority and responsibilities and sets the agenda for, and leads, all executive sessions of the independent directors, providing consolidated feedback, as appropriate, from those meetings to the Chairman of the Board. Mr. Sodderland has served on the Supervisory Board since 2011, and prior to that served as a non-employee managing director of the Company's sole managing director, CLIBV. He was deemed to be independent from the Company (according to applicable regulatory standards, as well as by shareholder advisory services such as ISS and Glass-Lewis), due to the fact that he has never been an employee of the Company or any affiliate and his service on the management board of the Company's sole management board, is the equivalent of serving as a Supervisory Director. He served as a non-employee managing director of CLIBV, an affiliate of the Company, until his election to the Supervisory Board of the Company in May 2011, at which time he resigned from that position with CLIBV and his position as a non-employee director of other Dutch affiliates of the Company. Ms. Carnes has served on the Supervisory Board since 2016 and is deemed to be independent from the Company (according to applicable regulatory standards, as well as by shareholder advisory services such as ISS and Glass-Lewis).

In its role in the risk oversight of the Company, the Supervisory Board oversees our stakeholders' interest in the long-term health and overall success of the Company and its financial strength, as well as the interests of the other stakeholders of the Company. The Supervisory Board is actively involved in overseeing risk management for the Company, and each of our Supervisory Board committees considers the risks within its areas of responsibilities. The Supervisory Board and each of our Supervisory Board committees regularly discuss with management our major risk exposures, their potential financial impact on us and the steps we take to manage them.

 

Supervisory Director Independence

 

In connection with determining the independence of each Supervisory Director of the Company, the Supervisory Board inquired as to any transactions and relationships between each Supervisory Director and his or her immediate family and the Company and its subsidiaries, and reviewed and discussed the results of such inquiry. The purpose of this review was to determine whether any such relationships or transactions were material and, therefore, inconsistent with a determination that a Supervisory Director is independent, under the standards set forth by the NYSE and, to the extent consistent therewith, the Dutch Corporate

17


 

Governance Code (the "Dutch Code"). Under the Dutch Code, the Supervisory Board is to be composed of members who are able to act critically and independently of each other and of the Management Board. With regard to Messrs. Barnett, Klingensmith and Straughen and Mmes. Carnes, van Dijken Eeuwijk and van Kempen, none have ever held any position with the Company or any of its affiliates apart from service on the Supervisory Board and its committees and all qualify as independent under the NYSE Listed Company Manual section 303A.02.

As a result of this review, after finding no material transactions or relationships among the following Supervisory Directors and the Company, the Supervisory Board affirmatively determined that each of Messrs. Barnett, Klingensmith, Sodderland and Straughen as well as Mmes. Carnes, van Dijken Eeuwijk and van Kempen are independent under the applicable standards described above.

 

Supervisory Board Meetings

The Supervisory Board held four meetings in 2019. All Supervisory Directors participated in 100% of the 2019 Supervisory Board meetings. All Supervisory Directors participated in 100% of the meetings in 2019 of all committees on which he or she serves. Under our Corporate Governance Guidelines, Supervisory Directors are expected to diligently fulfill their fiduciary duties to the Company, including preparing for, attending and participating in meetings of the Supervisory Board and the committees of which the Supervisory Director is a member. In 2019, all Supervisory Directors attended the 2019 annual shareholder meeting, with the exception of Mr. Charles Dunlap and Ms. Lucia van Geuns, who were not standing for re-election to the Supervisory Board and were excused from the meeting. Mr. Barnett, who was a candidate for election the Supervisory Board at the 2019 annual shareholder meeting did attend that meeting. Normally, all current board members and any candidates are expected to attend the annual meeting.  However, in 2020, due to the effects of COVID-19 on travel and the health and safety of individuals, the board members and the one candidate who reside outside of the Netherlands may not attend the 2020 annual meeting. Those board members and the one candidate who reside in the Netherlands are expected to attend the 2020 annual meeting in person.

Our non-executive Supervisory Directors meet separately in executive session without any members of management present. The Lead Director is the presiding Supervisory Director at each such session. If any of our non-executive Supervisory Directors were to fail to meet the applicable criteria for independence, then our independent Supervisory Directors would meet separately at least once a year in accordance with the rules of the NYSE.

 

Committees of the Supervisory Board

The Supervisory Board has three standing committees, the identities, memberships and functions of which are described below. Each Supervisory Director who is at the time "independent" and who has never served as a director of any affiliate of the Company may be considered for Committee assignment at any time during their term, as determined by the Supervisory Board. In accordance with the Dutch Code, any Supervisory Director who is at the time "independent", but who has previously served as a director of any affiliate of the Company, may be considered for Committee assignment, as determined by the Supervisory Board, at the earlier of: (a) five years after they last served as an affiliate director or (b) they are not classified as "non-independent" at the time of their nomination and election.

Audit Committee

The current members of the Audit Committee are Mme. Carnes (Chairman), and Messrs. Sodderland and Straughen. Following the conclusion of the 2020 annual shareholder meeting, Mr. Sodderland will retire from the Audit Committee, and assuming his election to the Supervisory Board, Mr. Klingensmith will join the Audit Committee, such that its members at that points will be Mme. Carnes (Chairman), and Messrs. Straughen and Klingensmith. The Audit Committee's principal functions, which are discussed in detail in its charter, include making recommendations concerning the engagement of the independent registered public accountants, reviewing with the independent registered public accountants the plan and results of the engagement, approving professional services provided by the independent registered public accountants and reviewing the adequacy of our internal accounting controls. Each member of the Audit Committee is independent, as defined by Section 10A of the Exchange Act of 1934, as amended (the "Exchange Act") and by the corporate governance standards set forth by the NYSE and, to the extent consistent therewith, the Dutch Code. Each member of the Audit Committee is financially literate and Mme.

18


 

Carnes qualifies as an audit committee financial expert under the rules promulgated pursuant to the Exchange Act. The Audit Committee held five meetings in 2019. A copy of the Audit Committee's written charter may be found on the Company's website at http://www.corelab.com/cr/governance. See "Audit Committee Report" below.

Compensation Committee

The current members of the Compensation Committee are Mr. Straughen (Chairman), Mr. Barnett and Ms. van Kempen. The composition of the Compensation Committee will not change following the 2020 annual meeting. The Supervisory Board has determined that each of the members of the Compensation Committee is (i) independent under the NYSE’s rules governing Compensation Committee membership; (ii) a “non-employee director” under Rule 16b-3 of the Exchange Act; and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "IRS Code"). For 2019, the Supervisory Board is not expecting any additional changes to the membership of the Compensation Committee.

The Compensation Committee's principal functions, which are discussed in detail in its charter, include a general review of our compensation and benefit plans to ensure that they are properly designed to meet corporate objectives. The Compensation Committee reviews and approves the compensation of our Chief Executive Officer and our senior executive officers, granting of awards under our benefit plans and adopting and changing major compensation policies and practices. The Compensation Committee also regularly discusses a succession plan for the Chief Executive Officer and other senior executive management. In addition to establishing the compensation for the Chief Executive Officer, the Compensation Committee reports its recommendations to the Supervisory Board for approval to review and approve awards made pursuant to our LTIP. Pursuant to its charter, the Compensation Committee has the authority to delegate its responsibilities to other persons. The Compensation Committee held three meeting in 2019.

The Compensation Committee periodically retains a consultant to provide independent advice on executive compensation matters and to perform specific project-related work. The consultant reports directly to the committee, which pre-approves the scope of the work and the fees charged. The Compensation Committee communicates to the consultant the role that management has in the analysis of executive compensation, such as the verification of executive and Company information that the consultant requires.

The Compensation Committee operates under a written charter. A copy of the Compensation Committee charter may be found on the Company's website at http://www.corelab.com/cr/governance. See "Compensation Committee Report" below.

Nominating, Governance and Corporate Responsibility Committee

The current members of the NGCR Committee are Mme. van Kempen (Chairman) and Mr. Barnett. Following the 2020 annual shareholder meeting, and assuming their election to the Supervisory Board, Mr. Klingensmith and Mrs. van Dijken Eeuwijk will join the NGCR Committee, such that its members at that points will be Mmes. van Kempen and van Dijken Eeuwijk and Mr. Klingensmith.

The NGCR Committee's principal functions, which are discussed in detail in its charter, include recommending candidates to the Supervisory Board for election as Supervisory Directors, recommending candidates to the Supervisory Board for appointment to the Supervisory Board's committees, reviewing and overseeing compliance with the Company's corporate governance and social responsibility policies; and leading the Supervisory Board in its annual review of the performance of the Supervisory Board, its committees and management. Each member of the NGCR Committee is independent as defined by the corporate governance standards of the NYSE. The NGCR Committee held three meetings in 2019.

The NGCR Committee operates under a written charter, which was updated in February 2014. A copy of the NGCR Committee Charter may be found on the Company's website at http://www.corelab.com/cr/governance.

 

Qualifications of Supervisory Directors

The NGCR Committee has the responsibility to make recommendations to the Board of Supervisory Directors of candidates for the Supervisory Board that the NGCR Committee believes will perform well in that role and maximize shareholder and stakeholder value. In considering suitable candidates for that position, the NGCR Committee considers, among other factors, the person's reputation, knowledge, experience, integrity, independence, skills, expertise, business and governmental acumen and

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time commitments. In addition to considering these factors on an individual basis, the NGCR Committee considers how these factors contribute to the overall variety and mix of attributes of our Supervisory Board as a whole so that the members of our Supervisory Board collectively possess the diverse knowledge and complementary attributes necessary to oversee our business. Supervisory Directors should be excellent representatives of the Company and be able to provide a wide range of management and strategic advice and be someone that the Company can count on to devote the required time and attention needed from members of the Supervisory Board. In the case of current Supervisory Directors being considered for re-nomination, the NGCR Committee will also take into account the Supervisory Director's tenure as a member of our Supervisory Board; the Supervisory Director's history of attendance at meetings of the Supervisory Board and committees thereof; the Supervisory Director's preparation for and participation in all meetings; and the Supervisory Director's contributions and performance as a member of the Supervisory Board.

Six of the seven members of the Supervisory Board who will serve following the 2020 annual meeting, assuming the election of Mr. Klingensmith and Mrs. van Dijken Eeuwijk, are considered independent under applicable SEC, NYSE and Dutch Code standards. For this year's annual meeting and election, the NGCR Committee believes the candidates possess the characteristics outlined above and bring to the Supervisory Board valuable skills that enhance the Supervisory Board's ability to manage and guide the strategic affairs of the Company in the best interests of our shareholders and our other stakeholders.

A more complete description of the specific qualifications of each of our Supervisory Board members and of this year's nominees are contained in the biographical information section beginning on page 10 of this proxy statement.

 

Supervisory Director Nomination Process

The NGCR Committee, the Chairman of the Board, the Chief Executive Officer, or a Supervisory Director identifies a need to add a new Supervisory Board member that meets specific criteria or to fill a vacancy on the Supervisory Board. The NGCR Committee also reviews the candidacy of existing members of the Supervisory Board whose terms are expiring and who may be eligible for reelection to the Supervisory Board. The NGCR Committee also considers recommendations for nominees for directorships submitted by shareholders as provided below:

 

If a new Supervisory Board member is to be considered, the NGCR Committee initiates a search by seeking input from other Supervisory Directors and senior management, and hiring a search firm, if necessary. An initial slate of candidates that will satisfy specific criteria and otherwise qualify for membership on the Supervisory Board are identified by and/or presented to the NGCR Committee, which ranks the candidates. Members of the NGCR Committee review the qualifications of prospective candidate(s), and the Chairman of the Board, the Chief Executive Officer, and all other Supervisory Board members have the opportunity to review the qualifications of prospective candidate(s);

 

Shareholders seeking to recommend Supervisory Director candidates for consideration by the NGCR Committee may do so by writing to the Company's Secretary at the address indicated on page 5 of this proxy statement, giving the recommended candidate's name, biographical data and qualifications. The NGCR Committee will consider all candidates submitted by shareholders within the time period specified under "Other Proxy Matters - Information About Our 2021 Annual Meeting; Shareholder Proposals and Shareholder Access" below;

 

The NGCR Committee recommends to the Supervisory Board the nominee(s) from among the candidate(s), including existing members of the Supervisory Board whose terms are expiring and who may be eligible for reelection to the Supervisory Board, and new candidates, if any, identified as described above; and

 

The nominee(s) are nominated by the Supervisory Board.

 

Related Person Transactions

Related person transactions have the potential to create actual or perceived conflicts of interest between the Company and its Supervisory Directors and named executive officers or their immediate family members. Under its charter, the Audit Committee is charged with the responsibility of reviewing with management and the independent registered public accountants (together and/or separately, as appropriate) insider and affiliated party transactions and potential conflicts of interest. The Audit

20


 

Committee has delegated authority to review transactions involving employees, other than our named executive officers, to our general counsel. We identify such transactions by distributing questionnaires annually to each of our Supervisory Directors, officers and employees.

In deciding whether to approve a related person transaction, the following factors may be considered:

 

information about the goods or services proposed to be or being provided by or to the related party or the nature of the transactions;

 

the nature of the transactions and the costs to be incurred by the Company or payments to the Company;

 

an analysis of the costs and benefits associated with the transaction and a comparison of comparable or alternative goods or services that are available to the Company from unrelated parties;

 

the business advantage the Company would gain by engaging in the transaction; and

 

an analysis of the significance of the transaction to the Company and to the related party.

To receive approval, the related person transaction must be on terms that are fair and reasonable to the Company, and which are on terms as favorable to the Company as would be available from non-related entities in comparable transactions. The Audit Committee requires that there is a Company business interest supporting the transaction and the transaction meets the same Company standards that apply to comparable transactions with unaffiliated entities. The Audit Committee has adopted a written policy that governs the approval of related person transactions.

There were no transactions that occurred during fiscal year 2019 in which, to our knowledge, the Company was or is a party, in which the amount involved exceeded $120,000, and in which any director, director nominee, named executive officer, holder of more than 5% of our common shares or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

 

Compensation Committee Interlocks and Insider Participation

 

During 2019, no named executive officer served as:

 

a member of the compensation committee (or other Supervisory Board committee performing equivalent functions or, in the absence of any such committee, the entire Supervisory Board of Directors) of another entity, one of whose named executive officers served on our Compensation Committee;

 

a member of the compensation committee (or other Supervisory Board committee performing equivalent functions or, in the absence of any such committee, the entire Supervisory Board of Directors) of another entity, one of whose named executive officers served as one of our Supervisory Directors; or

 

a director of another entity, one of whose named executive officers served on our Compensation Committee or the board of directors of one of our subsidiaries.

 

Communications with Directors; Website Access to Our Corporate Documents

 

Shareholders or other interested parties can contact any Supervisory Director or committee of the Board of Supervisory Directors by directing correspondence to Mark F. Elvig, Secretary, in care of Core Laboratories LP, 6316 Windfern Road, Houston, Texas 77040. Comments or complaints relating to the Company's accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee.

Our Internet address is www.corelab.com. Our Corporate Governance Guidelines, Code of Ethics and Corporate Responsibility and the charters of our Supervisory Board committees are available on our website. We will also furnish printed copies of such information free of charge upon written request to our Investor Relations department (investor.relations@corelab.com).

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We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the SEC. We also file Annual Accounts and Semi-Annual Accounts with the Dutch regulator, the Autoriteit Financiële Markten ("AFM").

These reports are available free of charge through our website as soon as reasonably practicable after they are filed with the respective agency. We may from time to time provide important disclosures to investors by posting them in the investor relations section of our website, as allowed by SEC and/or AFM rules. The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our Company that we file electronically with the SEC.

 

Dutch Corporate Governance Code

 

The Dutch Corporate Governance Code contains principles of good corporate governance and best practice provisions. The Dutch Code emphasizes the principles of integrity, transparency and accountability as the primary means of achieving good corporate governance. The Dutch Code includes certain principles of good corporate governance, supported by "best practice" provisions. Listed Dutch N.V. companies are required to disclose in their annual report how they intend to incorporate the principles of the Dutch Code or, where relevant, to explain why they do not. The Management and Supervisory Boards regularly monitor the Dutch Code and generally agree with its fundamental principles. As discussed above, the Company complies with U.S. corporate governance rules and, to the extent consistent therewith, the corporate governance principles of the Dutch Code. The Company intends to continue to monitor the developments in corporate governance and shall take such steps as it considers appropriate to further implement the provisions of the Dutch Code. Please see the report of the Management Board, a copy of which will be available for inspection at our offices in the Netherlands, located at Strawinskylaan 913, Tower A, Level 9, 1077 XX Amsterdam and on our Internet site at www.corelab.com for a discussion of our compliance with the Dutch Code.

 

Risk Assessment of Compensation Policies and Practices

 

We have assessed our compensation policies and practices and found that the compensation policies and practices are not reasonably likely to have a material adverse effect on us. Our Compensation Committee and our Supervisory Board are aware of the need to routinely assess our compensation policies and practices and will make a determination as to the necessity of this particular disclosure on an annual basis.

 

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CORPORATE GOVERNANCE AND RESPONSIBILITY

Core Laboratories maintains a corporate governance page on its website that includes key information about corporate governance initiatives, including Corporate Governance Guidelines, a Code of Ethics and Corporate Responsibility, and committee charters for the Audit, Compensation, and NGCR Committees of the Supervisory Board. The corporate governance page can be found at http://www.corelab.com/cr/governance.

The actions we are taking regarding corporate responsibility, are posted on our website, and in the form of our Annual Sustainability Reports, under the "Corporate Responsibility" link at http://www.corelab.com/cr/.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This Compensation Discussion and Analysis ("CD&A") describes our executive compensation program as it relates to our Named Executive Officers ("NEOs"). This CD&A also summarizes the Compensation Committee's process for making pay decisions, as well as its rationale for specific decisions related to the 2019 performance year. Our NEOs for 2019 are listed below, along with the title that each NEO held during the 2019 year:

 

 

 

Name of Executive

 

Title

David M. Demshur

 

Chairman and Chief Executive Officer

Lawrence Bruno

 

President and Chief Operating Officer

Christopher S. Hill

 

Senior Vice President and Chief Financial Officer

In January 2020, as previously announced, Mr. Demshur notified the Supervisory Board of his intention to retire from the Company effective December 31, 2020. Mr. Demshur will not stand for re-election to the Supervisory Board of Directors. Mr. Demshur has elected to resign from his role as Chief Executive Officer, effective at the conclusion of the 2020 annual meeting of shareholders; however, Mr. Demshur will continue to serve as an executive until his retirement on December 31, 2020. Mr. Bruno will be named Chief Executive Officer when Mr. Demshur resigns from his role as Chief Executive Officer on May 20, 2020 and is expected to be named Chairman of the Board.

 

Executive Summary

2019 Business Achievements

Over the course of our 24 years as a publicly-traded company, we have posted an annualized compounded shareholder return of 14.3%, according to Bloomberg Financial, compared to the S&P 500, which was up 7.8% compounded annually over that period. See "Ownership of Securities - Performance Graph" on page 9 of this proxy statement for a graph that compares our five-year cumulative total shareholder return to the S&P 500 Index and the Philadelphia Oil Services Index ("OSX").

In addition, during 2019, we continued to produce strong relative and absolute results in several areas:

 

Based on Bloomberg's calculations using the latest comparable data available, our return on invested capital ("ROIC") was the highest of the Bloomberg Oil and Gas Services Comp Group ("Comp Group"). Moreover, our ROIC exceeded the Comp Group average ROIC by approximately 22.2 percentage points;

 

Revenue decline of 5% for the year was at the 36th percentile of the Comp Group;

 

Operating margin of 15% was at the 75th percentile of the Comp Group;

 

EPS growth of 27% was at the 50th percentile of the Comp Group;

 

Safety performance was the highest to date with achieving the fewest total accidents and a record low TRIR of 0.21, a 53% improvement over 2018. From 2015 to 2019, safety gains have been driven by exceptional efforts recording the five best safety results in Company history while maintaining industry low TRIR's below 0.50 and a second best LTIR of 0.08 a year-over-year improvement of 53%;

 

We improved our ranking/score/standing on several key sustainability indexes and have been awarded inclusion in additional sustainability related indices in 2019. This reflects our emphasis on producing long-term profitable growth in a sustainable and responsible manner.

Compensation Actions

During 2019-2020, our executive compensation decisions included:

 

Increasing base salaries of the NEOs for 2020 to reflect market trends and, in the case of the President and Chief Operating Officer ("COO"), increased responsibilities;

 

Approving annual cash incentive compensation for 2019 performance at 56.25% of the maximum for each NEO; however, the decision whether the earned 2019 cash incentive bonuses would be paid is at the discretion of the

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Chairman of the Supervisory Board, who has decided that 2019 cash incentive bonuses will not be paid to the NEOs; and

 

Continuing to grant NEOs equity exclusively in the form of performance share awards for 2019 and 2020.

2019 "Say-on-Pay" / Shareholder Engagement

Each year, we carefully consider the results of our shareholder say-on-pay vote from the preceding year. We also consider the feedback we receive from our major shareholders, which we solicit in various ways to include face to face meetings during the year. At the 2019 annual meeting, almost 94% of the votes cast supported our executive compensation program. We believe that this strong level of shareholder support reinforces the Committee's view that our compensation program remains aligned with the best interests of our shareholders.

Best Compensation Governance Practices & Policies

Our executive compensation program is grounded in the following policies and practices, which promote sound compensation governance, enhance our pay-for-performance philosophy and further align our executives' interests with those of our stakeholders:

 

WHAT WE DO

 

WHAT WE DO NOT DO

  

Significant emphasis on performance-based, "at-risk" compensation

 

  

No non-performance-based incentive awards

  

Incentive awards that are based on both absolute and relative performance results

 

  

No hedging transactions by executive officers or directors

  

Equity award grants subject to three-year performance periods to promote retention

 

  

No significant perquisites

  

Retain independent compensation consultant

 

  

No "single trigger" change in control cash severance benefits

  

Share ownership guidelines (for executives and directors)

 

  

Core Lab stock may not be margined by executive officers or directors

 

 

 

What Guides Our Executive Compensation Program

Compensation Philosophy and Objectives

Our executive compensation program is designed to create a strong financial incentive for our NEOs to maximize ROIC, as well as other financial and operational metrics, which we believe leads to long-term sustainable growth in stakeholder value. Our compensation philosophy is driven by the following guiding principles and objectives:

 

Guiding Principle

 

Objective

Pay for Performance

 

Drive performance relative to our financial goals which are designed to achieve shareholder returns and long-term value for our owners

Competitiveness

 

Provide compensation at levels that will attract, motivate, and retain highly-qualified executives who are focused on the long-term best interests of our shareholders

Stakeholder Alignment

 

Reinforce a culture of ownership and long-term commitment to sustainable shareholder value creation through alignment of Corporate, Environmental and Social Governance

 

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The Core Elements of Compensation

The core elements of executive compensation are summarized in the table below:

 

Element

 

Form

 

What It Does

 

How It Links to Performance

Base Salary

 

Cash (Fixed)

 

Provides a competitive rate relative to similar positions in the oilfield services industry and other service-based industries, and enables the Company to attract and retain critical executive talent

 

Based on job scope, level of responsibilities, experience, tenure and market levels

Annual Cash Incentive Plan

 

Cash (Variable)

 

Focuses executives on achieving annual financial and operational goals that drive long-term stockholder value

 

Payouts: 0% to 220% of target, based on results against pre-established, relative and absolute goals

Financial Metrics: Growth in Revenue, Operating Margin and Earnings Per Share (EPS)

Non-Financial Metrics: Combined Safety and Environmental, Social and Governance (ESG)

Long-Term Incentive Plan (LTIP)

 

Equity (Variable)

 

Provides incentives for executives to execute on longer-term financial/strategic growth goals that drive value creation and support the Company's retention strategy

 

Awards vest based on financial performance relative to Comp Group for the performance period, which may be modified based upon the Company’s TSR performance starting with awards granted in 2020 (see page 30)

Financial Metric: Return on Invested Capital (ROIC)

 

Pay Mix

The charts below show the target compensation of our Chief Executive Officer ("CEO") and our other NEOs for fiscal 2019. These charts illustrate that a majority of NEO compensation is performance-based and variable (85% for our CEO and an average of 81% for our other NEOs). We view each compensation element as a different means of encouraging and promoting performance. These elements are designed to work in tandem, not against each other. The weighting of these compensation components is consistent with the market and puts a material, significant portion of the executives' total direct compensation "at risk" if Company performance declines or under performs relative to the Comp Group.  

 

 

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The Role of the Compensation Committee

Our Compensation Committee's principal functions include conducting periodic reviews of the compensation and benefits programs to ensure that they are properly designed to meet corporate objectives, overseeing of the administration of the cash incentive and equity-based plans and developing the compensation program for the Supervisory Directors.

The Compensation Committee generally focuses on compensation structures designed to reflect the normal market range (between the 25th to 75th percentiles), which gives the Compensation Committee the ability to set compensation that reflects Company and individual performance. We believe that maintaining compensation in the normal market range of our peer group minimizes competitive disadvantage while at the same time fairly compensating our NEOs for meeting our corporate goals. The Compensation Committee uses a range of compensation targets so as to respond better to changing business conditions, manage salaries and incentives more evenly over an individual's career, and minimize potential for automatic increases in salaries and incentives that could occur with inflexible and narrow competitive targets. The Compensation Committee links a significant portion of each executive's total compensation to accomplishing specific, measurable results based on both company and individual performance intended to create value for shareholders in both the short- and long-term. Only executives with performance exceeding established targets may exceed the market median in total compensation due to incentive compensation.

The Role of Management

Our CEO provides recommendations to the Compensation Committee in its evaluation of our other NEOs, including recommendations of individual cash and equity compensation levels for each of the NEOs. Mr. Demshur relies on his personal experience serving in the capacity of CEO with respect to evaluating the contribution of our other NEOs, as well as publicly- available information for comparable compensation guidance as the basis for his recommendations to the Compensation Committee. Mr. Demshur does not participate in discussions regarding his own pay.

The Role of the Independent Compensation Consultant

Our Compensation Committee periodically retains a consultant to provide independent advice on executive compensation matters and to perform specific project-related work. The Compensation Committee engaged Pearl Meyer & Partners, LLC ("Pearl Meyer") to provide information on pay levels and program design for 2019. Pearl Meyer has reported to and acted at the direction of the Compensation Committee. In connection with its engagement of Pearl Meyer, based on the information presented to it, the Compensation Committee assessed the independence of Pearl Meyer pursuant to applicable SEC and NYSE rules and concluded that the firm’s work for the Compensation Committee did not raise any conflict of interest for 2019.

The Role of Market Compensation Analysis

The Compensation Committee reviews several sources as a reference for determining competitive total compensation packages. For 2019 executive compensation recommendations, the Compensation Committee reviewed and considered Pearl Meyer's evaluation and analysis of compensation survey data from multiple general industry and industry-specific sources.

In addition, the Compensation Committee reviewed proxy statement data from a peer group of companies (see below). These analyses were used to determine the NEOs' base salary, annual incentive targets and long-term equity awards (100% performance-based) for 2019.

Selecting the Peer Group

The Compensation Committee, with the assistance of Pearl Meyer, developed a peer group of companies to be used for compensation comparison purposes. The peer group consists of publicly traded oilfield services companies comparable in size to our company in terms of annual revenues and the value of ongoing operations. The following companies comprise our compensation peer group used to evaluate the market for NEO compensation for 2019:

 

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Baker Hughes Company

 

Helix Energy Solutions Group

 

RPC, Inc.

CARBO Ceramics Inc.

 

John Wood Group PLC

 

Superior Energy Services, Inc.

Dril-Quip Inc.

 

Nabors Industries Ltd.

 

TechnipFMC plc

Forum Energy Technologies

 

Oceaneering International

 

Valaris plc

Frank’s International N.V.

 

Oil States International

 

Weatherford International

Fugro N.V.

 

 

 

 

 

 

In addition, the Compensation Committee reviewed the incentive trends at the following company of interest which was not included in our group for compensation comparisons due to relative financial size considerations:

Schlumberger, Ltd.

 

 

 

 

 

 

The Compensation Committee periodically reviews the composition of our compensation peer group to ensure it remains appropriate.

 

2019 Compensation Program Details

Base Salary

Base salary is the fixed annual compensation we pay to an executive for performing specific job responsibilities. It represents the minimum income an executive may receive in any given year. We target annual base salaries to result in annual salaries in the normal market range of our peer group for executives having similar responsibilities. The Compensation Committee may adjust salaries based on its annual review of the following factors:

 

the individual's experience and background;

 

the individual's performance during the prior year;

 

the benchmark salary data;

 

the general movement of salaries in the marketplace; and

 

our financial and operating results.

As a result of these factors, a particular executive's base salary may be above or below the median of our peer group at any point in time. The table below shows base salaries for each of our NEOs for the years ending December 31, 2019 and 2018. It also shows their base salaries that were approved by the Compensation Committee for 2020.

 

Name of Executive

 

2020 ($)

 

 

2019 ($)

 

 

2018 ($)

 

David M. Demshur

 

 

1,040,000

 

 

 

1,040,000

 

 

 

1,008,863

 

Lawrence Bruno

 

 

820,000

 

 

 

531,000

 

 

 

425,000

 

Christopher S. Hill

 

 

430,000

 

 

 

365,000

 

 

 

335,000

 

 

Annual Cash Incentives

All our NEOs participate in our annual cash incentive plan. Under this plan, each NEO is assigned a target and a maximum bonus expressed as a percentage of his base salary. The target bonus percentage and maximum bonus percentage for each of our NEOs for 2019 is set forth in the table below. Target and maximum opportunities for Mr. Demshur were unchanged from 2018. Messrs. Bruno and Hill received increases in their potential award opportunities due to their expanded roles and responsibilities between the 2018 and 2019 years.

 

 

 

 

 

Award Percentages

 

Name of Executive

 

Title

 

Target

 

 

Maximum

 

David M. Demshur

 

Chairman and Chief Executive Officer

 

110%

 

-

220%

 

Lawrence Bruno

 

President and Chief Operating Officer

 

90%

 

-

180%

 

Christopher S. Hill

 

Senior Vice President and Chief Financial Officer

 

75%

 

-

150%

 

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The maximum award opportunity is established as a percentage of salary for each NEO based upon a review of the competitive data for that officer's position, level of responsibility and ability to impact our financial success. The Compensation Committee designs these awards so that cash incentive compensation will approximate the market range when individual and corporate strategic objectives are achieved and will exceed the market median when performance plans are exceeded. Annual incentive awards are designed to put a significant portion of total compensation at risk. NEOs are eligible for an incentive cash award to the extent that the Company achieves certain relative and absolute performance goals.

 

The Compensation Committee has set performance goals that are consistent with the Company's business strategy and focus on creating long-term shareholder value. Performance is assessed based on the achievement of specific financial measures, safety metrics, operating objectives, and environmental, social and governance goals. The Compensation Committee may also consider individual contributions to performance results.

Relative Performance

Relative performance accounts for 75% of the potential annual cash incentive award and is based on the achievement of three different financial performance metrics as compared to the Comp Group:

 

Metric

 

Description

 

Weighting

 

Revenue

 

Compare the change in the Company's annual revenue to the

Comp Group's change in annual revenue over the same period

 

25%

 

Operating Margin

 

Compare the change in the Company's margins to the Comp

Group's change in margins over the same period

 

25%

 

EPS

 

Compare the change in the Company's annual EPS to the Comp

Group's change in annual EPS over the same period

 

25%

 

 

Relative performance is assessed after the end of the year. Bloomberg data is analyzed on a trailing four-quarter period for the Comp Group as published by Bloomberg for the period ending with the third quarter of the current year. This data is used to determine the Company’s performance as a percentile of the Comp Group for each metric, which is then ranked. A ranking at the top of the list will be assigned a ranking of being in the 100th percentile.

For each metric, the NEOs can achieve a maximum score of 25 and a minimum score of 12.5 for a ranking between the 100th and the 50th percentiles, respectively. For example, if the Company’s ranking for change in revenue compared to the Comp Group’s change in revenue is at the 75th percentile level, then the revenue metric would receive a score of 18.75. Scores will be interpolated on a straight-line basis from the 50th percentile to the 100th percentile. A score of zero will be applied to any ranking below the 50th percentile.

Absolute Performance

Absolute performance accounts for 25% of the annual incentive award. The Compensation Committee evaluates the Company’s progress in improving on a collective basis, year-over-year, in the areas of safety and ESG. The Compensation Committee will base its determination primarily on relevant objective third-party reports and may award up to 25% of the maximum bonus possible depending on the Company’s overall improvement in these areas. If the Compensation Committee determines that overall the Company’s performance at the end of a year, on a year-over-year basis, has declined, it may award as little as zero (0) bonus for this metric.

2019 Results

For 2019, our performance results were as follows:

 

Metric

 

Weighting

 

 

Ranking

 

Score

 

Revenue

 

25%

 

 

36th percentile

 

 

 

Operating Margin

 

25%

 

 

75th percentile

 

 

18.75

 

EPS

 

25%

 

 

50th percentile

 

 

12.50

 

Sub-Total Relative Score

 

 

 

 

 

 

 

 

31.25

 

 

 

 

 

 

 

 

 

 

 

 

Absolute Performance

 

25%

 

 

 

 

 

25.00

 

Total Score

 

 

 

 

 

 

 

 

56.25

 

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Based on the financial performance results and individual achievements, the Compensation Committee approved the annual incentive awards for 2019 as shown in the next table. The decision whether these earned 2019 cash incentive bonuses are paid is at the discretion of the Chairman of the Supervisory Board, who has decided that 2019 cash incentive bonuses will not be paid to the NEOs.

 

 

 

Award Percentages

 

 

Award Payouts ($)

 

Name of Executive

 

Target

 

 

Maximum

 

 

Actual (1)

 

 

Target

 

 

Maximum

 

 

Earned (1)

 

 

Paid (2)

 

David M. Demshur

 

110%

 

 

220%

 

 

124%

 

 

 

1,144,000

 

 

 

2,288,000

 

 

 

1,287,000

 

 

 

 

Lawrence Bruno

 

90%

 

 

180%

 

 

101%

 

 

 

477,900

 

 

 

955,800

 

 

 

537,638

 

 

 

 

Christopher S. Hill

 

75%

 

 

150%

 

 

84%

 

 

 

273,750

 

 

 

547,500

 

 

 

307,969

 

 

 

 

 

(1)

Award percentages are calculated as a percent of salary; payouts under the Company's annual cash incentive compensation for 2019 performance were awarded at 56.25% of the maximum. See the section entitled "--2019 Results" below for additional details regarding 2019 performance. Thus, the numbers in this column reflect 56.25% of the award amount percentage between the Target and the Maximum.

 

(2)

For fiscal 2019, the Chairman of the Supervisory Board has decided that 2019 cash incentive bonuses will not be paid to the NEOs.

Equity Incentive Compensation

We currently administer long-term incentive compensation awards through our LTIP. Under the LTIP, our NEOs are eligible for performance-based restricted shares.

Our Compensation Committee, based on recommendations from our CEO (other than with respect to awards for himself), determines the amount of each NEO's grant by periodically reviewing competitive market data and each NEO's long-term past performance, ability to contribute to our future success, and time in the current job. The Compensation Committee considers the risk of losing the executive to other employment opportunities and the value and potential for appreciation in our shares. The number of shares previously granted or vested pursuant to prior grants is not typically a factor in determining subsequent share grants to an NEO. The Compensation Committee considers the foregoing factors together and determines the appropriate magnitude of the award.

The Compensation Committee shall set a minimum vesting period for any time-based vesting Award at three (3) years and a minimum vesting period for any performance-based vesting Award at one (1) year; however, such vesting schedules may be designed to vest in installments if an Award is for longer than the minimum periods, but the Award may not vest in installments shorter than one (1) year.

Performance Share Award Program ("PSAP")

PSAP shares vest if we achieve certain performance goals generally over a three-year period, which allow us to compensate our employees as we meet or exceed our business objectives.

PSAP Awards Generally

Under the PSAP, our NEOs are awarded rights to receive a pre-determined number of common shares if certain performance targets are met at the end of a three-year performance period and as specified in the applicable agreements. Awards vest at the end of each three-year Performance Period. The amount of performance-based equity incentive compensation awarded to the CEO for 2019 and 2020 is five times his prior year base salary. The amount of performance-based equity incentive compensation awarded to the COO for 2019 and 2020 is four times his prior year base salary. The amount of performance-based equity incentive compensation awarded to the CFO for 2019 was 3 times his prior year base salary and for 2020 is 2.65 times his prior year base salary. These award guidelines reflect the market range for long-term incentive awards if the performance measures are met.

With respect to 2017, 2018 and 2019 PSAP awards, 50% of the restricted performance shares granted vest only upon the Company's ROIC being above the 50th percentile among a Bloomberg Peer Group of comparably sized companies ("Bloomberg Peer Group"), 100% of the award will vest if ROIC is above the 75th percentile of the Bloomberg Peer Group and 150% of the award will vest if ROIC is at the 100th percentile (the top performing company). The award will be interpolated on a straight line basis from the 50th percentile to the 100th percentile. If the minimum criterion of median performance is not met, then no shares shall vest and the award shall be forfeited. For 2020 PSAP awards, the same vesting and performance standards apply, but for

30


 

2020 awards the Compensation Committee has added a modifier based upon absolute total shareholder return (“TSR”), such that any award for performance in excess of 75th percentile ROIC may be reduced if TSR over the period is not positive.  

The PSAP shares are unvested and may not be sold, assigned, pledged, hedged, margined or otherwise transferred by an award recipient until such time as, and then only to the extent that, the restricted performance shares have vested. In the event of a change in control (as defined in the LTIP) prior to the last day of the Performance Period, all of the award recipient's restricted performance shares will vest as of the effective date of such change in control, as measured using the actual result of the Performance Criteria as of the most recent quarter-end. If the NEO dies or is disabled, is terminated by the Company without cause or voluntarily retires from the Company on or after having reached the age of 64, then the outstanding PSAP grants will not terminate but will vest only upon the end of the respective Performance Period and only to the extent the Performance Criteria are met.

2017 PSAP Awards

On February 14, 2017, we made grants of 44,200 PSAP shares to our current NEOs. The three-year Performance Period began on January 1, 2017 and ended on December 31, 2019.

The 2017 PSAP awards to the executives were as follows:

Name of Executive

 

Target

Award

(in Shares)

 

 

Amount to vest if

CLB in Top 50th

Percentile of ROIC

at end of 2017

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB in

Top 75th Percentile

of ROIC at end of 2017

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB is Top

Performer of ROIC

at end of 2017

Performance Period

(in Shares)

 

 

Maximum possible

award of 150%

(in shares)

 

David M. Demshur

 

 

39,400

 

 

 

19,700

 

 

 

19,700

 

 

 

19,700

 

 

 

59,100

 

 

On February 14, 2017, at the time of the 2017 PSAP Award, Messrs. Bruno and Hill were not NEOs. Messrs. Bruno and Hill were each awarded 2,400 PSAP shares on February 14, 2017. Based upon the actual performance results, which were verified by the Compensation Committee, the 2017 PSAP award to Mr. Demshur fully vested at 150% of the award on December 31, 2019, the end of the three-year 2017 Performance Period.

2018 PSAP Awards

On February 13, 2018, we made grants of 58,320 restricted performance shares to our current NEOs. The three-year Performance Period began on January 1, 2018 and will end on December 31, 2020.

The 2018 PSAP awards to the executives who were NEOs on the grant date were as follows:

Name of Executive

 

Target

Award

(in Shares)

 

 

Amount to vest if

CLB in Top 50th

Percentile of ROIC

at end of 2018

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB in

Top 75th Percentile

of ROIC at end of 2018

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB is Top

Performer of ROIC

at end of 2018

Performance Period

(in Shares)

 

 

Maximum possible

award of 150%

(in shares)

 

David M. Demshur

 

 

42,038

 

 

 

21,019

 

 

 

21,019

 

 

 

21,019

 

 

 

63,057

 

Lawrence Bruno

 

 

13,682

 

 

 

6,841

 

 

 

6,841

 

 

 

6,841

 

 

 

20,523

 

 

On February 13, 2018, at the time of the 2018 PSAP Award, Mr. Hill was not an NEO. Mr. Hill was awarded 2,600 PSAP shares on February 13, 2018, which will vest if we are in the top 75th percentile of ROIC compared to the Bloomberg Comp Group on December 31, 2020, the end of the three-year 2018 Performance Period.

2019 PSAP Awards

On February 12, 2019, we made grants of 119,710 restricted performance shares to our current NEOs. The three-year Performance Period began on January 1, 2019 and will end on December 31, 2021.

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The 2019 PSAP awards to the executives who were NEOs on the grant date were as follows:

Name of Executive

 

Target

Award

(in Shares)

 

 

Amount to vest if

CLB in Top 50th

Percentile of ROIC

at end of 2019

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB in

Top 75th Percentile

of ROIC at end of 2019

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB is Top

Performer of ROIC

at end of 2019

Performance Period

(in Shares)

 

 

Maximum possible

award of 150%

(in shares)

 

David M. Demshur

 

 

73,202

 

 

 

36,601

 

 

 

36,601

 

 

 

36,601

 

 

 

109,803

 

Lawrence Bruno

 

 

30,822

 

 

 

15,411

 

 

 

15,411

 

 

 

15,410

 

 

 

46,232

 

Christopher S. Hill

 

 

15,686

 

 

 

7,843

 

 

 

7,843

 

 

 

7,843

 

 

 

23,529

 

2020 PSAP Awards

On February 11, 2020, we made grants of 267,506 restricted performance shares to our current NEOs serving in 2020. The three-year Performance Period began on January 1, 2020 and will end on December 31, 2022.

The 2020 PSAP awards to the executives who were NEOs on the grant date were as follows:

Name of Executive

 

Target

Award

(in Shares)

 

 

Amount to vest if

CLB in Top 50th

Percentile of ROIC

at end of 2020

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB in

Top 75th Percentile

of ROIC at end of 2020

Performance Period

(in Shares)

 

 

Additional amount

to vest if CLB is Top

Performer of ROIC

at end of 2020

Performance Period

(in Shares) (1)

 

 

Maximum possible

award of 150%

(in shares) (1)

 

David M. Demshur

 

 

144,606

 

 

 

72,303

 

 

 

72,303

 

 

 

72,303

 

 

 

216,909

 

Lawrence Bruno

 

 

91,212

 

 

 

45,606

 

 

 

45,606

 

 

 

45,606

 

 

 

136,818

 

Christopher S. Hill

 

 

31,688

 

 

 

15,844

 

 

 

15,844

 

 

 

15,844

 

 

 

47,532

 

(1) subject to reduction if absolute Total Shareholder Return for the 2020 Performance Period is negative

 

 

Executive Compensation Policies

Stock Ownership Requirements

Alignment with shareholder interests is reflected in current stock ownership among the NEOs. They reflect a significant personal investment in the Company by the same executives responsible for determining the future success of the organization and the return to shareholders. The CEO is required to own our common shares equal in value to at least five times his annual base salary and the other NEOs are required to own common shares equal in value to at least three times their annual base salary.  NEOs have five years from the date they become an NEO to comply with these guidelines. As of December 31, 2019, Mr. Demshur was in compliance with his share ownership requirements, and Messrs. Bruno and Hill had not yet completed the initial compliance period.

Securities Trading Policy and Hedging Restrictions

We prohibit officers and certain other managers from trading our securities on the basis of material, non-public information or "tipping" others who may so trade on such information and from trading in our securities without obtaining prior approval from our General Counsel. If a manager or officer does not have inside information that is material to the business, such officer or manager may trade immediately following quarterly earnings press releases during an Allowed Trading Window. Any exceptions must be requested in writing and signed by our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or our General Counsel. Core Lab stock may not be margined and, further, any derivative transaction which effectively shifts the economic risk of ownership to a third party is not allowed at any time by our NEOs and managers unless approved by the Compensation Committee.

 

 

Health and Welfare Benefits

We offer a standard range of health and welfare benefits to all employees, including our NEOs. These benefits include medical, prescription drug, and dental coverages, life insurance, accidental death and dismemberment, long-term disability insurance and flexible spending accounts. Our plans do not discriminate in favor of our NEOs.

401(k)

We offer a defined contribution 401(k) plan to substantially all of our employees in the United States. We provide this plan to assist our employees in saving some amount of their cash compensation for retirement in a tax efficient manner. Participants may contribute up to 60% of their base and cash incentive compensation, subject to the current limits under the IRS Code. We

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provide safe harbor matching contributions under this plan up to the first 4% of the participant's compensation and may make additional discretionary contributions. For plan year 2019, the Compensation Committee approved a discretionary contribution of 1% to the 401(k) plan for any eligible employee, including our NEOs, subject to the discretion of the Chief Executive Officer.

Deferred Compensation Plan

Through our subsidiary, Core Laboratories LP, we have adopted a nonqualified deferred compensation plan that permits certain employees, including our NEOs, to elect to defer all or a part of their cash compensation (base, annual incentives and/or commissions) from us until the termination of their status as an employee. Participating employees are eligible to receive a matching deferral under the nonqualified deferred compensation plan that compensates them for contributions they could not receive from us under the 401(k) plan due to the various limits imposed on 401(k) plans by the U.S. federal income tax laws.

Discretionary employer contributions may also be made on behalf of participants in the plan and are subject to discretionary vesting schedules determined at the time of such contributions. Vesting in employer contributions is accelerated upon the death or disability of the participant or a change in control. Discretionary employer contributions under the plan are forfeited upon a participant's termination of employment to the extent they are not vested at that time. We made discretionary employer contributions to the nonqualified deferred compensation plan on behalf of Messrs. Bruno and Hill with respect to the 2019 year.

Supplemental Executive Retirement Plans

In 1998, based on our review of post-retirement compensation provided by various companies in the oilfield services industry, we adopted the Core Laboratories Supplemental Executive Retirement Plan, as amended, referred to as the "SERP". This plan was established to provide additional retirement income for certain of our then-executive officers and death benefits to the officers' designated beneficiaries as a reward for the NEOs' prior contributions and future efforts to our success and growth. David Demshur was a participant in the SERP during 2019. Please read "Information About Our Named Executive Officers and Executive Compensation - Post-employment Benefit Plans - SERP" for more information about the SERP.

Other Perquisites and Personal Benefits

We do not offer any perquisites or other personal benefits to any executive with a value over $10,000 beyond those discussed within this proxy and specifically in the table "Summary Compensation for the Years Ended December 31, 2017, 2018 and 2019" and the supplemental table titled "All Other Compensation from Summary Compensation Table" within this proxy statement.

We believe in the importance of providing attractive intangible benefits to all employees such as open and honest communications, ethical business practices, and a safe work environment.

Deductibility of Compensation Over $1 Million

Section 162(m) of the Internal Revenue Code limits the amount of compensation that may be deducted per covered employee to $1 million per taxable year. For 2017 and prior years, covered employees for this purpose included our Chief Executive Officer and the three next most highly compensated executive officers (other than the Chief Financial Officer) required to be reported as named executive officers, although any compensation that met the requirements of qualified performance-based compensation under Section 162(m) was not subject to this deduction limitation. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, the $1 million annual deduction limitation applies to compensation paid to any individual who is the Chief Executive Officer, Chief Financial Officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year (“the Covered Employees”), and there is no longer any exception for qualified performance-based compensation. For periods after 2017, without the performance-based compensation exception, it is expected that any compensation deductions (other than grandfathered amounts) for any individual who is our Chief Executive Officer, Chief Financial Officer or one of our other three most highly compensated executive officers in 2017 or any later year will be subject to a $1 million annual deduction limitation.

The Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, and will consider the tax law changes. The Committee reviews each material element of compensation on a continuing basis to determine whether deductibility can be accomplished without sacrificing flexibility and other important elements of the overall executive compensation program. Accordingly, the Compensation Committee will continue to retain the discretion to pay compensation that is not deductible.

33


 

 

Employment Agreements and Change in Control Agreements

We maintained employment agreements with Messrs. Demshur, Bruno and Hill in 2019 to ensure they would perform their roles for an extended period. These employment agreements remain in effect for 2020 and generally provide for severance compensation to be paid if the employment of these individuals is terminated under certain conditions. These agreements are described in greater detail in "Information About Our Named Executive Officers and Executive Compensation - Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table - Employment Agreements."

Change in Control

As part of our normal course of business, we engage in discussions with other companies about possible collaborations and/or other ways in which the companies may work together to further our respective long-term objectives. In addition, many larger, established companies consider companies at similar stages of development to ours as potential acquisition targets. In certain scenarios, the potential for a merger or being acquired may be in the best interests of our stakeholders. We provide severance compensation if certain of our executives' employment is terminated following a change in control transaction to promote the ability of our senior executives to act in the best interests of our stakeholders even though their employment could be terminated as a result of the transaction.

Termination Without Cause

If we terminate the employment of an NEO without cause as defined in their applicable agreements, we would be obligated to continue to pay him certain amounts as described in greater detail in "Potential Payments Upon Termination or Change in Control." We believe these payments are appropriate because the terminated executive is bound by confidentiality, non-solicitation and non-compete provisions covering the two year period immediately following termination of service and because the Company and each executive have mutually agreed to a severance package that is in place prior to any termination event. This provides us with more flexibility to make a change in senior management if such a change is in our best interests and the best interests of our shareholders.

 

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INFORMATION ABOUT OUR NAMED EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION

Named Executive Officers

As of December 31, 2019, our NEOs consisted of Messrs. Demshur, Bruno, and Hill. Biographical information regarding Mr. Bruno can be found in "Information About Our Supervisory Directors and Director Compensation - Board of Supervisory Directors." The following biography describes the business experience of Messrs. Demshur and Hill. Our NEOs are not Managing Directors of our Company for purposes of Dutch law.

Mr. Demshur, who is 64 years of age, joined our Company in 1979, most recently as Chief Executive Officer since our Initial Public Offering (“IPO”) in 1995 and Chairman of the Board from May 2001. Mr. Demshur has held various operating positions, including Manager of Geological Sciences from 1983 to 1987, Vice President of Europe, Africa and the Middle East from 1989 to 1991, Senior Vice President of Petroleum Services from 1991 to 1994 and Chief Executive Officer and President from 1994 to February 1, 2018 when Mr. Bruno assumed the position of President. As of May 20, 2020, Mr. Demshur will resign his role as Chief Executive Officer and will continue to serve as an executive until retirement on December 31, 2020. Mr. Demshur's extensive background with the Company and the diversity of experiences gained while in these leadership roles positions him to be an effective leader of our Company. Mr. Demshur is a member of the Society of Petroleum Engineers, the American Association of Petroleum Geologists, the Petroleum Exploration Society of Great Britain and the Society of Core Analysts Section of the Society of Professional Well Loggers Association.

Mr. Hill, who is 50 years of age, has been with the Company for thirteen years, most recently as Chief Financial Officer, as of May 24, 2018, after serving as Vice President, Chief Accounting Officer since May 2015. Since joining the Company in October 2006, Mr. Hill led the Company's Investor Relations effort, was Corporate Group Controller based in Amsterdam, and was Controller of Financial Reporting. Prior to joining the Company, he worked at Halliburton from August 2000 to October 2006 as Controller - Energy & Chemicals of the KBR Division and Corporate Director of Training and Accounting Research. Mr. Hill worked at Ernst & Young from January 1993 until August 2000, where he held the position of Manager his last three years there. Mr. Hill is a CPA and received his Executive MBA degree from Rice University in 2018.

 

35


 

Summary Compensation

The following table summarizes, with respect to our Chief Executive Officer and each of our other NEOs as of December 31, 2019, information relating to the compensation earned for services rendered to the Company in all capacities during fiscal years 2017, 2018, and 2019:

Summary Compensation

for the Years Ended December 31, 2017, 2018 and 2019

 

Name of Executive

and Principal

Position

 

Year

 

Salary

($)

 

 

Stock Awards

($) (1)

 

 

Non-Equity

Incentive Plan

Compensation

($) (2)

 

 

Non-Equity

Incentive Plan

Compensation Not

Paid ($) (2)

 

 

Change in Post-

employment

Benefit Value and

Nonqualified

Deferred

Compensation

Earnings

($) (3)

 

 

All Other

Compensation

($) (4)

 

 

Total

($)

 

 

Total Excluding

Non-Equity

Incentive Plan

Compensation Not

Paid ($) (5)

 

David M. Demshur

 

2019

 

 

1,040,000

 

 

 

6,539,867

 

 

 

 

 

 

1,287,000

 

 

 

708,000

 

 

 

37,160

 

 

 

9,612,027

 

 

 

8,325,027

 

Chief Executive Officer and

 

2018

 

 

1,008,863

 

 

 

6,282,999

 

 

 

 

 

 

1,553,649

 

 

 

(131,000

)

 

 

40,501

 

 

 

8,755,012

 

 

 

7,201,363

 

Supervisory Director

 

2017

 

 

979,479

 

 

 

6,547,689

 

 

 

 

 

 

1,670,011

 

 

 

(263,000

)

 

 

39,025

 

 

 

8,973,204

 

 

 

7,303,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawrence Bruno

 

2019

 

 

531,000

 

 

 

2,753,637

 

 

 

 

 

 

537,638

 

 

 

 

 

 

212,267

 

 

 

4,034,542

 

 

 

3,496,904

 

President, Chief Operating Officer and

 

2018

 

 

425,000

 

 

 

2,044,912

 

 

 

 

 

 

446,250

 

 

 

 

 

 

16,884

 

 

 

2,933,046

 

 

 

2,486,796

 

Supervisory Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher S. Hill

 

2019

 

 

365,000

 

 

 

1,401,387

 

 

 

 

 

 

307,969

 

 

 

 

 

 

83,020

 

 

 

2,157,376

 

 

 

1,849,407

 

Senior Vice President, and

 

2018

 

 

335,000

 

 

 

259,064

 

 

 

 

 

 

 

 

 

 

 

 

12,758

 

 

 

606,822

 

 

 

606,822

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The amounts included in the "Stock Awards" column include the aggregate grant date fair value of the equity-based awards granted during 2017, 2018 and 2019, and have been computed in accordance with FASB ASC Topic 718, formerly FAS 123(R) disregarding any estimate for forfeitures. Assumptions used in the calculation of these amounts are included in Note 13 to our audited financial statements for the fiscal years ended December 31, 2017, 2018 and 2019 and are included in our annual reports on Form 10-K. See "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table" for a description of the material features of these awards. For accounting purposes, the probable outcome for the awards is the maximum level.

(2)

In 2017, Mr. Demshur declined the non-equity incentive plan compensation awards due to industry market conditions. Messrs. Bruno and Hill were not NEOs during any part of 2017. In 2018, Messrs. Demshur, Bruno and Hill declined such awards due to industry market conditions. At the discretion of the Chairman of the Supervisory Board, 2019 cash incentive bonuses were not paid to the NEOs.

(3)

The changes in post-employment benefit values for 2017, 2018 and 2019 were primarily the result of changes in the underlying actuarial assumptions. Specifically, the interest rate is based on a federal rate that changes annually and the mortality tables are pursuant to Section 417 of the IRS Code which is required for valuing payouts from qualified plans. These changes were not the result of additional contributions or benefits accruing to the NEOs.

(4)

All Other Compensation is described in the following section.

(5)

Total Compensation excluding Non-Equity Incentive Plan Compensation is the total compensation excluding the non-equity incentive compensation which has not been paid and which may not be paid (see footnote 2). The amounts including the Non-Equity Incentive Plan Compensation and excluding such compensation have been used for the two Pay Ratio disclosure calculations on page 45.

All Other Compensation from Summary Compensation Table

The following table contains a breakdown of the compensation and benefits included under All Other Compensation in the Summary Compensation table above.

Name of Executive

 

Year

 

Core 401(k)

Contributions

($) (1)

 

 

Non-Qualified

Deferred

Compensation:

Registrant

Contributions

 

 

Discretionary

Contributions to

Retirement Plans

($) (2)

 

 

Company-Owned

Life Insurance

($) (3)

 

 

All Other

Compensation

Total

($)

 

David M. Demshur

 

2019

 

 

11,200

 

 

 

25,456

 

 

 

-

 

 

 

504

 

 

 

37,160

 

Lawrence Bruno

 

2019

 

 

7,022

 

 

 

13,729

 

 

 

191,200