DEF 14A 1 d665591ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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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

 

(Amendment No. )

 

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Check the appropriate box:

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Preliminary Proxy Statement

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

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

 

CONOCOPHILLIPS

 

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(Name of Registrant as Specified In Its Charter)

 

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

 

 

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Fee paid previously with preliminary materials.

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

    

 

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Table of Contents

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March 28, 2014

Dear Fellow Stockholder:

I invite you to join the ConocoPhillips Board of Directors, executives, employees and your fellow stockholders at our 2014 Annual Meeting of Stockholders. The meeting will take place at the Omni Houston Hotel at Westside, 13210 Katy Freeway, Houston, Texas 77079, on Tuesday, May 13, 2014, at 9:00 a.m. CDT. The attached Notice of Annual Meeting of Stockholders and Proxy Statement provide information about the business to be conducted at the meeting.

Enhanced stockholder communications

My fellow board members and I were very pleased with the positive feedback we received after redesigning our proxy statement last year. This year, we have further enhanced the transparency of the information provided to you. This Proxy Statement demonstrates our ongoing commitment to provide information about our company as clearly as possible.

You will find detailed information about the qualifications of our director candidates and why we believe they are the right people to help in shaping the direction of our company, starting on page 28. We have also continued to enhance the Compensation Discussion and Analysis that begins on page 39 to show how our executive compensation is linked to performance and to clearly explain our compensation philosophy and practices.

We are once again offering an Annual Meeting website for stockholders that, among other things, will enable you to learn more about our company, vote your proxy and listen to a live audio webcast of the meeting. We encourage you to visit this site at www.conocophillips.com/annualmeeting.

Every vote is important – please vote right away

Your vote is very important to us and to our business. Prior to the meeting, I encourage you to sign and return your proxy card, use telephone or Internet voting, or visit the Annual Meeting website so that your vote is registered. Instructions on how to vote begin on page 12.

Our values and commitment

We run our business under a set of guiding principles that we call our SPIRIT Values – Safety, People, Integrity, Responsibility, Innovation and Teamwork. These principles set the tone for how we behave with all our stakeholders, internally and externally. They are shared by everyone in our organization, distinguish us from competitors and are a source of pride. I invite you to attend our Annual Meeting and learn more about these values and our company.

Thank you for your continued trust and confidence in ConocoPhillips.

Ryan M. Lance

 

 

LOGO

Chairman and Chief Executive Officer


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PARTICIPATE IN THE FUTURE OF CONOCOPHILLIPS

CAST YOUR VOTE RIGHT AWAY

 

Your vote is very important to us and to our business. Please cast your vote right away on all of the proposals to ensure your shares are represented.

If you are a beneficial owner and do not give your broker instructions on how to vote your shares, the broker will return the proxy card to us without voting on proposals not considered “routine.” This is known as a broker non-vote. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2014 is considered to be a routine matter. Your broker may not vote on any non-routine matters without instructions from you.

Proposals requiring your vote

 

 

          More
Information
  Board Recommendation   Votes Required
for Approval
PROPOSAL 1   Election of Directors   Page 28   FOR each Nominee  

Affirmative “FOR” vote of a

majority of those shares

present in person or

represented by proxy at

the meeting and entitled

to vote on the proposal

PROPOSAL 2   Ratification of Independent Registered Public Accounting Firm   Page 34   FOR  
PROPOSAL 3   Advisory Approval of the Compensation of the Company’s Named Executive Officers   Page 38   FOR  
PROPOSAL 4   Approval of 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips   Page 70   FOR  
PROPOSALS 5-6   Stockholder Proposals   Pages 75-78   AGAINST each Proposal  

Vote right away

 

Even if you plan to attend our Annual Meeting in person, please read this proxy statement carefully and vote right away using any of the following methods. In all cases, have your proxy card or voting instruction card in hand and follow the instructions.

 

By Internet using your computer   By Internet using a tablet or smartphone   By telephone    By mailing your proxy card
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Visit 24/7

www.proxyvote.com

 

Scan this QR code 24/7

to vote with your mobile device

(may require free software)

 

Dial toll-free 24/7

(800) 690-6903

  

Cast your ballot, sign your

proxy card and send by mail in the
enclosed postage-paid envelope

If you hold your ConocoPhillips stock in a brokerage account (that is, in “street name”), your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please follow the directions on your proxy card or voting instruction card carefully. If you plan to vote in person at the Annual Meeting and you hold your ConocoPhillips stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting.

If you hold your stock through ConocoPhillips’ employee benefit plans, please see “Questions and Answers About the Annual Meeting and Voting” for information about voting.

Visit our Annual Meeting website

 

 

LOGO

Visit 24/7

www.conocophillips.com/annualmeeting

  LOGO  

Watch a special message for our stockholders from Ryan Lance, our Chairman and CEO.

Review and download this proxy statement and our Annual Report.

Listen to a live audio webcast of the Annual Meeting.

Sign up for electronic delivery of future Annual Meeting materials to save money and reduce ConocoPhillips’ impact on the environment.

Attend our 2014 Annual Meeting of Stockholders

 

 

LOGO

  Date and Time:   9:00 a.m. (CDT) on Tuesday, May 13, 2014
  Location:   Omni Houston Hotel at Westside
    13210 Katy Freeway
    Houston, Texas 77079
    (281) 558-8338
  Record Date:   March 14, 2014
  DIRECTIONS FROM DOWNTOWN HOUSTON
 

Take I-10 West 3 miles past Sam Houston Tollway.

 

Exit Eldridge Parkway, Exit 753A.

 

Turn right (north) on Eldridge Parkway.

 

The hotel will be immediately on your left.

 


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Table of Contents

 

NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS

     6   

PROXY SUMMARY

     7   

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

     12   

CORPORATE GOVERNANCE MATTERS

     17   

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

     18   

BOARD LEADERSHIP STRUCTURE

     18   

BOARD RISK OVERSIGHT

     20   

SUCCESSION PLANNING AND LEADERSHIP DEVELOPMENT

     20   

CODE OF BUSINESS ETHICS AND CONDUCT

     21   

RELATED PARTY TRANSACTIONS

     21   

PUBLIC POLICY ENGAGEMENT

     21   

SUSTAINABILITY

     22   

BOARD MEETINGS AND COMMITTEES

     22   

NOMINATING PROCESSES OF THE COMMITTEE ON  DIRECTORS’ AFFAIRS

     23   

NON-EMPLOYEE DIRECTOR COMPENSATION

     24   

ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES (Item 1 on the Proxy Card)

     28   

AUDIT AND FINANCE COMMITTEE REPORT

     33   

PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST  & YOUNG LLP (Item 2 on the Proxy Card)

     34   

ROLE OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE

     36   

HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT

     37   

HUMAN RESOURCES AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     37   

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION (Item 3 on the Proxy Card)

     38   


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COMPENSATION DISCUSSION AND ANALYSIS

     39   

Executive Overview

     39   

Philosophy and Objectives of Our Executive Compensation Program

     41   

Components of Executive Compensation

     42   

Process for Determining Executive Compensation

     44   

2013 Executive Compensation Analysis and Results

     49   

Other Executive Compensation and Benefits

     51   

Executive Compensation Governance

     52   

EXECUTIVE COMPENSATION TABLES

     54   

Summary Compensation Table

     54   

Grants of Plan-Based Awards Table

     57   

Outstanding Equity Awards at Fiscal Year End

     58   

Option Exercises and Stock Vested

     60   

Pension Benefits

     60   

Nonqualified Deferred Compensation

     62   

Executive Severance and Changes in Control

     63   

STOCK OWNERSHIP

     68   

Holdings of Major Stockholders

     68   

Securities Ownership of Officers and Directors

     68   

Section 16(a) Beneficial Ownership Reporting Compliance

     69   

EQUITY COMPENSATION PLAN INFORMATION

     69   

APPROVAL OF  2014 OMNIBUS STOCK AND PERFORMANCE INCENTIVE PLAN OF CONOCOPHILLIPS

(Item 4 on the Proxy Card)

     70   
STOCKHOLDER PROPOSAL:
REPORT ON LOBBYING EXPENDITURES (Item 5 on the Proxy Card)
     75   
STOCKHOLDER PROPOSAL:
GREENHOUSE GAS REDUCTION TARGETS (Item 6 on the Proxy Card)
     77   

SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS

     79   

AVAILABLE INFORMATION

     79   

APPENDIX A – NON-GAAP RECONCILIATIONS

     80   

APPENDIX B – 2014 OMNIBUS STOCK PERFORMANCE AND INCENTIVE PLAN OF CONOCOPHILLIPS

     81   


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NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS

Tuesday, May 13, 2014

9:00 a.m. (CDT)

Omni Houston Hotel at Westside, 13210 Katy Freeway, Houston, Texas 77079

The Annual Meeting of Stockholders of ConocoPhillips (the “Company”) will be held on Tuesday, May 13, 2014, at 9:00 a.m. (CDT) at the Omni Houston Hotel at Westside, 13210 Katy Freeway, Houston, Texas 77079, for the following purposes:

 

1.

To elect Directors to serve until the 2015 Annual Meeting (page 28);

 

2.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2014 (page 34);

 

3.

To provide an advisory approval of the compensation of our Named Executive Officers (page 38);

 

4.

To approve the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips (page 70);

 

5.

To consider and vote on two stockholder proposals (pages 75 through 78); and

 

6.

To transact any other business properly coming before the meeting.

Only stockholders of record at the close of business on March 14, 2014 will be entitled to receive notice of and to vote at the Annual Meeting. For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the proxy statement, on your enclosed proxy card. A list of stockholders entitled to vote at the meeting will be available for inspection by any stockholder at the offices of the Company in Houston, Texas during ordinary business hours for a period of 10 days prior to the meeting. This list also will be available to stockholders at the meeting.

March 28, 2014

By Order of the Board of Directors

 

LOGO

Janet Langford Kelly

Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on May 13, 2014: This proxy statement and our 2013 Annual Report are available at www.conocophillips.com/annualmeeting.

 

We urge each stockholder to promptly sign and return the enclosed proxy card or to use telephone or Internet voting. See “Questions and Answers About the Annual Meeting and Voting” for information about voting by telephone or Internet, how to revoke a proxy and how to vote shares in person.

   

 

6   ConocoPhillips 2014 Proxy Statement


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PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the Company’s 2013 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

2014 Annual Meeting of Stockholders

 

    Date and

     Time:

  May 13, 2014, 9:00 a.m. (CDT)

    Location:

 

Omni Houston Hotel at Westside

13210 Katy Freeway

Houston, Texas 77079

    Record Date:

  March 14, 2014

    Voting:

  Stockholders as of the record date are entitled to vote by Internet at www.proxyvote.com; by telephone at (800) 690-6903; by completing and returning their proxy card or voting instruction card; or in person at the Annual Meeting. If you hold your stock in street name or through ConocoPhillips’ employee benefit plans, please see “Questions and Answers About the Annual Meeting and Voting” for more information about voting.

Voting Matters and Board Recommendations

 

 

          Board Recommendation
PROPOSAL 1   Election of Directors   FOR each Nominee
PROPOSAL 2   Ratification of Independent Registered Public Accounting Firm   FOR
PROPOSAL 3   Advisory Approval of the Compensation of the Company’s Named Executive Officers   FOR
PROPOSAL 4   Approval of 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips   FOR
PROPOSALS 5 - 6   Stockholder Proposals   AGAINST each Proposal

Governance Highlights

 

The Company is committed to maintaining good corporate governance as a critical component of our success in driving sustained stockholder value. The Board of Directors continually monitors emerging best practices in governance to best serve the interests of the Company’s stockholders, including:

 

 

Annual election of all directors

 

 

Majority vote standard in uncontested elections

  ®  

Each director must be elected by a majority of votes cast

 

 

 

Active stockholder engagement

  ®  

ConocoPhillips regularly engages with its stockholders to better understand their perspectives

 

 

 

Transparent public policy engagement

 

 

Long-standing commitment to sustainability

 

 

Independent Board

  ®  

Our Board comprises all independent directors, except our CEO

 

 

 

Independent Lead Director

 

 

Independent Board committees

  ®  

Each of the Audit and Finance, Human Resources and Compensation, Directors’ Affairs and Public Policy committees is made up entirely of independent directors

 

 

 

Executive sessions of independent directors held at each regularly scheduled Board meeting

 

 

Stock ownership guidelines for directors and executives

  ®  

Significant requirements strongly link the interests of the Board and management with those of stockholders

 

 

 

Prohibition on pledging and hedging for directors and executives

  ®  

Company policies prohibit our directors and executives from pledging of or hedging or trading in derivatives of the Company’s stock

 

 

 

Clawback policy

  ®  

Executives’ incentives are subject to a clawback that applies in the event of certain financial restatements

 

 

 

ConocoPhillips 2014 Proxy Statement   7


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Director Nominees (page 30)

 

 

Name   Age   Director
Since
  Experience/Occupation  

Independent

(Yes/No)

  Committee
Memberships(1)
  Other Boards
Richard L. Armitage   68   2006   President of Armitage International; former U.S. Deputy Secretary of State; served as Assistant U.S. Secretary of Defense for International Security Affairs and held a wide variety of high ranking U.S. diplomatic positions   Yes  

DAC

PPC

 

ManTech International Corporation

Richard H. Auchinleck(2)   62   2002   Served as President and CEO of Gulf Canada Resources Limited and as COO of Gulf Canada; served as CEO for Gulf Indonesia Resources Limited   Yes  

Exec

HRCC

DAC*

 

Enbridge Commercial Trust(3)

Telus Corporation(3)

Charles E. Bunch   64   Nominated
February
2014
  Chairman and CEO of PPG Industries, Inc.; served as President, COO, EVP and SVP of PPG Industries, Inc.   Yes    

PPG Industries, Inc.

PNC Financial Services Group

James E. Copeland, Jr.   69   2004   Served as CEO of Deloitte & Touche; served as Senior Fellow for Corporate Governance with the U.S. Chamber of Commerce and as a Global Scholar with the Robinson School of Business at Georgia State University   Yes  

AFC*

Exec

 

Equifax Inc.

Time Warner Cable Inc.

Jody L. Freeman   50   2012   Archibald Cox Professor of Law at Harvard Law School and founding director of the Harvard Law School Environmental Law and Policy Program; served as a professor of Law at UCLA Law School; served as an independent consultant to the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling and as a counselor for energy and climate change in the White House   Yes  

PPC

 
Gay Huey Evans   59   2013   Former Vice Chairman of the Board and Non-Executive Chairman, Europe, of the International Swaps and Derivatives Association, Inc.; former Vice Chairman, Investment Banking and Investment Management at Barclays Capital; served as head of governance of Citi Alternative Investments (EMEA) and President of Tribeca Global Management (Europe) Ltd., both part of Citigroup; served as director of the markets division and head of the capital markets sector at the U.K. Financial Services Authority; previously held various senior management positions with Bankers Trust   Yes  

AFC

 

Aviva plc.(3)(4)

Itau BBA International Limited(3)(4)

Falcon Private Wealth Ltd.(3)(4)

The Financial Reporting Council(3)(4)

Ryan M. Lance   51   2012   Chairman and CEO of ConocoPhillips   No  

Exec*

 
Robert A. Niblock   51   2010   Chairman, President and CEO of Lowe’s Companies, Inc.; served as VP and Treasurer, SVP, EVP and CFO of Lowe’s; formerly with accounting firm Ernst & Young   Yes  

AFC

 

Lowe’s Companies, Inc.

Harald J. Norvik   67   2005   Chairman of Aschehoug ASA and Vice Chairperson of Petroleum Geo-Services ASA; served as Chairman and a partner at Econ Management AS; served as Chairman, President & CEO of Statoil   Yes  

Exec

HRCC

PPC*

 

Petroleum Geo-Services ASA(3)

Aschehoug ASA(3)(4)

William E. Wade, Jr.   71   2006   Served as President of Atlantic Richfield Company as well as other management positions   Yes  

Exec

HRCC*

DAC

   
 (1)  

Full committee names are as follows:

    

AFC – Audit and Finance Committee

    

Exec – Executive Committee

    

HRCC – Human Resources and Compensation Committee

    

DAC – Committee on Directors’ Affairs

    

PPC – Public Policy Committe

    

* – denotes committee chairperson

 (2)  

Lead Director

 (3)  

Not a U.S. based company

 (4)  

Not required to file periodic reports under the Securities Exchange Act of 1934

Executive Officers

 

 

Name   Age   Position
Ryan M. Lance   51   Chairman of the Board and Chief Executive Officer
Jeffrey W. Sheets   56   Executive Vice President, Finance and Chief Financial Officer
Matthew J. Fox   53   Executive Vice President, Exploration and Production
Alan J. Hirshberg   52   Executive Vice President, Technology and Projects
Donald E. Wallette, Jr.   55   Executive Vice President, Commercial, Business Development and Corporate Planning
Janet L. Kelly   56   Senior Vice President, Legal, General Counsel and Corporate Secretary
Andrew D. Lundquist   53   Senior Vice President, Government Affairs
Ellen DeSanctis   57   Vice President, Investor Relations and Communications
Sheila Feldman   59   Vice President, Human Resources and Real Estate and Facilities Services
Glenda M. Schwarz   48   Vice President and Controller

 

 

8   ConocoPhillips 2014 Proxy Statement


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Stock Performance Graph

 

This graph shows the cumulative total shareholder return for ConocoPhillips’ common stock in each of the five years from December 31, 2008 to December 31, 2013. The graph also compares the cumulative total returns for the same five-year period with the S&P 500 Index and our performance peer group of companies consisting of BP, Chevron, ExxonMobil, Royal Dutch Shell, Total, Anadarko, Apache, BG Group plc, Devon and Occidental, weighted according to the respective peer’s stock market capitalization at the beginning of each annual period. The comparison assumes $100 was invested on December 31, 2008, in ConocoPhillips stock, the S&P 500 Index and ConocoPhillips’ performance peer group and assumes that all dividends were reinvested.

FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN

 

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FIVE YEARS ENDED DECEMBER 31, 2013

 

           December 31  
      Initial     2009      2010      2011      2012      2013    

ConocoPhillips

   $ 100.0      $ 102.9       $ 142.9       $ 158.5       $ 173.0       $ 219.7     

Performance Peer Index

   $ 100.0      $ 113.5       $ 122.2       $ 132.5       $ 127.2       $ 150.6     

S&P 500

   $ 100.0      $ 126.4       $ 145.5       $ 148.6       $ 172.3       $ 228.2     

(Performance Peer Index) - BP; Chevron; ExxonMobil; Royal Dutch Shell; Total; Anadarko; Apache; BG Group plc; Devon; Occidental

  

  

2013 Business Performance and Compensation Highlights

 

In our first full year as an independent exploration and production (“E&P”) company since the spinoff of Phillips 66 in 2012, performance was strong in a broad number of areas and senior officer compensation was commensurate with that performance.

Business Performance Highlights

 

Operational:

 

 

Best-in-class employee safety rates.

 

 

Achieved a 179 percent organic reserve replacement ratio from reserve additions of approximately 1.1 billion barrels of oil equivalent (BBOE).

 

 

Grew year-end 2013 reserves 3 percent to 8.9 BBOE.

 

 

Produced 1,545 thousand barrels of oil equivalent per day (MBOED), achieving our production target despite five months of curtailed production from Libya.

 

 

Made significant progress on major growth projects.

 

 

Continued to grow our exploration program, with three successes in the deepwater Gulf of Mexico.

Financial:

 

 

Achieved first place for Total Shareholder Return relative to our 10 performance peers (calculated using 20 day average share price at beginning and end of the performance period).

 

 

Reported $9.2 billion in full-year earnings, or $7.38 per share. Excluding special items, full-year adjusted earnings were $7.1 billion, or $5.70 per share.

 

 

Maintained a strong balance sheet; A+ credit rating; and ended the year with $6.5 billion of cash and short-term investments.

Strategy:

 

 

Increased our dividend by 4.5 percent.

 

 

Remain on track to deliver both 3 to 5 percent compound annual production and cash margin growth.

 

 

Improved cash margins 9 percent year over year based on normalized prices.

 

 

Completed non-core asset dispositions that generated $10.2 billion in proceeds.

 

Organic reserve replacement ratio excludes sales and purchases.

Production includes continuing and discontinued operations.

Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap.

 

 

ConocoPhillips 2014 Proxy Statement   9


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Compensation Highlights

Our executive compensation programs are designed to align pay with performance and to align the economic interests of executives and stockholders. Consistent with this design, almost 90% of the CEO’s pay and almost 84% of the Named Executive Officers’ (“NEO”) pay is performance based, with stock-based long-term incentives comprising the largest portion of performance-based pay. The elements of total compensation are base pay, annual cash incentives and long-term incentives. Long-term incentives consist equally of performance share units and stock options. The mix of 2014 target pay for our current Named Executive Officers is shown in the graphs below.

 

LOGO

Based on the performance of the Company, we paid out performance-based programs as follows (see “Process for Determining Executive Compensation” on page 44 and “2013 Executive Compensation Analysis and Results” on page 49):

Annual Incentive: 2013 Variable Cash Incentive Program (VCIP)

The VCIP payout is calculated using the following formula, subject to HRCC approval and discretion to set the award:

 

                     
ELIGIBLE EARNINGS   X  

TARGET PERCENTAGE

FOR THE SALARY

GRADE

  X   (   50% OF CORPORATE PERFORMANCE ADJUSTMENT   +   50% OF AWARD UNIT PERFORMANCE ADJUSTMENT   )   +   ANY INDIVIDUAL PERFORMANCE ADJUSTMENT

Corporate Performance – 165% of target for each of our Named Executive Officers

Award Unit Performance – 141.4% of target for each of our Named Executive Officers

Individual Performance – Adjustments of between 10% and 20% for each of our Named Executive Officers

Long-Term Incentive: Performance Share Program (PSP)

In connection with the spinoff of Phillips 66 in 2012, we concluded two performance periods in progress under our PSP earlier than had been anticipated. We settled a pro rata portion of the PSP VIII and IX awards based on pre-spin performance and established new performance periods that began following the spinoff. While the normal program timing would have provided for a payout at the end of the 36 month performance period for PSP IX, the truncation of the program resulted in a pro rata portion of PSP IX being paid in 2012. However, the truncation also meant that only the balance of the program was paid out in 2014. In 2012, the HRCC approved new performance periods and performance metrics for PSP IX Tail running from May 2012 – December 2013 and for PSP X running from May 2012 – December 2014 (the HRCC delayed the commencement of this performance period until after the spinoff, however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012).

 

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10   ConocoPhillips 2014 Proxy Statement


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The HRCC determined that performance merited the following base awards as a percent of pro rata target awards:

 

 

PSP IX Tail Results: May 2012 – December 2013

Corporate Performance – 170% of target for each of our Named Executive Officers

Individual Performance – Adjustments of between 10% and 17.5% for each of our Named Executive Officers

To assist with determining the appropriate payouts for the 2013 VCIP and PSP IX Tail, the HRCC received comprehensive performance updates from senior management in July and October 2013 and twice in February 2014. The HRCC’s view is that the combination of appropriate targets and relative metrics, periodic reviews and updates during the performance period and rigorous evaluation of actual performance leads to appropriate payout decisions. The HRCC believes that multiple metrics more appropriately drive the desired short- and long-term performance, versus a few simple performance metrics.

2013 Executive Compensation Summary (page 54)

 

Set forth below is the 2013 compensation for our current Named Executive Officers:

 

Name and

Principal

Position

  

Salary

($)

    

Stock
Awards

($)

    

Option
Awards

($)

    

Non-Equity
Incentive Plan
  Compensation

($)

    

Change in
Pension Value
  and Nonqualified
Deferred
Compensation
Earnings

($)

     All Other
Compensation
($)
    

Total

($)

 

R.M. Lance

                    

Chairman and Chief

                    

Executive Officer

   $   1,666,667       $   6,791,925       $   5,790,510       $ 4,618,667       $ 3,584,523       $ 985,123       $   23,437,415   

J.W. Sheets

                    

Executive Vice President,

                    

Finance, and Chief

                    

Financial Officer

     880,933         1,735,819         1,480,050         1,351,422         1,629,147         152,148         7,229,520   

M.J. Fox

                    

Executive Vice President,

                    

Exploration &

                    

Production

     1,227,533         2,823,958         2,407,680         2,002,770         342,287         211,184         9,015,413   

A.J. Hirshberg

                    

Executive Vice President,

                    

Technology & Projects

     1,025,833         2,022,024         1,724,580         1,621,925         195,369         205,554         6,795,286   

D.E. Wallette, Jr.

                    

Executive Vice President,

                    

Commercial, Business

                    

Development and

                    

Corporate Planning

     814,050         1,747,530         1,272,150         1,260,717         2,830,080         857,701         8,782,228   

Response to the 2013 Say on Pay Vote

 

At our 2013 Annual Meeting, approximately 82% of stockholders who cast an advisory vote on the Company’s say on pay proposal voted in favor of the Company’s executive compensation programs. Throughout the past year, we have engaged in dialogue with our largest stockholders about various corporate governance topics, including executive compensation, and have received strong, positive feedback. The HRCC values these discussions and encourages stockholders to provide feedback about our executive compensation programs as described under “Communications with the Board of Directors” on page 18.

Based on the results of the 2013 vote and our ongoing dialogue with stockholders, as well as a consideration of evolving best practices, the HRCC made certain changes to our programs, including adoption of an anti-pledging policy and double trigger change in control provisions beginning with option awards granted in 2014 and performance share programs beginning in 2014.

Important Dates for 2015 Annual Meeting of Stockholders (page 79)

 

 

 

Stockholder proposals submitted for inclusion in our 2015 proxy statement pursuant to SEC Rule 14a-8 must be received by November 28, 2014.

 

Notice of stockholder proposals to nominate a person for election as a director or to introduce an item of business at the 2015 Annual Meeting of Stockholders outside Rule 14a-8 must be received no earlier than January 12, 2015 and no later than February 11, 2015.

 

 

ConocoPhillips 2014 Proxy Statement   11


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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

Who is soliciting my vote?

 

The Board of Directors of ConocoPhillips is soliciting your vote at the 2014 Annual Meeting of ConocoPhillips’ stockholders.

Who is entitled to vote?

 

You may vote if you were the record owner of ConocoPhillips common stock as of the close of business on March 14, 2014. Each share of common stock is entitled to one vote. As of March 14, 2014, we had 1,227,552,662 shares of common stock outstanding and entitled to vote. There is no cumulative voting.

How many votes must be present to hold the Annual Meeting?

 

 

Your shares are counted as present at the Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our outstanding shares of common stock as of March 14, 2014, must be

present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the meeting.

 

 

What is the difference between holding shares as a stockholder of record and as a beneficial stockholder?

 

If your shares are registered directly in your name with the Company’s registrar and transfer agent, Computershare Trust Company, N.A., you are considered a stockholder of record with respect to those shares. If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” or “street name” holder of those shares.

What is a broker non-vote?

 

 

Applicable rules permit brokers to vote shares held in street name on routine matters when the brokers have not received voting instructions from the beneficial owner on how to vote those shares. Brokers may not vote shares held in street name on non-routine matters unless they have received

voting instructions from the beneficial owners on how to vote those shares. Shares that are not voted on non-routine matters are called broker non-votes. Broker non-votes will have no effect on the vote for any matter properly introduced at the meeting.

 

 

What routine matters will be voted on at the Annual Meeting?

 

The ratification of Ernst & Young LLP as our independent registered public accounting firm for 2014 is the only routine matter to be presented at the Annual Meeting on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions.

 

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What non-routine matters will be voted on at the Annual Meeting?

 

The non-routine matters to be presented at the Annual Meeting on which brokers are not allowed to vote unless they have received specific voting instructions from beneficial owners are:

 

 

The election of directors;

 

 

The advisory approval of the compensation of the Company’s Named Executive Officers;

 

 

The approval of the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips;

 

 

Stockholder proposal relating to report on lobbying expenditures; and

 

 

Stockholder proposal relating to greenhouse gas reduction targets.

How are abstentions and broker non-votes counted?

 

Abstentions and broker non-votes are included in determining whether a quorum is present. Broker non-votes will have no effect on the vote for any matter properly introduced at the meeting, however, abstentions will have the same effect as a vote “AGAINST.”

What are my voting choices for each of the proposals to be voted on at the 2014 Annual Meeting of Stockholders and how does the Board recommend that I vote my shares?

 

 

         

More

Information

  Voting Choices and Board Recommendation
PROPOSAL 1   Election of Directors   Page 28  

vote in favor of all nominees;

vote in favor of specific nominees;

vote against all nominees;

vote against specific nominees;

abstain from voting with respect to all nominees; or

abstain from voting with respect to specific nominees.

The Board recommends a vote FOR each of the nominees.

PROPOSAL 2   Ratification of Independent Registered Public Accounting Firm   Page 34  

vote in favor of the ratification;

vote against the ratification; or

abstain from voting on the ratification.

The Board recommends a vote FOR the ratification.

PROPOSAL 3   Advisory Approval of the Compensation of the Company’s Named Executive Officers   Page 38  

vote in favor of the advisory proposal;

vote against the advisory proposal; or

abstain from voting on the advisory proposal.

The Board recommends a vote FOR the advisory approval of executive compensation.

PROPOSAL 4   Approval of 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips   Page 70  

vote in favor of the plan;

vote against the plan; or

abstain from voting on the plan.

The Board recommends a vote FOR the plan.

PROPOSAL 5  

Stockholder Proposal - Report on Lobbying

Expenditures*

  Page 75  

vote in favor of the proposal;

vote against the proposal; or

abstain from voting on the proposal.

The Board recommends a vote AGAINST the stockholder

proposal.

PROPOSAL 6   Stockholder Proposal - Greenhouse Gas Reduction Targets*   Page 77  

vote in favor of the proposal;

vote against the proposal; or

abstain from voting on the proposal.

The Board recommends a vote AGAINST the stockholder

proposal.

  *

We will provide the name, address and share ownership of the stockholders submitting these proposals, along with the information for any co-filers, promptly upon a stockholder’s request.

 

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How many votes are needed to approve each of the proposals?

 

 

Each of the director nominees and all proposals submitted require the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. As an advisory vote, the proposal to approve executive compensation is not binding upon the Company. However, the Human Resources and

Compensation Committee, which is responsible for designing and administering the Company’s executive compensation programs, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.

 

 

How do I vote?

 

Stockholders of Record: You can vote either in person at the meeting or by proxy. Persons who vote by proxy need not, but are entitled to, attend the meeting. Even if you plan to attend the meeting, we encourage you to vote your shares by proxy.

This proxy statement, the accompanying proxy card and the Company’s 2013 Annual Report are being made available to the Company’s stockholders on the Internet at www.proxyvote.com through the notice and access process.

Vote your shares as follows – in all cases, have your proxy card in hand:

 

LOGO    Vote over the Internet 24/7 at www.proxyvote.com    LOGO    Dial toll-free 24/7 (800) 690-6903
LOGO    Vote using your tablet or smartphone    LOGO   

If you elected to receive a hard copy of your proxy materials, fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage-paid envelope.

Beneficial Stockholders: If you hold your ConocoPhillips stock in a brokerage account (that is, in “street name”), your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please follow the directions on your proxy card or voting instruction card carefully. Please note that brokers may not vote your shares on the election of directors, compensation matters or stockholder proposals in the absence of your specific instructions as to how to vote. Please provide your voting instructions so your vote can be counted on these matters.

If you plan to vote in person at the Annual Meeting and you hold your ConocoPhillips stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting.

How do I vote if I hold my stock through ConocoPhillips’ employee benefit plans?

 

 

If you hold your stock through ConocoPhillips’ employee benefit plans, you must do one of the following:

 

 

Vote over the Internet (instructions are in the email sent to you or on the notice and access form);

 

 

Vote by telephone (instructions are on the notice and access form); or

 

If you received a hard copy of your proxy materials, fill out the enclosed voting instruction card, date and sign it, and return it in the enclosed postage-paid envelope.

You will receive a separate voting instruction card for each employee benefit plan under which you hold stock. Please pay close attention to the deadline for returning your voting instruction card to the plan trustee. The voting deadline for each plan is set forth on the voting instruction card. Please note that different plans may have different deadlines.

 

 

How can I revoke my proxy?

 

You can revoke your proxy by sending written notice of revocation of your proxy to our Corporate Secretary so that it is received prior to the close of business on May 12, 2014.

 

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Can I change my vote?

 

Yes. You can change your vote at any time before the polls close at the Annual Meeting. You can do this by:

 

 

Voting again by telephone or over the Internet prior to 11:59 p.m. EDT on May 12, 2014;

 

 

Signing another proxy card with a later date and returning it to us prior to the meeting; or

 

 

Voting again at the meeting.

Who counts the votes?

 

We have hired Broadridge Financial Solutions, Inc. to count the votes represented by proxies and cast by ballot, and Jim Gaughan of Carl T. Hagberg and Associates has been appointed to act as Inspector of Election.

When will the Company announce the voting results?

 

We will announce the preliminary voting results at the Annual Meeting of Stockholders. The Company will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four days following the meeting.

Will my shares be voted if I do not provide my proxy and do not attend the Annual Meeting?

 

 

If you do not provide a proxy or vote your shares held in your name, your shares will not be voted.

If you hold your shares in street name, your broker has the authority to vote your shares for certain routine matters even if you do not provide the broker with voting instructions. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2014 is considered to be a routine matter.

If you do not give your broker instructions on how to vote your shares, the broker will return the proxy card without voting on proposals not considered

routine. This is known as a broker non-vote. Without instructions from you, the broker may not vote on any proposals other than the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2014.

As more fully described on your proxy card, if you hold your shares through certain ConocoPhillips employee benefit plans and do not vote your shares, your shares (along with all other shares in the plan for which votes are not cast) may be voted pro rata by the trustee in accordance with the votes directed by other participants in the plan who elect to act as a fiduciary entitled to direct the trustee of the applicable plan on how to vote the shares.

 

 

What if I am a stockholder of record and return my proxy but do not vote for some of the matters listed on my proxy card?

 

If you return a signed proxy card without indicating your vote, your shares will be voted “FOR” each of the director nominees listed on the card, “FOR” the ratification of Ernst & Young LLP as ConocoPhillips’ independent registered public accounting firm, “FOR” the approval of the compensation of our Named Executive Officers, “FOR” the approval of the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips and “AGAINST” each of the stockholder proposals.

What if I am a beneficial owner and do not give voting instructions to my broker?

 

 

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank or broker by the deadline provided in the materials you receive from your bank or broker. If you do not provide voting instructions to your bank or broker, whether your shares can be voted by such person depends on the type of item being considered for vote. Brokers may not vote shares held in street name on

non-routine matters unless they have received voting instructions from the beneficial owners on how to vote those shares. The ratification of Ernst & Young LLP as our independent registered public accounting firm for 2014 is the only routine matter to be presented at the Annual Meeting on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions.

 

 

Could other matters be decided at the Annual Meeting?

 

We are not aware of any other matters to be presented at the meeting. If any matters are properly brought before the Annual Meeting, the persons named in your proxies will vote in accordance with their best judgment. Discretionary authority to vote on other matters is included in the proxy.

 

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Who can attend the Annual Meeting?

 

Stockholders of record at the close of business on March 14, 2014 may attend the Annual Meeting. No cameras, recording equipment, laptops, tablets, cellular telephones, smartphones or other similar equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting, and security measures will be in effect to provide for the safety of attendees. You will need a photo ID to gain admission.

Do I need a ticket to attend the Annual Meeting?

 

 

Yes, you will need an admission ticket or proof of ownership of ConocoPhillips stock to enter the meeting. If your shares are registered in your name, you will find an admission ticket attached to the proxy card sent to you. If your shares are in the name of your broker or bank or you received your materials electronically, you will need to bring evidence of your stock ownership, such as your most recent brokerage statement. All stockholders will be required to present valid picture identification.

 

IF YOU DO NOT HAVE VALID PICTURE IDENTIFICATION AND EITHER AN ADMISSION TICKET OR PROOF THAT YOU OWN CONOCOPHILLIPS STOCK, YOU MAY NOT BE ADMITTED INTO THE MEETING.

 

 

Does the Company have a policy about directors’ attendance at the Annual Meeting?

 

Pursuant to the Corporate Governance Guidelines, directors are expected to attend the Annual Meeting of Stockholders. All of the persons who were serving as directors at the time attended the 2013 Annual Meeting of Stockholders.

How can I access ConocoPhillips’ proxy materials and annual report electronically?

 

 

This proxy statement, the accompanying proxy card and the Company’s 2013 Annual Report are being made available to the Company’s stockholders on the Internet at www.proxyvote.com through the notice and access process. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.

If you own ConocoPhillips stock in your name, you can choose this option and save us the cost of producing and mailing these documents by checking the box for electronic delivery on your proxy card, or by following the instructions provided when you vote by telephone or over the Internet. If you hold your ConocoPhillips stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet.

If you choose to view future proxy statements and annual reports over the Internet, you will receive a Notice of Internet Availability next year in the mail containing the Internet address to use to access our proxy statement and

annual report. Your choice will remain in effect unless you change your election following the receipt of a Notice of Internet Availability. You do not have to elect Internet access each year. If you later change your mind and would like to receive paper copies of our proxy statements and annual reports, you can request both by phone at (800) 579-1639, by email at sendmaterial@proxyvote.com and through the Internet at www.proxyvote.com. You will need your 12-digit control number located on your Notice of Internet Availability to request a package. You will also be provided with the opportunity to receive a copy of the proxy statement and annual report in future mailings.

We also encourage you to visit our Annual Meeting website at www.conocophillips.com/annualmeeting that, among other things, will enable you to learn more about our Company, vote your proxy, listen to a live audio webcast of the meeting and elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.

 

 

Why did my household receive a single set of proxy materials?

 

 

SEC rules permit us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more stockholders reside if we believe the stockholders are members of the same family. This benefits both you and the Company, as it eliminates duplicate mailings that stockholders living at the same address receive and it reduces our printing and mailing costs. This rule applies to any annual reports, proxy statements, proxy statements combined with a prospectus or information statements. Each stockholder will continue to receive a separate proxy card or voting instruction card. Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set

by phone at (800) 579-1639, through the Internet at www.proxyvote.com, by email at sendmaterial@proxyvote.com, or by writing to ConocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholders to consent to such elimination, or through implied consent if a stockholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer stockholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or nominee directly to discontinue duplicate mailings to your household.

 

 

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Will my vote be kept confidential?

 

 

The Company’s Board of Directors has a policy that all stockholder proxies, ballots and tabulations that identify stockholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any stockholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the

results of the stockholder vote. The policy also provides that inspectors of election for stockholder votes must be independent and cannot be employees of the Company. Occasionally, stockholders provide written comments on their proxy card that may be forwarded to management.

 

 

What is the cost of this proxy solicitation?

 

 

Our Board of Directors has sent you this proxy statement. Our directors, officers and employees may solicit proxies by mail, by email, by telephone or in person. Those persons will receive no additional compensation for any solicitation activities. We will request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation materials to the beneficial owners of common stock held of record by those entities,

and we will, upon the request of those record holders, reimburse reasonable forwarding expenses. We will pay the costs of preparing, printing, assembling and mailing the proxy materials used in the solicitation of proxies. In addition, we have hired Alliance Advisors to assist us in soliciting proxies, which it may do by mail, telephone or in person. We anticipate paying Alliance Advisors a fee of $20,000, plus expenses.

 

 

CORPORATE GOVERNANCE MATTERS

 

The Committee on Directors’ Affairs and our Board annually review the Company’s governance structure to take into account changes in SEC and New York Stock Exchange (“NYSE”) rules, as well as current best practices. Our Corporate Governance Guidelines, posted on the Company’s Internet site under the “Governance” caption and available in print upon request (see “Available Information” on page 79), address the following matters, among others:

 

 

Director qualifications;

 

 

Director responsibilities;

 

 

Board committees;

 

 

Director access to officers;

 

 

Employees and independent advisors;

 

 

Director compensation;

 

 

Director orientation and continuing education;

 

 

Chief Executive Officer (“CEO”) evaluation and management succession planning;

 

 

Board performance evaluations;

 

 

Stock ownership and holding requirements for directors and management; and

 

 

Policies prohibiting hedging and pledging.

The Corporate Governance Guidelines also contain director independence standards, which are consistent with the standards set forth in the NYSE listing standards, to assist the Board in determining the independence of the Company’s directors. The Board has determined that each director nominee, except Mr. Lance, meets the standards regarding independence set forth in the Corporate Governance Guidelines and is free of any material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). In making such determination, the Board specifically considered the fact that many of our director nominees are directors, retired officers and stockholders of companies with which we conduct business. In addition, some of our director nominees serve as employees of, or consultants to, companies that do business with ConocoPhillips and its affiliates (as further described in “Related Party Transactions” on page 21). In all cases, the Board determined that the nature of the business conducted and the interest of the director nominee by virtue of such position were immaterial both to the Company and to the director nominee.

 

 

ConocoPhillips 2014 Proxy Statement   17


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COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board of Directors maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties may write or call our Board of Directors by contacting our Corporate Secretary, Janet Langford Kelly, as provided below:

 

LOGO   

Write to: ConocoPhillips Board of Directors

c/o Janet Langford Kelly, Corporate Secretary

ConocoPhillips

P.O. Box 4783

Houston, TX 77210-4783

 

 

LOGO

 

  

Call: (281) 293-3030

    

 

LOGO

 

  

Email: boardcommunication@conocophillips.com

    

 

LOGO

 

  

Annual Meeting Website:

   www.conocophillips.com/annualmeeting

 

Relevant communications are distributed to the Board, or to any individual director or directors, as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Board has requested that certain items that are unrelated to its duties and responsibilities be excluded, such as: business solicitations or advertisements; junk mail and mass mailings; new product suggestions; product complaints; product inquiries; resumes and other forms of job inquiries; spam; and surveys. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded. Any communication that is filtered out is made available to any outside director upon request.

Recognizing that director attendance at the Company’s Annual Meeting can provide the Company’s stockholders with an opportunity to communicate with Board members about issues affecting the Company, the Company actively encourages its directors to attend the Annual Meeting of Stockholders. In 2013, all of the Company’s directors attended the Annual Meeting.

 

 

BOARD LEADERSHIP STRUCTURE

 

BOARD OVERVIEW

 

   

Chairman of the Board and Chief Executive Officer: Ryan M. Lance

 

   

Lead Director: Richard H. Auchinleck

 

   

Active engagement by all Directors

 

   

9 of our 10 Director Nominees are independent

 

   

All members of the Audit and Finance Committee, Committee on Directors’ Affairs, Human Resources and Compensation Committee and Public Policy Committee are independent

 

Our Board believes that continuing to combine the position of Chairman and CEO is in the best interests of the Company and its stockholders, and that the strong presence of engaged independent directors ensures independent oversight.

 

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Chairman and CEO Roles

 

 

ConocoPhillips is focused on the Company’s corporate governance practices and values, believing that independent board oversight is an essential component of strong corporate performance and enhances stockholder value. While the Board retains the authority to separate the positions of Chairman and CEO if it deems appropriate in the future, the Board currently believes it is in the best interests of the Company’s stockholders to combine them. Doing so places one person in a position to guide the Board in setting priorities for the Company and in addressing the risks and challenges the Company faces. The Board believes that, while its independent directors bring a diversity of skills and perspectives to the Board, the Company’s CEO, by virtue of his day-to-day involvement in managing the Company, is best suited to perform this unified role.

The Board believes there is no single organizational model that is the best and most effective in all circumstances. As a consequence, the Board periodically considers whether the offices of Chairman and CEO should be combined and who should serve in such capacities. The Board has considered whether the offices of Chairman and CEO should be combined and concluded that doing so continues to be in the best interests of the Company and its stockholders. The Board will continue to reexamine its corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet the Company’s needs.

 

 

Independent Director Leadership

 

 

The Board believes that its current structure and processes encourage its independent directors to be actively involved in guiding the work of the Board. The Chairs of the Board’s committees establish their agendas and review their committee materials in advance, communicating directly with other directors and members of management as each deems appropriate. Moreover, each director is free to suggest agenda items and to raise matters at Board and committee meetings that are not on the agenda.

Our Corporate Governance Guidelines require that the independent directors meet in executive session at every meeting. The Board has designated the Chairman of the Committee on Directors’ Affairs, who must be an independent director, as the Lead Director. Richard H. Auchinleck currently serves in this role. As Lead Director, Mr. Auchinleck presides at executive sessions of the independent directors. Each executive session may include, among other things, (1) a discussion of the performance of the Chairman and CEO, (2) matters concerning the relationship of the Board with the management directors and other members of senior management, and (3) such other matters as the non-employee directors deem appropriate. No

formal action of the Board is taken at these meetings, although the non- employee directors may subsequently recommend matters for consideration by the full Board. The Board may invite guest attendees for the purpose of making presentations, responding to questions by the directors, or providing counsel on specific matters within their areas of expertise. In addition to chairing the executive sessions, Mr. Auchinleck leads the discussion with our CEO following the independent directors’ executive sessions, participates in the discussion of CEO performance with the Human Resources and Compensation Committee, and ensures that the Board’s self-assessments are done annually.

Each year, the Board completes a self-evaluation and Mr. Auchinleck discusses the results of the self-evaluation with the full Board and, individually, with each director. This allows for direct feedback by independent directors and enables Mr. Auchinleck to speak on their behalf in conversations with management about the Board’s role and informational needs. Mr. Auchinleck is also available to meet during the year with individual directors about any other areas of interest or concern they may have.

 

 

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BOARD RISK OVERSIGHT

 

While the Company’s management is responsible for the day-to-day management of risks to the Company, the Board has broad oversight responsibility for the Company’s risk management programs. In this oversight role, the Board is responsible for satisfying itself that the risk management processes designed and implemented by the Company’s management are functioning as intended, and that necessary steps are taken to foster a culture of risk-adjusted decision-making throughout the organization. In carrying out its oversight responsibility, the Board has delegated to individual Board committees certain elements of its oversight function. In this context, the Board delegated authority to the Audit and Finance Committee to coordinate oversight of the Company’s risk management programs among the Board’s

committees. As part of this authority, the Audit and Finance Committee regularly discusses the Company’s risk assessment and risk management policies to ensure that our risk management programs are functioning properly. Additionally, the Chairman of the Audit and Finance Committee meets with the Chairs of the other Board committees and management each year to discuss the Board’s oversight of the Company’s risk management programs. The Board receives regular updates from its committees on individual categories of risk, including strategy, reputation, operations, people, technology, investment, political/legislative/regulatory and market. Such updates incorporate, among other things, the following risk areas:

 

 

LOGO

The Board exercises its oversight function with respect to all material risks to the Company, which are identified and discussed in the Company’s public filings with the SEC.

SUCCESSION PLANNING AND LEADERSHIP DEVELOPMENT

 

On an ongoing basis, the Board plans for succession to the position of CEO and other senior management positions, and the Committee on Directors’ Affairs oversees this succession planning process. The Human Resources and Compensation Committee assists in succession planning, as necessary, and reviews and makes recommendations to the Board regarding people strategies and initiatives such as leadership development. To assist the Board,

the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO, as well as perspective on potential candidates from outside the Company. In addition, the CEO periodically provides the Board with an assessment of potential successors to other key positions. Succession planning and leadership development remain top priorities of the Board and management.

 

 

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CODE OF BUSINESS ETHICS AND CONDUCT

 

ConocoPhillips has adopted a worldwide Code of Business Ethics and Conduct which applies to all directors, officers and employees, including the CEO and CFO. Our Code of Business Ethics and Conduct is designed to help directors, officers and employees resolve ethical issues in an increasingly complex global business environment and covers topics such as conflicts of interest, insider trading, competition and fair dealing, discrimination and harassment, confidentiality, payments to government personnel, anti-boycott laws, U.S. embargos and sanctions, compliance procedures, employee

complaint procedures, expectations for supervisors, investigating concerns, social media and money laundering. In accordance with good corporate governance practices, we periodically review and revise as necessary the Code of Business Ethics and Conduct. Our Code of Business Ethics and Conduct is posted on our Internet site under the “Governance” caption. Stockholders may also request printed copies of our Code of Business Ethics and Conduct by following the instructions located under “Available Information” on page 79.

 

 

RELATED PARTY TRANSACTIONS

 

Our Code of Business Ethics and Conduct requires that all directors and executive officers promptly bring to the attention of the Company any transaction or relationship that arises and of which he or she becomes aware that reasonably could be expected to constitute a related party transaction. Recommended contacts for disclosure are the General Counsel and, in the case of directors, the Chairman of the Committee on Directors’ Affairs or, in the case of executive officers, the Chairman of the Audit and Finance Committee. Any such transaction or relationship is reviewed by the Company’s management and the appropriate Board committee to ensure that it does not constitute a conflict of interest and is reported appropriately. Additionally, the Committee on Directors’ Affairs conducts an annual review of related party transactions between each of our directors and the Company (and its subsidiaries) and makes recommendations to the Board regarding the continued independence of each Board member. In 2013, there were no

related party transactions in which the Company (or a subsidiary) was a participant and in which any director or executive officer (or their immediate family members) had a direct or indirect material interest. The Committee on Directors’ Affairs also considered relationships which, while not constituting related party transactions where 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 director. Included in its review were ordinary course of business transactions with companies employing a director, including ordinary course of business transactions with Lowe’s Companies, Inc., of which Mr. Niblock serves as Chairman of the Board, President and Chief Executive Officer. The Committee on Directors’ Affairs determined that there were no transactions impairing the independence of any director.

 

 

PUBLIC POLICY ENGAGEMENT

 

Legislators and regulators govern all aspects of our industry and hold the power to either facilitate or hinder our success. ConocoPhillips’ senior leadership and Board of Directors encourage involvement in activities that advance the Company’s goals and improve the communities where we work and live. As a company, we engage in activities that include direct lobbying, making contributions to candidates and political organizations from our corporate treasury and our employee political action committee, or Spirit PAC, and membership in trade associations. The Public Policy Committee of the Board of Directors has approved policies and guidelines to help ensure

corporate compliance with local, state and federal laws that govern corporate involvement in activities of a political or public policy nature, and all of these activities are carefully managed by the Company’s Government Affairs division in order to yield the best business result for ConocoPhillips and to demonstrate compliance with the various reporting rules. To learn more about our political contribution activity and view our disclosures related to candidates, political organizations and trade associations, please visit www.conocophillips.com/sustainable-development/our-approach/living-by-our-principles/policies.

 

 

ConocoPhillips 2014 Proxy Statement   21


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SUSTAINABILITY

 

For ConocoPhillips, Sustainable Development is about conducting our business to promote economic growth, a healthy environment and vibrant communities, now and into the future. We believe that this approach will enable us to deliver long-term value and satisfaction to our shareholders and our stakeholders. Sustainable Development is fully aligned with our vision to be the E&P company of choice for all stakeholders by pioneering a new standard of excellence, and with our SPIRIT Values (Safety, People, Integrity, Responsibility, Innovation and Teamwork). ConocoPhillips has been honored for our sustainable development success. We were named one of the 100 Best Corporate Citizens by Corporate Responsibility Magazine, included in the Dow

Jones Sustainability North America Index for the seventh consecutive year, and achieved improvement in our environmental disclosure and performance score from the Carbon Disclosure Project. Sustainable Development governance includes direction and oversight from the Public Policy Committee of the Board of Directors and senior leadership. The Public Policy Committee oversees our position on public policy issues, including climate change, and on matters that may impact our reputation as a responsible corporate citizen, including sustainable development actions and reporting. To learn more about Sustainable Development at ConocoPhillips, please view our Sustainable Development Report by visiting www.conocophillips.com/susdev.

 

 

BOARD MEETINGS AND COMMITTEES

 

The Board of Directors met seven times in 2013. Each director attended at least 75% of the aggregate of:

 

 

The total number of meetings of the Board (held during the period for which he or she has been a director); and

 

 

The total number of full committee meetings held by all committees of the Board on which he or she served (during the periods that he or she served).

The Board has five standing committees: the Audit and Finance Committee; the Executive Committee; the Human Resources and Compensation Committee; the Committee on Directors’ Affairs; and the Public Policy Committee. The Board has determined that all of the members of the Audit

and Finance Committee, the Human Resources and Compensation Committee, the Committee on Directors’ Affairs and the Public Policy Committee are “independent” directors within the meaning of the SEC’s regulations, the listing standards of the NYSE and the Company’s Corporate Governance Guidelines. Each committee conducts a self-evaluation of its performance on an annual basis. The charters for our Audit and Finance Committee, Executive Committee, Human Resources and Compensation Committee, Committee on Directors’ Affairs and Public Policy Committee can be found on ConocoPhillips’ website at www.conocophillips.com under the “Governance” caption. Stockholders may also request printed copies of our Board committee charters by following the instructions located under “Available Information” on page 79.

 

 

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The current membership and primary responsibilities of the committees are summarized below:

 

Committee   Members   Primary Responsibilities  

Number of

Meetings

in 2013

 
Audit and Finance  

James E. Copeland, Jr.*

Gay Huey Evans

Robert A. Niblock

 

Discusses with management, the independent auditors, and the internal auditors the integrity of the Company’s accounting policies, internal controls, financial statements, financial reporting practices, and select financial matters, covering the Company’s capital structure, financial risk management, retirement plans and tax planning.

Reviews, and coordinates the review by other committees of, significant corporate risk exposures and steps management has taken to monitor, control and report such exposures.

Monitors the qualifications, independence and performance of our independent auditors and internal auditors.

Monitors our compliance with legal and regulatory requirements and corporate governance, including our Code of Business Ethics and Conduct.

Maintains open and direct lines of communication with the Board and our management, internal auditors, independent auditors and the global compliance and ethics organization.

Assists the Board in fulfilling its oversight of enterprise risk management, particularly with regard to market based risks, financial reporting, effectiveness of the Company’s compliance programs, information systems and cybersecurity, commercial trading and procurement.

    11   
Executive  

Ryan M. Lance*

Richard H. Auchinleck

James E. Copeland, Jr. Harald J. Norvik

William E. Wade, Jr.

 

Exercises the authority of the full Board between Board meetings on all matters other than (1) those matters expressly delegated to another committee of the Board, (2) the adoption, amendment or repeal of any of our By-Laws and (3) matters which cannot be delegated to a committee under statute or our Certificate of Incorporation or By-Laws.

      
Human Resources and Compensation  

William E. Wade, Jr.*

Richard H. Auchinleck Harald J. Norvik

 

Oversees our executive compensation policies, plans, programs and practices and reviews the Company’s retention strategies.

Assists the Board in discharging its responsibilities relating to the fair and competitive compensation of our executives and other key employees.

Annually reviews the performance (together with the Lead Director) and sets the compensation of the CEO.

Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with the Company’s compensation programs and practices and retention strategies.

    8   
Directors’ Affairs  

Richard H. Auchinleck* Richard L. Armitage

William E. Wade, Jr.

 

Selects and recommends director candidates to the Board to be submitted for election at the Annual Meeting and to fill any vacancies on the Board.

Recommends committee assignments to the Board.

Reviews and recommends to the Board compensation and benefits policies for our non-employee directors.

Monitors the orientation and continuing education programs for directors.

Conducts an annual assessment of the qualifications and performance of the Board.

Reviews and reports to the Board annually on succession planning for the CEO and senior management.

Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with the Company’s governance policies and procedures.

    8   
Public Policy  

Harald J. Norvik*

Richard L. Armitage

Jody L. Freeman

 

Advises the Board on current and emerging domestic and international public policy issues.

Assists the Board in the development and review of policies and budgets for charitable and political contributions.

Reviews and makes recommendations to the Board on, and monitors the Company’s compliance with, its policies, programs and practices with regard to, among other things, health, safety and environmental protection and government relations.

Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with social, political, safety and environmental, and public policy aspects of the Company’s business and the communities in which it operates.

    6   
  *

Committee Chairperson

NOMINATING PROCESSES OF THE COMMITTEE

ON DIRECTORS’ AFFAIRS

 

The Committee on Directors’ Affairs comprises three non-employee directors, all of whom are independent under NYSE listing standards and our Corporate Governance Guidelines. The Committee on Directors’ Affairs identifies, investigates and recommends director candidates to the Board with the goal of creating balance of knowledge, experience and diversity. Generally, the Committee on Directors’ Affairs identifies candidates through business and organizational contacts of the directors and management and often through third-party search firms. Our By-Laws permit stockholders to nominate director candidates for election at a stockholder meeting whether or not such nominee is submitted to and evaluated by the Committee on Directors’ Affairs. Stockholders who wish to submit nominees for election at an annual or special meeting of stockholders should follow the procedures described on page 79. The Committee on Directors’ Affairs will consider director candidates recommended by stockholders. If a stockholder wishes to recommend a candidate for nomination by the Committee on Directors’ Affairs, he or she should follow the same procedures set forth above for nominations to be made

directly by the stockholder. In addition, the stockholder should provide such other information as it may deem relevant for the Committee on Directors’ Affairs’ evaluation. Candidates recommended by the Company’s stockholders are evaluated on the same basis as candidates recommended by the Company’s directors, CEO, other executive officers, third-party search firms or other sources.

Mohd H. Marican resigned from the Board effective July 10, 2013. Charles E. Bunch was nominated to the Board of Directors on February 19, 2014, to fill the resulting vacancy. Potential candidates were solicited from directors and management and a third-party search firm, SpencerStuart. The Board interviewed several candidates who were evaluated based on the established criteria for persons to be nominated. The Board believes Mr. Bunch meets the established criteria and is well qualified for election to the Board. Mr. Bunch is a new nominee for election to the Board this year. His nomination was recommended by the Committee on Directors’ Affairs and approved by the Board.

 

 

ConocoPhillips 2014 Proxy Statement   23


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NON-EMPLOYEE DIRECTOR COMPENSATION

The primary elements of our non-employee director compensation program consist of an equity compensation program and a cash compensation program.

Objectives and Principles

 

 

Compensation for directors is reviewed annually by the Committee on Directors’ Affairs and set upon approval of the Board of Directors. The Board’s goal in designing directors’ compensation is to provide a competitive package that will enable it to attract and retain highly skilled individuals with relevant experience and that reflects the time and talent required to serve on the board of a complex, multinational corporation. The Board seeks to provide sufficient flexibility in the form of delivery to meet the needs of different

individuals while ensuring that a substantial portion of directors’ compensation is linked to the long-term success of ConocoPhillips. In furtherance of ConocoPhillips’ commitment to be a socially responsible member of the communities in which it participates, the Board believes that it is appropriate to extend ConocoPhillips’ matching gift program to charitable contributions made by individual directors as more fully described below.

 

 

Equity Compensation

 

 

In 2013, non-employee directors received an annual grant of restricted stock units with an aggregate value of $170,000 on the date of grant. Effective 2014, the Board of Directors approved a $50,000 increase in the value of future grants. The restricted stock units are fully vested at grant, but contain restrictions on transfer under their terms and conditions. Prior to the grant, each director may elect the schedule on which the restrictions lapse and unrestricted Company stock is to be distributed, provided that restrictions on the units issued to a non-employee director will lapse in the event of retirement, disability, death, or a change of control, unless the director has elected to defer receipt of the shares until a later date. Directors forfeit the units if, prior to the lapse of restrictions, the Board finds sufficient cause for forfeiture (although no such finding can be made after a change of control). Before the restrictions lapse, directors cannot sell or otherwise transfer the

units, but the units are credited with dividend equivalents in the form of additional restricted stock units. When restrictions lapse, directors will receive unrestricted shares of Company stock as settlement of the restricted stock units.

Restricted stock units granted to directors who are not residents of the United States may have modified terms to comply with laws and tax rules that apply to them. Thus, the restricted stock units granted to Messrs. Auchinleck and Norvik have slightly modified terms responsive to the tax laws of their home countries (Canada and Norway, respectively), the most important difference being that the restrictions lapse only in the event of retirement, death, or loss of office.

 

 

Cash Compensation

 

 

In 2013, each non-employee director received $115,000 annual cash compensation. Non-employee directors serving in certain specified committee positions also received the following additional cash compensation:

 

  Lead Director—$50,000

 

  Chair of the Audit and Finance Committee—$25,000

 

  Chair of the Human Resources and Compensation Committee—$20,000

 

  Chair of the other committees—$10,000

 

  All other Audit and Finance Committee members—$10,000

 

  All other Human Resources and Compensation Committee members—$7,500

As part of its review in 2013, the Committee on Directors’ Affairs considered, among other factors, market competitiveness of directors’ compensation, based on studies prepared by Frederic W. Cook & Co., Inc., an outside consultant retained by the Committee. As a result of such review, effective January 2014, the Board of Directors approved a decrease in $15,000 for the Lead Director and implemented a $5,000 fee for each member, other than the Chair, of the Committee on Directors’ Affairs and Public Policy Committee. The

Committee on Directors’ Affairs assessed the engagement with Frederic W. Cook & Co., Inc. using the guidelines provided in SEC rules and concluded that the work of the consultant did not raise any conflict of interest.

The total annual cash compensation is payable in monthly installments. Directors may elect, on an annual basis, to receive all or part of their cash compensation in unrestricted stock or in restricted stock units (such unrestricted stock or restricted stock units are issued on the last business day of the month valued using the average of the high and the low market prices of ConocoPhillips common stock on such date), or to have the amount credited to the director’s deferred compensation account. The restricted stock units issued in lieu of cash compensation are subject to the same restrictions as the annual restricted stock units granted since 2005 and described above under “Equity Compensation.” Due to differences in the tax laws of other countries, the Board, at its July 1, 2003 meeting, approved modification of the compensation for directors who are taxed under the laws of other countries. Effective in 2004, Canadian directors (currently, Mr. Auchinleck) were able to elect to receive cash compensation either in cash or in restricted stock units, redeemable only upon retirement, death, or loss of office. Effective in 2007, Norwegian directors (currently, Mr. Norvik) receive compensation that would otherwise have been received as cash only as restricted stock units.

 

 

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Deferral of Compensation

 

 

Directors can elect to defer their cash compensation into the Deferred Compensation Program for Non-Employee Directors of ConocoPhillips (“Director Deferral Plan”). Deferred amounts are deemed to be invested in various mutual funds and similar investment choices (including ConocoPhillips common stock) selected by the director from a list of investment choices available under the Director Deferral Plan. Mr. Auchinleck (from Canada) and Mr. Norvik (from Norway) do not have the opportunity to defer cash compensation in this manner.

Compensation deferred prior to January 1, 2003, by former directors of Conoco Inc. and Phillips Petroleum Company continues to be deferred and is deemed to be invested in various mutual funds as selected by the director. The deferred amounts may be paid as a lump sum or as installment payments following retirement from the Board.

The future payment of any compensation deferred by non-employee directors of ConocoPhillips after January 1, 2003, and by former directors of Phillips Petroleum Company prior to January 1, 2003, may be funded in a grantor trust designed for this purpose. The future payment of any cash compensation deferred by former directors of Conoco Inc. prior to January 1, 2003, is not funded.

 

 

Directors’ Matching Gift Program

 

 

All active and retired directors are eligible to participate in the Directors’ Annual Matching Gift Program. This program provides a dollar-for-dollar match of a gift of cash or securities, up to a maximum of $15,000 per donor for active directors and $7,500 per donor for retired directors during any one

calendar year, to charities and educational institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries.

 

 

Other Compensation

 

 

Spouses and significant others of directors and executive officers attend certain meetings at the encouragement of the Board. The Company’s reimbursement of the cost of such attendance is treated by the Internal Revenue Service as income, and as such is taxable to the recipient. The Board believes that such costs are expenses of creating a collegial environment that enhances the effectiveness of the Board, and therefore the Company

reimburses directors for the out of pocket cost of the travel. However, in May 2013, the Committee on Directors’ Affairs eliminated gross-ups to directors of the resulting income taxes. Amounts representing the reimbursements are contained in the All Other Compensation column of the Non-Employee Director Compensation Table.

 

 

Stock Ownership

 

Directors are expected to own as much Company stock as the amounts of the annual equity grants during their first five years on the Board. Directors are expected to reach this level of target ownership within five years of joining the Board. Actual shares of stock, restricted stock, or restricted stock units, including deferred stock units, may be counted in satisfying the stock ownership guidelines. The holdings of each of our directors currently meet or exceed the guidelines.

 

ConocoPhillips 2014 Proxy Statement   25


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Non-Employee Director Compensation Table

 

 

Name  

Fees

Earned or
Paid in

Cash

($)(1)

   

Stock

Awards

($)(2)(3)

   

Option
      Awards

($)

    Non-Equity
Incentive Plan
  Compensation
($)
   

Change in Pension
Value and Nonqualified
  Deferred Compensation
Earnings

($)

    All Other
  Compensation
($)(4)
   

Total

($)

 

R.L. Armitage

  $       115,000      $       170,055      $ -      $ -      $ -      $ 3,000      $       288,055   

R.H. Auchinleck

    182,500        170,055        -        -        -        5,580        358,135   

J.E. Copeland, Jr.

    140,000        170,055        -        -        -        20,759        330,813   

J.L. Freeman

    115,000        170,055        -        -        -        8,248        293,303   

G. Huey Evans(5)

    104,167        -        -        -        -        14,275        118,442   

M.H. Marican(6)

    72,917        170,055        -        -        -        -        242,972   

R. A. Niblock

    125,000        170,055        -        -        -        30,000        325,055   

H.J. Norvik

    132,500        170,055        -        -        -        11,181        313,736   

W.K. Reilly(7)

    47,916        170,055        -        -        -        55,569        273,540   

W.E. Wade, Jr.

    135,000        170,055        -        -        -        30,000        335,055   
 (1)  

Reflects 2013 annual cash compensation of $115,000 payable to each non-employee director. In 2013, non-employee directors serving in specified committee positions also received the following additional cash compensation:      Lead Director— $50,000

      

Chair of the Audit and Finance Committee—$25,000

      

Chair of the Human Resources and Compensation Committee—$20,000

      

Chair of any other committee—$10,000

      

Each other Audit and Finance Committee member—$10,000

      

Each other Human Resources and Compensation Committee member—$7,500

 

      

Amounts shown include prorated amounts attributable to committee reassignments which may occur during the year. Amounts shown in the Fees Earned or Paid in Cash column include any amounts that were voluntarily deferred to the Director Deferral Plan, received in ConocoPhillips common stock, or received in restricted stock units. Messrs. Auchinleck, Niblock and Norvik received 100% of their cash compensation in restricted stock units in 2013 with an aggregate grant date fair value as shown in the table. Mr. Wade elected to receive 25% of his cash compensation in restricted stock units that had an aggregate grant date fair value of $33,750 with the remainder of his cash compensation deferred into the Director Deferral Plan. All other directors received their cash compensation in cash or deferred such amounts into the Director Deferral Plan.

 

 (2)  

Amounts represent the aggregate grant date fair value of stock awards. Under our non-employee director compensation program, each non-employee director received a 2013 annual grant of restricted stock units with an aggregate value of $170,000 on the date of grant based on the average of the high and low price for our common stock, as reported on the NYSE on such date, or if such date is a non-trading date, the last preceding trading date. These grants are made in whole shares with fractional share amounts rounded up, resulting in a grant of shares with a value of $170,055 on January 15, 2013 to each person who was a director on that date.

 

 (3)  

The following table reflects, for each director, the aggregate number of stock awards outstanding as of December 31, 2013:

 

     Stock Awards  
Name   

Number of Shares  

or Units of Stock  

That Have Not Vested  

(#)  

 

R.L. Armitage

     18,995     

R.H. Auchinleck

     76,887     

J.E. Copeland, Jr.

     36,451     

J.L. Freeman

     3,021     

G. Huey Evans

     -     

M.H. Marican

     5,651     

R. A. Niblock

     12,669     

H.J. Norvik

     36,195     

W.K. Reilly

     48,074     

W.E. Wade, Jr.

     25,333     

The following table lists vesting of director stock awards in 2013:

 

   

Stock Awards

Name  

Number of Shares

Acquired on Vesting

(#)

 

Value Realized Upon  
Vesting  

($)  

R.L. Armitage

  -   $                                   -  

R.H. Auchinleck

  -   -  

J.E. Copeland, Jr.

  -   -  

J.L. Freeman

  -   -  

G. Huey Evans

  -   -  

M.H. Marican

  -   -  

R.A. Niblock

  -   -  

H.J. Norvik

  -   -  

W.K. Reilly(a)

  10,631   777,724  

W.E. Wade, Jr.

  -   -  
   (a)  

Mr. Reilly received restricted stock and restricted stock unit awards for his service as a director of ConocoPhillips from 2002 — 2013. As permitted by the terms and conditions of the awards, Mr. Reilly elected to receive certain awards in the form of unrestricted shares six months after separation from service and other awards in annual installments.

 

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 (4)  

The following table reflects, for each director, the items contained in All Other Compensation:

 

Name  

    Tax Reimbursement
Gross-Up(a)

($)

   

Meeting Travel
Reimbursements &
    Meeting Perquisites(b)(c)

($)

   

    Matching Gift
Amounts(d)

($)

   

Total

($)

 

R.L. Armitage

  $ -      $ -      $ 3,000      $ 3,000   

R.H. Auchinleck

    2,008        3,572        -        5,580   

J.E. Copeland, Jr.

    1,286        1,973        17,500        20,759   

J.L. Freeman

    -        1,248        7,000        8,248   

G. Huey Evans

    -        -        14,275        14,275   

M.H. Marican

    -        -        -        -   

R.A. Niblock

    -        -        30,000        30,000   

H.J. Norvik

    4,653        6,528        -        11,181   

W.K. Reilly(c)

    20,184        20,384        15,000        55,569   

W.E. Wade, Jr.

    -        -        30,000        30,000   
   (a)  

The amounts shown are for payments by the Company relating to certain taxes incurred by the director. These primarily occur when the Company requests spouses or other guests to accompany the director to Company functions, including Board and committee meetings, and as a result, the director is deemed to make a personal use of Company assets (for example, when a spouse accompanies a director on a Company aircraft or when a spouse accompanies a director and the commercial air travel cost is paid or reimbursed by the Company) or when a retirement presentation is made to a retiring director. In such circumstances, if the director is imputed income in accordance with the applicable tax laws, the Company will generally reimburse the director for the increased tax costs. All such tax reimbursements have been included above, regardless of whether the corresponding perquisite or personal benefit is required to be reported pursuant to SEC rules and regulations. Such travel is no longer subject to reimbursement for the increased tax costs.

 

   (b)  

The amounts shown for Messrs. Auchinleck, Copeland, Freeman, Norvik, and Reilly are primarily for payments by the Company relating to travel costs when the Company requests spouses or other guests to accompany the director to Company functions, and as a result, the director is deemed to make a personal use of Company assets.

 

   (c)  

Included in this amount for Mr. Reilly is a retirement gift valued at $10,855.

 

   (d)  

The Company maintains a Matching Gift Program under which we match certain gifts by directors to charities and educational institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries. For directors, the program matches up to $15,000 with regard to each program year. Administration of the program can cause more than $15,000 to be paid in a single fiscal year of the Company, due to processing claims from more than one program year in that single fiscal year. The amounts shown are for the actual payments by the Company in 2013. Mr. Lance is eligible for the program as an executive of the Company, rather than as a director. Information on the value of matching gifts for Mr. Lance is shown on the Summary Compensation Table on page 54 and the notes to that table.

 

 (5)  

Ms. Huey Evans was elected to the Board effective March 7, 2013. The amounts in the tables above include her prorated compensation reflecting the portion of 2013 in which she served as a director. She received cash compensation beginning March 2013. She received no equity compensation for 2013, as she did not join the Board until after the grant date for equity compensation in January 2013.

 

 (6)  

Mr. Marican resigned from the Board effective July 10, 2013. The amounts in the tables above include his prorated compensation reflecting the portion of 2013 in which he served as a director.

 

 (7)  

Mr. Reilly retired from the Board effective May 14, 2013. The amounts in the tables above include his prorated compensation reflecting the portion of 2013 in which he served as a director.

 

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Table of Contents

ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES

 

LOGO

 

What am I voting on?

 

You are voting on a proposal to elect nominees to a one-year term as directors of the Company.

What is the makeup of the Board of Directors and how often are the members elected?

 

 

Our Board of Directors currently has nine members. Mr. Marican resigned from the Board effective July 10, 2013. The Committee on Directors’ Affairs evaluated the current size and composition of the Board in considering whether to nominate a candidate to replace Mr. Marican. The Committee on Directors’ Affairs determined that a 10 member Board comprised of nine independent directors and the Company’s CEO is appropriate and in the best interests of the Company and its stockholders. Accordingly, the Committee on Directors’ Affairs initiated a search for Mr. Marican’s replacement, consulting members of the Board and management as well as a third-party search firm, SpencerStuart, to identify potential candidates. Mr. Bunch was identified and recommended by SpencerStuart as a qualified candidate for election to fill the current vacancy. The Committee on Directors’ Affairs and the Board reviewed Mr. Bunch as a candidate for election to the Board and determined to nominate him as a director.

Directors are elected at the Annual Meeting of Stockholders every year. Any director vacancies created between annual stockholder meetings (such as by a current director’s death, resignation or removal for cause or an increase in the number of directors) may be filled by a majority vote of the remaining directors then in office. Any director appointed in this manner would hold office until the next election. If a vacancy results from an action of our stockholders, only our stockholders would be entitled to elect a successor. Under the Company’s Corporate Governance Guidelines, a director should not, as a general matter, stand for re-election after his or her 72nd birthday.

 

 

What if a nominee is unable or unwilling to serve?

 

This is not expected to occur, as all director nominees have previously consented to serve. However, should a director become unable or unwilling to serve and the Board does not elect to reduce the size of the Board, shares represented by proxies may be voted for a substitute nominated by the Board of Directors.

How are directors compensated?

 

Please see our discussion of director compensation beginning on page 24.

 

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What criteria were considered by the Committee on Directors’ Affairs in selecting the nominees?

 

 

In selecting the 2014 nominees for director, the Committee on Directors’ Affairs sought candidates who possess the highest personal and professional ethics, integrity and values, and are committed to representing the long-term interests of all the Company’s stakeholders. In addition to reviewing a candidate’s background and accomplishments, the Committee on Directors’ Affairs reviewed candidates for director in the context of the current composition of the Board and the evolving needs of the Company’s businesses. The Committee on Directors’ Affairs also considered the number of boards on which the candidate already serves. It is the Board’s policy that at all times at least a substantial majority of its members meets the standards of independence promulgated by the SEC and the NYSE, and as set forth in the Company’s Corporate Governance Guidelines. The Committee on Directors’ Affairs also seeks to ensure that the Board reflects a range of talents, ages, skills, diversity, and expertise, particularly in the areas of accounting and finance, management, domestic and international markets, leadership, and oil and gas related industries, sufficient to provide sound and prudent guidance with respect to the Company’s operations and interests. The Board seeks to maintain a diverse membership, but does not have a separate policy on diversity. The Board also requires that its members be able to dedicate the time and resources necessary to ensure the diligent performance of their duties on the Company’s behalf, including attending Board and applicable committee meetings.

The following are some of the key qualifications and skills the Committee on Directors’ Affairs considered in evaluating the director nominees. The table and individual biographies below provide additional information about each nominee’s specific experiences, qualifications and skills.

 

CEO or senior officer experience. We believe that directors with CEO or senior officer experience provide the Company with valuable insights. These individuals have a demonstrated record of leadership qualities and a practical understanding of organizations, processes, strategy, risk and risk management and the methods to drive change and growth. Through their service as top leaders at other organizations, they also bring valuable perspectives on common issues affecting both their company and ConocoPhillips.

 

 

Financial reporting experience. We believe that an understanding of finance and financial reporting processes is important for our directors. The Company measures its operating and strategic performance by reference to financial targets. In addition, accurate financial reporting and robust auditing are critical to the Company’s success. We seek to have a number of directors who qualify as audit committee financial experts, and we expect all of our directors to be financially knowledgeable.

 

 

Industry experience. We seek to have directors with leadership experience as executives or directors or experience in other capacities in the energy industry. These directors have valuable perspective on issues specific to the Company’s business.

 

 

Global experience. As a global energy company, the Company’s future success depends, in part, on its success in growing its businesses outside the United States. Our directors with global business or international experience provide valued perspective on our operations.

 

 

Environmental/Regulatory experience. The perspective of directors who have experience within the environmental regulatory field is valued as we implement policies and conduct operations in order to ensure that our actions today will not only provide the energy needed to drive economic growth and social well-being, but also secure a stable and healthy environment for tomorrow. With the energy industry so heavily regulated and directly affected by governmental actions and decisions, the Company recognizes that directors with government experience offer valuable insight in this regard.

 

 

     Armitage      Auchinleck      Bunch      Copeland      Freeman      Huey
Evans
     Lance      Niblock      Norvik      Wade
CEO/Senior Officer Experience        ü         ü         ü               ü         ü         ü       ü
Financial Reporting Experience           ü         ü            ü            ü         
Industry Experience        ü               ü            ü            ü       ü
Global Experience     ü         ü         ü         ü            ü         ü            ü       ü
Environmental/Regulatory Experience     ü                                    ü         ü                           ü        

The lack of a ‘ü’ for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. We look to each director to be knowledgeable in these areas, however, the ‘ü’ indicates that the item is a specific qualification, characteristic, skill or experience that the director brings to the Board.

 

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Who are this year’s nominees?

 

The following directors are standing for annual election this year to hold office until the 2015 Annual Meeting of Stockholders. Included below is a listing of each nominee’s name, age, tenure and qualifications.

 

Richard L. Armitage

 

 

LOGO

 

Age: 68

 

Director since: March 2006

 

ConocoPhillips Committees: Committee on Directors’

 

Affairs; Public Policy Committee

 

Other current directorships: ManTech International

 

Corporation

Mr. Armitage has served as President of Armitage International since March 2005. He is a former U.S. Deputy Secretary of State and held a wide variety of high ranking U.S. diplomatic positions from 1989 to 1993 including: Special Mediator for Water in the Middle East; Special Emissary to King Hussein of Jordan during the 1991 Gulf War; and Ambassador, directing U.S. assistance to the newly independent states of the former Soviet Union. He served as Assistant U.S. Secretary of Defense for International Security Affairs from 1983 to 1989. He serves on the board of ManTech International Corporation and previously served on the board of Transcu, Ltd. and is a member of The American Academy of Diplomacy as well as a member of the Board of Trustees of the Center for Strategic Studies.

Skills and Qualifications:

Mr. Armitage’s experience in a wide range of high ranking diplomatic positions qualify him to provide valuable insight and expertise in the context of the Company’s global operations with substantial governmental interface. Mr. Armitage has specific expertise in many of the Company’s key operating regions. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

Richard H. Auchinleck, Lead Director

 

 

LOGO  

Age: 62

 

Director since: August 2002

 

ConocoPhillips Committees: Executive Committee;

 

Human Resources and Compensation Committee;

 

Committee on Directors’ Affairs (Chair)

 

Other current directorships: Enbridge Commercial

 

Trust(1); Telus Corporation(1)

Mr. Auchinleck began his service as a director of Conoco Inc. in 2001 prior to its merger with Phillips Petroleum Company in 2002. He served as President and Chief Executive Officer of Gulf Canada Resources Limited from 1998 until its acquisition by Conoco in 2001. Prior to his service as CEO, he was Chief Operating Officer of Gulf Canada from 1997 to 1998 and Chief Executive Officer for Gulf Indonesia Resources Limited from 1997 to 1998. Mr. Auchinleck currently serves on the boards of Enbridge Income Fund Holdings Inc. and Telus Corporation.

Skills and Qualifications:

Mr. Auchinleck has served as a director of ConocoPhillips and its predecessors since Gulf Canada Resources was acquired by Conoco in 2001. His extensive experience in the industry and as a CEO of an energy company provides him with valuable insights into the Company’s business. In addition, Mr. Auchinleck has extensive industry experience in Canada, the location of many key Company assets and operations. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

 

(1)  

Not a U.S. based company.

Charles E. Bunch

 

 

LOGO

 

Age: 64

 

Director Nominee

 

Other current directorships: PPG Industries, Inc.;

 

PNC Financial Services Group

 
 

Mr. Bunch has served as Chairman and Chief Executive Officer of PPG Industries, Inc. since 2005. He was President and Chief Operating Officer of PPG from July 2002 until he was elected President and Chief Executive Officer in March 2005 and Chairman and Chief Executive Officer in July 2005. Before becoming President and Chief Operating Officer, he was Executive Vice President of PPG from 2000 to 2002 and Senior Vice President, Strategic Planning and Corporate Services, of PPG from 1997 to 2000. Mr. Bunch has a 34-year history with PPG, holding positions in finance and planning, marketing, and general management in the United States and Europe. He currently serves on the board of PNC Financial Services Group and is a member of the University of Pittsburgh’s board of trustees. He previously served as a director of H.J. Heinz Company and as chairman of the Federal Reserve Bank of Cleveland, the National Association of Manufacturers, and the American Coatings Association.

Skills and Qualifications:

Mr. Bunch has not previously served as a director of the Company. The Committee on Directors’ Affairs values his experience as a director and CEO in a highly-regulated industry as well as his management and finance experience. Additionally, Mr. Bunch has a strong background in management development and compensation. His international business experience with global issues facing a large, multinational public company allows him to provide the Board with valuable operational and financial expertise. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

James E. Copeland, Jr.

 

 

LOGO

 

Age: 69

 

Director since: February 2004

 

ConocoPhillips Committees: Audit and Finance

 

Committee (Chair); Executive Committee

 

Other current directorships: Equifax Inc.;

 

Time Warner Cable Inc.

Mr. Copeland served as Chief Executive Officer of Deloitte & Touche and Deloitte Touche Tohmatsu from 1999 to 2003. Mr. Copeland formerly served as Senior Fellow for Corporate Governance with the U.S. Chamber of Commerce and as a Global Scholar with the Robinson School of Business at Georgia State University. Mr. Copeland is currently a member of the boards of Equifax Inc., Time Warner Cable Inc. and BASS, LLC, and previously served on the board of Coca Cola Enterprises from 2003 to 2008.

Skills and Qualifications:

As the former CEO of one of the “Big Four” accounting firms, Mr. Copeland provides a wealth of financial and accounting expertise. In addition, Mr. Copeland’s experience as a CEO at a large global corporation allows him to provide valuable insights on managing a global business. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

 

 

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Jody L. Freeman

 

 

LOGO  

Age: 50

 

Director since: July 2012

 

ConocoPhillips Committees: Public Policy Committee

 

Ms. Freeman is the Archibald Cox Professor of Law at Harvard Law School and founding director of the Harvard Law School Environmental Law and Policy Program. Before joining the Harvard faculty in 2005, Ms. Freeman was a professor of Law at UCLA Law School from 1995 to 2005. Ms. Freeman formerly served as an independent consultant to the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling in 2010 and as a counselor for energy and climate change in the White House from 2009 to 2010. Ms. Freeman is a member of the Administrative Conference of the United States and the American College of Environmental Lawyers.

Skills and Qualifications:

Ms. Freeman’s expertise in environmental law and policy, and her unique experiences in shaping federal environmental policy, especially in matters critical to the Company’s operations, enable her to provide valuable insight into the Company’s policies and practices. The Board believes her experience and expertise in these matters make her well qualified to serve as a member of the Board.

Gay Huey Evans

 

 

 

LOGO

 

Age: 59

 

Director since: March 2013

 

ConocoPhillips Committees: Audit and Finance

 

Committee

 

Other current directorships: Aviva plc.(1)(2);

 

Itau BBA International Limited(1)(2);

 

Falcon Private Wealth Ltd.(1)(2);

 

The Financial Reporting Council(1)(2)

Ms. Huey Evans was formerly Vice Chairman of the Board and Non-Executive Chairman, Europe, of the International Swaps and Derivatives Association, Inc. from 2011 to 2012. She was former Vice Chairman, Investment Banking and Investment Management at Barclays Capital from 2008 to 2010. She was previously head of governance of Citi Alternative Investments (EMEA) from 2007 to 2008 and President of Tribeca Global Management (Europe) Ltd. from 2005 to 2007, both part of Citigroup. From 1998 to 2005, she was director of the markets division and head of the capital markets sector at the U.K. Financial Services Authority. She previously held various senior management positions with Bankers Trust Company in New York and London. She currently serves as a non-executive director of Aviva plc., Itau BBA International Limited, Falcon Private Wealth Ltd. and The Financial Reporting Council and previously served on the board of The London Stock Exchange Group plc.

Skills and Qualifications:

Ms. Huey Evans’ in-depth knowledge of, and insight into, global capital markets from her extensive experience in the financial services industry brings valuable expertise to the Company’s businesses. The Board believes her experience and expertise in these matters make her well qualified to serve as a member of the Board.

 

(1)  

Not a U.S. based company.

(2)  

Not required to file periodic reports under the Securities Exchange Act of 1934.

Ryan M. Lance

 

 

LOGO

 

Age: 51

 

Director since: April 2012

 

ConocoPhillips Committees: Executive Committee

 

(Chair)

 

Mr. Lance was appointed Chairman and Chief Executive Officer in April 2012, having previously served as Senior Vice President, Exploration and Production — International from May 2009. Prior to that he served as President, Exploration and Production — Asia, Africa, Middle East and Russia/Caspian since April 2009, having previously served as President, Exploration and Production — Europe, Asia, Africa and the Middle East since September 2007. Prior thereto, he served as Senior Vice President, Technology commencing in February 2007, and prior to that served as Senior Vice President, Technology and Major Projects commencing in 2006. He served as President, Downstream Strategy, Integration and Specialty Businesses from 2005 to 2006.

Skills and Qualifications:

Mr. Lance’s service as Chairman and Chief Executive Officer of ConocoPhillips makes him well qualified to serve both as a director and Chairman of the Board. Mr. Lance’s extensive experience in the industry as an executive in our exploration and production businesses, and as the global representative of ConocoPhillips, make his service as a director invaluable to the Company. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

Robert A. Niblock

 

 

LOGO

 

Age: 51

 

Director since: February 2010

 

ConocoPhillips Committees: Audit and Finance

 

Committee

 

Other current directorships: Lowe’s Companies, Inc.

 

Mr. Niblock is Chairman, President and Chief Executive Officer of Lowe’s Companies, Inc. He has served as Chairman and CEO of Lowe’s Companies, Inc. since January 2005 and he reassumed the title of President in 2011, after having served in that role from 2003 to 2006. Mr. Niblock became a member of the board of directors of Lowe’s when he was named Chairman and CEO-elect in 2004. Mr. Niblock joined Lowe’s in 1993 and, during his career with the company, has served as Vice President and Treasurer, Senior Vice President, and Executive Vice President and CFO. Before joining Lowe’s, Mr. Niblock had a nine-year career with accounting firm Ernst & Young. Mr. Niblock is a member of the board of directors of the Retail Industry Leaders Association, and has served as its Secretary since 2012 and served as its chairman in 2008 and 2009. He has been a member of the Association since 2003 and served as vice chairman in 2006 and 2007.

Skills and Qualifications:

Mr. Niblock became a member of the Board in 2010. The Committee on Directors’ Affairs valued his experience as a CEO and in financial reporting matters. Mr. Niblock’s experience as an actively-serving CEO of a large public company allows him to provide the Board with valuable operational and financial expertise. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

 

 

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Harald J. Norvik

 

 

LOGO  

Age: 67

 

Director since: July 2005

 

ConocoPhillips Committees: Executive Committee;

 

Human Resources and Compensation Committee;

 

Public Policy Committee (Chair)

 

Other current directorships: Petroleum Geo-Services

 

ASA(1); Aschehoug ASA(1)(2)

Mr. Norvik currently serves as Chairman of Aschehoug ASA and as Vice Chairperson of Petroleum Geo-Services ASA. He is also on the board of Deep Ocean Group and Umoe ASA. He was Chairman and a partner at Econ Management AS from 2002 to 2008 and was a strategic advisor there from 2008 to 2010. He served as Chairman of the Board of Telenor ASA from 2007 to 2012, and as Chairman, President & CEO of Statoil from 1988 to 1999.

Skills and Qualifications:

As a former CEO of an international energy corporation, Mr. Norvik brings valuable experience and expertise in industry and operational matters. In addition, Mr. Norvik provides valuable international perspective as a citizen of Norway, a country in which the Company has significant operations. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

 

(1)  

Not a U.S. based company.

(2)  

Not required to file periodic reports under the Securities Exchange Act of 1934.

William E. Wade, Jr

 

 

LOGO  

Age: 71

 

Director since: March 2006

 

ConocoPhillips Committees: Executive Committee;

 

Human Resources and Compensation Committee

 

(Chair); Committee on Directors’ Affairs

 

Mr. Wade served as a director of Burlington Resources Inc. from 2001 through the time of its acquisition by ConocoPhillips in 2006. Mr. Wade served as President of Atlantic Richfield Company from 1998 to 1999 and Executive Vice President of Atlantic Richfield Company from 1993 to 1998. Prior to this, he served in a series of management positions with Atlantic Richfield Company beginning in 1968.

Skills and Qualifications:

Mr. Wade’s extensive experience in senior management within the industry and in areas of significant Company operations makes him well qualified to serve as a member of the Board. Mr. Wade’s prior service as a director of Burlington Resources Inc. also provides him with valuable insights into the assets acquired as part of the acquisition of that company. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board.

 

 

What vote is required to approve this proposal?

 

Each nominee requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal.

What if a director nominee does not receive a majority of votes cast?

 

Our By-Laws require directors to be elected by the majority of the votes cast with respect to such director (i.e., the number of votes cast “for” a director must exceed the number of votes cast “against” that director). If a nominee who is serving as a director is not elected at the Annual Meeting and no one else is elected in place of that director, then, under Delaware law, the director would continue to serve on the Board as a “holdover director.” However, under our By-Laws, the holdover director is required to tender his or her resignation to the Board. The Committee on Directors’ Affairs then would consider the resignation and recommend to the Board whether to accept or reject the tendered resignation, or whether some other action should be taken. The Board of Directors would then make a decision whether to accept the resignation taking into account the recommendation of the Committee on Directors’ Affairs. The director who tenders his or her resignation will not participate in the Board’s decision. The Board is required to disclose publicly (by a news release, filing with the SEC or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.

What does the Board recommend?

 

THE BOARD RECOMMENDS YOU VOTE “FOR” EACH NOMINEE STANDING FOR ELECTION AS DIRECTOR.

 

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AUDIT AND FINANCE COMMITTEE REPORT

 

The Audit and Finance Committee (the “Audit Committee”) assists the Board in fulfilling its responsibility to provide independent, objective oversight for ConocoPhillips’ financial reporting functions and internal control systems.

The Audit Committee currently comprises three non-employee directors. The Board has determined that the members of the Audit Committee satisfy the requirements of the NYSE as to independence, financial literacy and expertise. The Board has determined that at least one member, James E. Copeland, Jr., is an audit committee financial expert as defined by the SEC. The responsibilities of the Audit Committee are set forth in the written charter adopted by ConocoPhillips’ Board of Directors and last amended on December 6, 2013, and which is available on our website www.conocophillips.com under the caption “Governance.” Pursuant to its charter, the Audit Committee’s responsibilities include the following:

 

 

Discussing with management, the independent auditors, and the internal auditor the integrity of the Company’s accounting policies, internal controls, financial statements, financial reporting practices, and select financial matters, covering the Company’s capital structure, financial risk management, retirement plans and tax planning.

 

 

Reviewing significant corporate risk exposures, and steps management has taken to monitor, control and report such exposures.

 

 

Reviewing the qualifications, independence and performance of the Company’s independent auditors and internal auditors.

 

 

Reviewing the Company’s overall direction and compliance with legal and regulatory requirements and its policies, including its Code of Business Ethics and Conduct.

 

 

Maintaining open and direct lines of communication with the Board and Company’s management, Compliance and Ethics Office, internal auditors and independent auditors.

Management is responsible for preparing the Company’s financial statements in accordance with generally accepted accounting principles, or GAAP, and for developing, maintaining and evaluating the Company’s internal control over financial reporting and other control systems. The independent registered public accountant is responsible for auditing the annual financial statements prepared by management, assessing the Company’s internal control over financial reporting, and expressing an opinion with respect to each.

One of the Audit Committee’s primary responsibilities is to assist the Board in its oversight of the integrity of the Company’s financial statements. The

following report summarizes certain of the Audit Committee’s activities in this regard for 2013.

Review with Management. The Audit Committee has reviewed and discussed with management the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, which included a discussion of the quality, and not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures presented in the financial statements. The Audit Committee also discussed management’s assessment of the effectiveness of the Company’s internal control over financial reporting, as of December 31, 2013, included in the financial statements.

Discussions with Internal Audit. The Audit Committee reviewed the Company’s internal audit plan and discussed the results of internal audit activity throughout the year. The Audit Committee met with the company’s General Auditor at every in-person meeting, both with and without company management present.

Discussions with Independent Registered Public Accounting Firm. The Audit Committee met throughout the year with Ernst & Young LLP (“E&Y”), the Company’s independent registered public accounting firm, including meeting with E&Y at each in-person meeting without the presence of management. The Audit Committee has discussed with E&Y the matters required to be discussed by standards of the Public Company Accounting Oversight Board, or PCAOB. The Audit Committee has received the written disclosures and the letter from E&Y required by applicable requirements of the PCAOB, and has discussed with that firm its independence from ConocoPhillips. In addition, the Audit Committee considered the non-audit services provided to the Company by E&Y, and concluded that the auditor’s independence has been maintained.

Recommendation to the ConocoPhillips Board of Directors. Based on its review and discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in ConocoPhillips’ Annual Report on Form 10-K for the year ended December 31, 2013.

THE CONOCOPHILLIPS AUDIT AND FINANCE COMMITTEE

James E. Copeland, Jr, Chairman

Gay Huey Evans

Robert A. Niblock

 

 

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PROPOSAL TO RATIFY THE APPOINTMENT

OF ERNST & YOUNG LLP

 

LOGO

 

What am I voting on?

 

You are voting on a proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2014. The Audit and Finance Committee has appointed Ernst & Young to serve as the Company’s independent registered public accounting firm.

What are the Audit and Finance Committee’s responsibilities with respect to the independent registered public accounting firm?

 

 

The Audit and Finance Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. The Audit and Finance Committee has appointed Ernst & Young to serve as the Company’s independent registered public accounting firm for fiscal year 2014.

The Audit and Finance Committee has the authority to determine whether to retain or terminate the independent auditor. Neither the lead audit partner nor the reviewing audit partner perform audit services for the Company for more than five consecutive fiscal years. The Audit and Finance Committee reviews the experience and qualifications of the senior members of the

independent auditor’s team and is directly involved in the appointment of the lead audit partner. The Audit and Finance Committee is also responsible for determination and approval of the audit engagement fees and other compensation associated with the retention of the independent auditor.

The Audit and Finance Committee has evaluated the qualifications, independence and performance of Ernst & Young and believes that the continued retention of Ernst & Young to serve as the Company’s independent registered public accounting firm is in the best interests of the Company’s stockholders.

 

 

What services does the independent registered public accounting firm provide?

 

 

Audit services of Ernst & Young for fiscal year 2013 included an audit of our consolidated financial statements, an audit of the effectiveness of the Company’s internal control over financial reporting, and services related to periodic filings made with the SEC. Additionally, Ernst & Young provided certain other services as described in the response to the next question. In

connection with the audit of the 2013 financial statements, we entered into an engagement agreement with Ernst & Young that sets forth the terms by which Ernst & Young will perform audit services for us. That agreement is subject to alternative dispute resolution procedures.

 

 

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How much was the independent registered public accounting firm paid for 2013 and 2012?

 

 

Ernst & Young’s fees for professional services totaled $16.8 million for 2013 and $18.1 million for 2012. Ernst & Young’s fees for professional services included the following:

 

 

Audit Fees—fees for audit services, which related to the fiscal year consolidated audit, the audit of the effectiveness of internal controls, quarterly reviews, registration statements, comfort letters, statutory and regulatory audits and related accounting consultations, were $13.7 million for 2013 and $14.4 million for 2012.

 

 

Audit-Related Fees—fees for audit-related services, which consisted of audits in connection with proposed or consummated dispositions, benefit plan audits, other subsidiary audits, special reports, and related accounting consultations, were $2.7 million for 2013 and $3.3 million for 2012. Approximately $0.6 million of 2013 asset disposition-related fees are expected to be reimbursed by the purchaser.

 

 

Tax Fees—fees for tax services, which consisted of tax compliance services and tax planning and advisory services, were $0.4 million for 2013 and $0.5 million for 2012.

 

 

All Other Fees—fees for other services were negligible in 2013 and 2012.

The Audit and Finance Committee has considered whether the non-audit services provided to ConocoPhillips by Ernst & Young impaired the independence of Ernst & Young and concluded they did not.

The Audit and Finance Committee has adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other non-audit services that may be provided by Ernst & Young to the Company. The policy (a) identifies the guiding principles that must be considered by the Audit and Finance Committee in approving services to ensure that Ernst & Young’s independence is not impaired; (b) describes the audit, audit-related, tax and other services that may be provided and the non-audit services that are prohibited; and (c) sets forth pre-approval requirements for all permitted services. Under the policy, all services to be provided by Ernst & Young must be pre-approved by the Audit and Finance Committee. The Audit and Finance Committee has delegated authority to approve permitted services to its Chair. Such approval must be reported to the entire committee at the next scheduled Audit and Finance Committee meeting.

 

 

Will a representative of Ernst & Young be present at the meeting?

 

Yes, one or more representatives of Ernst & Young will be present at the meeting. The representatives will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions from the stockholders.

What vote is required to approve this proposal?

 

Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. If the appointment of Ernst & Young is not ratified, the Audit and Finance Committee will reconsider the appointment.

What does the Board recommend?

 

THE AUDIT AND FINANCE COMMITTEE RECOMMENDS YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2014.

 

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ROLE OF THE HUMAN RESOURCES AND COMPENSATION

COMMITTEE

Authority and Responsibilities

 

 

The Human Resources and Compensation Committee (the “HRCC” or “Committee”) is responsible for providing independent, objective oversight for ConocoPhillips’ executive compensation programs and determining the compensation of anyone who meets our definition of a “Senior Officer.” Currently, our internal guidelines define a Senior Officer as an employee who is a senior vice president or higher, an executive who reports directly to the CEO, or any other employee considered an officer under Section 16(b) of the Securities Exchange Act of 1934. As of December 31, 2013, the Company had 17 Senior Officers. All of the officers shown in the compensation tables that follow are Senior Officers. In addition, the HRCC acts as plan administrator of the compensation programs and certain of the benefit plans for Senior Officers and as an avenue of appeal for current and former Senior Officers regarding disputes over compensation and certain benefits.

One of the HRCC’s responsibilities is to assist the Board in its oversight of the integrity of the Company’s executive compensation practices and programs as described in the “Compensation Discussion and Analysis” beginning on page 39 of this proxy statement, which summarizes certain of the HRCC’s activities during 2013 and 2014 concerning compensation earned during 2013 as well as any significant actions regarding compensation taken after the fiscal year end.

A complete listing of the authority and responsibilities of the HRCC is set forth in the written charter adopted by the Board and last amended on May 14, 2013, which is available on our website www.conocophillips.com under the caption “Governance.” Although the Committee’s charter permits it to delegate authority to subcommittees or other Board committees, the Committee made no such delegations in 2013.

 

 

Members

 

 

The HRCC currently consists of three members. The members of the HRCC and the member to be designated as Chair, like the members and Chairs of all of the Board committees, are reviewed and recommended annually by the Committee on Directors’ Affairs to the full Board. The Board of Directors has final approval of the committee structure of the Board. The only pre-existing

requirements for service on the HRCC are that members must meet the independence requirements for “non-employee” directors under the Securities Exchange Act of 1934, for “independent” directors under the NYSE listing standards, and for “outside” directors under the Internal Revenue Code.

 

 

Meetings

 

 

The HRCC holds regularly scheduled meetings in association with each regular Board meeting and meets by teleconference between such meetings as necessary to discharge its duties. The HRCC reserves time at each regularly scheduled meeting to review matters in executive session with no members of management or management representatives present except as specifically

requested by the HRCC. Additionally, the HRCC meets with the Lead Director at least annually to evaluate the performance of the CEO. In 2013, the HRCC had six regularly scheduled meetings and two meetings via teleconference. More information regarding the HRCC’s activities at such meetings can be found in the “Compensation Discussion and Analysis” beginning on page 39.

 

 

Continuous Improvement

 

 

The HRCC is committed to a process of continuous improvement in exercising its responsibilities. To that end, the HRCC also:

 

 

Receives ongoing training regarding best practices for executive compensation;

 

 

Regularly reviews its responsibilities and governance practices in light of ongoing changes in the legal and regulatory arena and trends in corporate governance, which review is aided by the Company’s management and consultants, independent compensation consultants, and, when deemed appropriate, independent legal counsel;

 

 

Annually reviews its charter and proposes any desired changes to the Board of Directors;

 

Annually conducts a self-assessment of its performance that evaluates the effectiveness of its actions and seeks ideas to improve its processes and oversight; and

 

 

Regularly reviews and assesses whether the Company’s executive compensation programs are having the desired effects and do not encourage an inappropriate level of risk.

 

 

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HUMAN RESOURCES AND COMPENSATION COMMITTEE

REPORT

 

Review with Management. The Human Resources and Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” presented in this proxy statement starting on page 39. Members of management with whom the HRCC discussed the “Compensation Discussion and Analysis” included the Company’s Chief Executive Officer, Chief Financial Officer and Vice President, Human Resources and Real Estate and Facilities Services.

Discussion with Independent Executive Compensation Consultant. The HRCC has discussed with Frederic W. Cook & Co., Inc. (“FWC”), an independent executive compensation consulting firm, the executive compensation programs of the Company, as well as specific compensation decisions made by the HRCC. FWC was retained directly by the HRCC, independent of the management of the Company. The HRCC has received written disclosures from FWC confirming no other work has been performed for the Company by FWC other than that related to non-employee director compensation, has discussed with FWC its independence from ConocoPhillips, and believes FWC to have been independent of management.

Discussion with Independent Executive Compensation Consultant. The HRCC has discussed with Frederic W. Cook & Co., Inc. (“FWC”), an independent executive compensation consulting firm, the executive compensation programs of the Company, as well as specific compensation decisions made by the HRCC. FWC was retained directly by the HRCC, independent of the management of the Company. The HRCC has received written disclosures from FWC confirming no other work has been performed for the Company by FWC, has discussed with FWC its independence from ConocoPhillips, and believes FWC to have been independent of management.

THE CONOCOPHILLIPS HUMAN RESOURCES AND COMPENSATION COMMITTEE

William E. Wade, Jr., Chairman

Richard H. Auchinleck

Harald J. Norvik

 

 

HUMAN RESOURCES AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

During the year ended December 31, 2013, none of our executive officers served as (1) a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board) of another entity, one of whose executive officers served on our Human Resources and Compensation Committee, (2) a director of another entity, one of whose executive officers served on our Human Resources and Compensation Committee or (3) a member of the compensation committee (or other board committee performing equivalent

functions or, in the absence of any such committee, the entire board) of another entity, one of whose executive officers served as one of our directors. In addition, none of the members of our Human Resources and Compensation Committee (1) was an officer or employee of the Company or any of our subsidiaries during the year ended December 31, 2013, (2) was formerly an officer or employee of the Company or any of our subsidiaries, or (3) had any other relationship requiring disclosure under applicable rules.

 

 

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ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

 

LOGO

 

What am I voting on?

 

 

Stockholders are being asked to vote on the following advisory resolution:

RESOLVED, that the stockholders approve the compensation of ConocoPhillips’ Named Executive Officers as described in the Compensation Discussion and Analysis section and in the tabular disclosures regarding Named Executive Officer compensation (together with the accompanying narrative disclosures) in this proxy statement.

ConocoPhillips is providing stockholders with the opportunity to vote on an advisory resolution, commonly known as “Say on Pay,” considering approval of the compensation of ConocoPhillips’ Named Executive Officers.

The Human Resources and Compensation Committee, which is responsible for the compensation of our executive officers, has overseen the development of a compensation program designed to attract, retain and motivate executives who enable us to achieve our strategic and financial goals. The Compensation Discussion and Analysis and the tabular disclosures regarding Named Executive Officer compensation, together with the accompanying narrative disclosures, allow you to view the trends in compensation and application of our compensation philosophies and practices for the years presented.

The Board of Directors believes that ConocoPhillips’ executive compensation program aligns the interests of our executives with those of our stockholders. Our compensation program is guided by the philosophy that the Company’s ability to responsibly deliver energy and to provide sustainable value is driven by superior individual performance. The Board believes that a company must offer competitive compensation to attract and retain experienced, talented and motivated employees. In addition, the Board believes employees in leadership roles within the organization are motivated to perform at their highest levels by making performance-based pay a significant portion of their compensation. The Board believes that our philosophy and practices have resulted in executive compensation decisions that are aligned with Company and individual performance, are appropriate in value and have benefited the Company and its stockholders.

 

 

What is the effect of this resolution?

 

Because your vote is advisory, it will not be binding upon the Board of Directors. However, the HRCC and the Board will take the outcome of the vote into account when considering future executive compensation arrangements.

What vote is required to approve this proposal?

 

Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal.

What does the Board recommend?

 

THE BOARD RECOMMENDS YOU VOTE “FOR” THE ADVISORY APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the material elements of the compensation of our Named Executive Officers and describes the objectives and principles underlying the Company’s executive compensation programs, the compensation decisions we have recently made under those programs, and the factors we considered in making those decisions.

Executive Overview

Our Named Executive Officers for 2013 were:

 

Name   Position

Ryan M. Lance

  Chairman and CEO

Jeffrey W. Sheets

  EVP, Finance and CFO

Matthew J. Fox

  EVP, Exploration & Production

Alan J. Hirshberg

  EVP, Technology & Projects

Donald E. Wallette, Jr.

  EVP, Commercial, Business Development and Corporate Planning

Overview of Our Compensation Programs

 

Our executive compensation has four primary elements, as shown in the chart below:

 

Element     Salary       

Variable Cash

Incentive Program

      

Performance

Shares

      

Stock

Options

 
                          
Purpose    

Base level of

compensation

      

Incentive to drive

short-term

performance

      

Incentive to drive

long-term

performance

      

Incentive to drive

long-term performance and stock price growth

 
                          

Target/Target Shares

Set by

    Fixed $        Fixed % of Salary       

Dividend Discount

Model

       Black-Scholes  
                          

Form of

Delivery

    Cash        Cash         Target Shares/Cash         Options  
                          

Company/Award Unit

Performance

    N/A        0% to 200%        0% to 200%        100%  
                          

Individual

Adjustment

    Discretion        Discretion        Discretion        Discretion  

How Our Performance Affected Our Pay

 

We achieved strong financial and operating performance in 2013. Our long-term strategy as an independent E&P company is focused on the following key priorities which we believe will continue to drive value for our stockholders: (1) maintain a relentless focus on safety and execution; (2) offer a compelling dividend; (3) deliver 3 to 5 percent compound annual production growth; (4) deliver 3 to 5 percent compound annual cash margin growth and (5) achieve ongoing improvements in financial returns.

Our compensation programs are designed to reward executives for performance consistent with the Company’s long-term strategy, to attract and retain high quality talent and to align compensation with the long-term interests of our stockholders. As a result, our executive compensation programs closely tie pay to performance.

 

ConocoPhillips 2014 Proxy Statement   39


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Annual Incentive – Variable Cash Incentive Program (VCIP)

The VCIP payout is calculated using the following formula for all Senior Officers, subject to HRCC approval and discretion to set the award:

 

                     
ELIGIBLE EARNINGS   X  

TARGET PERCENTAGE

FOR THE SALARY

GRADE

  X   (   50% OF CORPORATE PERFORMANCE ADJUSTMENT   +   50% OF AWARD UNIT PERFORMANCE ADJUSTMENT   )   +   ANY INDIVIDUAL PERFORMANCE ADJUSTMENT

Based on the Company’s strong performance, we paid out VCIP as follows:

Corporate Performance – 165% of target for each of our Named Executive Officers

Award Unit Performance – 141.4% of target for each of our Named Executive Officers

Individual Performance – Adjustments of between 10% and 20% for each of our Named Executive Officers

Long-Term Incentive – Performance Share Program (PSP)

In connection with the spinoff of Phillips 66 in 2012, we concluded two performance periods in progress under our PSP earlier than had been anticipated at the establishment of the regularly scheduled three-year performance periods. We settled a pro rata portion of the PSP awards based on pre-spin performance and established new performance periods that began following the spinoff. While the normal program timing would have provided for a payout at the end of the 36 month performance period for PSP IX, the truncation of the program resulted in a pro rata portion of PSP IX being paid in 2012. However, the truncation also meant that only the balance of the program was paid out in 2014. In 2012, the Committee approved new performance periods and performance metrics for PSP IX Tail running from May 2012 – December 2013 and for PSP X running from May 2012 – December 2014 (the HRCC delayed the commencement of this performance period until after the spinoff, however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012).

For the PSP IX Tail performance period (May 2012 – Dec 2013), the Company delivered very strong results against the approved metrics. The Committee determined that performance merited the following base awards as a percent of pro rata target awards:

 

 

PSP IX Tail Results: May 2012 – December 2013

Corporate Performance – 170% of target for each of our Named Executive Officers

Individual Performance – Adjustments of between 10% and 17.5% for each of our Named Executive Officers

(See “Process for Determining Executive Compensation” on page 44 and “2013 Executive Compensation and Analysis and Results” on page 52)

2013 Say on Pay Vote Result and Engagement

 

 

At our 2013 Annual Meeting, approximately 82% of stockholders who cast an advisory vote on the Company’s say on pay proposal voted in favor of the Company’s executive compensation programs. Since then, the Company actively engaged in dialogue with a significant number of large stockholders to better understand stockholder views regarding the Company’s compensation programs. The Company is committed to maintaining regular dialogue with its investors designed to:

 

 

Solicit their feedback on executive compensation and governance-related matters;

 

 

Evaluate the Company’s compensation programs; and

 

 

Report stockholder views directly to the HRCC and Board.

As a result of this engagement process, the Company learned the following:

 

 

Stockholders are generally pleased with the Company’s compensation programs and believe such programs are well-aligned with long-term company performance; and

 

 

Stockholders emphasized the continued importance of transparency and readability of the Company’s disclosure in the proxy statement.

The Committee values these discussions and also encourages stockholders to provide feedback about our executive compensation programs as described under “Communications with the Board of Directors.

The HRCC carefully considered the views of these stockholders. The deliberations of the HRCC were informed by conversations the Company had with its investors as well as proxy advisory firms following the 2013 advisory vote on executive compensation, current market practices and general investor concern over certain pay practices. Resulting changes to our programs included:

 

 

The adoption of an anti-pledging policy; and

 

 

The adoption of double trigger change in control provisions beginning with option awards granted in 2014 and performance share programs beginning in 2014.

We have also incorporated feedback on the importance of transparent and readable disclosure in drafting this proxy statement.

 

 

40   ConocoPhillips 2014 Proxy Statement


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Our Compensation and Governance Practices

 

Our executive compensation philosophy is focused on pay for performance and is designed to reflect appropriate governance practices aligned with the needs of our business. Below is a summary of compensation practices we have adopted, and a list of problematic pay practices that we avoid.

 

WHAT WE DO

ü

  Pay for Performance: We align executive compensation with corporate, award unit and individual performance on both a short-term and long-term basis. The majority of our target total direct compensation for Senior Officers comprises variable compensation through our annual incentive bonuses and long-term incentive compensation. Actual total direct compensation varies based on the extent of achievement of, among other things, safety, operational and financial performance goals and stock performance.

ü

  Stock Ownership Guidelines: Our Stock Ownership Guidelines require executives to own stock and/or have an interest in restricted stock units valued at a multiple of base salary, ranging from 1.8 times salary for lower-level executives to 6 times salary for the CEO. All of our current Named Executive Officers meet or exceed these requirements.

ü

  Mitigation of Risk: Our compensation plans have provisions designed to mitigate undue risk, including caps on the maximum level of payouts, clawback provisions, varied performance measurement periods, and multiple performance metrics. In addition, the Board and management perform an annual risk assessment to identify potential undue risk created by our incentive plans. We do not believe any of our compensation programs create risks that are reasonably likely to have a material adverse impact on the Company.

ü

  Clawback Policy: Executives’ incentives are subject to a clawback that applies in the event of certain financial restatements. This is in addition to provisions contained in our award documents pursuant to which we can suspend their right to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine is detrimental to the Company.

ü

  Independent Compensation Consultant: The Committee retained Frederic W. Cook & Co., Inc. (“FWC”) to serve as its independent executive compensation consultant. During 2013, FWC provided no other services to the Company other than those related to non-employee director compensation.

ü

  Double Trigger: Beginning with option awards granted in 2014 and performance share programs beginning in 2014, equity awards will not vest in the event of a change in control unless also accompanied by a qualifying termination of employment.
WHAT WE DON’T DO

û

  No Excise Tax Gross-Ups for Future Change in Control Plan Participants: In 2012, we eliminated excise tax gross-ups for future participants in our Change in Control Severance Plan.

û

  No Current Payment of Dividend Equivalents on Unvested Long-Term Incentives: Dividend equivalents on unvested restricted stock units are only paid out to the extent that the underlying award is ultimately earned.

û

  No Repricing of Underwater Stock Options: Our plans do not permit us to reprice or exchange underwater options without stockholder approval.

û

  No Pledging, Hedging, Short Sales, or Derivative Transactions: Company policies prohibit our directors and executives from pledging of or hedging or trading in derivatives of the Company’s stock.

û

  No Employment Agreements for Our Named Executive Officers: All compensation for these officers is established by the Committee.
 

 

Philosophy and Objectives of Our Executive Compensation Program

Our Goals

 

Our goals are to attract, retain, and motivate high-quality employees and to maintain high standards of principled leadership so that we can responsibly deliver energy to the world and provide sustainable value for our stakeholders, now and in the future.

Our Philosophy

 

 

We believe that:

 

 

Our ability to responsibly deliver energy and to provide sustainable value is driven by superior individual performance.

 

 

A company must offer competitive compensation to attract and retain experienced, talented, and motivated employees.

 

Employees in leadership roles within the organization are motivated to perform at their highest levels when performance-based pay is a significant portion of their compensation.

 

 

The use of judgment by the Human Resources and Compensation Committee plays an important role in administering effective executive compensation programs.

 

 

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Our Principles

 

To achieve our goals, we implement our philosophy through the following guiding principles:

 

 

Establish target compensation levels that are competitive with those of other companies with whom we compete for executive talent;

 

 

Create a strong link between executive pay and Company performance;

 

 

Encourage prudent risk taking by our executives;

 

 

Motivate performance by rewarding specific individual accomplishments in determining compensation;

 

 

Retain talented individuals; and

 

 

Integrate all elements of compensation into a comprehensive package that aligns goals, efforts, and results throughout the organization.

 

 

Components of Executive Compensation

Our four primary executive compensation programs are designed to provide a target value for compensation that is competitive with our peers and will attract and retain the talented executives necessary to manage a large and complex organization such as ConocoPhillips.

 

LOGO

 

LOGO

Base Salary

 

 

Base salary is a major component of the compensation for all of our salaried employees, although it becomes a smaller component as a percentage of total targeted compensation as an employee rises through the ConocoPhillips salary grade structure. Base salary is important to give an individual financial stability for personal planning purposes. There are also motivational and reward aspects to base salary, as base salary can be increased or decreased to account for considerations such as individual performance and time in position. The position-benchmarking exercise we conduct considers peer market data from the Company’s compensation consultant that, along with the Company’s recommendations, is reviewed with the Committee and its independent compensation consultant. See “Peers and Benchmarking” on page 45 for a discussion of this process.

The table below shows the base salary for each Named Executive Officer earned during the years ended 2012 and 2013:

 

Name    12/31/2012      12/31/2013  

R.M. Lance

   $ 1,258,667       $ 1,666,667   

J.W. Sheets

     705,200         880,933   

M.J. Fox

     858,347         1,227,533   

A.J. Hirshberg

     909,000         1,025,833   

D.E. Wallette

     617,150         814,050   

The increases in base pay approved by the Committee for Messrs. Lance, Fox, Hirshberg and Wallette are linked to their expanded leadership roles following the spinoff and, along with Mr. Sheets, reflect increases that align their respective positions’ base pay and total compensation to the market in accordance with our compensation philosophy. The position-benchmarking exercise we conduct considers peer market data from the Company’s compensation consultant that, along with the Company’s recommendations, is reviewed with the Committee and its independent compensation consultant.

Mr. Lance became Chairman and CEO, and the other Named Executive Officers became executive vice presidents, on May 1, 2012, the first day following the repositioning of the Company as an independent exploration and production company. In setting the CEO’s 2013 target compensation, and that of the other Named Executive Officers, the Committee considered current market data from the Company’s compensation consultant that it then reviewed with the Committee’s independent compensation consultant. See “Peers and Benchmarking” on page 45 for a discussion of this process.

 

 

 

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Performance-Based Pay Programs

 

Annual Incentive

The Variable Cash Incentive Program (“VCIP”) is an annual incentive program that is broadly available to our employees throughout the world, and it is our primary vehicle for recognizing Company, award unit, and individual performance for the past year. We believe that having an annual “at risk” compensation element for all employees, including executives, gives them a financial stake in the achievement of our business objectives and therefore motivates them to use their best efforts to ensure the achievement of those objectives. We believe that measuring and rewarding performance on an annual basis in a compensation program is appropriate because we measure and report our business accomplishments annually. We also believe that one year is a time period over which all participating employees can have the opportunity to establish and achieve their specified goals. The base award is weighted equally for corporate and award unit performance for the Named Executive Officers. See Process for Determining Executive Compensation – Developing Performance Measures beginning on page 46 for details regarding performance criteria. The HRCC has discretion to adjust the base award up or down based on individual performance and makes its decision on individual performance adjustments based on the input of the CEO for all Named Executive Officers.

Long-Term Incentives

 

Our primary long-term incentive compensation programs for executives are the Performance Share Program (“PSP”) and the Stock Option Program.

Our programs target approximately 50% of the long-term incentive award in the form of restricted stock units awarded under the PSP and 50% in the form of stock options.

 

 

Performance Share Program—PSP rewards executives based on the performance of the Company and their individual performance over a three-year period. Each year the Committee establishes a three-year performance period over which it compares the performance of the Company with that of its performance-measurement peer group using pre-established criteria. Thus, in any given year, there are three overlapping performance periods. Use of a multi-year performance period helps to focus management on longer-term results. This was modified for program periods that included 2012, because of the repositioning of the Company as an independent E&P company following the spinoff of Phillips 66. See “Long Term Incentive: Performance Share Program (PSP)” beginning on page 50 for details regarding these modifications. After the spinoff, the Committee determined that future distributions under PSP should be made in cash rather than stock consistent with market practice.

Each executive’s individual award under the PSP is subject to a potential positive or negative performance adjustment at the end of the performance period. Although the HRCC maintains final discretion to adjust compensation in accordance with any extraordinary circumstances that may arise, and has done so in the past, program guidelines generally result in an award range between zero to 200 percent of target. Final awards are based on the Committee’s evaluation of the Company’s performance relative to the established metrics (discussed below under “Process for Determining Executive Compensation – Developing Performance Measures”) and of each executive’s individual performance. The Committee considers input from the CEO with respect to Senior Officers, including all Named Executive Officers other than himself. Targets for participants whose salary grades are changed during a performance period are prorated for the period of time such participant remained in each respective salary grade.

 

Stock Option Program—The Stock Option Program is designed to maximize medium- and long-term stockholder value. The practice under this program is to set option exercise prices at not less than 100 percent of the Company stock’s fair market value at the time of the grant. Because the option’s value is derived solely from an increase in the Company’s stock price, the value of a stockholder’s investment in the Company must appreciate before an option holder receives any financial benefit from the option. Options under our program have three-year vesting provisions and ten-year terms in order to incentivize our executives to increase the Company’s share price over the long term.

The combination of the PSP and the Stock Option Program, along with our Stock Ownership Guidelines described elsewhere in this proxy statement, provides a comprehensive package of medium- and long-term compensation incentives for our executives that align their interests with those of our long-term stockholders.

 

 

Off-Cycle Awards—ConocoPhillips may make awards outside the PSP or the Stock Option Program (off-cycle awards). Off-cycle awards (also commonly referred to as “ad hoc” or “special purpose” awards) are granted outside the context of our regular compensation programs. Currently, off-cycle awards are granted to certain incoming executive personnel, typically on the first day of employment, for one or more of the following reasons: (1) to induce an executive to join the Company (occasionally replacing compensation the executive will lose by leaving the prior employer); (2) to induce an executive of an acquired company to remain with the Company for a certain period of time following the acquisition; or (3) to provide a pro rata equity award to an executive who joins the Company during an ongoing performance period for which he or she is ineligible under the standard PSP or Stock Option Program provisions. In these cases, the HRCC has sometimes approved a shorter period for restrictions on transfers of restricted stock units than those issued under the PSP or Stock Option Program. Pursuant to the Committee’s charter, any off-cycle awards to Senior Officers must be approved by the HRCC. In 2013, no off-cycle awards were made to any of our Named Executive Officers.

 

 

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Process for Determining Executive Compensation

 

Our executive compensation programs take into account marketplace compensation for executive talent; internal pay equity with our employees; past practices of the Company; corporate, award unit and individual results and the talents, skills and experience that each individual executive brings to ConocoPhillips. Our Named Executive Officers each serve without an employment agreement. We provided offer letters to each of Messrs. Fox and

Hirshberg as an incentive to accept employment and in recognition of foregone compensation from prior employers. A discussion of these letters is set forth on page 64 under “Other Arrangements” and beginning on page 54 under note 3 to the Summary Compensation Table. All compensation for these officers is set by the Committee as described below.

 

 

Risk Assessment

 

 

The Company has considered the risks associated with each of its executive and broad-based compensation programs and policies. As part of the analysis, the Company considered the performance measures used and described under the section entitled “Performance Criteria” beginning on page 47, as well as the different types of compensation, varied performance measurement periods and extended vesting schedules utilized under each incentive compensation program for both executives and other employees. As a result of this review, the Company has concluded the risks arising from the Company’s compensation policies and practices for its employees are not

reasonably likely to have a material adverse effect on the Company. As part of the Board’s oversight of the Company’s risk management programs, the HRCC conducts an annual review of the risks associated with the Company’s executive and broad-based compensation programs. The HRCC and its independent compensation consultant as well as the Company’s compensation consultant noted their agreement with management’s conclusion that the risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

 

 

Human Resources and Compensation Committee

 

 

The Committee reviews and determines compensation for the CEO and for our Senior Officers. The Committee annually reviews and establishes performance goals and objectives relevant to the compensation of the CEO and Senior Officers, and evaluates whether those goals and objectives have been achieved for purposes of determining the performance-based compensation of the CEO and Senior Officers. Performance goals and objectives established by the Committee are consistent with corporate objectives related to business strategy, leadership and other corporate matters established by the Board. Directors are encouraged to provide their views on CEO leadership to the Chair of the Committee at any time, and, more formally, once each year the Chair of the Committee speaks with each director concerning that director’s views on the performance of the CEO. The Committee meets annually with the Lead Director with respect to the evaluation of the CEO, which the Chair of the Committee and the Lead Director then discuss with the CEO.

The HRCC has approved various metrics to be reviewed in connection with our performance-based compensation, VCIP and PSP compensation plans. Because the HRCC believes that no single metric effectively captures the

many factors needed to make the company successful, both in the short- and long-term, it has approved the measures discussed in this proxy statement. The HRCC engages in a rigorous review of the Company’s performance in light of those metrics and more broadly. At four separate HRCC meetings in 2013 and early 2014, the HRCC met with the CEO and other members of management to hear reports on the Company’s progress on ongoing performance periods. After receiving a detailed review of the metrics, members of the HRCC determined the payouts based on actual performance tempered with judgement based on their knowledge and experience. The use of judgment in this process is paramount, for without it, the numbers would not be evaluated in their proper context. In the complex business environment in which the Company operates, the HRCC understands that meeting, exceeding or falling short of a particular metric may be due to factors other than the efforts of the employees of the Company. The members of the HRCC believe that it is their responsibility to the Company and its stockholders to exercise judgment and discretion in determining payouts under the performance programs of the Company.

 

 

Management

 

 

The Company’s Human Resources department supports the Committee in the execution of its responsibilities. The Company’s Vice President, Human Resources and Real Estate and Facilities Services supervises the development of the materials for each Committee meeting, including market data, individual and Company performance metrics and compensation recommendations for consideration by the Committee. The CEO considers performance and makes individual recommendations to the Committee on

base salary, annual incentive and long-term equity compensation with respect to Senior Officers, including all Named Executive Officers other than himself. The Committee reviews, discusses, modifies and approves, as appropriate, these compensation recommendations. No member of the management team, including the CEO, has a role in determining his or her own compensation.

 

 

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Compensation Consultants

 

 

As set forth in its charter, which can be found on our website, the Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the compensation of the Chairman, the CEO and the Senior Officers, and has sole authority to approve such consultant’s fees and other retention terms. The foregoing authority includes the authority to retain, terminate and obtain advice and assistance from external legal, accounting or other advisors and consultants.

The Committee retained Frederic W. Cook & Co., Inc. (“FWC”) to serve as its independent executive compensation consultant in 2013. The Committee has adopted specific guidelines for outside compensation consultants, which (1) require that work done by such consultants for the Company at management’s request be approved in advance by the Committee; (2) require a review of the advisability of replacing the independent consultant after a period of five years and (3) prohibit the Company from employing any individual who worked on the Company’s account for a period of one year after leaving the employ of the independent consultant. FWC has provided an annual attestation of its compliance with these guidelines. Separately, management retained Mercer to, among other things, assist it in compiling compensation data, conducting analyses, providing consulting services, and supplementing internal resources for market analysis.

 

The Committee considered whether any conflict of interest exists with either FWC or Mercer in light of SEC rules. The Committee assessed the following factors relating to each consultant in its evaluation: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; (5) any Company stock owned by the individual consultants involved in the engagement and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Both FWC and Mercer provided the Committee with appropriate assurances addressing such factors. Based on such information, the Committee concluded that the work of each of the consultants did not raise any conflict of interest. The Committee also took into consideration all factors relevant to FWC’s independence from management, including those specified in Section 303A.05(c) of the NYSE Listed Company Manual and determined that FWC is independent, and performs no services for the Company other than those related to non-employee director compensation.

 

 

Peers and Benchmarking

 

 

With the assistance of our outside compensation consultants, we set target compensation by referring to multiple relevant compensation surveys that include, but are not limited to, large energy companies. We then compare that information to our salary grade targets (both for base salary and for incentive compensation) and make any changes needed to bring the cumulative target for each salary grade to broadly the 50th percentile for similar positions as indicated by the survey data.

For our Named Executive Officers, we conduct benchmarking, using available data, for each individual position. For example, although we determine targets by benchmarking against other large, publicly held energy companies, in setting targets for our executives, we also consider broader categories, such as mid-sized, publicly held energy companies and other large, publicly held companies outside the energy industry. This position benchmarking exercise considers peer market data from the Company’s compensation consultant, Mercer, after which, the Committee’s independent consultant, FWC, reviews and independently advises on the conclusions reached as a result of this benchmarking. The Committee uses the results of these sources of

compensation information as a factor in setting compensation structure and targets relating to our Named Executive Officers.

The HRCC uses two separate categories of primary peer groups in designing our compensation programs: the compensation peer group and the performance peer group. ConocoPhillips utilizes compensation peer groups in setting compensation targets because these companies are broadly reflective of the industry in which it competes for business opportunities and executive talent, and because we believe these peers provide a good indicator of the current range of executive compensation. Performance peers are those companies in our industry in relation to which we believe we can best measure performance concerning financial and business objectives and opportunities. The companies chosen as compensation and performance peers have the following characteristics that led to their selection: complex organizations; publicly traded (and not directed by a government or governmental entity); very large market capitalization; very large production and reserves; competitors for exploration prospects and competitors for the same talent pool of potential employees.

 

 

Compensation and Performance Peers

The following table shows the companies that we currently consider our peers, together with their market capitalization and production:

 

Company Name    Symbol     

Market Cap ($B)

As of 12/31/2013(1)

     2012 Production
(MBOED)(2)
     Compensation
Peer
   Performance
Peer

Exxon Mobil Corporation

     XOM         442         4,239       ü    ü

Chevron Corporation

     CVX         240         2,610       ü    ü

Royal Dutch Shell plc

     RDSA         234         3,262       ü    ü

BP plc

     BP         151         3,331       ü    ü

TOTAL SA

     TOT         146         2,300          ü

ConocoPhillips

     COP         87         1,578         

Occidental Petroleum

     OXY         77         766       ü    ü

BG Group

     BG.L         73         659          ü

Anadarko Petroleum Corporation

     APC         40         732       ü    ü

Apache Corporation

     APA         34         779       ü    ü

Devon Energy

     DVN         25         682       ü    ü

Fortune 100 Industrials (for CEO & staff executives)

                              ü     

 

(1)  

Source: Bloomberg.

(2)  

Based on publicly available information.

 

ConocoPhillips 2014 Proxy Statement   45


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Setting Compensation Targets – Compensation Peer Group

At the February 2013 HRCC meeting, in setting total compensation targets and targets within each individual program, the HRCC used the compensation peer group indicated in the table above for benchmarking purposes. The HRCC also utilized a second group of peer companies for benchmarking the compensation of ConocoPhillips’ Named Executive Officers which are noted in the table above. In addition, for the CEO and staff executive positions, the HRCC considers other Fortune 100 non-financial companies when setting target compensation. Staff executive positions include executives who have duties not solely or primarily related to our operations, such as finance, legal, accounting and human resources.

 

Measuring Performance – Performance Peer Group

The HRCC believes our performance is best measured against both large independent E&P companies and the largest publicly held, international, integrated oil and gas companies against which we compete in our business operations. Therefore, for our performance-based programs, the Committee assessed our actual performance for a given period by using the performance peer group indicated in the table above.

 

 

Once an overall target compensation level is established, the Committee considers the weighting of each of our primary compensatory programs (Base Salary, VCIP, PSP and Stock Option Program) within the total targeted compensation, as discussed below under “Salary Grade Structure” and “Internal Pay Equity.”

Salary Grade Structure

 

 

Management, with the assistance of outside compensation consultants, thoroughly examines the scope and complexity of jobs throughout ConocoPhillips and studies the competitive compensation practices for such jobs. As a result of this work, management has developed a compensation scale under which all positions are designated with specific “salary grades.” For our executives, the base salary midpoint increases as the salary grade

increases, but at a lesser rate than increases in target incentive compensation percentages. The result is an increased percentage of “at risk” compensation as the executive’s salary grade is increased. Any changes in compensation for our Senior Officers resulting from a change in salary grade are approved by the HRCC.

 

 

Internal Pay Equity

 

 

We believe our compensation structure provides a framework for an equitable compensation ratio between executives, with higher targets for jobs at salary grades having greater duties and responsibilities. Taken as a whole, our compensation program is designed so that the individual target level rises as salary grade level increases, with the portion of performance-based compensation rising as a percentage of total targeted compensation. One

result of this structure is that an executive’s actual total compensation as a multiple of the total compensation of his or her subordinates is designed to increase in periods of above-target performance and decrease in times of below-target performance. In addition, the HRCC also reviews the compensation of Senior Officers periodically to ensure the equitable compensation of officers with similar levels of responsibilities.

 

 

Developing Performance Measures

 

 

We believe our performance metrics assess the performance of the Company relative to its strategy as an independent E&P company, focusing on the following key priorities that we believe will drive value for our stockholders:

 

 

Maintain a relentless focus on safety and execution;

 

 

Offer a compelling dividend;

 

 

Deliver 3 to 5 percent compound annual production growth;

 

 

Deliver 3 to 5 percent compound annual cash margin growth; and

 

 

Achieve ongoing improvements in financial returns.

 

Consistent with this focus, the HRCC has approved a balance of metrics, some of which measure performance relative to our peer group and some of which measure absolute metrics that are directly tied to the strategy. We have selected multiple metrics, as described herein, because we believe no single metric is sufficient to capture the performance we are seeking to drive, and any metric in isolation is unlikely to promote the well-rounded executive performance necessary to enable us to achieve long-term success. While the Committee reassesses performance metrics periodically, it has maintained the same metrics since the spinoff.

 

 

46   ConocoPhillips 2014 Proxy Statement


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Performance Criteria

 

We use corporate and award unit performance criteria in determining individual payouts. In addition, our programs contemplate that the Committee will exercise discretion in assessing and rewarding individual performance. The HRCC considers all the elements described below before making a final determination. For VCIP and PSP, the HRCC approved certain metrics and the weight considered for each metric, consistent with our strategy and focus as an independent E&P company. This is reflected in the charts below. The HRCC assigned approximately the following weights to the measures under VCIP and PSP:

 

LOGO

Corporate Performance Criteria

We utilize multiple measures of performance under our programs to ensure that no single aspect of performance is driven in isolation. For a discussion of the reconciliation of these measures with generally accepted accounting principles, refer to Appendix A and the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Metrics:

The HRCC has approved certain corporate-level performance criteria to reflect the circumstances of the Company as an independent E&P company. The HRCC makes the determination, in judging how well the Company achieves these metrics, of the ultimate payout of our programs. For performance periods beginning or continuing after the repositioning, the performance measures are as follows:

 

 

Relative Total Shareholder Return—Total shareholder return (“TSR”) represents the percentage change in a company’s common stock price from the beginning of a period of time to the end of the stated period, and assumes common stock dividends paid during the stated period are reinvested into that common stock. We use a total shareholder return measure because it is the most tangible measure of the value we have provided to our stockholders during the relevant program period. We recognize that total shareholder return is not a perfect measure. It can be affected by factors beyond management’s control and by market conditions not related to the Company’s intrinsic performance. Shareholder return over the short-term can also fail to fully reflect the value of longer-term projects. We seek to mitigate the influence of industry-wide or market-wide conditions on stock price by using total shareholder return relative to our performance peer group. Consistent with market practice, for programs beginning in 2012 or later, this percentage is measured using a 20 trading day simple average prior to the beginning of a period of time and a 20 trading day simple average prior to the end of the stated period, and assumes common stock dividends paid during the stated period are reinvested.

 

 

Operational—This measure was adopted to focus on various operational elements. For VCIP, these include absolute targets for Production, Capital (with milestones), Operating & Overhead Costs, Direct Operating Efficiency (a measure of operational up-time), Reserve Replacement Ratio, and milestones for Exploration. For PSP, the elements include absolute targets for Production and Reserve Replacement Ratio. Although management may set internal targets for such elements in accordance with the budget and strategic plans, review of this measure and determination of performance success is made by the HRCC.

 

 

Financial—This measure comprises several financial measures. For VCIP, it includes review of cash and net income margins, both absolute and relative to peers, as well as ROCE (discussed below) and CROCE (discussed below), both absolute and in terms of relative improvement. For PSP, the elements include cash margins, both absolute and relative to peers, ROCE/CROCE, both absolute and relative to peers, and Production per Debt Adjusted Share, relative to peers. Although management may set internal targets for such elements in accordance with the budget and strategic plans, review of this measure and determination of performance success is made by the HRCC.

Relative Adjusted Return on Capital Employed—Our businesses are capital intensive, requiring large investments, in most cases over a number of years, before tangible financial returns are achieved. Therefore, we believe that a good indicator of long-term Company and management performance, both absolute and relative to our performance peer group, is the measure known as return on capital employed (“ROCE”). Relative ROCE is a measure of the profitability of our capital employed in our business compared with that of our peers. We calculate ROCE as a ratio, the numerator of which is net income plus after-tax interest expense, and the denominator of which is average capital employed (total equity plus total debt). In calculating ROCE, we adjust the net income of the Company and our peers for certain non-core earnings impacts.

Relative Improvement in Adjusted Cash Return on Capital Employed—Similar to ROCE, adjusted cash return on capital employed (“CROCE”) measures the Company’s performance in efficiently allocating its capital. However, while ROCE is based on adjusted net income, CROCE is based on cash flow, measuring the ability of the Company’s capital employed to generate cash. CROCE is calculated by dividing adjusted EBIDA (earnings before interest, depreciation and amortization, adjusted for non-core earnings impacts) by average capital employed (total equity plus total debt). Our improvement in CROCE is compared against that of our peers.

 

ConocoPhillips 2014 Proxy Statement   47


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Production per Debt Adjusted Share—Production per share after adjusting for outstanding debt per share. The formula is:

 

Average (Total Production per Quarter) * 4

Average (Outstanding Shares + Debt Shares)

 

Debt Shares

 

= Outstanding Debt

   Quarter Ending Share Price

  

 

 

Strategic Plan and Initiatives—This measure contains several distinct elements. For VCIP, these include Organization (functional excellence), Culture (collaboration and retention), Asset Sales, Policies/Controls, and Relationships. For PSP, in addition to those elements, it also includes Governance, Diversity, Opportunity Capture, and Reputation. This measure is an analysis made by the HRCC of the Company’s progress in implementing its strategic plan over a given performance period.

 

 

Health, Safety, and Environmental (“HSE”)—We seek to be a good employer, good community member and good steward of the environmental resources we manage. Therefore, we incorporate multiple HSE metrics to comprehensively assess our performance.

Differences between the VCIP and PSP programs reflect the differences in the employee populations participating in the programs: VCIP is broadly based, with virtually all of our employees participating, while PSP is confined to senior management.

Award Unit Performance Criteria

There are approximately 43 discrete award units within the Company designed to measure performance and to reward employees according to business outcomes relevant to the award group. Although most employees participate in a single award unit designated for the operational or functional group to which such employee is assigned, a Senior Officer may participate in a blend of the results of more than one of these award units depending on the scope and breadth of his or her responsibilities over the performance period. Members of our executive leadership team, which includes all of the Named Executive Officers, are handled somewhat differently, with the results from all award units being blended together on a salary-weighted basis (that is, the proportion of the total salaries of employees in that award unit to the total salaries paid by the Company) to determine the expected payout for the award unit portion of VCIP, subject to the discretion of the HRCC to set the payout otherwise.

Performance criteria are goals consistent with the Company’s operating plan and include quantitative and qualitative metrics specific to each award unit, such as production, control of costs, health, safety and environmental performance, support of corporate initiatives, and various milestones set by management. At the conclusion of a performance period, management makes a recommendation based on the unit’s performance for the year against its performance criteria. The HRCC then reviews management’s recommendation regarding each award unit’s performance and has discretion to adjust any such recommendation in approving the final awards.

Individual Performance Criteria

Individual adjustments for our Named Executive Officers are approved by the HRCC, based on the recommendation of the CEO (other than for himself). The CEO’s individual adjustment is determined by the Committee taking into account the prior review of the CEO’s performance, which is conducted jointly by the HRCC and the Lead Director. The HRCC considers individual adjustments for each Named Executive Officer based on a subjective review of the individual’s personal leadership and contribution to the Company’s financial and operational success. The HRCC considers the totality of the executive’s performance in deciding on any individual adjustment.

Tax-Based Program Criteria

Our incentive programs are also designed to conform to the requirements of section 162(m) of the Internal Revenue Code, which allows for deductible compensation in excess of $1 million if certain criteria, including the attainment of pre-established performance criteria, are met. In order for a Named Executive Officer to receive any award under either VCIP or PSP, certain threshold criteria must be met. This tier of performance measure and methodology is designed to meet requirements for deductibility of these items of compensation under section 162(m) of the Internal Revenue Code. Pursuant to this tier, maximum payments for the performance period under VCIP and PSP are set, but they are subject to downward adjustment through the application of the generally applicable methodology for VCIP and PSP awards previously discussed, effectively establishing a ceiling for VCIP and PSP payments to each Named Executive Officer. Threshold performance criteria for VCIP and PSP differed, due primarily to the different lengths in the threshold performance periods that began after the repositioning.

For 2013 VCIP, the criteria required that the Company meet one of the following measures as a threshold to an award being made to any Named Executive Officer:

 

(1)

Among the top seven of eleven specified companies in total shareholder return;

 

(2)

Reserve replacement (normalized for the impact of assets sales and assumptions made in our budgeting process) of at least 100%; or

 

(3)

Cash from operations (normalized for the impact of asset sales and assumptions made in our budgeting process as to price for oil equivalents and excluding non-cash working capital) of at least $8.7 billion.

For PSP, the criteria for the 2012-2014 program period required that the Company meet one of the following measures as a threshold to an award being made to any Named Executive Officer:

 

(1)

Among the top seven of eleven specified companies in total shareholder return;

 

(2)

Reserve replacement (normalized for the impact of assets sales and assumptions made in our budgeting process) of at least 100%; or

 

(3)

Cash from operations (normalized for the impact of asset sales and assumptions made in our budgeting process as to price for oil equivalents and excluding non-cash working capital) of at least $31.5 billion.

For both the 2013 VCIP and the PSP 2012-2014 program period, the specified companies for comparison were ConocoPhillips, BP, Chevron, ExxonMobil, Royal Dutch Shell, Total, Anadarko, Apache, BG Group, Devon and Occidental.

The performance criteria for this purpose are set by the HRCC and may change from year to year, although the criteria must come from a list of possible criteria set forth in the stockholder-approved 2011 Omnibus Stock and Performance Incentive Plan. The award ceilings are also set by the HRCC each year, although they may not exceed limits set in the stockholder-approved 2011 Omnibus Stock and Performance Incentive Plan. Determination of whether the criteria are met is made by the HRCC after the end of each performance period. While this design is intended to preserve deductibility, the Committee reserves the right to grant non-deductible compensation and there is no guarantee that compensation payable pursuant to any of the Company’s compensation programs will ultimately be deductible.

 

48   ConocoPhillips 2014 Proxy Statement


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2013 Executive Compensation Analysis and Results

 

The following is a discussion and analysis of the decisions of the HRCC in compensating our Named Executive Officers in 2013.

In determining performance-based compensation awards for our Named Executive Officers for performance periods concluding in 2013, the HRCC began by considering overall Company performance. The Committee then

considered any adjustments to the awards under our three performance-based compensation programs (VCIP, PSP and Stock Option Program) in accordance with their terms and pre-established criteria, as the Committee retains the discretion to adjust awards based on its determination of appropriate payouts. As a result, the Committee made the following award decisions under the Company’s performance-based compensation programs.

 

 

Annual Incentive: 2013 Variable Cash Incentive Program (VCIP)

 

The VCIP payout is calculated using the following formula for all Senior Officers, subject to HRCC approval and discretion to set the award:

 

                     
ELIGIBLE EARNINGS   X  

TARGET PERCENTAGE

FOR THE SALARY

GRADE

  X   (   50% OF CORPORATE PERFORMANCE ADJUSTMENT   +   50% OF AWARD UNIT PERFORMANCE ADJUSTMENT   )   +   ANY INDIVIDUAL PERFORMANCE ADJUSTMENT

Corporate Performance

The VCIP program is designed to incentivize all employees worldwide to execute their duties in a way which achieves the Company’s approved strategy. The Company identified the following as the key priorities to achieve our strategy:

 

 

Maintain a relentless focus on safety and execution;

 

Offer a compelling dividend;

 

Deliver 3 to 5 percent compound annual production growth;

 

Deliver 3 to 5 percent compound annual cash margin growth; and

 

Achieve ongoing improvements in financial returns.

At the beginning of 2013, the Committee approved five corporate performance measures (Total Shareholder Return, Operational, Financial, Strategic Plan and Initiatives and Health, Safety and Environmental (“HSE)) by which it would judge performance. Each of the performance measures was given equal weight. Total Shareholder Return relative to peers is included to keep all employees focused on the importance of returns to stockholders. The metrics for Operational and Financial were those needed to deliver on our strategy of both 3 to 5 percent compound annual production and cash margin growth. The metrics for Strategic Plan and Initiatives included execution of key asset sales as well as establishing the culture needed to attract and retain the skills necessary to execute our work program. The metrics for HSE included both absolute metrics for employees and contractors and relative metrics to peers as well as metrics for environmental and process safety performance.

In determining award payouts under VCIP in 2013, the Committee met four times with management to review progress and performance against the measures and the approved metrics. The Committee considered the following quantitative and qualitative performance measures and made the following payout decisions:

 

Weights and Goals       Results         
~ 20% Total Shareholder Return (“TSR”)   ®   Ranked first in full-year TSR relative to our 10 performance peers (calculated using 20 day average share price).   ®    200%

~ 20% Operational

Production

Capital

Operating & Overhead

Direct Operating Efficiency

Reserve Replacement Ratio

Exploration Milestones

  ®   Produced 1,545 thousand barrels of oil equivalent per day (MBOED), achieving our production target despite five months of curtailed production from Libya; Exceeded direct operating efficiency target; Achieved a 179 percent organic reserve replacement ratio from reserve additions of approximately 1.1 billion barrels of oil equivalent (BBOE), exceeding our target; Grew year-end 2013 reserves 3 percent to 8.9 BBOE; Exceeded exploration target with continued growth in our exploration program, including three successes in the deepwater Gulf of Mexico.   ®    155%

~ 20% Financial

ROCE

CROCE

Cash/Net Income Margin

  ®   Exceeded all absolute targets; First in performance peer group relative percent cash margin improvement with cash margins improved 9 percent year over year based on normalized prices; Second in performance peer group relative percent net income margin improvement.   ®    180%

~ 20% Strategic Plan

Asset Sales

Culture Enhancement (collaboration and retention)

Organizational and Functional Excellence

Policies/Controls

Stakeholder Relationships

  ®   Completed non-core asset dispositions that generated $10.2 billion in proceeds; Increased dividend by 4.5 percent; Expanded workforce and enhanced skills and capabilities to meet significant talent demands needed to support growth with successful staffing initiatives; Reduced attrition, including Petrotech skills.   ®    200%

~ 20% Health, Safety and Environmental (“HSE”)

Total Recordable Rate

Lost Workday Rate

Process Safety

  ®   Achieved world-class safety performance, best-in-class employee rates (Total Employee Recordable Rate of 0.09) and recognized safety industry leader. Despite this performance, the Committee exercised negative discretion on this metric to reflect improvements it believes are needed in overall HSE performance.   ®    90%
    Corporate Payout 165%     

This compared with VCIP corporate performance for the prior six periods ranging from 70% to 180%.

Organic reserve replacement ratio excludes sales and purchases.

Production includes continuing and discontinued operations.

Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap.

 

ConocoPhillips 2014 Proxy Statement   49


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Award Unit Performance

The award units were subject to the following metrics:

 

 

Operating Award Units – 30% Production, 30% Unit Cost, 25% Milestones/Strategic Corporate Initiatives and 15% HSE

 

 

Non-Operating Award Units – 60% Milestones/Strategic Corporate Initiatives, 15% Unit Cost, 10% Production and 15% HSE

 

Staff – 65% – 75% Milestones/Strategic Corporate Initiatives, 20% Award Unit Average and 5%—15% HSE

The Committee approved an average award unit payout of 141.4% of target for each of our Named Executive Officers. Award unit performance payouts for our 43 award units ranged from 70% to 180% in 2013.

 

 

Individual Performance Adjustments

 

Finally, the Committee considered individual adjustments for each Named Executive Officer’s 2013 VCIP award based upon a subjective review of the individual’s impact on the Company’s financial and operational success during the year. The Committee considered the totality of the executive’s performance in deciding the individual adjustments. Based on the foregoing,

the Committee approved individual performance adjustments of between 10% and 20% for each of our Named Executive Officers. The individual adjustments for these officers reflect the Committee’s recognition of these individuals’ contributions to the strong 2013 operational performance of their respective operating or staff units.

 

 

Long-Term Incentive: Performance Share Program (PSP)

 

In connection with the spinoff of Phillips 66 in 2012, we concluded two performance periods in progress under our PSP earlier than had been anticipated at the establishment of the regularly scheduled three-year performance periods. We settled a pro rata portion of the PSP awards based on pre-spin performance and established new performance periods that began following the spinoff as shown in the diagram below:

 

LOGO

For PSP IX, while the normal program timing would have provided for a payout at the end of the 36 month performance period, the truncation of the program resulted in a pro rata portion of PSP IX being paid in 2012. However, the truncation also meant that only the balance of the program was paid out in 2014. In 2012, the Committee approved new performance periods and performance metrics for PSP IX Tail running from May 2012 – December 2013 and for PSP X running from May 2012 – December 2014 (the HRCC delayed the commencement of this performance period until after the spinoff, however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012).

Corporate Performance

In determining award payouts under PSP IX Tail, the Committee met four times with management to review progress and performance against the measures and the approved metrics. The Committee considered the following quantitative and qualitative performance measures and made the following payout decisions:

 

Weights and Goals

       Results         
~ 40% Total Shareholder Return   ®    Ranked first in TSR during the performance period relative to our 10 performance peers (calculated using 20 day average share price).   ®    200%

~ 40% Operational/Financial

HSE

Production

Reserve Replacement Ratio

Cash Margins

ROCE/CROCE

Production per Debt Adjusted Share

  ®    Achieved world-class safety performance, best-in-class employee rates (Total Recordable Rate of 0.12) and recognized safety industry leader; Achieved strategic goal of 3 to 5 percent compound annual production growth; Achieved a 167 percent organic reserve replacement ratio (2-year average); Achieved financial metrics.   ®    125%

~ 20% Strategic Plan

Culture, Organization, Governance, Diversity, Opportunity Capture, Reputation, Relationships, Policies/Controls, Asset Sales

  ®    Successfully completed the spinoff of Phillips 66 and established an independent ConocoPhillips; Successfully progressed strategy to deliver both 3 to 5 percent compound annual production and cash margin growth; Completed non-core asset dispositions that generated $12.4 billion in combined proceeds for 2012 and 2013; Increased dividend by 4.5 percent; Met significant talent demands needed to support growth; Reduced attrition, including Petrotech skills.   ®    195%
     Corporate Payout 170%     

 

This compared with three-year performance under PSP for the prior six periods ranging from 60% to 180%.

    

 

50   ConocoPhillips 2014 Proxy Statement


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Individual Performance Adjustments

With respect to individual adjustments, similar to the 2013 VCIP program, the Committee considered PSP individual adjustments for each Named Executive Officer in recognition of the individual’s personal leadership and contribution to the Company’s financial and operational success over the performance period. Based on the foregoing, the Committee approved individual performance adjustments of between 10% and 17.5% for such Named Executive Officers. The HRCC limited each payout so that no executive received more than 200% of the prorated target award.

Long-Term Incentive: 2013 Stock Option Awards

 

 

Although the Committee retains discretion to adjust stock option awards by up to 30 percent from the specified target, the Committee did not elect to exercise such discretion with respect to the stock option awards granted in

February 2013. All awards under the Stock Option Program for 2013 were made at target.

 

 

2014 Target Compensation

 

In addition to determining the 2013 compensation payouts, the HRCC established the targets for 2014 compensation for our Named Executive Officers under our four primary compensation programs. As discussed under “Components of Executive Compensation” beginning on page 42, with the exception of salary, the targeted amounts shown below are performance-based and, therefore, actual amounts received under such programs, if any, may differ from these targets.

 

Name    Salary      2014 VCIP
Target Value
     2014 Stock
Option Award
Target Value
    

PSP XII

(2014-2016)
Target Value

     Total 2014
Target
Compensation
 

R.M. Lance

   $ 1,700,000       $ 2,720,000       $ 5,790,000       $ 5,790,000       $ 16,000,000   

J.W. Sheets

     888,000         888,000         1,731,600         1,731,600         5,239,200   

M.J. Fox

     1,241,000         1,427,150         2,730,200         2,730,200         8,128,550   

A.J. Hirshberg

     1,096,000         1,260,400         2,016,301         2,389,185         6,761,886   

D.E. Wallette

     874,000         874,000         1,704,300         1,704,300         5,156,600   

Other Executive Compensation and Benefits

Other Compensation and Personal Benefits

 

In addition to our four primary compensation programs, we provide our Named Executive Officers a limited number of additional benefits as described below. In order to provide a competitive package of compensation and benefits, we provide our Named Executive Officers with executive life insurance coverage and nonqualified benefit plans. We also provide other benefits that are designed primarily to promote a healthy work/life balance, to provide opportunities for developing business relationships, and to put a human face on our social responsibility programs. All such programs are approved by the HRCC.

 

 

Comprehensive Security Program—Because our executives face personal safety risks in their roles as representatives of a global E&P company, our Board of Directors has adopted a comprehensive security program for our executives.

 

 

Personal Entertainment—We purchase tickets to various cultural, charitable, civic, entertainment, and sporting events for business development and relationship-building purposes, as well as to maintain our involvement in communities in which the Company operates. Occasionally, our employees, including our executives, make personal use of tickets that would not otherwise be used for business purposes. We believe these tickets offer an opportunity to expand the Company’s networks at a very low or no incremental cost to the Company.

 

 

Tax Gross-Ups—Certain of the personal benefits received by our executives are deemed by the Internal Revenue Service to be taxable income to the individual. When we determine that such income is incurred for purposes more properly characterized as Company business than personal benefit, we provide further payments to the executive to reimburse the cost of the inclusion of such item in the executive’s taxable income. Most often, these tax gross-up payments are provided for travel by a family member or other personal guest to attend a meeting or function in furtherance of Company business, such as Board meetings, company-sponsored events, and industry and association meetings where spouses or other guests are invited or expected to attend.

 

Executive Life Insurance—We provide life insurance policies and/or death benefits for all of our U.S.-based salaried employees (at no cost to the employee) with a face value approximately equal to the employee’s annual salary. For each of our executives, we maintain an additional life insurance policy (at no cost to the executive) with a value equal to his or her annual salary. In addition to these two plans, we also provide our executives the option of purchasing group variable universal life insurance in an amount up to eight times their annual salaries. We believe this is a benefit valued by our executives that can be provided at no cost to the Company.

 

 

Defined Contribution Plans—We maintain the following nonqualified defined contribution plans for our executives. These plans allow deferred amounts to grow tax-free until distributed, while enabling the Company to utilize the money for the duration of the deferral period for general corporate purposes.

 

 

Voluntary Deferred Compensation Plans—The purpose of our voluntary nonqualified deferred compensation plans is to allow executives to defer a portion of their salary and annual incentive compensation so that such amounts are taxable in the year in which distributions are made.

 

 

Make-Up Plans—The purpose of our nonqualified defined contribution make-up plans is to provide benefits that an executive would otherwise lose due to limitations imposed by the Internal Revenue Code on qualified plans.

 

 

Defined Benefit Plans—We also maintain nonqualified defined benefit plans for our executives. The primary purpose of these plans is to provide benefits that an executive would otherwise lose due to limitations imposed by the Internal Revenue Code on qualified plans. With regard to our Named Executive Officers, the only such arrangement under which they are entitled to benefits of this type is the Key Employee Supplemental Retirement Plan (“KESRP”). The two such limitations that most frequently impact the benefits to employees are the limit on compensation that can be taken into account in determining benefit accruals and the maximum annual pension benefit. In 2013, the former limit was set at $255,000, while the latter was set at

 

 

ConocoPhillips 2014 Proxy Statement   51


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$205,000. The KESRP determines a benefit without regard to such limits, and then reduces that benefit by the amount of benefit payable from the related qualified plan, the ConocoPhillips Retirement Plan. Thus, in operation the combined benefits payable from the related plans for the eligible employee equal the benefit that would have been paid if there had been no limitations

   

imposed by the Internal Revenue Code. This design is common among our competitors and we believe the lack of such a plan would put the Company at a disadvantage in attracting and retaining talented executives. Further information on the KESRP is provided in the Pension Benefits narrative, table and notes beginning on page 60.

 

 

Severance Plans and Changes in Control

 

 

We maintain plans to address severance of our executives in certain circumstances as described under the heading “Executive Severance and Changes in Control” beginning on page 63. The structure and use of these plans are competitive within the industry and are intended to aid the Company in attracting and retaining executives. Under each of our severance and change in control plans, the executive must terminate from service with the Company in order to receive severance pay. Furthermore, after the repositioning, the HRCC approved an amendment to the change in control severance plan to limit to executives who had been participants in the plan prior to the repositioning any payment of excise tax gross-ups under the plan and to make executives who began participation in the plan after the repositioning ineligible for excise tax gross-ups under the plan. The HRCC chose to grandfather this provision for existing participants because, in the event of a change in control, the provisions of our long-term incentive pay

through performance share units prior to the repositioning left those participants with the potential of a large excise tax due to the program design. The HRCC determined that it would be unfair should this burden suddenly be shifted to the participants. The post-spin design of PSP to use periodic cash payouts reduced the potential impact to participants and, therefore, the HRCC chose to no longer provide excise tax gross-ups in the event of a change in control to new participants. At its December 2013 meeting, the HRCC further amended the change in control severance plan to limit single trigger vesting of equity awards to awards not assumed by an acquirer and for program periods that began prior to 2014. Awards assumed by an acquirer made with regard to later program periods under PSP or the Stock Option Program will only vest upon the occurrence of both a change in control event and termination of employment of the employee (usually called a “double trigger”).

 

 

Broadly Available Plans

 

Our Named Executive Officers are eligible to participate in the same basic benefits package as our other U.S. salaried employees. This includes expatriate benefits, relocation services, and retirement, medical, dental, vision, life insurance, and accident insurance plans, as well as flexible spending arrangements for health care and dependent care expenses.

Executive Compensation Governance

Alignment of Interests—Stock Ownership and Holding Requirements

 

 

We place a premium on aligning the interests of executives with those of our stockholders. Our Stock Ownership Guidelines require executives to own stock and/or have an interest in restricted stock units valued at a multiple of base salary, ranging from 1.8 times salary for lower-level executives to six times salary for the CEO. Employees have five years from the date they become subject to these guidelines to comply. Holdings counted toward the guidelines include: (1) shares of stock owned individually or jointly, or in trusts controlled by the employee; (2) restricted stock and restricted stock units; (3) shares owned in qualified savings or stock ownership plans; (4) stock or units in nonqualified deferred compensation plans, whether vested or not and

(5) annual Performance Share Program target awards when approved by the Human Resources and Compensation Committee. Employees subject to the guidelines who have not reached the required level of stock ownership are expected to hold shares received upon vesting or earn-out of restricted stock, restricted stock units or performance shares (net of shares for taxes), and shares received upon exercise of stock options (net of shares tendered or withheld for payment of exercise price and shares for taxes), so that they meet their requirement in a timely manner. The multiple of equity held by each of our Named Executive Officers currently exceeds our established guidelines for his or her position.

 

 

Clawback Policy

 

 

In October 2012, the Committee approved a clawback policy providing that the Company shall recoup any incentive compensation (cash or equity) paid or payable to any executive by the Company to the extent such recoupment is required or contemplated by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley Act, or any other applicable law or listing standards, which allows the Board to recoup compensation paid in the event of certain business circumstances, including a financial restatement. This policy operates in addition to provisions already contained in our award documents supporting grants under PSP, the Stock Option Program, and other compensatory programs using Company equity pursuant to which we can suspend rights to

exercise, refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine is detrimental to the Company, including acts of misconduct, such as embezzlement, fraud, theft or disclosure of confidential information, or other acts that harm our business, reputation, or employees, as well as misconduct resulting in the Company having to prepare an accounting restatement. Once final rules are released regarding clawback requirements under the Dodd-Frank Act, we intend to review our policies and plans and, if necessary, amend them to comply with the new mandates. To date, no Named Executive Officers have been subject to reductions or withdrawals of prior grants or payouts of restricted stock, restricted stock units, or stock option awards.

 

 

52   ConocoPhillips 2014 Proxy Statement


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Anti-Hedging and Anti-Pledging

 

The Company has a policy that prohibits our directors and executives from hedging or trading in derivatives of the Company’s stock. This policy was amended in 2013 to include a prohibition against pledging of company stock by directors or executives. This policy, together with the Stock Ownership Guidelines discussed above, helps to assure that our Named Executive Officers and other Senior Officers remain subject to the risks, as well as the rewards, of stock ownership.

Equity Grant Practices

 

 

When the Committee grants Performance Share Units, options, or other equity grants to its Named Executive Officers, the Committee uses an average of the stock’s high and low prices on the date of grant (or the preceding business day, if the markets are closed on the date of grant) to determine the value of the units or the exercise price of the options or other equity. Grants of

Performance Share Units and option grants are generally made at the HRCC’s February meeting (the date of which is determined at least a year in advance) or, in the case of new hires, on the date of commencement of employment or the date of Committee approval, whichever is later.

 

 

Statutory and Regulatory Considerations

 

In designing our compensatory programs, we take into account the various tax, accounting and disclosure rules associated with various forms of compensation. The HRCC also reviews and considers the deductibility of executive compensation under section 162(m) of the Internal Revenue Code and designs its deferred compensation programs with the intent that they comply with section 409A of the Internal Revenue Code. The Committee generally seeks to preserve tax deductions for executive compensation. Nonetheless, the Committee has awarded compensation that is not fully tax deductible when it believes such grants are in the best interests of our stockholders and reserves the right to do so in the future. There is no guarantee that compensation payable pursuant to any of the Company’s compensation programs will ultimately be deductible by the Company.

 

ConocoPhillips 2014 Proxy Statement   53


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EXECUTIVE COMPENSATION TABLES

 

The following tables and accompanying narrative disclosures provide information concerning total compensation paid to the Chief Executive Officer and certain other officers of ConocoPhillips (the “Named Executive Officers”). Please also see our discussion of the relationship between the

Compensation Discussion and Analysis” to these tables under “2013 Executive Compensation Analysis and Results” beginning on page 49. The data presented in the tables that follow include amounts paid to the Named Executive Officers by ConocoPhillips or any of its subsidiaries for 2013.

 

 

Summary Compensation Table

 

The Summary Compensation Table below reflects amounts earned with respect to 2013 and performance periods ending in 2013. We also provide 2014 target compensation for Named Executive Officers on page 51. We have excluded arrangements that are generally available to our U.S.-based salaried employees, such as our medical, dental, life and accident insurance, disability, and health savings and flexible spending account arrangements, since all of our Named Executive Officers are U.S.-based salaried employees. Based on the salary and total compensation amounts for Named Executive Officers for 2013 shown in the table below, salary accounted for approximately 16% of the total

compensation of the Named Executive Officers and incentive compensation programs (stock awards, option awards, and non-equity incentive plan compensation) accounted for approximately 84%. For the CEO in 2013, salary accounted for approximately 11% of his total compensation and incentive compensation programs accounted for approximately 89% of his total compensation. These numbers reflect the emphasis placed by the Company on performance-based pay.

 

 

 

Name and Principal

Position

  Year      Salary ($)(1)     

Bonus

($)(2)

    

Stock

Awards ($)(3)

    

Option

Awards

($)(4)

    

Non-

Equity
Incentive

Plan
Compensation

($)(5)

    

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings

($)(6)

    

All

Other
Compensation

($)(7)

    

Total

($)

 

R.M. Lance

Chairman and CEO

    2013       $   1,666,667       $ -       $ 6,791,925       $   5,790,510       $ 4,618,667       $ 3,584,523       $ 985,123       $   23,437,415   
    2012         1,258,667         -         11,340,952         1,281,873         2,476,200         2,567,068         362,458         19,287,218   
      2011         750,500         -         1,361,687         1,197,390         979,875         1,473,776         152,223         5,915,451   

J.W. Sheets

Executive Vice President,

Finance, and CFO

    2013         880,933            1,735,819         1,480,050         1,351,422         1,629,147         152,148         7,229,520   
    2012         705,200         -         2,014,063         1,007,298         951,818         2,218,402         103,143         6,999,924   
    2011         619,500         -         1,451,661         729,790         784,132         1,473,218         87,404         5,145,705   

M.J. Fox

Executive Vice President,

Exploration & Production

    2013         1,227,533            2,823,958         2,407,680         2,002,770         342,287         211,184         9,015,413   
    2012         858,347         1,600,000         10,714,198         797,052         1,225,684         463,211         166,670         15,825,162   
    2011         -         -         -         -         -         -         -         -   

A.J. Hirshberg

Executive Vice President,

Technology & Projects

    2013         1,025,833            2,022,024         1,724,580         1,621,925         195,369         205,554         6,795,286   
    2012         909,000         -         2,838,884         1,281,873         1,211,964         1,571,923         141,549         7,955,193   
    2011         750,500         -         1,361,687         1,197,390         1,039,990         5,407,899         176,618         9,934,084   

D.E. Wallette, Jr.

Executive Vice President,

Commercial, Business

Development &

Corporate Planning

 

    2013         814,050            1,747,530         1,272,150         1,260,717         2,830,080         857,701         8,782,228   
    2012         617,150         -         2,725,364         516,201         823,513         1,777,876         776,532         7,236,636   
    2011         -         -         -         -         -         -         -         -   
                                                                               
 (1)  

Includes any amounts that were voluntarily deferred under the Company’s Key Employee Deferred Compensation Plan.

 

 (2)  

Because our primary short-term incentive compensation arrangement for salaried employees (the “Variable Cash Incentive Program” or “VCIP”) has mandatory performance measures that must be achieved before there is any payout to Named Executive Officers, amounts paid under VCIP are shown in the Non-Equity Incentive Plan Compensation column of the table, rather than the Bonus column. As an inducement to his employment, the HRCC approved a bonus payment to Mr. Fox of $1,600,000 upon his employment on January 1, 2012.

 

 (3)  

Amounts shown represent the aggregate grant date fair value of awards made under the Performance Share Program (“PSP”) during each of the years indicated, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 19 in the Notes to Consolidated Financial Statements in the Company’s 2013 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination.

 

      

The amounts shown for stock awards are from our PSP or for off-cycle awards. No off-cycle awards were granted to any of the Named Executive Officers during 2011 and 2013. The amounts shown for awards from PSP relate to the respective three-year performance periods that began in each of the years presented. Performance periods under PSP generally cover a three-year period and, as a new performance period has begun each year since the program commenced, there are three overlapping performance periods ongoing at any time.

 

      

Due to the spinoff in 2012, two ongoing performance periods (PSP VIII for the performance period January 2010 – December 2012 and PSP IX for the performance period January 2011 – December 2013) were terminated early and paid out on a pro rata basis. The performance program for the January 2012 – December 2014 period (PSP X) as well as the remaining prorated targets in the two performance program periods that were terminated early (PSP VIII for the performance period May 2012 – December 2012 and PSP IX for the performance period May 2012 – December 2013) were approved by the HRCC post-spin. Only promotional incremental targets associated with the post-spin PSP VIII and IX program periods for previously reported NEOs are included in the Stock Awards amount; for new NEO’s the full target is reported. For the 2013 PSP XI for the performance period January 2013 – December 2015, the full initial target as well as any promotional incremental targets are included in the Stock Awards amounts for all NEOs. Targets set for PSP VIII for the performance period May 2012 – December 2012, due to its short nature, paid out at target.

 

      

Amounts shown are targets set for awards for each year since it is most probable at the setting of the target for the applicable performance periods that targets will be achieved. If payout was made at maximum levels for company performance and excluding any individual adjustments, the amounts shown would double from the targets shown, although the value of the actual payout would be dependent upon the stock price at the time of the payout. If payout was made at minimum levels, the amounts would be reduced to zero. No adjustment is made to the target shown for prior years based upon any change in probability subsequent to the time the target is set. Changes to targets resulting from promotion or demotion of a Named Executive Officer are shown as awards in the year of the promotion or demotion, even though the awards may relate to a program period that began in an earlier year.

 

54   ConocoPhillips 2014 Proxy Statement


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Actual payouts with regard to the remaining targets for PSP IX (May 2012 – December 2013, after the pro rata payout for January 2011 – April 2012), were approved by the HRCC at its February 2014 meeting, at which the Committee determined the payouts to be made to Senior Officers (including the Named Executive Officers) for the performance period that began in May 2012 and ended in December 2013. Those payouts were as follows (with values shown at fair market value on the date of payout): Mr. Lance, $7,713,702; Mr. Sheets, $1,980,321; Mr. Fox, $3,246,376; Mr. Hirshberg, $2,508,673; and Mr. Wallette, $1,803,637.

 

      

Historically, awards under PSP were settled in restricted stock or restricted stock units that will generally be forfeited if the employee is terminated prior to the end of the escrow period set in the award (except in the cases of termination due to death, layoff, or retirement, or after disability or a change in control). For target awards for program periods beginning in 2008 and earlier, the escrow period lasts until separation from service, except in the cases of termination due to death, layoff, or retirement, or after disability or a change in control, when the escrow period ends at the exceptional termination event. For target awards for program periods beginning in 2009 and later, the escrow period lasts five years from the settlement of the award (which would be more than eight years after the beginning of the program period, when measured including the performance period) unless the employee makes an election prior to the beginning of the program period to have the escrow period last until separation from service instead; except that in the cases of termination due to death, layoff, or retirement, or after disability or a change in control, the escrow period ends at the exceptional termination event. In the event of termination due to layoff or retirement after age 55 with five years of service, a value for the forfeited restricted stock or restricted stock units will generally be credited to a deferred compensation account for the employee for awards made prior to 2005; for later awards, restrictions lapse in the event of termination due to layoff or early retirement after age 55 with five years of service, unless the employee has elected to defer receipt of the stock until a later time. For programs beginning in 2012 and later, settlement will be made in cash rather than unrestricted shares.

 

      

Mr. Fox became an employee of ConocoPhillips on January 1, 2012. As an inducement to his employment, the HRCC approved the grant of 60,311 restricted stock units (valued at $4,399,989), effective on the date of employment, the restrictions on which lapse as to one-half of the units on the fourth anniversary of his employment, while the remainder lapse on the fifth anniversary of his employment. Termination for any reason other than layoff, death, or disability results in forfeiture to the extent the award is not vested.

 

      

On May 8, 2012, each Named Executive Officer who remained an active employee of the Company received grants during the year to reflect his or her increased duties and responsibilities. These awards were made as restricted stock units, used in lieu of stock options. The number of units and aggregate grant date fair value were as follows: Mr. Lance, 46,100 units, $2,471,421; Mr. Sheets, 1,908 units, $102,288; Mr. Fox, 10,703 units, $573,788; Mr. Hirshberg, 10,703 units, $573,788; and Mr. Wallette, 6,109 units, $327,503. The restrictions lapse on the third anniversary of the grant date. Termination for any reason other than retirement or layoff at least six months after the grant date, death, or disability results in forfeiture to the extent the award is not vested. A layoff between six months and one year from the grant date results in a pro-rated award. For Mr. Fox, an additional grant of 20,518 units (valued at $1,099,970) was made to provide value for certain compensation forgone due to his termination from his prior employer. The restrictions lapse on the third anniversary of the grant date. Termination for any reason other than layoff, death, or disability results in forfeiture to the extent the award is not vested.

 

 (4)  

Amounts represent the dollar amount recognized as the aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 19 in the Notes to Consolidated Financial Statements in the Company’s 2013 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. All such options were awarded under the Company’s Stock Option Program. Options awarded to Named Executive Officers under that program generally vest in three equal annual installments beginning with the first anniversary from the date of grant and expire ten years after the date of grant. However, if a Named Executive Officer has attained the early retirement age of 55 with five years of service, the value of the options granted is taken in the year of grant or over the number of months until the executive attains age 55 with five years of service.

 

      

Option awards are made in February of each year at a regularly-scheduled meeting of the HRCC. Occasionally, option awards may be made at other times, such as upon the commencement of employment of an individual. In determining the number of shares to be subject to these option grants, the HRCC uses a Black-Scholes-Merton-based methodology to value the options.

 

 (5)  

Includes amounts paid under VCIP and amounts that were voluntarily deferred to the Company’s Key Employee Deferred Compensation Plan. See also note 2 above.

 

 (6)  

Amounts represent the actuarial increase in the present value of the Named Executive Officer’s benefits under all pension plans maintained by the Company determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. Interest rate assumption changes have a significant impact on the pension values with periods of lower interest rates having the effect of increasing the actuarial values reported and vice versa.

 

 (7)  

As discussed in Compensation Discussion and Analysis beginning on page 39 of this proxy statement, ConocoPhillips provides its executives with a number of compensation and benefit arrangements. The tables below reflect amounts earned under those arrangements. We have excluded arrangements that are generally available to our U.S.-based salaried employees, such as our medical, dental, life and accident insurance, disability, and health savings and flexible spending account arrangements, since all of our Named Executive Officers are U.S.-based salaried employees. Certain of the amounts reflected below were paid in local currencies for Named Executive Officers with foreign compensation, which we value in this table in U.S. dollars using a monthly currency valuation for the month in which costs were incurred. All Other Compensation includes the following amounts, which were determined using actual cost paid by the Company unless otherwise noted:

 

Name         

Personal
Use of
  Company
Aircraft(a)

($)

   

Home
  Security(b)

($)

   

Executive
Group Life
Insurance
  Premiums(c)

($)

   

Tax
  Reimbur-
sement
Gross-
Up(d)

($)

   

Relo-
cation(e)

($)

   

Expa-
triate(f)

($)

   

Meeting
Presentations &
Meeting Travel
Reimbursement(g)

($)

   

Matching

Gift
  Program(h)

($)

   

Matching
  Contributions
Under the
Tax-Qualified
Savings Plans(i)

($)

   

Company
   Contributions
to
Nonqualified
Defined
Contribution
Plans(j)

($)

 
R.M. Lance     2013      $ 330,869      $ 94,591      $ 4,600      $ 14,151      $ -      $ 305,108      $ 1,665      $ -      $ 22,950      $ 211,188   
    2012        91,048        29,507        3,474        6,752        -        97,780        752        15,500        31,671        85,974   
      2011        -        -        1,351        8,199        -        51,000        -        200        32,372        59,101   
J.W. Sheets     2013        -        -        4,546        9,580        -        -        1,665        15,000        22,950        98,408   
    2012        -        -        1,946        5,761        -        -        -        15,000        31,619        48,817   
      2011        -        -        1,710        5,213        -        -        -        13,500        32,255        34,726   
M.J. Fox     2013        -        -        3,388        35,206        -        -        6,350        4,000        17,403        144,837   
    2012        -        -        2,369        19,575        91,525        -        -        6,000        28,580        18,621   
      2011        -        -        -        -        -        -        -        -        -        -   
A.J. Hirshberg     2013        -        -        2,831        25,748        -        -        1,665        29,500        21,184        124,626   
    2012        -        -        2,509        34,705        -        -        -        1,475        31,671        71,189   
      2011        -        -        2,072        5,338        113,761        -        -        2,700        32,372        20,375   
D.E. Wallette     2013        -        -        4,201        1,827        -        745,349        1,665        -        20,753        83,907   
    2012        -        -        1,703        669        103,290        613,085        -        -        31,478        26,307   
      2011        -        -        -        -        -        -        -        -        -        -   
   (a)  

Upon Mr. Lance becoming the CEO, the Company’s Comprehensive Security Program required that Mr. Lance fly on Company aircraft, unless the Manager of Global Security determines that other arrangements represent an acceptable risk. Amounts in this column represent the approximate incremental cost to ConocoPhillips for personal use of the aircraft, including travel for any family member or guest. Approximate incremental cost has been determined by calculating the variable costs for each aircraft during the year, dividing that amount by the total number of miles flown by that aircraft, and multiplying the result by the miles flown for personal use during the year. However, where there were identifiable costs related to a particular trip—such as airport landing fees or food and lodging for aircraft personnel who remained at the location of the personal trip—those amounts are separately determined and included in the table above. The amounts shown include incremental costs reported associated with flights to the Company hangar or other locations without passengers (commonly referred to as “deadhead” flights) which related to the non-business use of the aircraft by a Named Executive Officer.

 

   (b)  

The use of a home security system is required as part of ConocoPhillips’ Comprehensive Security Program for certain executives and employees, including the Named Executive Officers, based on risk assessments made by the Company’s Manager of Global Security. Amounts shown represent the approximate incremental cost to

 

ConocoPhillips 2014 Proxy Statement   55


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ConocoPhillips for the installation and maintenance of the home security system with features required by the Company in excess of the cost of a “standard” system typical for homes in the neighborhoods where the Named Executive Officers’ homes are located. The Named Executive Officer pays the cost of the “standard” system himself.

 

 

  (c)  

The amounts shown are for premiums paid by the Company for executive group life insurance provided by the Company, with a value equal to the employee’s annual salary. In addition, certain employees of the Company, including the Named Executive Officers, are eligible to purchase group variable universal life insurance policies for which the employee pays all costs, at no incremental cost to the Company.

 

 

  (d)  

The amounts shown are for payments by the Company relating to certain taxes incurred by the employee. These taxes arise primarily when the Company requests family members or other guests to accompany the employee to Company functions and, as a result, the employee is deemed to make a personal use of Company assets (for example, when a spouse accompanies an employee on a Company aircraft) or when a retirement presentation is made to an employee. The Company believes that such travel is appropriately characterized as a business expense and, if the employee has imputed income in accordance with the applicable tax laws, the Company will generally reimburse the employee for any increased tax costs.

 

 

  (e)  

These amounts reflect relocation expenses approved by the HRCC in connection with the hiring of Messrs. Fox and Hirshberg. Mr. Wallette relocated from Singapore to our Houston office in connection with his appointment as Executive Vice President, Commercial, Business Development and Corporate Planning in 2012. The amounts were calculated pursuant to the standard relocation policy of the Company.

 

 

  (f)  

Messrs. Lance and Wallette were previously on assignment in Singapore, and Mr. Fox was previously on assignment in Canada related to service prior to his re-joining the company in January 2012. These amounts reflect net expatriate benefits under our standard policies for such service outside the United States, and these amounts include payments for increased tax costs related to such expatriate assignments and benefits. Amounts shown in the table above also reflect amended tax equalization and similar payments under our expatriate services policies that were made to and from, or on behalf of, the Named Executive Officer that were paid or received during 2013 but apply to earnings of prior years, but which were unknown or not capable of being estimated with any reasonable degree of accuracy in prior years. These amounts are returned to the Company when they are known or received through the tax reporting and filing process. Not included in the table are amounts less than $0 that primarily relate to tax amounts returned to the Company in the normal course of the expatriate tax protection process that may relate to a prior period. The amounts noted for Mr. Fox would have been ($158,707) in 2013.

 

 

  (g)  

The amounts in this column represent the cost of presentations made to employees and their spouses at Company meetings and reimbursements for the cost of spousal attendance at such meetings. The amounts shown reflect invoiced cost to the Company.

 

 

  (h)  

The Company maintains a Matching Gift Program under which certain gifts by employees to qualified educational or charitable institutions are matched. For executives, the program matches up to $15,000 with regard to each program year. Administration of the program can cause more than $15,000 to be paid in a single fiscal year of the Company, due to processing claims from more than one program year in that single fiscal year. The amounts shown are for the actual payments by the Company during the year.

 

 

  (i)  

Under the terms of its tax-qualified defined contribution plans, the Company makes matching contributions and allocations to the accounts of its eligible employees, including the Named Executive Officers.

 

 

  (j)  

Under the terms of its nonqualified defined contribution plans, the Company makes contributions to the accounts of its eligible employees, including the Named Executive Officers. See the narrative, table, and notes to the Nonqualified Deferred Compensation Table for further information.

 

 

56   ConocoPhillips 2014 Proxy Statement


Table of Contents

Grants of Plan-Based Awards Table

 

The Grants of Plan-Based Awards Table is used to show participation by the Named Executive Officers in the incentive compensation arrangements described below.

The columns under the heading Estimated Future Payouts Under Non-Equity Incentive Plan Awards show information regarding VCIP. The amounts shown in the table are those applicable to the 2013 program year using a minimum of zero and a maximum of 250 percent of VCIP target for each participant and do not represent actual payouts for that program year. Actual payouts for the 2013 program year were made in February 2014 and are shown in the Summary Compensation Table under the Non-Equity Incentive Plan Compensation column.

 

The columns under the heading Estimated Future Payouts Under Equity Incentive Plan Awards show information regarding PSP. The amounts shown in the table are those set for 2013 compensation tied to the 2013 through 2015 program period under PSP (PSP XI) and do not represent actual payouts for that program year. Amounts also include awards or adjustments made in 2013 due to hiring or promotion of Named Executive Officers.

The All Other Option Awards column reflects option awards granted under the Stock Option Program. The option awards shown were granted on the same day that the target was approved. For the 2013 program year under the Stock Option Program, targets were set and awards granted at the regularly scheduled February 2013 meeting of the HRCC.

 

 

         

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards(2)

       

Estimated Future Payouts

Under Equity

Incentive Plan Awards(3)

   

All Other
Stock Awards:
Number of
Shares of
Stock or Units

(#)

   

All Other
Option Awards:
Number of
Securities
Underlying
Options

(#)

   

Exercise or
Base Price
  Of Options
Awards
Average
Price

($Sh)(4)

   

Exercise or
Base Price
  Of Options
Awards
Closing
Price

($Sh)(5)

   

Grant
Date Fair
Value of
Stock and
Options
  Awards(6)

($)

 
Name  

Grant

Date(1)

      Threshold
($)
   

Target

($)

   

Maximum

($)

           Threshold
(#)
   

Target

(#)

    Maximum
(#)
                                    

R.M. Lance

    $ -      $ 2,666,667      $ 6,666,667          -        -        -        -        -      $ -      $ -      $ -   
    02/05/2013        -        -        -          -        -        -        -        584,900        58.07745        57.72        5,790,510   
      02/05/2013        -        -        -            -        116,946        233,892        -        -        -        -        6,791,925   

J.W. Sheets

      -        828,077        2,070,193          -        -        -        -        -        -        -        -   
    02/05/2013        -        -        -          -        -        -        -        149,500        58.07745        57.72        1,480,050   
      02/05/2013        -        -        -            -        29,888        59,776        -        -        -        -        1,735,819   

M.J. Fox

      -        1,190,707        2,976,769          -        -        -        -        -        -        -        -   
    02/05/2013        -        -        -          -        -        -        -        243,200        58.07745        57.72        2,407,680   
      02/05/2013        -        -        -            -        48,624        97,248        -        -        -        -        2,823,958   

A.J. Hirshberg

      -        964,283        2,410,709          -        -        -        -        -        -        -        -   
    02/05/2013        -        -        -          -        -        -        -        174,200        58.07745        57.72        1,724,580   
      02/05/2013        -        -        -            -        34,816        69,632        -        -        -        -        2,022,024   

D.E. Wallette Jr

      -        727,896        1,819,741          -        -        -        -        -        -        -        -   
    02/05/2013        -        -        -          -        -        -        -        128,500        58.07745        57.72        1,272,150   
    02/05/2013        -        -        -          -        25,688        51,376        -        -        -        -        1,491,894   
    12/05/2013        -        -        -          -        151        302        -        -        -        -        10,681   
    12/05/2013        -        -        -          -        1,931        3,862        -        -        -        -        136,589   
      12/05/2013        -        -        -            -        3,614        7,228        -        -        -        -        255,636   

 

 (1)  

The grant date shown is the date on which the HRCC approved the target awards.

 

 (2)  

Threshold and maximum awards are based on the program provisions under VCIP. Actual awards earned can range from zero to 200 percent of the target awards for corporate and award unit performance, with a further possible adjustment of up to 50 percent of the target awards for individual performance, although the HRCC has indicated that it does not expect to make an award that exceeds 200 percent of target. Amounts reflect estimated possible cash payouts under VCIP after the close of the performance period. The estimated amounts are calculated based on the applicable annual target and base salary for each Named Executive Officer in effect for the 2013 performance period. If threshold levels of performance are not met, then the payout can be zero. The HRCC also retains the authority to make awards under the program at its discretion, including awards greater than the maximum payout. Actual payouts under VCIP for 2013 are based on actual base salaries earned in 2013 and are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 54.

 

 (3)  

Threshold and maximum awards are based on the program provisions under the PSP. Actual awards earned can range from zero to 200 percent of the target awards. The HRCC retains the authority to make awards under the program at its discretion, including awards greater than the maximum payout. On February 5, 2013, the HRCC approved PSP XI, for the performance period from January 2013 to December 2015. The promotion approved for Mr. Wallette by the HRCC on December 5, 2013 and effective December 1, 2013 was, under the terms of PSP, taken into account in calculating the pro-rated increase to his target awards for the remaining performance period of PSP IX and the full performance periods for PSP X and PSP XI. Only the incremental promotional target units are shown for PSP IX and PSP X because the prior targets were previously disclosed as targets in 2012 under the stock awards column of the summary compensation table and would result in a double reporting if reported again in 2013. On July 10, 2012, the HRCC approved new programs for the remaining periods: 8 months for PSP VIII (May 2012 – December 2012), 20 months for PSP IX (May 2012- December 2013) and 36 months for PSP X (January 2012 – December 2014).

 

 (4)  

The exercise price is the average of the high and low prices of ConocoPhillips common stock, as reported on the NYSE, on the date of the grant (or on the last preceding date for which there was a reported sale, in the absence of any reported sales on the grant date). Accordingly, the option has no immediately realizable value on the grant date, and any potential payout reflects an increase in share price after the grant date. The Company’s stockholder-approved 2011 Omnibus Stock and Performance Incentive Plan provides for the use of such an average price in setting the exercise price on options, unless the HRCC directs otherwise. The immediate predecessor plans, the stockholder-approved 2004 and 2009 Omnibus Stock and Performance Incentive Plans, had the same provision. Grants made before May 13, 2009, were made under the 2004 Plan and grants made before May 11, 2011 but after May 12, 2009, were made under the 2009 Plan.

 

 (5)  

The closing price is the closing price of ConocoPhillips common stock, as reported on the NYSE, on the date of the grant.

 

 (6)  

For equity incentive plan awards, these amounts represent the grant date fair value at target level under PSP as determined pursuant to FASB ASC Topic 718. For option awards, these amounts represent the grant date fair value of the option awards using a Black-Scholes-Merton-based methodology to value the options. Actual value realized upon vesting of the PSP award or option exercise depends on market prices at the time of exercise. For other stock awards, these amounts represent the grant date fair value of the restricted stock or restricted stock unit awards determined pursuant to FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 19 in the Notes to Consolidated Financial Statements in the Company’s 2013 Annual Report on Form 10-K, for a discussion of the relevant assumptions used in this determination.

 

ConocoPhillips 2014 Proxy Statement   57


Table of Contents

Outstanding Equity Awards at Fiscal Year End

The Outstanding Equity Awards at Fiscal Year End Table is used to show equity awards measured in Company stock held by the Named Executive Officers.

 

     Option Awards(1)      Stock Awards(6)  
Name   

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable(2)

    

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

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

(#)

    

Option
Exercise
Price

($)

     Option
Expiration
Date
    

Number
of Shares
or Units of
Stock That
Have Not
Vested

(#)

   

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($)

    

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

(#)(12)

    

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

($)

 

R.M. Lance

     23,061         -        -       $ 45.05         02/10/2016         -      $ -         -       $ -   
     35,485         -        -         50.61         02/08/2017         -        -         -         -   
     44,896         -        -         60.53         02/14/2018         -        -         -         -   
     61,115         -        -         34.67         02/12/2019         -        -         -         -   
     98,949              36.90         02/12/2020              
     55,752         31,422 (3)      -         53.47         02/10/2021         -        -         -         -   
     35,032         70,066 (4)      -         54.80         02/09/2022         -        -         -         -   
     -         584,900 (5)         58.08         02/05/2023              
       -         -        -         -         -         356,229 (7)      25,023,306         211,914         14,885,899   

J.W. Sheets

     22,741         -        -         36.47         02/04/2015         -        -         -         -   
     15,746         -        -         45.05         02/10/2016         -        -         -         -   
     17,386         -        -         50.61         02/08/2017         -        -         -         -   
     17,127         -        -         60.53         02/14/2018         -        -         -         -   
     43,146         -        -         34.67         02/12/2019         -        -         -         -   
     46,578         -        -         36.90         02/12/2020         -        -         -         -