PRE 14A 1 crc-pre14a_20220504.htm PRE 14A crc-pre14a_20220504.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.         )

 

Filed by the Registrant

 

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

CALIFORNIA RESOURCES CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

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

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

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

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 

 


 

 

 

“Low Carbon Intensity Fuel for Today and Net Zero Fuel for The Future” California resources corporation 2022 proxy report and notice of annual meeting

 


 

California Resources Corporation

 

 

Letter to Shareholders from the Chair of the Board

 

 

 

 

Dear Shareholders,

I am proud of the progress and changes CRC made during 2021.  With a strengthened balance sheet, strong low-decline low carbon intensity assets, dedicated employees and an experienced management team operating under the direction of the new Board of Directors, CRC was able to demonstrate operational excellence and accomplish significant financial success.  

I am honored to have helped guide the Company as the Chair of CRC’s Board of Directors. The separation between the CEO and Chair roles demonstrated CRC’s strong governance commitment while the addition of several new directors enhanced the diversity of perspectives and skill sets on our Board. In 2021, we brought on three new Board members which provided us with significant experience in renewables, carbon capture, environmental, social and governance (ESG), as well as sustainability reporting. CRC is committed to its ESG goals and the company’s current assets are well positioned to help California reach its energy transition goals. This year, the Board unanimously approved a 2045 Full-Scope Net Zero Goal. The Company’s Sustainability Committee remains dedicated to supporting and guiding CRC down the path to reach this goal.

In 2022, CRC will not only remain dedicated to enhancing its sustainability initiatives but will also focus on maintaining its robust financial foundation through its base E&P business. The Company will continue to focus on core areas with strong margins that generate significant cash flow while continuing to emphasize cost reductions and operational excellence.  These cash flow generating assets will continue to help fund additional shareholder friendly initiatives, as well as the advancement of CRC’s Carbon Management Business and solar projects.

We believe we have a strong mix of diversity and experience among our current Board members, and we are always looking for ways to improve our governance structure, enhance our abilities and expand our horizons. We frequently review best practices, host annual reviews, and encourage feedback from our shareholders. Each member of the Board is up for re-election this year and we would encourage you to vote at or prior to our Annual Meeting on May 4, 2022.


 


 

 

On behalf of the entire Board, I thank you for your support and engagement.

Tiffany (TJ) Thom Cepak

Chair of the Board

California Resources Corporation

 

PLEASE NOTE:  This letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in our Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.  Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation and expressly disclaim any duty to correct or update any forward-looking statement, except as required by applicable law.

We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting. These disclosures speak only as of the date on which they are made, and we undertake no obligation and expressly disclaim any duty to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

 


 

 

 

California Resources Corporation

1 World Trade Center, Suite 1500 | Long Beach | California 90831

 

 

Notice of the 2022 Annual Meeting of Stockholders

 

 

Meeting Date:

May 4, 2022

 

 

Meeting Time:

11:00 a.m., Pacific Time

 

 

Location:

Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022

 

 

Record Date:

March 7, 2022

 

Purposes of the 2022 annual meeting of stockholders:

 

(1)

To elect the nine director nominees named in this proxy statement, each to a one-year term;

 

(2)

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022;

 

(3)

To hold an advisory vote to approve named executive officer compensation;

 

(4)

To approve the Employee Stock Purchase Plan;

 

(5a)

To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement; and

 

(5b)

To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement.

Information relevant to these matters is set forth in the accompanying proxy statement.

The close of business on March 7, 2022 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.

The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022.  You will not be able to attend the annual meeting physically.  If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement.  We have also provided information regarding how stockholders can engage during the Annual Meeting, including how they can vote, ask questions, request technical support and access information following the Annual Meeting within this proxy statement.

Beginning on March 22, 2022, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.

 


 

By Order of the Board of Directors,

Michael L. Preston

Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary

 


 

IMPORTANT VOTING INFORMATION

If you owned shares of our common stock at the close of business on March 7, 2022, you are entitled to one vote per share upon each matter presented at our 2022 annual meeting of stockholders to be held on May 4, 2022. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 7, 2022 to vote their shares at the 2022 annual meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.

If you hold shares in “street name,” unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2022, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be recognized, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.

YOUR VOTE IS IMPORTANT

Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.

QUESTIONS

If you have any questions about the proxy voting process, please contact Broadridge at (800) 579-1639. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-3731 or by e-mail at IR@crc.com.

ATTENDING THE ANNUAL MEETING

The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022.  You will not be able to attend the annual meeting physically.  If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement.

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF

PROXY MATERIALS FOR THE STOCKHOLDER MEETING

TO BE HELD ON MAY 4, 2022

 

The Notice of the 2022 Annual Meeting of Stockholders, the Proxy Statement for the 2022 Annual Meeting of Stockholders and the 2021 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2021) of California Resources Corporation are available at http://www.proxyvote.com.  You will need the 16-digit control number included on the Notice that was mailed to you, on your proxy card or on the instructions that accompanied your proxy materials.

 

 

 


 

2022 PROXY STATEMENT 

TABLE OF CONTENTS 

 

 

Table of Contents

Notice of the 2022 Annual Meeting of Stockholders

 

Proxy Statement Summary

1

Board of Directors and Corporate Governance

5

Our Board of Directors

5

Board Refreshment and Evaluation

13

Identifying and Evaluating Nominees for Director

13

Director Criteria, Qualifications and Experience

13

Board Diversity

13

Board Evaluations and Incumbent Directors

13

Board Education

14

Director Independence Determinations

14

Board Leadership Structure and Committees

15

Chair

15

Board Meetings and Attendance

15

Executive Sessions of the Board

15

Committees of the Board

15

The Board’s Role in Risk Oversight

19

Compensation Committee Interlocks and Insider Participation

19

Communications with Directors

20

Availability of Corporate Governance Documents

20

Certain Relationships and Related Transactions

20

Policies and Procedures

20

Related Party Transactions

21

Environment, Social and Governance Goals

22

Audit Committee Report

23

Compensation Discussion and Analysis

24

Restructuring of the Company

25

Setting a New Course for 2021

25

2021 Compensation Program Actions

26

2022 Compensation Program Actions

34

Other Compensation and Benefits

34

Compensation Objectives and Process

36

Executive Compensation Objectives

36

Compensation Program Best Practices

36

Role of Compensation Committee

38

Role of Management

38

Role of Independent Compensation Consultants

38

Use of Compensation Data

38

Stockholder Outreach

38

Stockholder Approval of Executive Compensation

38

Other Compensation Matters

39

Stock Ownership Guidelines

39

Clawback Policy

39

Anti-Hedging and Anti-Pledging Policy

39

Compensation Risk Management

39

Tax Considerations

40

 

 

Compensation Committee Report

41

Executive Compensation Tables

42

Summary Compensation Table

42

Grants of Plan-Based Awards

44

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

45

Outstanding Equity Awards at December 31, 2021

46

Option Exercises and Stock Vested in 2021

47

2021 Nonqualified Deferred Compensation Table

47

Potential Payments Upon Termination or Change in Control

47

CEO Pay Ratio

50

Director Compensation

52

Program Objectives

52

Program Elements

52

2021 Compensation of Directors

52

Stock Ownership Information

54

Security Ownership of Directors, Management and Certain Beneficial Holders

54

Proposals Requiring Your Vote

56

Proposal 1: Election of Directors

56

Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm

56

Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation

57

Proposal 4: Approval of California Resources Corporation Employee Stock Purchase Plan

58

Proposal 5(a) and Proposal 5(b): Approval of Amendments to the Certificate of Incorporation to Change to the Certificate of Incorporation to Change Each Supermajority Stockholder Vote Requirement to a Majority Vote Requirement

62

Proposal 5(a): Change the Supermajority Vote Requirement for Stockholders to Remove Directors without Cause to a Majority Vote Requirement

62

Proposal 5(b): Change the Supermajority Vote Requirement for Stockholders to Amend Certain Provisions of the Certificate of Incorporation to a Majority Vote Requirement

63

General Information

64

Voting Procedures

64

Record Date

64

Appointment of Proxy Holders

64

Quorum and Discretionary Authority

64

How to Vote Shares Registered in Your Name

65

How to Vote Shares Held in “Street Name”

65

Revoking or Changing a Proxy

66

Required Vote and Method of Counting

66

Method and Cost of Soliciting and Tabulating Votes

67

Attending the Annual Meeting

67

Notice of Internet Availability of Proxy Materials

68

Stockholder Proposals and Director Nominations

68

Householding of Proxy Materials

69

2021 Annual Report

69

Annex A – Reconciliation of Non-GAAP Measures

A-1

Annex B – California Resources Employee Stock Purchase Plan

B-1

Annex C – Amendments to Certificate of Incorporation

C-1

 

 

CALIFORNIA RESOURCES CORPORATION    i


 

2022 PROXY STATEMENT 

Proxy Statement Summary 

 

 

Proxy Statement Summary

This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.  California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.”  The 2022 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”

2022 Annual Meeting of Stockholders

 

Date:

May 4, 2022

 

 

Time:

11:00 a.m., Pacific Time

 

 

Place:

Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022

 

 

Record Date:

March 7, 2022

 

The Annual Meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022.  You will not be able to attend the Annual Meeting physically.  If you wish to attend the Annual Meeting, you must follow the instructions under “Attending the Annual Meeting” below.

Agenda and the Board’s Recommendation on Voting Matters

The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.

 

Agenda 

Item

 

 

 

Description

 

Board’s
Recommendation

1.

 

Proposal 1

 

Election of the nine director nominees named in this proxy statement each for a one-year term

 

FOR

2.

 

Proposal 2

 

Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2022

 

FOR

3.

 

Proposal 3

 

Advisory vote to approve named executive officer compensation

 

FOR

4.

 

Proposal 4

 

Approval of the Employee Stock Purchase Plan

 

FOR

5.

 

Proposal 5(a)

 

Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement

 

FOR

 

 

Proposal 5(b)

 

Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement

 

FOR

 

Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.

CALIFORNIA RESOURCES CORPORATION    1


 

2022 PROXY STATEMENT 

Proxy Statement Summary 

 

Directors

As of the Annual Meeting, the Board of Directors will be comprised of eight independent directors, plus Mr. McFarland, our President and Chief Executive Officer (“CEO”). The following table provides summary information about each director and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. Although he is not currently independent, the Board has determined that Mr. Bremner will be independent as of the date of the Annual Meeting. Each director is elected by a plurality of votes cast.

 

 

 

 

 

Committees

 

 

 

 

Director

 

 

Nominating &

 

Director

Positions

Age

Independent

Since

Audit

Compensation

Governance

Sustainability

Andrew B. Bremner

 

31

No

2021

 

 

 

Douglas E. Brooks

 

63

Yes

2020

 

 

 

Tiffany (TJ) Thom Cepak

Chair

49

Yes

2020

 

 

James N. Chapman

 

59

Yes

2020

 

Chair

 

Mark A. (Mac) McFarland

President & CEO

52

No

2020

 

 

 

 

Nicole Neeman Brady

 

41

Yes

2021

 

 

Julio M. Quintana

 

62

Yes

2020

 

Chair

 

William B. Roby

 

62

Yes

2020

 

Chair

Alejandra (Ale) Veltmann

 

53

Yes

2021

Chair

 

 

 

Corporate Governance Highlights

 

Supermajority votes. As part of our emergence from bankruptcy, our Bylaws were revised to reduce the prior supermajority voting threshold to amend the Bylaws to a majority vote. The Board is resubmitting for approval proposals to amend the Company’s Certificate of Incorporation to reduce the current supermajority voting thresholds to majority thresholds.

 

8 out of 9 Board members are independent. The Board has determined 8 out of 9 Board members are independent within the meaning of NYSE listing standards as of the date of the Annual Meeting.

 

Anti-Hedging and Anti-Pledging Policy. In response to feedback in prior years, our Insider Trading Policy specifically addresses the hedging or pledging of our securities.

 

Overboarding Policy. We maintain a policy to restrict directors who are currently sitting CEOs of public companies from serving on more than two other public company boards without approval, subject to a related company analysis, as applicable.

 

Clawback Policy. We maintain a comprehensive, standalone policy that covers cash, equity, equity-based and other awards under our incentive compensation programs.

 

Board is not classified. Our directors are elected on an annual basis.

 

Independent Board committees. Our Audit, Compensation, and Nominating and Governance committees are made up of independent directors. As of the Annual Meeting, the Sustainability Committee will also be made up of independent directors. Each standing committee operates under a written charter that has been approved by the Board and is available to stockholders.

 

Each committee has the authority to retain independent advisors.

 

Frequent executive sessions of independent directors. In 2021, the independent directors held executive sessions on a regular basis.

 

No stockholder rights plan (“poison pill”) in effect.

 

Director evaluation process. Each year, each of the Board committees and the full Board of Directors undertakes a self-assessment of its performance.

 

CEO and management evaluation process. The Board of Directors conducts an annual performance review of management, including the CEO, and periodically reviews succession planning for the CEO.

CALIFORNIA RESOURCES CORPORATION    2


 

2022 PROXY STATEMENT 

Proxy Statement Summary 

 

Compensation Program Highlights

In connection with the unprecedented circumstances affecting the industry and market volatility resulting from the COVID-19 pandemic, beginning in March 2020, the Former Compensation Committee (as defined below) reviewed the annual and long-term incentive programs to determine whether those programs appropriately aligned compensation opportunities with the Company’s then current goals and ensured the stability of the Company’s workforce. Following this review, in May 2020, the Former Compensation Committee approved changing the incentive compensation program for the organization, including the NEOs, to an all cash program consisting of a Retention Bonus Award and a Quarterly Incentive Award.

Following our emergence from the bankruptcy process, our New Compensation Committee (as defined below) immediately began setting a new course for our post-emergence compensation program, reinstituting long-term performance equity awards in line with compensation best practices and good governance policies.

Compensation Program Practices

Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is designed to incorporate compensation best practices, and is governed going forward from our emergence from bankruptcy by our New Compensation Committee. Prior to our restructuring in 2020, our annual incentive awards and long-term incentive plans were performance-based and intended to align with the long-term best interests of stockholders and to retain our management team. During the first half of 2020, our Former Compensation Committee changed our compensation programs to address the challenging environment and impending restructuring, including the elimination of long-term incentives for 2020 due to the diminished value of the Company’s stock. After we emerged from the bankruptcy process, our New Compensation Committee took action to realign our executive compensation program with our stockholders’ interests and with best practices and good governance policies.

CALIFORNIA RESOURCES CORPORATION    3


 

2022 PROXY STATEMENT 

Proxy Statement Summary 

 

The New Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:

 

 

WHAT WE DO √ We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. √ We are stockholder aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. All of the outstanding long-term incentive awards for our named executives are stock-based. √ We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. √ We solicit feedback from stockholders. We regularly reach out to our largest stockholders for feedback on our governance and executive compensation. √ We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. √ We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the Company. √ We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. √ We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

 

 

WHAT WE DON’T DO. X We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. X We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. X We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for our executives. X We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    4


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

 

Board of Directors and Corporate Governance

Our Board of Directors

Our Board of Directors has nominated nine directors for election at the 2022 Annual Meeting. All of our nominees currently serve as CRC directors.  Each nominee has agreed to serve another term, if elected.

Our Board values and exhibits an effective mix of diversity, perspective, skills and experience. Currently one-third of the Board are women and one-third of the Board are members of underrepresented communities as defined under California law.

 

INDEPENDENCE 11% non-independent 89% independent GENDER 33% female 67% male AGE 11.1% 30s 22.3% 40s 33.3% 50s 33.3% 60s

Note:  Independence statistics as of the date of the Annual Meeting.

 

INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 40% 50% 50s 60s 70s

Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s

CALIFORNIA RESOURCES CORPORATION    5


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Set forth below is a chart that summarizes the specific experience, qualifications, attributes and skills of our directors and biographical information regarding each of our directors. There are no family relationships between any of our directors and executive officers. There are no ongoing arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person will be selected as a director or an executive officer.

Director Skills and Qualifications

Summary of Director Qualifications and Experience

Andrew B. Bremner

Douglas E. Brooks

Tiffany (TJ) Thom Cepak

James N. Chapman

Mark A. (Mac) McFarland

Nicole Neeman Brady

Julio M. Quintana

William B. Roby

Alejandra (Ale) Veltmann

SKILLS & EXPERIENCE

Board of Directors Experience

 

X

X

X

X

X

X

X

 

CEO Experience

 

X

 

 

X

 

X

 

 

Senior Executive Experience

X

X

X

 

X

X

X

X

X

Oil and Gas Industry Experience

X

X

X

 

X

 

X

X

X

Financial/Capital Markets Expertise

 

X

X

X

X

X

X

 

X

Mergers & Acquisitions Experience

X

X

X

X

X

 

X

X

X

Engineering/Technology Expertise

X

X

X

 

X

 

X

X

 

Compensation Expertise

 

X

 

X

X

 

X

 

 

Health & Safety Experience

 

X

X

 

X

 

X

X

 

Environmental/Sustainability Experience

X

X

 

 

X

X

X

X

X

Risk Management Experience

 

X

X

X

X

 

X

 

 

Government/Regulatory Affairs Experience

 

X

 

 

X

X

X

X

 

 


CALIFORNIA RESOURCES CORPORATION    6


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

 

 

 

 

 

 

Andrew B. Bremner

Director since: 2021

Age: 31

 

•  Partner of JB Energy Partners, LP

•  VP, Oil & Gas of Jaco Oil Company

•  Formerly Portfolio Management & Strategic

   Planning for California Resources Corporation

 

•   Member of the Sustainability Committee

Mr. Bremner, 31, has served as a member of California Resources Corporation's Board of Directors since May 2021. Since 2019, Mr. Bremner, has served as a partner of JB Energy Partners, LP (JBEP) and is the Vice President of Oil & Gas for Jaco Oil Company. In these roles Mr. Bremner led the acquisition and management of a substantial portfolio of California energy and alternative assets. Mr. Bremner also launched JBEP’s carbon capture & storage (CCS) arm and currently manages a portfolio of CCS projects for the firm. From 2013 to 2019, Mr. Bremner worked for California Resources Corporation in various engineering roles, and most recently in Portfolio Management & Strategic Planning. Mr. Bremner earned his M.B.A. from University of California, Los Angeles, and has a Bachelor of Science degree in Mechanical Engineering from California Polytechnic State University San Luis Obispo.

 

 

 

 

 

 

Douglas E. Brooks

Director since: 2020

Age: 63

 

•  Board Chair and Former CEO of Oasis

   Petroleum, Inc.

•  Former Board Chair of OMP GP LLC

•  Former Director of Chaparral Energy, Inc. and Madalena Energy Inc.

•  Former CEO and Director of Energy XXI Gulf Coast, Inc., Yates Petroleum Corporation and Aurora Oil & Gas Limited

 

•   Member of the Nominating and Governance Committee

Mr. Brooks, 63, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Brooks is a private investor. He currently serves as the Board Chair of Oasis Petroleum Inc., an oil and natural gas company, and served as its Chief Executive Officer from December 2020 to April 2021.  Mr. Brooks also previously served as the Board Chair of OMP GP LLC, the general partner of Oasis Midstream Partners LP. He previously served on the Board of Directors of Chaparral Energy, Inc. from 2017 to October 2020 and also served on the Board of Directors of Madalena Energy Inc. (now Centaurus Energy, Inc.) in Canada. From April 2017 he served as President and Chief Executive Officer as well as a member of the Board of Directors of Energy XXI Gulf Coast, Inc., an offshore Gulf of Mexico exploration and production company, until it was acquired by an affiliate of Cox Oil LLC in October 2018. From 2015 to 2016, he served as President and Chief Executive Officer and a member of the Board of Directors of Yates Petroleum Corporation, a privately owned exploration and production company, which merged with EOG Resources. From 2012 to 2014, he served as Chief Executive Officer as well as a member of the Board of Directors of Aurora Oil & Gas Limited until it merged with Baytex Energy Corp. In 2012, he served as a Senior Vice President at Forest Oil Corporation. From 2006 to 2012, Mr. Brooks also built two private equity sponsored firms focused on unconventional resource projects in the western U.S. In addition, he spent 24 years with Marathon Oil Company in roles of increasing responsibility, lastly as the Director of Upstream Mergers and

CALIFORNIA RESOURCES CORPORATION    7


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Acquisitions and Business Development for the Americas. He holds a Bachelor of Science degree in business management from the University of Wyoming – Casper and a Master of Business Administration, Finance from Our Lady of the Lake University in Texas.

 

 

 

 

 

 

Tiffany (TJ)
Thom Cepak

Board Chair
Director since: 2020

Age: 49

•  Director of Patterson-UTI and Ranger Oil Corporation

•  Former CFO of Energy XXI Gulf Coast Inc., KLR Energy and EPL Oil & Gas, Inc.

•  Former Director of Yates Petroleum Corporation

 

•   Member of the Audit Committee

•   Member of the Compensation Committee

Ms. Cepak, 49, is the Chair of California Resources Corporation’s Board of Directors and has served as a member since October 2020. Ms. Cepak has 28 years of energy industry experience, including both financial and operational appointments. She has served as a director of Patterson-UTI, a company that provides land drilling and pressure pumping services, directional drilling, rental equipment and technology, since August 2014 and as a director of Ranger Oil Corporation, an independent oil and gas company, since September 2019. Most recently, Ms. Cepak joined the Board of Directors of EnLink Midstream, LLC, in December, 2021. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast Inc. from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak originally joined EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and an M.B.A. in Management with a concentration in Finance from Tulane University.

 

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    8


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

James N. Chapman

Director since: 2020

Age: 59

•  Advisory Director of SkyWorks Capital, LLC

•  Director of Denbury, Inc. and Arch Resources, Inc.

•  Over 35 years of investment banking experience

 

 

•   Chair of the Compensation Committee

•   Member of the Nominating and Governance Committee

Mr. Chapman, 59, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Chapman serves as a non-executive Advisory Director of SkyWorks Capital, LLC, an aviation and aerospace management consulting services company based in Greenwich, Connecticut, which he joined in December 2004. Prior to SkyWorks, he was associated with Regiment Capital Advisors, LP, an investment advisor based in Boston specializing in high yield investments, which he joined in January 2003. Prior to Regiment, Mr. Chapman acted as a capital markets and strategic planning consultant with private and public companies, as well as investment advisers and hedge funds (including Regiment), across a range of industries. Prior to establishing an independent consulting practice, Mr. Chapman worked for The Renco Group, Inc. (a multi-billion dollar private corporation with diverse investment holdings located throughout the world) from December 1996 to December 2001. Prior to Renco, he was a founding principal of Fieldstone Private Capital Group, Inc. in August 1990 where he headed the Corporate Finance and High Yield Finance Groups. Prior to joining Fieldstone, Mr. Chapman worked for Bankers Trust Company from July 1985 to August 1990, most recently in the BT Securities capital markets area. Mr. Chapman has over 35 years of investment banking experience in a wide range of industries including aviation/airlines, metals/mining, natural resources/energy, automotive/general manufacturing, financial services, real estate and healthcare. Mr. Chapman has served on the Board of Directors of Denbury, Inc. since September 2020, and on the Board of Directors of Arch Resources, Inc. since 2016. Mr. Chapman received an M.B.A. degree with distinction from Dartmouth College in 1985 and was elected an Edward Tuck Scholar. He received his BA degree, with distinction, magna cum laude, at Dartmouth College in 1984 and was elected to Phi Beta Kappa, in addition to being a Rufus Choate Scholar.

 

 

 

 

 

 

Mark A. (Mac) McFarland

President and CEO
Director since: 2020

Age: 52

•  Director of GenOn Energy, Inc.

•  Prior Director of Bruin E&P Partners, LLC, TerraForm Power, Inc. and Chaparral Energy, Inc.

•  Prior CEO of GenOn Energy, Inc. and Luminant Holding Company LLC

Mr. McFarland, 52, is the President and Chief Executive Officer of California Resources Corporation and has served on its Board of Directors since October 2020. Mr. McFarland is the former Executive Chairman of GenOn Energy, Inc., an independent power producer and continues to serve on its Board. From April 2017 to December 2018, he was the President and Chief Executive Officer of GenOn and served on its Board of Managers. From 2013 to 2016, he served as Chief Executive Officer of Luminant Holding Company LLC, a subsidiary of Energy Future Holdings Corporation, and a large independent power producer. From 2008 to 2013, he served as both Chief Commercial Officer of Luminant and Executive Vice President, Corporate Development and Strategy of Energy Future Holdings. From 1999 to 2008, Mr. McFarland served in various roles at Exelon Corporation, including as Senior Vice President, Corporate Development. He previously

CALIFORNIA RESOURCES CORPORATION    9


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

served on the Boards of Bruin E&P Partners (an independent company), TerraForm Power, and Chaparral Energy. Mr. McFarland earned his Masters of Business Administration from the University of Delaware and a Bachelor of Science degree in Civil Engineering (Environmental Concentration) from Virginia Polytechnic Institute and State University. He received his professional engineer license in 1995.

 

 

 

 

 

 

Nicole Neeman

Brady

Director since: 2021

Age: 41

•  CEO and Director of Sustainable Development

   Acquisition Corp.

•  Leadership roles at Renewable Resources Group

•  Prior President of Edison Water Resources

•  Prior Officer of Edison International

 

•   Member of the Compensation Committee

•   Member of the Sustainability Committee

Ms. Neeman Brady, 41, has served as a member of California Resources Corporation’s Board of Directors since August 2021. Nicole Neeman Brady currently serves as the Chief Executive Officer and a director of Sustainable Development Acquisition Corp. and since 2017 has been in various leadership roles at Renewable Resources Group. From 2015 to 2017 she was the President of Edison Water Resources and an officer of Edison International. In 2015, she was the Director, Strategic Planning of Edison International. From 2008 until 2015, Ms. Neeman Brady served in several roles at Southern California Edison, including Director, Energy Procurement, Power Supply from 2014 to 2015; Director, Asset Optimization and Trading, Power Supply from 2013 to 2014; Director, Contracts, Renewable and Alternative Power from 2011 to 2013. Prior to that, Ms. Neeman Brady held various finance and strategic planning positions for McKinsey and Company (2007), Twentieth Century Fox (2005-2006) and Goldman Sachs (2001-2004). Ms. Neeman Brady holds a Bachelor’s degree in Economics and History of Architecture from Brown University and an MBA from Harvard University. Ms. Neeman Brady currently serves on the Boards of Directors of Sustainable Development Acquisition Corp, Blue Ocean Mariculture and the Library Foundation of Los Angeles, is an independent board member of Mitigation Investment Holdings, and is a Commissioner of the Los Angeles Department of Water and Power. She previously served as Chairwoman of the Board of Fishpeople, a Board Alternate for CalBio Energy, a Board Observer of Enbala Networks, and a Board Member of Emrgy and the Colorado River Board of California.

CALIFORNIA RESOURCES CORPORATION    10


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

 

 

 

 

 

Julio M. Quintana

Director since: 2020

Age: 62

•  Former Chairman of Basic Energy Services

•  Director of SM Energy, Newmont Mining

•  Prior Director and CEO of Tesco Corporation

•  Extensive experience in the oil and gas industry

 

•   Chair of the Nominating and Governance Committee

•   Member of the Audit Committee

Mr. Quintana, 62, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Quintana served as the President and Chief Executive Officer of Tesco Corporation, an oilfield services company, from 2005 until his retirement in January 2015, and was a member of Tesco’s Board of Directors from September 2004 to May 2015. Prior to his appointment as President and Chief Executive Officer, Mr. Quintana served as Executive Vice President and Chief Operating Officer at Tesco beginning in September 2004. Prior to his tenure at Tesco, Mr. Quintana worked for Schlumberger Corporation as Vice President of Integrated Project Management and Vice President of Marketing for the Americas from November 1999 to September 2004. Prior to Schlumberger, Mr. Quintana worked from June 1980 to November 1999 for Unocal Corporation, an integrated E&P company. Mr. Quintana held various operational and managerial roles in production, drilling and asset management. His last roles at Unocal were Asset Manager for the MidContinent Region and Asset Manager for Deepwater Gulf of Mexico. Mr. Quintana brings 41 years of experience in various aspects of the oil and gas exploration and production industry, including strong experience in upstream operations, a deep understanding of drilling and asset management technologies, and broad human resources management skills and experience. He is a member of the Board of Directors of SM Energy since July 2006, a member of the Board of Directors of Newmont Mining since October 2015, Chairman of the Board of Basic Energy Services and member of its Board of Directors from December 2016 until October 2021. Mr. Quintana has a degree in Mechanical Engineering from The University of Southern California and is a Licensed Petroleum Engineer in California.

 

 

 

 

 

 

William B. Roby

Director since: 2020

Age: 62

•  CEO of Shepherd Energy, LLC

•  Director of Vermilion Energy Inc.

•  Extensive experience in the oil and gas industry

 

•   Chair of the Sustainability Committee

•   Member of the Audit Committee

•   Member of the Compensation Committee

Mr. Roby, 62, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Since 2015, Mr. Roby has served as the Chief Executive Officer of Shepherd Energy, LLC, Mr. Roby’s consulting company. From 2013 to 2014, he acted as Chief Operating Officer of Sheridan Production Company, LLC. From 2000 to 2013, he held a number of U.S. and international management positions with Occidental Petroleum Corporation, most recently as Senior Vice President, Worldwide Operations and

CALIFORNIA RESOURCES CORPORATION    11


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Production/Facility Engineering. Prior to his work at Occidental, he was Vice President of Operations of Altura Energy Ltd., a joint venture between Shell Oil Company and Amoco Corporation in the Permian Basin, following 15 years of various managerial and engineering roles with Shell Oil. Mr. Roby has served as a member of the Board of Directors of the international E&P firm Vermilion Energy Inc. since 2017. He has a bachelor’s degree in mechanical engineering from Louisiana State University.

 

 

 

 

 

 

Alejandra (Ale) Veltmann

Director since: 2021

Age: 53

•  Founder, CEO and Director of ESG Lynk

•  Former VP and Chief Accounting Officer of Paragon Offshore Plc

•  Former Controller, VP and Chief Accounting Officer
of Geokinetics, Inc.

•  Formerly with KPMG LLP and Arthur Andersen LLP

 

 

•   Chair of the Audit Committee

Ms. Veltmann, 53, has served as a member of California Resources Corporation's Board of Directors since December 2021. Ms. Veltmann has 30 years of experience that includes global financial leader of publicly-listed entities, private entrepreneurial companies and global auditing firms. Since 2018, she has served as founder, CEO and sole director of ESG Lynk, a leading sustainability reporting company. From 2015 to 2018, she was the Vice President and Chief Accounting Officer of Paragon Offshore Plc., an offshore drilling company. From 2010 to 2015, she worked in various roles including Corporate Controller and Vice President and Chief Accounting Officer at Geokinetics, Inc., formerly one of the world’s largest independent land and seafloor geophysical companies. She also worked in various auditor capacities at KPMG LLP from 1995 to 2002 and before that at Arthur Andersen LLP from 1992 to 1995. Since 2021, she has served as a director and chair of the Audit Committee for Structural Integrity Associates, a private company that provides life cycle engineering solutions. She has served as a Board member of The University of New Mexico Robert O. Anderson School of Management since 2018, and as an Advisory Council member of the K.B. Hutchison Center for Energy, Law & Business at The University of Texas at Austin since 2019. Ms. Veltmann is a certified public accountant and holds the FSA Credential from the Sustainability Accounting Standards Board (SASB). She has a BBA degree in Accounting from The University of New Mexico, and is an alumna of the Advanced Management Program at Harvard Business School.

 

CALIFORNIA RESOURCES CORPORATION    12


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

Board Refreshment and Evaluation

Identifying and Evaluating Nominees for Directors

 

Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.

Director Criteria, Qualifications and Experience

 

Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience:

 

independence under applicable standards;

 

business judgment;

 

service on boards of directors of other companies;

 

personal and professional integrity, including commitment to the Company’s core values;

 

willingness to commit the required time to serve as a Board of Directors member;

 

familiarity with the Company and its industry; and

 

such other matters as the committee deems appropriate.

Board Diversity

 

The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors. Currently, one-third of the Board are women and one-third of the Board are members of underrepresented communities as defined under California law.

Board Evaluations and Incumbent Directors

 

Our Board believes that a robust annual evaluation process is an important part of its governance practices.  For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board.  The committee distributes written evaluation surveys to each director, and the Chair of the Board discusses the results of these written surveys with the individual directors. In addition, the Chair shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness.

With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s:

 

past Board and committee meeting attendance and performance;

 

length of Board service;

CALIFORNIA RESOURCES CORPORATION    13


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

 

personal and professional integrity, including commitment to the Company’s core values;

 

relevant experience, skills, qualifications and contributions that the existing director brings to the Board;

 

independence under applicable standards; and

 

such other matters as the committee deems appropriate.

Board Education

 

The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction.  From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest.  The Company also makes resources available to individual directors, including access to director education from third party providers.

Director Independence Determinations

To qualify as “independent” under the NYSE listing standards, the Board of Directors must affirmatively determine that the director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us) that would interfere with his or her exercise of independent judgment in carrying out his or her responsibilities as a director. The NYSE independent director criteria include, among other things, that the director not be our employee and not have engaged in various types of business dealings with us.

14% Non-Independent 86% Independent

MAJORITY INDEPENDENT DIRECTORS

MAJORITY INDEPENDENT DIRECTORS 10% Non-Independent 90% Independent

Majority independent directors 11% non-independent 89% independent

The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Brooks, Chapman, Quintana and Roby and Mses. Cepak, Neeman Brady and Veltmann are independent directors as that term is defined in the listing standards of the NYSE. Mr. McFarland, our President and Chief Executive Officer, is not considered by the Board of Directors to be an independent director because of his current employment with CRC. Mr. Bremner is not currently considered by the Board to be an independent director under the NYSE’s standards because his prior employment with CRC ended just less than three years prior to the date of this proxy; however, the Board has determined that Mr. Bremner will be independent as of the date of the Annual Meeting.

CALIFORNIA RESOURCES CORPORATION    14


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Board Leadership Structure and Committees

Chair

 

The Board of Directors’ leadership structure separates the CEO and Chair of the Board positions. Mr. McFarland currently serves as our President and CEO, and Ms. Cepak serves as our non-executive Chair. Our Chair of the Board presides over all meetings of the Board, including executive sessions.

The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chair positions. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chair focuses on leading the Board of Directors in its oversight role.

Board Meetings and Attendance

 

During 2021, the Board of Directors held 18 meetings. Each of the standing and special committees held the number of meetings included in the description of the committees set forth below in 2021. Each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2021.

Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. All of the directors of our Board attended the virtual annual meeting in May 2021.

Executive Sessions of the Board

 

The Board of Directors intends to hold meetings of independent directors in executive session without management present on a regular basis. In addition to regularly scheduled Board meetings, executive sessions may be called upon the request of any independent director. In 2021, the Board held six executive sessions.

Committees of the Board

 

As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. On November 9, 2020, after the Company’s emergence from bankruptcy, the Board also established two temporary special committees, Finance and Operations. The formation of the special committees was undertaken to enhance the Board’s ability to quickly develop an in-depth understanding of the Company, including its operations and assets, particularly in light of the fact that all non-management members of the Board became directors in connection with the Company’s emergence from bankruptcy.  On March 9, 2021, the Board dissolved the Operations special committee after it completed its mandate.

The membership and purposes of each of the standing and special committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.

CALIFORNIA RESOURCES CORPORATION    15


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Standing Committees of the Board

Audit Committee

 

 

 

 

 

Alejandra (Ale) Veltmann,

Chair

 

 

 

Tiffany (TJ) Thom Cepak

 

 

 

Julio M. Quintana

 

 

 

William B. Roby

 

Our Audit Committee is composed entirely of independent directors pursuant to the applicable standards, including the heightened standards applicable to audit committee members. In addition to regularly scheduled meetings, the committee meets separately in executive sessions with representatives of our independent auditor, our independent reserves audit firms and our internal audit personnel. The Audit Committee approves the appointment and services of the independent auditor and reviews the general scope of audit and audit-related services, matters relating to internal controls and other matters related to accounting and reporting functions. The Audit Committee monitors the integrity of the financial statements of CRC. The committee oversees the Company’s compliance with ethical standards, and reviews material related party transactions. The Board of Directors determined that all of the members of the Audit Committee are financially literate and have accounting or financial management expertise, each as required by the applicable NYSE listing standards. The Board of Directors also determined that Ms. Cepak and Ms. Veltmann qualify as audit committee financial experts under the applicable rules of the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

5 Meetings Held in 2021

 

 

 

 

 

 

 

Compensation Committee

 

 

 

 

 

James N. Chapman,

Chair

 

 

 

Tiffany (TJ) Thom Cepak

 

 

 

Nicole Neeman Brady

 

 

 

William B. Roby

 

 

Our Compensation Committee is composed entirely of independent directors pursuant to the applicable standards, including the heightened standards applicable to compensation committee members. The committee is responsible for (i) determining compensation for our Chief Executive Officer and other executive officers, (ii) overseeing and approving compensation and employee benefit policies, (iii) reviewing and discussing with our management the Compensation Discussion and Analysis and related disclosure included in our annual proxy statement, and (iv) overseeing the evaluation of the performance of our executives. The Compensation Committee may delegate to its Chairperson or any subcommittee it may form some or all of its responsibility and authority for any particular matter as it deems appropriate from time to time under the circumstances. The Compensation Committee also has the authority to retain, compensate, direct, oversee and terminate legal counsel, compensation consultants and other experts and advisors hired to assist the Compensation Committee.

 

 

 

 

 

9 Meetings Held in 2021

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    16


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

 

Nominating and Governance Committee

 

 

 

 

 

 

Julio M. Quintana,

Chair

 

 

 

Douglas E. Brooks

 

 

 

James N. Chapman

 

 

The Nominating and Governance Committee is composed entirely of independent directors. The committee makes proposals to the Board of Directors for candidates to be nominated by the Board of Directors to fill vacancies or for new directorship positions, if any, which may be created from time to time. The Nominating and Governance Committee develops and recommends a set of corporate governance guidelines to our Board of Directors and oversees the evaluation of our Board and its committees. Each year, the Nominating and Governance Committee determines which directors, if any, qualify as independent, disinterested or non-employee directors under applicable standards. The Nominating and Governance Committee periodically reviews the advisability or need for any changes in the Board committee structure, and recommends to the Board the composition of each Board committee.

 

 

 

 

 

7 Meetings Held in 2021

 

 

 

 

 

Sustainability Committee

 

 

 

 

 

 

William B. Roby,

Chair

 

 

 

Andrew B. Bremner

 

 

 

Nicole Neeman Brady

 

Our Sustainability Committee will be composed entirely of independent directors as of the date of the Annual Meeting. The committee assists the Board in fulfilling its oversight responsibilities relating to sustainability for matters pertaining to the Company’s business, strategy, operations, performance or reputation. The committee reviews and discusses with management the status of strategies, objectives, issues, laws and regulations regarding matters relating to the Company’s operations; sustainability; and health, safety and environment (“HSE”). The committee reviews and discusses with management the Company’s programs on community engagement, diversity, inclusion, workplace culture, talent development and social responsibility. It also reviews our policies and programs designed to ensure (i) compliance with applicable laws and regulations, (ii) consistency with Company strategy, (iii) promotion of safe operations, sustainability and conservation of natural resources, and (iv) that timing requirements are set and achieved. The committee periodically reports to the Board of Directors with respect to operations, sustainability and HSE pertaining to the Company.

 

 

 

 

 

7 Meetings Held in 2021

 

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    17


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

Special Committees of the Board

Special Committee on Finance

 

 

 

 

 

James N. Chapman,

Chair

 

 

 

Andrew B. Bremner

 

 

 

Douglas E. Brooks

 

 

The Special Committee on Finance assisted the Board in fulfilling its oversight responsibilities for matters relating to the Company’s financial strategy, capital allocation, liquidity position and financial policies and activities.  

 

 

 

 

 

4 Meetings Held in 2021

 

 

 

 

 

Special Committee on Operations

 

 

 

 

 

 

William B. Roby,

Chair

 

 

 

Douglas E. Brooks

 

 

 

Tiffany (TJ) Thom Cepak

 

 

 

Julio M. Quintana

 

 

The Special Committee on Operations assisted the Board in fulfilling its oversight responsibilities for matters relating to the Company’s operations, including related capital expenditures.  The Special Committee on Operations was a temporary committee of the Board and was discontinued as of March 9, 2021.

 

 

 

 

 

1 Meeting Held in 2021; Dissolved on March 9, 2021

 

 

 

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    18


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

 

The Board’s Role in Risk Oversight

BOARD OF DIRECTORS Informed through committee reports and by the President and CEO about known risks to the Company’s strategy and business. Regularly reviews information regarding the Company’s credit, liquidity and operations, including the risks associated with each. COMPENSATION COMMITTEE Oversees the management of risks relating to the Company’s executive compensation plans and arrangements. AUDIT COMMITTEE Oversees financial risks and the ethical conduct of the Company’s business, including the steps the Company has taken to monitor and mitigate these risks, and reviews material related party transactions. NOMINATING AND GOVERNANCE COMMITTEE Manages risks associated with the independence of the Board of Directors and potential conflicts of interest. SUSTAINABILITY COMMITTEE Responsible for overseeing the management of risks relating to sustainability and health, safety and environment.

Our Company’s management is responsible for the day to day management of risks to the Company.  The Board of Directors has broad oversight responsibility for our risk management programs.

 

 

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is now, or at any time since the beginning of 2021 has been, employed by or served as an officer of CRC or any of its subsidiaries or had any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or at any time has been, since the beginning of 2021, a member of the compensation committee or board of directors of another entity one of whose executive officers has been a member of our Board of Directors or Compensation Committee.

CALIFORNIA RESOURCES CORPORATION    19


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

Communications with Directors

Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our Board, or to any director in particular, should be sent to:

Board of Directors, committee name or director’s name, as appropriate

California Resources Corporation

Attention: Corporate Secretary

1 World Trade Center, Suite 1500

Long Beach, California 90831

We will forward all correspondence directly to the committee or individual director, as appropriate. Our independent directors approved our process for collecting and organizing stockholder communications to the Board of Directors.

If any stockholder or third party has a complaint or concern regarding accounting, internal controls over financial reporting or audit matters at CRC, they should send their complaint in writing to Ms. Veltmann, the Chair of the Audit Committee, at the address listed above.

Availability of Corporate Governance Documents

We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Sustainability Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 1 World Trade Center, Suite 1500, Long Beach, California 90831. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers.

Certain Relationships and Related Transactions

Policies and Procedures

 

Our Board of Directors adopted written policies regarding related party transactions. We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our Corporate Secretary’s office implements procedures to obtain information from the directors and executive officers with respect to related party transactions. The Audit Committee reviews and discusses with management and the independent registered public accounting firm any material related party transactions as defined by, and required to be disclosed under, the rules of the Securities and Exchange Commission (“SEC”) and the NYSE. Agreements that embody transactions that are material in amount or significance are filed with the SEC as required.

Our business ethics and corporate policies prohibit significant conflicts of interest. Any waivers of these policies require approval by the compliance officer, or in the case of conflicts of our executive officers or directors, the Board of Directors. Under our Business Ethics and Corporate Policies, conflicts of interest generally are deemed to occur when private or family interests do not appear impartial, interfere or compete with the interests of our Company.

CALIFORNIA RESOURCES CORPORATION    20


 

2022 PROXY STATEMENT 

Board of Directors and Corporate Governance 

 

We have multiple processes for reporting conflicts of interests and related party transactions. Under our Business Ethics and Corporate Policies, all of our directors and employees are required to report any known or apparent conflict of interest, or potential conflict of interest, to their supervisors, the compliance officer, a member of the corporate compliance committee, our legal counsel, human resources, or the Board of Directors, as appropriate. As part of any review of any conflict of interest, potential conflict of interest or related party transaction, the following factors are generally considered:

 

the nature of the related person’s interest in the transaction;

 

the material terms of the transaction;

 

the importance of the transaction to the related person;

 

the importance of the transaction to us;

 

whether the transaction would impair the judgment of a director or executive officer to act or their ability to act in our best interest;

 

whether the transaction might affect a director’s independence under NYSE standards; and

 

any other matters deemed appropriate with respect to the particular transaction.

We also have other policies and procedures to prevent conflicts of interest and related person transactions. For example, the charter of our Nominating and Governance Committee requires that the committee members assess the independence of the non-management directors at least annually, including a requirement that it determine whether any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described above under “Director Independence Determinations.”

Related Party Transactions

 

There are no transactions or relationships with related persons since the beginning of our most recently completed fiscal year that are required to be disclosed.

 

 

 

CALIFORNIA RESOURCES CORPORATION    21


 

2022 PROXY STATEMENT 

Environment, Social and Governance Goals

 

 

Environment, Social and Governance Goals

ENVIRONMENT

Carbon Management

CRC is committed to the transition in the energy sector. Building upon the Company’s carbon management strategy, in November 2021, CRC adopted a 2045 Full-Scope Net Zero goal for Scope 1, 2 and 3 emissions. This goal places CRC among a select few industry peers to include scope 3 emissions in their Net Zero goal. In addition, CRC’s 2045 goal targets a timeframe five years sooner than most other companies’ Net Zero goals and aligns CRC with the State of California’s 2045 net zero ambitions.

In 2022 we have adopted specific objectives to advance our 2045 goal. The details of these objectives will be outlined in our annual Sustainability Report later this year but they are broadly geared towards putting us on a sustainable path to achieve our 2045 goal.  

Sustainability Goals

In addition to our carbon management goal, CRC continues to advance our previously announced 2030 goals relating to water sustainability, methane reductions, and integrating renewables in our operations in order to reduce scope 1 and 2 emissions. Updates on these goals and next targets will also be announced in our annual Sustainability Report later this year. Finally, in addition to our carbon management goal and sustainability goals, CRC has adopted 2022 targets for oil spill prevention rate and asset retirement obligation reductions.  

SOCIAL

We view our workforce as an asset and the Board provides oversight over significant aspects of our human capital.  Safety is a key value at CRC. As a result, CRC has adopted a 2022 Incident and Injury Rate target and a specific Diversity, Equity and Inclusion objective.

GOVERNANCE

The Board is responsible for overseeing our sustainability strategy, risk management and goals, including those related to carbon management, environmental stewardship, worker safety, and diversity, equity and inclusion in our oil and gas operations as well as our carbon management business.  

Compensation

We are proud to note that CRC’s ESG goals continue to be directly tied to the performance-based compensation of our employees, including executives and senior managers, further highlighting our standing commitment and dedication to a cleaner and more sustainable future for California. In fact, in 2022, the Board has further emphasized the importance of achieving ESG goals by tying 30% of our management team’s annual incentive related to company performance to ESG related metrics.  

 

 

 

 

 

CALIFORNIA RESOURCES CORPORATION    22


 

 2022 PROXY STATEMENT 

Audit Committee Report 

 

 

Audit Committee Report

The Audit Committee of the Board of Directors of California Resources Corporation approves the appointment and services of the independent registered public accounting firm, and monitors (1) the integrity of the financial statements of CRC; (2) the independent registered public accounting firm’s qualifications, independence and performance; (3) the effectiveness and performance of CRC’s internal audit function; (4) CRC’s system of disclosure controls and procedures, internal control structure over financial reporting and compliance with ethical standards; and (5) the compliance by CRC with legal and regulatory requirements related to financial statements.

The Board of Directors has determined that each of the members of the Audit Committee satisfies the standards of independence established under the SEC’s rules and regulations and listing standards of the NYSE. The Board of Directors has further determined that each of the members of the Audit Committee is financially literate and that Ms. Cepak and Ms. Veltmann are “audit committee financial experts” as defined by the rules and regulations of the SEC.

In connection with our financial statements for the year ended December 31, 2021, the Audit Committee has:

 

reviewed and discussed with management the audited financial statements contained in CRC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

 

discussed with CRC’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board and the Securities Exchange Commission;

 

received the written disclosures from KPMG LLP as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence;

 

discussed with KPMG LLP its independence from CRC and members of its management;

 

considered any non-audit services in assessing auditor independence;

 

had an executive session with KPMG LLP to provide them with the opportunity to discuss any other matters that they desired to raise without management present; and

 

had executive sessions with Ryder Scott Company and Netherland, Sewell & Associates, Inc., CRC’s independent reserves audit firms, to discuss the oil and gas reserves determination process and related public disclosures, and to provide them with the opportunity to discuss any other matters that they desired to raise without management present.

Based on the review and discussions with CRC’s management, independent registered public accounting firm and independent reserves audit firms, as set forth above, the Audit Committee recommended to CRC’s Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for filing with the SEC.

Audit Committee,

 

Alejandra (Ale) Veltmann, Chair

Tiffany (TJ) Thom Cepak

Julio M. Quintana

William B. Roby

February 22, 2022

 

 

CALIFORNIA RESOURCES CORPORATION    23


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) provides a description of the elements and key features of our compensation program, as well as context and rationale for decisions made with respect to the compensation for our “named executive officers” or “NEOs” for the year ended December 31, 2021, who are identified below:

 

Name

    

Position as of December 31, 2021

Mark A. (Mac) McFarland

 

President and Chief Executive Officer (1)

Francisco J. Leon

 

Executive Vice President and Chief Financial Officer

Jay A. Bys

 

Executive Vice President and Chief Commercial Officer (2)

Shawn M. Kerns

 

Executive Vice President and Chief Operating Officer

Michael L. Preston

 

Executive Vice President, Chief Administrative Officer and General Counsel

 

(1)

On December 31, 2020, our prior Chief Executive Officer departed the Company and Board, and the Board appointed our then-current Chair, Mr. McFarland, to serve as Interim Chief Executive Officer and initiated a search process for the Company’s next chief executive officer.  On March 22, 2021, the Company announced that Mr. McFarland was selected to serve as President and Chief Executive Officer, removing his previous interim title. On April 15, 2021, the Company announced that Ms. Tiffany (TJ) Thom Cepak was appointed to serve as independent Chair of the Board, replacing Mr. McFarland, who continues to serve as a director. See page 8 for Mr. McFarland’s prior experience.

(2)

Mr. Bys’ experience prior to joining CRC includes Private Energy Advisor 2019 to 2020 and 2015 to 2016; GenOn Energy and affiliate companies Chief Commercial Officer 2017 to 2018; Luminant Energy Vice President Origination and Capital Management 2007 to 2014; TXU, Enserch Energy various positions 1997 to 2007.

9

24

Restructuring of the Company

25

Setting a New Course for 2021

25

2021 Compensation Program Actions

26

2022 Compensation Program Actions

34

Other Compensation and Benefits

34

Compensation Objectives and Process

36

Executive Compensation Objectives

36

Compensation Program Best Practices

36

Role of Compensation Committee

38

Role of Management

38

Role of Independent Compensation Consultants

38

Use of Compensation Data

38

Stockholder Outreach

38

Stockholder Approval of Executive Compensation

38

Other Compensation Matters

39

Stock Ownership Guidelines

39

Clawback Policy

39

Anti-Hedging and Anti-Pledging Policy

39

Compensation Risk Management

39

Tax Considerations

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

41

Executive Compensation Tables

42

Summary Compensation Table

42

Grants of Plan-Based Awards

44

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

45

Outstanding Equity Awards at December 31, 2021

46

Option Exercises and Stock Vested in 2021

47

2021 Nonqualified Deferred Compensation Table

47

Potential Payments Upon Termination or Change in Control

47

CEO Pay Ratio

50

Director Compensation

52

Program Objectives

52

Program Elements

52

2021 Compensation of Directors

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

 

 

 

 

 

 

 


CALIFORNIA RESOURCES CORPORATION    24


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

Restructuring of the Company

On July 15, 2020, to address our unsustainable debt burden given the prevailing commodity markets at the time, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.  

On October 27, 2020, the Company emerged from the bankruptcy process with a new Board of Directors, new equity owners and a strong balance sheet.  CRC’s Joint Plan of Reorganization (the “Plan”) in its Chapter 11 case cancelled all equity interests of the Company, including outstanding shares of the Company’s common stock issued and outstanding immediately prior to the emergence date. As a result, all outstanding stock-based compensation awards under our pre-emergence Long-Term Incentive Plan were also cancelled upon our emergence from bankruptcy, eliminating our NEOs’ prior equity interests in the Company.  

Pursuant to the Plan, as of the emergence date, the pre-emergence Compensation Committee members (the “Former Compensation Committee”) ceased to serve on the Board and a new Compensation Committee was designated from the new Board members (the “New Compensation Committee”).

The Plan also provided for issuance of new common stock to certain of the Company’s creditors and a joint venture partner and reservation of common stock for issuance under a new employee incentive plan. In January 2021, our new Board of Directors adopted a new Long Term Incentive Plan.

As illustrated below, compensation decisions before, during and after our bankruptcy in 2020 were made by our Former Compensation Committee, the bankruptcy court, and our New Compensation Committee. Compensation decisions that were made during the 2021 year were made solely by the New Compensation Committee.

 

Elements of Compensation Program Approved by Former Compensation Committee Bankruptcy Court New Compensation Committee Pre-Chapter 11 Former Compensation Committee January 1 – July 14 2020  • Original 2020 Compensation Program • Revised 2020 Compensation Program Chapter 11 Bankruptcy Court July 15 – October 26 2020 • Quarterly Incentive Plan • Prior equity award cancellation • Creation of new equity incentive plan Emergence Bankruptcy Court October 27, 2020 Setting a New Course New CompensationCommittee October 28, 2020 and forward • One-time emergence equity grants • 2021 base salary • 2021 annual incentive plan

Setting a New Course for 2021

Our 2020 executive compensation program was driven by unprecedented circumstances that our Former Compensation Committee believed required extraordinary changes to the original 2020 compensation program the Former Compensation Committee had previously approved in order to retain and motivate our executive management team and broader organization through our financial restructuring.  

Following our emergence from bankruptcy, our New Compensation Committee went right to work with the assistance of Lyons Benenson & Company Inc.(“LB&Co”), independent compensation consultant to the New Compensation Committee, designing a new compensation program for 2021 which returned to a mix of short- and long-term incentives that are primarily performance-based, with a significant majority provided as equity awards, immediately aligning our NEO compensation with our shareholders’ interests.

CALIFORNIA RESOURCES CORPORATION    25


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

2021 Compensation Program Actions

 

Peer Group Selection

The first action taken by the New Compensation Committee was to develop a new compensation peer group.  With consultation from LB&Co, in November 2020, the New Compensation Committee adopted a new compensation peer group consisting of 20 companies in the same Global Industry Classification Standard (GICS) Sub-Industry classification of similar size and/or having similar geographic operating locations as the Company.  This new compensation peer group was utilized by the New Compensation Committee in making decisions regarding the 2021 executive compensation program.

Recent Financial Measures as of 11/24/2020 ($ Millions) Company Reported 12 Months Revenues Market Cap Total Assets Total Economic Value Antero Resources Corporation $3,255.0 $1,179.5 $13,349.7 $7,315.1 Berry Corporation $468.7 $344.5 $1,446.5 $690.1 Cabot Oil & Gas Corporation $1,455.6 $7,186.4 $4,419.3 $8,382.6 Callon Petroleum Company $891.8 $402.7 $4,937.3 $3,631.7 Cimarex Energy Co. $1,817.0 $3,865.8 $4,606.0 $5,866.0 CNX Resources Corporation $1,121.9 $2,243.0 $8,129.2 $4,837.7 Continental Resources, Inc. $2,750.8 $6,307.1 $14,728.2 $12,298.8 Denbury Inc. $864.3 $1,012.5 $1,677.9 $1,167.8 Devon Energy Corporation $4,335.0 $5,852.5 $10,326.0 $8,820.5 Diamondback Energy, Inc. $2,992.0 $7,446.8 $18,760.0 $14,331.8 Marathon Oil Corporation $3,532.0 $5,091.6 $18,663.0 $10,039.6 Matador Resources Company $841.2 $1,362.3 $3,786.2 $3,443.0 Murphy Oil Corporation $2,081.2 $1,755.6 $10,469.4 $5,480.3 PDC Energy, Inc. $1,091.0 $1,876.2 $5,332.5 $3,610.3 QEP Resources, Inc. $846.1 $428.7 $5,236.7 $2,067.6 Range Resources Corporation $1,854.7 $1,885.5 $6,012.9 $5,004.7SM Energy Company $1,205.3 $527.0 $5,122.3 $2,906.8 Southwestern Energy Company $2,274.0 $2,256.9 $4,157.0 $4,751.9 Whiting Petroleum Corporation $900.7 $822.7 $2,098.5 $1,227.0 WPX Energy, Inc. $2,096.0 $4,409.8 $9,501.0 $7,439.8 Peer Companies 20 Prior Peers 14 Median $1,636.3 $1,880.8 $5,284.6 $4,921.2 Mean $1,832.0 $2,812.9 $7,638.0 $5,665.7 Minimum $468.7 $344.5 $1,446.5 $690.1 Maximum $4,335.0 $7,446.8 $18,760.0 $14,331.9 California Resources Corporation $1,821.0 $1,527.3 $4,856.0 $2,940.3 Percentile 53.1% 39.0% 35.5% 21.3% Percent to Median 111.3% 81.2% 91.9% 59.7%

 

2021 Peer Group

CALIFORNIA RESOURCES CORPORATION    26


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

Base Salaries

The New Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned and set base salaries as shown below based on the similar scope of job responsibilities (other than the CEO), internal alignment and position relative to peer group compensation data.

Name

New Annual

Base Salary

Prior Annual

Base Salary

 

 

 

Effective Date

Mark A. (Mac) McFarland

$850,000

n/a

March 22, 2021*

Francisco J. Leon

$500,000

$385,000

January 25, 2021

Jay A. Bys

$500,000

n/a

May 1, 2021*

Shawn M. Kerns

$500,000

$425,000

January 25, 2021

Michael L. Preston

$500,000

$440,000

January 25, 2021

* Hire date as employee

 

 

 

Annual Incentive Program (AIP)

AnnuaI Incentive Targets

The New Compensation Committee reviewed the annual incentive targets for each of our NEOs against the 2021 Peer Group market data, and with consideration to internal alignment, set the annual incentive targets for the NEOs as shown below.

 

 

Name

2021 Annual Incentive Target

(as a % of New Annual Base salary)

Mark A. (Mac) McFarland

120%

Francisco J. Leon

100%

Jay A. Bys

100%

Shawn M. Kerns

100%

Michael L. Preston

100%

 

Payouts under the AIP can range from 0% to 200% of the annual incentive target for an individual.  Payout of 80% of the annual incentive target amount is based on the AIP Scorecard metrics and 20% is based on the Committee’s assessment of an NEO’s individual performance.

AIP Scorecard Metrics

In March 2021, the New Compensation Committee established the scorecard for the 2021 AIP to incentivize the AIP participants to undertake actions and invest capital to achieve sustainable long-term value for CRC.  The construct of the new AIP recognized the material impact that fluctuations in commodity prices have on CRC’s financial measures including adjusted EBITDAX, free cash flow and others.  As such, while any AIP program cannot eliminate the impact of such fluctuations, the new AIP added metrics related to capital efficiency and cost reductions, as well as the Company’s asset retirement obligations.  Further, there was continued incentive for health, safety and environment (“HSE”) performance.  CRC has always been committed to HSE standards and related policies, and continues the focus on the HSE metrics as well as forming a new Sustainability Committee serving at the discretion of the Board.

 

The New Compensation Committee also adopted a policy whereby management’s ability to achieve a maximum payout under the AIP should be due to extraordinary results, whether via financial performance or the other non-financial metrics incorporated into the AIP.  The goal was to lessen the impact of commodity price volatility on AIP payouts.

 

 

 

CALIFORNIA RESOURCES CORPORATION    27


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

2021 Annual Incentive Program Scorecard Actual 2021 Results Performance Measure (1) Weight Threshold (50% Payout) Target (100% Payout) Maximum (200% Payout) Measure Outcome Unweighted Measure Payout Weighted Bonus Payout Cost Savings 25% $50 MM $75 MM $100 MM $53 MM 56% 14.0% Adjusted EBITDAX 25% 488 MM $528 MM $750 MM $880 MM 200% 50.0% Free Cash Flow 25% $115 MM $165 MM $370 MM $458 MM 200% 50.0% Capital Efficiency 10% $22,670 $19,269 $14,918 $14,851 200% 20.0% ARO Strategy Approval 7.5% ByQ4 ByQ3 by!3 (with PV savings identified of >$50 MM) Completed Q3 (with PV savings) 200% 15.0% HSE/ESG: Combined IIR 2.5% 0.60 0.50 0.40 0.43 170% 4.25% Spill Prevention Rate 2.5% 99.9994% 99.9996% 99.9998% 99.9997% 150% 3.75% Strategic ESG Initiative Milestones 2.5% 2 of 4 3 of 4 4 of 4 4 of 4 200% 5.0% Total Scorecard Result 162.00%

(1)

Descriptions of the performance measures are as follows:

 

Performance Measure

Description

Cost Savings

 

Reflects reduction of 2021 general and administrative, operating and capital expenditures as compared to the baseline established in the 2021 business plan. The $1,066 million baseline was comprised of $222 million of general and administrative (which already reflected a $30 million decrease from 2020 results), $615 million of operating and $229 million of capital expenditures. Performance measured excludes costs to achieve (e.g., severance costs, AIP payouts other than target, one-time costs of asset sales, etc.).

The cost savings target level was set at $75 million of cost savings and threshold and maximum were set at $25 million below and above target, respectively.

Adjusted EBITDAX

Adjusted EBITDAX is based on earnings before interest, taxes, depreciation and amortization and exploration based on GAAP and excludes one-time items, costs to achieve and non-cash gains/losses related to the mark to market of our hedging contracts. Target level was set based on the approved 2021 management plan, which assumed $75 million of cost savings. The maximum level was set at 142% of the budget amount under the management plan.

Free Cash Flow

Free Cash Flow is calculated as Adjusted EBITDAX minus distributions to Benefit Street Partners, Asset Retirement Obligations, cash interest, cash taxes, working capital and capital expenditures. Excludes costs to achieve. Target level was set based on the approved 2021 management plan. The maximum level was set at 255% of the budget amount under the management plan.

  Capital Efficiency

The Capital Efficiency metric is a ratio of total 2021 capital divided by 30-day Peak initial production (“IP”) of new wells added during the year from drilling, workover, exploration well investment activities. Project substitutions are permitted at management’s discretion if they are within the approved budget. Operations projects (maintenance rigs) to reduce the production backlog are acceptable substitutions for purposes of this metric.

  ARO Strategy

California’s Idle Well Program accelerates the abandonment and retirement obligation related to all idle and not productive wells. This metric will incentivize management to create a project office that will be tasked to develop detailed multi-year plans to reduce the well backlog in a manner that satisfies the regulatory requirements and optimizes the company’s available resources.  

ARO Strategy is a qualitative measure as follows

Threshold: Creation of project office with dedicated staff. Project office to develop optimization strategy and present for Audit Committee approval in Q4 2021.

Target: Creation of project office with dedicated staff. Project office to develop optimization strategy and present for Audit Committee approval in Q3 2021.

Maximum: Creation of project office with dedicated staff. Project office to develop optimization strategy, present for Board approval in Q3 2021 and identify >$50 MM of savings or a reduction of~8% as compared to 2020 YE book ARO

 

  Combined IIR

Health and Safety - Combined Injury and Illness Incident Rate of employees and contractors.  

CALIFORNIA RESOURCES CORPORATION    28


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

Performance Measure

Description

  Spill Prevention Rate

Environmental Stewardship – Difference between barrels of oil equivalent produced and net unrecovered volume of reportable spill of crude oil or condensate, as a percent of barrels of oil equivalent produced.

  Strategic ESG Initiatives

Completion of project milestones on progress toward our 2030 Sustainability Goals:

1)Carbon Capture and Sequestration - Deliver Market Analysis summary and field-by-field analysis of cost ranges in terms of $/bbl including ranking of operations/fields with the highest carbon credit price exposure.  Evaluate impacts of CCS and/or LCFS credit generation through innovative crude provisions.  Present result to Board.

2)Water Recycling Volume - Complete the engineering evaluation and propose a plan to executive management with alternatives to increase water recycling at 27R.

3)Methane Emission Reduction - Written evaluation of methane reduction strategies (e.g., lower LDAR repair thresholds) and costs to provide a cost curve of possible methane emission reduction strategies.  Present report to Board.

4)Renewable Power Generation - Written report of strategy to finance and develop 10+ MW of behind the meter solar power by 2025, including CRC costs and benefits and potential financing partners including criteria for close of financing.  Make recommendations to Board.

 

 

Individual NEO Payout Considerations

The New Compensation Committee considered the contributions of the new management team that was formed post-bankruptcy and assessed the overall performance to be exceptional. The committee considered the contributions of each of the NEOs and determined that a payout at 150% of target for the individual portion of the AIP was appropriate for each of the NEOs based on the significant individual contributions to the strong Company performance achieved in the first full year since emergence from bankruptcy. Highlights of the performance achieved include:

 

Executed a re-alignment of the organization and balance sheet improvements consistent with the new Company strategy

 

Repositioned the Company as a lower-cost, capital disciplined, free cash flow-focused upstream oil and gas company and a leader in carbon management and ESG

 

o

Actively engaged with investors and analysts to communicate the new strategic direction

 

o

Developed a carbon management business strategy and launched Carbon TerraVault

 

o

Developed an ESG strategy and set goals for full-scope Net Zero by 2045

 

Delivered on shareholder return initiatives through the stock repurchase program and initiation of a quarterly dividend

 

Realigned the balance sheet with the offering of $600 million of senior unsecured notes along with amendments to the reserve based lending facility


CALIFORNIA RESOURCES CORPORATION    29


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

AIP Payouts

The following table shows the calculation of the 2021 AIP payouts, based on the AIP scorecard result of 162% and the individual portion result of 150%:

(1)

Per the terms of his employment agreement, the actual payout for Mr. McFarland was reduced by the difference ($278,878) between the monthly fee he would have received under his interim CEO agreement and the monthly salary he received under his employment agreement had it been in effect for the period from the beginning of 2021 until he was appointed President and CEO on March 22, 2021.

Approved Payouts 162% Payout 150% Payout Total Payout Name Base Salary Target Bonus% Target Bonus $ 80% Scorecard Portion 20% Individual Portion Approved Payout Mark A. (Mac) McFarland (1) $850,000 120% $1,020,000 $1,321,920 $306,000 $1,627,920 Francisco J. Leon $500,000 100% $500,000 $648,000 $150,000 $798,000 Jay A. Bys $500,000 100% $500,000 $648,000 $150,000 $798,000 Shawn M. Kerns $500,000 100% $500,000 $648,000 $150,000 $798,000 Michael L. Preston $500,000 100% $500,000 $648,000 $150,000 $798,000

 

Long-Term Incentive Grants

Working with LB&Co, the New Compensation Committee determined that the long-term incentive program for 2021 should consist of multi-year sized emergence grants to immediately realign the NEOs with shareholder interests and to reestablish the retention value of multi-year equity grants, since all of the NEOs’ prior Company stock holdings and equity awards were cancelled upon our emergence from bankruptcy.

In 2021, the New Compensation Committee approved emergence grants allocated between Restricted Stock Unit Awards and Performance Stock Unit Awards. The grant target values for the awards were split approximately evenly between the two award types for each NEO.  

2021 LONG-TERM INCENTIVE MIX (percent of Grant Target Value) CEO 48% Restricted Stock Units (RSU) 52% Performance Stock Units (PSU) NEOs OTHER THAN CEO 50% Restricted Stock Units (RSU) 50% Performance Stock Units (PSU)


CALIFORNIA RESOURCES CORPORATION    30


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

2021 Long-Term Incentives Granted to NEOs

Name

 

Grant

Target Value

 

Type of

Award Granted (1)

 

Date of Grant

 

Units Granted (2)

Mark A. (Mac) McFarland (3)

$1,217,466

Director Emergence RSU

1/25/2021

61,333

 

$6,291,692

Emergence RSU

3/22/2021

255,760

 

$7,993,870

Emergence PSU

3/22/2021

324,954

Francisco J. Leon

$1,650,000

Emergence RSU

1/25/2021

83,123

 

$1,650,000

Emergence PSU

1/25/2021

83,124

Jay A. Bys

$1,512,500

Emergence RSU

5/12/2021

61,309

 

$1,512,500

Emergence PSU

5/12/2021

61,309

Shawn M. Kerns

$1,650,000

Emergence RSU

1/25/2021

83,123

 

$1,650,000

Emergence PSU

1/25/2021

83,124

Michael L. Preston

$1,650,000

Emergence RSU

1/25/2021

83,123

 

$1,650,000

Emergence PSU

1/25/2021

83,124

(1)

The aggregate emergence awards were designed to provide approximately three times the anticipated annual future grant values. The New Compensation Committee does not contemplate granting annual long-term incentive awards to the NEOs during 2022 but expects to resume annual grants beginning in 2023 with grant target values of approximately one-third of the values granted in 2021.

(2)

The number of units granted is determined by dividing the grant target value by the 60-day volume-weighted average price of CRC stock on the day preceding the grant date.

(3)

Mr. McFarland was also serving as a Board member during the 2021 year and was eligible to receive a director emergence grant as the other independent directors received, described further in the Director Compensation section. The director emergence grant he received was considered in determining the grant target value of the emergence RSU grant he received upon his appointment as President and CEO.

2021 Restricted Stock Unit Award

The 2021 Restricted Stock Unit Award (“2021 RSU Award”) is a stock-based and stock-settled long-term incentive award primarily intended to promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. The 2021 RSU Award generally vests ratably on each of the first three anniversary dates of the grant date. The delivery of vested shares under the 2021 RSU Award is deferred until the final vesting date except under certain circumstances relating to the grantee’s death or a change in control. Dividend equivalents are accumulated and paid at the time shares are delivered.

2021 Performance Stock Unit Award

The 2021 Performance Stock Unit Award (“2021 PSU Award”) is a stock-based and stock-settled long-term incentive with performance measures based on the attainment of pre-determined 60-trading day Volume-Weighted Average Price (“VWAP”) thresholds for the Company’s shares during the three-year performance period commencing on the grant date (“Performance Period”). Utilizing VWAP thresholds for the performance criteria is intended to focus the NEOs on actions that will increase shareholder value over the Performance Period.

The 2021 PSU Award will generally cliff vest on the third anniversary of the grant date and payout up to 100% of the award units in shares based on the performance level attained during the Performance Period. Dividend equivalents will be accumulated during the vesting period and paid without interest following the vesting date based on the number of shares that are earned.

The “Performance Goal” for the 2021 PSU Award is based on the maximum “CRC Stock Value” attained during the Performance Period, as shown in the table below. The CRC Stock Value is the simple average of the VWAP of CRC common stock trading on the New York Stock Exchange during the sixty trading days immediately preceding the date upon which such value is being determined.  In order for the NEOs to earn 100% of the PSU Award units, the CRC stock price must attain a 60-day VWAP in excess of 170% of the stock price on the grant date.

 

CALIFORNIA RESOURCES CORPORATION    31


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

 

 

2021 PSU Award Performance Goal

 

Maximum CRC Stock Value (60-day VWAP)

Attained During Performance Period

 

Percentage of PSU Award

Units that Become Earned

PSU Award Units (2)

 

Mr. McFarland (1)

Messrs. Leon, Bys, Kerns

and Preston (1)

Less than $27.75

Less than $28.70

0%

$27.75

$28.70

25%

$31.91

$33.00

50%

$36.70

$37.75

75%

$42.20 or More

$43.65 or More

100%

 

(1)

Thresholds for Mr. McFarland’s award are different than other NEOs due to different CRC stock price at different grant dates.

 

(2)

Linear interpolation applies between any two rows below.

On December 1, 2021, the CRC Stock Value reached the 100% earned level for Mr. McFarland’s 2021 PSU Award.  As of December 31, 2021, the maximum CRC Stock Value had attained a 96.6% earned level under the 2021 PSU Awards for Messrs. Leon, Bys, Kerns and Preston.

Linkage Between Pay and Performance

Our 2021 Compensation Program was designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing incentives necessary to retain our executives as we emerge from bankruptcy.

The pay mix at target grant date values for our CEO and other NEOs under the 2021 Compensation Program was primarily long-term and performance-based.

PAY MIX OF CEO 5% salary 6% annual incentive 46% performance-based long-term incentive 43% time-vested long-term incentive 95% at risk AVERAGE PAY MIX OF NEOs OTHER THAN CEO 12% salary 12% annual incentive 38% performance based long-term incentive 38% time-vested long-term incentive 88% at risk                


CALIFORNIA RESOURCES CORPORATION    32


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

Employment Agreements

In 2021, the Company entered into various employment agreements with the CEO and other NEOs, as summarized below. The Compensation Committee believes it is the best interests of stockholders to have agreements in place to help retain the CEO and other NEOs. Such agreements also protect Company interests and ensure they can execute their duties in the best interests of stockholders without personal bias by providing change in control protections in the event a transaction that is in the best interests of stockholders would result in their termination of employment.    

CEO

Mr. McFarland was named Interim CEO following the departure of our prior CEO on December 31, 2020.  We entered an agreement with Mr. McFarland (the “Interim CEO Agreement”) that provided for a fee of $175,000 per month for his services as an independent contractor while he served as our Interim CEO.  During the period he served as Interim CEO, he did not receive cash retainer fees for serving on our Board.

Effective March 22, 2021, the Board named Mr. McFarland President and CEO, removing his previous interim title.  In connection with Mr. McFarland’s appointment, the Company and Mr. McFarland entered into an Employment Agreement (the “CEO Employment Agreement”). The CEO Employment Agreement provides for a two-year term, during which either the Company or Mr. McFarland may terminate the employment relationship for any or no reason (such two-year or earlier period, the “Term”). The parties may mutually agree to extend the Term for additional one-year periods. Pursuant to the CEO Employment Agreement, during the Term, Mr. McFarland will receive an annualized base salary of $850,000, will be covered under the Company’s directors and officers liability insurance and will be eligible (i) to receive an annual cash bonus with a target value of 120% of his base salary (reduced for 2021 by the difference, if any, between the amount of fees earned by Mr. McFarland from January 1, 2021 to March 21, 2021 for his service during such period as Interim Chief Executive Officer and the amount of base salary that would have been paid to Mr. McFarland during such period pursuant to the CEO Employment Agreement had such agreement been in effect January 1, 2021), (ii) to participate in those benefit plans and programs of the Company available to similarly situated executives and (iii) commencing in 2023, to receive annual long-term incentive awards (expected to be comprised 70% of performance stock units (“PSUs”) and 30% of restricted stock units (“RSUs”)) under the Company’s 2021 Long Term Incentive Plan (the “LTIP”) with a grant target value of not less than 588% of his base salary as in effect on the applicable grant date. Mr. McFarland also received an initial long-term incentive award consisting of PSUs with a grant target value of $7,993,870 (the “Initial PSUs”) and RSUs with a grant date value of $6,291,692 (the “Initial RSUs”), in each case, under the LTIP in connection with his appointment as President and Chief Executive Officer of the Company.

The CEO Employment Agreement also provides for certain severance payments and benefits to be provided to Mr. McFarland upon his termination of employment by the Company under various scenarios as further detailed in the Potential Payments upon Termination or Change in Control section of the Executive Compensation Tables which follow.

Other NEOs

On June 8, 2021, the Company entered into employment agreements with each of Messrs. Leon, Bys, Kerns and Preston (each an “Employment Agreement”). Each Employment Agreement provides for an initial one-year term and will automatically renew for an additional one-year term on each anniversary unless the Company or the executive provides 90 days’ written notice to the other that no such automatic renewal shall occur. However, either the Company or the executive may terminate the employment relationship for any or no reason at any time during the initial one-year term or any renewal term. Pursuant to each Employment Agreement, each executive will receive an annualized base salary of $500,000, will be covered under the Company’s directors and officers liability insurance and will be eligible (i) to receive an annual cash bonus with a target value of 100% of his base salary, (ii) to participate in those benefit plans and programs of the Company available to similarly situated executives and (iii) commencing in 2023, to receive annual long-term incentive awards (expected to be comprised 70% of performance stock units and 30% of restricted stock

CALIFORNIA RESOURCES CORPORATION    33


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

units) under the LTIP with a grant target value of not less than 220% of his base salary as in effect on the applicable grant date.

Each Employment Agreement also provides for certain severance payments and benefits to be provided to the executive upon his termination of employment by the Company under various scenarios as further detailed in the Potential Payments upon Termination or Change in Control section of the Executive Compensation Tables which follow.

2022 Compensation Program Actions

 

Base Salaries

The New Compensation Committee does not plan to provide base salary increases for the NEOs in 2022.

Annual Incentive Program

In February 2022, the New Compensation Committee approved the scorecard metrics for the 2022 Annual Incentive Program. In addition to metrics related to financial performance, capital efficiency and cost control, 30% of the 2022 scorecard weighting relates to carbon management, environmental stewardship, worker safety, and diversity, equity and inclusion.

Long-Term Incentive Grants

The 2021 Compensation Program provided multi-year sized long-term incentive grants to immediately align the NEOs compensation opportunities with our new shareholder interests and establish the retention value of multi-year equity grants.  As a result, the New Compensation Committee does not plan to provide long-term incentive grants to the NEOs during 2022, instead resuming single-year sized long-term incentive grants in 2023.

Other Compensation and Benefits

 

In addition to the components of the executive compensation program described above, we provided the following programs to our NEOs during the 2021 year.

Qualified Defined Contribution Plan – All of our employees, including our NEOs, were eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provided for periodic cash contributions by us based on annual employee cash compensation and employee-elected deferrals. Employees were permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by the Internal Revenue Service (“IRS”). Employees were able to direct their account balances to a variety of investments.

Nonqualified Defined Contribution Plans – Substantially all employees, including our NEOs, whose participation in our qualified defined contribution plan was limited by applicable tax laws were eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provided additional retirement benefits outside of those limitations.

Annual allocations for each participant were generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations, and certain employer allocations were subject to a vesting schedule that required the completion of three years of service. Vested account balances will be payable following separation from service.

Interest on SSP account balances was allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.

CALIFORNIA RESOURCES CORPORATION    34


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

In addition, we sponsored a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for Messrs. Leon, Kerns and Preston. All account balances under the SRP II were fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations were made under the SRP II other than the crediting of interest.

In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allowed in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.

Nonqualified Deferred Compensation Plan – Certain management and other highly compensated employees (including each of our NEOs) were eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants were able to elect to defer a portion of their base salary and annual bonus for a given year. For the year of deferral, we allocated an additional amount to a participant’s account equal to the sum of 6% (which is immediately vested) and 2% (which is subject to a vesting schedule that required the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that were not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts earned interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.

Tax Preparation and Financial Planning – Our executives, including each of the NEOs, were eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.

Insurance – We offered a variety of health coverage options to all employees. NEOs participated in these plans on the same terms as other employees. In addition, for executives, including the NEOs, we paid for an annual comprehensive physical examination. We provided all employees with life insurance equal to twice the employee’s base salary.

Employee Stock Purchase Plan We adopted a new California Resources Corporation Employee Stock Purchase Plan (the “ESPP”), effective February 22, 2022, subject to approval by shareholders at the Annual Meeting, which will provide our employees (including our NEOs) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of either the first day of each offering period or the last day of each offering period, whichever amount was less.

The maximum number of shares of our common stock to be authorized to be issued pursuant to the ESPP is 1.25 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP will be subject to certain limits on the number of shares that can be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.

CALIFORNIA RESOURCES CORPORATION    35


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

Compensation Objectives and Process

The purpose of our executive compensation program is to allow us to attract, retain, motivate and reward high-performing executives to maximize returns to our stockholders.

Executive Compensation Objectives

 

Our executive compensation objectives are to:

 

Motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward.

 

Provide a high percentage of senior executives’ pay based on performance to ensure the highest level of accountability to stockholders.

 

Offer an opportunity for performance-based pay to provide above market compensation when our performance exceeds our goals balanced by the risk of below market compensation when it does not.

 

Align executive and stockholder interests by focusing our executives on balancing short- and long-term performance of the Company.

Compensation Program Best Practices

 

Our executive compensation program is designed to incorporate compensation and governance best practices and is overseen by a highly engaged Compensation Committee. Our short-term and long-term incentive plans are primarily performance-based and are intended to align with the short- and long-term best interests of stockholders. The New Compensation Committee has engaged in best practices to further align executive pay with Company performance and to ensure good governance in the following ways:

 

CALIFORNIA RESOURCES CORPORATION    36


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. All of the outstanding long-term incentive awards for our named executive officers are stock-based.  We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

 

 

CALIFORNIA RESOURCES CORPORATION    37


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

 

Role of Compensation Committee

 

Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultants. In its oversight role, the Compensation Committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.

Role of Management

 

Our President and CEO and our Vice President of Compensation and Benefits provided input to the Compensation Committee with respect to executive compensation, key job responsibilities, achievement of performance objectives and compensation program design. We believe these individuals provide helpful support to the Compensation Committee in these areas given their understanding of our business and personnel, compensation programs and competitive environment. The Compensation Committee is not obligated to accept management’s recommendations with respect to executive compensation matters and meets in executive session to discuss such matters outside of the presence of our management. During 2021, the Compensation Committee held one executive session.

Role of Independent Compensation Consultants

 

The Compensation Committee retained Lyons Benenson & Company Inc. (“LB&Co”), after considering all factors relevant to LB&Co’s independence from our management and members of our New Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards. LB&Co advised the New Compensation Committee beginning immediately following our emergence from bankruptcy.

Use of Compensation Data

 

Early in 2021, our Compensation Committee analyzed the comparative total compensation of our executive officers. To facilitate this analysis, LB&Co provided the Compensation Committee with comparative Peer Group compensation data that included base salaries, annual incentive opportunities, and long-term incentive opportunities. This information reflected recent publicly available information and other market data. We believe that it provided our Compensation Committee with a sufficient basis to analyze the comparative total compensation of our executive officers.

2014 SPIN-OFF √ Occidental determines executive compensation in effect at Spin-off 2015 √ CRC Compensation Committee selects new peer group and designs compensation program 2016 √ Compensation Committee reduces base salaries by 10% during severe downturn √ Compensation Committee applies negative discretion and reduces annual incentive payouts due to severe business conditions √ Compensation Committee reduces long-term incentive grant date values in anticipation of market movement during severe downturn 2017 √ Compensation Committee changes long-term incentive to address retention concerns and equity burn rate with cash-based performance award 2018 √ Compensation Committee selects expanded peer group for 2018 √ Compensation Committee reduces qualitative portion of annual incentive √ Compensation Committee changes long-term performance award to equity-based 2019 √ Compensation Committee reduces number of metrics under Annual Incentive to provide greater focus on key objectives √ Compensation Committee changes long-term performance award metrics to include a relative Total Shareholder Return metric

Stockholder Outreach

 

Historically, we have regularly requested meetings with several of our stockholders to discuss our governance and executive compensation practices. We intend to engage with stockholders in 2022 to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.

Stockholder Approval of Executive Compensation

Our stockholder advisory vote in 2021 on our 2020 executive compensation program was negatively impacted by the extraordinary changes the Former Compensation Committee made to the original 2020 compensation program it had previously approved in order to retain and motivate our executive management team and broader organization through our financial restructuring. This resulted in a 69% approval of such compensation by stockholders.

In developing our 2021 Compensation Program, the New Compensation Committee considered the anticipated results of last year’s advisory vote on executive compensation and many other factors, including the New Compensation Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by LB&Co, the New Compensation Committee's independent compensation consultant, and review of data relating to pay practices of our compensation peer group.

CALIFORNIA RESOURCES CORPORATION    38


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

Other Compensation Matters

Stock Ownership Guidelines

 

We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the CEO is six times annual base salary, and for the other NEOs, is three times annual base salary. Executives are expected to attain their required ownership levels within five years of assuming their senior executive role. Due to the cancellation of the Company’s stock upon emergence from bankruptcy in October 2020, executives at emergence will have five years from the emergence date to attain the minimum stock holdings.

Clawback Policy

 

Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements or in the event of misconduct by a named executive officer or any section 16 reporting officer, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation received by a named executive officer. Such incentive compensation generally includes any cash, equity, equity-based or other award under our long-term incentive plan, or an annual bonus or annual incentive plan of the Company.

 

The Compensation Committee amended and restated the policy during 2021 to expand the employees covered to include all section 16 reporting officers, add misconduct as a recoupment event, allow for recoupment of up to the full amount of incentive compensation received and provide for Board discretion in application of the policy.

Anti-Hedging and Anti-Pledging Policy

 

Under the Company’s Insider Trading Policy, all directors, officers and employees, including the named executive officers, are prohibited from hedging, buying or selling options, engaging in short sales, or trading prepaid variable forwards, equity swaps, exchange funds, forward-sale contracts, collars or other derivatives or monetizations on Company securities. In addition, all directors, officers and employees, including named executive officers, may not pledge or mortgage Company securities as collateral for a loan, or hold Company securities in a margin account.

Compensation Risk Management

 

Our compensation programs are designed to motivate and reward our employees for their performance during the current year and over the long term, and for taking appropriate business risks to enhance CRC’s business performance. The Compensation Committee has analyzed CRC’s employee compensation programs and policies and believes that they are not reasonably likely to have a material adverse effect on CRC. CRC’s compensation programs do not encourage unnecessary or excessive risk-taking and any potential risk that the executive compensation program could influence behavior that would be inconsistent with the overall interests of CRC and its stockholders is mitigated by several factors:

 

Target compensation mix utilizes a balance of salary, annual incentives and long-term equity compensation vesting over three years

 

Transparent financial and operational metrics that are readily ascertainable from publicly-filed information

 

External performance metrics, utilizing the increase in the volume-weighted average price of the Company’s shares, for the long-term performance-based incentive awards

 

Forfeiture and clawback provisions for incentive compensation in the event of a restatement of our financial statements or misconduct

CALIFORNIA RESOURCES CORPORATION    39


 

 2022 PROXY STATEMENT 

Compensation Discussion and Analysis

 

Tax Considerations

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs. The Compensation Committee believes it is in the best interest of the Company and our stockholders to provide compensation that is necessary to retain and motivate our executive officers, even if that is not fully deductible.

 

 

CALIFORNIA RESOURCES CORPORATION    40


 

 2022 PROXY STATEMENT 

Compensation Committee Report

 

 

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 2022 Annual Meeting of Stockholders.

 

Compensation Committee,

James N. Chapman, Chair

Tiffany (TJ) Thom Cepak

Nicole Neeman Brady

William B. Roby

 

February 22, 2022

 

CALIFORNIA RESOURCES CORPORATION    41


 

 2022 PROXY STATEMENT 

Executive Compensation Tables

 

 

 

Executive Compensation Tables

Summary Compensation Table (SCT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

Deferred

 

 

 

 

 

 

 

 

 

 

 

Name and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

 

 

Option

 

 

Incentive Plan

Compensation

All Other

 

 

 

 

 

 

Principal

 

 

Year

 

 

Salary

 

 

 

Bonus

 

 

Awards

Awards

Compensation

Earnings

Compensation

 

Total

 

 

 

Position

 

 

 

(1)

 

 

 

(2)

 

 

 

(3)

 

 

 

(3)

 

 

 

(4)

 

 

 

(5)

 

 

 

(6)

 

 

 

 

 

 

 

 

 

Mark A. (Mac) McFarland (7)

 

 

2021

 

 

$

1,122,395

 

 

 

$

306,000

 

 

 

$

14,132,218

 

 

 

$

0

 

 

 

$

1,043,022

 

 

 

$

0

 

 

 

$

979,646

 

 

 

$

17,583,281

 

 

 

 

President and

 

 

2020

 

 

$

0

 

 

 

$

0

 

 

 

$

0

 

 

 

$

0

 

 

 

$

0

 

 

 

$

0

 

 

 

$

47,529

 

 

 

$

47,529

 

 

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Francisco J. Leon (7)

 

 

2021

 

 

$

491,154

 

 

 

$

150,000

 

 

 

$

3,641,638

 

 

 

$

0

 

 

 

$

648,000

 

 

 

$

4,181

 

 

 

$

106,925

 

 

 

$

5,041,898

 

 

 

 

Executive Vice President and

 

 

2020

 

 

$

362,788

 

 

 

$

288,750

 

 

 

$

900,010

 

 

 

$

100,002

 

 

 

$

1,677,300

 

 

 

$

2,673

 

 

 

$

195,898

 

 

 

$

3,527,421

 

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jay A. Bys (7)

 

 

2021

 

 

$

626,923

 

 

 

$

150,000

 

 

 

$

2,684,108

 

 

 

$

0

 

 

 

$

648,000

 

 

 

$

0

 

 

 

$

77,332

 

 

 

$

4,186,363

 

 

 

 

Executive Vice President and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chief Commercial Officer