DEF 14A 1 d821961ddef14a.htm DEF 14A DEF 14A
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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

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The Williams Companies, Inc.
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  NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  

 

 

 

Notice of the 2020 Annual Meeting of Stockholders

Date, Time, and Place

 

Tuesday, April 28, 2020 at 2:00 p.m. CDT

Williams Resource Center Theater, One Williams Center, Tulsa, Oklahoma 74172

Record Date

 

Close of business on February 28, 2020. Stockholders of record at such time will be entitled to receive notice of and to vote at the annual meeting.

Agenda

 

At the annual meeting, you will be asked to:

1.

Elect the 11 director nominees identified in the proxy statement;

2.

Approve the amendment to The Williams Companies, Inc. 2007 Incentive Plan;

3.

Approve the amendment to The Williams Companies, Inc. 2007 Employee Stock Purchase Plan;

4.

Approve, on an advisory basis, the Company’s executive compensation;

5.

Ratify the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2020; and

6.

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

The Board unanimously recommends that you vote FOR each of the director nominees and FOR each of proposals 2-5 above.

Voting

 

Even if you intend to be present at the annual meeting, please promptly vote by proxy in one of the following ways so that your shares of common stock may be represented and voted at the annual meeting:

 

Call the toll-free telephone number;

 

Vote via the Internet; or

 

If you received a printed version of the proxy materials, mark, sign, date, and return the enclosed proxy card in the enclosed postage-paid envelope.

For instructions on voting, please see the “Questions and Answers About the Annual Meeting and Voting” section of the proxy statement, refer to the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a printed version of the proxy materials by mail, on the enclosed proxy card.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 28, 2020: The proxy statement and our 2019 Annual Report, which includes a copy of our annual report on Form 10-K, are available at www.edocumentview.com/wmb.

Please refer to the proxy statement for the 2020 Annual Meeting of Stockholders for more information, including a detailed explanation of the matters being submitted to a vote of the stockholders.

By Order of the Board of Directors,

 

LOGO

Robert E. Riley, Jr.

Corporate Secretary

March 19, 2020

 

The Williams Companies, Inc. – 2020 Proxy Statement        


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Proxy Statement

We are providing this proxy statement as part of a solicitation by the Board of Directors (the “Board”) for use at our 2020 Annual Meeting of Stockholders and at any adjournment or postponement thereof, which may be necessary due to a national emergency, or any other reason, that makes the Company unable to hold the meeting on the date or the place as planned. We will hold the meeting in the Williams Resource Center Theater, One Williams Center, Tulsa, Oklahoma 74172 on Tuesday, April 28, 2020, at 2:00 p.m., Central Daylight Time. We expect to mail to stockholders or otherwise make available this proxy statement and accompanying proxy card beginning on March 19, 2020.

Unless the context otherwise requires, all references in this proxy statement to “Williams,” the “Company,” “we,” “us,” and “our” refer to The Williams Companies, Inc. and its consolidated subsidiaries.

 

PROXY STATEMENT SUMMARY

     1  

CORPORATE GOVERNANCE AND BOARD MATTERS

     2  

Corporate Governance

     2  

Environmental, Social, and Governance (ESG) Matters

     7  

Board and Committee Structure and Meetings

     10  

PROPOSAL 1: ELECTION OF DIRECTORS

     16  

Director Nominee Experience and Qualifications

     16  

Director Nominee Matrix: Skills, Experience, and Attributes

     18  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     25  

COMPENSATION DISCUSSION AND ANALYSIS

     27  

Our Commitment to Pay for Performance

     27  

2019 Business Overview

     29  

Compensation Summary

     32  

Objective of Our Compensation Programs

     32  

Our Pay Philosophy

     33  

Our Commitment to Pay for Performance

     34  

2019 Comparator Group

     34  

Determining Our Comparator Group

     34  

How We Use Our Comparator Group

     34  

Our Pay Setting Process

     35  

How We Determine the Amount for Each Type of Pay

     37  

Base Pay

     37  

Annual Cash Incentives

     37  

Long-Term Incentives

     42  

Benefits

     45  

Additional Components of Our Executive Compensation Program

     46  

Mitigating Risk

     47  

Accounting and Tax Treatment

     48  

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     49  

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     49  

EXECUTIVE  COMPENSATION AND OTHER INFORMATION

     50  

2019 Summary Compensation Table

     50  

Grants of Plan Based Awards

     52  

Outstanding Equity Awards

     53  

Option Exercises and Stock Vested

     54  

Retirement Plan

     54  

Pension Plan

     55  

Retirement Restoration Plan

     55  

Pension Benefits

     56  

Nonqualified Deferred Compensation

     56  

Change in Control Agreements

     56  

Termination Scenarios

     58  

COMPENSATION OF DIRECTORS

     61  

Director Compensation for Fiscal Year 2019

     62  

Outstanding Awards as of Fiscal Year End 2019

     63  

EQUITY COMPENSATION STOCK PLANS

     64  

Securities Authorized for Issuance under Equity Compensation Plans

     64  

REPORT OF THE AUDIT COMMITTEE

     65  

PROPOSAL 2: APPROVAL OF THE AMENDMENT TO THE WILLIAMS COMPANIES, INC. 2007 INCENTIVE PLAN

     66  

PROPOSAL 3: APPROVAL OF THE AMENDMENT TO THE WILLIAMS COMPANIES, INC. 2007 EMPLOYEE STOCK PURCHASE PLAN

     74  

PROPOSAL 4: ADVISORY VOTE ON EXECUTIVE COMPENSATION

     78  

PROPOSAL 5: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS

     79  

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

     81  

INCORPORATION BY REFERENCE

     86  

WEBSITE ACCESS TO REPORTS AND OTHER INFORMATION

     86  

APPENDIX A: THE WILLIAMS COMPANIES, INC. 2007 INCENTIVE PLAN

     A-1  

APPENDIX B: THE WILLIAMS COMPANIES, INC. 2007 EMPLOYEE STOCK PURCHASE PLAN

     B-1  

APPENDIX C: NON-GAAP MEASURES

     C-1  
 

 

The Williams Companies, Inc. – 2020 Proxy Statement        


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    PROXY STATEMENT SUMMARY    

 

 

 

Proxy Statement Summary

This summary highlights information contained elsewhere in this proxy statement. It does not contain all the information that you should consider. Please read this entire proxy statement carefully before voting.

Agenda and Voting Recommendations

 

     Proposal   Board Vote Recommendation   Page Reference    

No. 1 

 

 

Election of Directors

 

 

FOR

 

  16

 

No. 2 

 

 

Approval of the Amendment to The Williams

Companies, Inc. 2007 Incentive Plan

 

 

FOR

 

  66

 

No. 3 

 

 

Approval of the Amendment to The Williams

Companies, Inc. 2007 Employee Stock Purchase Plan

 

 

FOR

 

  74

 

No. 4 

 

 

Advisory Vote on Executive Compensation

 

 

FOR

 

  78

 

No. 5 

 

 

Ratification of the Appointment of Independent Auditors

 

 

FOR

 

  79

 

Corporate Governance and Structure:

 

 

10 of 11 director nominees, including all Audit Committee and Compensation and Management Development Committee members, are independent;

 

 

The Chairman of the Board is independent of our Chief Executive Officer;

 

 

Non-employee directors meet in executive session at each regularly scheduled Board meeting; and

 

 

The Board conducts an annual strategy session to discuss long-term strategy, risks, and opportunities.

Environmental, Social, and Governance:

 

 

Our Sustainability Report is published on our website;

 

 

We have committed to the ONE Future 2025 methane intensity goals for industry sectors of 0.08% for Gathering and Boosting, 0.11% for Processing, and 0.31% for Transmission and Storage;

 

 

Our Environmental, Health, and Safety Policy provides a safety framework for integrating safety performance into our core business activities; and

 

 

Our Code of Business Conduct is a comprehensive resource governing our ethical concerns and other matters.

Compensation:

 

 

We pay for performance: at target, at least 80% of our named executive officers’ (“NEOs”) compensation is variable based on the Company’s performance;

 

 

At target, 87% of our Chief Executive Officer’s compensation is at risk;

 

 

Our compensation programs are designed to reward officers and employees for strong operational and financial results aligned with our Company’s strategy; and

 

 

Annual equity awards provide the most significant differentiation in pay and performance.

 

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Corporate Governance and Board Matters

Corporate Governance

General

Our Board believes that strong corporate governance is critical to achieving our performance goals and to maintaining the trust and confidence of investors, employees, customers, business partners, regulatory agencies, and other stakeholders.

Corporate Governance Guidelines

Our Corporate Governance Guidelines provide a framework for the governance of Williams and address the operation, structure, and practice of the Board and its committees. The Corporate Governance Guidelines can be found in the Governance section of our website. The Nominating and Governance Committee reviews these guidelines at least annually and recommends changes to the Board as necessary.

Strategic Planning

During the year, the Board meets with management to discuss and approve strategic plans, financial goals, capital spending, and other factors critical to successful performance. The Board also reviews the Company’s long-term strategic planning at least annually and monitors the implementation of the Company’s strategic plan throughout the year. During Board meetings, directors review key issues and financial performance. In 2019, the Board met privately with the CEO and met in executive session at each regular Board meeting and additionally as required. Further, the CEO regularly communicates with the Board regarding the implementation of the Company’s strategic and financial plans.

Board/Committee/Director Evaluations

The Board and each of its committees conduct annual evaluations and self-assessments. The process is reviewed annually by the Nominating and Governance Committee which considers general trends and feedback regarding the prior year’s evaluations. In addition, the Corporate Governance Guidelines and the Nominating and Governance Committee Charter provide that individual directors will be evaluated as necessary.

Chief Executive Officer Evaluation and Management Succession

The Board and the CEO annually discuss and collaborate to set the CEO’s performance goals and objectives. The Board annually meets in executive session to assess the CEO’s performance. The Board, in conjunction with the Compensation and Management Development Committee, maintains a process for planning orderly succession for the CEO and other executive officer positions and oversees executive officer development.

Board Leadership Structure

Pursuant to our By-laws and Corporate Governance Guidelines, the positions of Chairman of the Board and CEO may be held by the same or different persons. At this time, the Board believes that having an independent Chairman of the Board is the most appropriate Board leadership structure. However, the Board has the flexibility to revise this structure based upon its periodic assessment and review of the Company’s needs and leadership. In this regard, Alan S. Armstrong currently serves as our President and CEO, and Stephen W. Bergstrom serves as our Chairman of the Board. The Board believes that having an independent Chairman aids in the Board’s oversight of management and promotes communications among the Board, the CEO, and other members of senior management. In addition, having a separate Chairman of the Board and CEO allows Mr. Armstrong to focus on his responsibilities in managing the Company.

 

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The responsibilities of the Chairman of the Board include:

 

 

presiding over meetings of the Board and executive sessions of the independent directors;

 

 

overseeing the planning of the annual Board calendar and, in consultation with the CEO, scheduling and setting the agendas for meetings of the Board and its committees;

 

 

overseeing the appropriate flow of information to the Board;

 

 

acting as liaison between the independent directors and management;

 

 

assisting the Chairs of the various Board committees in preparing agendas for committee meetings;

 

 

chairing the Company’s annual meeting of stockholders; and

 

 

performing other functions and responsibilities referred to in the Corporate Governance Guidelines or requested by the Board from time to time.

Board Oversight of Williams’ Risk Management Processes

The Board has oversight responsibility regarding the assessment of the major risks inherent in our business. Accordingly, the Board reviews management’s efforts to address and mitigate risks, including strategic, regulatory, compliance, operational, financial, reputational, and cybersecurity risks, among others. The Board reviews risk in the context of discussions, question and answer sessions, and management reports at each regular Board meeting. The Board also evaluates the risks inherent in significant transactions. While the Board is ultimately responsible for risk oversight, the committees of the Board assist it in fulfilling its oversight responsibilities. The Board’s committees do so by considering the risks within their respective areas of expertise. For example:

 

 

The Audit Committee oversees risks involving financial reporting and related internal controls. As part of this process, the Audit Committee meets periodically with management to review, discuss, and provide oversight with respect to our processes and controls, including controls to assess, monitor, manage, and mitigate potential significant risk exposures relating to the integrity of the Company’s financial statements and related compliance with legal and regulatory requirements. In providing such oversight, the Audit Committee may also discuss such processes and controls with our internal and independent auditors.

 

 

The Compensation and Management Development Committee oversees risks associated with compensation program design including by reviewing whether there are risks that are reasonably likely to have a material adverse effect on us. Such committee also addresses risks relating to management development and retention.

 

 

The Environmental, Health, and Safety Committee oversees risk management relating to environmental, health, and safety matters, including oversight of management’s safety-related policies and procedures.

 

 

The Nominating and Governance Committee considers structural governance and composition matters including recommending to the Board the allocation of oversight responsibilities to the Board committees.

At each regular Board meeting, the Board receives reports on significant committee activities. Certain risks, such as cybersecurity, are deemed to be of such importance to the Company that oversight is addressed by the full Board. In addition, risk management is incorporated in the Company’s strategic planning process, which is periodically reviewed by the Board.

Management also plays an important role in implementing the processes and procedures designed to mitigate risk and assisting the Board in the exercise of its oversight function. For example, we use a risk-based prioritization system, involving risk ranking and risk reduction estimates, in evaluating opportunities. This risk prioritization, as well as cost and other inputs, inform the proposed selection of opportunities proposed to the Board to be executed within a budget year. We also have a Chief Ethics and Compliance Officer who oversees our corporate ethics and compliance program (including Federal Energy Regulatory Commission compliance), our Code of Business Conduct training, and compliance with Company policies, standards, and procedures. Our Chief Ethics and Compliance Officer, or his delegee, and the General Counsel report, on an as needed basis, to the Audit Committee regarding Code of Business Conduct matters and calls to our ethics hotline related to accounting and

 

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auditing concerns. Such officers also report throughout the year to the Nominating and Governance Committee regarding all other Code of Business Conduct concerns and calls to our ethics hotline. At least annually, our Chief Ethics and Compliance Officer, or his delegee, and our General Counsel meet with the Nominating and Governance Committee to review the effectiveness of our corporate ethics and compliance program.

Management also periodically engages in a review of the critical risks to the Company and establishes and implements policies and procedures to address and mitigate such risks. For instance, we have a Chief Information Officer who assesses our information security and oversees our enterprise-wide cybersecurity risk management program. Such program includes, among other elements, mandatory cybersecurity training for our employees and third-parties who may have access to our systems, the maintaining of industrial control systems which meet or exceed industry cybersecurity standards, the ongoing evaluation of the threat landscape and, as needed, the engagement of independent, third-party experts. The Chief Information Officer also, at least annually, meets with the Board to present a cybersecurity update, including an analysis of our cybersecurity risk management program’s strengths, weaknesses, opportunities, and cyber threats to the Company.

Executive Sessions of Non-Employee Directors

Non-employee directors meet without management present at each regularly scheduled Board meeting. Additional meetings may be called by the Chairman of the Board in his discretion or at the request of the Board.

Director Independence

Our Corporate Governance Guidelines require that all members of the Board, except our CEO, be “independent” directors as defined by the rules of the New York Stock Exchange (“NYSE”). Our Corporate Governance Guidelines also require that the Board annually determine whether our directors are independent. In evaluating independence, the NYSE’s rules require that the Board affirmatively determine that a director has no material relationship with the Company, either directly or as a partner, shareholder, or officer of an organization that has a relationship with the Company. Certain relationship and transactional standards, including specified dollar and percentage threshold amounts, are also set forth in the NYSE’s independence rules which, if exceeded, would disqualify a director from being independent. Prior to making a recommendation to the Board, our Nominating and Governance Committee considers relationships, which, while not constituting related party transactions in which a director had a direct or indirect material interest, nonetheless involved transactions between the Company and a company with which a director is affiliated, whether through employment status or by virtue of serving as a director. Included in the Nominating and Governance Committee’s review were the following transactions, which occurred in the ordinary course of business. All matters described below fall below the relevant thresholds for independence as set forth in the NYSE’s rules:

 

Director    Matters Considered

Stephen W. Bergstrom

  

Ordinary course business transactions with Third Coast Midstream, LLC (f/k/a American Midstream Partners, LP)

Nancy K. Buese

  

Ordinary course business transactions with Newmont Mining Corporation

Charles I. Cogut

  

Ordinary course business transactions with Air Products & Chemicals, Inc.

Kathleen B. Cooper

  

Ordinary course business transactions with Deutsche Bank Trust Corporation

Vicki L. Fuller

  

Ordinary course business transactions with Fidelity Investments, Inc.

Peter A. Ragauss

  

Ordinary course business transactions with Apache Corp.

William H. Spence

  

Ordinary course business transactions with PPL Corporation

Based on the evaluations performed and recommendations made by the Nominating and Governance Committee, in January 2020, the Board affirmatively determined that each of Mr. Bergstrom, Ms. Buese, Mr. Chazen, Mr. Cogut, Mr. Creel, Ms. Fuller, Mr. Ragauss, Mr. Sheffield, Mr. Smith, and Mr. Spence are independent as defined by the NYSE’s rules. Dr. Cooper, a current director who has reached the Board’s mandatory retirement

 

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age and will not be standing for reelection at the 2020 Annual Meeting of Stockholders, was also determined by the Board to be independent. Mr. Armstrong, our President and CEO, as well as a director, is not independent because of his role as an executive officer of the Company.

In addition to the NYSE’s independence requirements generally applicable to directors, all members of our Audit Committee and Compensation and Management Development Committee must meet heightened independence standards imposed by the NYSE and the Securities and Exchange Commission (“SEC”). Based on evaluations performed and recommendations made by the Nominating and Governance Committee, in January 2020, the Board determined that all members of our Audit Committee and Compensation and Management Development Committee satisfy the heightened independence requirements imposed by the NYSE and the SEC applicable to members of such committees.

Transactions with Related Persons

The Board has adopted written policies and procedures with respect to related person transactions. Any proposed related person transaction involving a director must be reviewed and approved by the full Board. The Nominating and Governance Committee reviews proposed transactions with any other related persons, promoters, and certain control persons that would otherwise be required to be disclosed in our SEC filings. If convening a Nominating and Governance Committee meeting before a related person transaction occurs is impractical, the committee Chair may review the transaction alone.

No director may participate in any review, consideration, or approval of any related person transaction with respect to which such director or any of his or her immediate family members is the related person. The Nominating and Governance Committee or its Chair, or the Board, as the case may be, may approve, in good faith, only those related person transactions that are in, or not inconsistent with, the Company’s best interests and the best interests of our stockholders. In conducting a review of whether a transaction is in, or is not inconsistent with the Company’s best interest and its stockholders, the Nominating and Governance Committee or its Chair, or the Board, as the case may be, will consider, among other things, the benefits of the transaction to the Company, the availability of other sources for comparable products or services, the terms of the transaction, the terms available to unrelated third-parties and to employees generally, and the nature of the relationship between the Company and the related party. There were no transactions that required review or approval by the Nominating and Governance Committee, its Chair, or the full Board in 2019.

Outside Board Service

Our Corporate Governance Guidelines limit the service of our directors on publicly held company boards and investment company boards to no more than four, including our Board, provided that our CEO is limited to service on one non-affiliated public company board.

Majority Vote Standard

The Board has a majority vote standard for the election of directors in uncontested elections. Each of our directors executed an irrevocable resignation that will become effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts such resignation. If a director fails to receive the required votes for election, the Nominating and Governance Committee will act on an expedited basis to determine whether to recommend acceptance of the resignation. The Nominating and Governance Committee will then submit its recommendation for consideration by the Board. The Board will act on the recommendation, and publicly disclose its decision, within 90 days from the certification date of the election results. The Board expects the director whose tendered resignation is under consideration to abstain from participating in any decision regarding that resignation. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to make such recommendation or to accept a director’s tendered resignation. If the Board accepts a director’s resignation, the Nominating and Governance Committee will recommend to the Board whether to fill such vacancy or reduce the size of the Board.

 

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Director Attendance at Annual Meeting of Stockholders

We have a policy that all directors are expected to attend our annual meeting of stockholders. All Board members attended the 2019 Annual Meeting of Stockholders.

Stockholder Engagement

We are committed to ongoing, constructive, and meaningful engagement with our stockholders. During 2019, members of our executive management team attended 15 investor conferences, engaged in two non-deal roadshows where they met with existing and potential stockholders, and hosted our annual analyst day. Presentations from these meetings and conferences are usually posted on the Investor page of our website. Our Board also periodically invites representatives of our large investors to present at our Board meetings where such representatives may share their perspectives on the Company and our industry. Investors occasionally travel to our headquarters and meet with our management. We also regularly engage with investors concerning environmental, social, and governance (“ESG”) matters. These various engagements allow us to receive in-person feedback concerning our operational, financial, and strategic results, as well as ESG matters important to stockholders.

In addition, we host a quarterly earnings call during which our executive management team responds to analyst questions regarding both historical results and forward-looking information. Transcripts of our quarterly earnings calls, including the question and answer sessions, are posted to our website. In addition to the required reports which we file with the SEC, we make available on our website earnings analyst packages, investor presentations, and other reports with supplementary financial and operational information, including our Sustainability Report which contains ESG-related information. In addition to having a dedicated Investor Relations group which receives and responds to stockholder telephone calls and other communications, we also provide a means for stockholders to communicate directly with our Board, as provided under “Communications with Directors” below.

Communications with Directors

Any stockholder or other interested party may communicate with our directors, individually or as a group, by contacting our Corporate Secretary or our Chairman of the Board. The contact information is maintained through the Investors page of our website at www.williams.com.

The current contact information is as follows:

 

The Williams Companies, Inc.

   The Williams Companies, Inc.

One Williams Center, MD 49

   One Williams Center, MD 47

Tulsa, Oklahoma 74172

   Tulsa, Oklahoma 74172

Attn: Chairman of the Board

   Attn: Corporate Secretary

Communications will be forwarded to the relevant director(s) except for solicitations or other matters not related to the Company.

Code of Ethics

Our Code of Business Conduct is applicable to all employees, including our CEO, Chief Financial Officer, and Chief Accounting Officer, as well as our directors.

How to Obtain Copies of our Governance-Related Documents

The following documents are available through the Investors page of our website at www.williams.com:

 

 

Corporate Governance Guidelines;

 

 

Williams Code of Business Conduct; and

 

 

Charters for the Audit Committee, the Compensation and Management Development Committee, the Nominating and Governance Committee, and the Environmental, Health and Safety Committee.

 

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If you prefer to receive printed copies of these documents, please send a written request to our Corporate Secretary at The Williams Companies, Inc., One Williams Center, MD 47, Tulsa, Oklahoma 74172.

Prohibition on Employee, Officer and Director Hedging

As part of our Williams Policy on Securities Trading, we prohibit employees (including officers) and directors (“Covered Persons”) (i) from engaging in short sales of any Williams securities, or (ii) from engaging in hedging transactions or speculative transactions involving any Williams securities, including but not limited to option contracts, puts, calls, straddles, collars, hedges, swaps, forward contracts, exchange funds, or any transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of any Williams securities. Williams securities include, without limitation, common stock, debt, options for common stock, and any other derivative or non-derivative securities that Williams may issue from time to time, as well as derivative securities relating to the stock of Williams that are not issued by Williams or a subsidiary, such as exchange-traded put or call options, or swaps. Williams securities also include equity awards or stock options granted as compensation under any of Williams’ compensation or benefit plans. The restrictions in our Williams Policy on Securities Trading applicable to Covered Persons also apply to Covered Persons’ family members, others living in Covered Persons’ households, and entities that are directed by or subject to Covered Persons’ influence or control.

Environmental, Social, and Governance (ESG) Matters

During the last several years, we have significantly enhanced our ESG policies and practices including voluntarily increasing public disclosure of our environmental impact through our Sustainability Report, which we published in June 2019, and filing with the CDP (formerly the Carbon Disclosure Project). We have also recently hired a leader who will be dedicated to coordinating ESG activities and overseeing our internal ESG reporting teams. Oversight for the Company’s ESG efforts resides with the Board and its committees. In particular, the Nominating and Governance Committee has oversight and guidance responsibility for ensuring that the Board, its respective committees, and management are devoting adequate attention to ESG matters. It accomplishes this task through assigning directors to committees where their experience can be most effectively utilized, by reviewing and developing committee charters, through Board and committee evaluations, and by receiving periodic management reports on ESG topics. The Nominating and Governance Committee also recommends to the Board which committees should have oversight of specific responsibilities and other matters. In turn, the Board committees execute oversight for the Company’s ESG program based upon their respective areas of expertise and responsibility. These responsibilities are described in detail below and elsewhere in this proxy statement, but examples include the following: the Environmental, Health and Safety Committee has oversight for environmental and safety matters, and ensuring the proper focus and resources are being devoted by management to these areas; the Compensation and Management Development Committee addresses social issues such as management diversity and ensuring the Company has a pay for performance culture; and the Nominating and Governance Committee has direct responsibility for governance matters, such as director selection, in addition to its broader ESG oversight responsibility.

Our ESG philosophy is to focus our efforts in areas that are significant to the long-term sustainability of our business. We believe this focus best serves all stakeholders, including stockholders, employees, and the communities where we do business. For example, we previously engaged an outside vendor to assist us with an enterprise-wide materiality assessment to determine which ESG topics have the most impact to the Company. The Company then focused its’ efforts to address such ESG topics. During 2019, we utilized internal steering and execution teams to focus on sustainability reporting regarding such ESG topics. Those teams developed an ongoing reporting process which enhances our transparency to stakeholders. The result of such teams’ efforts was the creation of our Sustainability Report which is available on our website. We expect to annually review and issue updated sustainability reports. Among other matters, our Sustainability Report addresses matters relating to environmental stewardship (including climate change, methane reduction initiatives, and greenhouse gas emissions), safety, community engagement, and ethics and integrity. As discussed below and elsewhere in this

 

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proxy statement, we already have many standards, structures, and initiatives that address ESG matters. Accordingly, we view the preparation of our Sustainability Report to be an evolution of the initiatives we previously undertook and an opportunity to continue to identify areas for further focus. A description of certain facets of our ESG-related initiatives, programs, and actions follows on the next page.

 

LOGO

Jennifer H., Project Analyst II, Tulsa, Okla.

 

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    CORPORATE GOVERNANCE AND BOARD MATTERS    

 

 

 

“Sustainability grounded in sensibility is nothing new at Williams. We’ve worked to create value responsibly since our humble beginnings more than 100 years ago.”

 

Alan Armstrong

President and CEO, Williams

  LOGO  

 

Environmental, Health & Safety

 

•  Our Board-level Environmental, Health and Safety (“EH&S”) Committee is charged with oversight of EH&S matters and is committed to keeping Williams operating safely, reliably, and in a way that avoids, minimizes, and helps mitigate environmental impact.

 

•  Our EH&S Policy requires not only that we meet or exceed applicable EH&S laws and regulations, but also facilitates a full and open discussion to address responsible standards and practices where laws and regulations do not exist.

 

•  We developed the Williams Integrated Management System which defines how we manage and reduce physical risk to our assets, the environment, and people.

 

•  We have a Pipeline Integrity Management Plan that identifies additional safety procedures that we implement on liquid and gas transmission pipelines where a pipeline spill might have significant adverse impacts.

 

•  We are a member of Our Nation’s Energy Future Coalition, Inc. (“ONE Future”) which has a collective membership target to reduce methane emissions in the natural gas supply chain to 1% by 2025. Williams has committed to the ONE Future 2025 methane intensity goals for industry sectors of 0.08% for Gathering and Boosting, 0.11% for Processing, and 0.31% for Transmission and Storage.

 

•  While designing, constructing, and operating our pipeline system, we demonstrate our commitment to protecting environmentally and culturally sensitive areas by:

 

–  Conducting environmental assessments and archaeological surveys;

 

–  Using environmentally sensitive construction techniques;

 

–  Siting pipelines along existing rights of way, roadways, or utility corridors if feasible;

 

–  Maintaining an open dialogue with neighboring communities; and

 

–  Conducting our operations in a manner that protects human health and the environment.

  LOGO  

 

Social

 

•  We position ourselves as an employer of choice by offering industry competitive compensation, including a comprehensive benefits package to provide for the health and welfare and retirement needs of our employees.

 

•  We have policies and standards demonstrating respect for the dignity of the individual:

 

–  Our Code of Business Conduct provides a comprehensive resource governing ethical concerns, employee privacy and workplace matters, legal compliance, and other matters.

 

–  Our Equal Employment Opportunity Policy commits us to fairly treating all employees and candidates, without regard to characteristics having no bearing on job performance.

 

–  Our Prohibition of Workplace Discrimination and Harassment Policy addresses many forms of unwanted attention, including sexual harassment.

 

–  Our Human Rights Policy Statement commits us to respect principles aimed at promoting, protecting, and supporting all internationally recognized human rights and to avoid complicity in human rights abuses.

 

•  We capture critical metrics regarding workplace/human capital management, as well as other metrics and investments, in the Performance Data Table included in our Sustainability Report available on our website.

 

•  Our Community Relations Team implements our community giving strategy including our matching gifts program, which matches employee, board member, and retiree contributions to eligible non-profit organizations, and the homegrown giving grants program, in which grants are made to any eligible non-profit organization in communities where Williams employees are involved.

  LOGO  

 

Governance

 

We fervently believe in good corporate governance. Please see our disclosures in “Corporate Governance and Board Matters – Corporate Governance” above.

 

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Board and Committee Structure and Meetings

Board Meetings

Directors actively participate in Board and committee meetings. Meeting materials are distributed in advance of each regular Board meeting so that directors can prepare for meeting discussions.

The full Board met seven times in 2019. Each director attended at least 75 percent of the aggregate of the Board and applicable committee meetings held in 2019.

Board Committees

The Board has four standing committees: Audit, Compensation and Management Development, Nominating and Governance, and Environmental, Health and Safety. Each standing committee has a charter adopted by the Board. Each committee chair gives a committee report to the full Board at each regular Board meeting. The Board elects each committee’s members and chair annually. Each committee has authority to retain, approve fees for, and terminate advisors as it deems necessary to assist in the fulfillment of its responsibilities. The chart below shows the current composition of the committees and the number of committee meetings held in 2019.

 

         

 

Director

 

  Audit  

 

 Compensation 
and

Management
Development

  Nominating  

and
Governance

 

Environmental,
Health, and
Safety

         

Alan S. Armstrong

 

         

 

Stephen W. Bergstrom (Chairman of the Board)

 

LOGO

 

LOGO

         

 

Nancy K. Buese

 

LOGO

 

LOGO

         

 

Stephen I. Chazen

 

LOGO

 

LOGO

         

 

Charles I. Cogut

 

LOGO

 

LOGO

         

 

Kathleen B. Cooper*

 

LOGO

 

LOGO

         

 

Michael A. Creel

 

LOGO

 

LOGO

         

 

Vicki L. Fuller

 

LOGO

 

LOGO

         

 

Peter A. Ragauss

 

LOGO

 

LOGO

         

 

Scott D. Sheffield

 

LOGO

 

LOGO

         

 

Murray D. Smith

 

LOGO

 

LOGO

         

 

William H. Spence

 

LOGO

 

LOGO

         

 

Number of meetings in 2019

 

8

 

4

 

4

 

4

LOGO     Committee Chair

LOGO       Committee Member

 

  *

Dr. Cooper has reached the Board’s mandatory retirement age and will not be standing for reelection at the 2020 Annual Meeting of Stockholders.

 

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LOGO      

Responsibilities

   

The Board has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee:

   

 

•  appoints, evaluates, and approves the compensation of our independent registered public accounting firm;

 

•  assists the Board in fulfilling its responsibilities for generally overseeing Williams’ financial reporting processes and the audit of Williams’ financial statements, including the integrity of Williams’ financial statements, Williams’ compliance with legal and regulatory requirements, and risk assessment and risk management;

 

•  reviews the qualifications and independence of the independent registered public accounting firm;

 

•  reviews the performance of Williams’ internal audit function and the independent registered public accounting firm;

 

•  reviews Williams’ earnings releases;

 

•  oversees investigations into complaints concerning financial matters;

 

•  reviews with the General Counsel, and/or the Chief Ethics & Compliance Officer as needed, any actual and alleged violations of the Code of Business Conduct;

 

•  reviews annually its charter and performance; and

 

•  prepares the Report of the Audit Committee for inclusion in the annual proxy statement.

 

Independence Requirements

 

The Board has determined that Stephen I. Chazen, Charles I. Cogut, Michael A. Creel, Vicki L. Fuller, Peter A. Ragauss, and William H. Spence, comprising all current members of the Audit Committee, meet the heightened independence requirements under the NYSE’s rules for persons serving on audit committees.

 

Financial Literacy, Experts

 

The Board has determined that:

 

•  all the members of the Audit Committee are “financially literate” as defined by the NYSE rules;

 

•  all members of the Audit Committee, except for Charles I. Cogut, qualify as audit committee financial experts as defined by the SEC.

 

No member of the Audit Committee may serve on more than three public company audit committees, including the Company’s Audit Committee, unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve. As of the date of this proxy statement, no member of the Audit Committee is serving on more than three public company audit committees.

 

 

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LOGO    

Responsibilities

 

The Environmental, Health and Safety Committee:

 

•  oversees, considers, and evaluates EH&S matters and engages directly with management and its advisors, who from time-to-time provide reports, analyses, and other information as may be requested by the Committee;

 

•  provides oversight for the Company’s EH&S processes including ensuring compliance with applicable legal and regulatory requirements and evaluation of ways to address EH&S matters as part of the Company’s business operations and strategy;

 

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

 

•  reviews, monitors, and reports to the Board on the Company’s performance and activities related to EH&S matters;

 

•  to the extent deemed advisable by the Committee, engages independent advisors to serve the Committee’s needs;

 

•  makes recommendations to the Board regarding actions to be taken with respect to EH&S matters; and

 

•  reviews annually its charter and performance.

 

 

 

LOGO

David C., Operations Technician III, Rocky Mountain Midstream, Longmont, Colo.

 

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LOGO    

Responsibilities

 

The Compensation and Management Development Committee:

 

•  approves executive compensation philosophy, policies, and programs that align the interests of our executive officers with those of our stockholders;

 

•  oversees the material risks associated with compensation structure, policies, and programs;

 

•  assesses the results of the advisory votes on executive compensation;

 

•  recommends to the Board equity-based compensation plans;

 

•  recommends to the Board cash-based incentive compensation plans for the NEOs and other executives;

 

•  sets corporate goals and objectives for compensation for the NEOs and other executives;

 

•  evaluates the NEOs’ and certain other executives’ performance in light of those goals and objectives;

 

•  approves the NEOs’ and certain other executives’ compensation, including salary, incentive compensation, equity-based compensation, and any other remuneration;

 

•  reviews annually succession plans relating to the CEO and other executive officer positions, including plans to develop diverse candidates for leadership roles;

 

•  approves, amends, modifies, or terminates, in its settlor (non-fiduciary) capacity, the terms of any benefit plan that does not require stockholder approval;

 

•  reviews and discusses with management and, based on the review and discussions, recommends to the Board the Compensation Discussion and Analysis required by the SEC for inclusion in the annual proxy statement and annual report on Form 10-K;

 

•  reviews annually and recommends to the Board the appropriate compensation of non-employee directors;

 

•  develops, reviews, and recommends for Board approval, and then monitors the directors’ and executive officers’ compliance with, Williams’ stock ownership policy;

 

•  reviews and recommends for Board approval the terms of Williams’ change-in-control program;

 

•  assesses any potential conflicts of interest raised by the compensation consultants retained by management or the Committee and assesses the independence of any Compensation and Management Development Committee advisor; and

 

•  reviews annually its charter and performance.

 

Independence Requirements

 

The Board has determined that all members of the Compensation and Management Development Committee meet the heightened independence requirements under the NYSE’s rules for persons serving on compensation committees.

 

Independent Executive Compensation Advisor

 

The Compensation and Management Development Committee has selected and retained Frederic W. Cook & Co., an independent executive compensation consulting firm, to provide competitive market data and advice related to the CEO’s compensation level and incentive design; review and evaluate management-developed market data and recommendations on compensation levels, incentive mix, and incentive design for NEOs and certain other executives (excluding the CEO); develop the selection criteria and recommend comparator companies for executive compensation and performance comparisons; provide information on executive compensation trends and their implications to Williams; and provide competitive market data and advice on non-employee director compensation.

 

The Compensation and Management Development Committee evaluates the independence of Frederic W. Cook & Co., including consideration of the factors specified in Rule 10C-1 under the Exchange Act and the NYSE’s rules, to ensure that the advisors maintain objectivity and independence when rendering advice to the Committee. Frederic W. Cook & Co. does not provide any additional services to Williams. The compensation consultant reports to the Compensation and Management Development Committee and is independent of management. The Compensation and Management Development Committee has determined that the services Frederic W. Cook & Co. provides to the Committee do not create a conflict of interest.

 

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LOGO       Responsibilities
    The Nominating and Governance Committee:
   

•  develops and recommends director qualifications to the Board;

 

•  identifies and recommends director candidates to the Board;

 

•  reviews candidates recommended or nominated by stockholders;

 

•  recommends to the Board the individual, or individuals, to be the Chairman of the Board and the CEO;

 

•  reviews the CEO’s recommendations for individuals to be officers;

 

•  monitors significant developments in the regulation and practice of corporate governance;

 

•  provides oversight and guidance with regard to ESG matters;

 

•  reviews the size, structure, and composition of the Board and its committees and recommends any changes to the Board;

 

•  conducts a preliminary review of director independence and the financial literacy and expertise of the Audit Committee members;

 

•  recommends assignments to the Board committees;

 

•  oversees and assists the Board in the review of the Board’s performance and reviews its own performance;

 

•  reviews annually each standing committee’s charter, the Corporate Governance Guidelines, and the Williams Code of Business Conduct;

 

•  oversees and reviews risks relating to Williams’ ethics and compliance programs and annually reviews Williams’ policies and procedures regarding compliance with the Code of Business Conduct;

 

•  reviews annually the implementation and effectiveness of the Company’s ethics and compliance program with the General Counsel and/or the Chief Ethics & Compliance Officer, as applicable;

 

•  reviews transactions between Williams and related parties;

 

•  reviews stockholder proposals and correspondence and recommends responses to such proposals or correspondence when necessary;

 

•  reviews our directors’ current service and requests to serve on boards of other companies; and

 

•  reviews the performance of individual directors as necessary.

 

Consideration of Nominees

The Nominating and Governance Committee is responsible for developing and recommending to the Board qualifications and criteria for identifying and assessing Board membership candidates. The process for selecting a director nominee starts with a preliminary assessment of each candidate based upon his or her resume and other biographical and background information, and his or her willingness to serve. The Nominating and Governance Committee considers prior performance and contributions of any director nominee who has served as a member of the Board. A candidate’s qualifications are then evaluated against the criteria set forth in “Proposal 1 — Election of Directors,” as well as the specific needs of the Company at the time. Qualified new candidates are interviewed by the Chairman of the Board and the Chair of the Nominating and Governance Committee. Candidates may then meet with other directors and senior management. At the conclusion of this process, the Nominating and Governance Committee may recommend, and the Board act, to appoint the candidate to the Board and recommend him or her for election by our stockholders at the next annual meeting. The Nominating and Governance Committee may source candidates through outside search firms when necessary and uses the same process to evaluate all candidates regardless of the source of the nomination.

 

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Director Recommendations and Nominations

The Nominating and Governance Committee will consider written recommendations from stockholders for director nominations. If you wish to recommend a candidate for consideration by the Nominating and Governance Committee, please forward the candidate’s name and a detailed description of the candidate’s qualifications, a document indicating the candidate’s willingness to serve, and evidence that you own Williams stock to: The Williams Companies, Inc., One Williams Center, MD 47, Tulsa, Oklahoma 74172, Attn: Corporate Secretary.

In addition to being able to recommend candidates for nomination by our Board, our By-laws provide that stockholders may nominate candidates for election at an annual meeting of stockholders. To do so, the stockholder must be a stockholder of record when notice to the Company is given and on the record date for the determination of the stockholders entitled to vote at such annual meeting of stockholders. The stockholder must also satisfy the procedures provided in our By-laws, including the notice procedures described below.

The notice of a stockholder nomination for the election of a director must be in proper written form as specified in our By-laws. The notice must be received by our corporate secretary at our principal executive offices not later than the close of business on the 90th calendar day, nor earlier than the close of business on the 120th calendar day, prior to the anniversary of the date of the immediately preceding annual meeting of stockholders. Accordingly, to be timely for our 2021 Annual Meeting of Stockholders, such notice must be received by our corporate secretary not earlier than December 29, 2020 and not later than January 28, 2021.

In addition to the above method for stockholders to make director nominations at a meeting of stockholders, our By-laws contain a “proxy access” provision. Pursuant to such provision, a stockholder, or a group of up to 20 stockholders, owning at least 3% of our outstanding common stock continuously for at least three years as of the date of the stockholder notice, may nominate and include in our proxy materials director candidates constituting up to two directors or 20% of the Board, whichever is greater, provided that the stockholder(s) continue to own such amount of shares through the annual meeting of stockholders. The stockholder(s) and the nominee(s) must also satisfy all other requirements specified in our By-laws, including providing certain securities schedules to be filed with the SEC.

Under the proxy access option, the notice must be received by our corporate secretary at our principal executive offices not later than the close of business on the 120th calendar day, nor earlier than the close of business on the 150th calendar day, prior to the anniversary of the date (as stated in our proxy materials) the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting of stockholders. Accordingly, to be timely for our 2021 Annual Meeting of Stockholders, such notice must be received by our corporate secretary not earlier than October 20, 2020 and not later than November 19, 2020.

In both options described above, to be an eligible nominee for election as a director, a nominee will have to satisfy the requirements specified in our By-laws, including the timely delivery of the following: a written representation and agreement, a completed and executed director questionnaire, and certain additional information specified in our By-laws.

The above described notices and procedures are summaries and do not purport to be complete. For further information, please refer to our By-laws which are included as an exhibit to our annual report on Form 10-K filed with the SEC and which are also available on our website at www.williams.com. For information concerning submitting a proposal regarding matters other than the election of directors, please see “May I submit a proposal for consideration at the 2021 Annual Meeting of Stockholders?”

 

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    PROPOSAL 1    

 

 

 

PROPOSAL 1        ELECTION OF DIRECTORS

The Board unanimously recommends a vote “FOR” the election of the director nominees named in Proposal 1.

Our restated certificate of incorporation provides that the Board must consist of between five and 17 members, with the actual number of directors at any time to be determined by the Board. Our Board is declassified; therefore, each director nominee is considered for a term expiring at the Company’s next annual meeting of stockholders. Unless otherwise instructed, the individuals designated by the Board as proxies intend to vote to elect Messrs. Armstrong, Bergstrom, Chazen, Cogut, Creel, Ragauss, Sheffield, Smith, and Spence, and Mmes. Buese and Fuller. Should any of these nominees become unable for any reason to stand for election as a director, the designated proxies will vote to elect another nominee recommended by the Nominating and Governance Committee. Alternatively, the Board may choose to reduce its size.

Director Nominee Experience and Qualifications

At each of its regularly scheduled meetings, in satisfaction of our Corporate Governance Guidelines, the Nominating and Governance Committee evaluates the composition of the Board to assess the director skills and experience that are currently represented, as well as the skills and experience that, given the Company’s current situation and strategic plans, the Board may find valuable in the future. While the Nominating and Governance Committee does not have a formal diversity policy, it seeks a variety of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives and to enhance the Board’s diversity in such areas as geography, race, gender, ethnicity, and age. The Nominating and Governance Committee annually assesses the Board’s diversity as part of the director selection and nomination process. This assessment enables the Board to update, if necessary, the skills and experience it seeks in the Board as a whole, and in individual directors, as the Company’s needs evolve. For Board membership, the Nominating and Governance Committee considers the appropriate balance of experience, skills, and attributes that best suits the needs of the Company and our stockholders. Such committee also develops long-term Board succession plans to ensure that an appropriate balance of skills and experience is maintained.

The minimum qualifications and attributes that the Nominating and Governance Committee believes a director nominee must possess include:

 

 

an understanding of business and financial affairs and the complexities of a business organization;

 

 

genuine interest in Williams and in representing all our stockholders;

 

 

a willingness and ability to spend the time required to function effectively as a director;

 

 

an open-minded approach and the resolve to make independent decisions on matters presented for consideration;

 

 

a reputation for honesty and integrity beyond question;

 

 

independence as defined by the NYSE and qualifications otherwise required in accordance with applicable law or regulation;

 

 

strong intellectual capital, performance enhancing ideas, and strong networks that contribute to stockholder value;

 

 

ability to enhance the decision-making process by bringing relevant knowledge, an understanding of rigorous analysis, and a desire for constructive engagement; and

 

 

demonstrated, seasoned judgment for decisions involving broad and multi-faceted issues.

 

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    PROPOSAL 1    

 

 

 

In evaluating the director nominees and in reviewing the qualifications and experience of the directors continuing in office, the Nominating and Governance Committee considered a variety of factors. These include each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the Company’s needs. For incumbent directors, the factors also include past performance on the Board. Among other things, the Board has determined that it is important to have individuals on the Board with the skills, experiences, and attributes in the areas or with the attributes listed below:

 

•  Energy Industry

 

•  Financial and Accounting

•  Executive Leadership

 

•  Securities and Capital Markets

•  Engineering and Construction

 

•  Diversity

•  Strategy Development and Risk Management

 

•  Information Technology (including cybersecurity)

•  Operating

 

•  Corporate Governance

•  Environmental

 

•  Legal

•  Marketplace Knowledge

 

•  Public Policy and Government

Set forth below and on the following pages is certain information related to the director nominees, individually and in the aggregate.

 

LOGO

 

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    PROPOSAL 1    

 

 

 

Director Nominee Matrix: Skills, Experience, and Attributes

Each director nominee is individually qualified to make unique and substantial contributions to our Board. Collectively, their diverse viewpoints and independent-mindedness enhance the quality and effectiveness of Board deliberations and decision making that will contribute to the effective oversight of the Company. This blend of skills, experience, and attributes is summarized below.

 

LOGO

Armstrong Bergstrom Buese Chazen Cogut Creel Fuller Ragauss Sheffield Smith Spence Energy Industry Executive Leadership Engineering and Construction Strategy Development and Risk Management Operating Environmental Marketplace Knowledge Financial and Accounting Securities and Capital Markets Diversity Information Technology Corporate Governance Legal Public Policy and Government

 

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    PROPOSAL 1    

 

 

 

LOGO    

 

ALAN S.   

ARMSTRONG   

 

Director since 2011    

 

President and    

Chief Executive Officer    

  

Alan S. Armstrong, 57, has served as a director and President and Chief Executive Officer of the Company since 2011. During his tenure, Williams has expanded its reach, currently touching about 30 percent of all U.S. natural gas volumes, through gathering, processing, transportation, and storage services. In addition, Mr. Armstrong served as Chairman of the Board and Chief Executive Officer of the general partner of Williams Partners L.P. (“WPZ”), the master limited partnership that, prior to its 2018 merger with Williams, owned most of Williams’ gas pipeline and domestic midstream assets. Prior to being named as Williams’ CEO, Mr. Armstrong led the Company’s North American midstream and olefins businesses through a period of growth and expansion as Senior Vice President – Midstream. Previously, Mr. Armstrong served as Vice President of Gathering and Processing from 1999 to 2002; Vice President of Commercial Development from 1998 to 1999; Vice President of Retail Energy Services from 1997 to 1998; and Director of Commercial Operations for the Company’s midstream business in the Gulf Coast region from 1995 to 1997. He joined Williams in 1986 as an engineer. Mr. Armstrong serves on the board of directors of BOK Financial Corporation. He also serves on the board of directors of the American Petroleum Institute, and is a member of the National Petroleum Council, currently serving as the chair of the National Petroleum Council’s Energy Infrastructure Study on Changing Dynamics of Oil & Gas Infrastructure. He is past president of the GPA Midstream Association. He is also a former board member of Access Midstream Partners, GP, LLC. Mr. Armstrong serves on the boards of several education-focused organizations, including as a member of the Board of Trustees of the University of Oklahoma Foundation and Junior Achievement, USA. Mr. Armstrong is also a member of the boards of The Williams Foundation and Gilcrease Museum. Mr. Armstrong graduated from the University of Oklahoma in 1985 with a bachelor’s degree in civil engineering.

 

As Chief Executive Officer and President of Williams, former Chairman of the Board and Chief Executive Officer of the general partner of WPZ, and due to his various senior leadership roles at Williams, Mr. Armstrong’s skills, experience, and attributes include: energy industry, executive leadership, engineering and construction, strategy development and risk management, operating, environmental, and marketplace knowledge.

 

LOGO    

 

STEPHEN W.   

BERGSTROM   

 

Director since 2016    

Chairman of the Board    

 

Committees    

 

Compensation and    

Management Development    

 

Nominating and    

Governance    

 

  

Stephen W. Bergstrom, 62, has served as a director of the Company since 2016. Mr. Bergstrom has 40 years of experience in the energy and utility sectors. He was a director on the board of American Midstream Partners GP, LLC, a natural gas gathering, processing, and transporting company until they merged with ArcLight Capital Partners, LLC in July 2019. From 2013 to 2015, he served as President and Chief Executive Officer and Executive Chairman of the board of directors of American Midstream Partners’ general partner. Mr. Bergstrom acted as an exclusive consultant to ArcLight Capital Partners, an energy-focused investment firm, from 2003 to 2015, assisting ArcLight in connection with its energy investments. From 1986 to 2002, Mr. Bergstrom served in several leadership roles for Natural Gas Clearinghouse, which became Dynegy Inc., a major electric utility company. Mr. Bergstrom acted in various capacities at Dynegy, ultimately serving as President and Chief Operating Officer. Mr. Bergstrom began his career with Transco Energy Company, Inc. in 1980. Mr. Bergstrom earned a Bachelor of Science in Industrial Administration from Iowa State University.

 

As former President and Chief Executive Officer of the American Midstream Partners general partner, former exclusive consultant to ArcLight Capital Partners, and due to his various leadership roles for Natural Gas Clearinghouse, Mr. Bergstrom’s skills, experience, and attributes include: energy industry, executive leadership, engineering and construction, strategy development and risk management, operating, environmental, and marketplace knowledge.

 

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    PROPOSAL 1    

 

 

 

LOGO    

 

NANCY K. BUESE   

 

Director since 2018    

 

Committees    

 

Compensation and    

Management Development    

 

Environmental,    

Health and Safety    

 

  

Nancy K. Buese, 50, has served as a director of the Company since 2018. Ms. Buese came to the Company with more than 25 years of experience in finance leadership roles. Ms. Buese currently serves as Executive Vice President and Chief Financial Officer of Newmont Mining Corporation, the world’s largest gold producer with assets or operations on four continents. Before joining Newmont in 2016, Ms. Buese served as Executive Vice President and Chief Financial Officer of MPLX, a publicly traded energy company formed by Marathon Petroleum Corporation. Prior to MPLX’s acquisition of MarkWest Energy Partners in 2015, Ms. Buese served for eleven years as Executive Vice President and Chief Financial Officer of MarkWest Energy Partners. Prior to that, Ms. Buese worked in public accounting for twelve years, and is a former Partner with Ernst & Young. From 2009 through 2017, Ms. Buese served on the board of directors of UMB Financial Corporation. Ms. Buese earned her degree in Accounting and Business Administration from University of Kansas and is a Certified Public Accountant.

 

Bringing decades of accounting, financial, and executive experience to the Williams Board, and having held senior financial positions at Newmont Mining Corporation, MPLX, and MarkWest Energy Partners. Ms. Buese’s skills, experience, and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, marketplace knowledge, diversity and information technology.

 

LOGO    

 

STEPHEN I.   

CHAZEN   

 

Director since 2016    

 

Committees    

 

Audit    

 

Nominating and    

Governance    

  

Stephen I. Chazen, 73, has served as a director of the Company since 2016. Currently, he is the President, Chief Executive Officer, and Chairman of Magnolia Oil and Gas Corporation. Mr. Chazen retired as Chief Executive Officer of Occidental Petroleum in April 2016. Mr. Chazen began his career at Occidental in 1994 as Executive Vice President Corporate Development. He was named Chief Financial Officer in 1999 and served as Chief Financial Officer until 2010. Mr. Chazen was appointed President of Occidental in 2007. He was then named Chief Operating Officer in 2010 before being appointed Chief Executive Officer in May 2011. He was elected to the board of directors in 2010. Before joining Occidental, Mr. Chazen was Managing Director in Corporate Finance and Mergers and Acquisitions at Merrill Lynch. He worked as Director of Project Evaluation and Reservoir Engineering at Columbia Gas Development Corporation from 1977 to 1982. He began his career with Northrop Corporation in 1973 as a Laboratory Manager at the Johnson Space Center. Mr. Chazen is a former Chairman of the Board of the American Petroleum Institute and the Catalina Island Conservancy. Mr. Chazen was appointed to the University of Houston System Board of Regents in 2018 and serves on the Advisory Board at Rice University’s Baker Institute for Public Policy. He is a Director of Houston Methodist Institute for Academic Medicine and the National Park Foundation. Mr. Chazen holds a Ph.D. in Geology from Michigan State University, a master’s degree in Finance from the University of Houston, and a bachelor’s degree in Geology from Rutgers College.

 

Mr. Chazen brings to the Williams Board decades of executive leadership experience in the oil and gas industry, as well as significant mergers and acquisition and valuation expertise. Mr. Chazen’s skills, experience, and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, strategy development and risk management, operating, environmental, and marketplace knowledge.

 

The Williams Companies, Inc. – 2020 Proxy Statement        20


Table of Contents
   

 

    PROPOSAL 1    

 

 

 

LOGO    

 

CHARLES I.   

COGUT   

 

Director since 2016    

 

Committees    

 

Audit    

 

Nominating and    

Governance    

 

  

Charles I. Cogut, 73, has served as a director of the Company since 2016. Mr. Cogut is a retired partner at Simpson Thacher & Bartlett LLP (“STB”), where for many years he led the firm’s mergers and acquisitions and private equity practices, with a specialty in domestic, international and cross-border mergers and acquisitions, the representation of special committees of boards of directors, and buyouts and other corporate transactions. Mr. Cogut regularly advised boards of directors with respect to corporate governance matters and fiduciary responsibilities. Mr. Cogut joined STB in 1973; served as a partner from 1980 through 2012; and served as senior mergers and acquisitions counsel from 2013 through 2016. Mr. Cogut has been a member of the board of directors of Air Products and Chemicals, Inc. since 2015 and was a member of the board of directors of Patheon N.V. in 2017 prior to its sale. Mr. Cogut received his J.D. in 1973 from the University of Pennsylvania Law School after graduating summa cum laude from Lehigh University in 1969. He is a member of the Board of Overseers of the University of Pennsylvania Law School. He also serves as a vice chairman of the Board of Trustees and is a member of the Executive Committee of Cold Spring Harbor Laboratory, a private, not-for-profit research institution primarily focused on molecular biology.

 

Mr. Cogut brings to the Williams Board decades of legal and corporate experience, as well as significant mergers and acquisition and valuation expertise. Mr. Cogut’s skills, experience, and attributes include: corporate governance, securities and capital markets, and legal.

 

LOGO    

 

MICHAEL A.   

CREEL   

 

Director since 2016    

 

Committees    

 

Audit    

 

Environmental,    

Health and Safety    

 

  

Michael A. Creel, 66, has served as a director of the Company since 2016. Mr. Creel is an executive with 40 years of energy experience, including 15 years on large public company boards. Mr. Creel previously served as a director and Chief Executive Officer of Enterprise Products Partners L.P. from 2010 until his retirement in 2015. Earlier, he served in positions of increasing responsibility with the company since 1999. He was also group vice chairman at EPCO, Inc., and Executive Vice President and Chief Financial Officer at Duncan Energy Partners L.P., a company engaged in natural gas liquids transportation, fractionation, marketing and storage, and petrochemical product transportation, gathering, and marketing. He was also President and Chief Executive Officer at the general partner of Enterprise GP Holdings L.P. and held a number of executive management positions with Shell affiliate Tejas Energy and NorAm Energy Corp. Mr. Creel is a director and member of the Audit Committee of Lucid Energy Group LLC, a diversified energy company. Mr. Creel is a graduate of McNeese State University in Lake Charles, Louisiana, where he earned a bachelor’s degree in accounting, and is a Certified Public Accountant and a Chartered Global Management Accountant.

 

Mr. Creel brings to the Williams Board decades of executive leadership experience in the energy industry, as well as significant financial expertise. Mr. Creel’s skills, experience, and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, strategy development and risk management, and marketplace knowledge.

 

The Williams Companies, Inc. – 2020 Proxy Statement        21


Table of Contents
   

 

    PROPOSAL 1    

 

 

 

LOGO    

 

VICKI L. FULLER   

 

Director since 2018    

 

Committees    

 

Audit    

 

Nominating and    

Governance    

  

Vicki L. Fuller, 62, has served as a director of the Company since 2018. Ms. Fuller joined the Williams Board after retirement from the New York State Common Retirement Fund (“NYSCRF”) where she served as Chief Investment Officer beginning in August 2012. The fund is the third largest public pension fund in the nation and holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. Prior to joining NYSCRF, Ms. Fuller spent 27 years in leadership positions at AllianceBernstein Holding L.P., which has approximately $500 billion in assets under management. She joined the company in 1993 from the Equitable Capital Management Corporation, which was acquired by Alliance Capital Management LP (in 2000, the company became AllianceBernstein LP after the company acquired Sanford C. Bernstein). In December 2019, Ms. Fuller was appointed to the board of directors of Treliant, LLC, an international multi-industry consulting firm specializing in regulatory requirements. In 2018, Ms. Fuller was appointed to the Board of Trustees for Fidelity Equity and High Income Funds. Ms. Fuller, who was inducted into the National Association of Securities Professionals Wall Street Hall of Fame, was named to Chief Investment Officer Magazine’s “Power 100” and received the Urban Technology Center’s Corporate Leadership Award. She has also been named one of the most powerful African Americans on Wall Street by Black Enterprise.

 

Ms. Fuller brings significant executive leadership, investment, and corporate experience to the Williams Board. Ms. Fuller’s skills, experience, and attributes include: executive leadership, public policy and government, securities and capital markets, financial and accounting, and diversity.

 

LOGO    

 

PETER A.   

RAGAUSS   

 

Director since 2016    

 

Committees    

 

Audit (Chair)    

 

Nominating and    

Governance    

 

  

Peter A. Ragauss, 62, has served as a director of the Company since 2016. Mr. Ragauss retired from Baker Hughes, an oilfield services company, in November 2014, after serving eight years as Senior Vice President and Chief Financial Officer. Mr. Ragauss currently serves as a director of Skulte LNG, a private oil and gas company in Latvia. He joined the board of directors of Apache Corporation in December 2014. From 2003 to 2006, prior to joining Baker Hughes, Mr. Ragauss was Controller, Refining and Marketing, for BP Plc. From 2000 to 2003, he was Chief Executive Officer for Air BP. From 1998 to 2000, he was assistant to group chief executive for BP Amoco. He was Vice President of Finance and Portfolio Management for Amoco Energy International when Amoco Corporation merged with BP in 1998. Earlier in his career, from 1996 to 1998, Mr. Ragauss served as Vice President of Finance for El Paso Energy International. He held positions of increasing responsibility at Tenneco Inc. from 1993 to 1996 and Kidder, Peabody & Co. Incorporated from 1987 to 1993. Mr. Ragauss holds a master’s degree from Harvard Business School and bachelor’s degree in Mechanical Engineering from Michigan State University.

 

Bringing a wealth of accounting, financial, and executive experience to the Williams Board, and having held senior positions including Chief Executive Officer, Chief Financial Officer, Controller, and Vice President of Finance, Mr. Ragauss’ skills, experience, and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, information technology, and marketplace knowledge.

 

The Williams Companies, Inc. – 2020 Proxy Statement        22


Table of Contents
   

 

    PROPOSAL 1    

 

 

 

LOGO    

 

SCOTT D.   

SHEFFIELD   

 

Director since 2016    

 

Committees    

 

Compensation and    

Management Development    

(Chair)    

 

Environmental,    

Health, and Safety    

 

  

Scott D. Sheffield, 67, has served as a director of the Company since 2016. Since February 2019, Mr. Sheffield has served as Chief Executive Officer of Pioneer Natural Resources Company, a large domestic upstream oil and gas company. Mr. Sheffield also served as Chief Executive Officer of the company from August 1997 through December 2016. From August 1999 until February 2019, Mr. Sheffield served as Pioneer Natural Resources’ Chairman of the Board of Directors. He was President of the company from August 1997 to November 2004. Mr. Sheffield was the Chairman of the Board of Directors and Chief Executive Officer of Parker & Parsley Petroleum Company, a predecessor company of Pioneer Natural Resources Company, from January 1989 until August 1997. Mr. Sheffield joined Parker & Parsley as a petroleum engineer in 1979; was promoted to Vice President of Engineering in 1981; was elected President and a director in 1985; and became Parker & Parsley’s Chairman of the Board and Chief Executive Officer in 1989. Mr. Sheffield served as a director of Santos Limited, an Australian exploration and production company, from 2014 through 2017. He previously served as a director from 1996 to 2004 on the board of Evergreen Resources, Inc., an independent natural gas energy company. Mr. Sheffield is a distinguished graduate of The University of Texas with a Bachelor of Science degree in Petroleum Engineering.

 

With more than 40 years of experience in the energy industry, including his position as Chief Executive Officer and Chairman of the Board of Pioneer Natural Resources and his former service as a director of Santos Limited, Mr. Sheffield’s skills, experience, and attributes include: energy industry, executive leadership, engineering and construction, strategic development and risk management, operating, environmental, and marketplace knowledge.

 

LOGO    

 

MURRAY D.   

SMITH   

 

Director since 2012    

 

Committees    

 

Compensation and    

Management Development    

 

Environmental, Health,    

and Safety (Chair)    

 

 

  

Murray D. Smith, 70, has served as a director of the Company since 2012. Mr. Smith is currently president of Murray D. Smith and Associates, an energy consulting firm. Previously, he held various positions in the Canadian government. As an elected member of the Legislative Assembly of Alberta, Canada, Mr. Smith served in four different Cabinet portfolios between 1993 and 2004. As Minister of Energy of Alberta from 2001 to 2004, Mr. Smith oversaw the transformation of the electricity sector into a competitive wholesale generation market and initiated the largest industrial tax reduction in the Province’s history. Mr. Smith served as Representative of the Province of Alberta to the United States of America in Washington, D.C., from 2005 to 2007. Prior to becoming an elected official, Mr. Smith was an independent businessman, owning a number of Alberta-based energy services companies. Currently, he is a director of Surge Energy Inc., a publicly-traded oil and gas company with operations throughout Alberta and Saskatchewan.

 

As a former member of the Legislative Assembly of Alberta, Canada, diplomat, and now an energy consultant, Mr. Smith’s skills, experience, and attributes include: energy industry, public policy and government, and marketplace knowledge.

 

The Williams Companies, Inc. – 2020 Proxy Statement        23


Table of Contents
   

 

    PROPOSAL 1    

 

 

 

LOGO    

 

WILLIAM H.   

SPENCE   

 

Director since 2016    

 

Committees    

 

Audit    

 

Environmental,    

Health, and Safety    

  

William H. Spence, 63, has served as a director of the Company since 2016. Mr. Spence is Chairman and Chief Executive Officer of PPL Corporation, one of the largest investor-owned utility companies in the United States. Mr. Spence has announced that, as of June 1, 2020, he will be retiring as PPL’s Chief Executive Officer. However, he will remain as the non-executive Chairman of PPL’s board of directors. The PPL family of companies, with assets of more than $40 billion, delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom. Mr. Spence was named President and Chief Executive Officer in 2011 and Chairman in 2012. Previously, he had 19 years of service with Pepco Holdings, Inc., where he held a number of senior management positions. Mr. Spence serves on the boards of numerous industry organizations, including those dealing with research, cyber and physical security, the environment, and electric reliability. He also serves on several non-profit community organizations that focus on community education, health, and human services. Mr. Spence earned a bachelor’s degree in petroleum and natural gas engineering from Pennsylvania State University and a master’s degree in business administration from Bentley College. Mr. Spence also is a graduate of the Executive Development Program at the University of Pennsylvania’s Wharton School and the Nuclear Technology Program of the Massachusetts Institute of Technology.

 

As Chairman, President, and Chief Executive Officer of PPL Corporation, former Executive Vice President and Chief Operating Officer of PPL Corporation, and due to his several senior management positions with Pepco Holdings, Inc., Mr. Spence’s skills, experience, and attributes include: energy industry, executive leadership, engineering and construction, financial and accounting, strategy development and risk management, operating, environmental, information technology, and marketplace knowledge.

 

LOGO

Jerrod S. (left) and Marlin N. (right), Pipeline Control, Houston, Texas

 

The Williams Companies, Inc. – 2020 Proxy Statement        24


Table of Contents
   

 

  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  

 

 

 

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information known to us concerning beneficial owners of more than five percent of our common stock. Unless otherwise indicated, the persons named have sole voting and investment power with respect to the shares listed.

 

Title of Class   Name and Address of Beneficial Owner   

 

Number of Shares of

Common Stock

  

Percent    

of Class (4)    

 

Common Stock    

 

 

BlackRock, Inc. (1)

55 East 52nd Street

New York, New York 10055

  

 

132,996,632

  

 

11.0%

 

Common Stock

 

 

The Vanguard Group (2)

100 Vanguard Boulevard

Malvern, Pennsylvania 19355

  

 

100,719,986

  

 

8.3%

 

Common Stock

 

 

State Street Corporation (3)

One Lincoln Street

Boston, Massachusetts 02111

  

 

  62,187,670

  

 

5.13%

 

  (1)

According to a Schedule 13G/A filed with the SEC on February 10, 2020, BlackRock, Inc., an investment management corporation, may beneficially own the shares of common stock listed in the table above. The 13G/A indicates that BlackRock, Inc. may have sole voting power over 132,996,632 shares of our common stock and sole dispositive power over 122,318,043 shares of our common stock.

 
  (2)

According to a Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group, an investment advisor, may beneficially own the shares of common stock listed in the table above. The Vanguard 13G/A indicates that The Vanguard Group may have sole voting power over 2,141,041 shares of our common stock, sole dispositive power over 98,453,378 shares of our common stock, shared voting power over 575,711 shares of our common stock, and shared dispositive power over 2,266,608 shares of our common stock.

 
  (3)

According to a Schedule 13G filed with the SEC on February 14, 2020, State Street Corporation, an investment management corporation, may beneficially own the shares of common stock listed in the table above. The 13G indicates that State Street Corporation may have shared voting power over 527,735,512 shares of our common stock and shared dispositive power over 62,178,599 shares of our common stock.

 
  (4)

Ownership percentage is reported based on 1,213,099,608 shares of common stock outstanding on February 26, 2020.

 

 

The Williams Companies, Inc. – 2020 Proxy Statement        25


Table of Contents
   

 

  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  

 

 

 

The following table sets forth, as of February 26, 2020, the number of shares of our common stock beneficially owned by each of our directors and nominees for directors, by the NEOs, and by all directors and executive officers as a group.

 

Name of Beneficial
Owner
  Shares of Williams
Common Stock
Owned Directly or
Indirectly
  Williams
Shares Underlying
Stock Options (1)
  Williams
Shares
Underlying
RSUs (2)
  Total
Shares
Beneficially
Owned
 

Percent    

of Class (3)    

   

Alan S. Armstrong (4)

 

509,352

 

1,231,830

 

252,740

 

1,993,922

 

*    

   

Stephen W. Bergstrom

 

27,750

 

 

48,231

 

75,981

 

*    

   

Nancy K. Buese

 

 

 

13,145

 

13,145

 

*    

   

Stephen I. Chazen

 

43,428

 

 

19,593

 

63,021

 

*    

   

Charles I. Cogut

 

1,000

 

 

22,177

 

23,177

 

*    

   

Kathleen B. Cooper

 

26,090

 

 

19,593

 

45,683

 

*    

   

Michael A. Creel (5)

 

67,225

 

 

19,593

 

86,818

 

*    

   

Vicki L. Fuller

 

 

 

12,391

 

12,391

 

*    

   

Peter A. Ragauss

 

3,428

 

 

19,593

 

23,021

 

*    

   

Scott D. Sheffield

 

4,144

 

 

19,593

 

23,737

 

*    

   

Murray D. Smith (6)

 

19,998

 

 

39,500

 

59,498

 

*    

   

William H. Spence

 

 

 

24,479

 

24,479

 

*    

   

John D. Chandler (7)

 

20,112

 

53,352

 

 

73,464

 

*    

   

Micheal G. Dunn

 

19,524

 

189,866

 

144,713

 

354,103

 

*    

   

John E. Poarch (8)

 

23,297

 

44,494

 

 

67,791

 

*    

   

Chad J. Zamarin

 

2,500

 

53,352

 

 

55,852

 

*    

   

All directors and

executive officers as a

group (21 persons)

 

 

866,128

 

 

1,788,907

 

 

655,340

 

 

3,310,375

 

 

*    

 

 

  *

Less than 1%

  (1)

The SEC deems a person to have beneficial ownership of all shares that the person has the right to acquire within 60 days. Amounts reflect shares that may be acquired upon the exercise of stock options granted under Williams’ equity plan that are currently exercisable, will become exercisable, or would become exercisable upon the voluntary retirement of such person, within 60 days of February 26, 2020.

  (2)

The SEC deems a person to have beneficial ownership of all shares that the person has the right to acquire within 60 days. Amounts reflect shares that would be acquired upon the vesting of restricted stock units (“RSUs”) granted under Williams current or previous equity plans that will vest or that would vest upon the voluntary retirement of such person, within 60 days of February 26, 2020. RSUs have no voting or investment power.

  (3)

Ownership percentage is reported based on 1,213,099,608 shares of common stock outstanding on February 26, 2020, plus, as to the holder thereof only and no other person, the number of shares (if any) that the person has the right to acquire as of February 26, 2020, or within 60 days from that date, through the exercise of all options and other rights.

  (4)

Includes 34,264 shares held in the Alan and Shelly Armstrong Family Foundation dated December 16, 2015, Alan S. and Shelly S. Armstrong, Trustees.

  (5)

Includes 52,500 shares held in the B and B Living Trust dated February 2, 2012, Michael A. and Kathy R. Creel, Trustees.

  (6)

Includes 10,150 shares held by Murray D. Smith and Associates Limited.

  (7)

Includes 20,000 shares held by John D. Chandler Family Investments dated September 30, 2016, John D. and Barbara A. Chandler, Trustees.

  (8)

Mr. Poarch resigned effective February 28, 2020.

 

The Williams Companies, Inc. – 2020 Proxy Statement        26


Table of Contents
   

 

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

 

Compensation Discussion and Analysis

The Compensation Discussion and Analysis (“CD&A”) provides a detailed description of the objectives and principles of Williams’ executive compensation programs. It explains how compensation decisions are linked to performance as compared to the Company’s strategic goals and stockholder interests. Generally, Williams’ executive compensation programs apply to all officers; however, this CD&A focuses on the named executive officers (NEOs) for the Company for the 2019 fiscal year. The Company’s NEOs for the 2019 fiscal year are Mr. Armstrong, Mr. Dunn, Mr. Zamarin, Mr. Chandler, and Mr. Poarch:

 

LOGO

We seek stockholder support on our executive compensation pay programs annually. In 2019, our stockholders supported our programs with 97.07 percent “for” votes. In considering this positive response, along with our analysis of the competitive market, we have not made any material changes to the overall structure of our executive compensation program.

Our Commitment to Pay for Performance

Pay for Performance

We design our compensation programs to support our commitment to performance. In 2019, at target, 80 percent or more of a NEO’s annual compensation is variable based on our company performance.

 

LOGO

Pay for Performance Equity Annual Incentive Program Performance-based RSUs Time-based RSUs Cash At target, 80 percent or more of NEO compensation is linked to performance

The Summary Compensation Table provides SEC required disclosures for the 2017, 2018, and 2019 calendar years. These disclosures require the reporting of accounting-based grant date fair values for all stock-based compensation. These values remain fixed in Summary Compensation Table disclosures and are not adjusted to reflect how the Company’s business and/or stock price performance actually impact the value of stock awards earned by our NEOs. To supplement the SEC required disclosure, the following chart compares the accounting

 

The Williams Companies, Inc. – 2020 Proxy Statement        27


Table of Contents
   

 

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

 

grant date fair value of stock-based awards for Mr. Armstrong in 2015, 2016, and 2017 which vested in 2018, 2019, and 2020 respectively. The table shows the grant values which were included in the Summary Compensation Table in relation to the realizable value as of the vesting and distribution date of the restricted stock unit (“RSU”) awards. The stock options are valued based on their intrinsic value as of December 31, 2019 at a stock price of $23.72. The realizable value shown for time-based RSU awards includes accrued cash dividend equivalents which were paid upon the distribution of the award. It’s important to note that the 2015 performance-based awards, which would have vested in 2018, did not earn a payout and were cancelled. The 2016 performance-based awards, which vested in 2019, distributed 31.8 percent of the targeted number of RSUs awarded. The 2017 performance-based award, which vested in February 2020, distributed 44.4 percent of the targeted number of RSUs awarded.

As shown in the chart, Mr. Armstrong’s realizable equity pay for awards that vested during 2018, 2019, and 2020 is, in aggregate, 35 percent of what was targeted for his long-term incentive pay. The Compensation and Management Development Committee (“Committee”) believes it is important to demonstrate this correlation between executive pay and stock price performance.

CEO Target Equity Pay Compared to Realizable Equity Pay

 

LOGO

Year of Grant 2015 2016 2017 Year of Vesting 2018 2019 2020 Performance-Based Awards $2,632,389 $0 $3,830,750 $1,185,385 $4,026,872 $1,243,576 Time-Based Awards $1,437,490 $996,445 $1,437,499 $1,730,408 $1,499,999 $1,330,099 Stock Option Awards $1,165,677 $0 $1,150,003 $0 $1,248,860 $0 Total Equity Pay $5,235,556 $996,445 $6,418,252 $2,915,793 $6,775,731 $2,573,675 Percent Difference Between Realizable Equity Pay and Target Equity Pay (81.0%) (54.6%) (62.0%)

Note: Target Equity Pay includes the grant date value of the equity awards as valued in the Summary Compensation Table.

 

The Williams Companies, Inc. – 2020 Proxy Statement        28


Table of Contents
   

 

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

 

Long-term Incentives

Annual equity awards provide the most significant differentiation in pay and performance in our executive compensation program. We use equity awards to align compensation with the long-term interests of our stockholders. Equity awards in 2019 consist of performance-based RSUs and time-based RSUs. Stock options were removed from the equity mix in 2019. The largest component of our CEO’s long-term incentive award is performance-based RSUs. The 2016 performance-based RSU award, which vested and distributed in 2019, utilized both relative and absolute Total Shareholder Return (“TSR”) to determine the actual number of units that would be distributed to a NEO upon vesting. The 2017 performance-based RSU awards utilized relative TSR to determine performance and the actual number of units that would vest. In 2018 and 2019, the performance-based RSU awards utilize both relative TSR and return on capital employed (“ROCE”) to measure performance and the actual number of units that will vest.

At the time of the 2019 annual equity award, the five NEOs received an incremental performance-based equity award. This award measures 2021 Adjusted Earnings Per Share (“EPS”) against preestablished targets. While the performance period ends on December 31, 2021, any earned award would vest in 50 percent increments three and four years from the date of the award, on February 19, 2022 and February 19, 2023 respectively. While the award is performance-based, the extended vesting period was added for retentive purposes. Prior to the 2019 award, four of the five NEOs had been an executive officer with the Company for less than two years. Considering the progress associated with the reconstituted leadership group, the Committee sought to provide a common performance-based award across the group while also building in more significant retention.

Annual Incentive Program

Our performance-based cash compensation is paid under our Annual Incentive Program (“AIP”) which is based on the Company’s business and safety performance and the NEO’s individual performance. Under this program, cash compensation reflects annual business performance in 2019 and is based on weighted measures of adjusted EBITDA, controllable costs, and safety performance. The Company transitioned to adjusted EBITDA in 2019 following the 2018 acquisition of our master limited partnership WPZ. The Committee believes adjusted EBITDA better aligns to our corporate structure. For the third consecutive year, Williams has produced strong operational and financial results which produced above target AIP awards.

2019 Business Overview

As noted above, in 2019, the Company again delivered strong operational and financial results. Net income from continuing operations attributable to Williams available to common stockholders was $862 million, up $1 billion over 2018, and $0.71 per share on a diluted basis versus a loss of $0.16 per share in 2018. The following table further highlights this strong performance by detailing financial results and three-year compound annual growth rates (“CAGR”) for Adjusted EBITDA, Distributable Cash Flow and Adjusted Earnings Per Share. Additionally, we provide our three-year CAGR for Operating Margin % and ROCE %. Three-year improvement in Total Recordable Incident Rate, a safety metric, is also provided. This is intended to highlight the strong financial performance and growth the Company has delivered during this time frame. Additionally, the Company has exceeded the midpoint of our guidance to the market for Adjusted EBITDA in each of the three most recently completed calendar years.

 

The Williams Companies, Inc. – 2020 Proxy Statement        29


Table of Contents
   

 

  COMPENSATION DISCUSSION AND ANALYSIS  

 

 

 

Growing Our Key Financial and Operational Metrics While Also Improving Leverage

 

 

LOGO

Adjusted EBITDA 2017 $4.53 B 2018 $4.64 B 2019 $5.02 B 2017-2019 CAGR4 5% Distributable Cash Flow 2017 $2.58 B 2018 $2.87 B 2019 $3.30 B 2017-2019 CAGR4 13% Adjusted Earnings per Share 2017 $0.63 2018 $0.79 2019 $0.99 2017-2019 CAGR4 25% Operating Margin %1 2017-2019 CAGR4 4% Improvement ROCE%2(Return on Capital Employed) 2017-2019 CAGR4 ~13% Improvement Total Recordable Incident Rate3 2017-2019 ~50% Improvement

Note: This table contains non-GAAP measures. A reconciliation of these non-GAAP financial measures to their nearest comparable GAAP financial measure is included in Appendix C.

  1)

Operating margin ratio = operating margin/gross margin: Excludes depreciation, amortization expense, impairment charges, and other expenses not associated with operating the business.

  2)

Return on Capital Employed (ROCE) is Adjusted EBITDA, less included depreciation and amortization, divided by the sum of the average balances of Investments, Property, plant, and equipment – net, and Intangible assets – net.

  3)

Total Recordable Incident Rate (TRIR) = Total number of recordable injuries and/or illnesses x 200,000/number of work hours.

  4)

CAGR is compound annual growth rate.

Additionally, the items below detail select key accomplishments in 2019.

On March 18, 2019, Williams signed and closed the acquisition of the remaining 38 percent interest in Utica East Ohio Midstream (“UEOM”). UEOM is involved primarily in the processing and fractionation of natural gas and natural gas liquids in the Utica Shale play in eastern Ohio.

Concurrent with the UEOM acquisition, Williams executed an agreement whereby we contributed our consolidated interests in UEOM and our Ohio Valley midstream business to a newly formed partnership. In June 2019, our partner invested approximately $1.33 billion for a 35 percent ownership interest, and we retained 65 percent ownership of, as well as operate and consolidate, the Northeast JV business.

In April 2019, Williams sold 50 percent interest in Jackalope Gas Gathering Services, L.L.C. for $485 million in cash, resulting in a gain on the disposition of $122 million. The transaction also enabled us to avoid approximately $90 million in capital spending.

On August 31, 2018, Transco filed a general rate case with the FERC for an overall increase in rates. In October 2019, Williams reached an agreement on the terms of a settlement with the participants that would resolve all issues in the rate case without the need for a hearing, and on December 31, 2019, we filed a formal stipulation and agreement with the FERC setting forth such terms of settlement. We anticipate FERC approval of the stipulation and agreement in the second quarter of 2020.

 

The Williams Companies, Inc. – 2020 Proxy Statement        30


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Significant expansion project updates, including projects placed into service are described below.

Northeast G&P

Ohio River Supply Hub Expansion

Williams agreed to expand services for certain customers to provide additional rich gas processing capacity in the Marcellus and Upper Devonian Shale in West Virginia and Pennsylvania. Associated with these agreements, we expanded the inlet processing capacity of our Oak Grove facility to 400 MMdf/d. We also constructed a new NGL pipeline from Moundsville to the Harrison Hub fractionation facility to provide an additional outlet for NGLs. These expansions are supported by long-term, fee-based agreements and volumetric commitments.

Susquehanna Supply Hub Expansion

In November 2019, Williams completed a 500 MMcf/d expansion of the gathering system in the Susquehanna Supply Hub to bring the capacity to approximately 4.3 Bcf/d.

Atlantic-Gulf

Rivervale South to Market

In August 2018, Williams received approval from the FERC to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from the existing Rivervale interconnection with Tennessee Gas Pipeline on Transco’s North New Jersey Extension to other existing Transco locations within New Jersey. The project was placed into partial service on July 2019. The remaining portion of the project was placed into service on September 2019. The full project increased capacity by 190 Mdth/d.

Norphlet Project

In March 2016, Williams announced an agreement to provide deepwater gas gathering services to the Appomattox development in the Gulf of Mexico. We completed modifications to install an alternate delivery route to our Main Pass 261 Platform, as well as modifications to our onshore Mobile Bay processing facility. The project went in service early in July 2019, at which time we also purchased a 54-mile-long, 16-inch-diameter pipeline (the Norphlet Pipeline) for $200 million. This pipeline transports gas from the Appomattox development to our Main Pass 261 Platform.

Gateway

In December 2018, Williams received approval from the FERC to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from PennEast Pipeline Company’s proposed interconnection with Transco’s mainline south of Station 205 in New Jersey to other existing Transco meter stations within New Jersey. The project was placed into service in December 2019 and increased capacity by 65 Mdth/d.

Gulf Connector

In January 2019, the Gulf Connector project was placed into service. This project expanded Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from Station 65 in Louisiana to delivery points in Wharton and San Patricio Counties, Texas. The project increased capacity by 475 Mdth/d.

West

North Seattle Lateral Upgrade

In July 2018, Williams received approval from the FERC to expand delivery capabilities on Northwest Pipeline’s North Seattle Lateral. The project consists of the removal and replacement of approximately 5.9 miles of 8-inch diameter pipeline with new 20-inch diameter pipeline. The project was placed into service in November 2019. The project increased delivery capacity by approximately 159 Mdth/d.

 

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Wamsutter Expansion

Williams expanded gathering and processing infrastructure in the Wamsutter region of Wyoming in order to meet our customers’ production plans. We have completed construction of new compressor stations and modifications to our processing facilities, which were placed into service throughout 2019. The expansion added approximately 20 miles of gathering pipelines and approximately 15,000 horsepower of compression.

The accompanying chart compares Williams’ cumulative TSR on our common stock (assuming reinvestment of dividends) to the cumulative total return of the S&P 500 Stock Index, the Arca Natural Gas Index, and the median of the comparator companies used to measure relative TSR performance in our 2019 performance-based RSU awards. For more details on our comparator company group, see the CD&A section titled “Determining Our Comparator Group.” The graph below assumes an initial investment of $100 at the beginning of the period on December 31, 2016.

 

 

LOGO

The Williams Companies, Inc. $100.00 $102.04 $77.68 $88.72 S&P 500 Index $100.00 $121.82 $116.47 $153.14 2019 Comparator Company Group Median $100.00 $95.23 $79.41 $111.91 Arca Natural Gas Index $100.00 $85.34 $58.27 $57.55

Compensation Summary

Objective of Our Compensation Programs

The role of compensation is to attract and retain the talent needed to increase stockholder value and to help our businesses meet or exceed financial and operational performance goals. Our compensation programs’ objectives are to reward our NEOs and employees for successfully implementing our strategy to grow our business and create long-term stockholder value. To that end, in 2019 we used relative TSR and ROCE to measure long-term performance and we used adjusted EBITDA, controllable costs, and safety metrics to measure annual performance. We believe using separate long-term and annual metrics to incent and pay NEOs helps ensure that we make business decisions aligned with the long-term interests of our stockholders.

 

The Williams Companies, Inc. – 2020 Proxy Statement        32


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Our Pay Philosophy

Our pay philosophy throughout the entire organization is to pay for performance, be competitive in the marketplace, and consider the value a job provides to the Company. Our compensation programs reward NEOs not just for accomplishing goals, but also for how those goals are pursued. The principles of our pay philosophy influence the design and administration of our pay programs. Decisions about how we pay NEOs are based on these principles. The Committee uses several types of pay that are linked to both our long-term and short-term performance in the executive compensation programs. Included are long-term incentives, annual cash incentives, base pay, and benefits. The chart below illustrates the linkage between the types of pay we use and our pay principles.

 

Pay Principles

  

Long-term
Incentives

  

Annual Cash
Incentives

  

Base Pay

  

Benefits

Pay should reinforce business objectives and values.    🌑    🌑    🌑     
A significant portion of a NEO’s total pay should be variable based on performance.    🌑    🌑          
Incentive pay should balance long-term, intermediate, and short-term performance.    🌑    🌑          
Incentives should align interest of NEOs with stockholders.    🌑    🌑          
Pay should foster a culture of collaboration with shared focus and commitment to our Company.    🌑    🌑          
Incentives should enforce the value of safety within our Company.         🌑          
Pay opportunities should be competitive.    🌑    🌑    🌑    🌑
A portion of pay should be provided to compensate for the core activities required for performing in the role.              🌑    🌑

 

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Our Commitment to Pay for Performance

 

 

LOGO

Role of Board of Directors Reviews CEO performance [evaluations, CEO self-assessment, and company performance] Approves Board of Directors pay Role of Committee Determines CEO and NEO pay Recommends Board of Directors Pay Seeks input from independent consultant Engages independent consultant on comparator groups and Board of Director and CEO pay Role of CEO Reviews NEO performance Reviews competitive market information Recommends NEO pay, including base pay adjustments, AIP, LTI and any other compensation No role in setting compensation for his/her role Role of Independent Consultant Assists Committee in discussions and decisions regarding NEO compensation Provides competitive market data for CEO Develops comparator group, with input from Committee and Management Role of Management Human Resources provides CEO with data from comparator group proxies Human Resources provides CEO with pay information from various compensation surveys

2019 Comparator Group

Determining Our Comparator Group

Companies in our executive compensation benchmarking comparator group have a range of revenues, assets, market capitalization, and enterprise value. Business consolidation and unique operating models create some challenges in identifying comparator companies. Accordingly, we take a broad view of comparability to include organizations that are similar to Williams. This results in compensation that is appropriately scaled and reflects comparable complexities in business operations. We typically aim for a comparator group of 15 to 20 companies so our comparisons will be valid. The 2019 comparator group includes 16 companies which comprise a mix of both direct business competitors and companies with whom we compete for talent. Since 2017, the Committee also established a smaller targeted comparator company group for the purposes of measuring relative TSR related to our performance-based RSU awards. While not perfectly aligned to our natural gas strategy, these selected companies are more similar to our specific segment of the energy industry.

How We Use Our Comparator Group

We refer to publicly available information to analyze our comparator companies’ practices including how pay is divided among long-term incentives, annual incentives, base pay, and other forms of compensation. This allows the Committee to ensure competitiveness and appropriateness of proposed compensation packages. When setting pay, the Committee uses market median information of our comparator group, as opposed to market averages, to ensure that the impact of any unusual events that may occur at one or two companies during any particular year is diminished from the analysis. If an event is particularly unusual and surrounded by unique circumstances, the data is completely removed from the assessment. The smaller targeted comparator company group is used solely for the purposes of measuring relative TSR related to our 2017, 2018, 2019, and 2020 performance-based RSU awards.

 

The Williams Companies, Inc. – 2020 Proxy Statement        34


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The following table shows the range of our 2019 executive compensation benchmarking comparator companies’ assets, market capitalization, and enterprise value as originally reported for 2018 (dollars in millions):

 

Comparator Company  Ticker        Total Assets Market
Capitalization
Enterprise Value

CenterPoint Energy Inc.

CNP       

$

27,009

$

14,149

$

20,319

Cheniere Energy Inc.

LNG       

$

31,987

$

15,212

$

45,161

Devon Energy Corp

DVN       

$

19,566

$

10,143

$

13,676

Dominion Energy Inc.

D       

$

77,914

$

48,664

$

85,512

Enbridge (in U.S. dollars)

ENB       

$

122,508

$

62,943

$

118,583

Enterprise Products

EPD       

$

56,970

$

53,726

$

80,135

EOG Resources

EOG       

$

33,935

$

50,584

$

55,111

Magellan Midstream Partners, L.P.

MMP       

$

7,748

$

13,021

$

17,073

Marathon Petroleum Corp

MPC       

$

92,940

$

40,127

$

75,842

ONEOK Inc.

OKE       

$

18,232

$

22,202

$

31,571

Phillips 66

PSX       

$

54,302

$

39,299

$

49,940

Pioneer Natural Resources

PXD       

$

17,903

$

22,293

$

23,309

Sempra Energy Corp.

SRE       

$

60,638

$

29,644

$

59,129

Southern Co.

SO       

$

116,914

$

43,876

$

93,936

Targa Resources Corp.

TRGP       

$

16,938

$

8,349

$

16,140

TC Energy Corp. (in U.S. dollars)

TRP       

$

72,607

$

32,848

$

73,534

 

 

75th percentile

$

73,934

$

45,073

$

76,915

50th percentile

$

44,118

$

31,246

$

52,526

25th percentile

 

 

$

19,232

$

14,946

$

22,561

Williams

WMB       

$

45,302

$

26,681

$

50,299

Percent rank

 

50%

 

 

44%

 

 

47%

 

The Committee determined the same 16 companies listed in the table above will be used to benchmark compensation practices and pay decisions in 2020.

A separate comparator company group is used to specifically measure relative TSR as it pertains to performance-based RSU awards since 2017:

 

•   Enbridge

 

•   Kinder Morgan, Inc.

 

•   Targa Resources Corp.

•   Energy Transfer

 

•   ONEOK Inc.

 

•   TC Energy Corp.

•   Enterprise Products

 

•   Plains All-American Pipeline

 

 

 

•   Western Midstream Partners

 

 

Our Pay Setting Process

During the first quarter of the year, the Committee completes a review to ensure we are paying competitively, equitably, and in a way that encourages and rewards performance.

 

The Williams Companies, Inc. – 2020 Proxy Statement        35


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The compensation data of our comparator group, disclosed primarily in proxy statements, is the primary market data we use when benchmarking the competitive pay of our NEOs. Aggregate market data obtained from recognized third-party executive compensation survey companies is used to supplement and validate comparator group market data.

 

Although the Committee reviews relevant data as it determines compensation packages, other considerations are taken into account. Because market data alone does not reflect the strategic competitive value of various roles within our Company, internal pay equity is also considered when making pay decisions. Other considerations when making pay decisions for the NEOs include individual experience, sustained performance, historical pay, realized and realizable pay over three years, tally sheets that include annual pay and benefit amounts, wealth accumulated over the past five years, and the total aggregate value of the NEOs’ equity awards and holdings.

    

 

Multiple internal and
external factors are
considered when
determining NEO
compensation
packages

 

When setting pay, we determine an annual target pay mix (distribution of pay among base pay, short-term incentives, annual long-term incentives, and other forms of compensation) for the NEOs. Consistent with our pay-for-performance philosophy, the actual amounts paid, excluding benefits, are determined based on Company and individual performance. Because performance is a factor, the target versus actual pay mix will vary, specifically as it relates to the annual cash incentives and long-term incentives.

 

CEO

2019 Total Compensation at Target Pay Mix

    

NEO (Excluding CEO)

2019 Total Compensation at Target Pay Mix

LOGO      LOGO

 

The Williams Companies, Inc. – 2020 Proxy Statement        36


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How We Determine the Amount for Each Type of Pay

Base pay, annual cash incentives, and long-term incentives accomplish different objectives. The table below illustrates a summary of the primary objectives associated with each component of pay listed in the order of most significant to the NEO’s total compensation. The table is followed by specific details regarding each pay component.

 

 

LOGO

Type of Pay & Form Performance Period (years) Objectives Fixed Base pay (cash) 1 Compensates for carrying out the duties of the job Recognizes individual experiences, skills, and sustained performance Provides attraction and retention At Risk Short-term incentive: Annual cash incentive 1 Incents the accomplishment of annual business goals Aligns interests of executives to our stockholders Provides attraction and retention Long-term incentive: Performance-based RSUs 3 Long-term incentive: Time-based RSUs 3 Incents the accomplishment of long-term sustainable business goals Aligns interests of executives to our stockholders Prmotes ownership in the Company Provides attraction and retention

Base Pay

Base pay compensates the NEOs for carrying out the duties of their jobs and serves as the foundation of our pay program. Most other major components of pay are set based on a relationship to base pay, including long-term and annual incentives, as well as retirement benefits.

Base pay for the NEOs, including the CEO, is set considering the market median, with potential individual variation from the median due to experience, skills, and sustained performance of the individual as part of our pay-for-performance philosophy. Performance is measured in two ways. First, through the achieved results associated with attaining their annual goals, operational and/or functional area strategies, and personal development plans. Second, we also evaluate the NEOs’ observable skills and behaviors related to how they achieved their goals based on our defined competencies that contribute to workplace effectiveness and career success.

Annual Cash Incentives

As previously mentioned in the “Our Commitment to Pay for Performance” section, we pay annual cash incentives to encourage and reward our NEOs for making decisions that improve our annual operating performance through our AIP. The objectives of our AIP are to:

 

   

Offer sufficient incentive compensation to motivate management to put forth extra effort, take prudent risks, and make effective decisions to maximize stockholder value;

 

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Motivate and incent management to choose strategies and investments that maximize long-term stockholder value;

   

Provide sufficient total compensation to retain management; and

   

Limit the cost of compensation to levels that will maximize the return of current stockholders without compromising the other objectives.

NEOs’ AIP business performance is based on enterprise results of these business metrics in relation to established targets. We only use enterprise-level performance metrics for our NEOs in order to promote teamwork and collaboration by creating a shared goal for the overall Company performance. Our business performance targets are established utilizing the annual financial plan. Goals related to ROCE growth and operating margin improvement are considered when establishing the financial plan. Our incentive program allows the Committee to make adjustments to these business performance metrics to reflect certain business events. When determining which adjustments are appropriate, we are guided by the principle that incentive payments should not result in unearned windfalls or impose undue penalties. In other words, we make adjustments to ensure NEOs are not rewarded for positive results they did not facilitate nor are they penalized for certain unusual circumstances outside their control. Adjustments applied in 2019 served to reduce Adjusted EBITDA and Controllable Cost performance results, each by less than one percent of the original 2019 financial result.

Management reviews with the Committee a supplemental scorecard reflecting Adjusted EBITDA, maintenance capital expenditures, distributable cash flow, Adjusted EPS, ROCE, and Williams stock price performance to provide an update regarding the Company’s performance as well as to ensure alignment between these measures and the AIP’s business performance metrics. This scorecard provides the Committee with additional data to assist in determining final AIP awards.

The Committee’s independent compensation consultant annually compares our relative performance on various measures, including TSR and earnings per share with our comparator group of companies. The Committee also uses this analysis to validate the reasonableness of our AIP results.

How We Set the 2019 AIP Goals.

 

LOGO

CEO, CFO, and NEOs Establish business and financial goals Operational/Functional Leaders Create specific business and financial goals Corporate Planning Consolidate into enterprise business and financial goals CEO, CFO, and NEOs Finalize enterprise business and financial plan Establish AIP goals and recommend to the Committee Committee Reviews and makes any necessary adjustments to set AIP goals Monitors progress through the year

 

The Williams Companies, Inc. – 2020 Proxy Statement        38


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The AIP Calculation. The 2019 AIP is based on the weighted measures of Adjusted EBITDA, controllable costs, and safety metrics. Each metric is directly aligned with our business strategy to operationally grow the business, operate safely in everything we do, and continue to align with our dividend growth strategy.

 

LOGO

Business Performance Metric & Weighting 50% Adjusted EBITDA 40% Controllable Costs 10% Safety Measuring Profit Metric Operating & Maintenance ("O&M") and General & Administrative ("G&A") Costs Near Miss to Incident Ratio Late Post Startup Deliverables Importance Transition from WPZ Distributable Cash Flow recognizing current C-Corp structure following the acquisition of WPZ Encourages cost management discipline with achieving our growth strategy Emphasizes the importance of safety leadership Drive frontline employee action and continue to influence safety culture

The attainment percentage of AIP goals results in payment of annual cash incentives along a continuum between threshold and stretch levels, which corresponds to zero percent through 200 percent of the NEOs’ annual cash incentive target.

2019 NEO AIP Targets. The starting point to determine annual cash incentive targets (expressed as a percentage of base pay) is competitive market information referencing the market median, which provides an idea of what other companies target to pay in annual cash incentives for similar jobs. We also consider the internal value of each job (i.e., how important the job is to executing our strategy compared to other jobs in the Company) before the target is set for the year. The annual cash incentive targets as a percentage of base pay for the NEOs in 2019 were as follows:

 

   

Position

 

  

Target     

 

 

 

President and Chief Executive Officer

 

    

 

 

 

 

 

 

 

 

130%   

 

 

 

 

 

 

EVP, Chief Operating Officer

 

    

 

 

 

 

100%   

 

 

 

 

 

SVP, Corporate Strategic Development

 

    

 

 

 

 

 

 

75%   

 

 

 

 

 

SVP, Chief Financial Officer

 

    

 

 

 

 

80%   

 

 

 

 

SVP, Project Execution

 

    

 

 

 

 

70%   

 

 

 

 

The Williams Companies, Inc. – 2020 Proxy Statement        39


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Determining 2019 AIP Awards. To determine the funding of the annual cash incentive, we use the following calculation for each NEO:

 

LOGO

2019 Base Pay Received X 2019 Incentive Target % X 2019 Business Performance Metrics = Adjusted EBITDA (50%) Controllable Costs (40%) Safety (10%) 2019 AIP Result

Based on business performance relative to the established goals, the Committee certified business performance results as follows and the 2019 AIP award payout, at 117 percent of target, was paid in March 2020.

 

LOGO

THRESHOLD TARGET STRETCH ADJUSTED EBITDA $5,056 MM Target vs. $4,965 MM Actual=0.74x Payout 98% target; 74% payout CONTROLLABLE COSTS $(2,050) MM Target vs. $(1,933) MM Actual=1.59x Payout 106% target; 159% payout SAFETY: NEAR MISS TO INCIDENT RATIO >9:1<10:1 Target vs. 13.98:1 Actual= 1.50x Payout 150% payout SAFETY: LATE POST STARTUP DELIVERABLES >3% 4% Target vs. <1% Actual=1.75x Payout 175% payout

 

               
Metrics   Weighting   Threshold   Target   Stretch
@ 200%
  Actual   Result   Payout %  
   

Adjusted EBITDA

      50 %     $ 4,706       $ 5,056        $ 5,406     $ 4,965       74       37 %
   

Controllable Costs

      40 %     $ (2,250 )       $(2,050)       $ (1,850 )     $ (1,933 )       159 %       63 %
   

Safety: Near Miss to Incident Ratio

      5 %       < 4:1         >9:1 £10:1         >15:1         13.98:1         150 %       8 %
   

Safety: Late Post Startup Deliverables

      5 %       >10%         >3% £4%         0%         <1%         175 %       9 %
   

2019 AIP Business Performance %

                                                                  117 %

 

The Williams Companies, Inc. – 2020 Proxy Statement        40


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We calculate (a) Adjusted EBITDA as: Gross margin less operating and maintenance expenses, less selling, general, and administrative expenses, less other (income) and expense, plus proportionate EBITDA of joint venture partnerships; and (b) Controllable Costs as: operating and maintenance costs and selling, general and administrative costs that are under the responsibility of a cost center manager, less certain expenses that are considered less controllable (such as pension and postretirement benefit costs) or have no net impact on financial performance (such as costs that are passed directly to customers). Operating and maintenance costs, selling, general, and administrative costs, and total service revenues include our proportional ownership share of such items recognized by certain equity method investees.

While the controllable cost target was established at a level above 2018 actual results, this is primarily due to two items: (a) an accounting classification change made by a non-operated joint venture; and (b) incremental costs of operating assets associated with growth projects completed during 2018 which were operated during the full year of 2019.

For 2019, the safety metrics were Near Miss to Incident Ratio and Late Post Startup Deliverables. Near Miss to Incident Ratio was also a metric in 2018 and emphasizes our safety focus on hazard recognition and reinforces the importance of incident prevention. The Management of Change Quality Late Post Startup Deliverables metric was new in 2019 and places an emphasis on the importance of completing all post startup deliverables associated with newly completed projects. Each safety metric defines a minimum performance threshold and a maximum performance stretch threshold. Payout tiers are established, in 25 percent increments, from the threshold to stretch payout opportunity.

Individual performance, such as success toward our strategic objectives and individual goals, and successful demonstration of the Company’s leadership competencies which exceeded expectations may be recognized through adjustments. Payments may also be adjusted downward if performance warrants. The Committee chose to apply an adjustment to certain NEOs. In total, the adjustments applied to NEO awards were less than one percent of the original calculated awards. Mr. Poarch did not receive a 2019 AIP award as he resigned from the Company effective February 28, 2020 prior to the payment date of the award.

2020 AIP Design. In the 2020 AIP, Adjusted EBITDA and Controllable Costs will continue to be weighted at 50 percent and 40 percent respectively. A Safety Performance Metric, High Potential Near Miss to Incident Ratio, and an Environmental Performance Metric, Loss of Primary Containment (“LOPC”), will each be weighted at five percent. The Environmental Performance Metric is new in 2020 and continues our focus on environmental performance, the reduction of greenhouse gasses, and is aligned with our core value of being responsible stewards around the environment and the products we transport. The LOPC metric is considered a leading indicator to more significant process safety incidents and is directly related to reducing greenhouse gas emissions.

 

   

2020 AIP Metrics

 

  

Weight     

 

 

Adjusted EBITDA

 

    

 

 

 

 

 

 

50%   

 

 

 

 

 

Controllable Costs

 

    

 

 

 

 

40%   

 

 

 

Environmental and Safety (10%)

 

    

 

 

 

 

   

 

 

 

 

Environmental Performance Metric

 

    

 

 

 

 

5%   

 

 

 

 

Safety Performance Metric

 

    

 

 

 

 

5%   

 

 

 

 

The Williams Companies, Inc. – 2020 Proxy Statement        41


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Long-Term Incentives

To determine the value for long-term incentives granted to a NEO each year, we consider the following factors:

 

   

The proportion of long-term incentives relative to base pay;

   

The NEO’s impact on Company performance and ability to create value;

   

Long-term business objectives;

   

The market median and specific awards made to executives in similar positions within our comparator group of companies;

   

The market demand for the NEO’s particular skills and experience;

   

The amount granted to other NEOs in comparable positions at the Company;

   

The NEO’s demonstrated historical performance; and

   

The NEO’s leadership performance.

A summary of the long-term incentive program details for 2019 are shown in the following table. The long-term incentive mix for the CEO differs from the mix for the other NEOs. Since the CEO has more opportunity to influence our financial results, the Committee considers it appropriate that a greater percentage of his long-term incentives are directly tied to the performance of the Company’s stock price.

 

    

     

Performance-based RSUs

 

  

Time-based RSUs

 

 

CEO Equity Mix

 

 

 

60%

 

  

 

40%

 

 

NEO Equity Mix

 

 

 

50%

 

  

 

50%

 

 

Term

 

 

 

Three years

 

  

 

Three years

 

 

Frequency

 

 

 

Granted annually

 

  

 

Granted annually

 

 

Performance Criteria

 

 

 

Relative TSR and ROCE

 

  

 

Retention

 

 

Vesting

 

 

 

Cliff vesting after

three years

 

  

 

Cliff vesting after

three years

 

 

Payout

 

 

 

Upon vesting, shares are
distributed based on
performance certification

(0% – 200%)

 

  

 

Upon vesting, shares are
distributed

 

 

Dividends

 

 

 

No dividends

 

  

 

Dividend equivalents
accrued and paid in cash
upon vesting

 

In 2019, we did not include stock options in our annual equity award. The performance-based RSU award increased to 60 percent and 50 percent of our CEO’s and NEO’s equity mix respectively. The long-term incentive mix remained the same in 2020.

Performance-based RSUs. Performance-based RSU awards are only earned if we attain specific pre-determined performance results. In 2016, we measured both relative TSR and absolute TSR as interdependent measures in determining the attainment level of our performance-based awards. The 2017 performance-based RSU awards utilized relative TSR while the 2018 and 2019 performance-based RSU awards utilize both relative TSR and ROCE to determine performance and the actual number of units that will vest.

2016 Performance-based RSUs. The performance cycle for our 2016 performance-based RSUs was completed at the end of 2018 and vested in February 2019. Our relative TSR performance was in the top quartile of our comparator company group. Because we delivered an annualized absolute TSR performance of 5.8 percent, less

 

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than the threshold annualized TSR target of at least 7.5 percent, the earned payout was limited to 31.8 percent of the number of performance-based RSUs originally granted. This resulted in 68.2 percent of the original RSUs awarded being cancelled.

 

LOGO

Relative TSR TSR performance increases relative to our comparator companies 100 Percentile 60% 100% 125% 150% 175% 200% 75 Percentile 30% 75% 100% 125% 150% 175% 50 Percentile 0% 50% 75% 100% 125% 150% 25 Percentile 0% 25% 50% 75% 100% 125% <25 Percentile 0% 0% 0% 30% 60% 100% <7.5% 7.5% Threshold 10% 12.5% Target 15% 18% Stretch Annualized Absolute TSR Stockholders receive increased return on their investment

2017 Performance-based RSUs. The performance cycle for our 2017 performance-based RSUs was completed at the end of 2019 and vested in February 2020. The 2017 award measured our TSR performance relative to our established peer group. The design provides for up to a 200 percent payout if our relative TSR performance is at the top of our peer group and there will be no payout if our relative TSR performance is at the bottom of the peer group. The payout curve is linear between zero percent and 200 percent based on our placement within the peer group of companies. An award is limited to 100 percent if our actual TSR is negative. Williams’ TSR during this period placed Williams eighth among our peer companies resulting in an earned payout of 44.4 percent of the number of performance-based RSUs originally granted. This resulted in 55.6 percent of the original RSUs awarded being cancelled.

2018 and 2019 Performance-based RSUs. The 2018 and 2019 performance-based RSUs utilize two equally weighted metrics to measure performance and can result in a payout range from zero percent to 200 percent of target. Relative TSR is weighted at 50 percent and ROCE is weighted at 50 percent. Relative TSR, consistent with the 2017 award described above, provides up to a 200 percent payout if our relative TSR performance is at the top of our peer group and there will be no payout if our relative TSR performance is at the bottom of the peer group. The payout curve is linear between zero percent and 200 percent based on our placement within the peer group of companies, unless the TSR result is negative and the metric would be limited to 100 percent. The ROCE performance will be measured against pre-determined targets and is on a linear payout curve from 50 percent to 200 percent. The focus for this metric is on creating annual ROCE improvement.

 

         

2019 Performance-based RSU Metric

 

  

Weighting

 

  

Threshold

 

  

Target

 

  

Stretch 

 

 

2021 ROCE

 

  

 

50%

 

  

 

7.30%

 

  

 

8.20%

 

  

 

8.70%

 

This ROCE target represents approximately an eight percent compound annual growth rate from 2018 results and is aligned with the financial plan approved by the Board.

2019 Special Performance-based RSU award. At the time of the 2019 annual equity award, the five NEOs received an incremental performance-based equity award. This award measures 2021 Adjusted EPS against preestablished targets. While the performance period ends on December 31, 2021, any earned award would vest in 50 percent increments three and four years from the date of the award, on February 19, 2022 and February 19, 2023

 

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respectively. While the award is performance-based, the extended vesting period was added for retentive purposes. Prior to the 2019 award, four of the five NEOs had been an executive officer with the Company for less than two years. Considering the progress associated with the reconstituted leadership group, the Committee sought to provide a common performance-based award across the group while also building in more significant retention. The adjusted EPS performance will be measured against pre-determined targets and is on a linear payout curve from 50 percent to 200 percent.

 

         

2019 Special Performance-based RSU Metric

 

  

Weighting

 

  

Threshold

 

  

Target

 

  

Stretch 

 

 

2021 Adjusted EPS

 

  

 

100%

 

  

 

$0.99

 

  

 

$1.07

 

  

 

$1.23

 

This Adjusted EPS target represents approximately a 35 percent total growth rate from 2018 Adjusted EPS results.

2020 Performance-based RSU awards. The 2020 performance-based RSU awards, granted on February 24, 2020, utilize two equally weighted metrics to measure performance and can result in a payout range from zero percent to 200 percent of target. ROCE is weighted at 50 percent and Debt to EBITDA Ratio is weighted at 50 percent and both are measured against preestablished targets. Additionally, the calculated result from these weighted financial metrics may be increased or decreased by 25 percent of the calculated result utilizing a relative TSR metric. If our TSR relative to our peer company group is in the top three companies, the calculated result will be increased by 25 percent while the calculated result will be decreased by 25 percent if our TSR relative to our peer company group is in the bottom three companies. However, under no circumstance can the calculated award exceed 200 percent of target.

Time-based RSU Awards. We grant time-based RSUs to retain executives and to facilitate stock ownership. The use of time-based RSUs is also consistent with the practices of our comparator group of companies. Time-based RSUs accrue dividend equivalents which are paid in cash only upon vesting and distribution of the award.

Stock Option Awards. For recipients, stock options have value only to the extent the price of our common stock is higher on the date the options are exercised than it was on the date the options were granted. Stock options are no longer part of our annual equity award mix and were not granted beginning in 2019.

Grant Practices. The Committee typically approves our annual equity grant in February of each year, shortly after the annual earnings release to ensure the market has time to absorb material information disclosed in the earnings release and reflect that information in the stock price. The grant date for off-cycle grants for individuals who are not NEOs, for reasons such as retention or new hires, is generally the first business day of the month following the approval of the grant. By using this consistent approach, we remove grant timing from the influence of the release of material information.

Mr. Chandler, Mr. Dunn, and Mr. Zamarin were each hired after our 2017 annual equity awards were granted. Mr. Dunn received performance-based RSUs, time-based RSUs, and stock options considering the proximity of his hire date to the annual grant. Mr. Chandler and Mr. Zamarin received time-based RSUs. Mr. Zamarin’s award, and other elements of his pay package including a $500,000 deferred cash award paid in 2019, were intended to address the meaningful retention that was in place with his previous employer.

Stock Ownership Guidelines. Our program provides stock ownership guidelines for each of our NEOs and our Board of Directors as shown in the table below:

 

       

 

Position

 

 

 

Ownership Multiple

 

 

 

As a Multiple of

 

 

 

Holding / Retention Requirement

 

 

CEO

 

 

 

6x

 

 

 

Base Pay

 

 

 

50%, after taxes, until guidelines are met

 

 

NEO

 

 

 

3x

 

 

 

Base Pay

 

 

 

50%, after taxes, until guidelines are met

 

 

Board of Directors

 

 

 

5x

 

 

 

Annual Cash Retainer

 

 

 

60% until guidelines are met

 

 

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The Committee annually reviews the guidelines for competitiveness and alignment with best practices and monitors the NEOs’ progress toward compliance. WMB shares owned outright and outstanding time-based RSUs count as owned for purposes of the program. Stock options and performance-based equity are not included as owned for purposes of the program. NEOs must retain 50 percent of any vested equity awards, net of taxes, until their ownership guidelines are met. Board members must retain 60 percent of distributed vested equity awards until their ownership guidelines are met. At Williams, NEOs must hold at least 50  percent of any equity transaction if they have not met their ownership guideline regardless of their time in the role.

Benefits

Consistent with our philosophy to emphasize pay for performance, our NEOs receive very few perquisites or supplemental benefits. They are as follows:

 

   

Retirement Restoration Benefits. NEOs participate in our qualified retirement program on the same terms as our other employees. We offer a retirement restoration plan to maintain a proportional level of pension benefits to our NEOs as provided to other employees. The Internal Revenue Code of 1986, as amended (“Internal Revenue Code”), limits qualified pension benefits based on an annual compensation limit. For 2019, the limit was $280,000. Any limitation in a NEO’s pension benefit in the tax-qualified pension plan due to this limit is made up for (subject to a cap) in the unfunded retirement restoration plan. Benefits for NEOs are not enhanced and are calculated using the same benefit formula as that used to calculate benefits for employees in the qualified pension plan. The compensation included in the retirement restoration benefit is consistent with pay considered for employees in the qualified pension plan. Equity compensation, including RSUs and stock options, is not considered. Additionally, we do not provide a nonqualified benefit related to our qualified 401(k) defined contribution retirement plan.

 

   

Financial Planning Allowance. We offer financial planning to provide expertise on current tax laws to assist NEOs with personal financial planning and preparations for contingencies such as death and disability. Covered services include estate planning, tax planning, tax return preparation, wealth accumulation planning, and other personal financial planning services. In addition, by working with a financial planner, NEOs gain a better understanding of and appreciation for the programs the Company provides, which helps to maximize the retention and engagement aspects of the dollars the Company spends on these programs.

 

   

Personal Use of Company Aircraft. The CEO is allowed, but not required, to use the Company’s private aircraft for personal travel. Our policy for all other executive officers is to discourage personal use of the aircraft, but the CEO retains discretion to permit its use when deemed appropriate, such as when the destination is not well served by commercial airlines, personal emergencies, and the aircraft is not being used for business purposes. To the extent that NEOs use the Company’s private aircraft for personal travel, imputed income will be applied to the NEO, in compliance with Internal Revenue Code requirements.

 

   

Executive Physicals. The Committee requires annual physicals for the NEOs. Such physicals align with our wellness initiative as well as assist in mitigating risk. NEO physicals are intended to identify any health risks and medical conditions as early as possible in an effort to achieve more effective treatment and outcomes.

 

   

Event Center. We have a suite and club seats at certain event centers that were purchased for business purposes. If they are not being used for business purposes, we make them available to all employees, including our NEOs. This is not considered a perquisite to our NEOs because it is available to all employees.

 

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Additional Components of our Executive Compensation Program

In addition to establishing the pay elements described above, we have adopted a number of policies to further the goals of the executive compensation program, particularly with respect to strengthening the alignment of our NEOs’ interests with stockholder long-term interests.

Employment Agreements. We do not have employment agreements with our NEOs.

Termination and Severance Arrangements. The Executive Severance Pay Plan includes senior executive officers, which includes NEOs other than the CEO, in order to define a consistent approach of treatment in the event of a severance event. Under the plan, NEOs are eligible to receive a discretionary payment of 1.5 to 2.0 times the sum of the NEO’s base salary and target annual bonus. Any severance payment is discretionary. Considerations include the NEO’s term of employment, past accomplishments, reasons for separation from the Company, and competitive market practice. The NEO can elect coverage under the Company’s medical benefits plans for 18 months from the termination in the same manner and at the same cost as similarly situated active employees for up to the first 12 months. Outplacement services are provided up to a maximum amount of $25,000.

Change in Control Agreements. Williams’ change in control agreements, in conjunction with the NEOs’ equity award agreements, provide separation benefits for our NEOs. The program includes a double trigger for benefits and equity vesting. This means there must be a Company change in control and the NEO must experience a qualifying termination of employment prior to receiving benefits under the agreement. This practice creates security for the NEOs but does not provide an incentive for the NEO to leave the Company. Our program is designed to encourage the NEOs to focus on the best interests of stockholders by alleviating their concerns about a possible detrimental impact to their compensation and benefits under a potential change in control, not to provide compensation advantages to NEOs for executing a transaction.

The Committee reviews our change in control benefits periodically to ensure they are consistent with competitive practice and aligned with our compensation philosophy. As part of the review, calculations are performed to determine the overall program cost to the Company if a change in control event were to occur and all covered NEOs were terminated as a result. An assessment of competitive norms, including the reasonableness of the elements of compensation received, is used to validate benefit levels for a change in control. We do not offer a tax gross-up provision in our change in control agreements but instead include a ‘best net’ provision providing our NEOs with the better of their after-tax benefit capped at the safe harbor amount or their benefit paid in full, subjecting them to possible excise tax payments. The Committee continues to believe that offering a change in control program is appropriate and critical to attracting and retaining executive talent and keeping them aligned with stockholder interests in the event of a change in control.

On February 1, 2018, our NEOs, as well as other officers with a Change in Control Agreement (“Agreement”), received a one-year notice informing the recipient that their current Agreement would terminate on February 1, 2019. This one-year notice of termination was required under the Agreement. A revised agreement was provided, and each officer signed the Agreement which was effective February 2019. Among other changes to the language, the new Agreement removed the Retirement Restoration Plan component from the cash severance calculation. Additionally, the new Agreement changed the COBRA coverage benefit to a cash benefit.

 

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The following chart details the benefits received if a NEO were to be terminated or resigned for a defined good reason following a change in control as well as an analysis of those benefits as it relates to the Company, stockholders, and the NEO:

 

Change in Control Benefit

 

What does the benefit provide to
the Company and stockholders?

 

What does the benefit provide to
the NEO?

Multiple of 3x base pay

plus annual cash incentive at
target

 

Encourages NEOs to remain engaged
and stay focused on successfully
closing the transaction.

 

Financial security for the NEO
equivalent to three-years of
continued employment.

Accelerated vesting of stock
awards

 

An incentive to stay during and after a change in control. If there is risk of
forfeiture, NEOs may be less inclined
to stay or to support the transaction.

 

The NEOs are kept whole if they have
a separation from service following a
change in control.

The value of 36 months of group medical, dental, and/or prescription drug plan benefits

 

This is a minimal cost to the Company that creates a competitive benefit.

 

Access to health coverage.

   

Reimbursement of legal fees to enforce benefit

 

Keeps NEOs focused on the Company
and not concerned about whether the acquiring company will honor contractual
commitments after a change in control.

 

Security during an unstable period of
time.

Outplacement assistance

 

Keeps NEOs focused on supporting the transaction and less concerned about
trying to secure another position.

 

Assistance in finding a comparable executive position.

‘Best Net’ provision

 

Enables the change in control
benefits to be delivered in as close a
manner to the intended value of the
benefits as possible.

 

Provides NEOs with the better of their after-tax benefit capped at the safe
harbor amount or their benefit paid in full, which would subject them to possible excise tax payments.

Derivative Transactions. Our policy on securities trading applies to transactions in positions or interests whose value is based on the performance or price of our common stock. Because of the inherent potential for abuse, Williams prohibits officers, directors, and certain other employees from entering into short sales or using equivalent derivative securities in connection with Williams’ or its affiliates’ securities. Our policy on securities trading also prohibits holding Williams’ or its affiliates’ securities in a margin account or pledging them as collateral for a loan.

Mitigating Risk

Although no compensation-related risk was identified as a top risk, the approach to determine if there were adverse compensation risks was similar to the process detailed in the “Corporate Governance and Board Matters – Corporate Governance – Board Oversight of Williams’ Risk Management Process” section of this proxy statement. After this review and analysis, it was determined we do not have material adverse compensation-related risks. Our compensation plans are effectively designed and functioning to reward positive performance and motivate NEOs and employees to behave in a manner consistent with our stockholder interests, business strategies and objectives, ethical standards, and prudent business practices, along with our Core Values which are the foundation

 

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on which we conduct business. Our Core Values can be found on our website at www.williams.com from the Our Company tab. In fact, many elements of our executive pay program serve to mitigate excessive risk taking. For example:

Target Pay Mix. The target pay mix weighting of long-term incentives, annual cash incentives, and base pay is consistent with comparator company practices and avoids placing too much value on any one element of compensation, particularly the annual cash incentive. The mix of our pay program is intended to motivate NEOs to consider the impact of decisions on stockholders in the long-, intermediate-, and short-terms.

Annual Cash Incentive. Our annual cash incentive program does not allow for unlimited payouts. Calculated cash incentive payments for NEOs cannot exceed 200 percent of target levels.

Performance-based Awards.

   

Our annual cash incentive and long-term incentive programs include performance-based awards. The entire annual cash incentive award is measured against performance targets, while a significant portion of the long-term equity awards provided to NEOs is in the form of performance-based RSUs. Performance-based RSUs have no value unless we achieve pre-determined performance target thresholds.

   

To drive a long-term perspective, all 2019 RSU awards vest no earlier than three years from the date of grant rather than vesting ratably on an annual basis. Additionally, any earned cash dividend equivalents on time-based RSUs are not paid until the officer meets the vesting requirements and the award is distributed. Cash dividend equivalents are not provided on performance-based RSU awards.

   

NEOs’ incentive compensation performance is measured at the enterprise level rather than on a business unit level to ensure a focus on the overall success of the Company.

Stock Ownership Guidelines. As discussed previously in the CD&A, all NEOs, consistent with their responsibilities to stockholders, must hold an equity interest in the Company equal to a stated multiple of their base pay.

Recoupment Policy. In the event that financial results of the Company are restated due to fraud or intentional misconduct, the Board will review any performance-based incentive payments, including payments under the AIP and performance-based RSUs, paid to executive officers, who are found by the Board to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement and will, to the extent permitted by applicable law, seek recoupment from all executive officers of any amounts paid in excess of the amounts that would have been paid based on the restated financial results. In addition, the Company will take action to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 should the SEC determine and implement final rules.

Insider Trading Policy. Our insider trading policy prohibits NEOs and directors, directly or through family members or other persons or entities, from buying or selling Williams’ securities or engaging in any other action to take personal advantage of material nonpublic information. In addition, if during the course of working for the Company, the NEO or director learns of material nonpublic information about a competitor or a company with which Williams or an affiliate of Williams does or anticipates doing business with, he/she may not trade in that company’s securities until the information becomes public or is no longer material.

Accounting and Tax Treatment

We consider the impact of accounting and tax treatment when designing all aspects of pay, but the primary driver of our program design is to support our business objectives. Prior to 2018 and the implications of the tax reform legislation in late 2017, stock options and performance-based RSUs were intended to satisfy the requirements for performance-based compensation as defined in Section 162(m) of the Internal Revenue Code and are therefore considered a tax-deductible expense. Time-based RSUs did not qualify as performance-based and may not be fully deductible.

 

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    COMPENSATION AND MANAGEMENT DEVELOPMENT  COMMITTEE REPORT ON EXECUTIVE COMPENSATION  

 

Compensation and Management Development Committee Report on Executive Compensation

We have reviewed and discussed the foregoing CD&A with management. Based on our review and discussions with management, we recommend to the Board that the CD&A be included in this proxy statement.

By the members of the Committee of the Board as of March 19, 2020:

 

   

Stephen W. Bergstrom

   

Nancy K. Buese

   

Kathleen B. Cooper

   

Scott D. Sheffield

   

Murray D. Smith

The Committee Report on Executive Compensation is not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by Williams under the Securities Act or the Exchange Act, except to the extent that Williams specifically incorporates such information by reference.

 

    COMPENSATION AND MANAGEMENT DEVELOPMENT  COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION  

Compensation and Management Development Committee Interlocks and Insider Participation

During fiscal year 2019, Stephen W. Bergstrom, Nancy K. Buese, Kathleen B. Cooper, Scott D. Sheffield, and Murray D. Smith served on the Compensation and Management Development Committee. None of these Committee members has ever been an officer or employee of the Company or any of our subsidiaries, and none has an interlocking relationship requiring disclosure under applicable SEC rules.

 

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Executive Compensation and Other Information

2019 Summary Compensation Table

The following table sets forth certain information with respect to the compensation of the NEOs earned during fiscal years 2019, 2018, and 2017:

 

Name and Principal
Position

 

 

Year

 

   

Salary

 

   

Bonus

(1)

 

   

Stock Awards

(2)

 

   

Option Awards

(3)

 

   

Non-Equity
Incentive Plan
Compensation
(4)

 

   

Change in
Pension Value
& Nonqualified
Deferred
Compensation

Earnings(5)

 

   

All Other
Compensation
(6)

 

   

Total

 

 

Alan S. Armstrong

President and Chief

Executive Officer

 

 

 

2019

 

 

$

1,218,943

 

 

$

-

 

 

$

10,251,117

 

 

$

-

 

 

$

1,854,012

 

 

$

2,241,482

 

 

$

24,785

 

 

$

15,590,338

 

 

 

2018

 

 

 

1,184,615

 

 

 

-

 

 

 

6,180,144

 

 

 

1,270,144

 

 

 

2,028,654

 

 

 

-

 

 

 

27,818

 

 

 

10,691,376

 

 

 

 

2017

 

 

 

 

 

 

1,149,615

 

 

 

 

 

 

-

 

 

 

 

 

 

5,526,871

 

 

 

 

 

 

1,248,860

 

 

 

 

 

 

1,853,755

 

 

 

 

 

 

816,898

 

 

 

 

 

 

24,237

 

 

 

 

 

 

10,620,236

 

 

 

Micheal G. Dunn

EVP, Chief

Operating Officer

 

 

 

2019

 

 

 

670,673

 

 

 

-

 

 

 

4,691,701

 

 

 

-

 

 

 

780,000

 

 

 

426,174

 

 

 

42,761

 

 

 

6,611,309

 

 

 

2018

 

 

 

642,308

 

 

 

-

 

 

 

2,821,494

 

 

 

599,124

 

 

 

830,000

 

 

 

168,870

 

 

 

36,277

 

 

 

5,098,072

 

 

 

 

2017

 

 

 

 

 

 

496,154

 

 

 

 

 

 

-

 

 

 

 

 

 

2,288,233

 

 

 

 

 

 

533,665

 

 

 

 

 

 

600,000

 

 

 

 

 

 

97,761

 

 

 

 

 

 

59,111

 

 

 

 

 

 

4,074,924

 

 

 

Chad J. Zamarin

SVP, Corporate

Strategic Development

 

 

 

2019

 

 

 

552,404

 

 

 

500,000

 

 

 

3,420,247

 

 

 

-

 

 

 

485,000

 

 

 

292,790

 

 

 

18,216

 

 

 

5,268,657

 

 

 

2018

 

 

 

537,692

 

 

 

-

 

 

 

2,069,118

 

 

 

439,359

 

 

 

590,000

 

 

 

54,786

 

 

 

24,574

 

 

 

3,715,530

 

 

 

 

2017

 

 

 

 

 

 

262,500

 

 

 

 

 

 

600,000

 

 

 

 

 

 

2,250,013

 

 

 

 

 

 

-

 

 

 

 

 

 

254,000

 

 

 

 

 

 

-

 

 

 

 

 

 

133,532

 

 

 

 

 

 

3,500,045

 

 

 

John D. Chandler

SVP, Chief Financial

Officer

 

 

 

2019

 

 

 

556,539

 

 

 

-

 

 

 

3,323,615

 

 

 

-

 

 

 

540,000

 

 

 

328,699

 

 

 

23,216

 

 

 

4,772,069

 

 

 

2018

 

 

 

537,692

 

 

 

-

 

 

 

2,069,118

 

 

 

439,359

 

 

 

590,000

 

 

 

41,212

 

 

 

17,916

 

 

 

3,695,298

 

 

 

 

2017

 

 

 

 

 

 

159,519

 

 

 

 

 

 

-

 

 

 

 

 

 

500,008

 

 

 

 

 

 

-

 

 

 

 

 

 

165,000

 

 

 

 

 

 

42,212

 

 

 

 

 

 

10,117

 

 

 

 

 

 

876,856

 

 

 

John E. Poarch

SVP, Project

Execution

 

 

 

2019

 

 

 

413,231

 

 

 

-

 

 

 

2,830,904

 

 

 

-

 

 

 

-

 

 

 

194,857

 

 

 

16,857

 

 

 

3,455,849

 

 

 

2018

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

2017

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

  (1)

Bonus. As part of Mr. Zamarin’s pay package to join the Company, he received a sign-on bonus in 2017 and a deferred cash payment in 2019. These awards, and other elements of his pay package, were intended to address the significant retention that was in place and forfeited with his previous employer.

  (2)

Stock Awards. Awards were granted under the terms of The Williams Companies, Inc. 2007 Incentive Plan (the “2007 Incentive Plan”) and include time-based and performance-based RSUs. Amounts shown are the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The assumptions used to value the stock awards can be found in our Annual Report on Form 10-K for the year-ended December 31, 2019. Mr. Poarch resigned from the Company effective February 28, 2020 and forfeited all 2019 stock awards.

The potential maximum values of the performance-based RSUs, subject to changes in performance outcomes, are as follows:

 

     

2019 Performance-based RSU Maximum Potential

Alan S. Armstrong

  

$15,302,249

Micheal G. Dunn

  

    6,583,382

Chad J. Zamarin

  

    4,840,480

John D. Chandler

  

    4,647,215

John E. Poarch

  

    4,161,824

 

  (3)

Option Awards. Stock options were not granted in 2019. Prior to 2019, awards were granted under the terms of the 2007 Incentive Plan and included non-qualified stock options. Amounts shown are the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The assumptions used to value the option awards can be found in our Annual Report on Form 10-K for the year-ended December 31, 2019.

  (4)

Non-Equity Incentive Plan. The maximum annual incentive pool funding for NEOs is 200 percent of target. Mr. Poarch resigned from the Company effective February 28, 2020 and forfeited the 2019 AIP award.

 

The Williams Companies, Inc. – 2020 Proxy Statement        50


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  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

  (5)

Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amount shown is the aggregate change from December 31, 2018 to December 31, 2019 in the actuarial present value of the accrued benefit under the qualified pension and non-qualified plan. A portion of the increase in the change in present value is due to the lower discount rate used to measure these benefits at the end of 2019. The underlying design of these programs for our NEOs did not change from 2018 to 2019. Please refer to the “Pension Benefits” table for further details of the present value of the accrued benefit.

  (6)

All Other Compensation. Amounts shown represent payments made on behalf of the NEOs and include life insurance premiums, a 401(k) matching contribution, relocation benefits, and perquisites (if applicable). Perquisites may include financial planning services, mandated annual physical exams, and personal use of the Company aircraft. If the NEO used the Company aircraft, the incremental cost method is used to calculate the value of the personal use of the Company aircraft. The incremental cost calculation includes items such as fuel, maintenance, weather and airport services, pilot meals, pilot overnight expenses, aircraft telephone, and catering. Amounts do not include arrangements that are generally available to our employees and do not discriminate in scope, terms or operations in favor of our NEOs, such as medical, dental, and disability programs.

   

Mr. Armstrong received 401(k) matching contributions in the amount of $16,800; reimbursement related to a mandated annual physical exam; personal usage of the Company aircraft in the amount of $3,503; and life insurance premiums.

   

Mr. Dunn received 401(k) matching contributions in the amount of $16,800; reimbursement related to a mandated annual physical exam in the amount of $10,534; relocation benefits in the amount of $14,011; and life insurance premiums.

   

Mr. Zamarin received 401(k) matching contributions in the amount of $16,800 and life insurance premiums.

   

Mr. Chandler received 401(k) matching contributions in the amount of $16,800; reimbursement of financial planning services; and life insurance premiums.

   

Mr. Poarch received 401(k) matching contributions; reimbursement related to a mandated annual physical exam; relocation benefits; and life insurance premiums.

The Committee considers the compensation of CEOs from comparator companies when setting Mr. Armstrong’s pay. It is the competitive norm for CEOs to be paid more than other NEOs. In addition, the Committee believes the difference in pay between the CEO and other NEOs is consistent with our compensation philosophy (summarized in the CD&A), which considers the external market and internal value of each job to the Company along with the incumbent’s experience and performance of the job in setting pay. The CEO’s job is different from the other NEOs because the CEO has ultimate responsibility for performance results and is accountable to the Board and stockholders. Consequently, the Committee believes it is appropriate for the CEO’s pay to be higher.

 

The Williams Companies, Inc. – 2020 Proxy Statement        51


Table of Contents
   

 

  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Grants of Plan Based Awards

The following table sets forth certain information with respect to the grant of stock options, RSUs, and awards payable under the Company’s annual cash incentive plan during the last fiscal year to the NEOs:

 

Name  

Grant

Date

   

Estimated Future Payouts Under

Non-Equity Incentive Plan

Awards (1)

   

Estimated Future Payouts

Under Equity Incentive Plan

Awards (2) (3)

    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units (4)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
    Exercise
or Base
Price of
Option
Awards
    Grant Date
Fair Value
of Stock
and Option
Awards
 
            Threshold     Target     Maximum     Threshold     Target     Maximum                              

Armstrong

 

 

2/19/2019

 

 

 

$-

 

 

 

$1,584,626

 

 

 

$3,169,252

 

             

 

$-

 

    2/19/2019             -          134,817       269,634             3,785,661  
    2/19/2019                   94,821           2,599,992  
   

 

2/19/2019

 

                                 

 

170,206

 

 

 

340,412

 

                         

 

3,865,463

 

Dunn

    2/19/2019       -       670,673       1,341,346                   -  
    2/19/2019             -          48,396       96,792             1,358,960  
    2/19/2019                   51,058           1,400,010  
 

 

2/19/2019

 

                                 

 

85,103

 

 

 

170,206

 

                         

 

1,932,731

 

Zamarin

    2/19/2019       -       414,303       828,606                   -  
    2/19/2019             -          34,569       69,138             970,698  
    2/19/2019                   36,470           1,000,007  
 

 

2/19/2019

 

                                 

 

63,827

 

 

 

127,654

 

                         

 

1,449,542

 

Chandler

    2/19/2019       -       445,231       890,462                   -  
    2/19/2019             -          34,569       69,138             970,698  
    2/19/2019                   36,470           1,000,007  
 

 

2/19/2019

 

                                 

 

59,572

 

 

 

119,144

 

                         

 

1,352,910

 

Poarch (5)

    2/19/2019       -       289,262       578,524                   -  
    2/19/2019             -          25,926       51,852             728,002  
    2/19/2019                   27,352           749,992  
 

 

2/19/2019

 

                                 

 

59,572

 

 

 

119,144

 

                         

 

1,352,910

 

Note: Information provided is as of the close of market on December 31, 2019.

 

(1)

Non-Equity Incentive Awards. Awards from the 2019 AIP are shown.

   

Threshold: At threshold, the 2019 AIP awards are zero.

   

Target: The amount shown is based upon a business performance attainment of 100 percent.

   

Maximum: The maximum amount the NEOs can receive is 200 percent of their AIP target.

(2)

Represents performance-based RSUs granted in February 2019 under the 2007 Incentive Plan. Performance-based RSUs can be earned over a three year period only if the established performance target is met and the NEO is employed on the certification date, subject to certain exceptions such as the executive’s death, disability or retirement. Under any circumstances, these shares will be distributed no earlier than the third anniversary of the grant other than due to a termination upon a change in control. If performance plan goals are exceeded, the NEO can receive up to 200 percent of target. If plan threshold goals are not met, the NEO’s awards are cancelled in their entirety.

(3)

An incremental 2019 performance-based RSU award was granted to select executive officers and measures adjusted earnings per share against predetermined targets. This award has a three-year performance period and can be earned only if the established performance target is met and the NEO is employed on the vesting and distribution date, subject to certain exceptions such as the executive’s death, disability, or retirement. Under any circumstances, in fifty percent increments any earned shares will be distributed no earlier than the third and fourth anniversaries of the grant date other than due to termination upon a change in control. If performance plan goals are exceeded, the NEO can receive up to 200 percent of target. If plan threshold goals are not met, the NEO’s awards are cancelled in their entirety.

(4)

Represents time-based RSUs granted under the 2007 Incentive Plan. Time-based units vest 36 months from the respective grant date.

(5)

Mr. Poarch resigned from the Company effective February 28, 2020 and forfeited all 2019 awards.

 

The Williams Companies, Inc. – 2020 Proxy Statement        52


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  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Outstanding Equity Awards

The following table sets forth certain information with respect to the outstanding equity awards held by the NEOs at the end of 2019:

 

   

Option Awards

      

Stock Awards

 

Name

 

 

Grant

Date (1)

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

 

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

 

   

Equity

Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

 

   

Option

Exercise

Price

 

   

Expiration

Date

 

      

Grant

Date

 

 

Number of

Shares or

Units of

Stock That

Have Not

Vested

 

   

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

 

   

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares,

Units of

Stock or

Other Rights

That Have

Not Vested

 

   

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested (5)

 

 
       

Armstrong

  2/20/2018     77,118       154,238       -     $ 29.09     2/20/2028     2/19/2019 (2)     -       -       94,821     $ 2,249,154  
  2/21/2017     125,956       62,979       -       28.87     2/21/2027     2/19/2019 (3)     -       -       134,817       3,197,859  
  8/4/2016     145,570       -       -       24.98     8/4/2026     2/19/2019 (4)     -       -       170,206       4,037,286  
  2/23/2015     153,177       -       -       49.15     2/23/2025     2/20/2018 (2)     -       -       54,658       1,296,488  
  2/24/2014     133,080       -       -       41.77     2/24/2024     2/20/2018 (3)     -       -       139,011       3,297,341  
  2/25/2013     147,545       -       -       33.57     2/25/2023     2/21/2017 (2)     -       -       51,957       1,232,420  
  2/27/2012     159,681       -       -       29.11     2/27/2022     2/21/2017 (3)     -       -       130,151       3,087,182  
  2/24/2011     72,486       -       -       24.21     2/24/2021              
 

 

2/23/2010

 

 

 

 

60,646

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

17.28

 

 

 

 

2/23/2020

                                       
       

Dunn

  2/20/2018     36,376       72,754       -       29.09     2/20/2028     2/19/2019 (2)     -       -       51,058       1,211,096  
  2/27/2017     53,824       26,912       -       28.15     2/27/2027     2/19/2019 (3)     -       -       48,396       1,147,953  
                2/19/2019 (4)     -       -       85,103       2,018,643  
                2/20/2018 (2)     -       -       36,095       856,173  
                2/20/2018 (3)     -       -       53,649       1,272,554  
                2/27/2017 (2)     -       -       31,083       737,289  
                                             

 

2/27/2017 (3)

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

45,677

 

 

 

 

 

 

1,083,458

 

 

       

Zamarin

  2/20/2018     26,676       53,353       -       29.09     2/20/2028     2/19/2019 (2)     -       -       36,470       865,068  
                2/19/2019 (3)     -       -       34,569       819,977  
                2/19/2019 (4)     -       -       63,827       1,513,976  
                2/20/2018 (2)     -       -       26,470       627,868  
                2/20/2018 (3)     -       -       39,343       933,216  
                                             

 

6/27/2017 (2)

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

77,667

 

 

 

 

 

 

1,842,261

 

 

       

Chandler

  2/20/2018     26,676       53,353       -       29.09     2/20/2028     2/19/2019 (2)     -       -       36,470       865,068  
                2/19/2019 (3)     -       -       34,569       819,977  
                2/19/2019 (4)     -       -       59,572       1,413,048  
                2/20/2018 (2)     -       -       26,470       627,868  
                2/20/2018 (3)     -       -       39,343       933,216  
                                             

 

9/5/2017 (2)

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

16,584

 

 

 

 

 

 

393,372

 

 

       

Poarch (6)

  2/20/2018     14,550       29,102       -       29.09     2/20/2028     2/19/2019 (2)     -       -       27,352       648,789  
  2/21/2017     3,674       1,837       -       28.87     2/21/2027     2/19/2019 (3)     -       -       25,926       614,965  
  8/4/2016     4,051       -       -       24.98     8/4/2026     2/19/2019 (4)     -       -       59,572       1,413,048  
  2/23/2015     5,831       -       -       49.15     2/23/2025     2/20/2018 (2)     -       -       14,438       342,469  
                2/20/2018 (3)     -       -       21,460       509,031  
                4/3/2017 (2)     -       -       2,346       55,647  
                2/21/2017 (2)     -       -       2,425       57,521  
                                             

 

2/21/2017 (3)

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

2,761

 

 

 

 

 

 

65,491

 

 

Note: Information provided is as of the close of market on December 31, 2019.

Option Awards

 

  (1)

The following table reflects the vesting schedules for associated stock option grant dates for awards that were not 100 percent vested as of December 31, 2019. These awards vest in one-third increments as noted in the table.

 

   
Grant Date    Vesting Dates
   

2/20/2018

   2/20/2019, 2/20/2020, 2/20/2021
   

2/21/2017

   2/21/2018, 2/21/2019, 2/21/2020

Mr. Dunn’s February 27, 2017 stock option award vests in one-third increments on February 27, 2018, February 27, 2019, and February 27, 2020.

 

The Williams Companies, Inc. – 2020 Proxy Statement        53


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  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Stock Awards

 

(2)

The following table reflects the vesting dates for associated time-based RSU award grant dates:

 

Grant Date

  

Vesting Dates

2/19/2019

  

2/19/2022

2/20/2018

  

2/20/2021

2/21/2017

  

2/21/2020

Mr. Dunn’s February 27, 2017 time-based RSU award will fully vest in three years on February 27, 2020.

Mr. Zamarin’s June 26, 2017 time-based RSU award will fully vest in three years on June 26, 2020.

Mr. Chandler’s September 5, 2017 time-based RSU award will fully vest in three years on September 5, 2020.

Mr. Poarch’s April 3, 2017 time-based RSU award would fully vest in three years on April 3, 2020. This award was cancelled due to his February 28, 2020 resignation.

 

(3)

Performance-based RSUs are subject to attainment of performance targets established by the Committee. If earned, these awards generally vest three years from the date of grant. The awards included on the table are outstanding as of December 31, 2019. While the full award for the 2017 performance-based RSUs are shown on the table, these awards did not meet established target level performance requirements and 44.4 percent of the granted awards vested and were distributed in 2020. The unearned RSUs were cancelled and returned to the Plan.

 

(4)

An incremental 2019 performance-based RSU award was granted to select executive officers and is subject to attainment of performance targets established by the Committee. This performance-based RSU award measures adjusted earnings per share against predetermined targets. If earned, these awards vest in one-half increments on the third and fourth anniversary of the award, February 19, 2022 and February 19, 2023.

 

(5)

Values are based on a closing stock price of $23.72 on December 31, 2019.

 

(6)

Mr. Poarch resigned from the Company effective February 28, 2020 and forfeited all unvested outstanding awards.

Option Exercises and Stock Vested

The following table sets forth certain information with respect to options exercised by the NEO and stock that vested during fiscal year 2019:

 

    

Option Awards

    

Stock Awards

 

Name

 

  

Number of Shares
Acquired on Exercise

 

    

Value Realized on
Exercise

 

    

Number of Shares
Acquired on Vesting

 

    

Value Realized on
Vesting

 

 

Alan S. Armstrong

  

 

98,587

 

  

$

1,800,199

 

  

 

101,271

 

  

$

2,745,457

 

Micheal G. Dunn

  

 

-

 

  

 

-

 

  

 

-

 

  

 

-

 

Chad J. Zamarin

  

 

-

 

  

 

-

 

  

 

-

 

  

 

-

 

John D. Chandler

  

 

-

 

  

 

-

 

  

 

-

 

  

 

-

 

John E. Poarch

  

 

-

 

  

 

-

 

  

 

3,447

 

  

 

93,448

 

Retirement Plan

The retirement plan for the Company’s executives consists of two plans: the pension plan and the retirement restoration plan as described below. Together these plans generally provide the same level of benefits to our executives as the pension plan provides to the majority of other employees of the Company. The retirement restoration plan was implemented to address the annual compensation limit of the Internal Revenue Code.

 

The Williams Companies, Inc. – 2020 Proxy Statement        54


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  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Pension Plan

Each of our NEOs have completed one year of service and participate in our pension plan. Our pension plan is a noncontributory, tax qualified defined benefit plan (with a cash balance design) subject to the Employee Retirement Income Security Act of 1974, as amended.

Each year, participants in the plan earn compensation credits that are posted to their cash balance account. The annual compensation credits are equal to the sum of a percentage of eligible pay (base pay and certain bonuses) and a percentage of eligible pay greater than the social security wage base. The percentage credited is based upon the participant’s age as shown in the following table:

 

Age

 

  

Percentage of Eligible Pay

 

        

Percent of Eligible Pay Greater than the
Social Security Wage Base

 

Less than 30

  

4.5%

  

+

  

From 1% to 1.2%

30-39

  

6%

  

+

  

           2%          

40-49

  

8%

  

+

  

           3%          

50 or over

  

10%

  

+

  

           5%          

For participants who were active employees and participants under the plan on March 31, 1998 and April 1, 1998, the percentage of eligible pay is increased by 0.3 percent multiplied by the participant’s total years of benefit service earned as of March 31, 1998.

In addition, interest is credited to account balances quarterly at a rate determined annually in accordance with the terms of the plan.

While a lump-sum benefit is also available, the monthly annuity available to those who take normal retirement is based on the participant’s account balance as of the date of retirement. Normal retirement age is 65. Early retirement eligibility begins at age 55. At retirement, participants may choose to receive a single-life annuity (for single participants), a qualified joint and survivor annuity (for married participants), or they may choose one of several other forms of payment having an actuarial value equal to that of the relevant annuity.

Retirement Restoration Plan

The Internal Revenue Code limits pension benefits, based on the annual compensation limit, which can be accrued in tax-qualified defined benefit plans, such as our pension plan. The annual compensation limit in 2019 was $280,000. Any reduction in an executive’s pension benefit accrual due to these limits will be compensated, subject to a cap, under an unfunded top hat plan – our retirement restoration plan.

The elements of compensation that are included in applying the payment and benefit formula for the retirement restoration plan are the same elements that are used, except for application of a cap, in the base pension plan for all employees. The elements of pay included in that definition are total base pay, including any overtime, base pay-reduction amounts, and cash bonus awards, if paid (unless specifically excluded under a written bonus or incentive-pay arrangement). Specifically excluded from the definition are severance pay, cost-of-living pay, housing pay, relocation pay (including mortgage interest differential), taxable and non-taxable fringe benefits, and all other extraordinary pay, including any amounts received from equity compensation awards.

With respect to bonuses, annual cash incentives are considered in determining eligible pay under the pension plan. Long-term equity compensation incentives are not considered.

 

The Williams Companies, Inc. – 2020 Proxy Statement        55


Table of Contents
   

 

  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Pension Benefits

The following table sets forth certain information with respect to the actuarial present value of the accrued benefit as of December 31, 2019 under the qualified pension plan and retirement restoration plan. All NEOs are fully vested in the benefits.

 

Name

 

 

Plan Name

 

 

Number of Years
Credited Services

 

 

Present Value of
Accrued Benefit (1)

 

 

Payments During  
Last Fiscal Year  

 

Alan S. Armstrong

 

Pension Plan

   

 

34

   

 

$1,137,319

   

 

-

 

Retirement Restoration Plan

   

 

34

   

 

6,081,806

   

 

-

Micheal G. Dunn (2)

 

Pension Plan

   

 

17

   

 

276,813

   

 

-

 

Retirement Restoration Plan

   

 

17

   

 

523,374

   

 

-

Chad J. Zamarin

 

Pension Plan

   

 

3

   

 

92,580

   

 

-

 

Retirement Restoration Plan

   

 

3

   

 

362,487

   

 

-

John D. Chandler (2)

 

Pension Plan

   

 

8

   

 

270,086

   

 

-

 

Retirement Restoration Plan

   

 

8

   

 

273,021

   

 

-

John E. Poarch

 

Pension Plan

   

 

11

   

 

193,790

   

 

-

 

Retirement Restoration Plan

   

 

11

   

 

190,443

   

 

-

 

  (1)

The primary actuarial assumptions used to determine the present values include an annual interest credit to normal retirement age equal to 3.50 percent and a discount rate equal to 3.24 percent for the pension plan and a discount rate equal to 2.80 percent for the retirement restoration plan.

  (2)

As former employees, Mr. Chandler and Mr. Dunn have prior years of vesting service under the plans.

Nonqualified Deferred Compensation

We do not provide other nonqualified deferred compensation for any of our NEOs or other employees.

Change in Control Agreements

We have entered into change in control agreements with each of our NEOs to facilitate continuity of management if there is a change in control of the Company.

On February 1, 2018, our NEOs, as well as other officers with a Change in Control Agreement, received a one-year notice informing the recipient that their current Agreement would terminate on February 1, 2019. This one-year notice of termination is required under the Agreement. A revised agreement was provided, and each officer signed the Agreement which was effective February 2019. Among other changes to the language, the new Agreement removed the retirement restoration plan component from the cash severance calculation. Additionally, the new Agreement changed the COBRA coverage benefit to a cash benefit.

If during the term of a change in control agreement, a “change in control” occurs and (i) the employment of any NEO is terminated other than for “cause,” “disability,” or death, or (ii) a NEO resigns for “good reason,” such NEO is entitled to the following:

 

   

Accrued but unpaid base salary, accrued but unpaid paid time off, and any other amounts or benefits due but not paid (lump sum payment).

 

   

Within sixty days after the termination date or such later date required by section 409A of the Internal Revenue Code of 1986, as amended:

 

   

Prorated annual cash incentive for the year of separation through the termination date (lump sum payment);

 

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A severance amount equal to three times the sum of his or her base salary and target annual incentive bonus, as of the termination date (lump sum payment); and

   

An amount equal to the full monthly cost of group medical, dental, and/or prescription drug plan benefits multiplied by thirty-six (lump sum payment).

 

   

All equity awards will vest and will be paid out only in accordance with the terms of the respective plan and award agreements;

 

   

Continued participation in the Company’s directors’ and officers’ liability insurance for six-years or any longer known applicable statute of limitations period;

 

   

Indemnification as set forth under the Company’s By-laws; and

 

   

Outplacement benefits for six months at a cost not exceeding $25,000 per NEO.

We provide a ‘best net’ provision providing our NEOs with the better of their after-tax benefit capped at the safe harbor amount or their benefit paid in full, subjecting them to possible excise tax payments. If a NEO’s employment is terminated for “cause” during the period beginning upon a change of control and continuing for two-years or until the termination of the agreement, whichever happens first, the NEO is entitled to accrued but unpaid base salary, and unpaid paid time off, and any other amounts or benefits due but not paid (lump sum payment).

The agreements with our NEOs use the following definitions:

“Cause” generally means a NEO’s:

 

   

Conviction of or a plea of nolo contendere to a felony or a crime involving fraud, dishonesty, or moral turpitude;

 

   

Misconduct in the performance of his or her duties that has a material adverse effect on Williams;

 

   

Violation or disregard of the Code of Business Conduct that has a material adverse effect on Williams;

 

   

Violation or disregard of a Company policy, standard or process that has a material adverse effect on Williams; or

 

   

Habitual or gross neglect of his or her duties.

Cause generally does not include bad judgment or negligence (other than habitual neglect or gross negligence); acts or omissions made in good faith after reasonable investigation by the NEO or acts or omissions with respect to which the Board could determine that the NEO had satisfied the standards of conduct for indemnification or reimbursement under the Company’s By-laws, indemnification agreement, or applicable law; or failure (despite good faith efforts) to meet performance goals, objectives, or measures for a period beginning upon a change of control and continuing for two years or until the termination of the agreement, whichever happens first. A NEO’s act or failure to act (except as relates to a conviction or plea of nolo contendere described above), when done in good faith and with a reasonable belief after reasonable investigation that such action or non-action was in the best interest of Williams or its affiliate or required by law shall not be Cause if the NEO cures the action or non-action within ten days of notice. Furthermore, no act or failure to act will be Cause if the NEO acted under the advice of Williams’ counsel or as required by the legal process.

“Change in control” means:

 

   

Any person, subject to certain exceptions, becomes a beneficial owner, as such term is defined under the Exchange Act, of 30 percent or more of the combined voting power of all securities entitled to vote generally in the election of directors (“Voting Securities”);

 

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A majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not approved by the majority of the members constituting the Board prior to the date of the appointment or election;

 

   

Consummation of any reorganization, merger, consolidation, statutory share exchange or similar transaction (a “Reorganization”), the sale or disposition of all or substantially all of Williams’ assets (a “Sale”), or the acquisition of the assets or stock of another entity (an “Acquisition”) unless immediately following such Reorganization, Sale or Acquisition, (A) all or substantially all of the beneficial owners of the outstanding shares of Williams common stock and Williams Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from such Reorganization, Sale or Acquisition (the “Surviving Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition and (B) no Person (other than Williams or any of its subsidiaries, the Surviving Entity or its ultimate parent, or any employee benefit plan sponsored or maintained by any of the foregoing)is the beneficial owner of 30% or more of the Voting Securities, and (C) at least a majority of the members of the board of directors or similar governing body of the Surviving Entity were members of the incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board of Directors, providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition; or

 

   

Approval by the stockholders of Williams for a complete liquidation or dissolution of Williams.

“Disability” means the inability of NEO, as determined by the Board, to perform the essential functions of his or her regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of 6 consecutive months.

“Good reason” means, generally, (i) the assignment of any duties inconsistent in any material respect with the NEO’s position, authority, duties or responsibilities as provided in the agreement or any other action that results in a material diminution in the NEO’s position, authority, duties or responsibilities, (ii) a reduction in the NEO’s base salary or annual bonus opportunity, (iii) required relocation to an office or location more than 50 miles for the NEO’s office or location as of the change in control, (iv) a successor company’s failure to honor the agreement, or (v) any other material breach of the Agreement not taken in good faith or not promptly remedied upon notice from the NEO.

Termination Scenarios

The following table sets forth circumstances that provide for payments to the NEOs following or in connection with a change in control of the Company or a NEO’s termination of employment for cause, upon retirement, upon death and disability, or not for cause. NEOs are generally eligible to retire at the earlier of age 55 and completion of three years of service or age 65.

All values are based on a hypothetical termination date of December 31, 2019 and a WMB closing stock price of $23.72 on such date. The values shown are intended to provide reasonable estimates of the potential benefits the NEOs would receive upon termination. The values are based on various assumptions and may not represent the actual amount a NEO would receive. In addition to the amounts disclosed in the following table, a departing NEO would retain the amounts he or she has earned over the course of his or her employment prior to the termination event, including accrued retirement benefits and previously vested stock options and RSUs.

 

The Williams Companies, Inc. – 2020 Proxy Statement        58


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  EXECUTIVE COMPENSATION & OTHER INFORMATION  

 

 

 

Name   Payment   For
Cause (1)
   

Retirement

(2)

    Death &
Disability (3)
    Not for
Cause (4)
    CIC (5)  

Armstrong

 

Stock options

        $     $