DEF 14A 1 a2020-mroproxystatement.htm DEF 14A Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
 
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Definitive Proxy Statement
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Soliciting Material under §240.14a-12
 
Marathon Oil Corporation
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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LETTER TO STOCKHOLDERS
 
April 9, 2020
Dear Marathon Oil Corporation Stockholder,
2019 was another year of differentiated execution for Marathon Oil. We believe in our strategy and our framework for success, which is underpinned by our multi-basin portfolio and our balance sheet strength. Unfortunately, today, our industry is facing the unprecedented combination of a significant decrease in global energy demand due to the COVID-19 (Coronavirus) outbreak, paired with an oversupplied market exacerbated by an unforeseen response from OPEC and Russia.


               
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With this dramatic drop in commodity prices, we’re taking action to maintain our strong financial foundation that positions us to navigate a challenging oil price environment ahead. In addition, we are taking steps to protect the health of our employees and contractors consistent with our core values.
Your Board of Directors and management cordially invite you to attend our 2020 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 27, 2020, at 10:00 a.m. Central Time. In the event it is not possible or advisable to hold our Annual Meeting in person because of the Coronavirus, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. If we take this step, we will announce the decision to do so in advance. We value the communication we have established with our stockholders. We look forward to continuing to hear your views, and we ask for your continued support as we work to maximize the value of your investment in our Company.
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.
 
2019
HIGHLIGHTS
 
» Best safety performance in company history
» Returned approximately $510MM to stockholders, including $350MM of share repurchases and $160MM of dividends
» Simplified international portfolio, elimination of over $970MM of asset retirement obligations
» Added over 1,000 gross operated drilling locations
» Investment grade credit rating at all primary rating agencies
On April 15, 2020, we plan to mail to our U.S. stockholders a notice explaining how to access our 2020 Proxy Statement and 2019 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 2020 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,
 
 
 
 
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Lee M. Tillman
 
 
Gregory H. Boyce
 
Chairman, President and Chief Executive Officer
Independent Lead Director



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NOTICE OF THE 2020 ANNUAL
MEETING OF STOCKHOLDERS
 
 
À
l
TIME AND DATE:
PLACE:
RECORD DATE:
Wednesday, May 27, 2020
10:00 a.m. Central Time
Conference Center Auditorium
of the Marathon Oil Tower
5555 San Felipe St., Houston, TX 77056
March 31, 2020
As part of our effort to maintain a healthy and safe environment at our Annual Meeting, we are closely monitoring statements issued by the World Health Organization and the Centers for Disease Control and Prevention regarding the Coronavirus.  In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting remotely on the Broadridge Virtual Shareholder Meeting Platform (VSM Platform). If we take this step, we will announce the decision to do so in advance via a press release and by filing the information with the SEC as supplemental proxy materials. Regardless, the meeting will still be held on Wednesday, May 27, 2020, 10:00 a.m. Central Time. If the meeting is held via the VSM Platform, you will be able to participate in the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/MRO2020 and entering your 16-digit control number.
AGENDA
At the 2020 Annual Meeting of Stockholders (Annual Meeting) for Marathon Oil Corporation (Marathon Oil or Company), stockholders will be asked to vote on the following proposals:
ITEM 1:  Elect 8 directors to serve until the 2021 Annual Meeting (read more on p. 3).
þ
Your Board recommends a vote FOR the election of each director nominee.
ITEM 2:  Ratify the selection of PricewaterhouseCoopers LLP as our independent auditor for 2020 (read more on p. 50).
þ
Your Board recommends a vote FOR Proposal 2.
ITEM 3: Approve on an advisory basis our 2019 named executive officer compensation (read more on p. 52).
þ
Your Board recommends a vote FOR Proposal 3.
Other Business: Stockholders will also transact any other business that properly comes before the meeting.
A list of stockholders entitled to vote at the meeting will be available at the meeting. 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. If the meeting is held via the VSM Platform, you will be able to access the list of stockholders entitled to vote at the meeting by visiting www.virtualshareholdermeeting.com/MRO2020, entering your 16-digit control number, and clicking on “Registered Shareholder List.” You will need to complete an attestation form to access the list.
The Notice of Internet Availability of Proxy Materials (Notice) is being mailed, and the attached proxy statement is being made available, to our stockholders on or about April 15, 2020. Please read the attached proxy statement carefully and submit your vote as soon as possible. Your vote is important. Whether the meeting is held at the Conference Center Auditorium of the Marathon Oil Tower or the VSM Platform, we hope you will vote as soon as possible. You can ensure that your shares are voted at the meeting by using our internet or telephone voting system, or by completing, signing and returning a proxy card.
BY INTERNET
BY TELEPHONE
BY MAIL
IN PERSON
:
(
+
î
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.
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.
Only if you received a proxy card by mail, you may send your completed and signed proxy card in the envelope provided.
You may vote in person at the Annual Meeting in certain circumstances outlined in this proxy.
By order of our Board of Directors,
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Reginald D. Hedgebeth
Secretary
April 15, 2020



PROXY STATEMENT
TABLE OF CONTENTS
 
PROPOSAL 1: ELECTION OF DIRECTORS
 
Director Qualifications and Nominations
 
Director Independence
 
Director Diversity
 
 
Nominees for Director
 
CORPORATE GOVERNANCE
 
Board of Directors
 
Committees of our Board
 
 
 
 
 
Our Board’s Role in Risk Oversight
 
Risk Assessment Related to our Compensation Structure
 
Corporate Governance Principles
 
Code of Business Conduct
 
Policy for Reporting Business Ethics Concerns
 
 
Communications from Interested Parties
 
Compensation Committee Interlocks and Insider Participation
 
DIRECTOR COMPENSATION
 
 
 
 
2019 Director Compensation Table
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
COMPENSATION COMMITTEE REPORT
 
 
 
 
 
 
 
 
COMPENSATION DISCUSSION AND ANALYSIS
 
Executive Summary
 
Compensation Philosophy
 
Compensation Governance and Best Practices
 
Pay for Performance
 
How We Determine Executive Compensation
 
Elements of Our Executive Compensation
 
2019 Total Target Direct Compensation Overview
 
Base Salary
 
Annual Cash Bonus
 
Long-Term Incentives
 
Other Benefits
 
Stock Ownership Requirements
 
Tax Considerations
 
EXECUTIVE COMPENSATION
 
Summary Compensation Table
 
Grants of Plan-Based Awards in 2019
 
 
 
Post-Employment Benefits
 
 
Potential Payments Upon Termination or Change in Control
 
 
TRANSACTIONS WITH RELATED PERSONS
 
AUDIT AND FINANCE COMMITTEE REPORT
 
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITOR FOR 2019
 
PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
 
 
 


MARATHON OIL | TABLE OF CONTENTS


PROXY SUMMARY
ABOUT MARATHON OIL CORPORATION
Company Overview
We are an independent exploration and production company based in Houston, Texas. Our strategy is to drive multi-year corporate returns improvement by focusing our capital investment in the lower cost, higher margin U.S. resource plays (the Eagle Ford in Texas, the Bakken in North Dakota, STACK and SCOOP in Oklahoma and Northern Delaware in New Mexico). We prioritize generating sustainable cash flow over a wide range of commodity prices and returning capital to stockholders, underpinned by differentiated execution across our multi-basin portfolio and an investment grade balance sheet.
FRAMEWORK FOR SUCCESS
CORPORATE RETURNS
 
FREE CASH FLOW
 
RETURN OF CAPITAL
 
DIFFERENTIATED EXECUTION
Portfolio transformation and focused capital allocation drive multi-year corporate returns improvement through capital efficient oil growth
 
Prioritized sustainable cash flow generation over a wide range of commodity prices
 
Returned incremental capital to stockholders in addition to peer competitive dividend, funded through free cash flow, not dispositions
 
Continuous improvement in capital efficiency and operating costs while enhancing our resource base; delivering on our commitments
 
POWERED BY OUR FOUNDATION
MULTI-BASIN PORTFOLIO
 
BALANCE SHEET STRENGTH
Capital allocation flexibility, broad market access, supplier diversification, rapid sharing of best practices, platform for talent development
 
Financial flexibility to execute business plan across broad range of pricing
We believe the Company has a track record of delivering on this strategy, as outlined below.
OBJECTIVES
 
2018
($65/bbl WTI, $3.15 HH, $26.50 NGL)
 
2019
($57/bbl WTI, $2.55 HH, $18.00 NGL)
 
 
 
 
þ
Capital Discipline
 
$2.3B development capital
consistent with initial guidance
 
$2.4B development capital consistent with initial guidance
 
þ
Corporate Returns
 
>50% CROIC1 improvement (2017 to 2019) on price normalized* basis
 
þ
Free Cash Flow
 
Generated post-dividend Free Cash Flow
 
þ
Return of Capital
 
$700MM of buybacks
$170MM of dividends
 
$350MM of buybacks
$160MM of dividends
 
þ
Capital Efficient Oil Growth
 
Approx. 30% U.S. Oil Growth
outperformed initial guidance midpoint
 
13% U.S. Oil Growth
outperformed initial guidance midpoint
 
þ
Resource Capture and Enhancement
 
Over 1,000 locations added through organic enhancement initiatives, bolt-ons/trades, and Resource Play Exploration;
hundreds of locations upgraded to top tier returns
* Price normalized to $50 WTI, $2.50 HH, $15 NGL
1 CROIC = Cash return on invested capital; calculated by taking cash flow (Operating Cash Flow before working capital + net interest after tax) divided by (average Stockholder’s Equity + average Net Debt)


MARATHON OIL | PROXY SUMMARY 1



GOVERNANCE HIGHLIGHTS
Our commitment to strong governance practices is illustrated by the following:
»    Annual election of directors
»    Independent Lead Director
»    Single class of voting stock
»    Majority voting standard for directors in uncontested elections
»    Proxy access by-law
»    No stockholder rights plan
COMPENSATION AND GOVERNANCE PRACTICES
WHAT WE DO
þ
Emphasize at-risk compensation designed to link pay to performance
þ
Engage an independent compensation consultant to advise the Committee
þ
Maintain stock ownership requirements for executive officers and directors
þ
Maintain “double-trigger” change in control cash payments and accelerated equity vesting
þ
Dedicate significant time to robust executive succession planning and leadership development each year
þ
Incorporate compensation clawback provisions in annual and long-term incentives
þ
Offer minimal use of perquisites and no related tax gross-ups
WHAT WE DON’T DO
ý
Offer employment agreements to our executive officers
ý
Provide gross-up payments to cover excess parachute payment excise taxes for executive officers
ý
Allow margin, derivative or speculative transactions, such as hedges, pledges and margin accounts, by executive officers and directors
ý
Reward executives for excessive, inappropriate or unnecessary risk-taking
 
 
FOCUS ON HEALTH, ENVIRONMENTAL, SAFETY
AND CORPORATE RESPONSIBILITY
Our Board’s key oversight role includes reviewing the sustainability of our operations and the strength of our risk management efforts. Our Board has four standing committees that assist with this oversight: Audit and Finance; Compensation; Corporate Governance and Nominating; and Health, Environmental, Safety and Corporate Responsibility (HESCR). The HESCR Committee plays a vital role in our sustainability efforts and includes directors with experience in this area. One of the principle functions of the HESCR Committee is to identify, evaluate and monitor health, environmental, safety, social, public policy and political trends, issues and concerns that could affect our business activities and performance. In addition, in early 2019, the HESCR committee explicitly added climate change risk oversight to its charter to highlight the importance of understanding climate risk.

VOTING ROADMAP
Our Board’s
Recommendation
Proposal No. 1: Election of Directors
FOR
Our Board of Directors believes that all of the director nominees listed in the Proxy Statement have the requisite qualifications to provide effective oversight of the Company’s business and management.
Pg 3
Proposal No. 2: Ratification of Independent Auditor for 2020
FOR
Our Audit and Finance Committee and Board of Directors believe that the retention of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 is in the best interest of the Company and its stockholders.
Pg 50
Proposal No. 3: Advisory Vote to Approve the Compensation of our Named Executive Officers
FOR
We are seeking a non-binding, advisory vote to approve, and our Board of Directors recommends the approval of, the 2019 compensation paid to our named executive officers, which is described in the section of this Proxy Statement entitled “Executive Compensation.”
Pg 52


2 MARATHON OIL | PROXY SUMMARY



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 currently have 8 directors whose terms expire in 2020. Each director is nominated for a one-year term expiring at the 2021 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 our Board of Directors (Board).
Our By-laws require any incumbent who does not receive sufficient votes to promptly tender his or her resignation to our Board. Our Corporate Governance and Nominating Committee will recommend to our Board whether to accept or reject the tendered resignation or take other action. Our 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, our Board may fill the position or decrease the size of our Board.
DIRECTOR QUALIFICATIONS AND NOMINATIONS
Our Corporate Governance Principles set forth the process for director selection and director qualifications. In summary, the chair of the Corporate Governance and Nominating Committee, the CEO, and the secretaries of the Compensation Committee and Corporate Governance and Nominating Committee generally work with a third-party professional search firm to review director candidates and their credentials when the Board believes there is a need. At least one member of the Corporate Governance and Nominating Committee, the Independent Lead Director and the CEO meet with the potential 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. Once a director has been selected either by our Board to serve until the next annual meeting or by election at the annual meeting, they undergo orientation and training. The Corporate Governance and Nominating Committee is responsible for reviewing with our Board the appropriate skills and characteristics required of directors. Directors should be individuals of substantial accomplishment with demonstrated leadership capabilities, and they should represent all stockholders rather than any special interest group or constituency. Selection of director nominees includes a consideration of numerous skills and qualifications, including:
»
an evaluation of their 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,
»
their diversity, including diversity of backgrounds and experience they will bring to our Board, and
»
the Company’s needs at that particular time.
DIRECTOR INDEPENDENCE
All of our directors, other than our CEO, are independent.  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


MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 3



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 Corporate Governance and Nominating Committee then makes a recommendation to the Board with respect to the independence of each director and director nominee.
As part of the determination, the Corporate Governance and Nominating Committee considered: survivor pension benefits to Mr. Deaton’s mother; product purchases by the Company in the ordinary course of business from Air Products & Chemicals, of which Mr. Deaton is the Independent Lead Director and product and services purchases by the Company in the ordinary course of business from National Oilwell Varco, of which Ms. Donadio is a director;  various charitable contributions paid by the Company to various organizations on which Ms. Donadio, Mr. Few and Mr. Foshee hold directorships; and fees paid in arm’s length transactions on terms and conditions similar to those of unrelated parties to Citigroup, of which Ms. Donadio’s immediate family member is an investment banking associate.
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 Gregory H. Boyce, Chadwick C. Deaton, Marcela E. Donadio, Jason B. Few, Douglas L. Foshee, M. Elise Hyland and J. Kent Wells are independent.   As CEO of the Company, Mr. Tillman is not independent.
DIRECTOR DIVERSITY
GENDER
INDEPENDENCE
TENURE
AGE
Two of our eight directors, including the chairs of the Audit and Finance and
HESCR Committees,
are female.
The NYSE requires that independent directors must comprise the majority of the Board. The Board has determined that each of the nominees, other than Mr. Tillman, meet the NYSE’s independence standards.
50% of our Board has joined within the last three years. The average tenure of the director nominees is less than five years, which we believe reflects a balance of company experience and new perspectives.
The average age of the director nominees is 61 years.
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The Corporate Governance and Nominating Committee is responsible for reviewing with our Board the appropriate size and composition of the Board. When considering the director nominees, our Board will 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.


4 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS



BOARD SKILLS AND EXPERIENCE DIVERSITY MATRIX
Our directors have a diversity of experience and skills that span a broad range of industries in the public and not-for-profit sectors. They bring to our Board a wide variety of skills, qualifications, and viewpoints that strengthen our Board’s ability to carry out its oversight role on behalf of our stockholders. The table below summarizes key qualifications, skills and attributes each director brings to our Board. The lack of a mark for a particular item does not mean the director does not possess that qualification or skill. However, a mark indicates a specific area of focus or expertise that the director brings to our Board. More details on each director’s qualifications, skills and attributes are included in the director biographies on the subsequent pages.
 
 
Tillman
Boyce
Deaton
Donadio
Few
Foshee
Hyland
Wells
Ç
Public Company CEO
Experience working as a CEO of a public company
l
l
l
 
l
l
 
 
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Financial Oversight/Accounting
Senior executive level experience in financial accounting and reporting, auditing, corporate financing and/or internal controls or experience in the financial services
l
l
l
l
l
l
l
l
A
E&P Industry Experience
Experience as executives or directors in, or in other leadership positions working with, the exploration and production industry
l
 
l
l
l
l
 
l
Ï
Engineering Expertise
Expertise through relevant undergraduate or graduate in engineering disciplines
l
l
 
 
 
 
l
l
®
Public Policy/Regulatory
Experience in or a strong understanding of the regulatory issues facing the oil and gas industry and public policy on a local, state and national level
l
l
l
l
l
l
l
l
P
HES Experience
Experience in managing matters related to health, environmental, safety and social responsibility in executive and operating roles
l
l
l
 
l
l
l
l
¸
International
Global business or international experience
l
l
l
l
l
l
l
l
:
Information Technology
Experience in or strong understanding of the information technology and cyber security issues facing the oil and gas industry
 
 
 
 
l
 
 
l
Í
Risk Management
Executive experience managing risk
l
l
l
l
l
l
l
l
î
Outside Public Boards
1
3
2
1
1


MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 5



NOMINEES FOR DIRECTOR
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH NOMINEE
 Gregory H. Boyce
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BUSINESS EXPERIENCE
»    Independent Lead Director, Marathon Oil Corporation (since 2019)
»    Former Executive Chairman and Chairman, Peabody Energy Corporation, a private-sector coal company, St. Louis, MO (Executive Chairman in 2015 and Chairman 2007-2015)
»    Chief Executive Officer, Peabody (2006-2015); Chief Executive Officer Elect, Peabody (2005); President, Peabody (2003-2008); Chief Operating Officer, Peabody (2003-2005)
»    Chief Executive Officer - Energy, Rio Tinto plc (2000-2003)
»    President and Chief Executive Officer, Kennecott Energy Company (1994-1999)
»    President, Kennecott Minerals company (1993-1994)
»    Joined Kennecott in 1977 and served in positions of increasing responsibility
OTHER CURRENT POSITIONS
»    Trustee, Heard Museum
»    Advisory Council, University of Arizona’s Lowell Institute of Mineral Resources
»    Business Council Member and past board member, U.S.-China Business Council
EDUCATION
»    B.S. (mining engineering), University of Arizona
»    Advanced Management Program, 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.


Former Executive Chairman, Chairman, CEO, President and COO, Peabody Energy Corporation
Age: 65
Director since: 2008
Independent Lead Director since: 2019
Committees:
AFC, COMP, CGN
Current Public Company Boards:
Newmont Goldcorp Corporation
Public Company Boards During Past 5 Years: Peabody
Monsanto Company


 
 
 Chadwick C. Deaton
deatonweb.jpg
 
BUSINESS EXPERIENCE
»    Former Executive Chairman and Chairman, Baker Hughes Incorporated, an oilfield services company, Houston, TX (Executive Chairman 2012-2013 and Chairman 2004-2012)
»    Chief Executive Officer, Baker Hughes (2004-2011)
»    President, Baker Hughes (2008-2010)
»    President and Chief Executive Officer, Hanover Compressor Company (2002-2004)
»    Senior Advisor to Schlumberger Oilfield Services (1999-2001)
»    Executive Vice President, Schlumberger Oilfield Services (1998-1999)
OTHER CURRENT POSITIONS
»    Board Member, Ariel Corporation
»    Board Member, Piri Technologies
»    Board Member, University of Wyoming Foundation
»    Member, Society of Petroleum Engineers
»    Wyoming Governor’s Engineering Task Force
EDUCATION
»    B.S. (geology), 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.
Former Executive Chairman, Chairman and CEO, Baker Hughes Incorporated
Age: 67
Director since: 2014
Committees:
COMP, CGN, HESCR
Current Public Company Boards:
Air Products and Chemicals, Inc. (Independent Lead Director)
CARBO Ceramics Inc.
Transocean Ltd. (Chairman)

 
 


6 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS



 Marcela E. Donadio
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BUSINESS EXPERIENCE
»    Former Partner, Ernst & Young LLP, a multinational professional services firm, Houston, TX (1989-2014)
»    Americas Oil & Gas Sector Leader, Ernst & Young LLP (2007-2014)
»    Audit Partner for multiple oil & gas companies, Ernst & Young LLP (1989-2014)
»    Joined Ernst & Young LLP in 1976 and served in positions of increasing responsibility, including various energy industry leadership positions
OTHER CURRENT POSITIONS
»    Board Member, Theatre Under the Stars
»    Trustee, Great Commission Foundation of the Episcopal Diocese of Texas
»    Member, Corporation Development Committee, Massachusetts Institute of Technology
»    Member of National Board, LSU Foundation
EDUCATION
»    B.S. (accounting), Louisiana State University
Ms. Donadio has audit and public accounting experience with a specialization in domestic and international operations in all segments of the energy industry, and is a licensed certified public accountant in the State of Texas. Her 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. The Board has determined that she qualifies as an “Audit Committee Financial Expert” under the SEC rules based on these attributes, education and experience. 
Former Partner, Ernst & Young LLP
Age: 65
Director since: 2014
Committees:
AFC (financial expert), COMP, HESCR
Current Public Company Boards:
National Oilwell Varco, Inc.
Norfolk Southern Corporation
 
 
 Jason B. Few
fewweb.jpg
 
BUSINESS EXPERIENCE
»    President, CEO and Chief Commercial Officer, FuelCell Energy, Inc., a global leader in molten carbonate fuel cell technology focused on enabling a world empowered by clean energy
»    President and Director, Sustayn, L.L.C., a privately-held cloud-based waste and recycling optimization company (2018-2019)
»    Founder and Senior Managing Partner, BJF Partners, L.L.C., a privately-held strategic transformation consulting firm (since 2016)
»    Senior Advisor, Verve Industrial Protection, a privately-held software company (since 2016)
»    President and CEO and Director, Continuum Energy, an energy products and services company (2013-2016)
»    President, Reliant Energy and EVP & Chief Customer Officer, NRG (2008-2012)
OTHER CURRENT POSITIONS
»    Board Member, Memorial Hermann Healthcare System
»    Board Member and past Chairman, American Heart Association
EDUCATION
»    BBA (computer systems in business), Ohio University School of Business
»    MBA, Northwestern University, J.L. Kellogg
Mr. Few’s broad understanding of advanced technologies, combined with his extensive energy industry experience adds valuable insight to our Company. His service on other publicly traded company boards has given him valuable insight and exposure to a variety of industries and approaches.
President, CEO and Chief Commercial Officer, FuelCell Energy, Inc.
Age: 53
Director since: 2019
Committees:
AFC, CGN
Current Public Company Boards:
FuelCell Energy, Inc.
 
 



MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 7



 Douglas L. Foshee
fosheeweb.jpg
 
BUSINESS EXPERIENCE
»    Founder and Owner, Sallyport Investments, LLC, an energy investment company (since 2012)
»    Chairman, President and Chief Executive Officer, El Paso Corporation (2003-2012)
»    Executive Vice President and Chief Operating Officer, Halliburton Company (2003)
»    Executive Vice President and Chief Financial Officer, Halliburton Company (2001-2003)
»    Chairman, President and Chief Executive Officer, Nuevo Energy Company (1996-2001)
»    Chief Operating Officer, Chief Executive Officer, and other capacities, Torch Energy Advisors Inc. (1993-1996)
»    Joined ARCO International Oil in 1992 and served in positions of increasing responsibility
OTHER CURENT POSITIONS
»    Founder and Board Member, NextOp Vets
»    Founder, Houstonians for Great Public Schools
»    Regional Board Member, KIPP Houston
»    Board of Trustees, Rice University
»    Chair, Rice Management Company
»    Council of Overseers at Jesse H. Jones Graduate School of Management at Rice University
»    Board Member, Texas Business Hall of Fame Foundation
»    Board Member, Welch Foundation
»    Board Member, Houston Endowment, Inc.
EDUCATION
»    MBA, Jesse H. Jones School at Rice University
»    BBA, Southwest Texas State University
»    Graduate, Southwestern Graduate School of Banking at Southern Methodist University
As a former chairman, president and CEO of a public oil and gas exploration and production company with over 30 years of energy industry experience, Mr. Foshee has a comprehensive knowledge and understanding of our business, provides superb leadership to our management team, and provides the Board with essential insight and guidance from an inside perspective on the day-to-day operations of our Company.
Founder and Owner, Sallyport Investments, LLC
Age: 60
Director since: 2018
Committees:
COMP, CGN
Public Company Boards During Past 5 Years:
Cameron International
 
 
 M. Elise Hyland
hylandweb.jpg
 
BUSINESS EXPERIENCE
»    Former Senior Vice President, EQT Corporation and Senior Vice President and Chief Operating Officer, EQT Midstream Services, LLC (2017-2018)
»    Executive Vice President of Midstream Operations and Engineering, EQT Midstream Services, LLC (2013-2017)
»    President of Commercial Operations, EQT Midstream Services, LLC (2010-2013)
»    President of Equitable Gas Company, a previously owned entity of EQT (2007-2010)
»    Joined EQT Corporation in 2000 and served in positions of increasing responsibility in finance, strategic planning and customer service
»    Joined Alcoa, Inc. in 1980 and held roles of increasing responsibility in research, materials and business development leading to her appointment as Manager of the Alloy Design Group at Alcoa Research Laboratories
OTHER CURRENT POSITIONS
»    Director, Washington Gas Light Company, a private company
EDUCATION
»    MBA, Tepper School of Business at Carnegie-Mellon University
»    M.S. and B.S. (Metallurgical Engineering and Materials Science), Carnegie-Mellon University
Ms. Hyland has over 15 years of executive level management in both the midstream and manufacturing industries. Through her strong engineering background and leadership, she brings commercial acumen and valuable insight into marketing fundamentals and key issues our Company faces as a publicly traded company in the oil and gas industry.
Former Senior Vice President, EQT Corporation
Age: 60
Director since: 2018
Committees:
AFC, HESCR
Current Public Company Boards:
Entergy Corporation
Public Company Boards During the Past 5 Years:
EQT Midstream Partners, LP

 
 


8 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS



 Lee M. Tillman
tillmanweb.jpg
 
BUSINESS EXPERIENCE
»    Chairman (2019-present), Director (2013-2019), President and Chief Executive Officer of Marathon Oil Corporation, Houston, TX (2013-present)
»    Vice President of Engineering, ExxonMobil Development Company
»    North Sea Production Manager and Lead Country Manager, ExxonMobil subsidiaries in Stavanger, Norway, 2007-2010
»    Acting Vice President, ExxonMobil Upstream Research Company, 2006-2007
»    Joined Exxon Corporation in 1989 as a research engineer and served in positions of increasing responsibility
OTHER CURRENT POSITIONS
»    Board Member, American Heart Association
»    Board Member, American Petroleum Institute
»    Board Member, American Exploration & Production Council
»    Member, University of Houston Energy Advisory Board
»    Member, Engineering Advisory Council and Chemical Engineering Advisory Council of Texas A&M University
»    Member, National Petroleum Council
»    Member, Business Roundtable
»    Member, Society of Petroleum Engineers
»    Member, Celebration of Reading Committee within the Barbara Bush Houston Literacy Foundation
»    Chairman of the Board, Spindletop Charities
EDUCATION
»    B.S. (chemical engineering), Texas A&M University
»    Ph.D. (chemical engineering), Auburn University
As our Chairman, President and CEO, 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.
Chairman (since 2019), President and CEO of Marathon Oil Corporation
Age: 58
Director since: 2013
Chairman since: 2019
 
 
 J. Kent Wells
wellsweb.jpg
 
BUSINESS EXPERIENCE
»    Former Chief Executive Officer and President, Fidelity Exploration & Production Company, an oil and natural gas production company (2011-2015) and Vice Chairman of MDU Resources, the parent company of Fidelity (2013-2015)
»    Senior Vice President, BP America (2007-2011)
»    General Manager, Abu Dhabi Company for Onshore Oil Operations (2005-2007)
»    Vice President, BP America (Rockies 2000-2002 and Gulf of Mexico 2002-2005)
EDUCATION
»    BS (mechanical engineering), Queen’s University
Mr. Wells has more than 35 years of experience in the oil and gas industry. His former service as CEO and President of Fidelity Exploration & Production Company and other senior leadership positions provide valuable experience in overseeing many issues that our Company may face.











Former CEO and President, Fidelity Exploration & Production Company and Vice Chairman of MDU Resources, the parent company of Fidelity
Age: 63
Director since: 2019
Committees:
COMP, HESCR
Public Company Boards During the Past 5 Years:
Newfield Exploration Company
MDU Resources

 
 


MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 9



Proposal 1
For the reasons stated above, your Board of Directors recommends a vote FOR Proposal 1 electing each nominee standing for election as a director.
þ

CORPORATE GOVERNANCE
BOARD OF DIRECTORS
Our business and affairs are managed under the direction of our Board, which met 12 times in 2019. Aggregate attendance for Board and committee meetings was over 95% for the full year. No director attended less than 75% of Board or committee meetings in 2019. Under our Corporate Governance Principles, directors are expected to attend the Annual Meeting. All of our directors nominated at the 2019 Annual Meeting, except Gregory Boyce, attended the 2019 Annual Meeting in person.
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 2019, the non-employee directors held seven independent executive sessions.
COMMITTEES OF OUR BOARD
A significant portion of our Board’s oversight responsibilities is carried out through our four standing committees, each of which is comprised solely of independent non-employee directors.
Our four standing committees are the Audit and Finance Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the Health, Environmental, Safety and Corporate Responsibility Committee.
COMMITTEE
CHARTERS
 
COMMITTEE
COMPOSITION
 
COMMITEE
OPERATIONS
Each committee’s written charter, adopted by our Board, is available on our website at www.marathonoil.com under About—Board of Directors—Committees and Charters.

 
Each committee is comprised solely of independent directors as defined under the rules of the NYSE. All members of the Audit and Finance and Compensation Committees meet the additional independence standards under the Securities Exchange Act of 1934 (Exchange Act) Rule 10A-3.
 
Each committee reports its actions and recommendations to the Board, receives reports from senior management, annually evaluates its performance and has the authority to retain outside advisors. Committee chairs have the opportunity to call for executive sessions at each meeting.


10 MARATHON OIL | GOVERNANCE



The following tables show each committee’s current membership, principal functions and number of meetings in 2019.
AUDIT AND FINANCE
Marcela E. Donadio
Chair
Members: 4 » Independent: 4 » 2019 Meetings: 7*
Audit Committee Financial Experts: 1
* Including 5 in-person meetings. The Committee met with the Company’s internal audit organization and independent auditor at 4 of the meetings, with and without management present.
Key Oversight Responsibilities:
»    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, where applicable, and discusses with management, the independent auditor and the internal auditors, as appropriate, 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 to our Board dividends, certain financings, loans, guarantees and other uses of credit.
»    Reviews codes of conduct and compliance activities.
Members:
Marcela E. Donadio†, Chair
Gregory H. Boyce
Jason B. Few
M. Elise Hyland
Audit Committee Financial Expert (as defined under the Securities and Exchange Commission’s (SEC) rules), in each case as determined by the Board.
 
COMPENSATION
Douglas L. Foshee
Chair
Members: 5 » Independent: 5 » 2019 Meetings: 7
Key Oversight Responsibilities:
»    Reviews and recommends to our Board all matters of policy and procedure relating to executive officer compensation.
»    Reviews and approves corporate philosophy, goals and objectives relevant to the CEO’s compensation, and determines and recommends to the independent directors for approval the CEO’s compensation level based on our 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 confirms the certification of the achievement of performance levels under our incentive compensation plans.
»    Engages and oversees external independent compensation consultant.
»    Reviews with management and recommends for inclusion in our annual Proxy Statement our Compensation Discussion and Analysis.
Members:
Douglas L. Foshee, Chair
Gregory H. Boyce
Chadwick C. Deaton
Marcela E. Donadio
J. Kent Wells


MARATHON OIL | GOVERNANCE 11



CORPORATE GOVERNANCE AND NOMINATING
Chadwick C. Deaton
Chair
Members: 4 » Independent: 4 » 2019 Meetings: 3
Key Oversight Responsibilities:
»    Reviews and recommends to our Board the appropriate size and composition of our 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 our Board committees, and all matters relating to the development and effective functioning of our Board.
»    Reviews and recommends to our Board each committee’s membership and chair, including a determination of whether one or more Audit and Finance Committee members qualifies as a “financial expert” under applicable law.
»    Assesses and recommends corporate governance practices, including reviewing and recommending to our Board certain governance policies.
»    Oversees the evaluation process of our Board and all committees.
»    Reviews and, if appropriate, approves related person transactions.
Members:
Chadwick C. Deaton, Chair
Gregory H. Boyce
Jason B. Few
Douglas L. Foshee
 
HEALTH, ENVIRONMENTAL, SAFETY AND CORPORATE RESPONSIBILITY
M. Elise Hyland
Chair
Members: 4 » Independent: 4 » 2019 Meetings: 2
Key Oversight Responsibilities:
»    Reviews and recommends Company policies, programs, and practices concerning broad health, environmental, climate change, safety, social, public policy and political issues.
»    Identifies, evaluates and monitors health, environmental, safety, social, public policy and political trends, issues and concerns that could affect the Company’s business activities and performance.
»    Reviews legislative and regulatory issues affecting our businesses and operations.
»    Reviews our political, charitable and educational contributions.
Members:
M. Elise Hyland, Chair
Chadwick C. Deaton
Marcela E. Donadio
J. Kent Wells
BOARD OVERVIEW
» Chairman of the Board and Chief Executive Officer: Lee M. Tillman*
»  Independent Lead Director: Gregory H. Boyce*
» Active engagement by all directors
»  7 of our 8 director nominees are independent
»  All members of the Audit and Finance Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Health, Environmental, Safety and Corporate Responsibility Committee are independent
Our Board believes that continuing to combine the position of Chairman and CEO is in the best interest of our Company and its stockholders.
* The non-employee directors selected Mr. Boyce to serve as Independent Lead Director and Mr. Tillman to serve as Chairman, effective February 1, 2019.
BOARD LEADERSHIP STRUCTURE
We believe that independent Board oversight is essential. Our 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 Corporate Governance Principles require that non-employee directors, all of which are independent, meet at regularly scheduled executive sessions without the CEO present. The independent lead director presides at these meetings. In addition, our Corporate Governance Principles require that all our principal committees be comprised of entirely independent directors.


12 MARATHON OIL | GOVERNANCE



INDEPENDENT DIRECTOR LEADERSHIP
As Independent Lead Director, Mr. Boyce is responsible for:
» presiding at independent executive sessions of independent directors;
» reviewing with Mr. Tillman the proposed Board and committee meeting agendas;
» serving as a liaison between the independent directors and Mr. Tillman in discussing issues from the
     independent executive sessions and ensuring the flow of information;
»  reviewing and recommending to Mr. Tillman the retention of consultants who report directly to our Board
    or committees thereof;
»  overseeing Board performance; and
»  establishing effective communications with stakeholder groups.
BOARD AND COMMITTEE EVALUATIONS
Each year, our Board performs a rigorous full Board evaluation. In addition, each committee also performs an annual evaluation. The evaluation process is managed by the Corporate Secretary’s office with oversight from the Corporate Governance and Nominating Committee. In 2019, the evaluation process consisted of:

þ
Evaluation questionnaires - each director and committee member completed a formal questionnaire. This allows each director and committee member to identify potential improvements.

þ
Individual interviews - our Independent Lead Director met with each director individually to solicit feedback and have an in-depth conversation.

þ
Independent Lead Director feedback to Board and Chairman - the Independent Lead Director communicated the feedback to the Board and also separately to the Chairman. In addition, each committee chair reported the feedback to his/her committee.

As a result of the evaluation process, the Board has implemented changes to the Board and committee meetings.

OUR BOARD’S ROLE IN RISK OVERSIGHT
While our Board and its committees oversee risk management, Company management is responsible for the day-to-day management of 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. Responsibility for risk oversight by our Board and its committees is delegated as set forth below:
»
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 reviews operational risks, including cyber-security, 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 Corporate Governance and Nominating Committee reviews the Board’s and Company’s governance policies and procedures to ensure adherence to best practices and legal requirements. The Corporate Governance and Nominating Committee also reviews director succession planning and committee assignments to ensure the directors’ skills and backgrounds are utilized to the best interests of the Company.
»
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, security and climate change. It reviews risks associated with social, political and environmental trends, issues and concerns,


MARATHON OIL | GOVERNANCE 13



domestic and international, which affect or could affect our business activities, performance and reputation.
»
Our 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 our Board’s strategy meeting and periodically throughout the year.
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 either the Compensation Committee, which is comprised solely of independent directors, or by the independent directors, for CEO compensation.
»
The Compensation Committee is advised by an independent compensation consultant that performs no other work for executive management or our Company.
»
Our executives do not have employment agreements.
»
The Compensation Committee manages our compensation programs to be competitive with those of peer companies and also monitors our programs against trends in executive compensation on an annual basis against the broader oil and gas industry and general industry of similar market capitalization. 
»
Our compensation programs are intended to balance short-term and long-term incentives.
»
Our long-term incentives feature multiple award vehicles and multi-year vesting criteria aligned with long-term ownership, and our executive officers are also subject to ongoing stock ownership requirements.
»
Our annual cash bonus program is based on a balanced set of multiple objective metrics that are not predominantly influenced by commodity prices. In addition, the Compensation Committee considers the achievement of individual performance goals 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.
»
Annual cash bonuses and performance share unit awards are capped.
»
The Compensation Committee regularly evaluates share utilization in our 2019 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 is generally 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. Our long-term incentive awards for executive officers have similar provisions.
CORPORATE GOVERNANCE PRINCIPLES
Our Corporate Governance Principles address our 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, our 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 www.marathonoil.com under About—Board of Directors—Committees and ChartersGovernance and Nominating.


14 MARATHON OIL | GOVERNANCE



CODE OF BUSINESS CONDUCT
Our Code of Business Conduct, which applies to our directors, officers and employees, is available on our website at www.marathonoil.com under Investors—Corporate Governance.  In addition, our Code of Ethics for Senior Financial Officers, 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 www.marathonoil.com under Investors—Corporate Governance.
We intend to disclose any amendments and any waivers to our Code of Ethics for Senior Financial Officers on our website at www.marathonoil.com under Investors—Corporate Governance within four business days. The waiver information will remain on the website for at least 12 months after the initial disclosure of such waiver.
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 www.marathonoil.com under Investors—Corporate Governance—Policies and Reporting—Policies.
HEDGING POLICY
Our Trading of Securities by Directors, Officers and Employee Policy prohibits our directors and officers from pledging, hedging and trading in derivatives of our stock. Excluding derivative securities issued by the Company, no director or officer of the Company may purchase or sell, directly or indirectly through family members or other persons or entities, any financial instrument including, but not limited to, put or call options, the price for which is affected in whole or in part by changes in the price of Company’s securities (including common or preferred stock, debt securities and derivative securities), or conduct any hedging transactions related to such securities. The policy does not apply to non-officer employees.
COMMUNICATIONS FROM INTERESTED PARTIES
All interested parties, including security holders, may send communications to our Board through the Corporate Secretary office. 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 his 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, Deaton and Foshee and Ms. Donadio, served on the Compensation Committee for all of 2019. Mr. Wells served on the Compensation Committee since May 29, 2019, and Mr. Foshee became the chair of the Compensation Committee on February 27, 2019. There are no matters relating to interlocks or insider participation that we are required to report.


MARATHON OIL | GOVERNANCE 15



DIRECTOR COMPENSATION
Our 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 our Board or as Chairman. Non-employee director compensation is intended to attract qualified directors, ensure that they are fairly compensated for their contributions to our performance, and align the interests of directors and stockholders.
CASH COMPENSATION
Following are the annual cash retainers and fees we paid our non-employee directors for 2019:
Type of Fee
Amount ($)
 
10
years with no increase in directors’ cash retainer
Annual Board Retainer
$150,000
 
 
Additional Fee for Independent Lead Director
$25,000
 
 
Additional Fee for Audit and Finance Committee Chair
$25,000
 
 
Additional Fee for Compensation Committee Chair
$25,000
 
 
Additional Fee for Corporate Governance and Nominating Committee Chair
$12,500
 
 
Additional Fee 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 Company’s Deferred Compensation Plan for Non-Employee Directors (DCP). These deferred amounts may be invested in certain investment options, which generally mirror the investment options offered to employees under the Marathon Oil Company Thrift Plan (Thrift Plan).
EQUITY-BASED COMPENSATION AND STOCK OWNERSHIP REQUIREMENTS
For 2019, non-employee directors received an annual common stock unit award valued at $175,000. These awards were credited to an account on the first business day of the calendar year, based on the closing stock price on the grant date. Directors may elect to defer settlement of their common stock units until after they cease serving on our Board under the Company’s DCP. Directors who make such a deferral election receive dividend equivalents in the form of additional common stock units, which will be settled in common stock.
Directors who elect not to defer their common stock units receive dividend equivalents in cash, payment of which is deferred until the distribution date of the related common stock units. These awards vest and are payable shortly after the earlier of (a) the third anniversary of the grant date, or (b) the director’s departure from our Board.
Director stock ownership requirement of
5x
annual cash retainer
 
In 2019, we increased our stock ownership guidelines requiring each non-employee director to hold five times the value of his or her annual cash retainer in Marathon Oil stock. Directors have five years from their initial election to our 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. The Corporate Governance and Nominating Committee reviews each non-employee director’s progress toward the requirements during the first quarter of each year. Each non-employee director meets the requisite threshold other than Ms. Hyland, Mr. Few and Mr. Wells, who are still within the five-year window.



16 MARATHON OIL | DIRECTOR COMPENSATION



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 $5,000 annual limit.
2019 DIRECTOR COMPENSATION TABLE
Name
Fees Earned or
Paid in Cash
($)
Stock Awards (1)
($)
All Other
Compensation (2)
($)
Total
($)
Gregory H. Boyce
$175,000
 
$175,000
(3)

 
$350,000
 
Chadwick C. Deaton
$162,500
 
$175,000
(4)
$5,000
 
$342,500
 
Marcela E. Donadio
$175,000
 
$175,000
(4)

 
$350,000
 
Jason B. Few (5)
$112,500
 
$131,250
 

 
$243,750
 
Douglas L. Foshee
$168,750
 
$175,000
 

 
$343,750
 
M. Elise Hyland
$162,500
 
$175,000
(3)

 
$337,500
 
J. Kent Wells (5)
$112,500
 
$131,250
(4)

 
$243,750
 
(1)    Represents the amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2019, 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, 2019 for each director is as follows: Mr. Boyce, 60,760; Mr. Deaton, 32,659; Ms. Donadio, 32,659; Mr. Few, 7,547; Mr. Foshee, 20,317; Ms. Hyland, 20,405; and Mr. Wells, 7,635.
(2)    Represents contributions made under our matching gifts programs. In addition, spouses were allowed to accompany directors on company aircraft for business travel. These additional passengers did not result in an aggregate incremental cost to the Company.
(3)    Mr. Boyce and Ms. Hyland deferred 50% of their annual common stock unit award under the DCP.
(4) Messrs. Deaton and Wells, and Ms. Donadio, deferred 100% of their annual common stock unit award under the Marathon Oil Corporation Deferred Compensation Plan for Non-Employee Directors.
(5) Messrs. Few and Wells were elected to the Board effective April 1, 2019.


MARATHON OIL | DIRECTOR COMPENSATION 17



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 March 10, 2020:
Name and Address
of Beneficial Owner
Amount and Nature of Beneficial Ownership
Percent of
Outstanding Shares
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
94,282,334
(1)
11.78%
 
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
83,865,971
(2)
10.50%
 
Macquarie Group Limited and associated entities
50 Martin Place
Sydney, New South Wales, Australia

Macquarie Investment Management Holdings Inc. and Macquarie Investment Management Business Trust
2005 Market Street
Philadelphia, PA 19103

Macquarie Investment Management Austria Kapitalanlage AG
L3, Kaerntner Strasse 28
Vienna C4 1010, Austria
66,459,965
(3)
8.30%
 
Invesco Ltd.
1555 Peachtree Street NE, Suite 1800
Atlanta, GA 30309
54,979,840
(4)
6.90%
 
State Street Corporation
State Street Financial Center
One Lincoln Street
Boston, MA 02111
43,653,102
(5)
5.46%
 
(1)    Based on its Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group, Inc., as an investment advisor, beneficially owns 94,282,334 shares, has sole voting power over 1,168,180 shares, shared voting power over 220,854 shares, sole dispositive power over 92,935,393 shares, and shared dispositive power over 1,346,941 shares. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of Vanguard, is the beneficial owner of 906,479 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 689,574 shares as a result of its serving as investment manager of Australian investment offerings.
(2)    Based on its Schedule 13G/A filed with the SEC on February 4, 2020, BlackRock, Inc., through itself and as the parent holding company or control person over certain subsidiaries, beneficially owns 83,865,971 shares, has sole voting power over 75,348,560 shares, sole dispositive power over 83,865,971 shares, and shared voting and shared dispositive power over no shares.
(3)    Based on its Schedule 13G/A filed with the SEC on February 13, 2020, Macquarie Group Limited through its subsidiaries Macquarie Bank Limited, Macquarie Investment Management Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Australia Limited, Macquarie


18 MARATHON OIL | SECURITY OWNERSHIP


Investment Management Holdings Inc. and Macquarie Investment Management Business Trust (all aforementioned entities collectively referred to herein as Macquarie), beneficially owns 66,459,965 shares. Macquarie Group Limited, through its subsidiaries, has no sole or shared voting power and no sole or shared dispositive power over any shares. Macquarie Bank Limited, through its subsidiaries, has sole voting and sole dispositive power over 5,400 shares, and shared voting and shared dispositive power over no shares. Macquarie Investment Management Holdings Inc., through its subsidiary, Macquarie Investment Management Business Trust has sole voting and sole dispositive power over 64,857,529 shares, and shared voting and shared dispositive power over no shares. Macquarie Investment Management Australia Limited has sole voting and sole dispositive power over 21,500 shares, and shared voting and shared dispositive power over no shares. Macquarie Investment Management Austria Kapitalanlage AG has sole voting and sole dispositive power over 58,649 shares, and shared voting and shared dispositive power over no shares.
(4)     Based on its Schedule 13G filed with the SEC on February 13, 2020, Invesco Ltd., together with certain of its subsidiaries and in its capacity as a parent holding company to its investment advisors, beneficially owns 54,979,840 shares, has sole voting power over 52,198,981 shares, sole dispositive power over 54,979,840 shares, and shared voting and shared dispositive power over no shares.
(5)    Based on its Schedule 13G filed with the SEC on February 14, 2020, State Street Corporation, together with certain of its direct or indirect subsidiaries, beneficially owns 43,653,102 shares, has sole voting and sole dispositive power over no shares, shared voting power over 39,773,707 shares, and shared dispositive power over 43,553,862 shares.



MARATHON OIL | SECURITY OWNERSHIP 19



SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Marathon Oil common stock beneficially owned as of
March 10, 2020, by each director, by each executive officer named in the Summary Compensation Table and by all directors and executive officers as a group. Unless otherwise indicated by footnote, we believe, based on the information furnished to us, that the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Unless otherwise provided, the address of each individual listed below is c/o 5555 San Felipe, Houston, Texas 77056.
Name
Shares(1)
Restricted
Stock
(2)
Stock Options or Restricted Stock Units Exercisable Prior to
May 11, 2020(3)
Total Shares(4)
% of Total
Outstanding
Gregory H. Boyce
56,654

 

 
63,699

 
120,353

 
*
Chadwick C. Deaton
25,645

 

 
45,451

 
71,096

 
*
Marcela E. Donadio
20,263

 

 
45,451

 
65,714

 
*
Jason B. Few

 

 
20,339

 
20,339

 
*
Douglas L. Foshee
60,000

 

 
33,109

 
93,109

 
*
M. Elise Hyland

 

 
33,196

 
33,196

 
*
J. Kent Wells

 

 
20,428

 
20,428

 
*
Lee M. Tillman
407,182

 
170,455

 
1,988,604

 
2,566,241

 
*
Reginald D. Hedgebeth
9,006

 
140,618

 
160,763

 
310,387

 
*
T. Mitchell Little
144,879

 
182,304

 
409,670

 
736,853

 
*
Patrick J. Wagner
67,751

 
140,563

 
213,481

 
421,795

 
*
Dane E. Whitehead
114,995

 
159,970

 
225,640

 
500,605

 
*
All Directors and Executive Officers as a group (13 persons) (1)(2)(3)
 
5,157,722

 
*
*
Does not exceed 1% of the common shares outstanding.
(1)    Includes all shares held, if any, under the Marathon Oil Thrift Plan, a Dividend Reinvestment and Direct Stock Purchase Plan, the Company’s DCP and in brokerage accounts.
(2)    Reflects shares of restricted stock which are subject to limits on sale and transfer and can be forfeited under certain conditions.
(3)    Includes options and restricted stock units exercisable within sixty days of March 10, 2020.
(4)    None of the shares are pledged as security.


20 MARATHON OIL | SECURITY OWNERSHIP


COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed with management the Company’s Compensation Discussion and Analysis for 2019. Based on that review, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Douglas L. Foshee, Chair
Gregory H. Boyce
Chadwick C. Deaton
Marcela E. Donadio
J. Kent Wells



MARATHON OIL | COMPENSATION COMMITTEE 21



COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes in detail the compensation paid to the named executive officers (NEOs) listed in the Summary Compensation Table. It is designed to provide stockholders with an understanding of our compensation principles and practices and insight into our decision-making process as it relates to the compensation of our NEOs.
2019 NAMED EXECUTIVE OFFICERS
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Lee M.
Tillman
T. Mitchell
(“Mitch”)
Little
Dane E.
Whitehead
Patrick J.
(“Pat”)
Wagner
Reginald D.
(“Reggie”) Hedgebeth
Chairman, President and Chief Executive Officer
Executive Vice President,
Operations
Executive Vice President and Chief Financial Officer
Executive Vice President, Corporate Development and Strategy
Executive Vice President, General Counsel and Chief Administrative Officer
Table of Contents Highlights:
 
Page
I.
Executive Summary
 
II.
Compensation Philosophy
 
III.
Compensation Governance and Best Practices
 
IV.
Pay for Performance
 
V.
How We Determine Executive Compensation
 
VI.
Elements of Our Executive Compensation Program
 
EXECUTIVE SUMMARY
Current Market Environment
This Compensation Discussion and Analysis focuses on the Company’s 2019 compensation programs, actions and outputs relative to the Company’s 2019 performance. Those outcomes considered the 2019 financial, operating, safety and environmental achievements against plan objectives, and stock price performance on an absolute and relative basis through the end of 2019.
Unfortunately, today, our industry is facing the unprecedented combination of a significant decrease in global energy demand due to the COVID-19 (Coronavirus) outbreak, paired with an oversupplied market exacerbated by an unforeseen response from OPEC and Russia. With this dramatic drop in commodity prices, the Company has experienced a stock price decline since the end of 2019, consistent with its peer companies and the broader oil and gas industry. The Company is committed to taking action to maintain our strong financial foundation that positions us to navigate a challenging oil price environment ahead.
As described further here, the Company’s executive compensation programs strongly align realized compensation outcomes with the Company’s absolute and relative stock price performance. We will determine the near-term outcomes of this year’s stock price performance after the conclusion of 2020, and describe those outcomes in next year’s Compensation Discussion and Analysis.


22 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



2019 Operational & Financial Highlights
We are an independent exploration and production company based in Houston, Texas. Our strategy is to drive multi-year corporate returns improvement by focusing our capital investment in the lower cost, higher margin U.S. resource plays (the Eagle Ford in Texas, the Bakken in North Dakota, STACK and SCOOP in Oklahoma and Northern Delaware in New Mexico). We prioritize generating sustainable cash flow over a wide range of commodity prices and returning capital to stockholders, underpinned by differentiated execution across our multi-basin portfolio and an investment grade balance sheet.
Key 2019 highlights include:
»
Greater than 50% improvement in CROIC from 2017 on a price normalized basis.
»
Returned approximately $510 million of capital back to stockholders during 2019, including execution of $350 million of share repurchases and $160 million of dividends.
»
Delivered annual, divestiture-adjusted U.S. oil production growth of 13% on unchanged $2.4 billion development capital budget; fourth quarter U.S. oil production averaged 196,000 net bopd, up 9% from prior year.
»
Achieved approximately 10% annual reduction in average completed well cost per lateral foot and approximately 15% annual reduction in U.S. unit production expense during 2019.
»
Simplified International portfolio to free cash flow generating integrated business in Equatorial Guinea; divested U.K. and Kurdistan eliminating over $970 million of asset retirement obligations.
»
Enhanced resource base with addition of over 1,000 gross operated locations through success across all elements of returns focused resource capture framework; highlighted by organic enhancement in the Eagle Ford and Bakken, resource exploration success in new Texas Delaware oil play, and accretive Eagle Ford bolt-on that closed in 2019.
»
Investment grade credit rating at all primary rating agencies with conservative leverage metrics and low cash flow breakeven oil price.
Executive Compensation Highlights
The Compensation Committee (Committee) demonstrated its sustained commitment to corporate governance and sound compensation practices, continuing to align the interests of executive officers with the long-term interests of our stockholders.
Annual Bonus Program Metrics: Enhanced Financial Metrics
Our short-term incentive program metrics strongly align to our financial commitments. In 2019, the addition of Total Cash Return to Stockholders (CRS) as a metric further strengthened our commitment to financial discipline and alignment with stockholders. Our short-term incentive program is weighted in excess of 60% to our financial performance. Production performance only carries a 17.50% weighting.
Additionally, we are committed to our core values of safety, environmental protection and business integrity. We believe our ongoing commitment to health, environment and safety is captured in both our quantitative metrics and strategic objectives under the Total Recordable Incident Rate (TRIR) metric and the Safe, Clean and Responsible (SCR) Days metric, respectively. For more information about our quantitative and strategic objectives for 2019, see the discussion below in “Annual Cash Bonus”.
GHG intensity metric added to 2020 executive compensation scorecard
 
In 2020, we added a greenhouse gas intensity metric to our strategic objectives. We believe adding this metric places a greater tie between our operations and our commitment to addressing the risk of climate change. Non-financial performance is detailed more fully in our Corporate Sustainability Report.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 23


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We recognize no single metric can fully capture E&P business performance. As such, we will continue to consider multiple financial and operating metrics that strike an appropriate balance and ensure alignment with both our strategic intent and the stockholder experience.
COMPENSATION PHILOSOPHY
COMPENSATION PHILOSOPHY
Our success is based on financial performance and operational results, and we believe that our executive compensation program is an important driver of that success. The primary objectives of our program are to:
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 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 restricted stock/restricted stock units, stock options and performance units tied to our relative stockholder returns.
Pay competitively
We provide market-competitive pay levels to attract and retain the best talent, and we regularly benchmark each component of our pay program, including our benefit programs, to ensure we remain competitive.
COMPENSATION GOVERNANCE AND BEST PRACTICES
The Committee periodically evaluates market best practices and pay programs at other companies, and modifies our compensation program as necessary. The Committee seeks to provide balanced incentives, while managing compensation risks appropriately in the context of our business objectives. Our program incorporates the following best practices:
WHAT WE DO
þ
Emphasize at-risk compensation designed to link pay to performance
þ
Engage an independent compensation consultant to advise the Committee
þ
Maintain stock ownership requirements for executive officers and directors
þ
Maintain “double-trigger” change in control cash payments and accelerated equity vesting
þ
Dedicate significant time to robust executive succession planning and leadership development each year
þ
Incorporate compensation clawback provisions in annual and long-term incentives
þ
Offer minimal use of perquisites and no related tax gross-ups
WHAT WE DON’T DO
ý
Offer employment agreements to our executive officers
ý
Provide gross-up payments to cover excess parachute payment excise taxes for executive officers
ý
Allow margin, derivative or speculative transactions, such as hedges, pledges and margin accounts, by executive officers and directors
ý
Reward executives for excessive, inappropriate or unnecessary risk-taking
 
 


24 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



PAY FOR PERFORMANCE
Our executive compensation program creates a strong alignment with stockholder interests. We deliver the largest portion of NEO compensation through equity-based, long-term incentives that tie eventual realized compensation to the absolute and relative performance of our stock. In addition, our annual bonus delivers payments directly aligned with performance against our strategic, operational and financial commitments each year.
Mr. Tillman’s realized compensation has aligned well with stock price and company performance. His reported pay, as detailed in the Summary Compensation table (excluding retirement), does not accurately reflect the realized pay from his at-risk incentive opportunities. Realized pay is defined as base salary, earned annual incentive, all other compensation as reported in the summary compensation table and long-term equity incentives at the value they actually vested and options at the value they are exercised.
Reported vs. Realized Pay
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Our Company’s three-year TSR for the last five performance periods has averaged -28%. Mr. Tillman’s total realized pay during his tenure (2014 - 2019) is 31% lower than his reported pay, averaging $7.6 million per year. This is the result of a combination of lower stock price, out of the money stock options and performance-based equity awards that had zero pay out in two of the last four performance periods.
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 such decisions, the Committee considers a variety of factors, including stockholder feedback, information provided by its independent compensation consultant, our CEO’s input, peer group data, each executive’s experience in the role, Company and individual performance, internal pay equity and any other information the Committee deems relevant in its discretion.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 25


Stockholder Engagement
The Committee considers the outcomes of the Company’s advisory stockholder vote on our executive compensation program and any associated outreach initiatives when making compensation decisions.
At our 2019 Annual Meeting, our stockholders expressed support for the Company’s proposals and all of our agenda items were approved. Within those approvals, approximately 94% of shares voted were in favor of our 2019 “say-on-pay” agenda item. Overall, investor feedback has been positive regarding our executive compensation program and its link between our pay and performance both philosophically and historically.
 
2019
“Say-on-Pay”
Support
94%
In 2019, we engaged a broad base of investors to ensure transparency and to solicit valuable feedback on various governance issues, which we then shared with the Committee and our Board. As a result of these conversations, we added a greenhouse gas intensity metric for 2020. We remain committed to engaging stockholders regularly and to ensuring alignment of our compensation programs and stockholder interests.
Compensation Consultant
For 2019, 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 items such as emerging industry trends (in both broader oil and gas and general industries), legislative issues, defining the Company’s peer group and benchmarking our executive compensation programs against the peer group. Meridian provides no other services to the Company 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. All final compensation decisions for our executive officers are made by the Committee, except that the independent members of our full Board determine and approve the CEO’s compensation level. The CEO does not provide recommendations or participate in Committee or Board discussions concerning his own compensation.
Peer Group
Peer group benchmarking is one of several factors the Committee considers in setting pay. Our peer group, which the Committee reviews annually, is comprised of independent exploration and production companies that the Committee believes provide the best external benchmarks for the market in which we compete for executive talent and for general company performance.
In its review of the peer group for 2019, the Committee considered pertinent financial measures for each company, including market capitalization, assets and revenue, as shown (in millions) in the table below as of December 31, 2018.
 
Enterprise Value
Market Capitalization
Assets
Revenue
Peer Group 50th Percentile
$17,090
$10,553
$20,172
$7,197
Marathon Oil
$15,854
$11,920
$21,778
$5,928


26 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



Following its review of the peer group, the Committee decided to make no changes for 2019.
2019 Peer Group Companies
Anadarko Petroleum Corporation*
EOG Resources, Inc.
Apache Corporation
Hess Corporation
Chesapeake Energy Corporation
Murphy Oil Corporation
Continental Resources, Inc.
Noble Energy, Inc.
Devon Energy Corporation
Pioneer Natural Resources Company
Ovintiv Inc. (formerly Encana Corporation)
 
* Due to acquisition, Anadarko was removed from the peer group in 2019 and replaced with Cimarex Energy Co. for the 2020 peer group.
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 gathered and provided by Meridian through surveys and public company disclosure. 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 position. We define total direct compensation as the sum of base salary, target annual cash bonus and the target grant-date value of long-term incentive awards.
In October 2019, Meridian provided the Committee a market analysis that included information regarding peer group executives’ base salaries, target annual bonus levels and the mix and level of long-term incentives. According to this analysis, NEO compensation levels varied by individual, but overall were appropriately positioned relative to 50th percentile benchmarks of comparable roles. Additionally, as part of this exercise, the Committee reviewed supporting benchmarks for the broader oil and gas industry and general industry.
ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program includes base salary, annual cash bonuses, long-term incentive (LTI) awards and other benefits and perquisites. By design, a significant portion of our executive officers’ overall compensation, including annual cash bonuses and LTI awards, is “performance-based,” and 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 compensation benchmarks from independent upstream companies, broader oil and gas companies, and general industry, a review of our compensation philosophy and the Committee’s subjective judgment. Because the Committee does not set fixed percentages for each element of compensation, the mix may change over time as the competitive market moves, governance standards evolve or our business needs change.
90%
of CEO’s total target direct compensation influenced by Company performance
 
Ninety percent of our CEO’s total target direct compensation is influenced by Company performance. The allocation of our compensation components, with a significant emphasis on LTI awards, aligns with the practices of our peer group. The following pie charts reflect the 2019 pay mix of total target direct compensation components for our CEO and other NEOs, respectively.

 
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neopaymix2020v4a02.jpg
 


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 27


2019 TOTAL TARGET DIRECT COMPENSATION OVERVIEW
The Committee determined 2019 base salaries, target annual cash bonus opportunities and LTI awards in February 2019. The Committee determined the payment of 2019 annual cash bonuses in February 2020, after 2019 business results were known and audited.
The following table summarizes the elements of total direct compensation the Committee awarded to our NEOs for 2019 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 target value for short-term and LTI compensation. Target LTI values reflect established compensation valuation methodologies that are similar to, but may differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table.
Name
Year
End Base
Salary
Target Bonus Opportunity
LTI Award
Target Value
Total
Target
Compensation
Mr. Tillman

$1,200,000

 

$1,620,000

 

$9,200,000

 

$12,020,000

 
Mr. Little

$600,000

 

$510,000

 

$2,500,000

 

$3,610,000

 
Mr. Whitehead

$575,000

 

$488,750

 

$2,400,000

 

$3,463,750

 
Mr. Wagner

$500,000

 

$425,000

 

$2,000,000

 

$2,925,000

 
Mr. Hedgebeth*

$575,000

 

$451,729

 

$1,800,000

 

$2,826,729

 
* Due to the addition of responsibilities as Chief Administrative Officer, Mr. Hedgebeth’s bonus target was increased on a prorated basis from 75% to 85% effective August 24, 2019.
BASE SALARY
The primary purpose of base salary is to recognize and reward overall responsibilities, experience and established skills. In setting base salary, the Committee compares each NEO’s current salary to the market 50th percentile, and 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 2019, the Committee reviewed base salaries and the considerations noted above. The Committee determined to make no base salary increases for the NEOs at that time, except for Mr. Tillman who was positioned below the median of the peer benchmark at the time of the analysis. He received a base pay increase in recognition of the Company’s ongoing transformation in the prevailing commodity price environment.
Name
Base Salary as of
January 1, 2019
Base Salary as of
December 31, 2019
Mr. Tillman

$1,150,000

 

$1,200,000

 
Mr. Little

$600,000

 

$600,000

 
Mr. Whitehead

$575,000

 

$575,000

 
Mr. Wagner

$500,000

 

$500,000

 
Mr. Hedgebeth

$575,000

 

$575,000

 


28 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



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 range of market practices, as well as each executive’s experience, relative scope of responsibility, internal pay equity considerations and any other information the Committee deems relevant in its discretion. Our targeted performance goals, established by the Committee during the first quarter of the year, are defined to focus and 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 2019 annual cash bonus payout for each NEO based on its assessment of the following:
Quantitative company performance metrics, weighted at 70%;
Strategic company performance objectives, 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.
OFFICER BONUS FRAMEWORK
[
Base Salary
x
Bonus Target
(as % of Base Salary)
=
Target Bonus Opportunity
]
x
Company Performance Score
70% Quantitative Performance
30% Strategic Performance
+/-
Individual Performance Adjustment
=
Annual Bonus Payout
The quantitative and strategic performance scores can range 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.
2019 Quantitative Performance Metrics
During the first quarter of 2019, the Committee established quantitative performance goals for the bonus program, representing 70% of the total bonus award opportunity, by taking into consideration key safety, financial and operational performance measures that are important indicators of success in our industry. The Company’s business strategy in 2019 focused on execution and portfolio transformation, while maintaining our disciplined approach to cost control.
Considering this strategy, the Committee made no changes to the list and weighting of quantitative bonus metrics at the start of 2019. The quantitative bonus metrics established for 2019 emphasize operational excellence and financial stewardship.
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 2019, top tier peer performance, and Company strategy. The Company set steep, competitive target and stretch goals to challenge our employees and drive stockholder value throughout the year. In the case of Cash Costs/Barrels of Oil Equivalent (BOE), a stretch goal was set at the top quartile of our oil weighted peers, and in the case of EBITDAX/BOE, a stretch goal was set at the top quartile of our peers.
In early 2020, the Committee evaluated the Company’s 2019 quantitative performance against goals established in early 2019. The Company delivered results that met or exceeded those targets in the categories of Total Recordable Incident Rate, Production and EBITAX/BOE, with F&D Cost/BOE and Cash Cost/BOE just outside of target. Additionally, Total Recordable Incident Rate in 2019 was the best performance we have delivered since becoming an independent E&P company, further demonstrating our commitment to safe operations.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 29


The following table shows the targets and weightings established by the Committee and the performance achieved during 2019.
Critical Capability
Weight (%)
Performance Measure
Target
Performance
Achieved
Weighted Payout
Operational Excellence
10
TRIR(1)
0.48
0.32
200%
25
Production, MBOEPD(2)
420
422
120%
Financial Stewardship
25
Cash Costs, $/BOE(3)
7.20
7.28
89%
15
F & D Cost, $/BOE Reserve(4)
19.44
20.80
86%
25
EBITDAX, $/BOE(5)
20.70
21.94
118%
 
 
 
Total Payout of 70% Quantitative Bonus Opportunity
114%
 
 
 
Weighted Payout of 70% Quantitative Bonus Opportunity
80%
(1) Calculated by dividing (a) the Occupational Safety and Health Administration (OSHA) recordable incidents multiplied by 200,000 by (b) the total number of exposure hours. This metric includes both Company employees and contractors and is applied to Company operated properties only.
(2) Available for sale, adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
(3) Cash cost includes direct expense, indirect expense, general and administrative expense; adjusted for legal settlements, pay for performance, special items, acquisitions, and divestitures. Production denominator is recorded sales adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
(4) F&D cost includes development CapEx (excluding acquisition costs). Reserves exclude acquisitions, dispositions and impairments as a result of price impact.
(5) Earnings before interest, taxes, depreciation, amortization, and exploration adjusted for special items. Production denominator is recorded sales adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
2019 Strategic Objectives
After assessing the Company’s quantitative performance metrics, the Committee evaluated the strategic objective achievements, representing 30% of the total bonus award opportunity. For 2019, the Committee clearly defined the Company’s strategic objectives across five areas to measure strategic performance. These areas included a new objective of Total Cash Return to Stockholders, which is calculated by taking the total dividend paid to stockholders and adding the total share repurchase amount. The Committee reviews and evaluates these objectives to determine their degree of achievement, but there are generally no threshold or weighting guidelines. We achieved positive results on all objectives, and in most cases, well exceeded original expectations.
Strategic Objectives
 
 
Performance Achieved
Enterprise returns based on year-on-year improvement in Cash Return on Invested Capital, or CROIC; (CROIC is calculated by dividing the sum of Operating Cash Flow and after tax interest expense by invested capital, i.e., the sum of stockholders equity and net debt)
 
 
Year-on-year underlying improvement in Cash Return on Invested Capital of 19% compared to the previous year (price normalized)
Cash Flow Per Share Growth based on year-on-year improvement in Cash Flow per Debt Adjusted Share, or CFPDAS; (CFPDAS is calculated by dividing the sum of Operating Cash Flow before working capital and net interest after tax by total shares including debt shares)
 
 
Year-on-year improvement underlying improvement in Cash Flow per Debt Adjusted Share of 18% compared to the previous year (price normalized)


30 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



Strategic Objectives, continued
 
 
Performance Achieved, continued
Total resource additions (excluding dispositions)
 
 
Through our U.S. resource capture activity, we added total resources of about 426 MMBOE generating a resource replacement ratio of 286%
Safe, Clean, Responsible, or SCR, days (defined as no serious events, no recordable injuries, and no spills to the environment)
 
 
Greater than 95% SCR days on average across our individual operational asset teams
Cash returns to stockholders based on taking the total dividend paid to stockholders and adding the total share repurchase amount
 
 
Total cash return to stockholders of approximately $510MM comprised of $160MM annual dividend and $350MM of share repurchases
The successful achievement of these strategic objectives produced an exceptional delivery year that delivered on financial outcomes that matter, reached key milestones in our strategic portfolio transformation and drove differentiated execution.
Upon review of these strategic achievements, the Committee concluded that the Company had achieved overall performance above target expectations, resulting in a 40% weighted payout score for the strategic bonus opportunity.
2019 Individual Performance
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 2019, the Committee considered each NEO’s specific contribution to our Company’s key achievements, including those discussed under “Compensation Discussion and Analysis—Executive Summary.”
Annual Cash Bonus Payouts Earned for 2019
Taking into consideration the Company’s quantitative and strategic performance, the Committee determined payout percentages of 80% from the quantitative metrics and 40% from the strategic objectives resulting in overall performance under the 2019 bonus program at 120% of target, which is down from a bonus payout of 150% in 2018.
To recognize differentiated performance in 2019, Messrs. Wagner and Hedgebeth received a differentiated individual performance factor. Final percent of target achieved for each named executive officer is listed in the following table.
Below are the actual bonus payments earned for 2019 performance.
 
Base Salary as of
December 31, 2019
Bonus Target
Target Bonus Opportunity
Percent of Target Achieved
Actual Bonus Payout
Mr. Tillman

$1,200,000

 
135%

$1,620,000

 
120%

$1,944,000

 
Mr. Little

$600,000

 
85%

$510,000

 
120%

$612,000

 
Mr. Whitehead

$575,000

 
85%

$488,750

 
120%

$586,500

 
Mr. Wagner

$500,000

 
85%

$425,000

 
138%

$586,500

 
Mr. Hedgebeth*

$575,000

 
79%

$451,729

 
132%

$596,283

 
* Due to the addition of responsibilities as Chief Administrative Officer, Mr. Hedgebeth’s bonus target was increased on a prorated basis from 75% to 85% effective August 24, 2019.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 31


LONG-TERM INCENTIVES
Long-term incentive, or LTI, awards align the interests of NEOs and stockholders over the long term and are intended to represent the largest portion of the NEO’s total direct compensation. LTI is designed to incentivize executives to achieve strategic goals that will maximize long-term stockholder value and also encourage retention through continued service requirements. 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.
The Committee awards LTI based on a target award value that reflects competitive market data, each NEO’s performance and each NEO’s target total compensation. The 2019 target award value for NEOs was allocated 50% to performance units, 20% to stock options and 30% to restricted stock or restricted stock units.
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 compensation 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.
2019 Long-Term Incentive Awards
After considering competitive market data, the demand for talent, cost considerations and the performance of both the Company and the individual NEOs, the Committee awarded LTI to each NEO consistent with our normal grant timeline resulting in a grant date of February 27, 2019.
The table below lists the target grant date LTI value for each NEO. The Committee’s methodologies to deliver target LTI values are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table. See the Grants of Plan-Based Awards Table for additional detail about each LTI award.
Total 2019 LTI Awards Target Value
Name
Annual Target
Mr. Tillman
$9,200,000
Mr. Little
$2,500,000
Mr. Whitehead
$2,400,000
Mr. Wagner
$2,000,000
Mr. Hedgebeth
$1,800,000
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 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. The Committee generally has sole and absolute discretion to reduce the final payment associated with any performance unit award as it may deem appropriate. The 2019 performance units, if earned, will be paid in stock.


32 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



2019 Performance Units
In February 2019, the Committee awarded the NEOs performance units that will vest based on relative TSR for the three-year performance period ending December 31, 2021. The percentage of units earned ranges from 0% to 200% of the units granted based on the payout table below. Earned awards are paid in shares of stock shortly after the completion of the performance period and the Committee has approved the payout percentage. Each NEO will receive vested shares of common stock equal to the number of units granted multiplied by the payout percentage. Dividend equivalents accrue and are paid in cash based on the number of shares earned at the end of the performance period. In the event that any companies in our peer group either cease to exist or are no longer a company for which TSR can be calculated from publicly available information, then the Committee may replace such company in the peer group. The Committee designated Cimarex Energy Co. and Concho Resources Inc. as replacement companies (in that order). Since the time of grant, Anadarko Petroleum Corporation has been acquired and was replaced with Cimarex Energy Co. in the peer group. 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%
2018 Performance Units
The performance units granted in February 2018 have a performance period end date of December 31, 2020 and follow the payout table below. Anadarko Petroleum Corporation, which was part of the peer group in 2018, has since been acquired and was replaced with Cimarex Energy Co., as approved by the Committee in the award terms at the time of grant. See the Outstanding Equity Awards at 2019 Fiscal Year-End Table for information about the estimated payouts of those 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%
2017 Performance Units
For the performance period ending December 31, 2019, we ranked 5 out of 12 companies. In the event that any companies in our peer group either cease to exist or are no longer a company for which TSR can be calculated from publicly available information, then the Committee may replace such company in the peer group. The Committee designated Concho Resources Inc. and Cimarex Energy Co. as replacement companies (in that order). Anadarko Petroleum Corporation, which was part of the peer group in 2017, has since been acquired and was replaced with Concho Resources, as approved by the Committee in the award terms at the time of grant. In January 2020, the Committee determined final payout values for Messrs. Tillman, Little, Whitehead and Wagner, the four NEOs who received 2017 performance units. Although we ranked 5 out of 12 companies, the payout was capped at 100% due to negative TSR. The payouts, which were made on January 31, 2020, were $3,018,223, $986,356, $867,993 and $394,540 for each of Messrs. Tillman, Little, Whitehead and Wagner, respectively.
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%
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.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 33


Stock options granted according to our normal annual grant timeline generally have a three-year ratable vesting period and a maximum term of ten years. Additional information on these awards, including the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table.
Restricted Stock and Restricted Stock Units
The Committee awards restricted stock, or restricted stock units for individuals who are retirement eligible during the vesting period, for diversification of the LTI award mix, for consistent alignment between executives and stockholders, and for retention purposes. Restricted stock and restricted stock units provide recipients with the opportunity for capital accumulation, leading to retention and stock ownership and a more predictable long-term incentive value than is provided by performance units or stock options.
Restricted stock and restricted stock units awarded generally vest 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 and restricted stock unit recipients receive dividend equivalents on the restricted stock units and do not have voting rights during the vesting period.
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 available to our NEOs include reimbursement for certain tax, estate, and financial planning services up to $15,000 per year, an enhanced annual physical examination and a Company-provided car service for our CEO. Limited personal use of the Company aircraft is also available to our NEOs, and family members and guests may also accompany officers on business travel. Any aggregate incremental cost to the Company resulting from the personal use of the Company aircraft would be included in the “All Other Compensation” column of the Summary Compensation Table. Our NEOs also participate in the health, retirement, matching gift program 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 2019.
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 Thrift Plan and the Retirement Plan.
»
Marathon Oil Company Deferred Compensation Plan (Deferred Compensation Plan) – A nonqualified plan that grows when an NEO accrues benefits above the tax limits in the Thrift Plan or when an NEO defers a portion of his or her eligible compensation.
The Thrift Plan and the Retirement Plan are broad-based plans that are open to all eligible employees of the Company. Benefits payable under our qualified and nonqualified plans are described in more detail in “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
We also currently sponsor retiree medical plans for a broad-based group of employees, including the NEOs hired before 2017.


34 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS



Change in Control and Severance Benefits
Our NEOs do not have employment agreements but are eligible for change in control termination benefits under the Marathon Oil Corporation Officer Change In Control Severance Plan (Change in Control Plan), as described under “Potential Payments upon Termination or Change in Control.” We believe these 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 stockholders.
Our Board may exercise discretion to make severance payments to executives on a case-by-case basis. We have a policy requiring that our Board seek stockholder approval or ratification of certain severance agreements (not including the Change in Control Plan) for senior executive officers that would require payment of certain cash severance benefits exceeding 2.99 times the officer’s base salary plus the most recent annual cash bonus paid.
STOCK OWNERSHIP REQUIREMENTS
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.
EXECUTIVE OFFICER STOCK OWNERSHIP REQUIREMENTS
 
CEO’s actual
stock ownership
10x
base salary
Position
Multiple of Base Salary
 
Chief Executive Officer
6
 
Executive Vice Presidents
4
 
Senior Vice Presidents
2
 
Vice Presidents
2
 
Executive officers have five years from their respective appointment or promotion dates to achieve the designated stock ownership level. The Committee reviews each executive officer’s progress toward the requirements during the first quarter of each year to determine whether the market value of shares, including the value of unvested shares, satisfies our requirements. Stock options and performance units are not counted as shares owned in measuring stock ownership. Executive officers who do not hold the required level of stock ownership must hold the shares they receive upon vesting of restricted stock, restricted stock units or exercise of stock options (after payment of exercise prices and after taxes) until they have met their requirement. As of January 21, 2020, each NEO meets the requisite threshold other than Mr. Hedgebeth, who is still within the five-year window. To ensure that they bear the full risks of stock ownership, our officers, including our executive officers, are prohibited from engaging in hedging transactions related to our stock.
TAX CONSIDERATIONS
The Committee considers the tax effects to both the Company and the NEOs when making executive compensation decisions. While the Committee endeavors to deliver compensation in a tax efficient manner, 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 imposed by Section 162(m) of the Internal Revenue Code, which limits the deduction that we can take to $1 million per “covered employee” each year.


MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 35


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
Compen-
sation
(3) 
($)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(4) 
($)
All
Other
Compensation
(5) 
($)
Total
($)
Lee M. Tillman
2019
1,189,615
 

 
8,421,294

 
1,791,293
 
1,944,000

 
403,012

 
301,637
 
14,050,851
 
Chairman, President and Chief Executive Officer
2018
1,139,808
 

 
6,600,008

 
1,742,669
 
2,242,500

 
240,620

 
245,269
 
12,210,874
 
2017
1,090,000
 

 
5,604,382

 
1,449,989
 
1,501,500

 
232,568

 
237,225
 
10,115,664
 
T. Mitchell Little
2019
600,000
 

 
2,288,392

 
486,762
 
612,000

 
1,205,873

 
120,042
 
5,313,069
 
Executive Vice President, Operations
2018
600,000
 

 
2,625,027

 
528,081
 
765,000

 

 
102,836
 
4,620,944
 
2017
600,000
 

 
1,831,517

 
473,855
 
586,500

 
133,820

 
90,601
 
3,716,293
 
Dane E. Whitehead
2019
575,000
 

 
2,196,851

 
467,293
 
586,500

 
129,892

 
111,561
 
4,067,097
 
Executive Vice President and Chief Financial Officer
2018
575,000
 

 
1,760,013

 
464,715
 
733,125

 
90,992

 
104,273
 
3,728,118
 
2017
453,365
 
1,270,000

 
3,935,218

 
977,250
 
513,190

 
40,693

 
54,151
 
7,243,867
 
Patrick J. Wagner
2019
500,000
 

 
1,830,706

 
389,408
 
586,500

 
133,963

 
120,294
 
3,560,871
 
Executive Vice President, Corporate Development and Strategy
2018
500,000
 

 
1,890,025

 
380,221
 
637,500

 
82,286

 
108,294
 
3,598,326
 
2017
424,808
 
300,000

 
732,603

 
189,542
 
488,750

 
98,078

 
94,340
 
2,328,121
 
Reginald D. Hedgebeth
2019
575,000
 

 
1,556,101

 
331,000
 
596,283

 
121,695

 
98,973
 
3,279,052
 
Executive Vice President, General Counsel and Chief Administrative Officer
2018
575,000
 

 
1,280,010

 
337,977
 
646,875

 
85,354

 
88,346
 
3,013,562
 
2017
375,961
 
300,000

 
588,118

 
622,149
 
452,820

 
33,930

 
41,826
 
2,414,804
 
(1)    For Messrs. Whitehead and Hedgebeth, this column includes the one-time cash sign-on bonus amounts received upon commencement of employment. For Mr. Wagner, this column includes the one-time cash bonus received upon completion of his interim term as Chief Financial Officer.
(2)    These columns reflect 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 18 to our consolidated financial statements in our annual reports on Form 10-K for the years ended December 31, 2019, December 31, 2018 and December 31, 2017. For 2017, 2018 and 2019, the Stock Awards column also includes the grant date fair value of the share-denominated performance units granted in February 2017, February 2018 and February 2019 respectively. Grants made in February 2017 and February 2018 will be settled in cash and grants made in February 2019 will be share settled. 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. The maximum (200%) payouts for the 2019 performance units using the December 31, 2019 closing stock price of $13.58 would be: for Mr. Tillman, $7,441,080; for Mr. Little, $2,022,035; for Mr. Whitehead, $1,941,152; for Mr. Wagner, $1,617,622; and for Mr. Hedgebeth, $1,374,975. See the “Grants of Plan-Based Awards Table” and “Long-Term Incentive Awards” for further detail on our performance unit program.
(3)    This column reflects annual cash bonus payments, determined by the Compensation Committee and paid in the first quarter of the following year respectively, pursuant to the Company’s annual cash bonus program. These awards are discussed in further detail in our Compensation Discussion and Analysis under “Annual Cash Bonus.”
(4)    This column reflects the annual change in accumulated benefits under our retirement plans. See “Post-Employment Benefits” for more information about our defined benefit plans and the assumptions used in calculating these amounts. No deferred compensation earnings are reported in this column because our non-qualified deferred compensation plans do not


36 MARATHON OIL | EXECUTIVE COMPENSATION


provide above-market or preferential earnings. In 2018 for Mr. Little, the actual change in accumulated benefit decreased by $226,165.
(5)    The following table describes each component of the “All Other Compensation” column for 2019 in the Summary Compensation Table. For additional information regarding perquisites, see “Perquisites” in our Compensation Discussion and Analysis.
Name
Tax &
Financial
Planning
(a) 
($)
Misc.(b) 
($)
Company Contributions to Defined
Contribution
Plans
(c) 
($)
Matching
Contributions
(d) 
($)
Total All
Other
Compensation
($)
Mr. Tillman
15,000
 
37,462

 
239,175
 
10,000
 
301,637
 
Mr. Little
15,000
 

 
95,550
 
9,492
 
120,042
 
Mr. Whitehead
15,000
 

 
91,569
 
4,992
 
111,561
 
Mr. Wagner
15,000
 

 
79,894
 
25,400
 
120,294
 
Mr. Hedgebeth
3,287
 

 
85,686
 
10,000
 
98,973
 
(a)    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.
(b)    For Mr. Tillman, this column reflects access to a Company-provided car service. 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.
(c)    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.
(d)    The amounts shown represent contributions made on behalf of the NEOs for 2019 contributions under our matching gifts programs for universities and approved not-for-profit charities.


MARATHON OIL | EXECUTIVE COMPENSATION 37



GRANTS OF PLAN-BASED AWARDS IN 2019
The following table provides information about all plan-based LTI awards (stock options, restricted stock, restricted stock units and performance units) granted to each named executive officer during 2019. The awards listed in the table were granted under the Marathon Oil Corporation 2016 Incentive Compensation Plan, or 2016 Plan, and are described in more detail in “Compensation Discussion and Analysis.”
 
 
 
Estimated Future Payouts
Under Non‑Equity
Incentive Plan Awards
(1)
Estimated Future Payouts
Under Equity
Incentive Plan Awards
(2)
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(2) 
(#)
All Other
Option
Awards:
Number of
Securities
Underlying Options
(#)
Exercise
or Base
Price of
Option Awards
($)
Grant Date
Fair Value
of Stock
and Option Awards
(3) 
($)
Name
Type of Award
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Lee M. Tillman
Annual Cash Bonus

567,000
 
1,620,000
3,240,000
 

 


 




 

Performance
Units
02/27/2019

 


 
147,945
 
273,972
547,944
 



5,661,303
 

Stock Options
02/27/2019

 


 

 


 

270,588
16.79
1,791,293
 

Restricted Stock Units
02/27/2019

 


 

 


 
164,383


2,759,991
 
T. Mitchell Little
Annual Cash Bonus

178,500
 
510,000
1,020,000
 

 


 




 

Performance
Units
02/27/2019

 


 
40,202
 
74,449
148,898
 



1,538,399
 

Stock Options
02/27/2019

 


 

 


 

73,529
16.79
486,762
 

Restricted Stock
02/27/2019

 


 

 


 
44,669


749,993
 
Dane E. Whitehead
Annual Cash Bonus

171,063
 
488,750
977,500
 

 


 




 

Performance Units
02/27/2019

 


 
38,594
 
71,471
142,942
 



1,476,862
 

Stock Options
02/27/2019

 


 

 


 

70,588
16.79
467,293
 

Restricted Stock
02/27/2019

 


 

 


 
42,882


719,989
 
Patrick J. Wagner
Annual Cash Bonus

148,750
 
425,000
850,000
 

 


 




 

Performance
Units
02/27/2019

 


 
32,162
 
59,559
119,118
 



1,230,715
 

Stock Options
02/27/2019

 


 

 


 

58,823
16.79
389,408
 

Restricted Stock
02/27/2019

 


 

 


 
35,735


599,991
 
Reginald D. Hedgebeth
Annual Cash Bonus

158,105
 
451,729
903,459
 

 


 




 

Performance
Units
02/27/2019

 


 
27,338
 
50,625
101,250
 



1,046,105
 

Stock Options
02/27/2019

 


 

 


 

50,000
16.79
331,000
 

Restricted Stock
02/27/2019

 


 

 


 
30,375


509,996
 
(1)    This column shows potential payout opportunity established for the 2019 performance period under the Company’s Annual Cash Bonus Program. The actual amounts paid to each NEO under the program for 2019 are disclosed in the Summary Compensation Table.
(2)    Performance units, restricted stock and restricted stock 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 stock.
(3)    The amounts shown in this column reflect the total grant date fair values of stock options, restricted stock, restricted stock units 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 27, 2019 was $6.62. 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 18 to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2019. See “Long-Term Incentive Awards” for more information about restricted stock, restricted stock units, stock options, and performance unit awards.


38 MARATHON OIL | EXECUTIVE COMPENSATION


OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR-END
The following table provides information about the unexercised stock options (vested and unvested) and unvested restricted stock and restricted stock units held by each NEO as of December 31, 2019.
 
Option Awards
Stock Awards
 

Number of Securities
Underlying Unexercised Options
 
 
 
Restricted Stock/Units
Equity Incentive Plan Awards
(Performance Units)
 
Name
Exercisable
(#)
Unexercisable(1) 
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Number of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested
(#)
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
($)
Lee M. Tillman


 


 


 


 

 

 

 
 
229,886

 

 
34.65

 
8/15/2023
133,353
(2) 
1,810,934
 
222,255
(7) 
3,018,223
 
 
330,189

 

 
34.03

 
2/25/2024
170,455
(3) 
2,314,779
 
284,091
(8) 
3,857,956
 
 
256,591

 

 
29.06

 
2/25/2025
164,383
(4) 
2,232,321
 
273,972
(9) 
4,055,388
 
 
212,000

 

 
7.22

 
2/24/2026

 

 

 

 
 
161,648

 
80,825

 
15.76

 
2/22/2027

 

 

 

 
 
99,638

 
199,276

 
14.52

 
2/28/2028
 
 
 
 
 
 
 
 
 

 
270,588

 
16.79

 
2/27/2029

 

 

 

 
T. Mitchell Little


 


 


 


 

 

 

 
 
18,947

 

 
33.06

 
5/25/2021
57,928
(2) 
786,662
 
72,633
(7) 
986,356
 
 
2,309

 

 
26.92

 
8/31/2021
66,002
(3) 
896,307
 
86,089
(8) 
1,169,089
 
 
5,009

 

 
35.06

 
2/28/2022
44,669
(4) 
606,605
 
74,449
(9) 
1,102,009
 
 
33,700

 

 
32.86

 
2/26/2023

 

 

 

 
 
56,604

 

 
34.03

 
2/25/2024

 

 

 

 
 
70,299

 

 
29.06

 
2/25/2025

 

 

 

 
 
58,667

 

 
7.22

 
2/24/2026

 

 

 

 
 
52,826

 
26,414

 
15.76

 
2/22/2027

 

 

 

 
 
30,193

 
60,387

 
14.52

 
2/28/2028

 

 

 

 
 

 
73,529

 
16.79

 
2/27/2029

 

 

 

 
Dane E. Whitehead