DEF 14A 1 a2016-mroproxystatement.htm DEF 14A DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
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the Securities Exchange Act of 1934 (Amendment No. )
 
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Marathon Oil Corporation
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NOTICE OF 2016 ANNUAL MEETING
MARATHON OIL CORPORATION PROXY STATEMENT
ANNUAL MEETING
Wednesday, May 25, 2016
10:00 a.m. Central Time
Conference Center Auditorium
Marathon Oil Tower
5555 San Felipe Street
Houston, Texas 77056
MEETING HOURS
Registration 9:00 a.m.
Meeting 10:00 a.m.
Please vote promptly by:
telephone,
the Internet, or
marking, signing and returning your proxy or voting instruction card.








Marathon Oil Corporation
5555 San Felipe Street
Houston, TX 77056
Lee M. Tillman
President and
Chief Executive Officer
April 7, 2016
Dear Marathon Oil Corporation Stockholder,
Your Board of Directors and management cordially invites you to attend our 2016 Annual Meeting of Stockholders, to be held in the Conference Center Auditorium of the Marathon Oil Tower, 5555 San Felipe Street, Houston, Texas, on Wednesday, May 25, 2016 at 10:00 a.m. Central Time.
We are making our proxy materials accessible over the Internet, which allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. Please read the Proxy Statement for more information about how to access the proxy materials over the Internet.
On April 13, 2016, we plan to mail to our U.S. stockholders a notice explaining how to:
access our 2016 Proxy Statement and 2015 Annual Report;
request a printed copy of these materials; and
vote online.
All other stockholders will continue to receive copies of the Proxy Statement and Annual Report by mail. You can find information about the matters to be voted on at the meeting in the 2016 Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote promptly so that your shares will be represented and properly voted at the meeting.
Sincerely,
Lee M. Tillman
President and Chief Executive Officer



MARATHON OIL CORPORATION
Notice of 2016 Annual Meeting of Stockholders
Dear Stockholders,
You are invited to attend Marathon Oil Corporation’s 2016 Annual Meeting of Stockholders, to be held in the Conference Center Auditorium of the Marathon Oil Tower, 5555 San Felipe Street, Houston, Texas 77056 on Wednesday, May 25, 2016 at 10:00 a.m. Central Time.
The meeting will be held for the following purposes:
Œ    
To elect eight directors to serve until the 2017 Annual Meeting;
    
To ratify the selection of PricewaterhouseCoopers LLP as our independent auditor for 2016;
Ž    
To approve on an advisory basis our 2015 named executive officer compensation;
    
To approve the 2016 Incentive Compensation Plan; and
    
To act on any other matters properly brought before the meeting.
You are entitled to vote if you were a stockholder of record on March 28, 2016. If you plan to attend the meeting, you will need to show proof of your stock ownership, such as a recent account statement, letter or proxy from your broker or other intermediary, along with a photo identification.
By order of the Board of Directors,
Sylvia J. Kerrigan
Executive Vice President, General Counsel and Secretary
April 7, 2016

Your vote is very important. Please vote right away, even if you plan to attend the Annual Meeting, to ensure your vote is counted. There are four ways to vote:
INTERNET
Visit www.proxyvote.com or scan the QR code on your Notice or proxy card with a smart phone. You will need the 16-digit number included in your Notice, proxy card or voting instructions.
TELEPHONE
Dial 1-800-690-6903 and follow the recorded instructions. You will need the 16-digit number included in your Notice, proxy card or voting instructions.
MAIL
If you received a proxy card by mail, send your completed and signed proxy card in the envelope provided.
IN PERSON
You may vote in person at the Annual Meeting.





PROXY STATEMENT
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




MARATHON OIL | 2016 PROXY STATEMENT


Q&A ABOUT THE ANNUAL MEETING
When and where is the Annual Meeting?
The 2016 Annual Meeting of Stockholders (“Annual Meeting”) will be held in the Conference Center Auditorium of the Marathon Oil Tower, 5555 San Felipe Street, Houston, Texas 77056 on Wednesday, May 25, 2016 at 10:00 a.m. Central Time.
Who may vote?
You may vote if you held Marathon Oil Corporation (“Marathon Oil” or “Company”) common stock at the close of business on March 28, 2016, the record date for the meeting. Each share of common stock is entitled to one vote. As of the record date, there were 847,739,667 shares of Marathon Oil common stock outstanding and entitled to vote.
Who is soliciting my vote?
Our Board of Directors (the “Board”) is soliciting your proxy to vote your shares at the Annual Meeting. In connection with this solicitation, we mailed a Notice Regarding the Availability of Proxy Materials (“Notice”) to our stockholders on or about April 13, 2016. You may access the proxy materials on the Internet or request a printed set of the proxy materials by following the instructions in the Notice.
What is included in the proxy materials for the Annual Meeting?
The proxy materials include the Notice, this Proxy Statement, and our 2015 Annual Report. If you requested printed versions by mail, the proxy materials also include the proxy card or voting instructions. The proxy materials are being distributed and made available on or about April 13, 2016.
What am I voting on and how does the Board recommend that I vote?
Proposal
 
More Information
Board Recommendation
PROPOSAL 1
Election of Directors
Page 4
FOR each nominee
PROPOSAL 2
Ratification of Independent Auditor for 2016
Page 49
FOR
PROPOSAL 3
Advisory Vote to Approve the Compensation of Our Named Executive Officers
Page 51
FOR
PROPOSAL 4
Approval of 2016 Incentive Compensation Plan
Page 52
FOR
How do I vote?
There are four ways to vote:
INTERNET
Vote by Internet at www.proxyvote.com or scan the QR code on your Notice or proxy card with a smart phone. You will need the 16-digit number included in your Notice, proxy card or voting instructions.
TELEPHONE 
Vote by phone by dialing 1-800-690-6903 and following the recorded instructions. You will need the 16-digit number included in your Notice, proxy card or voting instructions.
MAIL
If you received a proxy card by mail, send your completed and signed proxy card in the envelope provided.
IN PERSON
You may vote in person at the Annual Meeting.

MARATHON OIL | 2016 PROXY STATEMENT 1


To be counted, votes by Internet, telephone or mail must be received by 11:59 p.m. Eastern Time on May 24, 2016, for shares held by registered holders directly, and by 11:59 p.m. Eastern Time on May 22, 2016 for shares held in the Marathon Oil Company Thrift Plan.
If I am a beneficial owner of Marathon Oil shares, how do I vote?
If you are a beneficial owner of Marathon Oil common stock held in street name, you should have received either a Notice or a voting instruction card with these proxy materials from the record owner of the shares. Follow the instructions in the Notice or the voting card to vote by mail, telephone or Internet. To vote in person at the Annual Meeting, you must obtain a valid proxy from the record owner. Follow your broker’s instructions to obtain this proxy.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
We provide our proxy materials over the Internet. Unless you request a printed copy of the proxy materials or reside outside the United States, we will send you a Notice explaining how to access the proxy materials over the Internet or to request a printed copy. You can request proxy materials in printed form by mail or electronically by e-mail on an ongoing basis.
May I change my vote?
If you are a record holder of Marathon Oil common stock, you may change your vote or revoke your proxy at any time before your shares are voted at the meeting by:
voting again by telephone or over the Internet;
sending us a signed and dated proxy card dated later than your last vote;
notifying the Secretary of Marathon Oil in writing; or
voting in person at the meeting.
How many votes are needed to approve each of the proposals?
Directors will be elected by a majority of the votes cast. To be elected, the number of shares voted “FOR” a director must exceed the number of shares voted “AGAINST” that director. Abstentions will have no effect in director elections.
Each other proposal will require the affirmative vote of a majority of the shares of common stock represented in person or by proxy at the meeting and entitled to vote. Abstentions will have the same effect as a vote against such proposal. Broker non-votes are not counted as either votes for or votes against a proposal.
What are broker non-votes?
Brokers may vote on routine matters, such as ratification of the independent auditor, without customer voting instructions. However, brokers may not vote on non-routine matters, such as the election of directors or approval of executive compensation, without customer voting instructions. Broker-held shares that are not voted on non-routine matters are referred to as broker non-votes.
How many votes are needed for a quorum?
Under our By-laws, a quorum is one third of the voting power of the outstanding shares entitled to vote. Both abstentions and broker non-votes are counted in determining that a quorum is present for the meeting.
Will my vote be confidential?
The voting records of employee stockholders are confidential. Otherwise, voting records are not confidential, except as necessary to meet legal requirements and in other limited circumstances such as proxy contests.

2     MARATHON OIL | 2016 PROXY STATEMENT


Who pays for the proxy solicitation related to the meeting?
We do. In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies by telephone, in person or by other means. They will receive no additional compensation for this work. We will arrange for brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of common stock, and we will reimburse them for reasonable out-of-pocket expenses incurred in connection with forwarding the material.
How will other matters raised at the meeting be voted?
If any matters other than those on the proxy card are presented at the meeting, the proxy committee will vote on them using its best judgment. Under our By-laws, notice of any matter to be presented by a stockholder for a vote at the meeting must have been received by our corporate Secretary between November 19, 2015 and December 19, 2015, accompanied by certain information about the stockholder presenting it. We have not received notice of any matter to be presented other than those on the proxy card.
If I want to submit a stockholder proposal for consideration at the 2017 Annual Meeting, when is that proposal due?
Stockholder proposals submitted for inclusion in our 2017 Proxy Statement must be received in writing by our corporate Secretary no later than the close of business on December 14, 2016. Stockholder proposals submitted outside the process for inclusion in the Proxy Statement must be received in writing by our corporate Secretary on or after December 14, 2016 and no later than the close of business on January 13, 2017 and must be accompanied by certain information about the stockholder making the proposal, in accordance with our By-laws.
If I want to nominate a director for consideration at the 2017 Annual Meeting, when is that nomination due?
Eligible stockholders may nominate a candidate for election to the Board for inclusion in our 2017 Proxy Statement in accordance with the “proxy access” provisions of our By-laws. Stockholder nominations for director submitted for inclusion in our 2017 Proxy Statement must be received in writing by our corporate Secretary on or after December 14, 2016, and no later than the close of business on January 13, 2017, and must otherwise comply with all of the requirements of the By-laws.
Stockholder nominations for director submitted outside the “proxy access” process must be received in writing by our corporate Secretary on or after December 14, 2016, and no later than the close of business on January 13, 2017, and must otherwise comply with all of the requirements of the By-laws.
Will I receive more than one copy of the proxy materials if multiple stockholders share my address?
Unless we have received contrary instructions from one or more of the stockholders sharing your address, we will send only one set of proxy materials to your household. Upon oral or written request, we will promptly send a separate copy of the proxy materials to any stockholder at your address. To request separate or single delivery of these materials now or in the future, call us at 1-866-984-7755 or write to us at Marathon Oil Corporation, Investor Relations Office, 5555 San Felipe Street, Houston, Texas, 77056-2701.

MARATHON OIL | 2016 PROXY STATEMENT 3


PROPOSAL 1: ELECTION OF DIRECTORS
Under our Restated Certificate of Incorporation, directors are elected for terms expiring at the next succeeding Annual Meeting of stockholders. We have eight nominees for director whose terms expire in 2016. Each director is nominated for a one-year term expiring at the 2017 Annual Meeting.
Directors are elected by a majority of votes cast. For a director to be elected, the number of shares cast FOR a director must exceed the number of votes cast AGAINST that director. Abstentions will have no effect in director elections. If any nominee for whom you have voted becomes unable to serve, your proxy may be voted for another person designated by the Board.
Our By-laws require any incumbent who does not receive sufficient votes to promptly tender his or her resignation to the Board. Our Corporate Governance and Nominating Committee will recommend to the Board whether to accept or reject the tendered resignation or take other action. The Board will act on the tendered resignation, taking into account the Corporate Governance and Nominating Committee’s recommendation, and publicly disclose its decision regarding the tendered resignation within 90 days after certification of the election results. In the event of a vacancy, the Board may fill the position or decrease the size of the Board.
 
DIRECTOR QUALIFICATIONS AND NOMINATIONS
Our Corporate Governance Principles set forth the process for director selection and director qualifications. In summary, the chairman of the Corporate Governance and Nominating Committee, the Chairman of the Board, the CEO, and the secretaries of the Compensation Committee and Corporate Governance and Nominating Committee should work with a third-party professional search firm to review director candidates and their credentials. At least one member of the Corporate Governance and Nominating Committee, the Chairman of the Board and the CEO should meet with the director candidate. This screening process applies to nominees recommended by the Corporate Governance and Nominating Committee, as well as nominees recommended by our stockholders in accordance with our By-laws or applicable law. Selection of new directors includes an evaluation of their independence, as discussed below under “Director Independence,” their business or professional experience, their integrity and judgment, their record of public service, their ability to devote sufficient time to the affairs of the Company, the diversity of backgrounds and experience they will bring to the Board, and the Company’s needs at that particular time. Directors should also be individuals of substantial accomplishment with demonstrated leadership capabilities, and they should represent all stockholders rather than any special interest group or constituency.
Eligible stockholders may nominate a candidate for election to the Board for inclusion in our 2017 Proxy Statement in accordance with the “proxy access” provisions of our By-laws. Nominations must be received in writing by our corporate Secretary at least 90 days, but not more than 120 days, before the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s Annual Meeting, and must otherwise comply with all of the requirements of the By-laws. Stockholder nominations for director submitted outside the “proxy access” process must be received in writing by our corporate Secretary at least 90 days, but not more than 120 days, before the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s Annual Meeting, and must otherwise comply with all of the requirements of the By-laws.


4     MARATHON OIL | 2016 PROXY STATEMENT


 
DIRECTOR INDEPENDENCE
In accordance with applicable laws, regulations, our Corporate Governance Principles and the rules of the New York Stock Exchange (“NYSE”), the Board must affirmatively determine the independence of each director and director nominee. The Corporate Governance and Nominating Committee considers all relevant facts and circumstances including, without limitation, transactions during the previous year between the Company and the director directly, immediate family members of the director, organizations with which the director is affiliated, and the frequency and dollar amounts associated with these transactions. The Corporate Governance and Nominating Committee further considers whether the transactions were at arm’s length in the ordinary course of business and whether the transactions were consummated on terms and conditions similar to those of unrelated parties. The Committee then makes a recommendation to the Board with respect to the independence of each director and director nominee.
In assessing the independence of each director who served on the Board during 2015, the Corporate Governance and Nominating Committee considered: royalty payments received by a subsidiary of the Company from a subsidiary of Peabody Energy Corporation, at which Mr. Boyce served as chairman and chief executive officer; contributions to the University of Wyoming Foundation, of which Mr. Deaton is a board member, made pursuant to a commitment entered into before Mr. Deaton joined the Board; contributions to Rensselaer Polytechnic Institute, of which Ms. Jackson is president; royalty interests paid to family members and/or trusts affiliated with Mr. Deaton; and contributions to non-profit organizations of which Messrs. Deaton and Lader or their immediate family members are affiliates.
Based on these considerations, the standards in our Corporate Governance Principles and the recommendation of the Corporate Governance and Nominating Committee, the Board determined that the following directors are independent:
Gaurdie E. Banister, Jr.
Chadwick C. Deaton
Michael E.J. Phelps
Gregory H. Boyce
Marcela E. Donadio
Dennis H. Reilley
Pierre Brondeau (former director)
Philip Lader
Shirley Ann Jackson (former director)
As CEO of the Company, Mr. Tillman is not independent.
 
DIRECTOR DIVERSITY
The Corporate Governance and Nominating Committee is responsible for reviewing with the Board the appropriate skills and characteristics required of Board members in the context of the Board’s current make-up. When we have an opening on the Board, we will always look at a diverse pool of candidates, considering each candidate’s business or professional experience, demonstrated leadership ability, integrity and judgment, record of public service, diversity, financial and technological acumen and international experience. We view and define diversity in its broadest sense, which includes gender, ethnicity, age, education, experience and leadership qualities.
Of the eight director nominees, one is an officer of Marathon Oil, five have top executive experience with a wide variety of businesses, one has extensive audit and public accounting experience, and one has a distinguished career as an international business leader and diplomat. Each nominee’s background and qualifications are discussed further on the following pages.


MARATHON OIL | 2016 PROXY STATEMENT 5

NOMINEES FOR DIRECTOR | TERMS EXPIRE 2017
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE


Mr. Banister, 58, retired as president and CEO of Aera Energy LLC (an oil and gas exploration and production company jointly owned by Shell Oil Company and ExxonMobil) in July 2015, having served in that position since 2007. Prior to Aera Energy, he served in executive level positions at Shell Oil, as technical vice president, Upstream Asia Pacific from 2005 until 2007 overseeing drilling and development activities in Southeast Asia, Australia and New Zealand. From 2003 to 2005 Mr. Banister was technical vice president, Upstream Americas, where he championed innovative capital cost approaches to major projects and from 2001 to 2003 served as vice president of Business Development and Technology. He was president USA and executive vice president of Shell Services EP Gas and Power from 1998 to 2001. Mr. Banister joined Shell Oil in 1980 as an offshore facilities engineer. Mr. Banister is lead independent director of the Board of Directors of Tyson Foods, Inc. He also serves as trustee of the South Dakota School of Mines and Technology Foundation. He previously served on the executive committee of the California Chamber of Commerce, the advisory board of the Chancellor of the California State University System, the board of the Western States Petroleum Association and is past chair of the board of the United Way of Kern County. Mr. Banister holds a B.S. in metallurgical engineering from the South Dakota School of Mines and Technology and received an honorary doctorate degree in arts and sciences from Fort Valley State University.
Through his position as president and CEO of an oil and gas exploration and production company and his 35 years working in the oil and gas industry with experience in onshore and offshore operations, global shared services, strategic planning, engineering and technology, Mr. Banister has gained valuable knowledge, experience and management leadership regarding many of the same issues that we face as a publicly-traded company in the oil and gas industry, as well as insight into key issues faced by our international operations.
Gaurdie E. Banister, Jr.
Director since 2015
Independent


Mr. Boyce, 61, retired as Executive Chairman of Peabody Energy Corporation (a private-sector coal company) in December 2015. He was named Chief Executive Officer Elect in 2005, and served as Chief Executive Officer from 2006 until 2015. Mr. Boyce was President of Peabody from 2003 to 2008 and was Chief Operating Officer from 2003 to 2005. He was a director of Peabody since 2005, was appointed Chairman in 2007 and Executive Chairman in 2015. From 2000 to 2003, Mr. Boyce served as Chief Executive Officer-Energy of Rio Tinto plc (an international natural resource company). He served as President and Chief Executive Officer of Kennecott Energy Company from 1994 to 1999 and as President of Kennecott Minerals Company from 1993 to 1994, having served in positions of increasing responsibility with Kennecott since 1984. Mr. Boyce serves on the board of directors of Monsanto Company (a multinational agrochemical and agricultural biotechnology company) and Newmont Mining Corporation (a world-leading gold producer). He is past chairman of the National Mining Association, served on the board of directors of the U.S.-China Business Council, and is a member of the Business Council. Mr. Boyce is past Chairman of the Coal Industry Advisory Board of the International Energy Agency, and a member of the National Coal Council. He serves on the board of trustees of Washington University of St. Louis, the Advisory Council of the University of Arizona’s Lowell Institute of Mineral Resources, and the School of Engineering and Applied Science National Council at Washington University. Mr. Boyce holds a B.S. in mining engineering from the University of Arizona and completed the Advanced Management Program from the Graduate School of Business at Harvard University.
Mr. Boyce’s former role as a chief executive officer has provided him with experience running a major corporation with international operations, including developing strategic insight and direction for his company, and exposed him to many of the same issues we face in our business, including markets, competitors, operational, regulatory, technology and financial matters.
Gregory H. Boyce
Director since 2008
Independent


6     MARATHON OIL | 2016 PROXY STATEMENT

NOMINEES FOR DIRECTOR | TERMS EXPIRE 2017
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE


Mr. Deaton, 63, retired as Executive Chairman of the Board of Baker Hughes Incorporated (an oilfield services company) in April 2013, having served in that position since 2012 and as Chairman of the Board from 2004 to 2012. He served as Chief Executive Officer of Baker Hughes from 2004 through 2011, and as President from 2008 through 2010. Prior to joining Baker Hughes, Mr. Deaton was President and Chief Executive Officer of Hanover Compressor Company from 2002 through 2004. He was a Senior Advisor to Schlumberger Oilfield Services from 1999 to September 2001 and was an Executive Vice President from 1998 to 1999. Mr. Deaton serves on the boards of directors of Ariel Corporation (a privately held gas compressor equipment manufacturer), Air Products and Chemicals, Inc. (an industrial gas and chemical supplier), CARBO Ceramics Inc. (an oil and gas production enhancement company) and Transocean Ltd. (an offshore drilling contractor). Mr. Deaton is a member of the Society of Petroleum Engineers. He also serves on the board of the University of Wyoming Foundation and on the Wyoming Governor’s Engineering Task Force. Mr. Deaton earned a Bachelor of Science in Geology from the University of Wyoming.
Mr. Deaton’s over 30 years of executive and management experience in the energy business, including over 15 years of senior executive experience in the oilfield services industry, provides him valuable knowledge, experience and management leadership regarding many of the same issues that we face as a publicly-traded company in the oil and gas industry. His service on the boards of other publicly-traded companies has provided him exposure to different industries and approaches to governance.
Chadwick C. Deaton
Director since 2014
Independent

Ms. Donadio, 61, retired as a partner of Ernst & Young LLP (a multinational professional services firm) in 2014. Prior to her retirement, Ms. Donadio was Americas Oil & Gas Sector Leader for Ernst & Young LLP from 2007, with responsibility for one of Ernst & Young’s significant industry groups helping set firm strategy for oil and gas industry clients in the United States and throughout the Americas. Ms. Donadio joined Ernst & Young LLP in 1976, and from 1989 served as an audit partner for multiple companies in the oil and gas industry. During her tenure as a partner with Ernst & Young LLP, Ms. Donadio held various energy industry leadership positions. She has audit and public accounting experience with a specialization in domestic and international operations in all segments of the energy industry. Ms. Donadio is a member of the Board of Directors of National Oilwell Varco, Inc. (an oilfield products and services company). She is also a member of the Board of Directors of Theatre Under the Stars, a trustee for the Great Commission Foundation of the Episcopal Diocese of Texas, a member of the Corporation Development Committee of the Massachusetts Institute of Technology, and a member of the Dean's Advisory Council for the E. J. Ourso College of Business at Louisiana State University. Ms. Donadio holds a B.S. in accounting from Louisiana State University and is a licensed certified public accountant in the State of Texas.
Ms. Donadio’s comprehensive knowledge of public company financial reporting regulations and compliance requirements contributes valuable expertise to our Board. She also has a deep understanding of the strategic issues affecting companies in the oil and gas industry. In addition, her extensive audit and public accounting experience in the energy industry, both domestic and international, uniquely qualifies her to serve as a member of our Audit and Finance Committee.
Marcela E. Donadio
Director since 2014
Independent


MARATHON OIL | 2016 PROXY STATEMENT 7

NOMINEES FOR DIRECTOR | TERMS EXPIRE 2017
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE


Ambassador Lader, 70, served from 2001 to June 2015 as non-executive Chairman of WPP plc, a global advertising and communications services company, which includes J. Walter Thompson, Ogilvy & Mather, Young & Rubicam, Hill & Knowlton, Grey Global and Burson-Marsteller, among other international marketing and media services companies. He also serves as a senior advisor to Morgan Stanley (a financial services company) and Palantir Technologies (a private analytic data technology company), and is a partner in the law firm of Nelson, Mullins, Riley & Scarborough. Ambassador Lader served as U.S. Ambassador to the Court of St. James from 1997 through 2001, and was Assistant to the President and White House Deputy Chief of Staff, Deputy Director of the Office of Management and Budget, and Administrator of the U.S. Small Business Administration. His former service includes as President of Sea Pines Company, Executive Vice President of Sir James Goldsmith’s U.S. holding company, and president of universities in Australia and South Carolina. He also serves on the boards of directors of AES Corporation (a global power company) and United Company RUSAL Plc (a global aluminum producer). Ambassador Lader is a member of the Board of Trustees of RAND Corporation, previously serving as Vice Chairman, and is also a member of the Board of Trustees of The Atlantic Council, as well as a member of the Council on Foreign Relations. Within the past five years, Ambassador Lader also served on the board of directors of Lloyd’s of London. He holds a B.A. from Duke University (Phi Beta Kappa), an M.A. from the University of Michigan and a J.D. from Harvard Law School, completed graduate studies in law at Oxford University and has been awarded honorary doctorates by 14 universities and colleges.
Through his service as chairman of the world’s largest marketing and media services company, senior-level U.S. government appointments, partner at a major law firm and other appointments and positions, Ambassador Lader has valuable knowledge and experience managing many of the key issues we face as a publicly-traded company. He has extensive experience with public policy matters, which uniquely qualify him to serve as Chairman of our Health, Environmental, Safety and Corporate Responsibility Committee.
Philip Lader
Director since 2002
Independent



Mr. Phelps, 68, is chairman and founder of Dornoch Capital, Inc., a private investment company. Prior to forming Dornoch, he served as chairman and CEO of Westcoast Energy, Inc. (a natural gas company) from 1992 to 2002, as chief financial officer from 1987 to 1989, and as a corporate development executive from 1982 to 1987. Mr. Phelps serves on the board of directors of Spectra Energy Corporation (a pipeline and midstream company). He also serves as a director of Vancouver General Hospital Foundation, having previously served as Chair from 2010 to 2012. Within the past five years, he also served on the boards of directors of Canadian Pacific Railway Company and Prodigy Gold Incorporated (formerly Kodiak Exploration Ltd.). He is a member of the North American Advisory Board of the London School of Economics and is a Special Advisor to Nomura Canada, Inc. Mr. Phelps holds a B.A. in economics and history and an LL.B. from the University of Manitoba, an LL.M. from the London School of Economics and Political Science in London, and has been awarded honorary doctorates by three universities.
Through his positions as chairman and founder of a private investment company, chairman and CEO of a natural gas company with international operations, and other executive and management positions, Mr. Phelps has valuable experience with key issues faced by international operations. His experience on the boards of several other publicly-traded companies has given him exposure to a variety of industries and approaches to governance.
Michael E. J. Phelps
Director since 2009
Independent


8     MARATHON OIL | 2016 PROXY STATEMENT

NOMINEES FOR DIRECTOR | TERMS EXPIRE 2017
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE


Mr. Reilley, 63, is non-executive Chairman of the Board of Marathon Oil Corporation. He served as chairman of Praxair, Inc. (a provider of gases and coatings) from 2006 to 2007, as chairman and chief executive officer in 2006, and as chairman, president and chief executive officer from 2000 to 2006. Prior to joining Praxair, Mr. Reilley served as executive vice president and chief operating officer of E. I. Du Pont de Nemours & Company since 1999, having served in positions of increasing responsibility with DuPont and Conoco, Inc. (which was acquired by DuPont in 1981) since joining Conoco in 1975 as a pipeline engineer. Mr. Reilley is a founding member and partner of Trian Advisory Partners (an advisory group for Trian Fund Management, L.P.). He also serves on the board of directors of Dow Chemical Company (a provider of specialty chemicals). Within the past five years, Mr. Reilley also served on the boards of directors of Covidien Ltd., having served as non-executive chairman of Covidien from 2007 through 2008 and H. J. Heinz Co. He is a former Chairman of the American Chemistry Council. Mr. Reilley holds a B.S. in finance from Oklahoma State University.
Mr. Reilley has over 35 years of executive and management experience in the oil, petrochemical and chemical industries. His service as chairman, president and CEO of Praxair and other executive and management positions, has provided valuable experience in managing many of the major issues that we face as a publicly-traded company in the oil and gas industry. His service on other publicly-traded company boards has given him valuable insight and exposure to a variety of industries and approaches to governance.
Dennis H. Reilley
Director since 2002
Independent

Mr. Tillman, 54, became a director, President and Chief Executive Officer of Marathon Oil on August 1, 2013. Prior to joining Marathon Oil, he served as vice president of engineering for ExxonMobil Development Company (a project design and execution company), where he was responsible for all global engineering staff engaged in major project concept selection, frontend design and engineering. He served as North Sea production manager and lead country manager for subsidiaries of ExxonMobil in Stavanger, Norway, from 2007 and 2010, and as acting vice president, ExxonMobil Upstream Research Company from 2006 to 2007. Mr. Tillman began his career in the oil and gas industry at Exxon Corporation in 1989 as a research engineer and has extensive operations management and leadership experience that has included assignments in Jakarta, Indonesia; Aberdeen, Scotland; Stavanger, Norway; Malabo, Equatorial Guinea; Dallas and New Orleans. He is a board member of the American Petroleum Institute, American Exploration & Production Council and the Greater Houston Partnership, a member of the University of Houston Energy Advisory Board and the Chemical and Engineering Advisory Councils of Texas A&M University. He is also a member of the National Petroleum Council, the Business Roundtable and the Society of Petroleum Engineers. Mr. Tillman serves as a member of the Celebration of Reading Committee within the Barbara Bush Houston Literacy Foundation. He also is a member of the advisory board and currently president of Spindletop Charities. Mr. Tillman holds a B.S. in chemical engineering from Texas A&M University and a Ph.D. in chemical engineering from Auburn University.
As our President and Chief Executive Officer, Mr. Tillman sets our Company’s strategic direction under the Board’s guidance. He has extensive knowledge and experience in global operations, project execution and leading edge technology in the oil and gas industry gained through his executive and management positions with our Company and ExxonMobil. His knowledge and hands-on experience with the day-to-day issues affecting our business provide the Board with invaluable information necessary to direct the business and affairs of our Company.
Lee M. Tillman
Director since 2013
Management/Non-Independent


MARATHON OIL | 2016 PROXY STATEMENT 9


CORPORATE GOVERNANCE
 
BOARD OF DIRECTORS
Our business and affairs are managed under the direction of the Board, currently comprised of eight directors. The Board met eight times in 2015. Attendance for Board and committee meetings was 97% for the full year. Under our Corporate Governance Principles, directors are expected to attend the Annual Meeting of Stockholders. All of our then-current directors attended the 2015 annual meeting.
Our Corporate Governance Principles require our non-employee directors to meet at regularly scheduled executive sessions. An offer of an executive session is extended to non-employee directors at each regularly scheduled Board meeting. In 2015, the non-employee directors held eight executive sessions.
 
COMMITTEES OF THE BOARD
The Board has four standing committees: (i) the Audit and Finance Committee, (ii) the Compensation Committee, (iii) the Corporate Governance and Nominating Committee, and (iv) the Health, Environmental, Safety and Corporate Responsibility Committee. Each committee is comprised solely of independent directors as defined under the rules of the New York Stock Exchange (“NYSE”). Each committee’s written charter, adopted by the Board, is available on our website at http://www.marathonoil.com/Investor_Center/Corporate_Governance/.
The following tables show each committee’s membership, principal functions and number of meetings in 2015.
Audit and Finance Committee(1)
Michael E.J. Phelps, Chair
Members:
Gaurdie E. Banister, Jr.(2)
Gregory H. Boyce
Pierre Brondeau(3)
Marcela E. Donadio
Shirley Ann Jackson(4)

Meetings in 2015: 6
• Appoints, compensates and oversees the work of the independent auditor.
• Reviews and approves in advance all audit, audit-related, tax and permissible non-audit services to be performed by the independent auditor.
• Meets separately with the independent auditor, the internal auditors and management with respect to the status and results of their activities annually reviewing and approving the audit plans.
• Reviews, evaluates and assures the rotation of the lead audit partner.
• Reviews with management, and if appropriate the internal auditors, our disclosure controls and procedures and management’s conclusions about their efficacy.
• Reviews, approves and discusses with management, the independent auditor and if appropriate the internal auditors, the annual and quarterly financial statements, earnings press releases, reports of internal control over financial reporting, and the annual report.
• Discusses with management guidelines and policies for risk assessment and management.
• Reviews and recommends dividends, certain financings, loans, guarantees and other uses of credit.


10     MARATHON OIL | 2016 PROXY STATEMENT


Compensation Committee
Gregory H. Boyce, Chair
Members:
Pierre Brondeau(3)
Chadwick C. Deaton
Marcela E. Donadio
Shirley Ann Jackson(4)
Philip Lader

Meetings in 2015: 5
• Recommends to the Board all matters of policy and procedures relating to executive compensation.
• Reviews and approves corporate goals and objectives relevant to the CEO’s compensation, and determines and approves the CEO’s compensation level based on the Board’s performance evaluation.
• Determines and approves the compensation of the other executive officers, and reviews the executive officer succession plan.
• Administers our incentive compensation plans and equity‑based plans, and certifies the achievement of performance levels under our incentive compensation plans.
• Reviews with management and recommends for inclusion in our annual Proxy Statement our Compensation Discussion and Analysis.
Corporate Governance and Nominating Committee
Pierre Brondeau, Chair(3)
Members:
Gaurdie E. Banister, Jr. (2)
Chadwick C. Deaton
Philip Lader
Michael E.J. Phelps

Meetings in 2015: 4
• Reviews and recommends to the Board the appropriate size and composition of the Board, including candidates for election or re-election as directors, the criteria to be used for the selection of director candidates, the composition and functions of the Board committees, and all matters relating to the development and effective functioning of the Board.
• Reviews and recommends to the Board each committee’s membership and chairperson, including a determination of whether one or more Audit and Finance Committee members qualifies as an “audit committee financial expert” under applicable law.
• Assesses and recommends corporate governance practices, including reviewing and approving codes of conduct and policies applicable to our directors, officers and employees.
• Oversees the evaluation of the Board.
• Reviews and, if appropriate, approves related person transactions.
Health, Environmental, Safety and Corporate Responsibility Committee
Philip Lader, Chair
Members:
Gaurdie E. Banister, Jr. (2)
Gregory H. Boyce Marcela E. Donadio
Shirley Ann Jackson(4)
Michael E.J. Phelps

Meetings in 2015: 2
• Reviews and recommends Company policies, programs, and practices concerning broad health, environmental, safety, social, public policy and political issues.
• Identifies, evaluates and monitors the health, environmental, safety, social, public policy and potential trends, issues and concerns, which affect or could affect our business activities.
• Reviews legislative and regulatory issues affecting our businesses and operations.
• Reviews our political, charitable and educational contributions.
(1)    All the members of the Audit and Finance Committee meet the additional independence standards under Exchange Act Rule 10A-3. Based on the recommendation of the Corporate Governance and Nominating Committee, the Board has determined that each of Ms. Donadio and Mr. Phelps qualifies as an “Audit Committee Financial Expert” under the Securities and Exchange Commission’s (“SEC”) rules based upon the attributes, education and experience discussed in their respective biographies above.
(2)    Mr. Banister was elected to the Board effective October 1, 2015, and was appointed to serve on the Audit and Finance Committee, the Corporate Governance and Nominating Committee and the Health, Environmental, Safety and Corporate Responsibility Committee, effective October 28, 2015.
(3) Mr. Brondeau’s service on the Board concluded on March 28, 2016.
(4) Dr. Jackson’s service on the Board concluded on April 29, 2015.

MARATHON OIL | 2016 PROXY STATEMENT 11


 
BOARD LEADERSHIP STRUCTURE
The Board does not have a policy regarding whether the roles of the Chairman and CEO should be separate, but rather makes this determination on the basis of what is best for our Company at a given point in time. Our current Chairman, Mr. Reilley, was appointed as non-executive chairman on January 1, 2014. As non-executive Chairman, Mr. Reilley presides at all meetings of stockholders and the Board, as well as at all executive sessions of the non-employee directors. We believe the Board leadership structure is appropriate for us at this time.
 
THE BOARD’S ROLE IN RISK OVERSIGHT
Responsibility for risk oversight rests with the Board and its committees:
The Audit and Finance Committee annually reviews our enterprise risk management process and the latest assessment of risks and key mitigation strategies. It regularly reviews risks associated with financial and accounting matters and reporting. It monitors compliance with legal and regulatory requirements and internal control systems, and reviews risks associated with financial strategies and the Company’s capital structure.
The Compensation Committee reviews the executive compensation program to ensure it does not encourage excessive risk-taking. It also reviews our executive compensation, incentive compensation and succession plans to ensure we have appropriate practices in place to support the retention and development of the talent necessary to achieve our business goals and objectives.
The Health, Environmental, Safety and Corporate Responsibility Committee regularly reviews and oversees operational risks, including those relating to health, environment, safety and security. It reviews risks associated with social, political and environmental trends, issues and concerns, domestic and international, which affect or could affect our business activities, performance and reputation.
The Board receives regular updates from the committees about these activities, and reviews additional risks not specifically within the purview of any particular committee and risks of a more strategic nature. Key risks associated with the strategic plan are reviewed annually at the Board’s strategy meeting and periodically throughout the year.
While the Board and its committees oversee risk management, Company management is responsible for managing risk. We have a robust enterprise risk management process for identifying, assessing and managing risk, and monitoring risk mitigation strategies. Our CEO and CFO and a committee of executive officers and senior managers work across the business to manage each enterprise level risk and to identify emerging risks.
 
RISK ASSESSMENT RELATED TO OUR COMPENSATION STRUCTURE
The Compensation Committee regularly evaluates and considers the role of executive compensation programs in ensuring that our executive officers take only appropriate and prudent risks, and that compensation opportunities do not motivate excessive risk-taking. The practices we employ include:
All executive officer compensation decisions are made by the Compensation Committee, which is comprised solely of independent directors.
The Compensation Committee is advised by an independent compensation consultant that performs no other work for executive management or our Company.

12     MARATHON OIL | 2016 PROXY STATEMENT


Our executives do not have employment agreements.
The Compensation Committee manages our compensation programs to be competitive with those of peer companies and monitors our programs against trends in executive compensation on an annual basis.
Our compensation programs are intended to balance short-term and long-term incentives.
Our annual cash bonus program is based on a balanced set of objective metrics that are not significantly influenced by commodity prices. In addition, the Compensation Committee considers the achievement of individual performance commitments and overall corporate performance.
Annual cash bonuses are determined and paid to executive officers only after the Audit and Finance Committee has reviewed audited financial statements for the performance year.
The Compensation Committee regularly evaluates share utilization in our 2012 Incentive Compensation Plan by reviewing overhang levels (dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares).
Our clawback policy applies to annual cash bonuses and long-term incentives and generally would be triggered with respect to an executive officer in the event of a material accounting restatement due to noncompliance with financial reporting requirements or an act of fraud by that executive officer.
 
CORPORATE GOVERNANCE PRINCIPLES
Our Corporate Governance Principles address the Board’s general function, including its responsibilities, Board size, director elections and limits on the number of Board memberships. These principles also address Board independence, committee composition, the process for director selection and director qualifications, the Board’s performance review, the Board’s planning and oversight functions, director compensation and director retirement and resignation. The Corporate Governance Principles are available on our website at
http://www.marathonoil.com/Investor_Center/Corporate_Governance/.
 
CODE OF BUSINESS CONDUCT
Our Code of Business Conduct, which applies to our directors, officers and employees, is available on our website at http://www.marathonoil.com/Investor_Center/Corporate_Governance/.
 
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
Our Code of Ethics for Senior Financial Officers, which applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, is available on our website at http://www.marathonoil.com/Investor_Center/Corporate_Governance/. Under this code these officers must:
act with honesty and integrity, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC and in other public communications made by the Company;

MARATHON OIL | 2016 PROXY STATEMENT 13


comply with applicable governmental laws, rules and regulations; and
promote the prompt internal reporting of violations of this Code of Ethics to the chair of the Audit and Finance Committee and to the appropriate person or persons identified in the Company’s Code of Business Conduct.
The code further provides that any violation will be subject to appropriate discipline, up to and including dismissal from the Company and prosecution under the law.
 
POLICY FOR REPORTING BUSINESS ETHICS CONCERNS
Our Policy for Reporting Business Ethics Concerns establishes procedures for the receipt and treatment of business ethics concerns received by the Company, including those regarding accounting, internal accounting controls, or auditing matters. The Policy for Reporting Business Ethics Concerns is available on our website at http://www.marathonoil.com/About_Us/Our_Values/Ethics_and_Integrity/.
 
COMMUNICATIONS FROM INTERESTED PARTIES
All interested parties, including security holders, may send communications to the Board through the Secretary of the Company. You may communicate with our outside directors, individually or as a group, by emailing
non-managedirectors@marathonoil.com. You may communicate with the Chairs of each of our Board’s committees by email as follows:
Committee Chair
Email Address
Audit and Finance Committee
auditandfinancechair@marathonoil.com
Compensation Committee
compchair@marathonoil.com
Corporate Governance and Nominating Committee
corpgovchair@marathonoil.com
Health, Environmental, Safety and Corporate Responsibility Committee
hescrchair@marathonoil.com
The corporate Secretary will forward to the directors all communications that, in her judgment, are appropriate for consideration by the directors. Examples of communications that would not be considered appropriate for consideration by the directors include commercial solicitations and matters not relevant to the Company’s affairs.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Boyce, Brondeau, Deaton and Lader and Ms. Donadio served on the Compensation Committee for all of 2015. Dr. Jackson served on the Compensation Committee until her departure from the Board on April 29, 2015. There are no matters relating to interlocks or insider participation that we are required to report.

14     MARATHON OIL | 2016 PROXY STATEMENT


DIRECTOR COMPENSATION
The Board determines annual retainers and other compensation for non-employee directors. Mr. Tillman, the only director who is also an employee, receives no additional compensation for his service on the Board.
 
CASH COMPENSATION
Following are the annual cash retainers we paid our non-employee directors for 2015:
Type of Fee
Amount ($)
Annual Board Retainer
150,000
 
Additional Retainer for Chairman of the Board
125,000
 
Additional Retainer for Audit and Finance Committee Chair
25,000
 
Additional Retainer for Compensation Committee Chair
25,000
 
Additional Retainer for Corporate Governance and Nominating Committee Chair
12,500
 
Additional Retainer for Health, Environmental, Safety and Corporate Responsibility Chair
12,500
 
Directors do not receive meeting fees for attendance at Board or committee meetings.
Non-employee directors may defer up to 100% of their annual retainer into an unfunded account under the Marathon Oil Corporation Deferred Compensation Plan for Non-Employee Directors. These deferred amounts may be invested in certain investment options, which generally mirror the investment options offered to employees under our Thrift Plan with the exception of Marathon Oil common stock.
 
EQUITY-BASED COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS
For 2015, non-employee directors received an annual common stock unit award valued at $175,000. These awards were credited to an unfunded account on the first business day of the calendar year, based on the closing stock price on the grant date. When dividends are paid on our common stock, directors receive dividend equivalents in the form of common stock units. The awards vest and are payable in shares upon the earlier of (a) the third anniversary of the grant date, or (b) the director’s departure from the Board.
Under our stock ownership guidelines, each non-employee director is expected to hold three times (four times in the case of the Chairman) the value of the annual retainer in Marathon Oil stock. Directors have five years from their initial election to the Board to meet this requirement. Directors who do not hold the required level of stock ownership due to fluctuations in the price of our common stock are expected to hold the awards they receive until they have met their requirement. Other than Ms. Donadio and Messrs. Banister and Deaton, who each joined the Board fewer than five years ago, and Mr. Phelps, who previously attained the required ownership level but has fallen below due to the recent significant decrease in our share price, the remaining non-employee directors meet or exceed this ownership requirement.

MARATHON OIL | 2016 PROXY STATEMENT 15


 
MATCHING GIFTS PROGRAMS
Under our matching gifts programs, we will annually match up to $10,000 in contributions made by non-employee directors to certain tax-exempt educational institutions. This annual limit is based on the date of the director’s gift to the institution. We will also make a donation to a charity of the director’s choice equal to the amount of his or her contribution to the Marathon Oil Company Employees Political Action Committee (“MEPAC”) for contributions above $200. MEPAC contributions are subject to a $5,000 annual limit.
 
2015 DIRECTOR COMPENSATION TABLE
Name(1)
Fees Earned
or Paid in
Cash
($)
 
Stock Awards(1) 
($)
All Other
Compensation
(2) 
($)
Total
($)
Gaurdie E. Banister, Jr.(3)
37,500
(5)
0
10,000
47,500
Gregory H. Boyce
175,024
 
175,000
5,000
355,024
Pierre Brondeau(4)
162,524
 
175,000
0
337,524
Chadwick C. Deaton
150,000
 
175,000
0
325,000
Marcela E. Donadio
150,000
 
175,000
8,750
333,750
Shirley Ann Jackson(5)
50,000
(6)
175,000
10,000
235,000
Philip Lader
162,524
(6)
175,000
15,000
352,524
Michael E. J. Phelps
175,024
 
175,000
0
350,024
Dennis H. Reilley
275,024
 
175,000
0
450,024
(1)    Represents the amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2015, in accordance with generally accepted accounting principles in the United States regarding stock compensation, for the annual common stock unit award. These amounts are also equal to the grant date fair value of the awards. The aggregate number of stock unit awards outstanding as of December 31, 2015 for each director is as follows: Mr. Banister, 2,867; Mr. Boyce, 44,923; Mr. Brondeau, 23,991; Mr. Deaton, 11,631; Ms. Donadio, 6,325; Dr. Jackson, 0; Mr. Lader, 89,273; Mr. Phelps, 40,963; and Mr. Reilley, 92,948.
(2)    Represents contributions made under our matching gifts programs.
(3)    Mr. Banister joined the Board effective October 1, 2015.
(4)    Mr. Brondeau’s service on the Board concluded on March 28, 2016.
(5)    Dr. Jackson’s service on the Board concluded on April 29, 2015.
(6)    Deferred under the Marathon Oil Corporation Deferred Compensation Plan for Non-Employee Directors.
(7)    Mr. Lader deferred payment of his annual retainer under the Marathon Oil Corporation Deferred Compensation Plan for Non-Employee Directors, but received his additional retainer for serving as the Chair of the Health, Environmental, Safety and Corporate Responsibility Committee in cash.




16     MARATHON OIL | 2016 PROXY STATEMENT


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, file reports of beneficial ownership on Form 3 and changes in beneficial ownership on Form 4 or Form 5 with the SEC. Based solely on our review of the reporting forms and written representations provided by the individuals required to file reports, we have concluded that each of our directors and executive officers complied with the applicable reporting requirements for transactions in Company securities during 2015, except that a Form 4 for Patrick J. Wagner was filed late due to an administrative error, and a Form 4/A was filed for Sylvia J. Kerrigan to correct an administrative error on a previously-filed Form 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the beneficial owners of five percent or more of the Company’s common stock, based on information available as of February 16, 2016:
Name and Address
of Beneficial Owner
Amount and Nature of Beneficial Ownership
Percent of
Outstanding Shares
Blackrock, Inc.
55 East 52nd Street
New York, NY 10022
72,136,674
(1)
10.7%
 
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
60,551,171
(2)
8.94%
 
Wellington Management Group LLP
c/o Wellington Management Company LLP
280 Congress Street
Boston, MA 02210
41,958,339
(3)
6.20%
 
Hotchkis and Wiley Capital Management, LLC
725 S. Figueroa Street, 39th Floor
Los Angeles, CA 90017
38,466,164
(4)
5.68%
 
State Street Corporation
State Street Financial Center
One Lincoln Street
Boston, MA 02111
35,258,712
(5)
5.20%
 
(1)    Based on its Schedule 13G/A filed with the SEC on January 8, 2016, Blackrock, Inc., through itself and as the parent holding company or control person over certain subsidiaries, beneficially owns 72,136,674 shares, has sole voting power over 65,625,249 shares, shared voting power over no shares, sole dispositive power over 72,136,674 shares, and shared dispositive power over no shares.
(2)    Based on its Schedule 13G/A filed with the SEC on February 10, 2016, the Vanguard Group, Inc., as an investment adviser, beneficially owns 60,551,171 shares, has sole voting power over 1,241,382 shares, shared voting power over 65,100 shares, sole dispositive power over 59,243,648 shares, and shared dispositive power over 1,307,523 shares. Vanguard
Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 1,049,393 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 450,119 shares as a result of its serving as investment manager of Australian investment offerings.
(3)    Based on its Schedule 13G filed with the SEC on February 11, 2016, Wellington Management Group LLP, together with certain affiliates, beneficially owns 41,958,339 shares, has sole voting power over no shares, shared voting power over 18,815,159 shares, sole dispositive power over no shares, and shared dispositive power over 41,958,339 shares. Wellington Management Company, LLP is deemed to beneficially hold 39,406,195 shares, has sole voting power over no shares, shared voting power over 17,276,156 shares, sole dispositive power over no shares, and shared dispositive power over 39,406,195 shares.
(4)    Based on its Schedule 13G filed with the SEC on February 12, 2016, 38,466,164 shares are owned of record by clients of Hotchkis and Wiley Capital Management, LLC (“HWCM”) in its capacity as investment advisor. HWCM disclaims beneficial ownership of such shares. HWCM has sole voting power over 23,373,122 shares, shared voting power over no shares, sole dispositive power over 38,466,164 shares, and shared dispositive over no shares. The securities as to which the Schedule 13G was filed are owned of record by clients of HWCM. Those clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities. No such client is known to have such right or power with respect to more than five percent of this class of securities.
(5)    Based on its Schedule 13G filed with the SEC on February 16, 2016, State Street Corporation, together with certain of its direct or indirect subsidiaries, has sole voting power over no shares, shared voting power over 35,258,712 shares, sole dispositive power over no shares and shared dispositive power over 35,258,712 shares.



MARATHON OIL | 2016 PROXY STATEMENT 17


 
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Marathon Oil common stock beneficially owned as of
March 1, 2016, by each director, by each executive officer named in the Summary Compensation Table and by all directors and executive officers as a group.
Name
Shares
 
Restricted
Stock
(1)
Stock Options
Exercisable Prior to
 April 29, 2016(2)
Total Shares(3)
% of Total
Outstanding
Gaurdie E. Banister, Jr.
24,118

(4)(5)
0
 
0
 
24,118

*
Gregory H. Boyce
73,756

(4)
0
 
0
 
73,756

*
Chadwick C. Deaton
25,281

(4)
0
 
0
 
25,281

*
Marcela E. Donadio
19,976

(4)(5)
0
 
0
 
19,976

*
Philip Lader
113,702

(4)(5)
0
 
0
 
113,702

*
Michael E. J. Phelps
59,797

(4)
0
 
0
 
59,797

*
Dennis H. Reilley
115,981

(4)(5)
0
 
0
 
115,981

*
Lee M. Tillman
64,733

 
412,768
 
508,976
 
986,477

*
John R. Sult
12,750

 
107,220
 
147,319
 
267,289

*
Sylvia J. Kerrigan
45,575

(5)
85,373
 
364,955
 
495,903

*
T. Mitchell Little
21,286

 
112,229
 
134,703
 
268,218

*
Lance W. Robertson
30,720

(5)
112,229
 
112,936
 
255,885

*
All Directors and Executive Officers as a group (15 persons)
(1)(2)(4)(5)


2,949,105

*
*
Does not exceed 1% of the common shares outstanding.
(1)    Reflects shares of restricted stock granted under the 2012 Incentive Compensation Plan, which are subject to limits on sale and transfer and can be forfeited under certain conditions.
(2)    Includes options exercisable within sixty days of February 29, 2016, including the following number of options that are not in-the-money based on the closing price of our common stock on February 29, 2016 ($8.21): Mr. Tillman: 508,976; Mr. Sult: 147,319; Ms. Kerrigan: 364,955; Mr. Little: 134,703; and Mr. Robertson: 112,936.
(3)    None of the shares are pledged as security.
(4)    Includes deferrals of annual retainers into common stock units under the Deferred Compensation Plan for Non-Employee Directors and the 2003 Incentive Compensation Plan prior to January 1, 2006, and non-retainer annual director stock awards in common stock units under the 2007 Incentive Compensation Plan and the 2012 Incentive Compensation Plan, including their respective dividend equivalent rights allocated in common stock units, as follows:
Name
Annual Retainer Deferred Into
Common Stock Units
Annual Common Stock Unit Awards
Gaurdie E. Banister, Jr.
0
 
16,518
 
Gregory H. Boyce
0
 
52,600
 
Chadwick C. Deaton
0
 
25,281
 
Marcela E. Donadio
0
 
19,976
 
Philip Lader
18,960
 
77,991
 
Michael E.J. Phelps
0
 
48,641
 
Dennis H. Reilley
22,634
 
77,991
 
(5)    Includes all shares held, if any, under the Marathon Oil Thrift Plan, a Dividend Reinvestment and Direct Stock Purchase Plan, the Non-Employee Director Stock Plan and in brokerage accounts.

18     MARATHON OIL | 2016 PROXY STATEMENT


AUDIT AND FINANCE COMMITTEE REPORT
The Audit and Finance Committee’s purpose is to assist the Board in fulfilling its oversight responsibilities relating to, among other things:
the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of internal accounting and financial controls;
the engagement of the independent auditor and the evaluation of the independent auditor’s qualifications, independence and performance;
the performance of the internal audit function;
the Company’s compliance with legal and regulatory requirements; and
the Company’s risk management process.
The Audit and Finance Committee is comprised of five directors, each of whom has been determined by the Board to be independent and financially literate under the NYSE’s requirements. See the director biographies under “Proposal 1: Election of Directors” for more information about the qualifications, education and experience of each Committee member. Based on these qualifications, the Board has determined that each of Marcela E. Donadio and Michael E.J. Phelps qualifies as an “Audit Committee Financial Expert” under the SEC’s rules. The Audit and Finance Committee’s responsibilities are set forth in its charter, available on our website at www.marathonoil.com/Investor_Center/Corporate_Governance/Board_Committees_and_Charters/. The Audit and Finance Committee met a total of six times in 2015, including four in-person meetings at which the Committee met with the Company’s internal audit organization and the independent auditor, with and without management present.
Management has primary responsibility for preparing our financial statements and establishing and maintaining our internal control over financial reporting. The Company’s independent auditor is responsible for auditing our financial statements and the effectiveness of our internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”), and issuing its reports based on those audits. The Audit and Finance Committee oversees these processes.
In connection with the evaluation, appointment and retention of the independent registered public accountants, the Audit and Finance Committee annually reviews the qualifications, performance and independence of the independent auditor and lead engagement partner, and assures the regular rotation of the lead engagement partner as required. In doing so, the Audit and Finance Committee considers a number of factors including, but not limited to: quality of services provided; technical expertise and knowledge of the industry; effective communication; objectivity; and independence. Based on this evaluation, the Audit and Finance Committee has selected PricewaterhouseCoopers LLP (“PwC”), an independent registered public accounting firm, to audit the Company’s financial statements and the effectiveness of internal control over financial reporting for 2016. In conjunction with the mandated rotation of the lead audit partner, the Audit and Finance Committee and its chairperson are directly involved in the selection of PwC’s lead engagement partner. The current lead engagement partner was appointed in 2012.
We are seeking our stockholders’ ratification of the appointment of PwC to audit the Company’s financial statements and the effectiveness of internal control over financial reporting for 2016 at the Annual Meeting. The Audit and Finance Committee and the Board believe the appointment of PwC as our independent auditor for 2016 is in the Company’s best interests and in the best interests of our stockholders.
The Audit and Finance Committee reviews and pre-approves the fees and expenses of the independent auditor for audit, audit-related, tax and permissible non-audit services. See “Proposal 2: Ratification of Independent Auditor for 2016” for more information on our pre-approval policy.

MARATHON OIL | 2016 PROXY STATEMENT 19


In connection with the preparation of the Company’s audited financial statements for the year ended December 31, 2015 and the report on internal control over financial reporting for 2015:
The Audit and Finance Committee reviewed and discussed with management the Company’s audited financial statements and its report on internal control over financial reporting for 2015.
The Audit and Finance Committee met throughout the year with management and PwC, and met with PwC each quarter without the presence of management. The Committee discussed with PwC the matters required to be discussed by the auditing standards of the PCAOB.
The Audit and Finance Committee received the written disclosures and the letter from PwC required by the applicable requirements of the PCAOB for independent auditor communications with audit committees concerning independence, and has considered whether PwC’s provision of non-audit services to the Company was compatible with maintaining such independence.
Based on this review and discussion, the Audit and Finance Committee recommended to the Board that the Company’s audited financial statements for the year ended December 31, 2015 and the report on internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for 2015 filed with the SEC.
AUDIT AND FINANCE COMMITTEE
Michael E. J. Phelps, Chair
Gaurdie E. Banister, Jr.
Gregory H. Boyce
Marcela E. Donadio
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed with management the Company’s Compensation Discussion and Analysis for 2015. Based on that review, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Gregory H. Boyce, Chair
Chadwick C. Deaton
Marcela E. Donadio
Philip Lader


20     MARATHON OIL | 2016 PROXY STATEMENT


COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the compensation paid to the named executive officers (“NEOs”) listed in the Summary Compensation Table. It discusses the Company’s 2015 highlights, our compensation philosophy, the Compensation Committee’s (the “Committee”) processes and procedures for establishing an executive compensation program consistent with that philosophy, the individual elements of our compensation program and the Committee’s 2015 compensation decisions for each NEO.
For 2015, our NEOs were:
Name
Title
Lee M. Tillman
President and Chief Executive Officer
John R. Sult
Executive Vice President and Chief Financial Officer
Sylvia J. Kerrigan
Executive Vice President, General Counsel and Secretary
Lance W. Robertson
Vice President, Resource Plays
T. Mitchell Little
Vice President, Conventional

 
EXECUTIVE SUMMARY
In 2015, the commodity price environment presented significant challenges to the industry. We focused on the aspects of our business within our control—disciplined capital allocation, cost reduction, efficient production, and portfolio management—to protect our strong balance sheet. Total company net production averaged 431,000 net barrel of oil equivalent per day (“boed”), up 8% over 2014 and above our stated target of 5-7%. We achieved year-over-year production growth of 21% from U.S. resource plays with average net production of 219,000 boed. We achieved organic reserve replacement of 157%, excluding revisions and dispositions, at a competitive drillbit finding and development cost of $12 per barrel of oil equivalent.
We are focused on long-term shareholder value, and believe we are well positioned for a low price environment. Our year-end liquidity of $4.2 billion was comprised of $1.2 billion in cash and an undrawn $3 billion revolving credit facility. Demonstrating our commitment to maintaining a strong balance sheet, we reduced our full year 2015 capital program to $3 billion, which was $500 million below our original target, and we lowered production expenses by approximately 24% year-over-year. Fourth quarter North America Exploration and Production (“E&P”) production costs were $6.91 per boe, down 28% from the year-ago period, with full-year North America E&P unit production costs of $7.38 per boe. We closed or announced non-core asset sales of more than $300 million in 2015, excluding closing adjustments, in the Gulf of Mexico, East Texas, North Louisiana and Wilburton, Oklahoma, as well as our East Africa exploration acreage. In the fourth quarter of 2015, we announced a quarterly dividend reduction of more than 75% to $0.05 per share to address the uncertain commodity price environment and prioritize balance sheet protection.
Despite these financial, strategic and operating achievements, the Company generated a negative return for shareholders in 2015 of 47%, driven by the decline in commodity prices. The actions we took in 2015 and the strategies we have implemented for 2016 aim to preserve and restore shareholder value in the ongoing difficult commodity environment.
In 2015 and early 2016, the Committee demonstrated its continued commitment to corporate governance and sound compensation practices, further aligning the interests of executive officers with the long-term interests of our stockholders:
Consistent with and in recognition of the difficult commodity price environment, the Committee decided to keep NEO base pay flat in 2015.

MARATHON OIL | 2016 PROXY STATEMENT 21


Early in 2015, the Committee implemented a limitation to the annual cash bonus program, providing that the quantitative portion of the company performance score would be capped at no greater than target (100%) if the Company’s earnings or total shareholder return (“TSR”) for 2015 were negative. At the end of the 2015 performance period, the quantitative portion of the company performance score was 169% prior to application of the 100% cap under this new program feature. Further, the Committee also exercised downward discretion because of the meaningful impact low commodity prices have had on our stock price, resulting in the final aggregate quantitative and qualitative funding being reduced by 10%, to 90% of target. As a result of this program design change and the Committee’s further downward discretion, 2015 NEO bonus payments averaged 29% lower than 2014 NEO bonus payments.
The Committee reevaluated the long-term incentive mix for officers to further emphasize performance-based compensation and alignment with our stockholders, while also remaining competitive in our peer group. In 2014, our long term incentive (“LTI”) mix was 40% performance units, 40% stock options, and 20% restricted stock. Beginning in 2015, our LTI mix is 50% performance units, 20% stock options, and 30% restricted stock.
The Committee approved a payment from the 2013-2015 performance unit awards at 54% of target (within an original opportunity range of 0% to 200% of target). This below-target outcome was determined by the Company’s relative TSR, which ranked 9th out of 12 over the three-year performance period.
The Committee determined that in the event of a change in control, future performance unit awards will vest at the applicable performance percentage based on the Company’s TSR ending on the day immediately prior to the date of the change of control as assessed by the Committee.
 
COMPENSATION PHILOSOPHY
Our success is based on financial performance and operational results, and we believe our executive compensation program is an important driver of that success. The primary objectives of our program are to:
Pay competitively. We provide market-competitive pay levels to attract and retain the best talent, and regularly benchmark each component of our pay program, including our benefit programs, to ensure we remain competitive.
Pay for performance. Our program is designed to reward executives for their performance and motivate them to continue to perform at a high level. Cash bonuses based on annual performance combined with equity awards that vest over several years balance short-term and long-term business objectives.
Encourage creation of long-term stockholder value. Equity awards and robust stock ownership requirements align our executives’ interests with those of our stockholders. A substantial portion of our NEOs’ long-term incentive awards is comprised of stock options and performance units tied to relative stockholder returns.
 
COMPENSATION BEST PRACTICES
The Committee periodically evaluates market best practices in executive compensation and modifies our compensation program as necessary to ensure it continues to provide balanced incentives, while managing compensation risks appropriately in the context of our business objectives. Our compensation program incorporates the following best practices, which we believe are in the best interests of our stockholders:
Emphasis on at-risk compensation designed to link pay to performance.

22     MARATHON OIL | 2016 PROXY STATEMENT


Emphasis on long-term incentive compensation designed to align executives’ interests with those of our stockholders.
Engagement of an independent compensation consultant to advise the Committee.
Stock ownership requirements for officers and directors.
Elimination of all excise tax gross-ups for executive officers.
Limited use of perquisites, and no tax gross-ups for perquisites.
“Double-trigger” change in control cash payments.
Clawback policy that applies to both annual cash bonuses and long-term incentive awards.
Prohibition on margin, derivative or speculative transactions, such as hedges, pledges and margin accounts, by executive officers.
 
PAY FOR PERFORMANCE
Our executive compensation programs deliver payments aligned with performance achieved. The largest component of executive compensation is our LTI award program, which is described in more detail in “Long-Term Incentive Awards.” These awards strongly align the amounts an NEO eventually earns from the awarded opportunities with the Company’s stock performance.
To demonstrate this performance philosophy, the charts below track a notional $1,000 award made in each of the past three long-term incentive cycles as of December 31, 2015. In aggregate, LTI values tracked at 77% below their original target opportunity. The year-end value of these outstanding awards fairly reflects the Company’s performance, demonstrating that our LTI programs effectively align pay with performance.
CEO COMPENSATION
The following chart compares our CEO’s targeted compensation opportunities awarded in early 2015 to how the opportunities were tracking at year-end based on Company performance.
Target compensation represents the Committee’s decisions for annual base salary, target bonus opportunity, and intended long term incentive opportunity granted in February 2015.
The value shown as of December 31, 2015 represents the annual base salary, the actual bonus paid for 2015 performance, the year-end value of restricted stock, an updated Black-Scholes valuation of stock options, and an

MARATHON OIL | 2016 PROXY STATEMENT 23


estimated prevailing value of performance awards. The ultimate value of these performance awards will depend on our stock price and our total shareholder return relative to industry peers. In combination, the realizable compensation from these awarded opportunities reflects both the Company’s near-term financial and operating successes and the Company’s long-term stock performance.
CEO Total Compensation
2015 Target vs. Value as of 12/31/2015
(In thousands)

Values for the “Pay for Performance” and “CEO Total Compensation” illustrations were determined with the following inputs:
Our closing stock price of $12.59 as of December 31, 2015.
An updated Black-Scholes valuation of outstanding stock options as of December 31, 2015.
Our rank in our TSR peer group as of December 31, 2015 and the corresponding payout percentage as measured under our performance unit programs: 54% for 2013, 54% for 2014, and 50% for 2015.
 
HOW WE DETERMINE EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Committee is responsible for establishing and overseeing executive compensation programs and policies that are consistent with our overall compensation philosophy. In making compensation decisions, the Committee considers a variety of factors, including each executive’s current compensation, information provided by its independent compensation consultant, our CEO’s input, Peer Group (as defined below) data, each executive’s experience in the role, relative scope of responsibility and potential, Company and individual performance, internal pay equity considerations, and any other information the Committee deems relevant in its discretion.
The Committee also considers the outcome of the Company’s advisory stockholder vote on our executive compensation program. At our 2015 Annual Meeting of Stockholders, our stockholders approved our executive compensation by over 90% of the votes cast. The Committee believes that this strong stockholder vote indicates support for our executive compensation program. Based on this voting result and its ongoing review of our compensation policies and important governance processes, the Committee concluded that our compensation program effectively aligns the interests of our NEOs with the Company’s long-term goals.

24     MARATHON OIL | 2016 PROXY STATEMENT


COMPENSATION CONSULTANT
For 2015, the Committee directly engaged Meridian Compensation Partners LLC (“Meridian”) as its independent compensation consultant to advise the Committee on executive compensation matters. Meridian provides the Committee with information on industry trends, market practices and legislative issues. Meridian provides no other services to us or our executive officers, and the Committee has the right to terminate the services of Meridian and appoint a new compensation consultant at any time.
Meridian interacts with several of our officers and employees as necessary. In addition, Meridian may seek input and feedback from members of our management regarding its work product prior to presentation to the Committee to confirm that information is accurate or address other issues. We believe that Meridian provides an independent perspective to the Committee.
THE CEO’S ROLE
The Committee seeks significant input from the CEO on compensation decisions and performance appraisals for all executive officers other than himself. However, all final compensation decisions for our executive officers are made by the Committee. The CEO does not provide recommendations or participate in Committee discussions concerning his own compensation.
PEER GROUP
Peer group benchmarking is one of several factors the Committee considers in setting pay. The table below shows our “Peer Group,” comprised of the industry companies the Committee believes provide the best external benchmarks for executive compensation. In selecting the Peer Group, the Committee considered pertinent financial measures for each company, including assets, revenue, market capitalization and enterprise value.
Our Peer Group reflects the companies against which we compete for executive talent as an independent exploration and production company. The Committee reviews the Peer Group annually for continued appropriateness.
In January 2015, the Committee determined to adjust the Peer Group to remove Talisman Energy Inc., due to its expected acquisition, and add ConocoPhillips and Pioneer Natural Resources Company. However, for purposes of February 2015 compensation decisions, the Committee referenced the benchmarking outcomes completed in October 2014.
2015 Peer Group Companies
 
Anadarko Petroleum Corp.
EOG Resources Inc.
Apache Corp.
Hess Corp.
Chesapeake Energy Corp.
Murphy Oil Corp.
ConocoPhillips
Noble Energy Inc.
Devon Energy Corp.
Occidental Petroleum Corp.
Encana Corp.
Pioneer Natural Resources Company

MARATHON OIL | 2016 PROXY STATEMENT 25


COMPENSATION BENCHMARKING PROCESS
The Committee conducts an annual comparison of the compensation of our NEOs to the compensation of executives with similar job responsibilities among companies in our Peer Group, based upon information Meridian gathers and provides to the Committee. The Committee references this competitive market analysis in making compensation decisions for the coming year. The Committee generally targets executive total direct compensation opportunities at the 50th percentile of the Peer Group for average performance and adjusts total direct compensation opportunities higher or lower based on the Committee’s assessment of each executive’s experience, relative scope of responsibility and potential, internal pay equity considerations and any other information the Committee deems relevant in its discretion. We define total direct compensation as the sum of base salary, annual cash bonus and the intended value of long-term incentive awards.
In October 2014, Meridian provided the Committee a market analysis that included information regarding Peer Group executives’ base salaries, annual bonus levels and the mix and level of long-term incentives. According to this analysis, NEO compensation levels varied by individual, but were fairly positioned relative to 50th percentile benchmarks, averaging 103% of the market 50th percentile. The compensation of our CEO was 86% of the market 50th percentile.
 
PAY MIX
Our executive compensation program includes base salary, annual cash bonuses, long-term incentive awards and other benefits and perquisites. By design, a significant portion of our executive officers’ overall compensation, including annual cash bonuses and long-term incentive awards, is “performance-based,” meaning that the opportunity to earn value is largely dependent on both Company and individual performance. The Committee determines a total compensation opportunity for each executive officer based on a review of competitive market data, a review of our compensation philosophy, and the Committee’s subjective judgment. The Committee does not set fixed percentages for each element of compensation, so the mix may change over time as the competitive market moves, governance standards evolve, or our business needs change.
The following table shows the 2015 pay mix of total target direct compensation components for our NEOs. The allocation of our compensation components, with a significant emphasis on long-term incentive awards, aligns with the practices of our Peer Group.

26     MARATHON OIL | 2016 PROXY STATEMENT


 
2015 TOTAL DIRECT COMPENSATION OVERVIEW
The Committee determined 2015 base salaries, target annual cash bonus opportunities and long-term incentive awards in February 2015. The Committee determined the payment of 2015 annual cash bonuses in February 2016, after 2015 business results were known and audited.
The following table summarizes the elements of total direct compensation the Committee awarded to our NEOs for 2015 as part of our regular compensation program. The amounts shown differ from the amounts shown in the Summary Compensation Table because this table provides the intended value for LTI compensation. Intended value reflects established compensation valuation methodologies that are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table. Additionally, this table excludes changes in pension value.
Name
2015 Year
End Base
Salary
2015 Bonus Payment
(paid in 2016)
(1)
2015 LTI Award Intended Value
2015 Total
Direct
Compensation
Mr. Tillman
1,050,000

 
1,181,250

 
7,300,000

 
9,531,250

 
Mr. Sult
600,000

 
459,000

 
2,300,000

 
3,359,000

 
Ms. Kerrigan
575,000

 
439,880

 
2,000,000

 
3,014,880

 
Mr. Robertson
510,000

 
390,150

 
2,000,000

 
2,900,150

 
Mr. Little
500,000

 
425,000

 
2,000,000

 
2,925,000

 
(1)    Excludes $500,000 paid to Mr. Tillman in 2015 as the final installment of the cash sign-on bonus he received in connection with the commencement of his employment in August 2013.
 
BASE SALARY
The primary purpose of base salary is to recognize and reward overall responsibilities, established skills, experience and expertise. In setting base salary, the Committee compares each NEO’s current salary to the market 50th percentile, and also considers each individual’s experience and expertise, the value and responsibility associated with the role and internal pay equity. The Committee does not use a formula to calculate base salary increases for NEOs.
In February 2015, the Committee reviewed base salaries and the considerations noted above. However, given the current market conditions in the oil and gas industry, the Committee determined to make no base salary increases for the NEOs.
Name
Base Salary as of
January 1, 2015
Base Salary as of
January 1, 2016
Mr. Tillman

$1,050,000

 

$1,050,000

 
Mr. Sult

$600,000

 

$600,000

 
Ms. Kerrigan

$575,000

 

$575,000

 
Mr. Robertson

$510,000

 

$510,000

 
Mr. Little

$500,000

 

$500,000

 


MARATHON OIL | 2016 PROXY STATEMENT 27


 
ANNUAL CASH BONUS
The annual cash bonus rewards executives for achieving short-term financial, operational, and strategic goals that drive stockholder value, as well as for individual performance during the year.
When determining target bonus opportunities for our executives, the Committee considers the market 50th percentile, as well as each executive’s experience, relative scope of responsibility and potential, internal pay equity considerations and any other information the Committee deems relevant in its discretion. Our targeted performance goals are established to challenge our NEOs to perform at a high level. Payout results may be above or below target based on actual Company and individual performance.
The Committee determined the 2015 annual cash bonus payout for each NEO based on its assessment of the following:
Quantitative Company performance goals, established by the Committee during the first quarter of the year, weighted at 70%;
Qualitative organizational and strategic performance, evaluated by the Committee and weighted at 30%; and
Individual performance, including achievement of pre-established goals, leadership and ethics, and overall value that the officer created for the Company.
The illustration below summarizes the framework the Committee uses to determine individual officer bonus payouts:
[
Base Salary
x
Bonus Target
(as % of Base Salary)
=
Target Bonus Opportunity
]
x
Company Performance Score
70% Quantitative Performance
30% Organizational / Strategic Performance
+/-
Individual Performance Adjustment
=
Annual Bonus Payout
Beginning in 2015, the Committee established that quantitative Company performance is capped at no greater than target (100%) when the Company experiences either negative earnings or negative TSR. With the 70% weighting applied to the quantitative performance in a year with negative earnings or TSR, the quantitative performance portion of the Company performance score would be limited to no greater than 70%. The quantitative and qualitative scores can be between 0% and 200% (target is 100%). The final payout for each NEO may be adjusted based on the Committee’s discretionary assessment of the NEO’s individual performance.
2015 QUANTITATIVE PERFORMANCE METRICS
During the first quarter of 2015, the Committee established the performance goals for the bonus program, taking into consideration key financial, safety and operational performance measures that are important indicators of success in our industry and are not excessively influenced by commodity price fluctuations. The Committee determined the target level of performance for each metric by evaluating factors such as performance achieved in the immediately preceding year, anticipated challenges for 2015, the business plan and Company strategy.
The Committee further recognized that the quantitative metric results should not reward the NEOs above target in a year when shareholder experience was negative. Therefore, the Committee implemented a design feature that would cap the quantitative performance at target (100%) if the Company experienced either negative earnings or negative TSR.

28     MARATHON OIL | 2016 PROXY STATEMENT


The following table shows the targets and weightings established by the Committee and the performance achieved during 2015.
Strategic Imperative
Weight (%)
Performance Measure
Target
Performance
Achieved
Living Our Values
17
TRIR(1)
0.67
0.39
Spills to the Environment(2) ≥ 1 bbl
58
47
Process Safety Incidents(3)
2
1
Serious Event Rate(4)
0.45
0.37
Profitable & Sustainable Growth
33
Production, MBOEPD(5)
383
386
SCO Production, MBPD(6)
40
44
Operating & Capital Efficiency
50
Cash Costs, $/BOE(7)
12.60
10.18
F & D Cost, $/BOE Reserve(8)
38
17.04
Quality & Material Resource Capture
Resource Additions, MMBOE(9)
600
503
(1)    Calculated according to the same formula as the Occupational Safety and Health Administration (“OSHA”) Recordable Incident Rate by dividing (a) the total number of OSHA recordable incidents multiplied by 200,000 by (b) the total number of hours worked. This metric includes both Company employees and contractors, and applies to Company-operated properties only.
(2)    Includes the number of all produced and chemically-treated fluid spills with a volume greater than or equal to one barrel outside of secondary containment on Company-operated properties. This metric applies to Company-operated properties only.
(3)    Includes incidents at Company-designated facilities that constitute a Process Safety Event Tier 1 as defined by American Petroleum Institute Recommended Practice 754 (Process Safety Performance Indicators for the Refining and Petrochemical Industries).
(4)    Comprised of the total number of significant and critical severity events (as defined in the Company’s Event Reporting and Management Standard) and exposure hours, calculated by dividing (a) the number of events multiplied by 200,000 by (b) total exposure hours. This metric applies to Company-operated properties only.
(5)    Represents our North America E&P and International E&P segments available for sale, adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures. This metric excludes Libya.
(6)    Calculated as net synthetic crude oil production (bitumen after royalties and upgrading, excluding blend-stocks), adjusted for price, business climate, acquisitions and divestitures.
(7)    Calculated by dividing (a) production expense (direct and indirect expense) and unallocated corporate general and administrative expense, adjusted for foreign exchange rates, legal settlements, acquisitions and divestitures, bonus accruals, and certain special items by (b) recorded sales adjusted for pricing effects of production sharing contracts and acquisitions and divestitures. This metric excludes Libya and Oil Sands Mining.
(8)    Calculated by dividing (a) capital expenditures and cash exploration expenditures adjusted for foreign exchange rate, capitalized interest and capitalized asset retirement obligations from our North America E&P, International E&P and Oil Sands Mining segments by (b) reserves excluding dispositions and price related changes. This metric excludes Libya.
(9)    Proved, Probable and Contingent resource additions, including acquisitions, excluding dispositions. This metric excludes Libya.
Upon review of the quantitative outcomes relative to targeted performance and the Company’s negative earnings and TSR, the Committee capped the quantitative portion of the program, representing 70% of the total bonus award opportunity, at target. Prior to application of the cap, the quantitative metrics would have funded at 169%.

MARATHON OIL | 2016 PROXY STATEMENT 29


2015 ORGANIZATIONAL AND STRATEGIC PERFORMANCE
After assessing the Company’s financial and operational performance, as detailed in “Compensation Discussion and Analysis—Executive Summary,” the Committee evaluated the organizational and strategic performance achievements, representing 30% of the total bonus award opportunity. The Committee also considered the Company’s absolute and relative shareholder return performance, within the context of the difficult commodity price environment. Upon review of these qualitative outcomes, the Committee concluded that the Company had achieved overall performance at target expectations.
2015 INDIVIDUAL PERFORMANCE
Although our annual bonus program applies a framework and uses goals and formulas, the Committee maintains discretion to adjust individual cash bonuses to recognize critical performance factors and accomplishments that may not have been fully considered in the performance score calculation. In evaluating our NEOs’ contributions during 2015, the Committee considered each NEO’s specific contribution to our Company’s key achievements, including those discussed under “Compensation Discussion and Analysis—Executive Summary.” Following this consideration, the Committee determined to make no individual adjustments to the NEOs’ 2015 bonuses, except with respect to Mr. Little. In recognition of Mr. Little’s leadership through a period of significant change, including the Company’s scale back of conventional exploration and the sale of certain non-core assets, the Committee determined that Mr. Little’s payout would not be subject to the discretionary reduction discussed below.
ANNUAL CASH BONUS PAYOUTS EARNED FOR 2015
Taking into consideration the Company’s quantitative performance, the Company’s qualitative financial and operational performance and individual performance, the Committee initially determined to assess overall performance under the 2015 bonus program at 100% of target. However, the Committee also recognized the meaningful impact low commodity prices have had on our stock price. Accordingly, the Committee exercised its discretion to lower the final aggregate quantitative and qualitative results under the 2015 bonus program by 10%, to 90% of target, to align the bonus payouts with the stockholder impact in 2015. For the reasons discussed above, Mr. Little’s payout remained at 100% of target.
 
Base Salary as of
December 31, 2015
Bonus Target
Target Bonus Opportunity
Percent of Target Achieved
Actual Bonus Payout
Mr. Tillman

$1,050,000

 
125%

$1,312,500

 
90%
$1,181,250
 
Mr. Sult

$600,000

 
85%

$510,000

 
90%
$459,000
 
Ms. Kerrigan

$575,000

 
85%

$488,750

 
90%
$439,880
 
Mr. Robertson

$510,000

 
85%

$433,500

 
90%
$390,150
 
Mr. Little

$500,000

 
85%

$425,000

 
100%
$425,000
 

30     MARATHON OIL | 2016 PROXY STATEMENT


 
LONG-TERM INCENTIVE AWARDS
Long-term incentive, or LTI, awards align the interests of NEOs and stockholders over the long term. These awards assist NEOs in establishing and maintaining significant equity ownership and place a meaningful portion of compensation at risk based on our common stock price performance. Long-term incentives also encourage retention through continued service requirements and are intended to represent the largest portion of the NEOs’ total direct compensation.
The Committee awards LTIs based on an intended award value that reflects competitive market data, each NEO’s performance and each NEO’s intended target total compensation. The 2015 intended award value for NEOs was allocated 50% to performance units, 20% to stock options and 30% to restricted stock.
ANNUAL GRANT PROCESS
Each year, the Committee grants LTI awards at its regularly scheduled February meeting, the date of which is generally set at least one year in advance. The grant date for such awards is generally the meeting date; however, for awards approved after market close, the grant date is the next trading day.
The actual LTI value realized by each NEO depends on the price of the underlying shares of common stock at the time of vesting or exercise, and, in the case of performance units, our TSR relative to that of the companies in our Peer Group.
2015 LONG-TERM INCENTIVE AWARDS
After considering competitive market data, the demand for talent, cost considerations, and the performance of the Company and the NEOs, the Committee awarded LTIs to each NEO on February 25, 2015 consistent with our normal grant timeline. The Committee awards LTIs based on intended value, which reflects established compensation valuation methodologies that are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table. See the Grants of Plan-Based Awards Table for additional detail about each LTI award.
Total 2015 LTI Awards Intended Value
Name
Annual Grants
Mr. Tillman
$7,300,000
Mr. Sult
$2,300,000
Ms. Kerrigan
$2,000,000
Mr. Robertson
$2,000,000
Mr. Little
$2,000,000

PERFORMANCE UNITS
The Committee believes that a performance unit program based on TSR relative to peer companies aligns pay and Company performance. The industry peers selected for each performance cycle generally match the industry peers comprising the prevailing Peer Group used for compensation benchmarking. TSR is determined by adding the sum of stock price appreciation or reduction per share, plus cumulative dividends per share for the performance period, and dividing that total by the beginning stock price per share. For purposes of this calculation, the beginning and ending stock prices are the averages of the closing stock prices for the month immediately preceding the beginning and ending dates of the performance period. If the TSR at the end of the performance period is negative, the payout percentage is capped at 100% regardless of ranking. The Committee has discretion to reduce the final payment associated with any performance unit award. Performance units, when earned, are paid in cash.

MARATHON OIL | 2016 PROXY STATEMENT 31


2015 PERFORMANCE UNITS
In February 2015, the Committee awarded the NEOs performance units that will vest based on relative TSR for the three-year performance period ending December 31, 2017. The value of each underlying unit tracks the price of a share of our common stock. The percentage of units earned ranges from 0% to 200% of the units granted. When the award is settled, NEOs will receive dividend equivalents paid in cash for a number of shares equal to the number of units granted multiplied by the payout percentage. Dividend equivalents accrue and are paid based on performance at the end of the performance period. Earned awards are paid in cash shortly after the completion of the performance period with the final cash value impacted both by relative TSR rank and our common stock price. In the event that any companies in our Peer Group undergo a change in corporate capitalization or a corporate transaction during the performance period, the Committee may evaluate whether such company will be replaced in the Peer Group. The Committee has designated Southwestern Energy, Continental Resources, and Concho Resources as replacement companies (in that order). The payout percentages for each ranking are:
MRO TSR Ranking
1
2
3
4
5
6
7
8
9
10
11
12
13
Payout (% of Target)
200%
183%
167%
150%
133%
117%
100%
83%
67%
50%
0%
0%
0%
2014 PERFORMANCE UNITS
The performance units granted in February 2014 have a performance period end date of December 31, 2016. See the Outstanding Equity Awards at 2015 Fiscal Year-End Table for information about the estimated payouts of the 2014 performance units.
MRO TSR Ranking
1
2
3
4
5
6
7
8
9
10
11
12
Payout (% of Target)
200%
182%
164%
145%
127%
109%
91%
73%
54%
0%
0%
0%
2013 PERFORMANCE UNITS
The performance units granted in February 2013 had a performance period end date of December 31, 2015. The payout percentages for each ranking are:
MRO TSR Ranking
1
2
3
4
5
6
7
8
9
10
11
12
Payout (% of Target)
200%
182%
164%
145%
127%
109%
91%
73%
54%
0%
0%
0%
For the performance period we ranked ninth out of twelve companies.
In January 2016, the Committee determined final payout values for Sylvia J. Kerrigan, Lance W. Robertson, and T. Mitch Little, who were the only NEOs employed as officers when the 2013 performance units were granted. The payout, which was made in January 2016, is included in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column.
STOCK OPTIONS
Stock options provide a direct link between officer compensation and the value delivered to stockholders. The Committee believes that stock options are inherently performance-based, as option holders only realize compensation if the value of our stock increases following the grant date.
Stock options granted according to our normal annual grant timeline generally have a three-year pro-rata vesting period and a maximum term of ten years. Additional information on these awards, including the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table.

32     MARATHON OIL | 2016 PROXY STATEMENT


RESTRICTED STOCK
The Committee awards restricted stock for diversification of the LTI award mix, for consistent alignment between executives and stockholders, and for retention purposes. Restricted stock provides recipients with the opportunity for capital accumulation and a more predictable long-term incentive value than is provided by performance units or stock options.
Restricted stock awarded according to our normal annual grant schedule typically vests in full on the third anniversary of the grant date. Prior to vesting, restricted stock recipients have the right to vote and receive dividends on the restricted shares.
 
OTHER BENEFITS
PERQUISITES
We offer limited perquisites to our NEOs. We believe these perquisites are reasonable, particularly because the cost of these benefits constitutes a small percentage of each NEO’s total compensation. The Committee assesses these perquisites at least annually as part of its total competitive review. We do not provide any tax gross-ups on these perquisites. The perquisites provided to our NEOs include reimbursement for certain tax, estate, and financial planning services up to $15,000 per year, an enhanced annual physical examination, limited personal use of Company aircraft, and a Company provided car and driver for our CEO. Our NEOs also participate in the health, retirement, and other benefit plans generally available to our U.S. employees.
See the “All Other Compensation” column of the Summary Compensation Table and the footnotes following the Summary Compensation Table for additional details concerning the perquisites provided to our NEOs in 2015.
RETIREMENT BENEFITS
We offer our NEOs the opportunity to provide for retirement through four plans:
Marathon Oil Company Thrift Plan (“Thrift Plan”) – A tax-qualified 401(k) plan.
Retirement Plan of Marathon Oil Company (“Retirement Plan”) – A tax-qualified defined benefit pension plan.
Excess Benefit Plan (“Excess Plan”) – A nonqualified plan allowing employees to accrue benefits above the tax limits, with components attributable to both the Retirement Plan and the Thrift Plan.
Marathon Oil Company Deferred Compensation Plan (“Deferred Compensation Plan”) – A nonqualified plan that grows when an NEO accrues benefits above the tax limits in the Thrift Plan or when an NEO defers a portion of their compensation.
Benefits payable under our qualified and nonqualified plans are described in more detail in “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
We also sponsor retiree medical plans for a broad-based group of employees, including the NEOs. The Committee has determined that providing these arrangements plays a meaningful role in attracting and retaining qualified employees and executives.
SEVERANCE BENEFITS
Our NEOs do not have employment agreements entitling them to any special executive severance payments, other than the change in control termination benefits described below. The Board may exercise discretion to make executive severance payments to executives on a case-by-case basis. We have a policy requiring that our Board seek stockholder approval or ratification of certain severance agreements, including agreements providing change

MARATHON OIL | 2016 PROXY STATEMENT 33


in control benefits, for senior executive officers that would require payment of cash severance benefits exceeding 2.99 times the officer’s salary plus bonus for the prior calendar year.
We believe change in control benefits are necessary to attract and retain talent within our industry, ensure continuity of management in the event of a change in control and provide our NEOs with the security to make decisions that are in the best interests of our stockholders. Our change in control benefits are described in more detail under “Potential Payments upon Termination or Change in Control.”
 
STOCK OWNERSHIP REQUIREMENTS AND ANTI-HEDGING & ANTI-PLEDGING POLICIES
All of our officers who are “executive officers” for purposes of Section 16 of the Exchange Act are subject to our stock ownership requirements, which are intended to reinforce the alignment of interests between our officers and stockholders. The stock ownership requirements are as follows:
CEO – six times base salary;
Executive Vice Presidents – four times base salary; and
Vice Presidents – two times base salary.
Executive officers have five years from their respective appointment dates to achieve the designated stock ownership level. The Committee reviews each executive officer’s progress toward the requirements on at least an annual basis to determine whether the market value of shares, including the value of unvested shares not subject to performance conditions, satisfies our requirements. Executive officers who do not hold the required level of stock ownership, including Ms. Kerrigan, who previously attained the required ownership level but has fallen below due to the recent significant decrease in our share price, are expected to hold the shares they receive upon vesting of restricted stock or exercise of stock options (after payment of exercise prices and after taxes) until they have met their requirement. Each NEO other than Ms. Kerrigan is currently within the five year window.
To ensure that they bear the full risks of stock ownership, officers are prohibited from engaging in hedging transactions related to our stock. Officers are also prohibited from pledging or creating a security interest in any shares of our common stock they hold, including shares in excess of the applicable ownership requirement.
 
TAX CONSIDERATIONS
The Committee considers the tax effects to the Company and the NEOs when making executive compensation decisions to deliver compensation in a tax-efficient manner. However, the Committee’s priority is to provide performance-based and competitive compensation. Therefore, some compensation paid to NEOs is not deductible due to the limitations of Section 162(m) of the Internal Revenue Code.
As required under Section 162(m), our stockholders approved the material terms of performance goals for awards to NEOs, which are contained in our 2012 Incentive Compensation Plan. These performance goals include both financial and operational measures. For purposes of qualifying annual cash bonus payments to our NEOs as “performance-based compensation” under Section 162(m) in 2015, we used both financial and operational goals to establish maximum potential payment amounts. The determination of actual annual cash bonus payments for NEOs is described above under “Annual Cash Bonus.” Performance units and stock options are also performance-based compensation for purposes of Section 162(m).

34     MARATHON OIL | 2016 PROXY STATEMENT


EXECUTIVE COMPENSATION
The following table summarizes the total compensation for each NEO for the years shown.
 
SUMMARY COMPENSATION TABLE
Name and
Principal Position
Year
Salary
($)
Bonus(1) 
($)
Stock
Awards
(2) 
($)
Option
Awards
(2) 
($)
Non‑
Equity
Incentive
Plan
Compensation
(3) 
($)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(4) 
($)
All
Other
Compensation
(5) 
($)
Total
($)
Lee M. Tillman
2015
1,050,000
500,000
6,299,598
1,755,082
1,181,250
234,292
256,619
11,276,841
President and Chief Executive Officer
2014
1,036,346
500,000
4,301,154
3,466,985
1,706,250
249,489
237,843
11,498,067
2013
392,307
3,875,000
3,813,995
2,609,206
0
35,246
42,153
10,767,907
John R. Sult
2015
600,000
0
1,984,827
552,973
459,000
107,638
104,720
3,809,158
Executive Vice President and Chief Financial Officer
2014
600,000
0
1,290,384
1,040,099
663,000
117,093
136,800
3,847,376
2013
182,308
765,000
1,045,584
996,745
0
16,781
20,092
3,026,510
Sylvia J. Kerrigan
2015
575,000
0
1,725,931
480,845
439,880
78,002
113,647
3,413,305
Executive Vice President, General Counsel and Secretary
2014
575,000
0
1,167,467
941,042
1,918,739
879,494
112,435
5,594,177
2013
575,000
733,000
1,113,954
673,050
788,487
205,407
108,569
4,197,467
Lance W. Robertson
2015
510,000
0
1,725,931
480,845
390,150
60,154
107,754
3,274,834
Vice President, Resource Plays
2014
458,019
0
1,239,418
594,342
563,550
70,054
78,735
3,004,118
2013
392,211
526,000
1,371,882
353,850
0
51,322
65,141
2,760,406
T. Mitchell Little
2015
500,000
0
1,725,931
480,845
425,000
706,766
79,275
3,917,817
Vice President, Conventional
2014
423,558
0
1,239,418
594,342
552,500
1,101,270
64,064
3,975,152
2013
344,904
422,000
1,371,882
353,850
0
213,815
52,278
2,758,729
(1)    This column reflects payouts made under the Annual Cash Bonus Plan for years prior to 2014. For Mr. Tillman, this column also includes installments of the cash sign-on bonus he received in connection with the commencement of his employment with us in August 2013: $2,000,000 in 2013, $500,000 in 2014, and $500,000 in 2015.
(2)    This column reflects the aggregate grant date fair values calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. Assumptions used in the calculation of these amounts are included in footnote 21 to our consolidated financial statements in our annual reports on Form 10-K for the year ended December 31, 2015 and footnote 20 to our consolidated financial statements in our annual reports on Form 10-K for the years ended December 31, 2014, and December 31, 2013, respectively. For 2014 and 2015, the Stock Awards column also includes the grant date fair value of the share-denominated performance units granted in February 2014 and February 2015 respectively, which ultimately will be settled in cash. The value ultimately realized by the officers upon the actual vesting of the awards may or may not be equal to this determined value, as these awards are subject to market conditions and have been valued based on an assessment of the market conditions as of the grant date. See the “Grants of Plan-Based Awards Table” and “Long-Term Incentive Awards” for further detail on our performance unit program.
(3)    This column reflects the 2015 and 2014 annual cash bonus payments, determined by the Compensation Committee and paid in February 2016 and February 2015 respectively, pursuant to the Company’s Annual Cash Bonus Plan. These awards are discussed in further detail under “Annual Cash Bonus.” The amounts shown in this column also reflect the vested value of performance units earned by our NEOs during the performance period that ended on December 31, 2014 and December 31, 2013 respectively. In 2013, we changed the design of our performance units which resulted in reporting performance unit values in the Stock Awards column as of the date granted instead of Non-Equity Incentive column as of the date earned. This means an NEO could show performance unit values in both columns during the overlapping 3 year vesting period. For 2014, the only NEO whose performance unit value appears in both columns is Ms. Kerrigan.
(4)    This column reflects the annual change in accumulated benefits under our retirement plans. See “Post-Employment Benefits” for more information about our defined benefit plans and the assumptions used in calculating these amounts. No

MARATHON OIL | 2016 PROXY STATEMENT 35


deferred compensation earnings are reported in this column because our non-qualified deferred compensation plans do not provide above-market or preferential earnings.
(5)    The following table describes each component of the All Other Compensation column for 2015 in the Summary Compensation Table.
Name
Personal
Use of
Company
Aircraft
(a) 
($)
Company
Physicals
(b) 
($)
Tax &
Financial
Planning
(c) 
($)
Miscellaneous
Perks
(d) 
($)
Company Contributions to Defined
Contribution
Plans
(e) 
($)
Matching
Contributions
(f) 
($)
Total All
Other
Compensation
($)
Lee M. Tillman
0
1,310
15,000
31,372
192,937
16,000
256,619
John R. Sult
0
1,310
0
0
88,410
15,000
104,720
Sylvia J. Kerrigan
0
1,310
12,610
0
84,727
15,000
113,647
Lance W. Robertson
0
1,310
16,829
0
75,149
14,466
107,754
T. Mitchell Little
0
1,310
3,250
0
73,675
1,040
79,275
(a)    While limited personal use of the company aircraft is permitted for NEOs, no NEO used the aircraft for this purpose in 2015.
(b)    All regular employees in the United States, including our NEOs, are eligible to receive annual physical and wellness incentives. However, officers may receive an enhanced physical under the executive physical program. This column reflects the average incremental cost of the executive physical program over the employee physical program. Due to Health Insurance Portability and Accountability Act (“HIPAA”) confidentiality requirements, we do not disclose actual use of this program by individual officers.
(c)    This column reflects reimbursement for professional advice related to tax, estate, and financial planning. The maximum annual benefit is $15,000, and reimbursements are attributed to the calendar year in which services are performed. Due to processing delays, the actual amount reimbursed to an officer may exceed $15,000 in a given year.
(d)    This column reflects access to a Company provided car and driver for Mr. Tillman as business needs dictate. This benefit is offered to Mr. Tillman to allow the efficient use of his time and to provide safe transportation given the demands of his role, including travel, after hours/weekend obligations and extended work hours. We provide access to this benefit because we believe that the cost is outweighed by the convenience, increased safety and efficiency that it offers.
(e)    This column reflects amounts contributed by us under the Thrift Plan and related non-qualified deferred compensation plans. See “Post-Employment Benefits” and “Nonqualified Deferred Compensation” for more information about the non-qualified plans.
(f)    The amounts shown represent contributions made on behalf of the NEOs under our matching gifts programs for approved not-for-profit charities.


36     MARATHON OIL | 2016 PROXY STATEMENT


 
GRANTS OF PLAN‑BASED AWARDS IN 2015
The following table provides information about all plan-based long-term incentive awards (stock options, restricted stock, and performance units) granted to each named executive officer during 2015. The awards listed in the table were granted under the 2012 Incentive Compensation Plan (the “2012 Plan”) and are described in more detail in “Compensation Discussion and Analysis.”
 
 
 
Estimated Future Payouts
Under Non‑Equity
Incentive Plan Awards
Estimated Future Payouts
Under Equity
Incentive Plan Awards
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying Options
(#)
Exercise
or Base
Price of
Option Awards
($)
Grant Date
Fair Value
of Stock
and Option Awards
(2) 
($)
Name
Type of Award
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Lee M. Tillman
Annual Cash Bonus
 
0
1,312,500
2,625,000
 
 
 
 
 
 
0
 
Performance Units(1)
2/25/2015
 
 
 
67,744
135,487
270,974
 
 
 
3,937,252
 
Stock Options
2/25/2015
 
 
 
 
 
 
 
256,591
29.06
1,755,082
 
Restricted Stock
2/25/2015
 
 
 
 
 
 
81,292
 
 
2,362,346
John R. Sult
Annual Cash Bonus
 
0
510,000
1,020,000
 
 
 
 
 
 
0
 
Performance Units(1)
2/25/2015
 
 
 
21,344
42,688
85,376
 
 
 
1,240,513
 
Stock Options
2/25/2015
 
 
 
 
 
 
 
80,844
29.06
552,973
 
Restricted Stock
2/25/2015
 
 
 
 
 
 
25,613
 
 
744,314
Sylvia J. Kerrigan
Annual Cash Bonus
 
0
488,750
977,500
 
 
 
 
 
 
0
 
Performance Units(1)
2/25/2015
 
 
 
18,560
37,120
74,240
 
 
 
1,078,707
 
Stock Options
2/25/2015
 
 
 
 
 
 
 
70,299
29.06
480,845
 
Restricted Stock
2/25/2015
 
 
 
 
 
 
22,272
 
 
647,224
Lance W. Robertson
Annual Cash Bonus
 
0
433,500
867,000
 
 
 
 
 
 
0
 
Performance Units(1)
2/25/2015
 
 
 
18,560
37,120
74,240
 
 
 
1,078,707
 
Stock Options
2/25/2015
 
 
 
 
 
 
 
70,299
29.06
480,845
 
Restricted Stock
2/25/2015
 
 
 
 
 
 
22,272
 
 
647,224
T. Mitchell Little
Annual Cash Bonus
 
0
425,000
850,000
 
 
 
 
 
 
0
 
Performance Units(1)
2/25/2015
 
 
 
18,560
37,120
74,240
 
 
 
1,078,707
 
Stock Options
2/25/2015
 
 
 
 
 
 
 
70,299
29.06
480,845
 
Restricted Stock
2/25/2015
 
 
 
 
 
 
22,272
 
 
647,224
(1)    Performance units, discussed under “Long-Term Incentive Awards,” are denominated as an equivalent of one share of our common stock and, if earned, are paid in cash.
(2)    The amounts shown in this column reflect the total grant date fair values of stock options, restricted stock, and performance units calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. The Black-Scholes value used for the stock options granted on February 25, 2015 was $6.837. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. Valuation assumptions used in the calculation of these amounts are included in footnote 21 to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2015. See “Long-Term Incentive Awards” for more information about restricted stock, stock options, and stock-based performance unit awards.


MARATHON OIL | 2016 PROXY STATEMENT 37


 
OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END
The following table provides information about the unexercised stock options (vested and unvested) and unvested restricted stock held by each NEO as of December 31, 2015.
 
Option Awards
Stock Awards

Number of Securities
Underlying
Unexercised
Options
 
 
Restricted Stock/Units
Equity Incentive Plan Awards
(Performance Units)
Name and
Grant Date
Exercisable
(#)
Unexercisable(1) 
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock
That Have
Not Vested
(2) 
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
(3) 
($)
Number of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested
(4) 
(#)
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
(5) 
($)
Lee M. Tillman
 
 
 
 
 
 
 
 
8/15/2013
153,257
76,629
34.65
8/15/2023
 
 
 
 
2/25/2014
110,063
220,126
34.03
2/25/2024
 
 
 
 
2/25/2015
0
256,591
29.06
2/25/2025
 
 
 
 
 
263,320
553,346
 
 
 
 
 
 
 
 
 
 
 
215,150
6,252,259
 
 
2014
 
 
 
 
 
 
84,262
2,448,654
2015
 
 
 
 
 
 
135,487
1,968,626
John R. Sult
 
 
 
 
 
 
 
 
9/11/2013
54,333
27,167
36.49
9/11/2023
 
 
 
 
2/25/2014
33,019
66,038
34.03
2/25/2014
 
 
 
 
2/25/2015
0
80,844
29.06
2/25/2025
 
 
 
 
 
87,352
174,049
 
 
 
 
 
 
 
 
 
 
 
47,805
1,389,213
 
 
2014
 
 
 
 
 
 
25,279
734,608
2015
 
 
 
 
 
 
42,688
620,257
Sylvia J. Kerrigan
 
 
 
 
 
 
 
 
6/01/2006
10,851
0
23.69
6/1/2016
 
 
 
 
5/30/2007
8,568
0
38.25
5/30/2017
 
 
 
 
5/28/2008
6,679
0
32.06
5/28/2018
 
 
 
 
5/27/2009
14,991
0
18.32
5/27/2019
 
 
 
 
2/24/2010
48,499
0
18.28
2/24/2020
 
 
 
 
2/23/2011
62,786
0
30.81
2/23/2021
 
 
 
 
2/28/2012
65,300
0
35.06
2/28/2022
 
 
 
 
2/26/2013
42,733
21,367
32.86
2/26/2023
 
 
 
 
2/25/2014
29,874
59,749
34.03
2/25/2024
 
 
 
 
2/25/2015
0
70,299
29.06
2/25/2025
 
 
 
 
 
290,281
151,415
 
 
 
 
 
 
 
 
 
 
 
45,008
1,307,932
 
 
2013
 
 
 
 
 
 
22,600
106,785
2014
 
 
 
 
 
 
22,871
664,631
2015
 
 
 
 
 
 
37,120
539,354
Lance W. Robertson
 
 
 
 
 
 
 
 
2/28/2012
9,542
0
35.06
2/28/2022
 
 
 
 
8/31/2012
8,525
0
27.82
8/31/2022
 
 
 
 
2/26/2013
22,466
11,234
32.86
2/26/2023
 
 
 
 
2/25/2014
18,868
37,736
34.03
2/25/2024
 
 
 
 
2/25/2015
0
70,299
29.06
2/25/2025
 
 
 
 
 
59,401
119,269
 
 
 
 
 
 
 
 
 
 
 
61,397
1,784,197
 
 
2013
 
 
 
 
 
 
11,900
56,228

38     MARATHON OIL | 2016 PROXY STATEMENT


2014
 
 
 
 
 
 
14,445
419,772
2015
 
 
 
 
 
 
37,120
539,354
T. Mitchell Little
 
 
 
 
 
 
 
 
5/30/2007
7,661
0
38.25
5/30/2017
 
 
 
 
5/28/2008
5,908
0
32.06
5/28/2018
 
 
 
 
5/25/2011
18,947
0
33.06
5/25/2021
 
 
 
 
8/31/2011
2,309
0
26.92
8/31/2021




2/28/2012
5,009
0
35.06
2/28/2022




2/26/2013
22,466
11,234
32.86
2/26/2023




2/25/2014
18,868
37,736
34.03
2/25/2024




2/25/2015
0
70,299
29.06
2/25/2025





81,168
119,269











61,397
1,784,197


2013






11,900
56,228
2014






14,445
419,772
2015






37,120
539,354
(1)    All stock options listed in this column vest in one-third increments on each anniversary of the grant date.
(2)    This column reflects the number of shares of unvested restricted stock held by our NEOs on December 31, 2015.
Name
Grant Date
 
# of Unvested Shares
Vesting Date
Lee M. Tillman
8/15/2013
 
91,727
8/15/2016
 
2/25/2014
 
42,131
2/25/2017
 
2/25/2015
 
81,292
2/25/2018
 
 
Total:
215,150
 
John R. Sult
9/11/2013
 
9,552
9/11/2016
 
2/25/2014
 
12,640
2/25/2017
 
2/25/2015
 
25,613
2/25/2018
 
 
Total:
47,805
 
Sylvia J. Kerrigan
2/26/2013
 
11,300
2/26/2016
 
2/25/2014
 
11,436
2/25/2017
 
2/25/2015
 
22,272
2/25/2018
 
 
Total:
45,008
 
Lance W. Robertson
2/26/2013
 
6,000
2/26/2016
 
5/10/2013
 
4,647
5/10/2016
 
9/25/2013
 
8,596
9/25/2016
 
2/25/2014
 
7,223
2/25/2017
 
7/30/2014
 
12,659
7/30/2017
 
2/25/2015
 
22,272
2/25/2018
 
 
Total:
61,397
 
T. Mitchell Little
2/26/2013
 
6,000
2/26/2016
 
5/10/2013
 
4,647
5/10/2016
 
9/25/2013
 
8,596
9/25/2016
 
2/25/2014
 
7,223
2/25/2017
 
7/30/2014
 
12,659
7/30/2017
 
2/25/2015
 
22,272
2/25/2018
 
 
Total:
61,397
 
(3)    This column reflects the aggregate value of all shares of unvested restricted stock held by each NEO on December 31, 2015, using the December 31, 2015 closing stock price of $12.59. Upon normal retirement, unvested shares are forfeited.

MARATHON OIL | 2016 PROXY STATEMENT 39


(4)    This column represents the number of outstanding share-based performance units. The awards granted in 2013 have a performance period of January 1, 2013 to December 31, 2015. The awards granted in 2014 have a performance period of January 1, 2014 to December 31, 2016. The awards granted in 2015 have a performance period of January 1, 2015 to December 31, 2017.
(5)    The 2013 payouts are shown as actual amounts and reflect a 54% payout based on a completed performance period and a closing share price of $8.75 on January 27, 2016, the date the Committee approved the 2013 performance unit payout. The 2014 estimated payouts are currently tracking at a 54% payout based on performance as of December 31, 2015. Market Value shown reflects a payout at target (100%) and uses the December 31, 2015 closing stock price of $12.59. The 2015 estimated payouts are currently tracking at a 50% payout based on performance as of December 31, 2015. Market Value shown reflects a payout at threshold (50%) and uses the December 31, 2015 closing stock price of $12.59. These estimated payouts are not necessarily indicative of the actual payout at the end of the performance period.
 
OPTION EXERCISES AND STOCK VESTED IN 2015
The following table provides information about the value realized by the NEOs on option award exercises and restricted stock vesting during 2015.
 
Option Awards
Stock Awards
Name
Number of Shares
Acquired on
Exercise
(#)
Value Realized on
Exercise
(1) 
($)
Number of Shares
Acquired on
Vesting
(#)
Value Realized on
Vesting
(2) 
($)
Lee M. Tillman
0
0
9,173
157,317
John R. Sult
0
0
9,551
142,023
Sylvia J. Kerrigan
0
0
12,000
330,240
Lance W. Robertson
0
0
11,795
272,882
T. Mitchell Little
0
0
10,675
233,078
(1)    This column reflects the actual pre-tax income realized by NEOs upon exercise of stock options, which, in each case, is the fair market value of the shares on the exercise date less the grant price.
(2)    This column reflects the actual pre-tax income realized by NEOs upon vesting of restricted stock, which, in each case, is the fair market value of the shares on the vesting date.
 
POST-EMPLOYMENT BENEFITS
Marathon Oil offers NEOs the opportunity to save for retirement as follows:
Marathon Oil Company Thrift Plan (“Thrift Plan”): A tax-qualified 401(k) plan that currently provides for company matching contributions of up to 7% of eligible earnings.
Retirement Plan of Marathon Oil Company (“Retirement Plan”): A tax qualified defined benefit pension plan.
Excess Benefit Plan (“Excess Plan”): A nonqualified plan. The defined benefit portion allows participants to accrue benefits above the defined benefit tax limits, and the defined contribution portion allows participants to accrue benefits above the defined contribution tax limits.
Marathon Oil Company Deferred Compensation Plan (“Deferred Compensation Plan”): A nonqualified plan allowing participants to defer a portion of their compensation and accrue benefits above the Thrift Plan tax limits.

40     MARATHON OIL | 2016 PROXY STATEMENT


All plans have a three-year vesting requirement for company contributions. All NEOs have met the vesting requirement.
See “Nonqualified Deferred Compensation” below for additional information on the Deferred Compensation Plan and the defined contribution portion of the Excess Plan.
RETIREMENT PLAN
In general, all regular full-time and part-time employees in the United States are eligible to participate in the Retirement Plan as of their date of hire.
Benefit accruals are determined under a cash-balance formula, under which plan participants receive pay credits each year equal to a percentage of eligible compensation based on their plan points. Plan points equal the sum of a participant’s age and cash-balance service. Participants with fewer than 50 points receive a 7% pay credit percentage; participants with 50 to 69 points receive a 9% pay credit percentage; and participants with 70 or more points receive an 11% pay credit percentage. Participants are also credited with interest at a rate based on the 30-year Treasury rate, which in 2015 was 3.17%.
For 2015, Mr. Little and Ms. Kerrigan received a pay credit equal to 11% of compensation, Messrs. Tillman and Sult received pay credits equal to 9% of compensation and Mr. Robertson received a pay credit equal to 7% of compensation.
Participants who began employment prior to January 1, 2010 also have a portion of their benefit calculated under a legacy final average pay formula, which is referred to as the Legacy formula. Ms. Kerrigan and Mr. Little are the only NEOs with a Legacy benefit. Up to 37.5 years of participation may be recognized under the formula, and only service earned prior to January 1, 2010 is recognized. Eligible earnings under the Retirement Plan primarily include base salary and annual cash bonuses (including Thrift Plan deferrals but excluding amounts deferred under our nonqualified Deferred Compensation Plan). Long-term incentive compensation is not included. Final average pay was frozen as of July 6, 2015, but vesting service and age continue to be updated under the Legacy formula.
The monthly benefit under the Legacy formula is calculated as follows:
[
1.6%
x
Final Average Pay
x
Years of Participation
]
-
[
1.33%
x
Estimated Primary SS Benefit
x
Years of Participation
]
Normal retirement age under the Retirement Plan is age 65. However, retirement‑eligible participants are able to retire and receive an unreduced benefit under the Legacy formula upon reaching age 62. Retirement Plan benefits include various annuity options and a lump sum distribution option. Participants are eligible for early retirement subsidies under the Legacy formula upon reaching age 50 and completing ten years of vesting service. Both Mr. Little and Ms. Kerrigan are eligible for early retirement subsidies.
We have not granted years of service in addition to the service recognized under the terms of our qualified retirement plans (applicable to a broad-based group of employees) to any NEO for purposes of retirement benefit accruals.
EXCESS PLAN – DEFINED BENEFIT PORTION
The Excess Plan for certain highly compensated employees, including our NEOs, provides benefits that participants would have received under our tax-qualified Retirement Plan but for certain Internal Revenue Code limitations. Eligible compensation under the Excess Plan includes deferred compensation contributions made by NEOs. The Excess Plan also provides an enhancement for officers based on the three highest bonuses earned

MARATHON OIL | 2016 PROXY STATEMENT 41


during their last ten years of employment, instead of the consecutive bonus formula in place for non-officers. Distributions under the Excess Plan are paid in a lump sum following separation from service.
PENSION BENEFITS TABLE
The following table shows the actuarial present value of accumulated benefits payable to each NEO under the Retirement Plan and the defined benefit portion of the Excess Plan as of December 31, 2015. These values have been determined using actuarial assumptions consistent with those used in our financial statements.
Name
Plan Name
Number of Years of Credited Service (1) 
(#)
Present Value of Accumulated Benefit (2) 
($)
Payments During Last Fiscal Year
($)
Lee M. Tillman
Retirement Plan
2.42
67,425
0
 
Marathon Oil Company Excess Benefit Plan
2.42
451,602
0
John R. Sult
Retirement Plan
2.33
62,833
0
 
Marathon Oil Company Excess Benefit Plan
2.33
178,679
0
Sylvia J. Kerrigan
Retirement Plan
18.67
618,912
0
 
Marathon Oil Company Excess Benefit Plan
18.67
2,825,676
0
Lance W. Robertson
Retirement Plan
4.25
68,624
0
 
Marathon Oil Company Excess Benefit Plan
4.25
149,927
0
T. Mitchell Little
Retirement Plan
28.58
1,086,388
0
 
Marathon Oil Company Excess Benefit Plan
28.58
2,848,031
0
(1)    Represents the number of years the NEO has participated in the plan. However, Plan Participation Service, used to calculate each participant’s benefit under the Legacy formula, was frozen as of December 31, 2009.
(2)    Assuming a discount rate of 4.04%, a lump sum interest rate of 1.54%, the RP2000 combined healthy mortality table weighted 75% male and 25% female, a lump sum election rate of 100% for the non‑qualified plan and 90% for the qualified plan, and retirement at age 62 or the age at measurement date, if older.


42     MARATHON OIL | 2016 PROXY STATEMENT


 
NONQUALIFIED DEFERRED COMPENSATION
We offer certain employees, including our NEOs, the opportunity to accrue benefits equal to the Company matching contributions they would have received under the Thrift Plan but for certain Internal Revenue Code limitations. Officers generally accrue these benefits in the Deferred Compensation Plan, while other employees accrue such benefits in the defined contribution portion of the Excess Plan. Both plans have a three year vesting requirement for Company contributions. All NEOs have met the vesting requirement. Distributions from the Deferred Compensation Plan and the Excess Plan are paid as a lump sum following separation from service.
DEFERRED COMPENSATION PLAN
The Deferred Compensation Plan is an unfunded, nonqualified plan into which a participant may elect to defer up to 20% of his or her salary and bonus each year. One NEO elected to defer compensation for 2015, Mr. Robertson. Participants are fully vested in their own deferrals under the plan. Additionally, participants can receive company contributions into the plan equal to the maximum potential matching contribution under the Thrift Plan after they have reached defined contribution accruals under the Thrift Plan in excess of tax limits.
The investment options available under the Deferred Compensation Plan generally mirror the core investment options available under the Thrift Plan, except for Marathon Oil common stock, which is not available under the Deferred Compensation Plan.
EXCESS PLAN – DEFINED CONTRIBUTION PORTION
Prior to becoming eligible for participation in the Deferred Compensation Plan, NEOs may have received defined contribution accruals under the Excess Plan. These contributions were available after a participant’s Thrift Plan contributions were limited due to tax requirements and equaled the matching contribution that participants would have received under the Thrift Plan but for limits imposed by tax law. Defined contribution accruals in the Excess Plan are credited with interest equal to that paid in the “Marathon Oil Stable Value Fund” option of the Marathon Oil Company Thrift Plan. The annual rate of return on this option for 2015 was 1.90%.
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table shows each NEO’s accumulated benefits under our nonqualified savings and deferred compensation plans for 2015.
Name
Plan Name
Executive
Contributions
in Last Fiscal
Year
(1) 
($)
Registrant
Contributions
in Last Fiscal
Year
(1) 
($)
Aggregate
Earnings
in Last
Fiscal Year
($)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance at
Last Fiscal
Year End
(2) 
($)
Lee M. Tillman
Deferred Compensation
0
174,387
(3,039)
0
374,573
John R. Sult
Deferred Compensation
0
69,860
8,322
0
161,225
Sylvia J. Kerrigan
Excess Benefit Plan
0
0
801
0
43,401
 
Deferred Compensation
0
66,177
9,661
0
548,968
Lance W. Robertson
Excess Benefit Plan
0
0
375
0
20,340
 
Deferred Compensation
75,149
56,599
(4,317)
0
239,745
T. Mitchell Little
Excess Benefit Plan
0
0
1,223
0
66,265
 
Deferred Compensation
0
55,125
139
0
134,815
(1)    The amounts shown in this column are also included in the All Other Compensation column of the Summary Compensation Table.
(2)    Certain portions shown for each NEO were also reported in the Summary Compensation Tables of our proxy statements in prior years.

MARATHON OIL | 2016 PROXY STATEMENT 43


 
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
As a matter of policy, we do not enter into employment, severance, or change in control agreements with our NEOs. Rather, we provide an Executive Change in Control Severance Benefits Plan, which is described in more detail below.
RETIREMENT OR SEPARATION
Upon retirement or separation, our NEOs are entitled to receive their vested benefits that have accrued under our broad-based and executive benefit programs. For more information see “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
If an NEO retires, meaning the NEO separates employment after attaining age 50 with at least ten years of vesting service, unvested stock options granted prior to July 30, 2014 become immediately vested while unvested stock options granted July 30, 2014 and later are forfeited. Unvested restricted stock awards are forfeited upon retirement (except in the case of mandatory retirement at age 65). Unvested performance units are forfeited upon retirement unless the NEO has worked more than half of the performance period, in which case awards may be vested on a prorated basis at the Committee’s discretion. Of the NEOs, only Mr. Little and Ms. Kerrigan are currently retirement eligible.
DEATH OR DISABILITY
In the event of death or disability, our NEOs (or the beneficiary or estate, as defined by the plan terms) would be entitled to vested benefits accrued under our broad-based and executive benefits programs. Long-term incentive awards would immediately vest in full upon the death of an NEO, with performance units vesting at the target level. In the event of disability, long-term incentive awards would continue to vest as if the NEO remained actively employed for up to 24 months during the period of disability.
CHANGE IN CONTROL
To encourage our NEOs to continue their dedication to their assigned duties where a change in control of the Company is under consideration, our Executive Change in Control Severance Benefits Plan (the “Change in Control Plan”) provides certain severance benefits if employment is terminated under certain circumstances following a change in control or during a potential change in control.
Under the Change in Control Plan, a change in control will have occurred if:
any person not affiliated with Marathon Oil acquires 20% or more of the voting power of our outstanding securities;
our Board no longer has a majority comprised of (1) individuals who were directors on the effective date of the plan and (2) new directors (other than directors who join our Board in connection with an election contest) approved by two-thirds of the directors then in office who (a) were directors on the effective date of the plan or (b) were themselves previously approved by our Board in this manner;
we merge with another company and, as a result, our stockholders hold less than 50% of the surviving entity’s voting power immediately after the transaction;
our stockholders approve a plan of complete liquidation of Marathon Oil; or
we sell all or substantially all of our assets.


44     MARATHON OIL | 2016 PROXY STATEMENT


In addition, a potential change in control could occur if any person takes certain actions that could result in a change in control. The definition of a potential change in control for purposes of the Change in Control Plan is complex but, in general, would occur if:
Marathon Oil enters into an agreement which could result in a change in control;
any person becomes the owner of 15% or more of our common stock;
any person or entity publicly announces an intention to take over Marathon Oil; or
our Board determines that a potential change in control has occurred.
If an NEO is terminated without cause or resigns for good reason following a change in control or during a potential change in control, he or she will be entitled to the following:
a cash payment of up to three times the sum of the NEO’s current salary on the termination date plus the average bonus awarded to the NEO in the three years before the termination or change in control (or during the period of employment if less than three years);
life and health insurance benefits for up to 36 months after termination, at the lesser of the current cost or the active employee cost;
an additional three years of service credit and three years of age credit for purposes of retiree health and life insurance benefits;
a cash payment equal to the difference between the amount receivable under our defined contribution plan and the amount which would have been received if the NEO’s savings had been fully vested;
a cash payment equal to the actuarial equivalent of the difference between the amounts receivable by the NEO under the final average pay formula in our pension plans and the amounts which would be payable if (a) the NEO had an additional three years of participation service credit, (b) the NEO’s final average pay would be the higher of salary at the time of the change in control event or termination plus his or her highest annual bonus from the preceding three years, (c) for purposes of determining early retirement commencement factors, the NEO had three additional years of vesting service credit and three additional years of age, and (d) the NEO’s pension had been fully vested; and
a cash payment equal to the difference between the amount receivable under our defined benefit plan and the amount which would have been received if the NEO’s savings had been fully vested.
These benefits are not payable if the termination is for cause or due to mandatory retirement, death, disability or resignation (other than for good reason) by the NEO.
The program includes no provisions to reimburse or “gross up” tax obligations following a change in control.
Immediately upon a change in control or upon an NEO’s termination of employment during a potential change in control, unvested stock options and restricted stock vest in full. If a change in control occurs prior to the end of a performance period, unvested performance units vest in full as follows:
performance units granted prior to 2015 vest at the target level; and
performance units granted after 2014 will vest at the applicable performance percentage based on Marathon Oil’s actual relative TSR ending on the day immediately prior to the date of the change of control.
The Change in Control Plan will continue in effect during a potential change in control period and for two years after a change in control.
We have a policy that our Board will seek stockholder approval or ratification of any severance agreement for a senior executive officer (other than agreements consistent with our 2001 change in control policy, which is

MARATHON OIL | 2016 PROXY STATEMENT 45


reflected in the Change in Control Plan) that generally requires payment of cash severance benefits exceeding 2.99 times a senior executive officer’s salary plus bonus for the prior calendar year.
The following tables assume a termination date or change in control date of December 31, 2015, the last business day of 2015. The value of the equity awards (accelerated vesting of restricted stock awards, stock options and performance unit awards) was calculated using the December 31, 2015 closing market price for our common stock ($12.59). The value of performance unit awards assumes that the 2014 and 2015 Performance Units would vest and be paid out at target.
Payments upon a Change in Control without Termination of Employment
Name
Accelerated Vesting of LTI
($)
Lee M. Tillman
9,094,645
John R. Sult
2,576,986
Sylvia J. Kerrigan
2,309,989
Lance W. Robertson
2,271,467
T. Mitchell Little
2,271,467
Payments upon a Change in Control or Potential Change of Control Followed by Termination of Employment with Good Reason or by the Company without Cause
Name
Accelerated
Vesting of LTI
($)
Severance
Payment
(1) 
($)
Health and Welfare Benefits(2) 
($)
Retirement
Enhancement
(3) 
($)
Total
Payments
($)
Lee M. Tillman
9,094,645
8,521,875
 
84,400
0
 
17,700,920
 
John R. Sult
2,576,986
3,942,000
 
74,619
0
 
6,593,605
 
Sylvia J. Kerrigan
2,309,989
3,848,379
 
151,175
1,965,321
 
8,274,864
 
Lance W. Robertson
2,271,467
3,094,551
 
81,628
0
 
5,447,646
 
T. Mitchell Little
2,271,467
2,824,500
 
142,982
1,681,306
 
6,920,255
 
(1)    Messrs. Tillman and Sult and Ms. Kerrigan are subject to the policy concerning Severance Agreements with Senior Executive Officers that requires payment of cash severance benefits in an amount exceeding 2.99 times the sum of base salary plus previous year’s bonus to be subject to stockholder approval. The amounts shown are maximum amounts, assuming that stockholder approval is obtained.
(2)    Reflects the incremental value of continued coverage and enhanced subsidy for retiree medical coverage assuming an election based on the officer’s current elections regarding plan participation and coverage level.
(3)    Retirement benefits included in these amounts were calculated using the following assumptions: individual life expectancies using the RP2000 Combined Healthy Table weighted 75% male and 25% female; a discount rate of 1.00% for NEOs who are retirement eligible (taking into account the additional three years of age and service credit); and a lump sum form of benefit.


46     MARATHON OIL | 2016 PROXY STATEMENT


TRANSACTIONS WITH RELATED PERSONS
We have written procedures for monitoring, reviewing, approving or ratifying related person transactions. We will enter into or ratify related person transactions only when the Board, acting through the Corporate Governance and Nominating Committee, determines that the related person transaction is in the best interests of the Company and its stockholders. The primary features of these procedures are:
Each director and executive officer must submit a list of his or her immediate family members, each listed individual’s employer and job title, each firm, corporation or other entity in which such individual is a partner or principal or in a similar position or in which such person has a five percent or greater beneficial ownership interest, and any charitable or non-profit organization for which such individual is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
The Company maintains a list, to the extent the information is publicly available, of five percent beneficial owners, including (a) if the owner is an individual, the same information requested of directors and executive officers as noted above, and (b) if the owner is a firm, corporation or other entity, a list of principals or executive officers of the firm, corporation or entity.
The Corporate Governance and Nominating Committee considers the facts and circumstances of each related person transaction and determines whether to approve it.
Any pending or ongoing related person transaction is submitted to the Corporate Governance and Nominating Committee or Committee Chair, which will consider all of the relevant facts and circumstances. Based on the conclusions reached, the Corporate Governance and Nominating Committee or the Committee Chair evaluates all options, including ratification, amendment or termination of the related person transaction.
The Corporate Governance and Nominating Committee annually reviews any previously approved or ratified related person transaction with a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Committee determines whether it is in the best interests of the Company and its stockholders to continue, modify or terminate the transaction.
During 2015, there were no transactions in excess of $120,000 between the Company and a related person in which the related person had a direct or indirect material interest.

MARATHON OIL | 2016 PROXY STATEMENT 47


PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITOR FOR 2016
The Audit and Finance Committee has selected PricewaterhouseCoopers LLP (“PwC”), an independent registered public accounting firm, to audit the Company’s financial statements and the effectiveness of internal control over financial reporting for 2016. While the Audit and Finance Committee is responsible for appointing, compensating and overseeing the independent auditor’s work, we are requesting, as a matter of good corporate governance, that our stockholders ratify the appointment of PwC as our independent auditor for 2016. PwC served as the Company’s independent auditor during 2015. We believe the appointment of PwC as our independent auditor for 2016 is in the best interests of the Company and our stockholders.
We expect representatives of PwC to be present at the Annual Meeting with an opportunity to make a statement if they would like to do so and to be available to respond to appropriate questions from our stockholders.
YOUR BOARD RECOMMENDS A VOTE FOR PROPOSAL 2
RATIFYING THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANY’S INDEPENDENT AUDITOR FOR 2016.
If our stockholders do not ratify this appointment, the Audit and Finance Committee will reconsider whether to retain PwC and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if the appointment is ratified, the Audit and Finance Committee may, in its discretion, direct the appointment of a different independent auditor at any time during the year if it determines that such change would be in the best interests of the Company and our stockholders.
Aggregate fees for professional services rendered for the Company by PwC for the years ended December 31, 2015 and 2014 were (in thousands):
 
2015
2014
Audit Fees
$7,036
 

$8,513

 
Audit‑Related Fees
16
 
17

 
Tax Fees
365
 
500

 
All Other Fees
5
 
5

 
Total
$7,422
 

$9,035

 
Audit Fees were for professional services rendered for the audit of the consolidated financial statements and audit of internal control over financial reporting of the Company, statutory and regulatory audits, issuance of comfort letters, consents, and assistance with and review of documents filed with the SEC.
Audit-Related Fees were for assurance and related services related to employee benefit plan audits, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.
Tax Fees were for services related to tax compliance, including the preparation of tax returns and claims for refund, and tax planning and tax advice, including assistance with and representation in tax audits and appeals, and requests for rulings or technical advice from tax authorities.
All Other Fees were for services rendered for accounting research, internal audit software licenses and other projects.
The Audit and Finance Committee reviews and approves the fees and expenses of the independent auditor for audit, audit-related, tax and permissible non-audit services. To assure continuing auditor independence, the Audit and Finance Committee annually reviews the independence of the independent auditors, in addition to assuring

48     MARATHON OIL | 2016 PROXY STATEMENT


the regular rotation of the lead audit partner as required and considering whether there should be a rotation of the independent audit firm itself. In conjunction with the mandated rotation of the lead audit partner, the Audit and Finance Committee and its chairperson are directly involved in the selection of PwC’s lead engagement partner.
The Audit and Finance Committee’s Policy for Pre-Approval of Audit, Audit-Related, Tax and Permissible Non-Audit Services is available at http://www.marathonoil.com/Investor_Center/Corporate_Governance/. Among other things, this policy sets forth the procedure for the Audit and Finance Committee to pre-approve all audit, audit-related, tax and permissible non-audit services, other than as provided under the de minimus exception. Notwithstanding the de minimus exception, the Committee’s standard practice is to pre-approve all permissible non-audit services. The Audit and Finance Committee has delegated pre-approval authority of up to $500,000 to the Audit and Finance Committee Chair for unbudgeted items.
The Audit and Finance Committee pre-approved all the fees and services for 2015 and 2014, and did not utilize the de minimus exception in either year.
Proposal 2
For the reasons stated above, your Board of Directors recommends a vote FOR Proposal 2 ratifying of the selection of PricewaterhouseCoopers LLP as the Company’s Independent Auditor for 2016.

þ


MARATHON OIL | 2016 PROXY STATEMENT 49


PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we seek your advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement under “Compensation Discussion and Analysis” and “Executive Compensation.”
YOUR BOARD RECOMMENDS A VOTE FOR PROPOSAL 3
APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
Although this vote is non-binding, the Compensation Committee values your opinion and will consider the voting results when making future decisions about executive compensation.
Additionally, we believe that constructive dialogue with our stockholders provides meaningful feedback about specific executive compensation practices and programs, and we encourage our stockholders to communicate directly with both management and the Committee about executive compensation. Stockholders may contact the Committee Chair to provide input on executive compensation matters at any time by emailing compchair@marathonoil.com.
As described under “Compensation Discussion and Analysis,” the Compensation Committee, comprised entirely of independent directors, has established executive compensation programs that reward both company and individual performance. Our Compensation Committee consistently exercises great care and discipline in determining executive compensation. Executive compensation decisions are made in order to attract, retain and motivate talented executives to deliver business results and long-term value to our stockholders.
We currently seek the advisory vote of our stockholders to approve the compensation of our named executive officers on an annual basis and expect that the next such advisory vote will be held at our 2017 Annual Meeting.
Proposal 3
For the reasons stated above, your Board of Directors recommends a vote FOR Proposal 3 approving the compensation of our Named Executive Officers.

þ




50     MARATHON OIL | 2016 PROXY STATEMENT


PROPOSAL 4: APPROVAL OF 2016 INCENTIVE COMPENSATION PLAN
On February 24, 2016, our Board approved the 2016 Incentive Compensation Plan (the “2016 Plan”) and its submission to the stockholders for their approval.
Although a significant number of shares remain available for grant under the 2012 Incentive Compensation Plan (the “2012 Plan”), our Board believes it is appropriate to propose a replacement plan at this time in order to ensure that sufficient shares are available for grants in 2017. In addition, our Board wants to ensure that certain amounts paid to “covered employees” under Section 162(m) of the Internal Revenue Code (the “Code”) are deductible, which requires periodic stockholder approval of incentive compensation plans.
If the new 2016 Plan is approved by our stockholders, all granting authority under the 2012 Plan will be revoked and no new grants will be made from the 2012 Plan following the date of stockholder approval. However, outstanding awards under the 2012 Plan would continue to be settled from shares available under that plan.
YOUR BOARD RECOMMENDS A VOTE FOR PROPOSAL 4
APPROVING THE 2016 INCENTIVE COMPENSATION PLAN.
The following summary of the 2016 Plan is qualified by reference to the full text of the 2016 Plan, which is attached as Appendix A to this Proxy Statement and incorporated by reference into this proposal. The 2016 Plan is not tax-qualified under Section 401(a) of the Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.
 
PURPOSES OF THE 2016 PLAN
The primary purposes of the 2016 Plan are to attract and retain employees and non-employee directors with valuable training, experience and ability and to promote the active interests of such persons in the development and financial success of the Company and its subsidiaries. In accordance with these goals, the 2016 Plan is designed to enable employees and non-employee directors to acquire or increase their ownership of our common stock and to compensate employees and non-employee directors for creation of stockholder value. The 2016 Plan enables us to provide variable long-term compensation to our employees and non-employee directors, and our Board believes this further aligns the interests of our employees and non-employee directors with those of our stockholders.
 
AWARD TYPES UNDER THE 2016 PLAN
The 2016 Plan authorizes the granting of awards, including shares of our common stock, in any combination of the following:
stock options, including incentive stock options and nonqualified stock options;
stock appreciation rights (“SARs”);
stock awards, restricted stock awards and other awards denominated or paid in common stock;
restricted stock units (which may include dividend equivalents);
cash awards; and
performance awards.

MARATHON OIL | 2016 PROXY STATEMENT 51


 
ELIGIBILITY
All employees and non-employee directors of Marathon Oil and its subsidiaries are eligible to receive awards under the 2016 Plan. We expect that awards under the 2016 Plan will generally be granted to our officers, managers and technical and professional employees, as well as to non-employee directors. Given the technical demands of our industry, a broad group of our employees is eligible for, and likely to receive, awards under the 2016 Plan.
We anticipate that each non-employee director will receive an annual non-retainer grant of common stock units under the 2016 Plan. All other awards under the 2016 Plan will be granted at the discretion of the committee appointed by our Board to administer the Plan, or by the delegate of such committee pursuant to the terms of the 2016 Plan. Therefore, the total benefits that will be received by any particular person or group under the 2016 Plan are not determinable at this time.

 
AUTHORIZED SHARES AND LIMITS
Subject to stockholder approval, we have reserved a total of 55,000,000 shares of our common stock for issuance in connection with the 2016 Plan. In connection with the granting of a stock award that is not a stock option or SAR, the number of shares of our common stock available for issuance under the 2016 Plan shall be reduced by 2.41 shares of common stock in respect of each share of common stock with respect to which the stock award is granted. As a result, no more than 22,821,576 shares may be used for stock awards other than stock options or SARs. The number of shares authorized to be issued under the 2016 Plan, as well as individual limits and exercise prices, is subject to adjustment for stock dividends, stock splits, recapitalizations, mergers, or similar corporate events.
The following limitations apply to any awards made under the 2016 Plan:
During any calendar year, no employee may be granted, stock options or SARs that are exercisable for or relate to more than 5,000,000 shares of common stock;
During any calendar year, no employee may be granted stock awards or restricted stock unit awards covering or relating to more than 4,000,000 shares of common stock; and
For any calendar year, no employee may be granted performance awards consisting of cash having a maximum value determined on the grant date in excess of $30,000,000.
 
HISTORICAL BURN RATES
Our burn rate represents the total number of shares of our common stock subject to equity awards (stock options, stock appreciation rights, restricted stock and restricted stock units) granted in a given year divided by the weighted average number of outstanding shares for such year. Our burn rates for 2015, 2014 and 2013 were 0.55%, 0.59% and 0.61%, respectively. Our three-year average burn rate was 0.58%.
 
POTENTIAL DILUTION
The maximum number of shares of our common stock that may be issued under the 2016 Plan is 55,000,000, which represents approximately 6.5% of the total number of shares of our common stock outstanding on March 4,

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2016, excluding treasury shares. This level of dilution is comparable to that of companies in our peer group. The closing price per share of our common stock on March 4, 2016 as reported on the NYSE was $11.00.
 
ADMINISTRATION OF THE 2016 PLAN
Our Board will designate one or more committees of directors to determine the types of awards made under the 2016 Plan and to designate the employees and non-employee directors who will receive the awards. Consistent with past practice, we anticipate that the Compensation Committee will oversee administration of the 2016 Plan with respect to awards made to employees, and the Corporate Governance and Nominating Committee will oversee administration of the 2016 with respect to awards made to non-employee directors. The applicable committee has full and exclusive power to administer and interpret the 2016 Plan and may adopt guidelines for administering the 2016 Plan as it deems necessary or proper.
The committee also may correct any defect, supply any omission or reconcile any inconsistency in the 2016 Plan or in any award. Any committee decision about the interpretation and administration of the 2016 Plan is within its sole and absolute discretion and is final, conclusive, and binding on all parties concerned.
While awards will generally vest over three years, the committee may, in its discretion, extend or accelerate the exercisability of, accelerate the vesting of, or eliminate or make less restrictive any restrictions contained in any award, waive any restriction or other provision of the 2016 Plan or in any award, or otherwise amend or modify any award in a manner that either is not adverse to the participant or is consented to by the participant if the committee determines that such a change is appropriate and in the best interests of the Company.
The committee and our Board may delegate to our CEO and other senior officers their authority under the 2016 Plan, as permitted by applicable law. Either may engage third-party administrators to carry out administrative functions under the 2016 Plan.
Awards that are stock options or SARs may not be repriced, replaced, or regranted through cancellation or modified without stockholder approval (except if in connection with a change in our capitalization) if the effect would be to reduce the underlying grant price.
 
EMPLOYEE AWARD TERMS
All awards to employees under the 2016 Plan are subject to the terms, conditions, and limitations as determined by the committee. Subject to the terms of the 2016 Plan, awards may, in the discretion of the committee, be made in combination with, in replacement of, or as alternatives to, grants under the 2016 Plan or other plans of our Company or subsidiaries, including plans of an acquired entity.
A stock option granted to an employee under the 2016 Plan may consist of either an incentive stock option that complies with the requirements of Section 422 of the Code or a nonqualified stock option that does not comply with those requirements. A stock appreciation right, or SAR, may be granted under the 2016 Plan with respect to all or a portion of the shares of common stock subject to a stock option or may be granted separately. All stock options and SARs must have an exercise price per share that is not less than the fair market value of the common stock on the grant date and, subject to certain adjustment provisions of the 2016 Plan that apply upon the occurrence of significant corporate events reflecting a change in our capitalization, the exercise price of an option or SAR may not be decreased. The term of a stock option or SAR cannot be more than ten years after the grant date.

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Stock awards consist of restricted common stock and restricted stock unit awards. Rights to dividends or dividend equivalents, as applicable, may be extended to and made part of any stock award at the committee’s discretion. Stock awards settled in stock that are not performance-based will have a minimum vesting period of three years, but awards may vest incrementally on each anniversary of the grant date over the three-year period. The committee may also determine when and if all, or any portion, of an award may be deferred and may also establish procedures for crediting of interest on deferred awards or dividend equivalents. Consistent with past practice, we anticipate that restricted stock and restricted stock unit awards will generally vest either incrementally on each of the first three anniversaries of the grant date or in full on the third anniversary of grant.
Cash awards, which consist of grants denominated in cash, may also be granted to employees under the 2016 Plan. The committee may also establish rules and procedures for the crediting of interest or other earnings on deferred cash payments.
Performance awards consist of grants made subject to the attainment of one or more performance goals and may be intended to meet the requirements of qualified performance-based compensation under Section 162(m) of the Code. The goals intended to satisfy Section 162(m) of the Code must be established by the committee prior to the earlier of: (a) 90 days after the commencement of the period of service to which the performance goals relate and (b) the lapse of 25% of the period of service.
A performance goal intended to meet the requirements of Section 162(m) of the Code may be based upon one or more business criteria that apply to the employee, one or more business units of the Company, or the Company as a whole, and may include any of the following:
revenue and income measures, including revenue, gross margin, income from operations, net income, net sales, earnings per share, earnings before interest, taxes, depreciation and amortization, and economic value added;
expense measures, including costs of goods sold, selling, finding and development costs, general and administrative expenses and overhead costs;
operating measures,including productivity, operating income, funds from operations, cash from operations, after-tax operating income, market share, margin and sales volumes;
cash flow measures, including net cash flow from operating activities and net cash flow before financing activities;
liquidity measures, including earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, and free cash flow;
leverage measures, including debt-to-equity ratio and net debt;
market measures, including market share, stock price, growth measure, total stockholder return and market capitalization measures;
return measures, including return on equity, return on assets and return on invested capital, and which may be risk-adjusted;
reserve additions, including reserve replacement ratios;
objectively determinable corporate value and sustainability measures, including compliance, safety, environmental and personnel matters; and
other measures such as those relating to acquisitions or dispositions, including proceeds from dispositions.
Prior to the payment of any performance award based on the achievement of performance goals pursuant to Section 162(m) of the Code, the committee must certify in writing that the applicable performance goals and any material terms were, in fact, satisfied.

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Under the terms of the 2016 Plan, awards do not automatically vest upon a Change in Control. However, if an employee is terminated during the 24-month period following a Change in Control, his or her awards under the 2016 Plan shall vest. Further, the committee retains discretion to accelerate vesting of awards upon a Change in Control. The committee may also provide for vesting upon death, disability, involuntary termination of employment (e.g., layoff) and retirement.
 
NON-EMPLOYEE DIRECTOR AWARD TERMS
All awards to our non-employee directors under the 2016 Plan are subject to the terms, conditions, and limitations as determined by our Board or the committee. Subject to the terms of the 2016 Plan, awards may, in the discretion of the committee, be made in combination or in tandem with, in replacement of, or as alternatives to, grants under the 2016 Plan or other plans of Marathon Oil Corporation or its subsidiaries, including plans of an acquired entity.
A stock option granted to a non-employee director under the 2016 Plan may consist of a nonqualified stock option that does not comply with the requirements of Section 422 of the Code. Nonqualified stock options must have an exercise price per share that is not less than the fair market value of the common stock on the grant date and, subject to certain adjustment provisions of the 2016 Plan that apply upon the occurrence of significant corporate events reflecting a change in our capitalization, the exercise price of an option granted under the 2016 Plan may not be decreased. The term of a stock option cannot be more than ten years after the grant date.
A stock appreciation right, or SAR, may be granted under the 2016 Plan with respect to all or a portion of the shares of common stock subject to a stock option or may be granted separately. The exercise price of an SAR may not be less than the fair market value of the common stock on the grant date and its term cannot be more than ten years from the grant date.
Stock awards consist of restricted common stock and restricted stock unit awards. Restricted stock unit awards consist of awards of units denominated in common stock. Rights to dividends may be extended to and made part of any stock award at the discretion of the committee.
Cash awards, which consist of grants denominated in cash, may also be granted to directors under the 2016 Plan. The committee may also establish rules and procedures for the crediting of interest or other earnings on deferred cash payments.
Performance awards consist of grants made subject to the attainment of one or more performance goals. Performance awards to non-employee directors are not required to meet the requirements of qualified performance-based compensation under Section 162(m) of the Code. The committee shall determine the terms, conditions, limitations and performance goals with respect to performance awards to our non-employee directors.
 
AMENDMENT OF THE 2016 PLAN
The committee or our Board may amend or terminate the 2016 Plan in response to any legal requirements or for any other purpose permitted by law; provided, however, no amendment that would adversely affect the rights of a participant may be made without the participant’s consent, and no amendment may be effective prior to its approval by our stockholders if such approval is required by applicable law. We intend to make awards under the 2016 Plan that comply with, or are exempt from, the requirements of Section 409A of the Code. The 2016 Plan will not be amended in a manner that would cause the 2016 Plan or any amounts payable under the 2016 Plan to fail to comply with the requirements of Section 409A of the Code, to the extent applicable. The provisions of any purported amendment that may reasonably be expected to result in such non-compliance shall be of no force or effect with respect to the 2016 Plan.

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FEDERAL INCOME TAX CONSEQUENCES
The following discussion of material U.S. federal income tax consequences to participants in the 2016 Plan who are U.S. citizens or residents is based on U.S. tax law as in effect as of the date of this proxy statement. This discussion is limited, and does not cover state, local, or foreign tax treatment. Differences in participants’ situations may cause tax consequences to vary.
Participants will not realize taxable income upon the grant of a nonqualified stock option or SAR. Upon the exercise of a nonqualified stock option, the participant will generally recognize ordinary income in an amount equal to the excess of (a) the fair market value of the common stock over (b) the exercise price paid by the participant for the stock. Upon the exercise of a SAR, the participant will generally recognize ordinary income in an amount equal to the excess of (x) the fair market value of the common stock underlying the SAR over (y) the grant price of the SAR. In the case of our employees, we are required to withhold federal income tax on ordinary income. The participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of a SAR, or pursuant to the exercise of a nonqualified stock option, that equals the fair market value of the shares on the date of exercise. Generally, we will be entitled to a deduction for U.S. federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by the participant. Upon a subsequent sale of the shares received upon exercise of a nonqualified stock option, any difference between the net proceeds on the sale and the fair market value of the shares on the date of exercise will be taxed as capital gain or loss (long- or short-term, depending on the holding period).
Incentive stock options can only be granted to employees. An employee will not have taxable income upon the grant of an incentive stock option. To satisfy the employment requirement, a participant must exercise the incentive stock option not later than three months after he or she ceases to be an employee (one year if he or she is disabled). Upon the exercise of an incentive stock option, the employee will not have taxable income, although the excess of the fair market value of the shares of common stock received upon exercise of the incentive stock option over the exercise price will increase the alternative minimum taxable income of the employee, which may cause the employee to incur alternative minimum tax. The payment of any alternative minimum tax due to the exercise of an incentive stock option may be allowed as a credit against the employee’s regular tax liability in a later year.
Upon the disposition of stock received upon exercise of an incentive stock option that has been held for the requisite holding period (generally one year from the date of exercise and two years from the grant date), the employee will generally recognize capital gain or loss equal to the difference between the amount received in the disposition and the exercise price paid. However, if an employee disposes of stock that has not been held for the requisite holding period, the employee will recognize ordinary income in the year of such a “disqualifying disposition” to the extent that the fair market value of the stock at the time of exercise of the incentive stock option, or, if less, the amount realized in the case of an arm’s-length disqualifying disposition to an unrelated party, exceeds the exercise price paid by the employee for the stock. The employee will also recognize capital gain, or, depending on the holding period, additional ordinary income, to the extent the amount realized in the disqualifying disposition exceeds the fair market value of the stock on the exercise date. If the exercise price paid for the stock exceeds the amount realized in the disqualifying disposition, in the case of an arm’s-length disposition to an unrelated party, the excess would ordinarily be a capital loss.
Stock options otherwise qualifying as incentive stock options will be treated as nonqualified stock options to the extent that the aggregate fair market value of the shares with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under all of our plans and any of our subsidiaries’ plans) exceeds $100,000. This rule is applied by taking the stock options into account in the order granted.

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We are generally not entitled to any federal income tax deduction upon the grant or exercise of an incentive stock option, unless the employee makes a disqualifying disposition of the stock. If an employee makes a disqualifying disposition, we will generally be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by the employee.
An employee will recognize ordinary income upon receipt of cash pursuant to a cash award or performance award or, if earlier, at the time the cash is otherwise made available for the employee to draw upon it.
A participant will not have taxable income upon the grant of a stock award in the form of units denominated in common stock, but rather will generally recognize ordinary income at the time the participant receives common stock or cash in satisfaction of a stock unit award in an amount equal to the fair market value of the common stock or cash received. In general, a participant will recognize ordinary income as a result of the receipt of common stock pursuant to a stock award or performance award in an amount equal to the fair market value of the common stock when the stock is received; provided, however, that if the stock is not transferable and is subject to a substantial risk of forfeiture when received, the participant will recognize ordinary income in an amount equal to the fair market value of the common stock when it first becomes transferable or is no longer subject to a substantial risk of forfeiture, unless the participant makes an election to be taxed on the fair market value of the common stock when the stock is received.
An employee will be subject to tax withholding for federal, and generally for state and local, taxes at the time the employee recognizes income with respect to common stock or cash received pursuant to a cash award, performance award, stock award or stock unit award. Dividends that are received by a participant prior to the time that the common stock is taxed to the participant are taxed as additional compensation, not as dividend income. A participant’s tax basis in the common stock received will equal the amount recognized by the participant as income, and the participant’s holding period in the shares will commence on the date income is recognized.
To the extent that a participant recognizes ordinary income in the circumstances described above, the participant’s employer will be entitled to a corresponding deduction provided, among other things, that such deduction meets the test of reasonableness, is an ordinary and necessary business expense, is not disallowed by the $1 million limitation on certain executive compensation and is not an “excess parachute payment” within the meaning of Section 280G of the Code.
Section 162(m) of the Code provides that certain compensation received in any year by a “covered employee” in excess of $1 million is non-deductible by the Company for federal income tax purposes. Section 162(m) provides an exception, however, for “performance-based compensation.” The 2016 Plan permits the committee to structure grants and awards made under the 2016 Plan to covered employees as performance-based compensation that is exempt from the limitations of Section 162(m). However, the committee may award compensation that is or may become non-deductible, and expects to consider whether it believes the grants are in the best interest of the Company, balancing tax efficiency with long-term strategic objectives.
We intend to make awards under the 2016 Plan that are either not subject to Section 409A of the Code or that comply with the requirements of Section 409A of the Code. Failure to comply with Section 409A of the Code may subject participants to potentially significant tax liabilities, including current taxation at vesting and a 20% additional income tax.

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