DEF 14A 1 d856141ddef14a.htm NOTICE & PROXY Notice & Proxy
Table of Contents

 

 

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

 

 

Filed by the Registrant  x                             Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement.
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
x Definitive Proxy Statement.
¨ Definitive Additional Materials.
¨ Soliciting Material Pursuant to §240.14a-12.

CONSOL Energy Inc.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

x No fee required.
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)

Title of each class of securities to which transaction applies:

 

     

(2)

Aggregate number of securities to which transaction applies:

 

     

(3)

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

 

     

(4)

Proposed maximum aggregate value of transaction:

 

     

(5)

Total fee paid:

 

     

¨ Fee paid previously with preliminary materials.
¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)

Amount Previously Paid:

 

     

(2)

Form, Schedule or Registration Statement No.:

 

     

(3)

Filing Party:

 

     

(4)

Date Filed:

 

     

 

 

 


Table of Contents

LOGO

CONSOL Energy Inc.

CNX Center

1000 CONSOL Energy Drive

Canonsburg, Pennsylvania 15317

Telephone (724) 485-4000

Annual Meeting of Shareholders

to be held on May 6, 2015

Dear Shareholder:

You are cordially invited to attend CONSOL Energy Inc.’s 2015 Annual Meeting of Shareholders on May 6, 2015 at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231.

The enclosed Notice of Annual Meeting and Proxy Statement describe the various matters to be acted upon at the meeting. Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or by internet (as described in the enclosed proxy card or voting instruction card) or by completing and returning the enclosed proxy card or voting instruction card, which requires no postage if mailed in the United States.

If you need assistance, please contact CONSOL’s Investor Relations Office at (724) 485-4000. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 accompanies this Proxy Statement.

We appreciate your ownership of CONSOL Energy Inc. and hope you will be able to join us at this year’s Annual Meeting.

 

Sincerely,
LOGO
J. Brett Harvey
Chairman of the Board

March 25, 2015


Table of Contents

LOGO

CONSOL Energy Inc.

CNX Center

1000 CONSOL Energy Drive

Canonsburg, Pennsylvania 15317

Telephone (724) 485-4000

Annual Meeting of Shareholders

to be held on May 6, 2015

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 6, 2015

Notice is hereby given that the Annual Meeting of Shareholders (the “Annual Meeting”) of CONSOL Energy Inc. (“CONSOL” or the “Corporation”) will be held on May 6, 2015, at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231, for the following purposes:

 

  1. To elect eleven directors to hold office in accordance with the Amended and Restated Bylaws of CONSOL;

 

  2. To ratify the anticipated selection of Ernst & Young LLP, an independent registered public accounting firm, as CONSOL’s independent auditor for the fiscal year ending December 31, 2015;

 

  3. To approve, on an advisory basis, the compensation paid to our named executives in 2014, as reported in this Proxy Statement;

 

  4. If properly presented, to consider and vote upon a shareholder proposal regarding proxy access;

 

  5. If properly presented, to consider and vote upon a shareholder proposal regarding a climate change report; and

 

  6. If properly presented, to consider and vote upon a shareholder proposal regarding an independent Board chair.

By resolution of the Board of Directors, we have fixed the close of business on March 12, 2015 as the record date for determining the shareholders of CONSOL entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or by internet (as described in the enclosed proxy card or voting instruction card) or by completing and returning the enclosed proxy card or voting instruction card, which requires no postage if mailed in the United States. Your prompt response will be helpful and your cooperation is appreciated. If you attend the Annual Meeting, you may withdraw your proxy and vote in person, if you so choose.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ON MAY 6, 2015: The Proxy Statement, form of proxy, Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and related materials are available at www.edocumentview.com/CNX or may be obtained by contacting the Investor Relations Department at the address and phone number above.

 

Sincerely,
LOGO
Stephanie L. Gill

Vice President, General Counsel and

Corporate Secretary

March 25, 2015


Table of Contents

TABLE OF CONTENTS

 

PROXY SUMMARY - 2015

     1   

INFORMATION ABOUT THE ANNUAL MEETING

     5   

Voting

     5   

Record Date and Vote Required for Approval

     5   

Director Resignation Policy

     6   

Revocation of Proxy

     6   

Proxy Solicitation

     7   

Secrecy in Voting

     7   

Attendance at the Meeting

     7   

BOARD OF DIRECTORS AND COMPENSATION INFORMATION

     7   

BOARD OF DIRECTORS AND ITS COMMITTEES

     7   

Board of Directors

     7   

Board Leadership Structure

     7   

Board’s Role in Risk Management

     9   

Committees of the Board of Directors

     9   

Audit Committee

     9   

Compensation Committee

     10   

Nominating and Corporate Governance Committee

     11   

Finance Committee

     12   

Health, Safety and Environmental Committee

     12   

Corporate Governance Web Page and Available Documents

     13   

Membership and Meetings of the Board of Directors and its Committees

     13   

Communication with the Board of Directors

     14   

DIRECTOR COMPENSATION TABLE – 2014

     15   

UNDERSTANDING OUR DIRECTOR COMPENSATION TABLE

     16   

BENEFICIAL OWNERSHIP OF SECURITIES

     19   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     21   

PROPOSAL NO. 1 - ELECTION OF DIRECTORS

     21   

Biographies of Nominees

     21   

Related Party Policy and Procedures

     27   

Determination of Director Independence

     27   

EXECUTIVE COMPENSATION INFORMATION

     30   

COMPENSATION DISCUSSION AND ANALYSIS

     30   

SUMMARY COMPENSATION TABLE – 2014, 2013 AND 2012

     49   

GRANTS OF PLAN-BASED AWARDS – 2014

     51   

UNDERSTANDING OUR SUMMARY COMPENSATION AND GRANTS OF PLAN-BASED AWARDS TABLES

     52   

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END – 2014

     54   

OPTION EXERCISES AND STOCK VESTED TABLE – 2014

     56   

PENSION BENEFITS TABLE – 2014

     57   

UNDERSTANDING OUR PENSION BENEFITS TABLE

     57   

NONQUALIFIED DEFERRED COMPENSATION TABLE – 2014

     61   

UNDERSTANDING OUR DEFERRED COMPENSATION TABLE

     62   

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLES

     62   

UNDERSTANDING OUR CHANGE IN CONTROL AND EMPLOYMENT TERMINATION TABLES AND INFORMATION

     67   


Table of Contents

TABLE OF CONTENTS

 

ACCOUNTANTS AND AUDIT COMMITTEE

     76   

AUDIT COMMITTEE REPORT

     76   

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     77   

PROPOSAL NO. 2 - RATIFICATION OF ANTICIPATED APPOINTMENT OF INDEPENDENT AUDITOR

     78   

PROPOSAL NO. 3 - APPROVAL OF CONSOL’S EXECUTIVE COMPENSATION

     78   

SECURITIES AUTHORIZED FOR ISSUANCE UNDER CONSOL ENERGY EQUITY COMPENSATION PLAN

     79   

PROPOSAL NO. 4 - SHAREHOLDER PROPOSAL REGARDING PROXY ACCESS

     80   

PROPOSAL NO. 5 - SHAREHOLDER PROPOSAL REGARDING CLIMATE CHANGE REPORT

     83   

PROPOSAL NO. 6 - SHAREHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIR

     88   

ADDITIONAL MATTERS

     91   

     Shareholder Proposals for Inclusion in Next Year’s Proxy Statement or Presentation at Next Year’s Annual Meeting

     91   

     General Information Regarding the Requirements for Shareholder Nominations of Directors

     91   

    Householding of Proxy Materials

     91   

    Other

     92   

APPENDIX A

     A-1   


Table of Contents

PROXY SUMMARY - 2015

This Proxy Summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement carefully before voting.

Annual Meeting of the Shareholders

 

   Time and Date:    Wednesday, May 6, 2015, at 10:00 a.m. Eastern Time
  

Place:

   Hyatt Regency Pittsburgh International Airport, Wright Room,
1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231
  

Record Date:

   March 12, 2015
  

Voting:

   Shareholders of CONSOL Energy Inc. (“CONSOL” or the “Corporation”) as of the record date are entitled to vote. Each share of CONSOL common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted upon at the Annual Meeting.

Annual Report

CONSOL’s Annual Report to Shareholders is being mailed together with this Proxy Statement on or about March 25, 2015 to shareholders of record, as of March 12, 2015, of CONSOL common stock.

Proposals for Meeting

 

  1. Elect Eleven Directors1

The following table provides summary information about each director nominee as of March 12, 2015. Each director nominee is elected annually by a majority of votes cast.

 

          

Director

Since

              Committee Memberships  
Name   Age       Occupation   Independent     AC     CC     HSE     FC     NCG  

J. Brett Harvey

    64        1998      CONSOL Chairman            

Nicholas J. DeIuliis

    46        2014      CONSOL President and Chief Executive Officer            

Philip W. Baxter

    66        2009      Former President Stan Johnson Company; CONSOL’s Lead Independent Director     X        X        X            X   

Alvin R Carpenter

    73        2013      Former Vice Chairman of CSX Corporation; Director of Stein Mart, Inc. and of Regency Centers Corporation     X          C          X     

William E. Davis

    72        2004      Former Chairman and Chief Executive Officer of Niagara Mohawk Power Corporation     X            X          C   

David C. Hardesty, Jr.

    69        2005      President Emeritus and Professor of Law at West Virginia University           X        X     

Maureen E. Lally-Green

    65        2013      Former Judge on the Superior Court of Pennsylvania; Associate General Secretary and Director of the Office for Church Relations for the Diocese of Pittsburgh; Director of Federated Mutual Fund Complex     X            X          X   

Gregory A. Lanham

    50        2014      Director and Chief Executive Officer of FTS International, Inc.     X          X        X       

John T. Mills

    67        2006      Former Chief Financial Officer of Marathon Oil Corporation     X        X        X         

William P. Powell

    59        2004      Managing Partner of 535 Partners LLC     X              X        X   

William N. Thorndike, Jr.

    51        2014      Managing Director of Housatonic Partners     X                X                X           

 

 

AC

   Audit Committee;
 

CC

   Compensation Committee;
 

HSE

   Health, Safety and Environmental Committee;
 

FC

   Finance Committee;
 

NCG

   Nominating and Corporate Governance Committee;
 

C

   Committee Chair

 

1  Immediately after the Annual Meeting, the Board will reduce the number of directors from fourteen to eleven. Accordingly, Messrs. Altmeyer, Gupta and Williams, long-standing, valuable members of our Board, are not on the slate of directors to be re-elected. Committee assignments, including Chair positions, will be determined immediately after the Annual Meeting.

 

1


Table of Contents
  2. Ratify the Anticipated Selection of Ernst & Young LLP (Auditors)

As a matter of good corporate governance, we are asking shareholders to ratify the anticipated selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015.

 

  3. Approve Named Executive Compensation

We provide our shareholders with an annual advisory vote to approve the compensation paid to our named executive officers (“named executives”). The following 2014-2015 business and compensation highlights demonstrate the direct linkage between our pay practices with respect to our named executives and our short- and long-term corporate financial and stock performance.

 

  4. Consider Shareholder Proposal Regarding Proxy Access

As described later, a shareholder has submitted a proposal regarding proxy access. For the reasons set forth in “Proposal No. 4 – Shareholder Proposal Regarding Proxy Access,” the Board of Directors (the “Board”) recommends that you vote AGAINST this proposal.

 

  5. Consider Shareholder Proposal Regarding a Climate Change Report

As described later, a shareholder has submitted a proposal requesting the issuance of a climate change report by CONSOL. For the reasons set forth in “Proposal No. 5 – Shareholder Proposal Regarding a Climate Change Report,” the Board recommends that you vote AGAINST this proposal.

 

  6. Consider Shareholder Proposal Regarding an Independent Board Chair

As described later, a shareholder has submitted a proposal requesting that CONSOL adopt a policy that the Chair of the Board be an independent director. For the reasons set forth in “Proposal No. 6 – Shareholder Proposal Regarding an Independent Board Chair,” the Board recommends that you vote AGAINST this proposal.

The Board recommends that you vote FOR Proposals 1, 2 and 3, and AGAINST Proposals 4, 5 and 6.

 

2


Table of Contents

2014 - 2015 Business, Compensation and Corporate Governance Highlights

 

Business Highlights

 

   

Demonstrated Strong Stock Price Performance. CONSOL’s 2014 Total Shareholder Return (“TSR”) outperformed its compensation peer group with a ranking in the 89th percentile as described on page 34.

 

 

   

Executed Our Strategic Plan. At its Analyst Day in June, 2014, CONSOL management laid out its vision for increasing net asset value per share. CONSOL successfully executed on a number of items to this end: (i) conducted an initial public offering of CONE Midstream Partners LP, a partnership formed by CONSOL and Noble Energy focusing on our Marcellus Shale gas gathering system; (ii) lowered our cost of capital by refinancing two-thirds of our public debt and amending our credit facility; (iii) sold $270 million of non-core assets; (iv) improved our E&P visibility in the investment community; (v) exceeded our $65 million overhead reduction target; (vi) approved and initiated a $250 million share buyback program; and (vii) announced our plan to form two coal-focused, publicly-owned subsidiaries to bring the value of our coal assets forward.

 

 

   

Strong Safety Performance in 2014. Our E&P Division achieved a milestone of 8.2 million exposure hours before experiencing its first lost-time accident in over 20 years. In addition, we reduced the number of fatal potential exceptions by 44% during 2014. In order to further strengthen our emphasis on safety we introduced behavior management training to shape behavior and proactively address policy changes and concerns. Safety is important for our shareholders because a safe workplace reduces our costs and increases the reliability of our operations and production.

 

 

   

Maintained Strong Financial Performance in Very Challenging Markets for Coal and Natural Gas in 2014. In very challenging markets, CONSOL delivered strong results in 2014, including: (i) net income of $163.1 million; (ii) net cash flow from operations of $936.8 million; (iii) annual E&P production of 235.7 billions of cubic feet equivalent (“Bcfe”), which exceeded our goal of 30% production growth over 2013; and (iv) strong liquidity at year-end with approximately $2 billion of total liquidity, including $177 million in cash. We also continue to reinvest in our business in a measured way while keeping our liquidity strong. To this end, fiscal year 2014 capital investments in continued operations were $1.5 billion, of which $1.1 billion were in natural gas-related projects.

 

 

   

Increased Well Performance and Returns. We utilized Short Stage Lengths and Reduced Cluster Spacing enhanced completion techniques on all of our operated wells in 2014 to achieve 24-hour production rates as high as 20.2 million cubic feet per day (“MMcf/d”), compared to a high of 18.4 Mmcf/d in 2013. Wells completed in this manner have shown initial production rates improving by as much as 40%. During 2014, CONSOL had 53 operated Marcellus Shale wells turned in line with an average completed lateral length of 7,600 feet.

 

 

   

Increased Total Gas Proved Reserves by 19%. Total gas proved reserves, as of December 31, 2014, were a record 6.8 trillion cubic feet equivalent (“Tcfe”), which represents a 19% increase from the 5.7 Tcfe at year-end 2013. In 2014, CONSOL added 1.1 Tcfe (net to CONSOL) of proved reserves through extensions and discoveries. Drilling and completion costs in 2014 directly attributable to extensions and discoveries were $836.7 million. When divided by the extensions and discoveries of 1.1 Tcfe, this yields a drill bit finding and development cost of $0.76 per thousand cubic feet equivalent (“Mcfe”).

 

 

   

Demonstrated Ability to Grow our E&P Business. CONSOL was focused on growing shareholder value by achieving 37% E&P production growth through 2014 and is currently working on improving breakeven economics by targeting our stacked plays. For the fourth quarter of 2014, we achieved a year-over-year 45% production growth at 70.5 Bcfe. This growth was mainly achieved through targeting Marcellus completions and recompletions, Upper Devonian, and Ohio Utica. We achieved record quarterly production of 70.5 Bcfe in the fourth quarter of 2014, with overall natural gas production up 45% from the fourth quarter of 2013. Additionally, in December 2014, we finalized an agreement with Columbia Energy Ventures to sublease approximately 20,000 contiguous acres of Utica Shale and Upper Devonian gas rights in Greene and Washington Counties in Pennsylvania and Marshall and Ohio Counties in West Virginia. This acquisition further positions CONSOL as one of the largest holders of Utica Shale acreage in Pennsylvania and West Virginia.

 

 

   

Successfully Transitioned Management Team. In early 2014, CONSOL hired a seasoned executive to serve as its new Chief Operating Officer for its E&P Division. Immediately after the Annual Meeting in 2014, as part of the Corporation’s succession plan, Mr. Harvey assumed the role of Executive Chairman and Mr. DeIuliis assumed his new role of Chief Executive Officer, in addition to his existing role as President. In January 2015, Mr. Harvey retired as an executive of CONSOL, but is continuing in his role as Chairman of CONSOL’s Board of Directors.

 

 

3


Table of Contents

Compensation Highlights

 

   

Reduced Chief Executive Officer’s Compensation Significantly. When Mr. Harvey assumed the role of Executive Chairman immediately after the 2014 Annual Meeting, his annual base salary was reduced by 25% to $750,000. Mr. DeIuliis declined an increase to his 2014 compensation in connection with his promotion to Chief Executive Officer in 2014.

 

 

   

Redesigned the 2014 Short-Term Incentive Compensation Program (“STIC”). The 2014 STIC was changed largely in response to certain shareholder comments that our program was too subjective and insufficiently based on our financial results. The changes included: (i) the elimination of the individual performance component of annual bonus for executive officers, which some stakeholders had believed to be too subjective (was 1/3 weighting); (ii) an increased emphasis on production, operating cost, and reserve replacement; and (iii) the addition of a profitability modifier (EBITDA results could impact awards +/- 30%). For 2015, this profitability modifier was replaced with an absolute TSR modifier (impacting awards as much +/- 20%).

 

 

   

Redesigned the Long-Term Incentive Compensation Program (“LTIC”). We changed the LTIC in response to certain shareholder comments that long-term incentive awards should be tied to our stock price and financial results of CONSOL. The changes included a 2014 Performance Share Unit (“PSU”) award to be earned based on performance relative to two equally-weighted goals of (i) average return on capital employed and (ii) relative TSR as compared to the S&P 500. For 2015, the payout formula remained the same.

 

 

•      Continued to Keep Executive 2014 Pay Aligned with Shareholder Interests. When examining our CEO’s total direct compensation (salary, STIC and LTIC) relative to our peer group, Mr. DeIuliis’ compensation, shown on the vertical axis, ranks in the 34th percentile for 2014, while CONSOL’s relative TSR performance, shown on the horizontal axis, ranks at the 89th percentile. See diagram to the right.

 

•      Implemented a Stock Retention Requirement. For equity awards granted in 2015, CONSOL implemented a stock retention requirement mandating that executive officers keep half of any shares vested (net of taxes) until the earlier of (i) retirement at age 62 or (ii) ten years from the grant date.

  LOGO

 

   

Followed Compensation Policy Best Practices. CONSOL maintained a policy prohibiting tax gross-ups for our executive officers (except those provided for in Messrs. DeIuliis’ and Johnson’s change in control agreements, which were entered into prior to April 2009) and a clawback policy that generally provides the Compensation Committee with the discretion to seek recovery of performance-based cash and equity incentive compensation paid to an executive officer in connection with an accounting restatement due to misconduct of that officer. In addition, we eliminated the accelerated vesting of equity awards when an employee leaves as a result of retirement, and we no longer have any employment agreements between CONSOL and our named executives. Finally, we continue to follow “no hedging” and “no pledging” policies that generally prohibit directors and employees from engaging in hedging or pledging transactions with our stock.

 

Corporate Governance Highlights

 

   

Maintained Corporate Governance Best Practices. Along with maintaining a Lead Independent Director, CONSOL does not have a shareholder rights plan or a classified board.

 

 

   

Expanded Gender Diversity in Management. CONSOL believes strongly in diversity throughout our organization, and has promoted women to several of the top management positions at CONSOL, including the Chief Accounting Officer, the Senior Vice President of Environmental Strategy and Regulatory Affairs, the Vice President of CNX Land LLC, the Director of Corporate Strategy and the General Counsel.

 

 

   

Continued Boardroom Evolution. Two new independent directors joined the Board in 2014, bringing the total new independent directors to join the Board since mid-2013 to four. These four new directors replace three of the longest tenured directors on the Board and bring diverse, new experiences and thinking along with expertise for future strategic growth. Of the 11 directors who are nominated for the Board at this year’s Annual Meeting, 36% have joined in the past two years.

 

 

   

Engaged in Risk Mitigation. The incentive compensation payable to our executives is based on a variety of performance factors which are designed to incentivize activities that lead to sustained growth and mitigate inappropriate risk.

 

 

   

Issuing Fourth Corporate Responsibility Report. We issued annual Corporate Responsibility Reports in 2012, 2013 and 2014, and our Fourth Corporate Responsibility Report will be published in Spring 2015.

 

 

 

4


Table of Contents

CONSOL Energy Inc.

CNX Center

1000 CONSOL Energy Drive

Canonsburg, Pennsylvania 15317

Telephone (724) 485-4000

INFORMATION ABOUT THE ANNUAL MEETING

March 25, 2015

The enclosed proxy is being solicited by the Board to be voted at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held on May 6, 2015, at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231.

The specific proposals to be considered and voted upon at the Annual Meeting are summarized in the Notice of Annual Meeting of Shareholders. Each proposal is described in more detail in this Proxy Statement.

Voting

The persons named as proxies on the accompanying proxy card have informed CONSOL of their intention, if no contrary instructions are given, to vote the shares represented by such proxies as follows:

 

   

in favor of the election of those persons nominated in this Proxy Statement to serve as directors of CONSOL (Proposal 1);

 

   

in favor of the ratification of the anticipated selection of Ernst & Young LLP, an independent registered public accounting firm, as the independent auditor of CONSOL for the fiscal year ending December 31, 2015 (Proposal 2);

 

   

in favor of, on an advisory basis, the compensation paid to our named executives in 2014 (Proposal 3);

 

   

if properly presented, against the shareholder proposal regarding proxy access (Proposal 4);

 

   

if properly presented, against the shareholder proposal regarding a climate change report (Proposal 5);

 

   

if properly presented, against the shareholder proposal regarding an independent Board chair (Proposal 6); and

 

   

in accordance with their judgment on any other matters which may properly come before the Annual Meeting.

The Board does not know of any other business to be brought before the Annual Meeting other than as indicated in the Notice of Annual Meeting of Shareholders.

Record Date and Vote Required for Approval

The record date with respect to this solicitation is March 12, 2015. All holders of record of CONSOL common stock as of the close of business on March 12, 2015 (the “Record Date”) are entitled to vote at the Annual Meeting and any adjournment or postponement thereof. As of March 12, 2015, the Corporation had 228,652,199 shares of common stock outstanding. Each share of common stock is entitled to one vote. Shareholders do not have cumulative voting rights. The holders of a majority of the outstanding shares of common stock of the Corporation entitled to vote generally in the election of directors, represented in person or by proxy, will constitute a quorum at the Annual Meeting.

 

   

Director Elections: The election of directors at the Annual Meeting will be by ballot and a majority of the votes cast at the Annual Meeting is required for each director nominee to be elected. Under our

 

5


Table of Contents
 

Amended and Restated Bylaws, this means that the number of votes cast “for” a director’s election must exceed 50% of the total number of votes cast with respect to that director’s election. Votes cast include direction to withhold authority.

 

   

Independent Auditor, Executive Compensation and Shareholder Proposals: The vote to ratify the anticipated selection of Ernst & Young LLP as the independent auditor of the Corporation for the fiscal year ending December 31, 2015, the advisory vote to approve the compensation paid to our named executives in 2014 as reported in this Proxy Statement, and the shareholder proposals regarding proxy access, a climate change report and an independent Board chair each will be determined by the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the meeting and entitled to vote on the matter.

If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may be treated as “broker non-votes.” Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and such instructions are not given. Brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on “non-routine” proposals, such as Proposals 1, 3, 4, 5 and 6, although they may vote their clients’ shares on “routine matters,” such as Proposal No. 2. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Abstentions have the same effect as votes against the matter except, in the case of Proposal 1, where abstentions would not have an effect on the outcome. Proxies received but marked as abstentions and broker non-votes will be counted for quorum purposes.

The voting instruction form also serves as the voting instructions for the trustees who hold shares of record for participants in the CONSOL Energy Inc. Investment Plan for Salaried Employees. If voting instructions representing shares in this plan are not received, those shares will not be voted.

Director Resignation Policy

Our Amended and Restated Bylaws provide that if an incumbent director is not elected at a meeting for the election of directors and no successor has been elected at such meeting, the director must tender his or her resignation promptly to the Board. The Nominating and Corporate Governance Committee of the Board will make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose its decision and the underlying rationale in a press release, a filing with the Securities and Exchange Commission (the “SEC”) or other broadly disseminated means of communication within 90 days from the date of the certification of the election results.

Revocation of Proxy

If you are the owner of record as of the close of business on the Record Date, you can revoke your proxy at any time before its exercise by:

 

   

sending a written notice to CONSOL at CNX Center, 1000 CONSOL Energy Drive, Canonsburg, PA 15317, attention: Corporate Secretary, bearing a date later than the date of the proxy that is received prior to the Annual Meeting, stating that you revoke your proxy;

 

   

submitting your voting instructions again by telephone or over the internet;

 

   

signing another valid proxy card bearing a later date than the proxy initially received and mailing it so that it is received by the Corporation prior to the Annual Meeting; or

 

   

attending the Annual Meeting and voting in person.

If you hold your shares through a bank, broker or other nominee, you must follow the instructions found on your voting instruction card, or contact your bank, broker or other nominee in order to revoke your previously delivered proxy.

 

6


Table of Contents

If a proxy is properly executed and is not revoked by the shareholder, the shares it represents will be voted at the Annual Meeting in accordance with the instructions provided by the shareholder. If a proxy card is signed and returned without specifying choices, the shares will be voted in accordance with the recommendations of the Board. Attendance at the Annual Meeting without a request to revoke a proxy will not by itself revoke a previously executed and delivered proxy.

Proxy Solicitation

All costs relating to the solicitation of proxies will be borne by CONSOL. Georgeson Inc. has been retained by CONSOL to aid in the solicitation of proxies at an estimated cost of $8,500 plus reimbursement of out-of-pocket expenses. Proxies may also be solicited by officers, directors and employees personally, by mail, or by telephone, facsimile transmission or other electronic means. Upon request, CONSOL will pay brokers and other persons holding shares of common stock in their names or in the names of their nominees for their reasonable expenses in sending soliciting material to, and seeking instructions from, their principals.

Secrecy in Voting

As a matter of policy, proxies, ballots and voting tabulations that identify individual shareholders are held confidential by CONSOL. Such documents are available for examination only by the inspectors of election and certain employees who assist in the tabulation of votes. The vote of any individual shareholder will not be disclosed except as may be necessary to meet applicable legal requirements.

Attendance at the Meeting

Subject to space availability, all shareholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Because seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration will begin at 9:00 a.m. Shareholders who attend may be asked to present valid picture identification, such as a driver’s license or passport, and may be issued a ticket for admission to the meeting. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. Please also note that if you hold your shares in “street name” (that is, through a bank, broker or other nominee), a copy of a brokerage statement reflecting your stock ownership as of the Record Date must be provided during check-in at the registration desk at the Annual Meeting. If you require directions to the Annual Meeting, please contact CONSOL’s Investor Relations Office at (724) 485-4000.

CONSOL will provide to any shareholder, without charge and upon the written request of the shareholder, a copy (without exhibits, unless otherwise requested) of CONSOL’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”) as filed with the SEC. Any such request should be directed to CONSOL Energy Inc., Investor Relations Department, 1000 CONSOL Energy Drive, Canonsburg, PA 15317.

BOARD OF DIRECTORS AND COMPENSATION INFORMATION

BOARD OF DIRECTORS AND ITS COMMITTEES

Board of Directors

The business and affairs of CONSOL are managed under the direction of our Board. We do not have a policy regarding directors’ attendance at our annual meetings of shareholders; however, all directors are encouraged to attend. All of then-currently serving members of our Board attended the 2014 annual meeting.

Bo ard Leadership Structure

Mr. Harvey, our former Chief Executive Officer, serves as our non-employee Chairman of the Board. He and Mr. DeIuliis, our current President and Chief Executive Officer, provide the Board and the Corporation with the skills, leadership and direction that CONSOL needs as it continues to execute on its strategic business plan. Mr. Harvey assumed the position of Executive Chairman at the conclusion of last year’s annual meeting held on

 

7


Table of Contents

May 7, 2014 and although he retired from serving as an executive of CONSOL in January 2015, he is continuing as Chairman of the Board. He served as the Chief Executive Officer and a director of CONSOL since January 1998. He also served as President of the Corporation from January 1998 until February 23, 2011. With more than 35 years of natural resources industry experience, Mr. Harvey is especially qualified to understand the risks and leadership challenges facing a diversified energy company like CONSOL. Mr. Harvey also brings substantial corporate governance expertise to the CONSOL Board, which he has acquired through his years of service on multiple public company boards.

With the combined depth of experiences of Messrs. Harvey and DeIuliis at the helms of our Board and the Corporation, our leadership structure promotes decisive, thoughtful and well-reasoned leadership at a time when CONSOL is and has engaged in a series of significant transactions including, without limitation, the sale of five coal mines to Murray Energy Corporation for $3.5 billion in December 2013 (the “Murray Transaction”); the acquisition of 100,000 Marcellus Shale acres; through our joint venture arrangement with Noble Energy, the successful launch of CONE Midstream Partners LP, a Master Limited Partnership (“MLP”) in 2014 which will own, operate, develop and acquire natural gas gathering and other midstream energy assets to service rapidly growing production in the Marcellus Shale in Pennsylvania and West Virginia; plans to pursue the initial public offerings of a thermal coal MLP and metallurgical coal subsidiary2; and on-going sales of non-strategic assets. Our Board’s and Corporation’s leadership structure ensures clear accountability and enhances the Corporation’s ability to communicate a clear and consistent message and strategy to shareholders, employees, customers and suppliers.

The Board also has determined that it is appropriate and necessary to have a Lead Independent Director, defined as an independent director who has served for at least one year with the Corporation. CONSOL’s corporate governance guidelines state that the Lead Independent Director has the following duties and authority:

 

   

To act as a liaison between the Chairman and the independent directors;

 

   

To preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;

 

   

To review and approve with the Chairman the schedule of meetings, meeting agendas and types of information to be provided for each Board meeting and to review with the Chairman whether there are particular risks which the Board should focus upon at such meetings;

 

   

To direct the Chief Executive Officer or Corporate Secretary to call a special meeting of the independent directors;

 

   

To consult directly with major stockholders, when requested and appropriate to do so; and

 

   

To perform such other duties as may from time to time be delegated to the Lead Independent Director by the Board.

The director appointed as Lead Independent Director will be appointed on an annual basis by at least a majority of the remaining directors. The Board appointed Mr. Baxter to this position in June 2010 and has re-appointed him each year thereafter. With Mr. Baxter’s service as a long-standing member of the CONSOL Board and as former chairman of the board of directors of CNX Gas, the Board determined that he was ideally suited for the position of Lead Independent Director.

Our Board is composed of more than a majority of independent directors. In addition, as indicated below, each of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, described below in “Committees of the Board of Directors,” is composed entirely of independent directors, including the chairperson of each respective committee. We believe that the number of independent directors that comprise our Board, along with the independent oversight of the Board provided by our Lead Independent Director, benefits the Corporation and our shareholders.

 

2  Registration statements relating to the securities of the thermal coal MLP and the metallurgical coal subsidiary that would be sold in the offerings have not been filed with the Securities and Exchange Commission or become effective. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities.

 

8


Table of Contents

Board’s Role in Risk Management

Our management team is responsible for the management and assessment of risk at the Corporation and communicating those risks to our Board. Through regular presentations to the Board and the appropriate committees (as determined by the subject matter of the particular risk), management identifies and discusses the risks affecting the Corporation and our business. In 2014, our management team performed a comprehensive risk analysis that included a review of the material risks that could affect the Corporation and communicated the results of the analysis to the full Board.

Under our Corporate Governance Guidelines, the Board is charged with assessing major risks facing the Corporation and reviewing options for their mitigation with the assistance of the various committees. Even when a risk has been delegated to a particular committee, the Board as a whole continues to monitor such risk through its receipt and review of reports provided by the respective committee chairpersons at each regularly-scheduled Board meeting.

The Audit Committee assists the Board in its general oversight of, among other things, the Corporation’s policies, guidelines and related practices regarding risk assessment and risk management, including the risk of fraud. As part of this endeavor, the Audit Committee reviews and assesses the Corporation’s major financial, legal, regulatory, environmental and similar risk exposures and the steps that management has taken to monitor and control such exposures. The Audit Committee also reviews and assesses the quality and integrity of our public reporting, compliance with legal and regulatory requirements, the performance and independence of our independent auditors, the performance of our internal audit department, the effectiveness of disclosure controls and procedures, and the adequacy and effectiveness of our risk management policies and related practices.

Our Finance Committee monitors and evaluates risks affecting the Corporation, specifically through its review of the Corporation’s financial plans, strategic plans, debt and investments, as well as ensuring the Corporation’s compliance with debt covenants.

Our Health, Safety and Environmental Committee addresses various risks associated with health, safety and the environment and reviews (i) any material compliance issues with health, safety and environmental laws, (ii) any material pending or threatened administrative, regulatory or judicial proceedings regarding health, safety or environmental matters, and (iii) management’s response to the foregoing legal matters.

Our Nominating and Corporate Governance Committee addresses risks associated with our management structure by reviewing, among other matters, the qualifications and backgrounds of our directors on an annual basis to ensure that our Board is composed of capable individuals who provide appropriate oversight and insight to our executive management team in light of the Corporation’s business.

Finally, our Compensation Committee reviews and comments on our succession planning and assesses whether our compensation policies and practices incentivize excessive risk-taking. See “Compensation Policies and Practices As They Relate To CONSOL’s Risk Management” on page 47 for a discussion of the Compensation Committee’s findings and conclusions with respect to the Corporation’s compensation policies and practices.

Committees of the Board of Directors

Our Board has five standing committees: Audit, Compensation, Nominating and Corporate Governance, Finance and Health, Safety and Environmental. Actions taken by our committees are reported to the full Board. In January 2015, the Board determined that all members of each of the Audit, Compensation and Nominating and Corporate Governance Committees are independent under the current listing standards of the New York Stock Exchange (“NYSE”) and other applicable regulatory requirements. See “Determination of Director Independence” on page 27 for additional information regarding the Board’s independence determinations with respect to its members.

Audit Committee

Our Audit Committee, which currently consists of three directors, provides assistance to our Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, financial reporting, internal control

 

9


Table of Contents

and compliance functions of the Corporation and its subsidiaries. Our Audit Committee employs an independent registered public accounting firm to audit the financial statements of CONSOL and its subsidiaries and perform other assigned duties. Further, our Audit Committee provides general oversight with respect to the accounting principles employed in financial reporting and the adequacy of CONSOL’s internal controls. In discharging its responsibilities, our Audit Committee may rely on the reports, findings and representations of the Corporation’s auditors, legal counsel, and responsible officers. Our Board has determined that all members of the Audit Committee are financially literate within the meaning of SEC rules and under the current listing standards of the NYSE. Our Board has also determined that Messrs. Gupta, Mills and Baxter each qualify as an “audit committee financial expert.” A copy of the audit committee’s report for the 2014 fiscal year is set forth in this Proxy Statement.

Compensation Committee

Our Compensation Committee, which currently consists of six directors, establishes executive compensation policies consistent with the Corporation’s objectives and shareholder interests. Our Compensation Committee also reviews the performance of our executive officers and establishes, adjusts and awards compensation, including incentive-based compensation, as more fully discussed below. In addition, our Compensation Committee generally is responsible for:

 

   

establishing and periodically reviewing our executive compensation philosophy and the adequacy of compensation plans and programs for our directors, executive officers and certain other employees;

 

   

overseeing our compensation plans, including the establishment of performance goals under the Corporation’s incentive compensation arrangements, and reviewing performance against those goals in determining incentive award payouts;

 

   

reviewing and monitoring our management development and succession plans and activities;

 

   

overseeing our executive employment contracts, special executive retirement benefits, executive severance, executive change in control arrangements and/or similar plans;

 

   

reviewing and recommending to our Board the compensation of our non-employee directors for their service as directors on our Board; and

 

   

overseeing the outside compensation consultant engaged by the Compensation Committee.

Our Compensation Committee’s charter generally permits it to delegate its authority, duties and responsibilities or functions to one or more members of the Compensation Committee or to the Corporation’s officers, except where otherwise prohibited by law or applicable listing standards. The terms of our Equity Incentive Plan (the “Plan”) also permit our Compensation Committee to delegate its power and authority under the Plan to our officers. In January 2014, the Compensation Committee authorized our Chief Executive Officer to grant up to 650,000 shares of our common stock (in the form of equity incentive awards) to our non-executive employees in compliance with the terms and conditions of such delegation, the Plan and applicable laws and regulations.

Our Compensation Committee periodically reviews the compensation paid to our non-employee directors and the principles upon which their compensation is determined. The Compensation Committee also periodically reports to the Board on how our non-employee director compensation practices compare with those of other similarly situated public corporations and, if the Compensation Committee deems it appropriate, recommends changes to our director compensation practices to our Board for approval.

In October 2013, the Compensation Committee retained Towers Watson to assist it with its evaluation of our compensation programs for executive officers and directors. The scope of the consultant’s work for the Compensation Committee included, among other matters:

 

   

the development and review of a relevant peer group of companies;

 

10


Table of Contents
   

the benchmarking of components of our compensation programs with those of our peer group;

 

   

assisting our Compensation Committee with the development of performance goals underlying the short- and long-term incentive programs; and

 

   

assessing the overall competitiveness of our executive compensation program.

Before retaining Towers Watson, the Compensation Committee considered the factors set forth in the NYSE rules regarding the independence of advisors from management and other relevant factors. After such review, the Committee determined that no conflict of interest arose out of the retention of the Towers Watson consulting team. Towers Watson did not provide any services to the Corporation in 2014, other than to the Compensation Committee.

For additional information regarding the Compensation Committee’s processes and procedures for reviewing and determining executive officer compensation, see “Compensation Discussion and Analysis” on page 30.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee, which currently consists of four directors, monitors our corporate governance system, assesses Board membership needs, makes recommendations to the Board regarding potential director candidates for election at annual meetings of shareholders or in the event of any director vacancy, and performs any other functions or duties deemed appropriate by the Board. Each of the director nominees was recommended by our Nominating and Corporate Governance Committee to our Board for nomination for election at the Annual Meeting.

In making director recommendations, the Nominating and Corporate Governance Committee will consider for nomination candidates whose names are submitted by shareholders. In 2014, Mr. Lanham and Mr. Thorndike were recommended for election to our Board by one of our shareholders. After the Board and management conducted interviews with them, considered their qualifications to serve on the Board, and completed thorough conflicts and background checks, the Nominating and Corporate Governance Committee recommended their election to the Board. The Board elected Messrs. Lanham and Thorndike to the Board on October 2, 2014.

Shareholders wishing to submit names of candidates for election as directors should submit the names of candidates to the Corporate Secretary, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317. See “Additional Matters” on page 91 for more information on making director nominations. In assessing the Board’s membership needs, the Nominating and Corporate Governance Committee generally seeks to maintain a Board that is comprised of individuals who are competent in the following areas:

 

   

general industry knowledge;

 

   

accounting and finance;

 

   

ability to make sound business decisions;

 

   

management;

 

   

leadership;

 

   

knowledge of international markets;

 

   

business strategy;

 

   

crisis management;

 

   

corporate governance; and

 

   

risk management.

 

11


Table of Contents

Nominees and directors must have or have had experience in positions with a high degree of responsibility and leadership experience in companies or institutions with which they are or have been affiliated. Nominees and directors are selected based upon contributions that they can make to CONSOL. The Nominating and Corporate Governance Committee’s process for identifying and evaluating director nominees is as follows:

 

   

determine what types of backgrounds, skills, and attributes of Board members are needed to help strengthen and balance the Board, taking into account the competencies described above;

 

   

at appropriate times, actively seek individuals qualified to become new members of the Board; and

 

   

evaluate and recommend to our Board the slate of director nominees to be elected by the shareholders at CONSOL’s next annual meeting of shareholders.

CONSOL does not maintain a separate policy regarding the diversity of its Board members. However, consistent with its charter, the Nominating and Corporate Governance Committee, and ultimately the Board, seeks director nominees with diverse personal and professional backgrounds, experience and perspectives that, when combined, provide a diverse portfolio of experience and knowledge that will well serve the Corporation’s governance and strategic needs.

On December 9, 2014, upon recommendation of the Nominating and Corporate Governance Committee, the Board amended the Bylaws to include an exclusive forum provision providing that, unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine, shall be a state court located within the State of Delaware.

The Board adopted this provision to serve the Corporation’s best interests and benefit shareholders by minimizing the expense of litigation in multiple jurisdictions and directing claims to courts that have expertise in Delaware corporate law. The Corporation’s exclusive forum selection provision seeks to address the issues that arise when plaintiffs or their lawyers forum-shop, such as the growing trend of companies facing the filing of duplicative lawsuits in multiple jurisdictions. In this regard, the provision may allow the Corporation and our shareholders to avoid costly and duplicative litigation and the risk of inconsistent outcomes when multiple similar cases proceed in different courts. CONSOL is incorporated in the State of Delaware. Delaware courts, and in particular, the Delaware Court of Chancery, are widely regarded as having significant expertise in corporate law issues. Thus, the Board believes that selecting an exclusive forum for certain types of disputes is in the best interests of CONSOL and our shareholders.

Furthermore, the Board narrowly tailored the forum selection provision to apply only to certain suits. As a result, the provision does not affect the ability of shareholders to bring many other types of lawsuits. The Board also retains the ability to consent to an alternative forum on a case-by-case basis.

Finance Committee

Our Finance Committee, which currently consists of six directors, monitors and provides advice and counsel to our Board and management regarding our asset mix, potential mergers and acquisitions, capital structure and policies, financial position and policies, financing activities, compliance with debt covenants, dividend policies and material investments and contracts.

Health, Safety and Environmental Committee

Our Health, Safety and Environmental Committee, which currently consists of six directors, provides oversight of the Corporation’s policies and management systems with respect to health, safety and environmental matters. Our Health, Safety and Environmental Committee generally is responsible for:

 

   

overseeing management’s monitoring and enforcement of the Corporation’s policies to protect the health and safety of employees, contractors, customers, the public and the environment;

 

12


Table of Contents
   

reviewing with management the quality of the Corporation’s procedures for identifying, assessing, monitoring and managing the principal risks facing our business associated with health, safety and environmental protection and reporting the Committee’s findings to the Board, as deemed necessary or appropriate;

 

   

reviewing the Corporation’s strategy, including objectives and policies, relative to the protection of the safety and health of employees, contractors, customers and the public, and environmental protection;

 

   

reviewing (i) any material compliance issues with health, safety and environmental laws, (ii) any material pending or threatened administrative, regulatory or judicial proceedings regarding health, safety or environmental matters, and (iii) management’s response to the foregoing matters; and

 

   

reviewing any significant health, safety and environmental public policy and legislative, political and social issues and trends that may materially affect the business operations, financial performance or public image of the Corporation or the industry, and management’s response to such matters.

Corporate Governance Web Page and Available Documents

We maintain a corporate governance page on our website at www.consolenergy.com. The following documents are currently included on the corporate governance page of our website:

 

   

Amended and Restated Bylaws;

 

   

CONSOL Corporate Governance Guidelines;

 

   

CONSOL Code of Director Business Conduct and Ethics;

 

   

CONSOL Code of Employee Business Conduct and Ethics, which covers all employees of CONSOL, including executive employees;

 

   

Charters of the Audit, Nominating and Corporate Governance, Compensation, Finance and Health, Safety and Environmental Committees;

 

   

Internal Audit Charter;

 

   

Related Party Policy; and

 

   

Corporate Responsibility Report.

We also will provide a printed copy of any of these documents free of charge upon request to shareholders who contact the Investor Relations department in writing at CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, Pennsylvania 15317. These documents address important principles and corporate governance processes, including a retirement age policy that generally provides that no member of the Board who has attained the age of 75 shall be nominated for re-election or re-appointment to the Board at the next Annual Meeting of Shareholders.

Membership and Meetings of the Board of Directors and its Committees

In 2014, all of the incumbent directors attended no fewer than 97% of the aggregate of:

 

   

the total number of meetings held by our Board (during the period for which he or she was a director); and

 

   

the total number of meetings held by all Board committees on which he or she served (during the period for which he or she served).

 

13


Table of Contents

Current committee membership and the number of meetings held during 2014 are shown in the following table:

 

    Board of
Directors
  Audit
Committee
  Compensation
Committee
  Nominating
and Corporate
Governance
Committee
  Finance
Committee
  Health, Safety and
Environmental
Committee

J. Brett Harvey

  Chair   -   -   -   -   -

Philip W. Baxter

  Lead Indep. Dir.   Member   Member   Member   -   -

James E. Altmeyer, Sr.

  Member   -   -   -   Member   Chair

Alvin R. Carpenter

  Member   -   Chair   -   Member   -

Nicholas J. DeIuliis

  Member   -   -   -   -   -

William E. Davis

  Member   -   -   Chair   -   Member

Raj K. Gupta

  Member   Chair   -   -   -   Member

David C. Hardesty, Jr.

  Member   -   -   -   Member   Member

Maureen E. Lally-Green

  Member   -   -   Member   -   Member

Gregory A Lanham(2)

  Member   -   Member   -   -   Member

John T. Mills

  Member   Member   Member   -   -   -

William P. Powell

  Member   -   -   Member   Member   -

William N. Thorndike, Jr.(2)

  Member   -   Member   -   Member   -

Joseph T. Williams

  Member   -   Member   -   Chair   -

No. of 2014 Meetings

  8(1)   10   6   4   5   4

 

(1) Of the 8 Board meetings, 5 were “Regularly Scheduled Meetings” and 3 were “Special Meetings.”

 

(2) Mr. Lanham and Mr. Thorndike joined the Board on October 2, 2014.

During 2014, the non-management directors held 7 executive sessions of the Board. The presiding director for the executive sessions was Mr. Baxter, our Lead Independent Director.

Communication with the Board of Directors

Shareholders and other interested persons who wish to communicate with the Board may do so by writing to the Board at Corporate Secretary, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, or by sending an e-mail to directors@consolenergy.com. The Corporate Secretary will relay all such communications to the Board in their entirety or to individual directors (as appropriate) at the next regularly scheduled Board meeting (or earlier as necessary) except for spam, junk mail, mass mailings, solicitations, resumes, job inquiries or other matters unrelated to the Corporation. Communications that are intended specifically for the Chairman or the independent directors should be sent to the street address or e-mail address noted above, to the attention of the Chairman or the independent directors, as intended. Information concerning how to communicate with the Board is also included on CONSOL’s website at www.consolenergy.com.

 

14


Table of Contents

DIRECTOR COMPENSATION TABLE – 2014

The following table sets forth the compensation of our directors for the 2014 fiscal year:

 

Name(1)   Fees Earned or
Paid in Cash
    Stock Awards(2)     Option Awards(3)     All Other
Compensation(4)
    Total  

James E. Altmeyer, Sr.

  $     130,000      $     150,000        -        -      $     280,000   

Philip W. Baxter

  $ 157,500      $ 150,000        -        -      $ 307,500   

Alvin R. Carpenter

  $ 140,000      $ 150,000        -        -      $ 290,000   

William E. Davis

  $ 130,000      $ 150,000 (5)      -        -      $ 280,000   

Raj K. Gupta

  $ 150,000      $ 150,000        -        -      $ 300,000   

David C. Hardesty, Jr.

  $ 120,000      $ 150,000 (5)      -        -      $ 270,000   

Maureen E. Lally-Green

  $ 120,000      $ 150,000 (5)      -        -      $ 270,000   

Gregory A. Lanham

  $ 29,783      $ 87,500 (6)      -        -      $ 117,283   

John T. Mills

  $ 127,500      $ 150,000 (5)      -        -      $ 277,500   

William P. Powell

  $ 120,000      $ 150,000 (5)      -        -      $ 270,000   

William N. Thorndike, Jr.

  $ 29,783      $ 87,500 (6)      -        -      $ 117,283   

Joseph T. Williams

  $ 130,000      $ 150,000        -        -      $ 280,000   

 

(1) Messrs. Harvey and DeIuliis are members of the Board of Directors of CONSOL. During 2014, Messrs. Harvey and DeIuliis served as executive officers of CONSOL, and as a result their compensation is reported in the Summary Compensation Table and other sections of this Proxy Statement. In 2014, they did not receive any additional compensation in connection with their service on our Board.

 

(2) The values set forth in this column are based on the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation” (“FASB ASC Topic 718”). The grant date fair value is computed based upon the closing price of CONSOL’s stock on the date of grant. A discussion of the relevant assumptions made in the valuation of these awards is provided in Note 19 of the 2014 Annual Report. The values reflect the awards’ fair market value at the date of grant, and do not correspond to the actual value that will be recognized by the directors.

As of December 31, 2014, the number of RSUs held by our current non-employee directors was: (i) 3,434 for Messrs. Altmeyer, Carpenter, Gupta, Williams, Baxter, Davis, Hardesty, Mills, and Powell and Ms. Lally-Green and (ii) 2,381 for Messrs. Lanham and Thorndike. In addition, as of December 31, 2014: (i) Messrs. Hardesty and Powell each had 20,535 deferred RSUs; (ii) Mr. Williams had 3,431 deferred RSUs; (iii) Mr. Gupta had 2,304 deferred RSUs; (iv) Mr. Mills had 17,354 deferred RSUs; (v) Mr. Davis had 16,077 deferred RSUs; (vi) Ms. Lally-Green had 3,305 deferred RSUs; (vii) Mr. Lanham had 1,828 deferred stock units; (viii) Mr. Thorndike had 1,808 deferred stock units and (ix) Mr. Gupta had 2,453 deferred stock units outstanding.

 

(3) No option awards were granted to directors in 2014. As of December 31, 2014, the number of shares underlying option awards held by our non-employee directors was: (i) 4,962 for Mr. Davis; (ii) 7,962 for Mr. Powell; (iii) 988 for Mr. Hardesty; (iv) 2,962 for each of Mr. Williams, Mr. Gupta, and Mr. Mills and (v) 3,643 for Mr. Altmeyer.

 

(4) The non-employee directors are permitted to use a de minimis number of tickets purchased by CONSOL to attend sporting or other events when such tickets are not otherwise being used for business purposes. In connection with the initial public offering of CONE Midstream Partners, LP (CNNX) common units in September 2014, the current directors and a limited group of officers and employees of the Corporation were offered the opportunity to purchase CNNX units through a Directed Unit Program (the “DUP”). There were no incremental costs to the Corporation associated with the DUP.

 

(5) Each of Messrs. Davis, Hardesty, Mills, Powell and Ms. Lally-Green elected to defer until termination of service, 100% of their RSU award granted on May 7, 2014 (or 3,420 RSUs). Upon termination of service, all of the shares underlying these RSU awards will be delivered in a one-time distribution.

 

(6) Upon their appointment to the Board on October 2, 2014, Mr. Lanham elected to defer 100% of his prorated RSU award for five years and Mr. Thorndike elected to defer 100% of his prorated RSU award until the termination of his service. Both Messrs. Lanham and Thorndike will receive all of the shares underlying these deferred RSU awards in a one-time lump sum distribution.

 

15


Table of Contents

UNDERSTANDING OUR DIRECTOR COMPENSATION TABLE

We generally use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our Board. Each of our non-employee directors is entitled to receive annual fees for their service, any portion of which may be deferred at such director’s election. In lieu of all or any portion of the annual retainer otherwise payable to our non-employee directors, directors may elect to receive deferred stock units, which carry dividend equivalent rights. We also reimburse directors for customary travel and related expenses for their attendance at Board or committee meetings. A description of the fees and awards paid to our non-employee directors is set forth in greater detail below.

CONSOL Non-Employee Director Annual Fees and Awards

Our non-employee director compensation program is set forth in the following table:

 

Element of Annual Compensation   Dollar Value
of Board
Compensation
(January 1,
2014 -
December 31,
2014)
 

Board Retainer

  $ 120,000   

Committee Chair Retainer (excluding Audit Committee and Compensation Committee Chair Retainer)

  $ 10,000   

Audit Committee Chair Retainer

  $ 30,000   

Compensation Committee Chair Retainer

  $ 20,000   

Audit Committee Member Retainer (excluding Audit Committee Chair Retainer)

  $ 7,500   

Lead Independent Director Retainer

  $ 30,000   

Annual Equity Award (RSUs)

  $         150,000   

The compensation structure adopted by our Board was the result of a competitive assessment of board compensation provided to the Compensation Committee by its compensation consultants in December 2013.

CONSOL Non-Employee Director Stock Options

Prior to October 2006, our non-employee directors received nonqualified stock options to acquire shares of the Corporation’s common stock. All of these options have fully vested. Subject to the provisions of the particular nonqualified stock option agreement and the Plan, the holders of these options may exercise all or any part of their options at any time prior to the tenth anniversary of the grant date, which is the expiration date. If a director’s service is terminated for cause, all options held by such director, if any, will be forfeited as of the termination date.

CONSOL Non-Employee Director RSUs

Each RSU represents the right to receive one share of common stock following the vesting date of that unit. Non-employee director RSU awards vest in full one year from the grant date. A director is not entitled to shareholder rights, including voting rights and/or dividend rights with respect to the shares underlying a RSU award, until such shares become vested and are issued to the director. Should a regular cash dividend be declared on the Corporation’s common stock at a time before the shares subject to a RSU award become vested and are issued, then the holder of the RSU will be entitled to dividend equivalent rights equal to the cash dividend declared on the shares. Dividend equivalent rights are converted into shares underlying the RSUs in accordance with a pre-established formula. The additional shares resulting from this calculation will be subject to the same terms and conditions as the unissued shares of common stock to which they relate under the award.

The non-employee director RSU award agreements provide that in the event of death or disability or upon the completion of a “change in control” (as defined in our Plan), all shares subject to such award will vest automatically

 

16


Table of Contents

and be delivered to the director immediately, or as soon as administratively practical thereafter (but in no event later than the 15th day of the third month following that date). If a director’s service is terminated for “cause” (as defined in our Plan) or ceases to provide services to the Corporation for any reason other than death, disability or in connection with a change in control, such director’s award will be cancelled with respect to any unvested shares, and the number of RSUs will be reduced accordingly. The director will then cease to have any rights or entitlements to receive any shares of common stock under those cancelled units.

As a condition to a director’s right to receive shares subject to a RSU award, the director must agree to abide by the terms and conditions of the proprietary information covenant included in the award agreement and must return any materials belonging to the Corporation upon termination of service on the Board. See “Equity Incentive Plan Definitions” on page 74 for definitions under our Plan.

CONSOL Non-Employee Directors Deferred Fee Plan (adopted 2004)

The CONSOL Directors Deferred Fee Plan was adopted on July 20, 2004 to allow non-employee directors of the Corporation to defer payment of all or any portion of their annual cash Board retainer and director meeting fees. Participation in the plan is at the election of the particular director. Upon the Corporation’s receipt of a deferral agreement from a director, an account is established by the Corporation on behalf of such director and is credited with all fees selected by the participating director. Prior to February 21, 2006, the account of each participant in the Directors Deferred Fee Plan was credited, on a quarterly basis, with interest based on the interest rate in effect on the last day of the applicable quarter. On February 21, 2006, our Board approved an amendment to the CONSOL Directors Deferred Fee Plan, which provides that a participant’s account will be adjusted by an amount equal to the amount that would have been earned (or lost) if amounts deferred under the plan had instead been invested in hypothetical investments designated by the participant based on a list of hypothetical investments provided by the plan administrator from time to time or, in the event that a participant fails to designate such hypothetical investments, the participant’s account shall earn interest as provided in the plan. Earnings are credited to the participant’s account on a quarterly basis. The amount payable to a director participant will be paid in cash as soon as administratively practicable after the earlier of: (i) the director’s termination of service as a director or (ii) the date selected by such director, which date must be at least two years after the end of the plan year for which fees are deferred. The CONSOL Directors Deferred Fee Plan is an unfunded and unsecured liability of the Corporation and benefits will be paid from our general assets. Accordingly, participants are general unsecured creditors of the Corporation with respect to any benefits to be received by them under the plan. At this time, Messrs. Gupta and Williams are the only participants in the Directors Deferred Fee Plan.

CONSOL Non-Employee Director Deferred Stock Units

Under the terms of our Plan, non-employee directors may elect to receive deferred stock units in lieu of all or any portion of their retainer fees otherwise payable to such director in cash, or to defer receipt of shares to be paid to them in the form of deferred stock units. The deferred stock units have dividend equivalent rights. Deferred stock units that have vested are paid following the earlier of: (i) the director’s separation from service or (ii) the date selected by the director on his or her payment date election form previously filed with the Corporation. Upon a change in control, unvested deferred stock units will accelerate and vest.

A director is not entitled to shareholder rights, including voting rights and actual dividends, with respect to the shares subject to an award until the director becomes the record holder of the shares following their actual issuance. Should a regular cash dividend be declared on the Corporation’s common stock at a time when the director holds deferred stock units, he or she will be entitled to dividend equivalent rights equal to the cash dividends declared on the shares. Dividend equivalent rights are converted into additional deferred stock units based on a pre-established formula. The additional deferred stock units resulting from this calculation will be subject to the same terms and conditions as the deferred stock units subject to the award.

If a director ceases to be a director on account of death, disability or retirement at normal retirement age for directors, all unvested deferred stock units granted to such director will automatically vest and become non-forfeitable. If the director’s service is terminated for “cause” or ceases to provide services for any reason other than death, disability or retirement at a normal age, all unvested deferred stock units and any rights to the underlying

 

17


Table of Contents

shares will be immediately forfeited for no consideration. In addition, in the event of a termination for “cause” (as defined in our Plan) or a breach of the proprietary information covenant contained in the deferred stock unit agreement, the director will also forfeit all of his or her right, title and interest in and to any shares that have vested under his or her award. See “Equity Incentive Plan Definitions” on page 74 for definitions of cause and disability under our Plan. Deferred stock units are structured to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). At this time, Messrs. Lanham and Thorndike are the only non-employee directors who have elected to receive deferred stock units in lieu of their retainer fees.

CONSOL Stock Ownership Guidelines for Directors

Our Board has adopted stock ownership guidelines for our directors to further align their interests with those of our shareholders and to ensure that they maintain an appropriate financial stake in CONSOL. The stock ownership guidelines provide, among other things, that our directors hold CONSOL common stock (not including shares issuable upon the exercise of options) with a value equal to three times the annual Board cash retainer on or before the fifth anniversary of becoming a Board member. As of February 27, 2015, each Board member was in compliance with our stock ownership guidelines or is expected to be within the five-year period.

 

18


Table of Contents

BENEFICIAL OWNERSHIP OF SECURITIES

The following table sets forth information with respect to the beneficial ownership of the Corporation’s common stock by:

 

   

beneficial owners of more than five percent of CONSOL’s common stock based upon information filed with the SEC; and

 

   

each director and each nominee for director, each named executive and all directors and executive officers of the Corporation as a group, as of March 12, 2015.

Amounts shown below include options that are currently exercisable or that may become exercisable within 60 days of March 12, 2015 (i.e., May 11, 2015) and the shares underlying deferred stock units and the shares underlying RSUs that will be settled before May 11, 2015. Unless otherwise indicated, the named person has the sole voting and dispositive powers with respect to the shares of CONSOL common stock set forth opposite such person’s name.

 

Name and Address of Beneficial Owner

   Amount and Nature of
    Beneficial Ownership(1)    
         Percent of Class      

Southeastern Asset Management, Inc.(2)
6410 Poplar Ave., Suite 900
Memphis, TN 38119

  

 

32,758,559

  

  

 

14.2%

  

T. Rowe Price Associates, Inc.(3)
100 E. Pratt Street
Baltimore, MD 21202

  

 

24,179,493

  

  

 

10.5%

  

BlackRock, Inc.(4)
55 East 52nd Street
New York, NY 10022

  

 

19,047,146

  

  

 

8.3%

  

The Vanguard Group, Inc.(5)
100 Vanguard Boulevard
Malvern, PA 19355

  

 

17,636,663

  

  

 

7.6%

  

Greenlight Capital, Inc.(6)
140 East 45
th Street, 24th Floor
New York, NY 10017

  

 

13,256,028

  

  

 

5.8%

  

Capital World Investors(7)
333 South Hope Street
Los Angeles, CA 90071

  

 

12,335,000

  

  

 

5.3%

  

State Street Corporation(8)
One Lincoln Street
Boston, MA 02111

  

 

11,755,211

  

  

 

5.1%

  

J. Brett Harvey(9)(10)

     2,200,599         *       

Nicholas J. DeIuliis(9)(11)

     643,807         *       

Stephen W. Johnson(9)

     213,133         *       

James E. Altmeyer, Sr.(9)(13)

     42,192         *       

William E. Davis(9)

     34,226         *       

Raj K. Gupta(9)(12)

     47,685         *       

John T. Mills(9)

     44,396         *       

William P. Powell(9)

     37,269         *       

Alvin R. Carpenter

     40,035         *       

James C. Grech(9)

     34,801         *       

Philip W. Baxter

     30,316         *       

David C. Hardesty, Jr(9)

     27,160         *       

David M. Khani(9)

     23,285         *       

Gregory A. Lanham(14)

     -         *       

William N. Thorndike, Jr.(14)

     -         *       

Timothy C. Dugan

     6,466         *       

Joseph T. Williams(9)

     40,366         *       

Maureen E. Lally-Green

     8,045         *       

All directors and current executive officers as a group

     3,552,585         1.6%   

 

19


Table of Contents

 

* Indicates less than one percent (1%) ownership.

 

(1) As of March 12, 2015, there were 228,652,199 shares of CONSOL common stock outstanding.

 

(2) Based on a Schedule 13G/A filed by Southeastern Asset Management, Inc., an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, on February 10, 2015. Southeastern Asset Management, Inc. is deemed to be the beneficial owner of and has sole voting power with respect to 12,727,518 shares, shared or no voting power with respect to 20,031,041 shares, sole dispositive power with respect to 15,392,006 shares and shared voting and dispositive power with respect to 17,366,553 shares. The Schedule 13G/A indicates that Longleaf Partners Fund, an investment company registered under Section 8 of the Investment Company Act, shares voting and dispositive power with Southeastern Asset Management, Inc. with respect to 11,692,000 shares.

 

(3) Based on a Schedule 13G/A filed by T. Rowe Price Associates, Inc., an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, on February 13, 2015. T. Rowe Price Associates, Inc. is deemed to be the beneficial owner of and have sole dispositive power with respect to 24,160,393 shares and sole voting power with respect to 6,845,343 shares. T. Rowe Price Associates, Inc. has advised the Corporation that (i) these securities are owned by various individual and institutional investors which T. Rowe Price Associates, Inc. serves as an investment adviser with power to direct investments and/or sole power to vote the securities and (ii) for the purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), T. Rowe Price Associates, Inc. is deemed to be a beneficial owner of such securities; however, T. Rowe Price Associates, Inc. expressly disclaims that it is, in fact, the beneficial owner of such securities.

 

(4) Based on a Schedule 13G/A filed by BlackRock, Inc. on January 23, 2015, BlackRock, Inc., as a parent holding company for a number of investment management subsidiaries, is deemed to have sole voting power with respect to 17,116,651 shares and be the beneficial owner of and have dispositive power with respect to all 19,047,146 shares. The following subsidiaries of BlackRock, Inc. are investment advisors which hold shares of our common stock: BlackRock Japan Co. Ltd, BlackRock Advisors, LLC, BlackRock Advisors (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management, LLC, BlackRock Investment Management (Australia) Limited, BlackRock Life Limited, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Fund Managers Ltd, BlackRock Asset Management Ireland Limited, BlackRock International Limited, BlackRock Investment Management (UK) Limited, and BlackRock Asset Management North Asia Limited.

 

(5) Based on a Schedule 13G/A filed by The Vanguard Group, Inc. on February 11, 2015. The Vanguard Group, Inc. is deemed to be the beneficial owner of and has sole voting power with respect to 393,588 shares, sole dispositive power with respect to 17,266,567 shares and shared dispositive power with respect to 370,096 shares.

 

(6) Based on a Schedule 13G filed by Greenlight Capital, Inc. (“Greenlight Inc.”), DME Advisors, LP (“DME Advisors”), DME Capital Management, LP (“DME CM”), DME Advisors GP, LLC (“DME GP” and together with Greenlight Inc., DME Advisors and DME, CM, “Greenlight”), and David Einhorn, the principal of Greenlight, reporting ownership as of December 31, 2014. Greenlight Inc. is deemed to be the beneficial owner of an aggregate of 8,167,028 shares, DME Advisors is deemed the beneficial owner of an aggregate of 1,789,400 shares, DME CM is deemed the beneficial owner of an aggregate of 3,167,400 shares, DME GP is deemed the beneficial owner of an aggregate of 4,956,800 shares, and Mr. Einhorn is deemed the beneficial owner of an aggregate of 13,256,028 shares.

 

(7) Based on a Schedule 13G/A filed by Capital World Investors with the SEC on February 13, 2015. Capital World Investors is deemed to have sole dispositive power and sole voting power with respect to 12,335,000 shares.

 

(8) Based on a Schedule 13G filed by State Street Corporation on February 12, 2015. State Street Corporation is deemed to be the beneficial owner of and has shared voting power and shared dispositive power with respect to 11,755,211 shares.

 

(9) Includes shares issuable pursuant to options that are currently exercisable (or may become exercisable on or before May 11, 2015) as follows: Mr. Harvey, 1,104,233; Mr. DeIuliis, 322,763; Mr. Johnson, 125,759; Mr. Khani, 7,487; Mr. Grech, 22,062; Mr. Altmeyer, 1,975; Mr. Davis, 2,962; Mr. Powell, 2,962; Mr. Gupta, 2,962; Mr. Williams, 2,962; Mr. Mills, 2,962; and Mr. Hardesty, 988.

 

(10) Includes 243,386 shares of common stock held in Grantor Retained Annuity Trusts. Also includes 2,000 shares of common stock held in Mr. Harvey’s wife’s Amended and Restated Revocable Trust, dated December 17, 2007, for which Mr. and Mrs. Harvey serve as trustees, and 38,514 shares of common stock held in trusts for his children, for which the co-trustees include Mrs. Harvey and the children of Mr. and Mrs. Harvey for their respective trusts.

 

(11) Includes 94,002 shares of common stock held in Grantor Retained Annuity Trusts and 601 shares held in trusts for his children.

 

(12) Includes 2,456 deferred stock units held by Mr. Gupta.

 

(13) Includes 1,600 shares of common stock held in a trust established for the benefit of Mr. Altmeyer’s spouse. Mr. Altmeyer disclaims beneficial ownership of such shares, and the inclusion of such shares shall not be an admission that the reporting person is the beneficial owner for purposes of Section 16 under the Exchange Act. Also includes 21,683 shares of common stock held in a trust established for the benefit of Mr. Altmeyer.

 

(14) Messrs. Lanham and Thorndike, joined the Board in October 2014 and currently have 2,381 RSUs each and 1,828 and 1,808 deferred stock units, respectively, which vest in October and November 2015. Accordingly, these awards were not referenced in the table.

 

20


Table of Contents

Brokerage account agreements may grant security interests in securities held at the broker to secure payment and performance obligations of the brokerage account holder in the ordinary course. Shares shown in the table for the directors and executive officers may be subject to this type of security interest.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Corporation’s directors, executive officers and persons who beneficially own more than ten percent of a class of the Corporation’s registered equity securities to file with the SEC and deliver to the Corporation initial reports of ownership and reports of changes in ownership of such registered equity securities. To our knowledge, based solely upon a review of Section 16 filings with the SEC, written representations that no other reports were required, and on CONSOL’s records, we believe that during 2014, the Corporation’s executive officers, directors and greater than ten percent shareholders complied with all applicable Section 16(a) filing requirements except for the late filing of a Form 4 by Mr. DeIuliis regarding the purchase of 40 shares as a result of the inadvertent reinvestment of a cash dividend by the administrator of his grantor retained annuity trust account on August  23, 2013.

PROPOSAL NO. 1 - ELECTION OF DIRECTORS

The eleven nominees for election as directors for 2015 are identified below. Each director who is elected will hold office until the next annual meeting and until the director’s successor is elected and qualified. All nominees are current members of the Board. If any nominee should for any reason become unable to serve, all shares represented by valid proxies will be voted for the election of such other person as the Board may designate as recommended by the Nominating and Corporate Governance Committee. Alternatively, the Board may reduce the number of directors to eliminate the vacancy.

Biographies of Nominees

The following biographies include information concerning the nominees for director, including their recent employment, positions with CONSOL, other directorships, board committee memberships and ages as of March 12, 2015.

J. BRETT HARVEY

 

Age: 64

Director Since: 1998

Occupation: Chairman

Background: J. Brett Harvey is our Chairman of the Board, a position he was appointed to on June 29, 2010. He served as CONSOL’s Executive Chairman from May 2014 through January 2015, Chief Executive Officer from January 1998 until May 2014, and as our President from January 1998 through February 2011. He has also been a director of CONSOL since January 1998. Mr. Harvey was also a director of CNX Gas, our wholly-owned subsidiary, from June 2005 until May 2014 and served as chairman of the CNX Gas Board from January 2009 to May 2014. He also served as chief executive officer of CNX Gas from January 2009 until May 2014. He is a member of the board of directors of Barrick Gold Corporation, the world’s largest gold producer (“Barrick”), where he serves on the compensation committee. He was elected lead director of Barrick in December 2013. Mr. Harvey is also a member of the board of directors of Allegheny Technologies Incorporated (“ATI”), a specialty metals producer, and serves on its nominating and corporate governance committee and personnel and compensation committee. He is a member of the National Executive Board of the Boy Scouts of America and a director and past chairman of the Laurel Highlands Council of the Boy Scouts.

 

21


Table of Contents

Qualifications: As our Chairman and former Chief Executive Officer, Mr. Harvey provides our Board with insight into the Corporation’s business and the challenges and material risks it faces. Mr. Harvey has more than 35 years of natural resources industry experience and is especially qualified to understand the risks and leadership challenges facing a diversified energy company. Mr. Harvey also brings substantial corporate governance expertise to our Board, which he acquired through his years of service on multiple public company boards, including Barrick and ATI.

NICHOLAS J. DEIULIIS

 

Age: 46

Director Since: 2014

Occupation: President and Chief Executive Officer

Background: Nicholas J. DeIuliis has been our Chief Executive Officer since May 7, 2014 and our President since February 23, 2011. Mr. DeIuliis was Executive Vice President and Chief Operating Officer of CONSOL from January 16, 2009 until February 23, 2011. He previously served in various positions at CNX Gas Corporation, including President, Chief Executive Officer and Chief Operating Officer. He is currently Chairman of the Board of CNX Gas Corporation. Additionally, he has previously held the following positions at CONSOL: Senior Vice President – Strategic Planning (November 1, 2004 to August 2005); Vice President – Strategic Planning (April 1, 2002 until November 1, 2004); Director – Corporate Strategy (October 1, 2001 to April 1, 2002); Manager – Strategic Planning (January 1, 2001 to October 1, 2001); and Supervisor – Process Engineering (April 1, 1999 to January 1, 2001). Mr. DeIuliis is also a member of the board of directors of the U.S. Chamber of Commerce, the University of Pittsburgh Cancer Institute, the Center for Sustainable Shale Development and the Allegheny Conference on Community Development. He is a registered engineer in the Commonwealth of Pennsylvania and a member of the Pennsylvania Bar. He is also a member of the Industrial & Professional Advisory Council College of Engineering at The Pennsylvania State University, and the Pittsburgh Penguins Foundation.

Qualifications: As our current President and Chief Executive Officer, Mr. DeIuliis has a unique and in-depth understanding of our business with over 20 years of experience with CONSOL. He provides our Board with direct operational insight through his leadership in the development and execution of our strategic priorities, and his understanding of our business, challenges and the material risks facing the Corporation.

PHILIP W. BAXTER

 

Age: 66 

Director Since: 1999 – 2005; and since 2009 Occupation: Lead Independent Director; Lead

Independent Director and Former President of Stan Johnson Company

  

CONSOL Committees:

•  Audit

•  Compensation

•  Nominating and Corporate Governance

Background: Philip W. Baxter rejoined the CONSOL Board in January 2009. He is currently the Lead Independent Director and serves as a member of the Audit, Compensation and Nominating and Corporate Governance Committees. Mr. Baxter previously served as a director of CONSOL (as well as Chairman of its Audit Committee and a member of its Finance Committee) from August 1999 until August 2005. Mr. Baxter also served as a director of CNX Gas from June 30, 2005 until May 28, 2010 and was the chairman of its board of directors from June 2005 until January 2009. With respect to the CNX Gas Board, he served as a member of the audit committee and the finance committee. Since January 1, 2013, Mr. Baxter has been the lead independent director of Stan Johnson Company, a nationally recognized leader in commercial real estate brokerage specializing in single-tenant properties. Previously, Mr. Baxter served as the President of Stan Johnson Company from September 2002 until his retirement on December 31, 2012. He is also a member of the board of directors of Yorktown Financial Holdings, headquartered in Tulsa, Oklahoma, where he serves on its audit committee. Mr. Baxter served as Chief Financial Officer and Executive Vice President of the Tulsa-based energy conglomerate, Mapco Inc., until March 1998, when it merged with The Williams Company. During his 18-year career at Mapco, Mr. Baxter held a number of officer level positions including Chief Information Officer and Senior Vice President of Strategic Planning. Prior to his career at Mapco, he held a number of financial positions with Williams Energy Company, a subsidiary of The Williams Company.

 

22


Table of Contents

Qualifications: Mr. Baxter brings over 40 years of business experience to our Board, including over 30 years of energy industry experience, accumulated principally in the areas of finance, strategic planning, mergers and acquisitions, technology, government affairs and human resources. Having served in various supervisory executive-level positions over the course of his career, Mr. Baxter has developed significant management and leadership skills and is well accustomed to interfacing with rating agencies, investors, analysts, auditors, outside advisors and governmental officials. He has also served as a member of our Board and the board of CNX Gas for 17 years, collectively, and has served on each of the Audit, Compensation, Finance and Nominating and Corporate Governance Committees of CONSOL.

ALVIN R. CARPENTER

 

Age: 73

Director Since: 2013

Occupation:  Former Vice Chairman – CSX
   Corporation; Director of Stein Mart, Inc.
   and of Regency Centers Corporation

 

CONSOL Committees:

•  Compensation (Chair)

•  Finance

Background: Alvin R. Carpenter joined the CONSOL Board in June 2013. Mr. Carpenter currently serves as Chairman of the Compensation Committee and a member of the Finance Committee. He retired from CSX Corporation (“CSX”), a railroad company, in February 2001, where he had served as vice chairman from July 1999 until his retirement. From 1962 until February 2001, he held various positions with CSX, including President and Chief Executive Officer of CSX Transportation, Inc. from 1992 to 1999 and Executive Vice President-Sales and Marketing of CSX Transportation, Inc. from 1989 to 1992. Mr. Carpenter currently serves as a director of Stein Mart, Inc., a retail company, since 1996, where he currently serves as chairman of its compensation committee and as a member of the corporate governance committee; and as a director of Regency Centers Corporation, an owner and developer of dominant, grocery-anchored retail centers, since 1993, where he serves as a member of its audit, compensation and nominating and corporate governance committees. He served as a director of Lender Processing Services, Inc. from 2009 until it was sold to Fidelity National Financial, Inc. in January 2014, where he had served as its lead director, chairman of the corporate governance and nominating committee and as a member of the compensation committee. Additionally, he previously served on the boards of PSS World Medical, Inc., Barnett Bank, Inc., Nations Bank, American Heritage Life Insurance Company, Blue Cross & Blue Shield of Florida, One Valley Bancorp of West Virginia and Florida Rock Industries, Inc. He also chaired Governor Jeb Bush’s Commission on Workers’ Compensation Reform and served on Governor Bush’s Advisory Council on Base Realignment and Closure.

Qualifications: Mr. Carpenter brings over 50 years of business experience to our Board, including 40 years of experience in the railroad industry where he has served in a wide variety of operating, planning and sales and marketing positions. In addition to the business expertise he developed while employed in the railroad industry, Mr. Carpenter has developed significant expertise in the areas of corporate governance, compensation and audit matters through his service on various public company boards.

WILLIAM E. DAVIS

 

Age: 72

Director Since: 2004

Occupation: Former Chairman and Chief

Executive Officer of Niagara
Mohawk Power Corporation

  

CONSOL Committees:

•  Nominating and Corporate Governance (Chair)

•  Health, Safety and Environmental

Background: William E. Davis joined the CONSOL Board in January 2004. He currently serves as Chairman of the Nominating and Corporate Governance Committee and as a member of the Health, Safety and Environmental Committee. From November 2007 until December 2010, Mr. Davis was a director of AbitibiBowater Inc., which produced a broad range of forest products marketed around the world, and served on its governance, finance and audit committees. Mr. Davis was a director of Abitibi Consolidated Inc., which produced newsprint and commercial printing paper, from April 2003 to November 2007, and served on its audit and nominating and governance committees. Mr. Davis was also the chairman of the board of directors and Chief Executive Officer of Niagara Mohawk Power Corporation, an electricity and natural gas utility located in upstate New York, from May 1993 to

 

23


Table of Contents

February 2002. Following the sale of Niagara Mohawk in February 2002, and until his retirement in April 2003, Mr. Davis served as chairman of National Grid USA and as an executive director of National Grid (UK), owner and operator of the electricity transmission network in England and Wales. He served as Chairman and Chief Executive Officer of the Metropolitan Development Foundation of Central New York until December 2008.

Qualifications: Having served as Chairman and Chief Executive Officer of Niagara Mohawk Power Corporation, a major investor owned gas and electric utility, for nine years, and as chairman of National Grid USA and executive director of National Grid (UK), Mr. Davis provides our Board with substantial insight into the energy industry. Mr. Davis also contributes significant knowledge with respect to corporate governance matters acquired through his years of multiple board service and a unique corporate governance insight having graduated from the National Association of Corporate Directors certification course.

DAVID C. HARDESTY, JR.

 

Age: 69

Director Since:  2005

Occupation:  President Emeritus and Professor of Law
   West Virginia University

  

CONSOL Committees:

•  Finance

•  Health, Safety and Environmental

Background: David C. Hardesty, Jr. joined the CONSOL Board in October 2005. He currently serves as a member of the Finance and Health, Safety and Environmental Committees. Mr. Hardesty is President Emeritus and Professor of Law at West Virginia University (“WVU”). He was President of WVU from 1995 to 2007. While serving as President, he was also a member of the National Security Higher Education Advisory Board. In addition, Mr. Hardesty served as the permanent chair of WVU’s affiliated research corporation, teaching hospital and the hospital’s parent health care system of hospitals. He is a member of numerous professional and civic organizations. Prior to his career in academia, Mr. Hardesty was a partner in the law firm of Bowles Rice LLP in Charleston, West Virginia, where he practiced in the areas of state and local taxation, corporate banking and administrative law. He is currently of counsel at this law firm. Mr. Hardesty was a State Tax Commissioner during John D. Rockefeller IV’s first term as Governor of West Virginia (1977-1980). He also served as chairman of the National 4-H Council, a director and officer in the Big East Conference, a member of the Bowl Championship Series Presidential Oversight Committee and was a founding director of the Blanchettee Rockefeller Neurosciences Institute.

Qualifications: Mr. Hardesty brings more than 16 years of senior level executive experience to our Board, as well as insight into the political affairs of the State of West Virginia, where CONSOL has significant operations. Mr. Hardesty also offers a unique and invaluable perspective into corporate governance matters, having practiced as an attorney in the areas of corporate law, banking and administrative law and state and local taxation. Mr. Hardesty has developed significant leadership skills over the course of his career, having been president of a major higher education institution, an agency head in state government, a law professor, and chair of a large health care system. He has also been a member of numerous civic and charitable boards and commissions, including the National Security Higher Education Advisory Board.

MAUREEN E. LALLY-GREEN

 

Age: 65

Director Since:  2013

Occupation:  Former Judge on the Superior Court of
   Pennsylvania; Associate General Secretary

   and Director of the Office for Church
   Relations for the Diocese of Pittsburgh;
   Director of Federated Mutual Fund Complex

  

CONSOL Committees:

•  Nominating and Corporate Governance

•  Health, Safety and Environmental

Background: Maureen E. Lally-Green joined the CONSOL Board in June 2013. Ms. Lally-Green currently serves as a member of the Nominating and Corporate Governance Committee and the Health, Safety and Environmental Committee. She is an Associate General Secretary of the Diocese of Pittsburgh in a reduced time capacity since July 2013, and was the director of the Office for Church Relations for the Diocese of Pittsburgh, a position she held from

 

24


Table of Contents

August, 2009 until September, 2014. Ms. Lally-Green has served on the board of Federated Mutual Fund Complex (the “Fund”), which manages approximately 120 funds of which she serves as a director or trustee, since August 2009, and was appointed to serve on its audit committee in May 2013. With respect to the Fund, she is currently a director or trustee of 41 separate investment companies of the Fund. In addition, Ms. Lally-Green has been a Professor of Law at Duquesne University’s School of Law in various capacities, including Adjunct Professor of Law and full-time Professor of Law, since September 1983. She served as a Judge of the Superior Court of Pennsylvania, a state-wide appellate court, from June 1998 until July 2009, when she retired. Other relevant experience includes her service as a consultant to the Supreme Court of Pennsylvania, counsel in the law department at the former Westinghouse Electric Corporation and counsel at the Divisions of Trading and Markets and Enforcement at the Commodity Futures Trading Commission. Ms. Lally-Green is a member of the Pennsylvania Bar Association, Allegheny County Bar Association, Allegheny County Bar Foundation, District of Columbia Bar Association, International Women’s Judges Association, and the National Association of Women Judges. She also serves on the board or as a trustee of the Saint Vincent Seminary, Saint Vincent College, the Epilepsy Foundation of Western/Central Pennsylvania, UPMC-Mercy Hospital, Catholic High Schools of the Diocese of Pittsburgh, Inc., Our Campaign for the Church Alive!, Inc., and the Pennsylvania Bar Institute.

Qualifications: Ms. Lally-Green brings over 40 years of legal experience to our Board that includes a diversity of experience while serving as a Judge on the Superior Court of Pennsylvania, her service with a major corporation and the federal government, her activities in the state-wide and local legal communities, and her experience with, among other things, corporate governance due to her service on a number of boards of non-profit entities and the for-profit Fund.

GREGORY A. LANHAM

 

Age: 50

Director Since: 2014

Occupation:  Director and Chief Executive Officer of FTS
   International, Inc.

 

CONSOL Committees:

•  Compensation

•  Health, Safety and Environmental

Background: Gregory A. Lanham has served on the CONSOL Board since October 2014. Mr. Lanham currently serves as a member of the Compensation Committee and the Health, Safety and Environmental Committee. He is the Chief Executive Officer of FTS International, Inc. (“FTSI”), the largest private oil field service company in North America, and has served as a member of the FTSI board of directors since May 2011. Previously, Mr. Lanham was the Managing Director and global head of energy and Managing Director of Investments for Australia and New Zealand at Temasek Holdings (Private) Limited, an investment company owned by the Government of Singapore. Prior to joining Temasek, Mr. Lanham spent 20 years with Anadarko Petroleum Corporation in positions of increasing responsibility, including President and General Manager of Anadarko’s Asian subsidiary. He previously held director positions at Venari Resources LLC and Black Gold Energy LLC, and is currently a director of the United Way of Tarrant County, Texas.

Qualifications: Mr. Lanham brings over 25 years of experience in the energy industry in both operations and investments. His extensive international experience in the energy industry, including his expertise in strategic planning and portfolio investment management, is a significant asset to the Board.

JOHN T. MILLS

 

Age:  67

Director Since:  2006

Occupation:  Former Chief Financial Officer – Marathon Oil
   Corporation

  

CONSOL Committees:

•  Audit

•  Compensation

Background: John T. Mills joined the CONSOL Board in March 2006. Mr. Mills currently serves as a member of the Audit Committee and the Compensation Committee. He serves on the board of directors of Cal Dive International Inc., a marine contractor providing manned diving, derrick, pipelay and pipe burial services to the offshore oil and natural gas industry, and serves as its lead independent director, and a member of the audit, compensation, and corporate governance and nominating committees. From January 2008 through June 2010,

 

25


Table of Contents

Mr. Mills was a member of the board of directors and audit, conflicts and risk management committees of Regency GP, LLC, the general partner of Regency GP, LP, the general partner of Regency Energy Partners LP, a natural gas gathering, processing and transportation master limited partnership. Mr. Mills joined the board of directors of Horizon Offshore, Inc., a marine construction company, in June 2002 and served as the chairman of the board of directors from September 2004 until December 2007, when Horizon Offshore, Inc. was acquired by Cal Dive International, Inc. Mr. Mills was the Chief Financial Officer of Marathon Oil Corporation, an integrated energy company, from January 2002 until his retirement in December 2003. In 2011, Mr. Mills attended the Harvard Business School program “Making Corporate Boards More Effective.”

Qualifications: As a licensed attorney with 39 years of business experience, including 16 years as an officer of Marathon Oil Corporation and U.S. Steel Corporation, Mr. Mills brings significant knowledge and experience to our Board. In particular, Mr. Mills brings an in-depth understanding of the evaluation of organic growth capital projects and acquisition and disposition opportunities, and the importance of maintaining a competitive capital structure and liquidity. In addition, having previously served as Senior Vice President, Finance and Administration, and later Chief Financial Officer of Marathon Oil Corporation, Mr. Mills has developed a wealth of financial knowledge with respect to the oversight of (i) the preparation of consolidated financial statements, (ii) internal audit functions, and (iii) public accountants, skills which are critical to our Corporation and particularly our Audit Committee.

WILLIAM P. POWELL

 

Age:  59

Director Since:  2004

Occupation:  Managing Partner – 535 Partners LLC

 

CONSOL Committees:

•  Finance

•  Nominating and Corporate Governance

Background: William P. Powell has served on the CONSOL Board since January 2004. He currently serves as a member of the Finance and Nominating and Corporate Governance Committees. Since 1993, Mr. Powell has also been a director of Cytec Industries, a global specialty chemicals and materials company, where he serves as their lead independent director, chairs the governance committee and has served on the audit committee. Until May 2007, Mr. Powell was a Managing Director of William Street Advisors, a New York City-based merchant banking boutique. Mr. Powell resigned from William Street Advisors to establish a family office, 535 Partners LLC, where he serves as Managing Partner. Prior to his time at William Street Advisors, he served as a Managing Director of UBS Warburg LLC and its predecessor Dillon, Read & Co. Inc. since 1991.

Qualifications: With an MBA degree and over 30 years of financial, management and investment experience, Mr. Powell brings a wealth of knowledge to our Board. Having served on multiple public company boards for over 20 years, Mr. Powell also has significant expertise in corporate governance matters.

WILLIAM N. THORNDIKE, JR.

 

Age:  51

Director Since:  2014

Occupation:  Managing Director of Housatonic Partners

 

CONSOL Committees:

•  Compensation

•  Finance

Background: William N. Thorndike, Jr. has served on the CONSOL Board since October 2014. Mr. Thorndike currently serves as a member of the Compensation Committee and the Finance Committee. He founded Housatonic Partners, a private equity firm, in Boston, MA in 1994 and has been a Managing Director since that time. Prior to founding Housatonic Partners, Mr. Thorndike worked with T. Rowe Price Associates and Walker & Company, a publishing company, where he was named to the board of directors. Mr. Thorndike has served as a director of over 30 companies since founding Housatonic Partners. He is currently a director of Alta Colleges; Carillon Assisted Living, LLC; Lincoln Peak Holdings, LLC; OASIS Group Ltd.; QMC International, LLC; and White Flower Farm, Inc. Mr. Thorndike briefly served on the board of LeMaitre Vascular, Inc., a former portfolio company, after it went public. He also serves as a Trustee of Stanford Business School Trust, and WGBH, a public broadcaster serving southern New England, and is the Chair of the Board of Trustees of the College of the Atlantic. Mr. Thorndike is the author of “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success.”

 

26


Table of Contents

Qualifications: Mr. Thorndike brings over 20 years of investment and board experience to the CONSOL Board. He has extensive leadership experience in evaluating strategic alternatives and helping to build value for shareholders across a variety of industries. He has a breadth of financial, strategic and human resource knowledge with specific expertise in the areas of capital allocation and compensation.

Related Party Policy and Procedures

Our Audit Committee adopted a written Related Party Policy and Procedures for the review and approval or ratification of related party transactions with directors, nominees for director, executive officers and certain family members (“related persons”). A copy of the policy is available on our website at www.consolenergy.com.

Under the policy, prior to entering into a potential related person transaction (which is generally a transaction in excess of $120,000 involving the Corporation and a related person), the related person must notify our chief financial officer and general counsel of the material facts regarding the transaction. If our chief financial officer and general counsel determine that the proposed transaction is in fact a related person transaction, the details of the transaction are presented to our Audit Committee (or if it is not practicable or desirable to wait until the next Audit Committee meeting, to the chairman of the Audit Committee) for approval. The Audit Committee or Chairman, as applicable, will consider all relevant facts and circumstances including the terms of the transaction and terms that would be available to unrelated parties, the benefits to us and, if the transaction involves an independent director, any impact the transaction would have on such director’s independence. The Audit Committee or Chairman, as applicable, will also inform our Nominating and Corporate Governance Committee of any related person transactions involving directors or nominees. Since the SEC’s related party regulation also applies to directors’ and executive officers’ family members, as well as entities in which they may be deemed to have an indirect material interest, it is possible that related person transactions could occur without a director or executive officer being aware of them and seeking approval in accordance with the policy. When we become aware of a related person transaction that has not been previously approved, the policy provides that the details of the transaction will be presented to our Audit Committee or Chairman, as applicable, for ratification or other action. Our Audit Committee also reviews, on an annual basis, ongoing related person transactions having a remaining term of more than six months or that are in excess of $120,000. We also require that officers and directors complete annual director and officer questionnaires and adhere to written codes of business conduct and ethics regarding various topics, including conflicts of interest, the receipt of gifts, service in outside organizations, political activity and corporate opportunities. Officers and directors must certify compliance with these codes in writing each year.

Mr. Hardesty, a member of the Board, has a daughter who is a partner at Bowles Rice LLP. The Corporation engages this law firm predominantly for land-related matters (including title work), and paid it approximately $5.39 million in 2014, which amount represented less than 5% of the total amount paid by the Corporation to all law firms retained in 2014. CONSOL engaged Bowles Rice LLP many years prior to Mr. Hardesty becoming a member of the Board. Further, Mr. Hardesty’s brother, Benjamin Hardesty, through his consulting firm, entered into a consulting agreement with CONSOL in 2011, pursuant to which CONSOL agreed to pay him a market-based commission for acquisition transactions which he introduced to CONSOL. In 2014, CONSOL acquired approximately 90,000 Marcellus Shale acres in West Virginia from Dominion Transmission Inc. (“DTI”) for which CONSOL paid Benjamin Hardesty’s firm $1.5 million pursuant to the terms of the consulting agreement. Benjamin Hardesty was instrumental in the successful completion of the transaction with DTI given his business relationships and history with Dominion.

Mr. Hardesty was not involved in the decisions to utilize these third parties.

The Audit Committee reviewed and approved the above transactions.

Determination of Director Independence

Our Board is required under the NYSE rules to affirmatively determine the independence of each director on an annual basis and to disclose this determination in the Proxy Statement for each annual meeting of shareholders of CONSOL. Based on the independence standards set forth in our Corporate Governance Guidelines, which are described below, our Board, at its January 2015 meeting determined that each of Messrs. Altmeyer, Baxter, Carpenter, Davis, Gupta, Lanham, Mills, Powell, Thorndike and Williams and Ms. Lally-Green had no material

 

27


Table of Contents

relationship with CONSOL (either directly or indirectly, including as a partner, shareholder or officer of an organization that has a relationship with CONSOL) and are “independent” under our Corporate Governance Guidelines and the corporate governance rules of the NYSE codified in Section 303A of the NYSE Listed Company Manual. In addition, upon their election to the Board in October 2014 the Board determined that Messrs. Lanham and Thorndike were each an independent director under applicable NYSE listing requirements. The Board also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE listing standards and the SEC rules, and considered the additional factors under the NYSE rules relating to members of the Compensation Committee before determining that each of them is independent.

The Board has established the following standards for determining director independence, which are reflected in our Corporate Governance Guidelines that are available in the Corporate Governance section of the Corporation’s website at www.consolenergy.com.

A director will not be deemed independent if:

 

   

(i) the director is, or has been within the previous three years, employed by CONSOL, or an immediate family member is, or has been within the previous three years, an executive officer of CONSOL; provided, that employment as an interim Chairman or CEO or other executive officer shall not disqualify a director from being considered independent following that employment;

 

   

(ii) the director or an immediate family member has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from CONSOL, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); provided, that compensation received by a director for former service as an interim Chairman or CEO or other executive officer need not be considered in determining independence under this paragraph (ii) and provided further, that compensation received by an immediate family member for service as an employee of CONSOL (other than an executive officer) need not be considered in determining independence under this paragraph (ii);

 

   

(iii)(A) the director or an immediate family member is a current partner of the firm that is CONSOL’s internal auditor or external auditor (each an “Audit Firm”); (B) the director is a current employee of an Audit Firm; (C) the director has an immediate family member who is a current employee of an Audit Firm and who personally works on CONSOL’s audit or (D) the director or an immediate family member was, within the previous three years (but is no longer), a partner or employee of an Audit Firm and personally worked on CONSOL’s audit within that time;

 

   

(iv) the director or an immediate family member is, or has been within the previous three years, employed as an executive officer of another company where any of CONSOL’s present executive officers at the same time serves or served on such company’s compensation (or equivalent) committee of the board of directors; or

 

   

(v) the director is a current employee, or an immediate family member is an executive officer, of a company that has made payments to, or received payments from, CONSOL for property or services in an amount which, in any of the previous three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues. For purposes of the foregoing, both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year; and

 

   

(vi) for members of the audit committee only: other than in the capacity as a member of the audit committee, the Board or any other committee of the Board, the director (A) does not accept, directly or indirectly, any consulting, advisory or other compensatory fee from CONSOL; provided that compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with CONSOL (provided that such compensation is not contingent in any way on continued service) or (B) is not an affiliated person of CONSOL.

 

28


Table of Contents

Any related person transaction required to be disclosed under SEC Regulation S-K, Item 404, shall be considered in determining the independence of a director or nominee.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ABOVE-NAMED NOMINEES FOR THE BOARD OF DIRECTORS.

 

29


Table of Contents

EXECUTIVE COMPENSATION INFORMATION

COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis section (the “CD&A”) is designed to provide our shareholders with an explanation of CONSOL’s executive compensation philosophy and objectives, our 2014 executive compensation program and the compensation paid by the Corporation to the following “named executives” in 2014:

 

   

Nicholas J. DeIuliis, President and Chief Executive Officer (“Chief Executive Officer”)*

 

   

J. Brett Harvey, Chairman of the Board*

 

   

David M. Khani, Executive Vice President and Chief Financial Officer (“Chief Financial Officer”)

 

   

Stephen W. Johnson, Executive Vice President and Chief Legal and Corporate Affairs Officer (“Chief Legal Officer”)

 

   

James C. Grech, Executive Vice President and Chief Commercial Officer (“Chief Commercial Officer”)

 

   

Timothy C. Dugan, Chief Operating Officer – Exploration and Production (“Chief Operating Officer – E&P”)

* Immediately after the 2014 Annual Meeting of Shareholders, as part of the Corporation’s succession plan, Mr. Harvey assumed the role of Executive Chairman and Mr. DeIuliis assumed the role of Chief Executive Officer, in addition to his existing role of President. Effective January 31, 2015, Mr. Harvey retired as an employee of CONSOL, but retained his role as Chairman of the Board.

The contents of this CD&A are organized into the following five sections: Section 1 – Summary; Section 2 – Pay for Performance; Section 3 – Compensation Setting Process; Section 4 – Compensation Decisions for 2014; and Section 5 – Other Compensation Policies and Information.

This CD&A contains references to one or more financial measures that have not been calculated in accordance with generally accepted accounting principles (“GAAP”). A reconciliation of each disclosed non-GAAP financial measure to the most directly comparable GAAP financial measure is attached as Appendix A.

SECTION 1 - SUMMARY

Our executive compensation program is designed to attract, motivate and retain key executives who will promote the short- and long-term growth of the Corporation and create sustained shareholder value. To this end, we take a pay-for-performance approach to our executive compensation program that ties the majority of the compensation payable to our named executives to CONSOL’s stock price and operational performance, and promotes equity ownership among the named executives to greater align their interests with those of our shareholders. Some of our highlights from 2014 and 2015 include:

 

   

The significant reduction of the Chief Executive Officer’s compensation as a result of Mr. DeIuliis’ transition into the Chief Executive Officer role.

 

   

Approximately 80% of the shares voted at our 2014 Annual Meeting of Shareholders approved our 2013 executive compensation program.

 

   

The implementation of stock retention requirements for equity awards granted in 2015 and beyond.

 

   

No employment agreements between CONSOL and current executives.

 

   

Superior stock price performance in 2014 (89th percentile among our compensation peer group as defined within “Use of Peer Group and Other Benchmarking Data” on page 33).

 

30


Table of Contents

Managerial decisions over time drive a company’s financial performance. CONSOL’s financial and non-financial performance has been consistently solid over the years – despite the volatile economy and volatile commodity prices. This conclusion is underscored by our 2014-2015 Business, Compensation and Corporate Governance Highlights described on pages 3-4.

SECTION 2 - PAY FOR PERFORMANCE

We consistently put a substantial portion of our named executives’ compensation at-risk. As demonstrated in the following chart(s), more than a majority of our named executives’ compensation is in the form of annual and equity incentive-based compensation.

 

CONSOL’s CEO Target Pay Mix

 

 

LOGO

 

 

CONSOL’s Other Named Executive
Target Pay Mix

 

LOGO

Because so much of the compensation of our named executives’ is at-risk, there is a strong alignment between these named executives’ compensation and the long term interests of our shareholders. In short, their compensation is highly correlated with stock price performance – if value is not delivered to our shareholders in terms of stock price, the named executives’ compensation will be adversely affected.

For further reference, the chart below shows Mr. DeIuliis’ total direct compensation in 2014 against our 1-year stock price performance, as measured by total shareholder return (“TSR”), in each case relative to a peer group of companies (as defined on page 34). As you will find, the vertical axis of the chart shows Mr. DeIuliis’ total direct compensation falls in the 34th percentile for 2014 and the horizontal axis of the chart shows our relative TSR was ranked at the 89th percentile during the same period. Mr. DeIuliis’ compensation was lower than his peers primarily because of Mr. DeIuliis’ refusal to take an increase in his compensation when he was promoted to Chief Executive Officer in May 2014.

 

 

LOGO

 

31


Table of Contents

SECTION 3 - COMPENSATION SETTING PROCESS

Compensation Philosophy and Objectives

Our executive compensation program is designed to attract, motivate and retain key executives who drive our success and industry leadership. We achieve these objectives through compensation that:

 

   

links a significant portion of total compensation to performance, which we believe will create long-term shareholder value;

 

   

consists primarily of stock-based compensation, which encourages our named executives to act as owners of the Corporation and aligns their interests with those of our shareholders;

 

   

is tied to overall corporate performance, financial and operational goals (annual and long-term);

 

   

enhances retention in a highly competitive market by subjecting a significant portion of total compensation to multi-year vesting or performance conditions;

 

   

discourages unnecessary and excessive risk taking; and

 

   

provides a competitive total pay opportunity.

Key factors affecting the Compensation Committee’s executive compensation judgments include: (i) the nature and scope of an executive’s responsibilities; (ii) an executive officer’s performance (including contribution to the Corporation’s financial results); and (iii) the Compensation Committee’s outside compensation consultant’s report(s) on survey and/or proxy data for compensation paid to executives with similar responsibilities at other similar industry companies.

Results of 2014 Shareholder Vote on Named Executive Compensation

CONSOL maintains a practice of engaging in discussions with our major shareholders on various topics, including executive compensation. The insight we have gained over the years through these discussions has been helpful to the Compensation Committee as it considers and adopts compensation policies relating to our named executives.

Approximately 80% of the shares voted at our 2014 Annual Meeting of Shareholders approved our 2013 executive compensation program. We believe this vote outcome was impacted by our active engagement with our shareholders over the years, and our continued efforts to structure our executive compensation programs to better align the interests of our named executives and shareholders. We understand from our shareholders that the changes we have made to our executive compensation programs and business have, in fact, more closely aligned our programs with their expectations and interests including, without limitation:

 

   

Strategic Initiatives. Engaging in significant, strategic transactions to implement our long-term growth plan, including the initial public offering of our midstream joint venture with Noble Energy, Inc., CONE Midstream Partners, LP (the “CONE IPO”), and our recent announcement to form (i) a publicly-traded master limited partnership for the Corporation’s thermal coal business (the “Thermal Coal IPO”) and (ii) a separate subsidiary entity for the purpose of owning CONSOL’s metallurgical coal properties and related mining operations, with a view to conducting an initial public offering of each subsidiary’s equity in the second half of 2015 (the “Met Coal IPO”);

 

   

CEO Compensation. When Mr. Harvey was serving as Chief Executive Officer, Mr. Harvey agreed, after discussions with the Compensation Committee, to reduce his 2014 total direct compensation, at target, by $3,000,000 in 2014, and his annual base salary was reduced by 25% to $750,000 when he assumed the role of Executive Chairman immediately after the 2014 Annual Meeting of Shareholders;

 

   

LTIC. We made changes to our Long-Term Incentive Compensation Program, or “LTIC,” by making the 2014 PSU target award opportunity contingent on both long-term Return on Capital Employed (“ROCE”) results and Total Shareholder Return (“TSR”) relative to the S&P 500; and

 

32


Table of Contents
   

STIC. We enhanced the alignment of our annual bonus program (the Short-Term Incentive Program, or “STIC”) with our growth strategy and investors’ financial interests by (i) eliminating the individual performance component in the 2014 STIC, which previously was weighted as a third of annual incentive compensation, and tying all annual bonus opportunity to financial and operational results of the Corporation for named executives; (ii) increasing the emphasis on production, operating cost, reserve replacement, safety, and environmental compliance; (iii) adding a profitability modifier tied to EBITDA results; and (iv) reducing the payout for threshold performance from 70% of target to 50% of target. The following table sets forth the changes to the metrics between the 2013 and 2014 STIC showing the emphasis on financial and operational results, which aligns the incentive compensation opportunity of our named executives with the financial and strategic interests of our shareholders:

 

Changes to STIC Metrics (2013 v. 2014)

 

Metric Change

   2013     2014     Change  

Production

     13.3     35.0     21.7

Operating cost

     13.3     22.5     9.2

Safety

     23.3     22.5     (0.8 )% 

Environment

     16.7     12.5     (4.2 )% 

Reserve growth

     0     7.5     7.5

Individual

     33.3     0     (33.3 )% 
  

 

 

   

 

 

   

 

 

 

Total

     100.0 %*      100.0       
  

 

 

   

 

 

   

 

 

 

 

* 

2013 Metrics do not add up to 100% due to rounding.

We will continue to actively engage in discussions with our shareholders on these matters and consider shareholder views about our core principles and objectives when determining the compensation of our named executives.

Use of Peer Group and Other Benchmarking Data

One of the primary factors that the Compensation Committee considers in determining the total compensation opportunity to be provided to each of our named executives is whether such total compensation opportunity is competitive with the total compensation opportunities offered to similarly situated executives by our competitors.

Since we are unique in that we are both a coal producer and a gas producer, the Compensation Committee uses a peer group of companies which includes a mix of both coal and gas companies, against which the Compensation Committee measures our overall compensation program. The scarcity of companies similar to CONSOL makes it more difficult for the market to value our diverse holdings of coal and gas assets, which leads to a more complex business than most, if not all, of our peers. In selecting these companies, the Compensation Committee also considers CONSOL’s revenue and market capitalization relative to the peers and their business segment revenue.

In light of significant, recent changes to CONSOL’s strategic plan, including the sale of $3.5 billion of certain coal assets to Murray Energy in December 2013 (the “Murray Transaction”), the Compensation Committee determined to reconsider the peer group. The Compensation Committee approved a revised peer group that more accurately reflected our business, which included four peer companies identified by management (EQT Corporation, Range Resources, Cabot Oil & Gas, and Antero Resources) and two additional peer companies identified by the compensation consultant (Teck Resources and Walter Energy). Four companies were eliminated from the peer group, including Newfield Exploration Co. (oil-focused), Apache Corporation (size), Anadarko Petroleum Corporation (size), and Plains Exploration & Production Company (acquired).

 

33


Table of Contents

Accordingly, the following peer companies were used to help establish 2014 compensation for our named executives (the “peer group”):

 

Alpha Natural Resources, Inc.

 

Noble Energy, Inc.

Antero Resources

 

Peabody Energy Corp.

Arch Coal Inc

 

QEP Resources, Inc.

Cabot Oil and Gas

 

Range Resources

Chesapeake Energy Corporation

 

Southwestern Energy Co.

Devon Energy Corporation

 

Teck Resources

EOG Resources, Inc.

 

Walter Energy

EQT Corporation

 

WPX Energy, Inc.

The Compensation Committee’s long-term philosophy is to have the compensation for our named executives, including our Chief Executive Officer, set at the median of the peer group to be consistent with CONSOL’s revenue and market capitalization relative to our peer group. Because of the transition of the management team, most importantly with the Chief Executive Officer position, the current named executives are at the 31st percentile on average. With respect to the average percentile ranking for the named executives’ total direct compensation compared to the peer group, the compensation consultant found the following in late 2014 when evaluating the 2014 compensation packages for the named executives:

CONSOL Percentile Rankings Among Peer Group

 

     
Average Total Direct  Compensation for
Named Executives
   Revenue    Market Capitalization
   

31st percentile(1)

   52nd percentile(2)    36th percentile(3)

 

(1) Average total direct compensation includes base salary, annual incentive payment and grant date value of long-term incentives of the following named executives: DeIuliis, Khani, Johnson, Grech and Dugan. Antero Resources was not included in the peer group for determining CONSOL’s percentile ranking with respect to Average Total Direct Compensation for Named Executives.

 

(2) Based on CONSOL’s revenues of $3.3 billion in 2013.

 

(3) Based on CONSOL’s market capitalization of $8.7 billion (as of December 31, 2013).

In connection with the preparation of the 2014 compensation program, the compensation consultant benchmarked the proposed compensation packages for the named executives against (i) proxy data available for the peer group and (ii) published survey data.

The Compensation Committee uses the compensation consultant’s benchmarking studies to determine the market pay practices of executives at comparable companies who are similarly situated to our executives. The Compensation Committee’s policy is to use the data prepared and presented by the compensation consultant as a reference point or guideline. Our named executives’ actual compensation may be higher or lower than the compensation paid to executives in similar positions at comparable companies based on CONSOL’s financial performance and a subjective, qualitative review of individual performance.

Role of Compensation Consultant

The Compensation Committee engaged Towers Watson to assist it with the development of our 2014 executive compensation program. The compensation consultants work for the Compensation Committee in coordination with management. A representative of Towers Watson generally attends the Compensation Committee meetings and is available to participate in executive sessions. Towers Watson provided no other services to CONSOL during 2014. In order to assure independence, the Compensation Committee would pre-approve any work unrelated to executive compensation proposed to be provided by Towers Watson. In addition, the Compensation Committee also considers all factors relevant to the consultant’s independence from management, including those identified by the NYSE.

The Compensation Committee looks to the compensation consultants to review the elements of our compensation program and recommend any modifications thereto, including the appropriate mix of short- and long-term

 

34


Table of Contents

incentives, based on their review of the market practices of a peer group of companies and the Corporation’s compensation objectives. The consultants also provide ongoing input on the design of our incentive programs and the underlying performance metrics.

Process for Evaluating Compensation

In the first quarter of each year, the Compensation Committee meets to establish the base salaries, incentive opportunities and related performance goals of the Corporation’s compensation programs. To establish compensation for a particular named executive (other than our Chief Executive Officer), the Corporation’s human resources personnel make an initial assessment and submit it to our Chief Executive Officer for review. This assessment considers relevant industry salary practices, the complexity and level of responsibility associated with the particular named executive’s position, the position’s overall importance to the Corporation in relation to other executive positions, and the competitiveness of the named executive’s total compensation. Our Chief Executive Officer may make appropriate changes to this assessment based on his determination of such named executive’s past performance. The Compensation Committee then reviews: our Chief Executive Officer’s compensation recommendations for each named executive (other than himself); our Chief Executive Officer’s evaluation of each named executive’s performance and internal value; and the benchmarking studies and tally sheets as compiled by the outside compensation consultant. After considering the factors described above, and in consultation with the Chief Executive Officer and our outside compensation consultant, the Compensation Committee approved, and the independent members of the Board ratified, the named executives’ 2014 compensation packages.

To establish compensation for our Chief Executive Officer, the Compensation Committee reviews: (i) the benchmarking studies and compensation alternatives compiled by the outside compensation consultant; (ii) the Chief Executive Officer’s self-evaluation of his annual performance; and (iii) the Board’s evaluation of his annual performance. After considering these factors, the Compensation Committee typically approves, and then recommends that the independent members of the Board ratify, the compensation of our Chief Executive Officer. Our Chief Executive Officer does not participate, and is not present for, any approvals relating to his compensation.

 

35


Table of Contents

SECTION 4 - COMPENSATION DECISIONS FOR 2014

Elements of Executive Compensation Program

In 2014, we continued to compensate our named executives through the following elements of our executive compensation program:

 

Compensation
Element
  Form of
Compensation
  Performance Criteria/Formula   Purpose

1. Base Salary

    (page 37)

 

•Cash

  Individual performance and experience in the role are factors in determining base salaries.  

To provide fixed compensation necessary to attract and retain key executives and to offset the cyclicality in our business that may impact variable pay year-to-year.

 

2. Short-Term

    Incentive

    (page 37)

 

•Cash

 

 

For 2014 STIC, the formula was:

 

 

To provide incentives to our employees to achieve operational performance goals and to reward our employees for the achievement of those goals.

 

           

Coal Performance

50%

  +  

Gas Performance

50%

    x   Profit Modifier      
            Production   30%     Production     40%        EBITDA   +/-30%    
            Operating Cost   30%     Operating Cost     15%             
            Safety   30%     Reserve Growth     15%             
          Environment   10%     Safety     15%             
                  Environment     15%             
                                                               
3. Long-Term     Incentive     (page 44)  

•PSUs (three-year cliff vesting)

 

•   For 2012 PSUs, the formula was:

 

  To create a strong incentive for our key management members to achieve our short- and long-term performance objectives and strategic plan, and to align management’s interests with our shareholders’ interests. Further, RSUs are intended to retain executive talent.
        Factor

(2012-14)

  Weight              
        TSR (relative to companies

referenced on page 34)

  50%              
            Average ROCE   50%              
            Safety Modifier   +/- 25%              
       

 

•   For 2014 PSUs, the formula was:

 

 
            Factor

(2014-16)

  Weight              
            TSR (relative to the S&P  500)   50%              
            Average ROCE   50%              
   

 

•RSUs (i) three-year ratable vesting and (ii) five-year cliff vesting

 

 

 

•   RSUs have time-based vesting.

 
   

All equity awards settle in stock.

 

                                                   
4. Employment and
    Other Agreements     and Benefits
    (page 45)
 

•Employment Agreement (Chairman only who retired in January)

 

•Change in Control Agreements

 

•Other Retirement Benefits

 

                                                To attract and retain key management members and, for change in control agreements, to motivate executives to take actions that are in the best interests of CONSOL.
5. Perquisites
    (page 46)
 

•Country Club Memberships

 

•Corporate Aircraft

 

•Financial Planning

 

•Vehicle Allowance

 

                                                To provide a competitive compensation package and, in certain cases, to optimize an executive officer’s time.

 

36


Table of Contents

2014 Base Salary

The Compensation Committee reviewed the base salaries of our named executives in January 2014. The Compensation Committee approved a 2% increase to the annual base salary of Mr. DeIuliis at that time. Mr. DeIuliis did not accept an additional increase at the time of his promotion to Chief Executive Officer in May 2014.

The annual base salaries for 2014 were as follows:

 

Named Executive

   Salaries for 2013      Salaries for 2014     Percent
Change
 

Chief Executive Officer

   $             725,000       $             740,000        2.0

Chairman of the Board

   $ 1,000,000       $ 750,000 (1)      (25 )% 

Chief Financial Officer

   $ 480,000       $ 490,000        2.1

Chief Legal Officer

   $ 450,000       $ 460,000        2.2

Chief Commercial Officer

   $ 370,000       $ 380,000        2.7

Chief Operating Officer – E&P

           $ 412,000 (2)        

 

(1) 

Mr. Harvey had an annual base salary of $1 million until the 2014 Annual Meeting of Shareholders when he assumed the role of Executive Chairman and his salary was reduced to the annualized amount reflected in the table.

 

(2) 

Mr. Dugan joined CONSOL in January 2014, and therefore did not receive a base salary adjustment in 2014.

2014 STIC

(1) Executive STIC (Named Executives, Excluding Chief Operating Officer – E&P)

The STIC is designed to deliver annual cash awards when CONSOL and our named executives are successful in meeting or exceeding established performance targets and to pay less, or nothing at all, when CONSOL and/or our employees fall short of these targets. The STIC provides incentive compensation (measured at target) that is comparable to compensation provided by companies with which CONSOL competes for executive talent. The STIC bonus pay-outs for 2014 were determined based on a strict application of the following formula:

 

LOGO

 

37


Table of Contents

Each of coal results and gas results are measured independently, with scores ranging from 0-200% for each component, with a 100% score indicating target performance and a higher score (up to 200%) indicating above target performance. If the minimum score of 50% (threshold) is not reached for a particular goal, a score of zero is recorded for that goal. The weighted scores for coal results and gas results are aggregated and multiplied by the EBITDA modifier. All corporate goals were derived from the annual Board-approved profit objective for the year, and represent a change from prior STICs, including (i) the elimination of the individual performance component in response to shareholder comments regarding the subjectivity, (ii) more emphasis placed upon production, operating cost, and reserve replacement, and (iii) the addition of the EBITDA profit modifier. For purposes of 2014, the Performance Factor was calculated based on the three components as follows:

 

LOGO

 

(1) 

Average severity score.

 

(2) 

NOVs mean “Notices of Violations” and NONs mean “Notices of Non-Compliance.”

 

(3) 

See calculation from financial statements on Appendix A.

 

(4) 

Production, costs and EBITDA have been adjusted in accordance with the STIC, and were not material. See calculation from financial statements for EBITDA results on Appendix A.

 

38


Table of Contents

Based on the results of each of the three components above, the Performance Factor for 2014 was calculated at 211.18% of the target payout (which was reduced to 200% as a result of the 200% maximum pay-out cap). The ultimate payouts to our named executives for 2014 performance were as follows:

STIC Payout Information (Executive STIC and Non-Executive STIC) (2014 Performance)

 

Named Executive    Target Opportunity
Percentages
(as a % of Base
Salary)(1)
    Target Payout     Actual Payout
(Maximum
Potential)
(rounded up to
nearest thousand)
 

Chief Executive Officer

     120   $ 888,000      $ 1,776,000   

Chairman of the Board

     175   $ 1,463,942 (2)    $ 2,928,000   

Chief Financial Officer

     70   $ 343,000      $ 686,000   

Chief Legal Officer

     65   $ 299,000      $ 598,000   

Chief Commercial Officer

     65   $ 247,000      $ 494,000   

Chief Operating Officer – E&P

     65   $ 267,800      $ 457,000 (3) 

 

(1) 

The Compensation Committee determined the 2014 Target Opportunity Percentages for our named executives based on a review of competitive data and performance. The Compensation Committee and Board approved the Target Opportunity Percentages and Target Payouts for each of the named executives.

 

(2) 

Mr. Harvey’s weighted average 2014 base salary of $836,538 was used for the purpose of determining Mr. Harvey’s 2014 STIC payout, which was calculated by adding 18 weeks of an annual salary of $1,000,000 plus 34 weeks of an annual salary of $750,000.

 

(3) 

Mr. Dugan participated in the Non-Executive STIC (as described below) and received a payout at 170.55% of his target, which is less than the maximum payout.

(2) Non-Executive STIC (Chief Operating Officer – E&P)

Mr. Dugan was determined to be an officer for purposes of Section 16 of the Exchange Act on September 24, 2014, and as a result participated in the Non-Executive STIC during 2014. The Non-Executive STIC is designed to deliver to participants an annual cash bonus when the Corporation achieves certain goals. The Committee determined Mr. Dugan’s Non-Executive STIC payout by applying the following formula:

 

LOGO

Each of the individual results, coal results and gas results are measured independently, with scores ranging from 70-200% for each component, with a score of 100% representing the target performance and a higher score (up to 200%) indicating above target performance. If the minimum score of 70% is not reached for a particular goal, a score of zero is recorded for that goal. Individual results are based on multiple factors that are considered on a holistic and qualitative, rather than quantitative basis. All corporate goals were derived from the annual Board-approved profit objective for the year. Since

 

39


Table of Contents

joining CONSOL on January 28, 2014, Mr. Dugan was primarily responsible for the efforts of the Exploration and Production division tasked with developing the natural gas assets. Mr. Dugan’s STIC award recognized his performance in achieving the following individual results, among others:

 

   

Restructuring the E&P division in order to achieve efficiencies by centralizing management at corporate headquarters and designating asset teams to lead the continued development of our acreage positions.

 

   

Exceeding our 30% production growth target for 2014, and continuing to drive down our costs as drilling and completion efficiencies tracked in the positive direction.

 

   

Continuing to add the necessary infrastructure to provide our products with access to demand centers across the U.S.

Mr. Dugan’s Performance Factor for the Non-Executive 2014 STIC was calculated based on the average of all three components as follows:

 

LOGO

 

(1) 

The “At Zero” safety rewards program is based on time periods in which sites achieved zero accidents. The time periods applicable to sites are adjusted for exposure (for example, higher exposure sites have shorter time periods measured).

 

(2) 

NOVs mean “Notices of Violations” and NONs mean “Notices of Non-Compliance.”

 

(3) 

Production and costs have been adjusted in accordance with the Non-Executive STIC, and were not material.

Mr. Dugan is participating in the Executive STIC for 2015.

 

40


Table of Contents

LTIC

Our LTIC program is designed to create a strong incentive for our named executives to achieve our longer-term performance objectives in the strategic plan and to align management’s interests with our shareholders’ interests.

In January 2014, the Compensation Committee determined that each named executive would receive his entire 2014 long-term incentive opportunity in the form of PSUs and RSUs, with two-thirds of each named executive’s target long-term incentive opportunity in the form of PSUs, and one-third in the form of RSUs.

(1) 2014 PSUs

The PSUs vest, if earned, after the end of a three-year performance period (January 1, 2014 through December 31, 2016).

The Compensation Committee believes that our PSU awards align the interests of our employees with those of our shareholders because the vesting of such awards is tied to the achievement of pre-approved three-year performance goals. The vesting of the named executives’ 2014-2016 PSU awards will be calculated at the end of the performance period based on the following pre-established, equally-weighted goals:

 

  (i)

TSR relative to the S&P 500 at the end of the three-year performance period equaling or exceeding the 25th percentile (for threshold pay-out), 50th percentile (for target pay-out) and 75th or greater percentile (for maximum pay-out); and

 

  (ii) average ROCE for the three-year performance period (with payout capped at 200% of target).

The Compensation Committee has determined that the ROCE target number constitutes confidential information, disclosure of which would result in competitive harm to CONSOL. When the ROCE goal was established, the Compensation Committee believed that it was set at a challenging, yet achievable target level based upon a review of CONSOL’s performance in the prior three-year period and its business goals and objectives for the 2014-2016 performance period. ROCE is calculated by taking the annual net income plus after-tax cost of interest divided by net assets, with adjustments. The target goal will be disclosed in the 2017 proxy once the performance period has been completed and any earned awards are reported.

The Compensation Committee approved the following 2014 PSU awards for those named executives serving as executive officers at the time the awards were granted (in the dollar amounts shown below):

 

Named Executive

   PSUs
(Target)
 

Chief Executive Officer

   $                     2,216,667   

Chairman of the Board

   $                     3,125,000   

Chief Financial Officer

   $                     500,000   

Chief Legal Officer

   $                     720,000   

Chief Commercial Officer

   $                     333,333   

(2) 2014 RSUs

In order to retain key executive talent (especially to accomplish strategic objectives as mentioned above), the Compensation Committee approved awards of time-based, three-year ratable vesting RSU awards to all of the named executives and five-year cliff vesting RSUs to the Chief Financial Officer, Chief Commercial Officer, and the Chief Operating Officer – E&P.

Given the current and proposed significant and transformational organizational and business changes occurring at CONSOL, including, without limitation, the Murray Transaction, the CONE IPO, the Thermal Coal IPO and the

 

41


Table of Contents

Met Coal IPO, the Compensation Committee wished to ensure that our named executives and other employees remained with the Corporation over the long-term to execute CONSOL’s business and strategic priorities. The Compensation Committee viewed the RSUs as an important vehicle to accomplish this purpose.

Additionally, the Compensation Committee also reviewed certain of the executive positions to consider their respective equity stake in the success of CONSOL through this transformative period. In reviewing the equity ownership of certain officers, the Compensation Committee determined that the five-year cliff-vesting RSUs would be an appropriate award to retain and further incentivize them to focus on our long-term business plan. Subject to continued employment, the five-year cliff-vesting RSUs will vest in full on the fifth anniversary of the grant date unless, at any point prior to the fifth anniversary of the grant date, the closing market price of CONSOL’s common stock equals or exceeds $55.00 per share for fifteen consecutive trading days (the “Stock Price Trigger”), at which point the RSUs will generally vest in full, (i) on the third anniversary of the grant date if the Stock Price Trigger occurs prior to the third anniversary of the grant date or (ii) immediately after the close of business on the fifteenth day of the Stock Price Trigger if the Stock Price Trigger occurs between the third and fifth anniversary of the grant date.

The 2014 RSUs granted to each of the named executives were as follows:

 

Named Executive

   Aggregate Grant Date
Dollar Value of  3-Year
RSU Awards
    Aggregate Grant Date
Dollar Value of  5-Year
RSU Awards
 

Chief Executive Officer

   $ 1,470,833 (1)      -   

Chairman of the Board

   $ 3,000,000        -   

Chief Financial Officer

   $ 490,000 (1)    $ 733,000   

Chief Commercial Officer

   $ 351,667 (1)    $ 600,000   

Chief Legal Officer

   $ 635,000 (1)      -   

Chief Operating Officer – E&P

   $ 1,050,000 (2)    $ 400,000   

 

(1) 

The RSU award amounts include special awards made to the Chief Executive Officer, the Chief Financial Officer, Chief Commercial Officer and Chief Legal Officer in connection with the Murray Transaction in the following amounts: $362,500, $240,000, $185,000, and $275,000, respectively.

 

(2) 

Amount includes a $400,000 signing bonus in the form of 3-year RSU awards received on January 31, 2014. Further, the Chief Operating Officer – E&P received an additional $650,000 3-year RSU award on that same date, as reflected in the table.

(3) Payout of PSUs Covering 2012-2014 Performance Period

In February 2012, the Compensation Committee approved (and, in the case of our Chief Executive Officer at that time, the independent members of the Board ratified) the award of PSUs to our named executives and other key employees, which had a performance period from January 1, 2012 through December 31, 2014.

 

42


Table of Contents

Following the performance period, the Compensation Committee determined the actual payout of the awards by strictly adhering to the following formula (each metric is equally weighted):

Step 1

 

LOGO

 

(1) 

Based on the following companies (the “TSR Peer Group”): Alliance Resource Partners, L.P.; Alpha Natural Resources, Inc.; Anadarko Petroleum Corporation; Apache Corporation; Arch Coal Inc.; Cabot Oil & Gas Corporation; Callon Petroleum Co/DE; Chesapeake Energy Corporation; Cimarex Energy Co.; Comstock Resources Inc.; Denbury Resources Inc.; Devon Energy Corporation; Encana Corporation; EOG Resources, Inc.; James River Coal Company (bankruptcy); Newfield Exploration Company; Nexen Inc.; Noble Energy Inc.; Peabody Energy Corporation; Penn Virginia Corporation; Pioneer Natural Resources Company; Rio Tinto Group (GBR) – ADR; St. Mary Land & Exploration Company or SM Energy Company (its current name), Stone Energy Corporation; Ultra Petroleum Corporation; and Westmoreland Coal Company (unlike the current 16-company peer group used to benchmark compensation pay levels, this TSR Peer Group was not selected based on company size and represents a broader mix of energy companies). As approved by the Compensation Committee in February 2012, any company filing for bankruptcy during the performance period would be deemed in last place for purposes of calculating TSR.

 

(2) 

See calculations from financial statements on Appendix A.

Step 2

 

LOGO

 

43


Table of Contents

As a result of the above performance determinations, the PSUs were earned at 168.6% with individual payouts as follows:

 

Named Executive

   PSUs Granted
in February  2012 (Target)
(including Dividend Equivalents)
     Shares of Common Stock Issued
(Earned PSUs)
 

Chief Executive Officer

     42,641         71,893   

Chairman of the Board

     198,294         334,324   

Chief Financial Officer

     3,015         5,084   

Chief Legal Officer

     8,148         13,738   

Additional information regarding this PSU program is included in the CONSOL proxy statement filed on March 29, 2013.

SECTION 5 - OTHER COMPENSATION POLICIES AND INFORMATION

Retirement Benefit Plans

CONSOL maintains retirement benefit plans, including supplemental retirement plans, which are intended to attract and retain key talent. CONSOL also continues to move toward a defined contribution strategy to deliver retirement benefits to its employees. In 2014, we froze the retirement plan for certain employees and we eliminated retiree medical for all active employees, including our named executive officers.

Due to changes in factors affecting the SEC prescribed methodology in calculating pension values, which were beyond our control, anomalous pension values that resulted in no realized benefit in 2014 to our named executives were required to be reported in the Summary Compensation Table and the Pension Benefits Table. The first factor was a change in the discount rate reflecting record low interest rates. Long-term high quality corporate bond rates, which are the basis used to establish discount rates, ranged between 3.38% and 8.69% over the last 20 years. As a result of these low interest rates, the discount rate at the end of 2014 used to measure our pension benefits was a near record low 4.07%. The greater the decrease in the discount rate (as in 2014), the greater the increase in reported pension values. The second factor was the release by the Society of Actuaries of the new mortality tables projecting longer life expectancies, and longer life expectancies will necessarily increase the reported pension values. The third factor was attributable to the passage of time (i.e., natural growth as participants are one year closer to retirement), which will also cause an increase in the reported pension values.

The impact of these factors on the values required to be reported in the Change in Pension Value column and the Compensation Total column in the Summary Compensation Table is reflected below:

Change in Pension Values

 

Executive

  Components of Change in Pension Value
(as reflected in the Summary Compensation Table)
    Alternative Compensation Total for
Summary Compensation Table*
(excluding change in pension value due to
 
  Interest Rates and
Mortality Assumptions
    Passage of Time     Additional Service and
Compensation Growth
   

interest rates, mortality assumptions and

passage of time)

 
         

Chief Executive Officer

  $ 1,300,177      $ 207,795      $ 226,817      $ 6,818,124   
         

Chairman of the Board

  $ 2,400,780      $ 1,100,296      $ 1,047,567      $ 11,560,284   
         

Chief Financial Officer

  $ 18,691      $ 2,116      $ 68,996      $ 3,085,973   
         

Chief Legal
Officer

  $ 276,536      $ 66,036      $ 300,874      $ 2,862,992   
         

Chief Commercial Officer

  $ 151,318      $ 31,449      $ 54,498      $ 2,306,734   

 

* The Alternative Compensation Total constitutes supplemental information and is not intended as a substitute for the information required to be reported in the Summary Compensation Table. Further, Mr. Dugan was not included in this table since he is a new hire and his pension value for 2014 was not impacted by the factors described above.

 

44


Table of Contents

Certain retirement plans are more fully described in “Understanding Our Pension Benefits Table” on page 57.

Employment Agreement

We originally entered into an employment agreement with our Chairman of the Board when he was our Chief Executive Officer in 1997. The Compensation Committee believed that this agreement was necessary for purposes of maintaining consistency with market and past practice and retaining our then Chief Executive Officer. On March 21, 2014, we amended this Agreement for his new position as Executive Chairman which went into effect after the 2014 Annual Meeting of Shareholders. Effective January 31, 2015, Mr. Harvey retired as an employee of CONSOL, but retained his role as Chairman of the Board. Upon his retirement, Mr. Harvey’s employment agreement no longer governed his compensation arrangements with the Corporation. Mr. Harvey’s compensatory arrangements were modified to provide for: (i) a $675,000 annual cash retainer and (ii) a $150,000 annual non-employee director equity retainer in the form of RSUs. For additional information regarding Mr. Harvey’s retirement, see “Understanding Our Change in Control and Employment Termination Tables” on page 67.

Change in Control Agreements

We have change in control agreements with each of our named executives who are currently employed by us (which we refer to as “CIC Agreements”). Under the CIC Agreements, each named executive will receive severance benefits if such person’s employment is terminated or constructively terminated after, or in connection with, a change in control (as defined in the respective CIC Agreements) if such named executive enters into a general release of claims reasonably satisfactory to us (i.e., a double trigger agreement). Under these circumstances, these named executives would be entitled to receive a lump sum cash severance payment equal to a multiple of base pay plus a multiple of incentive pay (as defined in their respective CIC Agreements) as follows:

 

Named Executive(1)

   Multiple of Base Salary
and Incentive Pay
 

Chief Executive Officer

     2.5   

Chief Financial Officer

     2.0   

Chief Legal Officer

     2.0   

Chief Commercial Officer

     2.0   

Chief Operating Officer – E&P

     2.0   

 

(1) 

In connection with Mr. Harvey’s voluntary retirement, he would no longer be eligible for severance pay under his CIC Agreement.

Additionally, benefits would be continued for 24 to 30 months (as set forth in the CIC Agreement) and equity grants would accelerate and vest in connection with a change in control. The Compensation Committee believes that providing change in control benefits in each of the CIC Agreements and equity award agreements will motivate executives to take actions that are in the best interests of CONSOL and its shareholders and reduce the distraction regarding the impact of such a transaction on the personal situation of an executive. To protect our business interests, the CIC Agreements and equity award agreements also contain confidentiality obligations, a one-year non-competition covenant and a two-year non-solicitation covenant. Additional terms of these agreements are more fully described in “Understanding Our Change in Control and Employment Termination Tables” on page 67 .

In connection with the Compensation Committee’s objective to provide compensation opportunities that will attract and retain superior executive personnel who will make significant contributions to CONSOL, our CIC Agreements that were entered into prior to 2009 provide for tax gross-ups in the event of a change in control (Messrs. Khani’s, Dugan’s and Grech’s agreements, entered into more recently, do not contain tax gross-ups). If it is determined that any payment or distribution by CONSOL or CNX Gas (in the case of our Chief Executive Officer and Chief Legal Officer) to or for the disqualified person’s benefit would constitute an “excess parachute payment,” CONSOL or CNX Gas (in the case of our Chief Executive Officer and Chief Legal Officer) will pay to the disqualified person a gross-up payment, subject to certain limitations, such that the net amount retained by the disqualified person after deduction of any excise tax imposed under Section 4999, and any tax imposed upon the gross-up payment, will be equal to the excise tax on such payments or distributions. In connection with incorporating gross-up provisions in the CIC agreements entered into prior to 2009, the Compensation Committee determined that such gross-up payments were consistent with general market practice at that time such that each executive would receive the intended level of severance benefits unencumbered by the 20% excise tax. It is CONSOL’s policy not to provide tax gross-ups in future CIC Agreements (as is the case with the more recent agreements with Messrs. Khani, Dugan and Grech).

 

45


Table of Contents

Clawback Policy

The Compensation Committee and Board approved the adoption of an executive compensation clawback policy providing that the Committee may seek to recover performance-based cash and equity incentive compensation awarded in 2014 and thereafter which was paid to an executive officer in the three years prior to a restatement as a result of CONSOL’s material non-compliance with the financial reporting requirements of the securities laws if such officer is responsible for such restatement and the amount paid to the officer would have been lower had it been calculated based on such restated financial statements.

Stock Ownership Guidelines for Executives

The stock ownership guidelines provide that all employees designated as officers for purposes of the policy should own shares of the Corporation’s stock, the value of which is a multiple of that employee’s base salary. The guidelines provide each officer with a five-year period from their appointment as an officer to achieve the applicable ownership level. Shares issuable upon the exercise of stock options or settlement of PSUs held by an individual are not counted for purposes of determining whether an individual has satisfied the ownership guideline requirement which is as follows:

 

Named Executive(1)

   Multiple of Base Salary      Actual Ownership
Multiple of Base Salary(2)
 

Chief Executive Officer

     5.5         24.83   

Chief Financial Officer

     3.5         6.65   

Chief Legal Officer

     2.5         12.18   

Chief Commercial Officer

     2.5         6.45   

Chief Operating Officer–E&P

     2.5         4.93   

 

(1) The Chairman of the Board is subject to the stock ownership guidelines applicable to the non-employee directors on the Board.

 

(2) Based on the Corporation’s 200-day average rolling stock price per share ending February 27, 2015 of $38.24.

Our stock ownership guidelines were implemented by the Compensation Committee in order to further align our named executives’ interests with those of our shareholders and to comply with best practices. CONSOL reviews compliance with the stock ownership guidelines annually. As of March 1, 2015, all of our named executives had satisfied their stock ownership guidelines or are expected to within the five-year period.

No Hedging/Pledging Policy

Our Insider Trading Policy prohibits directors, officers and employees from engaging in any of the following activities with respect to securities of CONSOL (except as otherwise may be approved in writing by the General Counsel): (i) purchases of CONSOL stock on margin; (ii) short sales; (iii) buying or selling options (other than those granted by CONSOL), including buying or selling puts or calls or other hedging transactions with CONSOL securities; or (iv) pledging CONSOL stock (provided, however, that brokerage account agreements may grant security interests in securities held at the broker to secure payment and performance obligations of the brokerage account holder in the ordinary course).

Stock Retention Requirements

In December 2012, the Committee implemented stock retention requirements for CONSOL Stock Unit awards granted after December 31, 2012 to provide that 50% of the shares relating to such awards must generally be held until the earlier of (i) ten years from the time of award share settlement or (ii) normal retirement. Additionally, the Compensation Committee approved that, for regular annual cycle three-year vesting PSU and RSU awards granted after December 31, 2014, such awards will include a provision which provides that 50% of vested shares (after tax) must be held until the earlier of: (i) 10 years from grant or (ii) age 62.

Perquisites

We provide our named executives and other senior officers with perquisites that we believe are reasonable, competitive and consistent with CONSOL’s compensation program. Our principal perquisite programs include the personal use of the corporate aircraft in accordance with the terms and conditions of the Aircraft Policy (described

 

46


Table of Contents

below), country club memberships, financial planning assistance, de minimis personal usage of company purchased event tickets and a vehicle allowance. These programs are more fully described in the footnotes to the Summary Compensation Table and “Understanding Our Summary Compensation and Grants of Plan-Based Awards Tables” on page 52. In early 2009, management and our Board collectively decided to eliminate tax gross-ups on CONSOL-provided perquisite programs for our named executives.

Tax, Accounting, and Regulatory Considerations

We consider the effect of tax, accounting and other regulatory requirements in designing and implementing our compensation programs, and while these factors may impact plan designs, ultimately decisions reflect the pay strategy of the Corporation and program intent.

With some exceptions, Section 162(m) of the Code limits CONSOL’s deduction for compensation in excess of $1 million paid to certain covered employees (generally our Chief Executive Officer and the three next highest-paid executive officers). Compensation paid to covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. Awards made under our STIC and PSU awards are structured to comply with Section 162(m) of the Code to maximize tax deductions for our shareholders. For a description of the Section 162(m) components of our 2014 STIC and 2012-2014 PSU programs, see Appendix A.

Although the Compensation Committee strives to provide the named executives with compensation packages that will preserve deductibility of significant components of those packages to the extent reasonably practicable or consistent with our compensation objectives, the Committee believes that shareholder interests are best served by not restricting the Committee’s flexibility in structuring, determining and ultimately approving payment with respect to these compensation programs (even if the programs or such decisions may result in certain non-deductible compensation).

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with CONSOL’s management and, based upon such review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement. The Compensation Committee’s charter is available on our website at www.consolenergy.com.

Members of the Compensation Committee:

              Alvin R. Carpenter, Chairman

              Philip W. Baxter

              Gregory A. Lanham

              John T. Mills

              William N. Thorndike, Jr.

              Joseph T. Williams

The foregoing Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of CONSOL under the Securities Act of 1933 or the Exchange Act, except to the extent that the Corporation specifically incorporates the Report by reference therein.

COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO CONSOL’S RISK MANAGEMENT

Our compensation program is designed to motivate and reward our employees and executive officers for their performance during the fiscal year and over the long-term and for taking appropriate business risks.

In January 2015, the Compensation Committee reviewed an assessment of the risks, if any, to CONSOL associated with our compensation policies and practices. The Compensation Committee, with management, reviewed and discussed the design features, characteristics, performance metrics and approval mechanisms for all of our various compensation components, to determine whether any of our compensation policies or programs could create risks that would be reasonably likely to have a material adverse effect on the Corporation. The assessment was also reviewed

 

47


Table of Contents

by our Internal Auditors and Human Resources Department. Based on this review, management, the Compensation Committee and the full Board identified the following risk mitigating components, which, in their opinion, would be likely to reduce incentives for excessive risk-taking and mitigate any incentives to maximize short-term results at the expense of long-term value:

 

   

Balanced Pay Mix: The target compensation mix of our executive officers is heavily weighted towards long-term incentive compensation.

 

   

Mix of Performance Metrics: We do not rely on a single performance metric to determine payouts for performance-based awards. Instead, performance targets are tied to a variety of metrics, including Safety, EBITDA, ROCE, and TSR. Performance-based awards are also based, in part, on the achievement of strategic and operational objectives in addition to the foregoing metrics.

 

   

Calculation and Verification of Performance: Controls are in place to ensure accuracy of calculations as to actual performance against metrics. In cases where management determines performance scores, the Compensation Committee (and the independent members of the Board with respect to the CEO) generally reviews and makes judgments regarding these determinations.

 

   

Cap on Incentive Payouts: Our incentive programs use financial measures with sliding scales, with amounts, if potentially earned, interpolated between threshold, target and maximum. Payouts are capped at a percentage of the target award to protect against excessive payouts.

 

   

Performance Period and Vesting Schedules: The performance period and vesting schedules for long-term incentives overlap and, therefore, reduce the motivation to maximize performance in any one period.

 

   

Stock Ownership and Retention Guidelines: As it relates to our executives, these policies require our named executives to own equity in the Corporation and retain shares of the Corporation acquired through equity grants for the long-term.

Based on its review of the Corporation’s internal controls and the risk mitigating components of the Corporation’s compensation programs identified in the management team’s risk assessment, together with the assistance of its outside compensation consultant, it was determined that the Corporation’s compensation policies and practices do not encourage our executives or our other non-executive employees to take excessive risks that are reasonably likely to have a material adverse effect on the Corporation.

 

48


Table of Contents

SUMMARY COMPENSATION TABLE – 2014, 2013 AND 2012

The following table discloses the compensation for Mr. DeIuliis, the current principal executive officer of CONSOL, Mr. Harvey, the former principal executive officer of CONSOL, Mr. Khani, the principal financial officer of CONSOL, and the other three most highly compensated executive officers of CONSOL serving at fiscal year-end 2014: Mr. Johnson, the Chief Legal Officer, Mr. Grech, the Chief Commercial Officer, and Mr. Dugan, Chief Operating Officer – E&P.

In reviewing the Summary Compensation Table, it should be noted that the values in the Change in Pension Value column for 2014 were principally attributable to factors beyond our control and those factors resulted in no realized benefit in 2014 to our named executives. When we eliminate the effect of these factors, Messrs. DeIuliis’ and Harvey’s total compensation for 2014 would have been $6,818,124 and $11,560,284, as opposed to $8,326,097 and $15,061,360, respectively. Total compensation for certain other named executives was also affected by higher change-in-pension values, again, primarily attributable to the above-referenced external factors. See page 30 of the “Compensation Discussion and Analysis”.

 

Name and

Principal Position
(a)

  Year
(b)
    Salary
(c)
    Bonus
(d)
    Stock
Awards(1)
(e)
    Option
Awards(2)
(f)
    Non-Equity
Incentive
Compensation(3)
(g)
   

Change in
Pension

Value

and
Nonqualified
Deferred
Compensation
Earnings(4)
(h)

    All Other
Compensation(5)
(i)
    Total
(j)
 

Nicholas J. DeIuliis(6)

    2014      $ 738,500      $ -      $ 4,018,389 (7)    $ -      $   1,776,000      $   1,734,790      $ 58,418 (8)    $ 8,326,097   

President and Chief

    2013      $ 721,635      $   362,500 (17)    $ 3,493,687      $ -      $ 1,074,000      $ -      $ 71,450      $ 5,723,272   

Executive Officer

    2012      $ 690,000      $ -      $ 2,472,223      $ 791,070      $ 1,225,000      $ 1,419,596      $ 66,010      $ 6,663,899   
                   

J. Brett Harvey(6)

    2014      $ 843,269      $ -      $ 6,591,492 (9)    $ -      $ 2,928,000      $ 4,548,643      $   149,956 (10)    $   15,061,360   

Chairman and

    2013      $   1,000,000      $ -      $ 9,809,214      $ -      $ 2,386,000      $ 1,771,205      $ 204,073      $ 15,170,492   

Former Chief

    2012      $ 1,018,077      $ -      $   10,308,263      $ -      $ 2,823,392      $ 3,374,425      $ 177,286      $ 17,701,443   

Executive Officer 

                                   
                   

David M. Khani

    2014      $ 489,000      $ -      $ 1,797,637 (11)    $ -      $ 686,000      $ 89,804      $ 44,339 (12)    $ 3,106,780   

Chief Financial

Officer

    2013      $ 472,308      $ 240,000 (17)    $ 537,490      $ -      $ 425,000      $ 45,277      $ 40,440      $ 1,760,515   
                   

Stephen W. Johnson

    2014      $ 459,000      $ -      $ 1,462,508 (13)    $ -      $ 598,000      $ 643,446      $ 42,610 (14)    $ 3,205,564   

Chief Legal Officer

    2013      $ 443,269      $ 275,000 (17)    $ 911,584      $ -      $ 380,000      $ 21,856      $ 40,440      $ 2,072,149   
                   

James C. Grech

    2014      $ 379,000      $ -      $ 1,334,773 (15)    $ -      $ 494,000      $ 237,265      $ 44,463 (16)    $ 2,489,501   

Chief Commercial

Officer

    2013      $ 360,865      $ 185,000 (17)    $ 354,756      $ -      $ 285,000      $ -      $ 99,582      $ 1,285,203   
                   

Timothy C. Dugan

    2014      $ 369,846      $ 100,000 (18)    $ 1,450,000      $ -      $ 457,000      $ 53,527      $ 122,106 (19)    $ 2,552,479   

Chief Operating

Officer – E&P

                                                                       

 

  (1) The values set forth in this column reflect awards of RSUs and PSUs (including CONSOL Stock Units), and are based on the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718. For RSUs and PSUs, the grant date fair value is computed based upon the closing price of CONSOL’s stock on the date of grant, except that for PSUs, there is an adjustment based on estimated probability that the performance conditions required for vesting will be achieved and an adjustment for the valuation of the market condition which is in accordance with FASB ASC Topic 718. A discussion of the relevant assumptions made in the valuation of these awards is provided in Note 19 of the 2014 Annual Report. The values do not correspond to the actual value that will be recognized by the named executives at the time such units vest.

 

  (2) The value set forth in this column is based on the aggregate grant date fair value of the stock option award computed in accordance with FASB ASC Topic 718. A discussion of the relevant assumptions made in the valuation of this award is stated in the financial statements included in CONSOL’s Annual Report on Form 10-K for the year ended December 31, 2012 (Note 18). The value does not correspond to the actual value that will be recognized by the named executive at the time that the option vests and becomes exercisable.

 

  (3) Includes cash incentives earned in the applicable year under the CONSOL STIC and Non-Executive STIC. The relevant performance measures underlying the cash awards were satisfied in the applicable annual performance period.

 

  (4) Amounts reflect the actuarial increase in the present value of the named executive’s benefits under the CONSOL Employee Retirement Plan, the CONSOL Retirement Restoration Plan, the CONSOL Supplemental Retirement Plan and the Defined Contribution Restoration Plan (the “New Restoration Plan”). These amounts were determined using the interest rate and mortality assumptions set forth in the financial statements of CONSOL’s applicable Annual Reports on Form 10-K (Note 16 in the 2014 Annual Report for the 2014 amount, Note 16 in the 2013 Annual Report for the 2013 amount and Note 15 in the 2012 Annual Report for the 2012 amount). For Messrs. DeIuliis and Grech, zero is shown for 2013 because the actual change in pension value was a decrease in the amounts of $620,497 and $67,094, respectively. The change in pension values from 2013 to 2014 were primarily attributable to the following factors, which were beyond our control: changes in interest rates, mortality assumptions and the passage of time, as set forth on page 44 of the “Compensation Discussion and Analysis”.

 

49


Table of Contents
  (5) On April 6, 2009, CONSOL filed a Form 8-K stating that it would no longer provide tax gross-ups to its officers, as defined under Section 16 of the Exchange Act, in connection with company-maintained perquisite programs. In 2014, none of the named executives used tickets purchased by the Corporation to attend sporting events or other events in excess of the four ticket de minimis level.

 

  (6) Messrs. DeIuliis and Harvey did not receive any compensation from CONSOL in connection with their Board service in 2014.

 

  (7) Includes the target amount of Mr. DeIuliis’ PSU award for 2014. The maximum amount is $4,433,334. This value does not correspond to the actual value that may be recognized by Mr. DeIuliis.

 

  (8) Mr. DeIuliis’ additional personal benefits for 2014 include: an annual vehicle allowance, annual physical exam, country club membership, luncheon and city club dues, and financial planning. On occasion, Mr. DeIuliis had one or more guests accompany him on the airplane. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan.

 

  (9) Includes the target amount of Mr. Harvey’s PSU award for 2014. The maximum amount is $6,250,000. This value does not correspond to the actual value that may be recognized by Mr. Harvey.

 

(10) Mr. Harvey’s personal benefits for 2014 include: an annual vehicle allowance, annual physical exam, country club membership, luncheon and city club dues, financial planning and $5,000 for a one-time payment relating to the elimination of retiree medical benefits. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan and $75,972 for personal air travel on the Corporation’s airplane. The aggregate incremental cost of Mr. Harvey’s personal use of the corporate aircraft is determined on a per flight basis and includes the cost of fuel used, the cost of onboard catering, landing fees, trip related hangar and parking costs, crew expenses (including hotel lodging and meals) and other variable costs specifically incurred. On occasion, Mr. Harvey had one or more guests accompany him on the airplane. Mr. Harvey has also used administrative and other staff for personal matters, for which there has been no additional incremental cost to the Corporation.

 

(11) Includes the target amount of Mr. Khani’s PSU award for 2014. The maximum amount is $1,000,000. This value does not correspond to the actual value that may be recognized by Mr. Khani.

 

(12) Mr. Khani’s personal benefits for 2014 include: an annual vehicle allowance, annual physical exam, luncheon and city club dues and financial planning. On occasion, Mr. Khani had one or more guests accompany him on the Corporation’s airplane. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan.

 

(13) Includes the target amount of Mr. Johnson’s PSU award for 2014. The maximum amount is $1,440,000. This value does not correspond to the actual value that may be recognized by Mr. Johnson.

 

(14) Mr. Johnson’s personal benefits for 2014 include: an annual vehicle allowance, annual physical exam and financial planning. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan.

 

(15) Includes the target amount of Mr. Grech’s PSU award for 2014. The maximum amount is $666,666. This value does not correspond to the actual value that may be recognized by Mr. Grech.

 

(16) Mr. Grech’s personal benefits for 2014 include: an annual vehicle allowance, annual physical exam, country club membership, and financial planning. On occasion, Mr. Grech had one or more guests accompany him on the Corporation’s airplane. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan.

 

(17) Bonuses awarded in connection with the Murray Transaction.

 

(18) Mr. Dugan received $100,000 as a cash signing bonus when he joined CONSOL on January 27, 2014.

 

(19) Mr. Dugan’s personal benefits for 2014 include: an annual vehicle allowance, financial planning, $77,769 worth of transfer assistance and certain associated tax gross-ups. The tax gross-ups were prior to Mr. Dugan becoming a Section 16 officer. On occasion, Mr. Dugan had one or more guests accompany him on the Corporation’s airplane. The total in column (i) also includes $15,600 in matching contributions made by CONSOL under its 401(k) plan.

 

50


Table of Contents

GRANTS OF PLAN-BASED AWARDS - 2014

The following table sets forth each grant made to a named executive in the 2014 fiscal year under plans established by CONSOL.

 

Name

 

Grant
Date

   

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards

(STIC Awards)(1)

   

Estimated Future Payouts
Under Equity Incentive

Plan Awards

(PSUs)(2)

   

All

Other

Stock

Awards:

Number

of

Shares

of Stock

or Units

(RSUs)(3)

(#)

   

All

Other

Option

Awards:

Number of

Securities

Underlying

Options

(#)

   

Exercise

or Base

Price of

Option

Awards

($/Sh)

   

Grant

Date

Fair

Value of

Stock

and

Option

Awards

(Target)(4)

($)

 
   

 

 

Threshold
($)

   

Target

($)

    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Nicholas J. DeIuliis

    -        444,000        888,000        1,776,000        -        -        -        -        -        -        -   
      1/31/14        -        -        -        29,675        59,349        118,698        -        -        -        $2,547,556   
      1/31/14        -        -        -        -        -        -        29,675        -        -        $1,108,333   
      1/31/14        -        -        -        -        -        -        9,705        -        -        $362,500   

J. Brett Harvey

    -        875,000        1,750,000        3,500,000        -        -        -        -        -        -        -   
      1/31/14        -        -        -        41,835        83,669        167,338        -        -        -        $3,591,492   
      1/31/14        -        -        -        -        -        -        80,322        -        -        $3,000,000   

David M. Khani

    -        171,500        343,000        686,000        -        -        -        -        -        -        -   
      1/31/14        -        -        -        6,694        13,387        26,774        -        -        -        $574,637   
      1/31/14        -        -        -        -        -        -        6,694        -        -        $250,000   
      1/31/14        -        -        -        -        -        -        6,426        -        -        $240,000   
      1/31/14        -        -        -        -        -        -        19,626        -        -        $733,000   

Stephen W. Johnson

    -        149,500        299,000        598,000        -        -        -        -        -        -        -   
      1/31/14        -        -        -        9,639        19,278        38,556        -        -        -        $827,508   
      1/31/14        -        -        -        -        -        -        9,639        -        -        $360,000   
      1/31/14        -        -        -        -        -        -        7,363        -        -        $275,000   

James C. Grech

    -        123,500        247,000        494,000        -        -        -        -        -        -        -   
      1/31/14        -        -        -        4,463        8,925        17,850        -        -        -        $383,106   
      1/31/14        -        -        -        -        -        -        4,463        -        -        $166,667   
      1/31/14        -        -        -        -        -        -        4,953        -        -        $185,000   
      1/31/14        -        -        -        -        -        -        16,065        -        -        $600,000   

Timothy C. Dugan

    -        119,779        239,558        479,115        -        -        -        -        -        -        -   
      1/31/14        -        -        -        -        -        -        28,113        -        -        $1,050,000   
      9/24/14        -        -        -        -        -        -        10,803        -        -        $400,000   

 

(1) Awards were made pursuant to the STIC under the Executive Annual Incentive Plan or the Non-Executive STIC, in the case of Mr. Dugan. Actual incentive plan payments based on fiscal 2014 performance are set forth in column (g) of our Summary Compensation Table above.

 

(2) These columns report the number of PSUs that may be earned pursuant to the awards granted under the Plan. The amounts reflect threshold (50%), target (100%), and maximum (200%) performance levels.

 

(3) Each of the RSU awards was granted under the Plan.

 

(4) The values set forth in this column reflect awards of RSUs and PSUs (at target), and are based on the aggregate grant date fair value of the awards computed in accordance with FASB ASC Top 718. A discussion of the relevant assumptions made in the valuation of these awards is provided in Note 19 of the 2014 Annual Report. The values do not correspond to the actual values that will be recognized by the named executives.

 

51


Table of Contents

UNDERSTANDING OUR SUMMARY COMPENSATION AND GRANTS OF PLAN-BASED AWARDS TABLES

Executive Summary of CONSOL Plans and Agreements with Named Executives

In addition to their base salaries, our executive officers receive a mix of at-risk compensation, both short- and long-term, for their services. Pursuant to various plans which have been adopted by the Corporation, our executive officers are eligible to receive annual cash incentive awards based on the achievement of certain performance targets, stock options, RSUs, and/or PSUs. Executive officers are also entitled to use of the Corporation’s owned and chartered aircraft, subject to certain terms and conditions set forth below. Each of these elements of compensation and the plans under which they are awarded are discussed below in greater detail.

Employment Agreement with our Former Chief Executive Officer

For information regarding Mr. Harvey’s employment agreement, see “Understanding our Change in Control and Employment Termination Tables” on page 67.

STIC

To be eligible to receive an annual award under the STIC, a named executive must be an active, full-time employee on December 31 of the year in which the award was granted, have worked for at least three months of that same year and be an active employee on the date the annual award is paid out unless the named executive is an early, normal or incapacity retiree in which case the named executive must only be an active, full-time employee on December 31 of the year in which the award was granted. For more information on the STIC, see “Compensation Discussion and Analysis” on page 30.

RSUs

RSUs are also granted under our Plan. Our Compensation Committee determines the number of RSUs to be granted to each participant, the duration of such awards, the conditions under which the RSUs may be forfeited to CONSOL, and the other terms and conditions of such awards. RSUs are structured to comply with Section 409A of the Code. Accordingly, distributions shall be made only upon a permissible distribution event, including upon separation from service. The timing and implementation of deferral elections must occur as prescribed by Section 409A of the Code.

PSUs

The PSU awards, including the CONSOL Stock Unit awards, represent a contingent right to receive shares of CONSOL common stock to the extent such units are earned and become payable pursuant to the terms of the Plan and related award documents. For more information on the PSU awards, see “Compensation Discussion and Analysis” on page 30.

Aircraft Policy

We have a policy titled the “Use of Corporate-Owned or -Leased or Chartered Aircraft” (the “Aircraft Policy”). To best utilize the time of directors, executive officers and members of management and to address potential security concerns, we own, lease and charter aircraft for use by our directors, executives, members of management and their spouses in connection with business travel. To comply with applicable laws and prevent any abuse of this aircraft by having it used for personal reasons, we have instituted the Aircraft Policy, which sets forth detailed procedures by which a person may use CONSOL-owned or -leased aircraft and chartered aircraft including, without limitation, the requirement that the user complete a request form which details such person’s trip and a description of the business activities, accompanying persons and, in the case of CONSOL-owned or -leased aircraft, the prior approval of our Chief Executive Officer on trips for which he is not present. In the case of flights on which our Chief Executive Officer is present, the flight manifest is approved by our Chief Financial Officer and Chief Legal Officer. The Aircraft Policy also informs any user of CONSOL-owned or -leased or chartered aircraft that such use could result in imputed income, as a taxable employee benefit, to the director(s), executive(s) or member(s) of management under federal tax regulations relating to the non-business use of aircraft.

 

52


Table of Contents

Time Sharing Agreement

On May 1, 2007, the Corporation entered into a Time Sharing Agreement (the “Time Sharing Agreement”) with Mr. Harvey. The Time Sharing Agreement provides that CONSOL will, from time to time, lease its Gulfstream Aerospace G-II59 aircraft (the “Aircraft”) to Mr. Harvey with a flight crew for the operation thereof, as and when required by Mr. Harvey, so long as the Aircraft is not otherwise employed on behalf of the Corporation. Mr. Harvey’s use of the aircraft will constitute a non-exclusive lease and the Time Sharing Agreement will only be applicable in instances in which the Corporation seeks partial reimbursement of Aircraft-related costs. Pursuant to the Time Sharing Agreement, Mr. Harvey has agreed that the rates to be charged for any particular flight (round-trip between Pittsburgh, Pennsylvania and Toronto, Canada) will be $1,500 per round-trip flight unless otherwise modified by the Chairman of the Compensation Committee in compliance with the Time Sharing Agreement and applicable law. The Corporation has the right to charge Mr. Harvey on a flight-by-flight basis up to an amount which equals the cost of: (i) fuel, oil, lubricants, and other additives; (ii) travel expenses of the crew; (iii) hangar and tie-down costs away from the Aircraft’s base of operation; (iv) insurance obtained for the specific flight; (v) landing fees, airport taxes, and similar assessments; (vi) customs, foreign permit, and similar fees directly related to the flight, if applicable; (vii) in-flight food and beverages; (viii) passenger ground transportation; (ix) flight planning and weather contract services; and (x) an additional charge equal to 100% of the expenses listed in (i) above.

CONSOL is also obligated to provide and maintain aircraft third party aviation legal liability insurance under the Time Sharing Agreement, naming Mr. Harvey as an additional insured and to indemnify and agree to hold Mr. Harvey harmless from and against any and all liabilities, claims, demands, suits, judgments, damages, losses, costs and expenses (including reasonable legal expenses and attorneys’ fees) arising in connection with the Aircraft. The Time Sharing Agreement terminated by its terms when Mr. Harvey retired as an executive of CONSOL in January 2015.

 

53


Table of Contents

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END – 2014

The following table sets forth all unexercised options, and unvested RSU, PSU and CONSOL Stock Unit awards that have been awarded to our named executives by CONSOL and were outstanding as of December 31, 2014.

 

     Option Awards     Stock Awards  

Name

(a)

 

Number of
Securities
Underlying
Unexercised

Options

(#)
(Exercisable)
(b)

   

Number of
Securities
Underlying
Unexercised
Options

(#)
(Unexercisable)
(c)

   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

Options

(d)

   

Option
Exercise
Price

(e)

   

Option
Expiration
Date

(f)

   

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)

(g)

   

Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested(1)
($)

(h)

   

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(2)
(#)

(i)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(1)
($)

(j)

 

Nicholas J. DeIuliis

    48,072 (3)      -        -        27.900        2/17/2019        -        -        -        -   
      35,589 (4)      -        -        50.500        2/16/2020        -        -        -        -   
      152,046 (5)      -        -        45.050        6/15/2020        -        -        -        -   
      34,177 (6)      -        -        48.610        2/23/2021        -        -        -        -   
      35,252 (7)      17,627 (7)      -        35.820        3/01/2022        -        -        -        -   
      -        -        -        -        -        46,738 (8)      1,580,212        -        -   
      -        -        -        -        -        71,893 (9)      2,430,702        -        -   
      -        -        -        -        -        -        -        165,176        5,584,601   

J. Brett Harvey

    42,354 (10)      -        -        32.785        2/24/2016        -        -        -        -   
      131,318 (11)      -        -        44.100        5/02/2016        -        -        -        -   
      41,163 (12)      -        -        34.850        2/20/2017        -        -        -        -   
      136,352 (12)      -        -        34.850        2/20/2017        -        -        -        -   
      89,885 (13)      -        -        78.650        2/19/2018        -        -        -        -   
      211,566 (3)      -        -        27.900        2/17/2019        -        -        -        -   
      132,373 (4)      -        -        49.910        2/19/2020        -        -        -        -   
      243,273 (5)      -        -        45.050        6/15/2020        -        -        -        -   
      75,949 (6)      -        -        48.610        2/23/2021        -        -        -        -   
      -        -        -        -        -        80,820 (8)        2,732,524        -        -   
      -        -        -        -        -         334,324 (9)      11,303,454        -        -   
      -        -        -        -        -        -        -        380,300        12,857,943   

David M. Khani

    4,990 (7)      2,497 (7)      -        35.820        3/01/2022        -        -        -        -   
      -        -        -        -        -        14,204 (8)      480,237        -        -   
      -        -        -        -        -        19,746 (14)      667,612        -        -   
      -        -        -        -        -        5,084 (9)      171,890        -        -   
      -        -        -        -        -        -        -        29,687        1,003,717   

Stephen W. Johnson

    18,806 (3)      -        -        27.900        2/17/2019        -        -        -        -   
      12,193 (4)      -        -        50.500        2/16/2020        -        -        -        -   
      60,819 (5)      -        -        45.050        6/15/2020        -        -        -        -   
      13,722 (6)      -        -        48.610        2/23/2021        -        -        -        -   
      13,478 (7)      6,741 (7)      -        35.820        3/01/2022        -        -        -        -   
      -        -        -        -        -        19,825 (8)      670,283        -        -   
      -        -        -        -        -        13,738 (9)      464,482        -        -   
      -        -        -        -        -        -        -        46,911        1,586,061   

 

54


Table of Contents
     Option Awards     Stock Awards  

Name

(a)

 

Number of
Securities
Underlying
Unexercised

Options

(#)
(Exercisable)
(b)

   

Number of
Securities
Underlying
Unexercised
Options

(#)
(Unexercisable)
(c)

   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

Options

(d)

   

Option
Exercise
Price

(e)

   

Option
Expiration
Date

(f)

   

Number of
Shares or
Units of
Stock That
Have Not
Vested (#)

(g)

    Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested(1)
($) (h)
   

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(2)
(#)

(i)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(1)
($)

(j)

 

James C. Grech

    2,464 (15)      -        -        22.750        5/03/2015        -        -