DEF 14A 1 d62498ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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Hess Corporation

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LOGO


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LOGO

HESS CORPORATION

April 23, 2021

Dear Stockholder:

Our company’s strategy has been – and continues to be – to grow our resource base, have a low cost of supply and sustain cash flow growth. By investing only in high return, low cost opportunities, we have built a differentiated portfolio that is balanced between short cycle and long cycle assets, with Guyana as our growth engine and the Bakken, Gulf of Mexico and Southeast Asia as our cash engines. Guyana will become a significant cash engine as multiple phases of low cost oil developments come online, which we believe will drive our company’s breakeven price below $40 per barrel Brent and provide industry leading cash flow growth over the course of the decade.

Throughout the pandemic, our company has maintained a constant focus on the safety of our workforce and the communities where we operate. In response to the pandemic’s severe impact on oil prices, our priorities have been to preserve cash, preserve our operating capability and preserve the long term value of our assets. In terms of preserving cash, we came into 2020 with approximately 80% of our oil production hedged with put options for 130,000 barrels per day at $55 per barrel West Texas Intermediate (“WTI”) and 20,000 barrels per day at $60 per barrel Brent. For 2021, we have hedged 120,000 barrels per day with $55 per barrel WTI put options and 30,000 barrels per day with $60 per barrel Brent put options.

To enhance cash flow and maximize the value of our production, in March and April of 2020 when U.S. oil storage was near capacity, we chartered three very large crude carriers to store and transport more than 6 million barrels of Bakken crude oil to high value markets in Asia; all three cargoes were sold at a premium to Brent.

We reduced our 2020 capital and exploratory budget from $3 billion down to $1.8 billion, primarily by dropping from six Bakken rigs to one. We also reduced our 2020 cash operating costs by $275 million. We further strengthened our cash and liquidity position in 2020 through a $1.0 billion, three year term loan agreement. During the fourth quarter, we closed on the sale of our 28% interest in the Shenzi Field in the Gulf of Mexico for a total consideration of $505 million.

In terms of preserving capability, a key for us was continuing to operate one rig in the Bakken in 2020. Our Bakken team has made great progress over the past 10 years in Lean manufacturing capabilities and innovative practices, which have delivered significant cost efficiencies and productivity improvements that we want to preserve for the future.

To preserve the long term value of our assets, we allocated more than 80% of our 2021 capital and exploratory budget of $1.9 billion to Guyana, where our three sanctioned oil developments have a Brent breakeven oil price of between $25 and $35 per barrel, and to the Bakken, where we have a large inventory of future drilling locations that can generate attractive financial returns at $50 per barrel WTI.

On the Stabroek Block in Guyana, where Hess has a 30% interest and ExxonMobil is the operator, 2020 was another outstanding year. Three oil discoveries during the year brought total discoveries on the block to 18, and we continue to see multibillion barrels of future exploration potential remaining.

Production from Liza Phase 1 reached its nameplate capacity of 120,000 gross barrels of oil per day in December 2020, and the Liza Phase 2 development, with a capacity of 220,000 gross barrels of oil per day, is on track to achieve first oil in early 2022. In September 2020, we sanctioned our third oil development on the Stabroek Block at the Payara Field, which will have a capacity of 220,000 gross barrels of oil per day and is expected to achieve first oil in 2024.


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In the Bakken, our 2020 net production came in well above our original guidance for the year and 27% above that of 2019. As WTI oil prices moved above $50 per barrel, in February 2021 we added a second rig, which will allow us to maintain net production in the range of 175,000 barrels of oil equivalent per day and sustain long term cash flow generation from our largest operated asset.

Proved reserves at the end of 2020 stood at 1.17 billion barrels of oil equivalent. Net proved reserve additions and revisions in 2020 totaled 117 million barrels of oil equivalent, including negative net price revisions of 79 million barrels of oil equivalent, replacing 95% of 2020 production.

Sustainability

As we execute our company’s strategy, we will continue to be guided by our longstanding commitment to sustainability. In keeping with our Hess values, we strive to help address societal inequities by fostering a diverse and inclusive work environment and creating opportunities in the communities where we operate. Our board of directors is climate change literate and actively engaged in overseeing Hess’ sustainability practices. We are committed to transparency – our strategy and reporting are closely aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”). We are proud to have been recognized throughout 2020 by a number of third party organizations as an industry leader in our environmental, social and governance performance and disclosure.

We recognize that climate change is one of the greatest scientific challenges of the 21st century that must be addressed while at the same time providing the safe, affordable and reliable energy that is fundamental to human prosperity and world economic growth. We support the aim of the Paris Agreement and a global ambition to achieve net zero emissions by 2050. Our business planning includes actions we will undertake to continue reducing our carbon footprint in keeping with the findings of the U.N. Intergovernmental Panel on Climate Change.

Our board and senior leadership have set aggressive targets for greenhouse gas (“GHG”) emissions reduction. In 2020, we significantly surpassed our five year targets to reduce Scope 1 and 2 GHG emissions intensity by 25% and flaring intensity by 50% from our operated assets – reducing GHG emissions intensity and flaring intensity by approximately 40% and 60%, respectively, compared with 2014 levels. We recently announced our new five year GHG reduction targets for 2025, which are to reduce operated Scope 1 and 2 GHG emissions intensity by approximately 44% and methane emissions intensity by approximately 50% from 2017.

In addition, we are investing in technological and scientific advances designed to reduce, capture and store carbon emissions, including groundbreaking work being conducted by the Salk Institute to develop plants with larger root systems that according to the Salk Institute are capable of absorbing and storing potentially billions of tons of carbon per year from the atmosphere.

We have tested the resilience of Hess’ portfolio under the supply and demand scenarios from the International Energy Agency (“IEA”). The IEA’s Sustainable Development Scenario, which assumes all the pledges of the Paris Climate Agreement are met, projects oil and gas will still be 46% of the global energy mix in 2040. Our current asset portfolio is robust, and our pipeline of forward investments is projected to provide strong financial returns under the Sustainable Development Scenario.

Commitment to Shareholders

We will continue to execute our strategy that has positioned our company to deliver industry leading cash flow growth and financial returns over the course of the decade. We are proud of our employees for their many accomplishments and grateful for the counsel and guidance of our directors. Thank you, our shareholders, for your continued support and interest in our company.

You are cordially invited to participate in our annual meeting of stockholders, which will be held as a virtual meeting, on Wednesday, June 2, 2021 at 9:00 a.m., Central Time. We look forward to sharing more about our company at our annual meeting.

Sincerely,

 

LOGO

 

Independent Chairman

of the Board of Directors

  

 

LOGO

 

Chief Executive Officer


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TABLE OF CONTENTS

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

     i  

PROXY SUMMARY

     ii  

2021 Annual Meeting Information

     ii  

Voting Matters

     ii  

How to Vote

     ii  

Our Purpose: To Be The World’s Most Trusted Energy Partner

     iii  

Corporate Culture and Human Capital Management

     iii  

Strategy of Value Creation

     iv  

Corporate Performance Highlights

     iv  

Commitment to Sustainability

     v  

Sustainability Focus Across Our Company

     v  

Environmental, Social and Governance Disclosure and Transparency

     vi  

Director Nominees

     vii  

Executive Compensation Tied to Company Performance

     viii  

Strong Governance Practices Promote Alignment with Stockholder Interests

     ix  

PROXY STATEMENT

     1  

PROPOSAL 1:  ELECTION OF DIRECTORS

     2  

Majority Voting Standard

     2  

Nominees for Director

     2  

Director Nominations

     6  

Board Evaluation

     7  

Board Leadership Structure / Independent Chairman

     8  

Director and Nominee Independence

     8  

Meeting Attendance

     8  

Corporate Governance Guidelines

     9  

Stockholder and Interested Party Communications

     9  

Related Party Transactions

     9  

Committees of the Board

     10  

Report of the Audit Committee

     12  

Stockholder Engagement

     14  

Risk Oversight

     14  

Ownership of Voting Securities by Certain Beneficial  Owners

     16  

Ownership of Equity Securities by Management

     18  

Director Compensation

     19  

EXECUTIVE COMPENSATION

     20  

Compensation Discussion and Analysis

     20  

A Special Note Regarding COVID-19

     20  

Executive Summary

     21  

Compensation Program Key Practices Promote Alignment with Stockholder Interests

     25  

Compensation Objective and Philosophy

     26  

2020 Total Direct Compensation

     26  

Peer Group

     33  

Process for Determining Compensation and Role
of Compensation Consultants

     34  

Additional Information

     34  

Compensation Committee Report

     37  

Compensation Committee Interlocks and
Insider Participation

     37  

Summary Compensation Table

     38  

Grants of Plan-Based Awards

     39  

Outstanding Equity Awards at Fiscal Year End

     40  

Option Exercises and Stock Vested

     42  

Pension Benefits

     42  

Nonqualified Deferred Compensation

     43  

Employment Agreements and Termination Agreements

     43  

Potential Payments upon Termination or
Change in Control

     44  

CEO Pay Ratio

     47  

Compensation and Risk

     47  

PROPOSAL 2:  ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

     49  

PROPOSAL 3:  RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

     50  

PROPOSAL 4:  APPROVAL OF AMENDMENT NO. 1 TO OUR 2017 LONG TERM INCENTIVE PLAN

     52  

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

     62  

ADDITIONAL INFORMATION

     67  

OTHER MATTERS

     68  

ANNEX A: AMENDMENT NO. 1 TO HESS CORPORATION 2017 LONG TERM INCENTIVE PLAN

     A-1  

ANNEX B: 2017 LONG TERM INCENTIVE PLAN

     B-1  
 


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Cautionary Note Regarding Forward-Looking Statements

 

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; estimates of our crude oil and natural gas reserves and levels of production; benchmark prices of crude oil, natural gas liquids and natural gas and our associated realized price differentials; our projected budget and capital and exploratory expenditures; expected timing and completion of our development projects; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; and future economic and market conditions in the oil and gas industry.

Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:

 

   

fluctuations in market prices of crude oil, natural gas liquids and natural gas and competition in the oil and gas exploration and production industry, including as a result of the global COVID-19 pandemic (“COVID-19”);

 

   

reduced demand for our products, including due to COVID-19 or the outbreak of any other public health threat, or due to the impact of competing or alternative energy products and political conditions and events;

 

   

potential failures or delays in increasing oil and gas reserves, including as a result of unsuccessful exploration activity, drilling risks and unforeseen reservoir conditions, and in achieving expected production levels;

 

   

changes in tax, property, contract and other laws, regulations and governmental actions applicable to our business, including legislative and regulatory initiatives regarding environmental concerns, such as measures to limit greenhouse gas emissions and flaring as well as fracking bans;

 

   

disruption or interruption of our operations due to catastrophic events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber-attacks or health measures related to COVID-19;

 

   

the ability of our contractual counterparties to satisfy their obligations to us, including the operation of joint ventures under which we may not control;

 

   

unexpected changes in technical requirements for constructing, modifying or operating exploration and production facilities and/or the inability to timely obtain or maintain necessary permits;

 

   

availability and costs of employees and other personnel, drilling rigs, equipment, supplies and other required services;

 

   

any limitations on our access to capital or increase in our cost of capital, including as a result of weakness in the oil and gas industry or negative outcomes within commodity and financial markets;

 

   

liability resulting from litigation, including heightened risks associated with being a general partner of Hess Midstream LP; and

 

   

other factors described in Item 1A – Risk Factors in our Annual Report on Form 10-K and any additional risks described in our other filings with the Securities and Exchange Commission.

As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

 


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LOGO

HESS CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Wednesday, June 2, 2021, at 9:00 a.m.

To the Stockholders:

The annual meeting of stockholders of Hess Corporation will be held on Wednesday, June 2, 2021, at 9:00 a.m., Central Time, for the following purposes:

 

  1.

To elect eleven directors for the ensuing one-year term (pages 2 to 19 of the accompanying proxy statement);

 

  2.

To conduct a non-binding advisory vote to approve the compensation of our named executive officers (page 49);

 

  3.

To act upon the ratification of the selection by the audit committee of Ernst & Young LLP as our independent registered public accountants (pages 50-51);

 

  4.

To approve amendment no. 1 to our 2017 long term incentive plan (pages 52-61); and

 

  5.

To transact any other business which properly may be brought before the meeting.

Due to the ongoing health impact of COVID-19 and in order to protect our stockholders, employees and others and align with relevant gathering and travel restrictions, the annual meeting will be held as a virtual only meeting of stockholders. If you are a stockholder of record at the close of business on April 12, 2021, the record date for the annual meeting, you will be able to attend the annual meeting as well as submit questions and vote during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HES2021. You will not be able to attend the annual meeting in person. Additional information on how to participate in the virtual annual meeting can be found on page 62. This does not represent a change in our stockholder engagement philosophy, and we intend to return to an in-person meeting next year.

By order of the board of directors,

Timothy B. Goodell

Secretary

April 23, 2021

YOUR VOTE IS IMPORTANT

 

You are urged to date, sign and promptly return the proxy card in the envelope provided to you, or to use the telephone or internet method of voting described in your proxy card, so that if you are unable to attend the meeting and vote electronically your shares can be voted.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 2, 2021:

Hess Corporation’s notice of meeting, proxy statement and 2020 annual report are available at www.proxyvote.com.

The attached proxy statement is dated April 23, 2021 and is first being mailed to stockholders on or about April 23, 2021.


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PROXY SUMMARY

The following section is only a summary of key elements of the proxy statement. This summary is intended to assist you in reviewing the proxy statement in advance of the annual meeting of stockholders. It does not contain all of the information you should consider, and we encourage you to read this entire proxy statement before submitting your vote.

2021 Annual Meeting Information

 

 

 

Date & Time

Wednesday, June 2, 2021

at 9:00 a.m., Central Time

      

 

Place

Online at www.virtualshareholdermeeting.com/
HES2021

      

 

Record Date

April 12, 2021

Voting Matters

 

 

Proposals

   Board Vote
Recommendation
     Page
Reference
 
 1.  

Election of eleven director nominees for one-year term expiring in 2022

   ü

FOR

each nominee

       2  

 

 2.

 

Advisory approval of the compensation of our named executive officers

  

 

ü

FOR

    

 

 

 

 

49

 

 

 

 

 3.  

Ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the year ending December 31, 2021

 

 

  

ü

FOR

    

 

 

50

 

 

 

 4.  

Approval of amendment no. 1 to our 2017 long term incentive plan

 

  

 

 

ü

FOR

 

      

 

 

52

 

 

 

 

 

Your vote is important to us. Please exercise your right to vote.

How to Vote

 

 

LOGO   

Over the Internet

 

     LOGO   

By Telephone

 

  

Visit the website listed on your Notice of Internet Availability of Proxy Materials or proxy card or voting instruction form.

 

     

Call the toll-free telephone number listed on your proxy card or voting instruction form.

 

LOGO   

By Mail

 

     LOGO   

At the Annual Meeting

 

  

Follow the instructions on your proxy card or voting instruction form.

     

Stockholders are invited to attend the virtual annual meeting and vote electronically.

To participate, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or on your proxy card (or on your voting instruction form or as provided by your bank, broker or other nominee in the case of beneficial holders). See page 64 for more information.

 

            LOGO    2021 PROXY STATEMENT    ii


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Proxy Summary

    

 

Our Purpose: To Be the World’s Most Trusted Energy Partner

 

Hess Corporation is a global Exploration and Production (“E&P”) company engaged in the exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas.

As a leading independent energy company, our purpose is to be the world’s most trusted energy partner through our strong company values and focus on long-term strategy. We are committed to developing oil and gas resources in an environmentally responsible and sustainable manner. We are focused on building a company that makes a positive impact for all stakeholders: our investors, employees, partners and the communities in which we do business.

Hess Values

Our company values set the framework and establish the ethical standards by which we conduct our business.

 

LOGO  

 

•  INTEGRITY: We are committed to the highest level of integrity in all our relationships.

 

•  PEOPLE: We are committed to attracting, retaining and energizing the best people by investing in their professional development and providing them with challenging and rewarding opportunities for personal growth.

 

•  PERFORMANCE: We are committed to a culture of performance that demands and rewards outstanding results throughout our business.

 

•  VALUE CREATION: We are committed to creating stockholder value based on sustained financial performance and long-term profitable growth.

 

•  SOCIAL RESPONSIBILITY: We are committed to meeting the highest standards of corporate citizenship by protecting the health and safety of our employees, safeguarding the environment and creating a long-lasting, positive impact on the communities where we do business.

 

•  INDEPENDENT SPIRIT: We are committed to preserving the special qualities and unique personality that have made us a successful independent enterprise.

Corporate Culture and Human Capital Management

 

Our workplace culture is guided by the Hess values and reinforced by developing quality leadership, fostering diversity, equity and inclusion, emphasizing continuous learning, creating opportunities for engagement, driving innovation and embracing Lean processes. We are pursuing a Life at Hess initiative to optimize the work experience for our multigenerational workforce and unlock the discretionary effort that is required to perform at a high level on a sustained basis. The Life at Hess framework encompasses programs, policies and practices, and a listening system that draws on in-person dialogues, pulse polls and data analytics to help leaders understand employees’ issues and perspectives and to ensure the health of our company culture and alignment with our values and strategic business priorities. During 2020, due to COVID-19, we adapted our Life at Hess initiative for a work experience that was largely away from the office and with stringent health and safety protocols throughout our operations. We offered supplemental medical resources, mental wellness programs and access to third-party medical experts, at no cost to employees. Employee turnover, diversity, equity and inclusion and leadership development metrics, along with qualitative data are considered by our Diversity, Equity and Inclusion Council and at the executive level. They are also discussed at the compensation and management development committee regularly throughout the year and shared with the full board of directors. Directors have opportunities throughout the year to meet with employees, including virtually due to COVID-19.

 

iii      2021 PROXY STATEMENT   

LOGO

         


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Proxy Summary

 

Strategy of Value Creation

 

Our strategy is to grow our resource base, have a low cost of supply and sustain cash flow growth – investing in high return, low cost projects to move down the cost curve and be profitable in a lower price environment with increasing cash generation and returns to stockholders. Consistent with this strategy, we have built a differentiated portfolio that is balanced between short cycle and long cycle assets, with Guyana as our growth engine and the Bakken, Gulf of Mexico and Southeast Asia as our cash engines. We are confident in our company’s strategy, positioning us to manage through a low price environment to deliver long-term value to our stockholders.

 

 

LOGO

Corporate Performance Highlights

 

In 2020, we built upon our strong performance in 2018 and 2019 to achieve a number of important milestones in Guyana and the Bakken, while substantially reducing cash costs and capital and exploratory expenditures in response to the sharp decline in oil prices due to COVID-19.

 

Strategy & Operations

 

Liza Phase 1

 

reached its nameplate capacity of 120,000 gross barrels of oil per day (“bopd”) in December 2020

 

 

      

  

40% Reduction

 

in 2020 capital and exploratory spend from the original capital budget of $3.0 billion

 

 

      

  

$505 million

 

total consideration, before closing adjustments, for the sale of the company’s interests in the Shenzi Field in the deepwater Gulf of Mexico

 

Finance and Stockholder Returns

 

$5.2 billion

 

total liquidity at 12/31/2020, excluding midstream and including committed credit facilities

 

 

      

  

Ranked #1

 

during 2018-2020 performance period based on total shareholder return compared to peers using performance share unit methodology

 

      

  

150,000 bopd

 

hedged for 2020, including 130,000 bopd with $55 per barrel WTI put options and 20,000 bopd with $60 per barrel Brent put options

 

Exploration and Reserves

 

3 Discoveries

 

during 2020 on the Stabroek Block offshore Guyana, bringing total discoveries to 18

 

 

      

  

Payara Field

 

sanctioned third development on the Stabroek Block offshore Guyana

 

 

      

  

95%

 

organic reserve replacement for 2020 (158% excluding price revisions)

 

            LOGO    2021 PROXY STATEMENT    iv


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Proxy Summary

    

 

Commitment to Sustainability

 

Hess is committed to helping meet the world’s growing energy needs in a safe, environmentally responsible, socially sensitive and profitable way. Our purpose is to be the world’s most trusted energy partner and sustainability is fundamental to our long-term strategy. We believe our focus on sustainability creates value for our stockholders and helps position us to continuously improve business performance. We recently completed a review and update of our environment, health, safety and social responsibility (“EHS & SR”) strategy, beginning with a materiality assessment to prioritize our strategic actions through 2025, which will be discussed more fully in our 2020 sustainability report.

 

 

Strategy and reporting aligned
with TCFD recommendations

 

Support aim of Paris Agreement

and a global ambition to achieve net zero emissions by 2050

   

 

Outperformed 5-year emission reduction targets for 2020

 

Reduced operated Scope 1 and 2 greenhouse gas emissions intensity by
~40% vs. 25% target vs. 2014

 

Reduced flaring intensity by ~60% vs.
50% target
vs. 2014

 

 

   

 

Set new 5-year emission reduction targets for 2025

 

Reduce operated Scope 1 and 2 greenhouse gas emissions intensity by ~44% vs. 2017

 

Reduce methane emissions intensity by ~50% vs. 2017

       

 

Account for cost of carbon in capital investment decisions

 

Test resilience of portfolio under
supply/demand scenarios
including
IEA’s ambitious Sustainable Development Scenario

 

   

 

Contributing to groundbreaking R&D at Salk Institute

 

Research and development of plants capable of storing potentially billions of
tons of atmospheric carbon per year

 

   

 

Executive compensation tied to EHS and climate change goals

 

Bakken flaring reduction target added to 2021 annual incentive plan for all employees

Climate Change Strategy

Hess has established a climate change strategy that is closely aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (“TCFD”) to guide our initiatives to support the transition to a low carbon economy, reduce greenhouse gas emissions and invest in carbon-efficient technologies and innovations. Our climate change strategy ties to our broader business strategy, strategic planning and capital allocation decisions, including applying a theoretical price of carbon in our economic evaluations for significant new projects and conducting annual scenario planning exercises which incorporate the International Energy Agency’s (“IEA”) scenarios for future energy demand and carbon pricing. We understand that a substantive climate strategy requires companies to look beyond a five year timeframe and have established an executive-led taskforce to consider our medium and longer term climate strategy. These efforts help position Hess for the long term as a low-cost producer providing the energy necessary to ensure human welfare and global economic development, even in a low-carbon future.

Sustainability Focus Across Our Company

 

 

 

Safety

 

           

 

Social Responsibility

 

 

  ü   Multidisciplinary team overseeing Hess COVID-19 response; safety of workforce and local communities is our top priority

 

 ü   Reduced our severe safety incident rate by 42% since 2014

 

 ü   Achieved 13% reduction in total recordable incident rate since 2014

 

 ü   Reduced Tier 1 process safety incidents by 65% (2014 to 2019), down to zero incidents in 2020

       

 

ü  Guided by commitments to international voluntary initiatives including the U.N. Global Compact

 

ü  Invest in community programs that address societal inequities with a focus on education and workforce development

 

ü  Committed to making a positive impact on communities where we operate and fostering a diverse and inclusive work environment

 

 

v      2021 PROXY STATEMENT   

LOGO

         


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Proxy Summary

 

Board Oversight of Sustainability Practices

The board is actively engaged in overseeing Hess’ sustainability practices and works alongside senior management to evaluate sustainability risks and global scenarios in making strategic decisions, including those related to climate change. Furthermore, our independent board chairman periodically accompanies our chief executive officer and other members of senior management to meet with investors to solicit shareholder views on EHS & SR topics.

The environmental, health and safety (“EHS”) committee has specific oversight responsibility and makes recommendations to the full board of directors so that sustainability risks and opportunities are taken into account when making strategic decisions. The EHS committee assists the board in identifying, evaluating and monitoring EHS & SR strategies and material risks with the potential to affect the people, environment or communities where we operate or our company’s business activities, performance and reputation. The EHS committee makes recommendations to the full board on policies, programs and practices to address such strategies and risks and monitors the company’s performance against these policies, programs and practices. The EHS committee reviews emergency response preparedness and planning and EHS & SR legal and regulatory matters that could affect the company’s business and operations, including the company’s ongoing response to COVID-19. The EHS committee also advises the board’s compensation and management development committee regarding executive compensation measures to advance the EHS & SR goals of the company.

Board Climate Literacy

Our board is climate change literate, and these and other environmental issues are discussed at the board level and taken into account in strategic decisions. Each member of the EHS committee is independent and qualified under the standards established by applicable law, New York Stock Exchange (“NYSE”) listing standards and our Corporate Governance Guidelines. EHS committee members have extensive oil and gas industry experience, including operational, regulatory and financial expertise. To supplement the expertise of EHS committee members and the full board of directors, we bring in outside subject matter experts to brief members on current and developing issues relevant to our business, such as climate change. Board members, together with our executive leadership, also participate in field visits to Hess operated and non-operated assets to better understand our key EHS & SR strategies and risks. During these visits, the EHS committee engages with the Hess workforce and observes how Hess is managing EHS & SR risks and opportunities, such as leveraging Lean and technology-focused initiatives in the field.

Environmental, Social and Governance Disclosure and Transparency

 

Hess is committed to transparency. The company’s disclosures, including our annual sustainability report, are aligned with the TCFD and informed by the oil and gas industry metrics published by the Sustainability Accounting Standards Board (“SASB”). Our website www.hess.com contains information on our environmental and social policies and programs. Hess is recognized as an industry leader in environmental, social and governance disclosure and transparency:

 

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12 consecutive years

Leadership status

 

11 consecutive

years on North

America Index

 

10 consecutive years

with AA ESG Rating

 

8 consecutive years on

U.S. Index

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No. 1 oil & gas company

No. 9 overall company

13 consecutive years on list

 

Only U.S.

oil & gas producer

  No. 1 oil & gas producer   Only U.S. oil & gas company at 4-Star level

 

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Table of Contents

 

Proxy Summary

    

 

Director Nominees

 

 

    Diverse  

Committee Memberships

    Audit   Compensation   Governance   EHS

Terrence J. Checki*

Former EVP, Federal Reserve Bank of NY

    Chair      

Leonard S. Coleman, Jr.*

Former President of the National League of Major League Baseball; Former Commissioner of the New Jersey Department of Energy

  ü        

Joaquin Duato*

Vice Chairman of the Executive Committee of
Johnson & Johnson

  ü        

John B. Hess

Chief Executive Officer

         

Edith E. Holiday*

Corporate Director and Trustee

  ü       Chair  

Marc S. Lipschultz*

Co-founder and President of Owl Rock Capital Partners and Co-Chief Investment Officer of Owl Rock Capital Advisors

      Chair    

David McManus*

Former EVP, Pioneer Natural Resources

         

Kevin O. Meyers*

Former SVP of Americas E&P, ConocoPhillips

          Chair

Karyn F. Ovelmen*

Former Gas and Power Transformation Leader, General Electric Company and Former EVP and CFO, Flowserve Corporation

  ü        

James H. Quigley*

Independent Chairman of the Board; Former Chief Executive Officer, Deloitte, Touche Tohmatsu Limited

         

William G. Schrader*

Former COO, TNK-BP Russia

               
*

Independent Director

Independent Director Nominee Characteristics

When evaluating nominees for our board of directors, the corporate governance and nominating committee considers diversity of viewpoints, backgrounds and experience, including diversity of race, gender, ethnicity, age, national origin and cultural background to ensure effective oversight of our strategy and culture and effective representation of the interests of all stockholders.

 

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Proxy Summary

 

Executive Compensation Tied to Company Performance

 

Compensation Objective

We strive to attract and retain talented executives and motivate them to achieve our business goals through a combination of cash and stock-based compensation, which includes a base salary, annual incentive, and long-term incentives. The board oversees our compensation program and ensures that we implement our objectives by setting short-term targets that lead to long-term success and long-term targets based on total shareholder return (“TSR”). We engage with our stockholders on a regular basis to ensure we fully understand the factors they consider to be most important when evaluating our company, including compensation.

Key Compensation Actions

In early March 2020, the compensation and management development committee (the “committee”) approved 2020 compensation decisions for our named executive officers (“NEOs”), including title and salary updates and establishing 2020 annual incentive plan (“AIP”) targets and long term incentive plan (“LTI”) targets, including performance share units (“PSUs”). Payouts under the AIP and PSU programs are determined based on attainment of pre-established metrics and are highly sensitive to shareholder returns and our operational performance. Shortly thereafter, COVID-19, in conjunction with global oil market disruptions, severely impacted demand for oil. In response, the company implemented a number of cost-saving measures, including reducing its E&P capital and exploratory spend, ending the year at $1.8 billion, representing a 40% reduction from the original budget of $3.0 billion. The committee observed that global economic conditions warranted changes to the previously approved 2020 AIP. When assessing possible changes, the committee focused on (i) finding opportunities to reduce the company’s cash expense in-line with the company’s other cost saving measures, and (ii) ensuring that the AIP continued to serve as a performance driver, with rigorous but attainable goals.

In support of these objectives, in June 2020, the committee determined to reduce the maximum payout under the AIP from 200% to 50% of target. The committee believed that limiting the AIP payout for 2020 to 50% of target ensured that management shared in the necessary sacrifices to achieve our critical strategic initiative of preserving cash while also maintaining salaries and benefits for employees across the company. In addition, the committee approved adjustments to weightings and targets for certain annual enterprise-level metrics to reflect the company’s shift in priorities given the dramatically changed economic and oil price environment. Revised AIP targets were intended to preserve the rigor of initial 2020 incentive targets in this context to continue incentivizing management to make positive progress during a year of significant market uncertainty.

 

Timeline

 

Component

 

Action

    

March 2020

Set pay levels and performance targets for
2020

  Salary  

•  No increases for our CEO or COO.

•  Other NEOs received increases of 4.5% to 10.7% to reflect market adjustments and changes in responsibility as described on pages 26-27.

  
  AIP Targets  

•  NEO AIP target value as a percent of salary held flat.

    
  2020 LTI Grants  

•  NEO LTI awards increased 6% to 13% to reflect market adjustments and changes in responsibility.

    

June 2020

Took action in response to
the global pandemic

  AIP Target Adjustment  

•  2020 AIP payout subject to a cap at 50% of target for 2020 due to the global pandemic.

•  The committee approved adjustments to weighting and targets for certain enterprise-level AIP metrics due to uncertainties from the global pandemic.

    

March 2021

Determined payouts for
incentive plans
based on
2020 performance

  2020 AIP Enterprise Payout  

•  AIP achieved at 117% performance, but payout capped at 50% of target due to the global pandemic.

•  Strong year operationally resulted in high final enterprise performance results of annual goals, as described on page 29.

    
  2018-20 PSU
Payout
 

•  PSUs earned at 200% of target.

•  Hess ranked first among peers and was the only company with a positive TSR over the three year performance period.

    

 

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Proxy Summary

    

 

TSR Performance

Our PSUs are tied to relative TSR to effectively measure our performance compared to peers. Our 3-year TSR as of December 31, 2020 was ranked first among peers and we were the only company with a positive TSR over this period. Our ability to navigate COVID-19 in 2020 and the low oil price environment during the last several years has resulted in our TSR far exceeding our peer companies, as indicated by our 3-year TSR performance as of December 31, 2020.

 

 

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Strong Governance Practices Promote Alignment with Stockholder Interests

 

 

 

  ü

Independent directors (10 of 11 nominees)

 

  ü

Independent chairman

 

  ü

Over 80% of the board refreshed since 2013

 

  ü

Annual board and committee evaluations

 

  ü

Stockholder proxy access

 

  ü

Annual election of directors

 

  ü

Strong risk-oversight culture

ü

No poison pill

 

 

ü

Stock ownership policy for executives and directors

 

 

ü

Majority vote for director elections

 

 

ü

Annual CEO performance evaluation led by the Board

 

 

ü

Independent board committees

 

 

ü

Engagement with stockholders representing approximately 70% of outstanding shares

 
 

Risk Oversight

The board of directors has oversight of the company’s risk management policies with an emphasis on understanding the key enterprise risks affecting the company’s business and the ways in which the company attempts to prudently mitigate such risks, to the extent reasonably practicable and consistent with the company’s long-term strategies. The audit committee of the board has been delegated primary responsibility for oversight of the company’s risk management practices, and the chief risk officer periodically presents to the audit committee a comprehensive review of the company’s enterprise levels risks, the status of the enterprise risk program and risk management strategies utilized by the company under its corporate risk policy. The audit committee and the board will also receive updates at meetings during the year on any particular matters relating to specific risks that management believes needs to be brought to the attention of the committee or the board. Additionally, each of the board’s committees is assigned with overseeing risk management specific to their scope of responsibilities.

 

 

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PROXY STATEMENT

The enclosed proxy is solicited by the board of directors of Hess Corporation for use at the annual meeting of stockholders to be held on Wednesday, June 2, 2021, at 9:00 a.m. Central Time virtually, via live webcast. You will be able to attend the annual meeting as well as submit questions and vote during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/HES2021.

On or about April 23, 2021, we commenced mailing this proxy statement, the notice of annual meeting and the proxy card to stockholders. Holders of record of common stock of the company at the close of business on April 12, 2021 will be entitled to vote at the annual meeting. Each share of common stock will be entitled to one vote. As of April 12, 2021, there were 308,421,378 shares of common stock outstanding and entitled to vote at the annual meeting. There are no other voting securities of the company outstanding. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the annual meeting. Abstentions and broker non-votes will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business.

In accordance with Securities and Exchange Commission (“SEC”) rules, we are making our proxy materials available to stockholders over the internet. On or about April 23, 2021, we mailed the Notice of Internet Availability of Proxy Materials to our stockholders (the “Notice”). The Notice contains instructions on how to access this proxy statement and our annual report and submit a proxy over the internet. If you received the Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials by following the instructions contained in the Notice.

If at the close of business on April 12, 2021 your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the proxy materials, as applicable, are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares in your account. If that organization is not given specific direction, shares held in the name of that organization may not be voted and will not be considered as present and entitled to vote on any matter to be considered at the annual meeting, except with respect to the ratification of the company’s independent auditors. Brokers are not permitted to vote your shares with respect to Proposal 1, the election of directors, Proposal 2, the advisory vote on executive compensation, or Proposal 4, approval of amendment no. 1 to our 2017 long term incentive plan, without your instructions as to how to vote. Please instruct your broker how to vote your shares using the voting instruction form provided by your broker so that your vote can be counted.

If you are a stockholder of record, you can vote by using the internet or by calling a toll-free telephone number. Internet and telephone voting information is provided on the proxy card or the Notice. A control number, located on the instruction sheet attached to the proxy card or the Notice, is designated to verify your identity and allow you to vote your shares and confirm that your voting instructions have been recorded properly. If you vote via the internet or by telephone, there is no need to return a signed proxy card. However, you may still vote by proxy by using the proxy card.

Proxies will be voted at the annual meeting in accordance with the specifications you make on the proxy. If you sign the proxy card or submit a proxy by telephone or over the internet and do not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the board of directors. For more information, see “Questions and Answers About the Annual Meeting and Voting” beginning on page 62.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Majority Voting Standard

 

It is intended that proxies will be voted for the nominees set forth below. The company’s by-laws provide for majority voting in uncontested elections of directors, which is the case for the election of directors at the annual meeting. To be elected as a director of the company at the annual meeting, nominees must receive a majority of the votes cast. A majority of votes cast means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Abstentions and broker non-votes are not counted as votes cast.

If a director is not elected at the annual meeting and no successor has been elected at the annual meeting, the director is required to promptly tender his or her resignation to the board. The corporate governance and nominating committee is then required to make a recommendation to the board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The board will act on the tendered resignation and will publicly disclose its decision and rationale within 90 days following certification of the election results. These procedures are described in full in our by-laws, which may be found on the company’s website at www.hess.com.

It is expected that all candidates will be able to serve. However, if before the annual meeting any nominee in this proxy statement is unable to serve, or for good cause will not serve as a director, the proxy holders will vote the proxies for the remaining nominees and for substitute nominees chosen by the board of directors to fill the vacancy unless the board reduces the number of directors to be elected at the annual meeting.

Nominees for Director

 

The following table presents information as of January 25, 2021 about the nominees for election as directors of the company at the annual meeting, including the specific experience, qualifications, attributes and skills that led the board to conclude that such person should serve as a director. All of the directors on the board are elected for a one-year term expiring in 2022.

 

 

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Terrence J. Checki

 

 

Independent Director

Age: 75

Director Since: 2014

Committees Served: Audit (Chair), Compensation, Governance

Principal Occupation: Former Executive Vice President and Head, Emerging Markets and International Affairs, Federal Reserve Bank of New York. Mr. Checki retired from the Federal Reserve Bank of New York in March 2014.

 

Other Directorships: Director or trustee of various Franklin Templeton funds.

 

Skills and Experience

Mr. Checki brings decades of experience in management, international relations, government and public policy to the Hess board. He has had key roles in the resolution of numerous economic and financial challenges in the U.S. and abroad during his tenure at the Federal Reserve Bank of New York. Mr. Checki currently chairs our audit committee.

 

 

 

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Leonard S. Coleman, Jr.

 

 

Independent Director

Age: 71

Director Since: 2016

Committees Served: Governance, EHS

Principal Occupation: Former President of the National League of Major League Baseball and Former Commissioner of the New Jersey Department of Energy.

 

Other Directorships: Electronic Arts Inc., Omnicom Group Inc. and Santander Consumer USA Holdings Inc. Former Director, Aramark, Avis Budget Group, Inc., Churchill Downs, Inc. and H.J. Heinz Company.

 

Skills and Experience

Mr. Coleman has acquired substantial business experience over his career, including more than a decade of senior management experience in Major League Baseball, significant financial experience through his years of working as a municipal finance banker at Kidder Peabody and extensive government experience, including serving as Commissioner of the New Jersey Department of Energy. Mr. Coleman also contributes to the racial diversity of the Hess board and plays a critical role in overseeing the company’s diversity, equity and inclusion initiatives.

 

 

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Proposal 1: Election of Directors + Nominees for Director

 

 

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Joaquin Duato

 

 

Independent Director

Age: 58

Director Since: 2019

Committees Served: Compensation, Governance

Principal Occupation: Vice Chairman of the Executive Committee, Johnson & Johnson.

 

Skills and Experience


Mr. Duato brings extensive experience overseeing key operational, human capital management and innovation functions. He contributes to the ethnic diversity of the Hess board, providing a unique international perspective as a dual citizen of Spain and the United States with experience living and working on-the-ground on multiple continents. Mr. Duato is responsible for Johnson & Johnson’s pharmaceuticals and consumer sectors, as well as supply chain, information technology, global services and health and wellness functions. He was named to his current role in 2018 after serving as Worldwide Chairman, Pharmaceuticals since 2011. Prior to that, he held executive positions of increasing responsibility in the pharmaceutical sector since joining Johnson & Johnson in 1989.

 

 

 

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John B. Hess

 

 

Age: 66

Director Since: 1978

Principal Occupation: Chief Executive Officer of Hess Corporation and Hess Midstream GP LLC, the General Partner of Hess Midstream LP.

 

Other Directorships: Hess Midstream GP LLC and KKR & Co. Inc.

 

Skills and Experience

Mr. Hess has over 40 years of experience with the company. During his career, Mr. Hess has acquired in-depth knowledge of the company’s strategy and operations and the history of the company’s development, and he and his family have been long-term shareholders and have had a long-standing commitment to the company.

 

 

 

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Edith E. Holiday

 

 

Independent Director

Age: 68

Director Since: 1993

Committees Served: Governance (Chair)

Principal Occupation: Corporate Director and Trustee. Former Assistant to the President of the United States and Secretary of the Cabinet and Former General Counsel, United States Department of the Treasury.

 

Other Directorships: Santander Consumer USA Holdings Inc. and White Mountains Insurance Group Ltd. (until May 2021). She also serves as a director or trustee of Franklin Templeton mutual funds. Former Director, Canadian National Railway Company, H.J. Heinz Company and RTI International.

 

Skills and Experience

Ms. Holiday brings deep public policy and governance expertise to the Hess board. She contributes to the gender diversity of the Hess board, and was the first woman to serve as General Counsel of the Treasury Department. Ms. Holiday possesses strong corporate governance and regulatory expertise, as well as legal and managerial experience in both the private and public sectors. She has also served in a directorship capacity across a diverse range of industries throughout her career. Ms. Holiday currently chairs our corporate governance and nominating committee.

 

 

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Proposal 1: Election of Directors + Nominees for Director

    

 

 

LOGO     

 

 

Marc S. Lipschultz

 

 

Independent Director

Age: 52

Director Since: 2016

Committees Served: Compensation (Chair)

Principal Occupation: Co-founder and President of Owl Rock Capital Partners and Co-Chief Investment Officer of Owl Rock Capital Advisors. Mr. Lipschultz served as Global Head of Energy and Infrastructure at KKR & Co. LP, from 1995 to 2016 prior to founding Owl Rock.

 

Skills and Experience

Mr. Lipschultz brings significant energy, infrastructure, investment, finance and management experience to the Hess board after two decades at KKR & Co. LP, including as the Global Head of Energy and Infrastructure, as well as his current leadership position at Owl Rock, the investment firm that he co-founded. Mr. Lipschultz currently chairs the compensation and management development committee.

 

 

 

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David McManus

 

 

Independent Director

Age: 67

Director Since: 2013

Committees Served: Compensation, EHS

Principal Occupation: Former Executive Vice President and Head of International Operations, Pioneer Natural Resources Co.

 

Other Directorships: FLEX LNG Limited and Genel Energy plc. Former Director, Caza Oil & Gas Inc., Costain Group plc. and Rockhopper Exploration plc.

 

Skills and Experience

Mr. McManus is an experienced international business leader in the energy industry and provides the Hess board with oil and gas project management and commercial expertise.

 

 

 

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Kevin O. Meyers, Ph.D.

 

 

Independent Director

Age: 67

Director Since: 2013

Committees Served: EHS (Chair), Audit

Principal Occupation: Independent Energy Consultant. Former Senior Vice President of E&P for the Americas, ConocoPhillips.

 

Other Directorships: Denbury Inc. (formerly Denbury Resources Inc.), Hornbeck Offshore Services, Inc. and Precision Drilling Corporation, Former Director, Bill Barrett Corporation.

 

Skills and Experience

Dr. Meyers has over 30 years of experience in E&P, both domestic and international. Based on this experience, Dr. Meyers brings to the Hess board decades of managing E&P operations in geographies directly relevant to Hess’ focused E&P portfolio. Dr. Meyers currently chairs the environmental, health and safety committee.

 

 

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Proposal 1: Election of Directors + Nominees for Director

 

 

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Karyn F. Ovelmen

 

 

Independent Director

Age: 57

Director Since: 2020

Committees Served: Audit

Principal Occupation: Former Gas and Power Transformation Leader, General Electric Company and Former Executive Vice President and Chief Financial Officer, Flowserve Corporation.

 

Other Directorships: ArcelorMittal S.A. Former Director, Gates Industrial Corporation plc.

 

Skills and Experience

Ms. Ovelmen has over 25 years of financial, accounting and operating experience across the energy, manufacturing, retail and distribution industries and also contributes to the gender diversity of the Hess board. Most recently, she served as Gas and Power Transformation Leader at the General Electric Company during 2019 and as Executive Vice President and Chief Financial Officer of Flowserve Corporation from 2015 to 2017. Prior to joining Flowserve, Ms. Ovelmen served as Executive Vice President and Chief Financial Officer of LyondellBasell Industries N.V., a multinational chemical company, from 2011 to 2015, as Executive Vice President and Chief Financial Officer of Petroplus Holdings AG, an independent oil refiner, from 2006 to 2010 and prior to that served in senior finance positions at Argus Services Corporation and Premcor Refining Group Inc. Ms. Ovelmen also spent 12 years with PricewaterhouseCoopers LLP, primarily serving energy industry accounts.

 

 

 

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James H. Quigley

 

 

Independent Chair

Age: 68

Director Since: 2013

Committees Served: Audit, Compensation

Principal Occupation: Chairman of the Board of Hess Corporation; Former Chief Executive Officer, Deloitte, Touche Tohmatsu Limited.

 

Other Directorships: Former Director, Merrimack Pharmaceuticals Inc. and Wells Fargo & Company.

 

Skills and Experience

Mr. Quigley led Deloitte, Touche Tohmatsu Limited, one of the world’s largest accounting and consulting firms. During his 38 years at Deloitte, he was a trusted consultant on strategic leadership and operating matters to senior management teams of multinational companies across multiple industries. He brings to the Hess board significant leadership and governance experience, on a global scale, and knowledge of financial, tax and regulatory matters that are relevant to Hess’ operations.

 

 

 

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William G. Schrader

 

 

Independent Director

Age: 62

Director Since: 2013

Committees Served: Audit, EHS

Principal Occupation: Former Chief Operating Officer, TNK-BP Russia.

 

Other Directorships: Bahamas Petroleum Company Ltd. (Chairman). Former Director, CHC Group Ltd. and Ophir Energy plc (African oil and gas exploration company).

 

Skills and Experience

Mr. Schrader is an experienced international E&P executive responsible for transforming BP’s significant E&P assets, and brings to the Hess board his experience as a disciplined E&P operator with expertise in production sharing structures, government relations and delivering returns.

 

 

 

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The board of directors unanimously recommends that stockholders vote FOR the election of each of the eleven director nominees named above.

 

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Table of Contents

 

Proposal 1: Election of Directors + Director Nominations

    

 

Director Nominations

 

The corporate governance and nominating committee is responsible for recommending to the board qualified candidates for election as directors. In advance of each annual meeting, the committee meets to recommend nominees for election at the annual meeting. From time to time throughout the year, the committee reviews the mix of skills, qualifications and experience of the directors currently on the board and seeks to identify individuals whose skills, qualifications and experience will supplement and contribute to the effectiveness of the board. Members of the committee may from time to time meet with potential candidates.

The corporate governance and nominating committee and the board believe that the board collectively should encompass a broad range of skills, expertise, general industry knowledge and diversity of opinion. New perspectives and ideas are essential to the proper functioning of the board as is the experience and institutional knowledge of longer-tenured directors. The board has undergone significant refreshment over the last several years, replacing over 80% of the board since 2013. Ms. Karyn F. Ovelmen, a financial and accounting expert with significant experience in the energy industry, was appointed to the board in November 2020. The corporate governance and nominating committee continues to evaluate potential future candidates to support ongoing refreshment, prioritizing sourcing diverse director candidates with key skills that are important to our strategy.

 

In accordance with the company’s corporate governance guidelines approved by the board of directors, nominees are reviewed and recommended based on a variety of criteria including:

 

    personal qualities and characteristics, education, background, accomplishments and reputation in the business community;

 

    current knowledge of the energy industry or industries relevant to the company’s business and relationships with individuals or organizations affecting the domestic and international areas in which the company does business;

 

    ability and willingness to commit adequate time to board and committee matters;
    the fit of the individual’s skills and personality with those of other directors and potential directors in building a board that is effective, collegial and responsive to the needs of the company;  

 

    diversity of viewpoints, background and experience; and  

 

    compatibility with independence and other qualifications established by applicable law and rules.  
 

As noted above, among the criteria used to evaluate nominees for the board is diversity of viewpoints, background and experience, including diversity of race, gender, ethnicity, age, national origin and cultural background. The board believes that such diversity provides varied perspectives which promote active and constructive dialogue among board members and between the board and management, resulting in more effective oversight. The board believes this diversity is demonstrated in the varied backgrounds, experience, qualifications and skills of the current members of the board. In the board’s executive sessions and in annual performance evaluations conducted by the board and its committees, the board from time to time considers whether the members of the board reflect such diversity and whether such diversity contributes to a constructive and collegial environment.

The corporate governance and nominating committee has retained Russell Reynolds Associates, a director and executive search and recruiting firm, to identify and review potential independent director candidates and assist the committee and the board in assessing their qualifications and promoting the consideration of diverse candidates. The committee has not paid fees to any other third parties to assist in identifying or evaluating potential nominees. Each of the nominees for election at the 2021 annual meeting were recommended by the non-management directors of the corporate governance and nominating committee, with the input of senior management, the committee’s consultants and advisors.

In addition, the company has adopted a director retirement policy, which provides that no person may be nominated to stand for election or re-election to the board of directors as a non-management director if the election would take place after such person has attained the age of 75, unless otherwise approved by the board. Upon the recommendation of the corporate governance and nominating committee, the board determined to nominate Mr. Checki to stand for re-election at the 2021 annual meeting. In reaching this decision, the corporate governance and nominating committee and the board considered Mr. Checki’s leadership of the audit committee and the desire for continuity given changes to the composition of the audit committee during 2020 as well as Mr. Checki’s extensive experience in government and public policy, including managing financial and market risks during his tenure at the Federal Reserve Bank of New York.

 

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Proposal 1: Election of Directors + Director Nominations

 

 

Stockholder Recommendations and Proxy Access

Stockholders may suggest candidates by writing to the corporate governance and nominating committee, in care of the corporate secretary of the company at the address set forth on page 67. Stockholder suggestions should include a summary of the candidate’s qualifications, the information required by SEC rules for director nominees and contact information for the candidate. Stockholder suggestions should be submitted no later than December 1 for consideration as nominees for election at the next annual meeting and otherwise in accordance with the company’s policy and by-laws. The committee follows the same process of identifying and evaluating nominees recommended by stockholders as that for candidates recommended by any other source.

In 2015, our board adopted a proxy access by-law that permits a stockholder, or group of up to 20 stockholders, owning at least 3% of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials up to the greater of two directors or 20% of our board of directors. Stockholders and nominees must satisfy the requirements set forth in the by-laws in connection with such nominations. We believe that this by-law provision provides meaningful and effective proxy access rights to our stockholders, and balances those benefits against the risk of misuse by stockholders with interests that are not shared by a significant percentage of our stockholders.

Board Evaluation

 

Our board is committed to continuous improvement and recognizes the importance of a rigorous evaluation process to enhance board performance and effectiveness. Our corporate governance and nominating committee oversees the annual performance evaluation of the board and ensures that each of the board’s committees conducts an annual self-evaluation. The chair of the corporate governance and nominating committee also oversees the evaluation of our board chairman.

 

 

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Our board evaluations are designed to solicit input and perspective on various topics, including:

 

    board structure, size and composition, including director skills and experience;

 

    committee structure and allocation of responsibilities;

 

    conduct of meetings, including cadence, length and opportunity for director input and meaningful discussion;

 

    materials and information, including quality, timeliness and relevance;

 

    director orientation and education;

 

    director performance, including attendance, preparation and participation;
    access to management and internal and external experts, resources and support;  

 

    key areas of focus for the board, including strategy, sustainability, crisis management and stockholder engagement;  

 

    committee structure and process, member and chair performance, duties and functions and management support; and  

 

    performance of the board chair, including communication, relationship with management, availability, focus on appropriate issues and inclusiveness.  
 

 

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Table of Contents

Proposal 1: Election of Directors + Board Leadership Structure / Independent Chairman

 

 

Board Leadership Structure / Independent Chairman

 

Our by-laws provide separate positions for the chairman of the board and chief executive officer. Mr. Quigley serves as the independent chairman of the board and Mr. Hess serves as CEO and a director of the board.

The board currently believes that having a separate chairman and chief executive officer allows for better alignment of corporate governance with stockholder interests and aids in the board’s oversight of management and the board’s ability to carry out its roles and responsibilities on behalf of the stockholders. The board also believes that the separation of the roles of chairman and chief executive officer allows the chief executive officer to focus more of his time and energy on operating and managing the company and leverages the chairman’s leadership and financial, governance and regulatory experience.

The chairman, an independent member of the board who has not previously served as an executive officer of the company, is appointed by the board annually.

 

As set forth in the company’s corporate governance guidelines, the responsibilities of the chairman include:

 

    acting as chair of regular and special meetings of the board;

 

    acting as chair of executive sessions or other meetings of the independent directors and leading such executive sessions and meetings;

 

    determining if special meetings of the board should be called (but without prejudice to any rights of others to call special board meetings);

 

    acting as a liaison between the chief executive officer and the board and facilitating communication between meetings, including discussing action items with the chief executive officer following executive sessions;
    consulting with the chief executive officer regarding agenda items and appropriate materials for board meetings, and the allocation of time to each discussion topic on the agenda and coordinating with committee chairpersons to facilitate their meetings;  

 

    presiding over the annual stockholders meeting;  

 

    being available to participate in or facilitating appropriate meetings with stockholders; and  

 

    partnering with the chair of the compensation and management development committee to conduct the annual performance evaluation of the chief executive officer and relay board feedback.  
 

Director and Nominee Independence

 

The board of directors has affirmatively determined that all of the current directors on the board, other than Mr. Hess, and that ten of the eleven nominees for election at the annual meeting, namely, Mr. Checki, Mr. Coleman, Mr. Duato, Ms. Holiday, Mr. Lipschultz, Mr. McManus, Dr. Meyers, Ms. Ovelmen, Mr. Quigley, and Mr. Schrader, are independent within the meaning of the rules and standards of the NYSE. The board determined that these directors and nominees not only met all “bright-line” criteria under these rules, but also that, based on all known relevant facts and circumstances, there did not exist any relationship that would compromise the independence of these directors.

Meeting Attendance

 

The board of directors met ten times in 2020, including two special meetings. Each director attended at least 75% of the aggregate of all board of directors meetings and all meetings of the committees of the board of directors on which he or she served during 2020.

Non-management directors meet without members of management present after each regularly scheduled board meeting. The chairman of the board of directors presides at these meetings.

All of the current directors who were serving as a director at the time of last year’s annual meeting attended that meeting.

 

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Proposal 1: Election of Directors + Corporate Governance  Guidelines

 

Corporate Governance Guidelines

 

The board has approved a set of corporate governance guidelines in accordance with the rules of the NYSE. These guidelines set forth the key policies relating to corporate governance, including director qualification standards, director responsibilities and director compensation. The board has also approved a code of business conduct and ethics in accordance with rules of the NYSE and the SEC applicable to all directors, officers and employees, including the chief executive officer, the principal financial and accounting officer and other senior financial officers. The code is intended to provide guidance to directors and management to assure compliance with law and promote ethical behavior. Copies of the company’s corporate governance guidelines and its code of business conduct and ethics may be found on the company’s website at www.hess.com and are also available without charge upon request to the company’s corporate secretary at the address set forth on page 67.

Stockholder and Interested Party Communications

 

Any stockholder or interested party who wishes to communicate or request a meeting with members of the board of directors or with only non-management directors or any specified individual director may do so by writing to them in care of the chairman of the board of directors, Hess Corporation, at the address set forth on page 67. Stockholders may also communicate directly to the chairman by e-mail to BoardChairman@hess.com. Communications sent by mail or e-mail will be reviewed by the chairman and will be referred for resolution and response as deemed appropriate by the chairman. If a stockholder requests a meeting, the corporate governance and nominating committee will decide whether the subject matter is a proper one to be addressed by the board and, if so, whether a meeting is warranted. The corporate governance and nominating committee will meet periodically to review all stockholder communications received.

Related Party Transactions

 

The company expects all directors and executive officers to bring to the company’s attention any related party transactions, including transactions which may be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC. The company’s policies provide that if any company representative, including a director or officer, considers conducting any transaction that reasonably would be expected to give rise to a conflict of interest between the representative and the company, such representative must disclose such transaction in advance to the company’s legal department for review. In addition, the company annually sends each director and executive officer a questionnaire requiring such person to describe any transaction contemplated under Item 404 or in the case of independent directors, any transaction that might compromise their independence. The company also annually conducts a review of its accounting records to determine whether any such related party transaction occurred in the prior fiscal year. If any proposed or existing related party transaction is identified, the transaction is brought to the general counsel for review. If the general counsel determines the transaction poses a conflict of interest, or would compromise the independence of a non-management director, the general counsel will advise the audit committee of the transaction and the disinterested members of the audit committee will determine whether the transaction serves the best interest of the company and its stockholders and whether if proposed, it may proceed and if existing, it may continue to exist. The general counsel and the disinterested members of the audit committee will determine the appropriate scope of, and process for, the review of any such transaction based on the then existing facts and circumstances of the transaction in view of applicable listing standards of the NYSE.

In June 2020, Mr. Hess purchased certain pieces of art owned by the company for a total of approximately $844,000 in cash. The company obtained an independent appraisal, and Mr. Hess purchased the artwork at the highest appraised value. The transaction was reviewed and approved by the audit committee in accordance with the company’s policies.

 

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Proposal 1: Election of Directors + Committees of the Board

    

 

Committees of the Board

 

The board has four standing committees: the compensation and management development committee, the corporate governance and nominating committee, the audit committee and the environmental, health and safety committee. Each committee’s written charter is available on our website at www.hess.com and also available without charge upon request to the company’s corporate secretary at the address set forth on page 67. The board receives regular reports from each committee and discusses matters of particular concern or importance.

 

 

Compensation and Management Development Committee

 

 

LOGO                 

Mr. Lipschultz (Chair)

Mr. Checki

Mr. Duato

Mr. McManus

Mr. Quigley

 

All committee

members are

independent

  

 

7 meetings in 2020

 

  

The committee’s principal responsibilities are to:

 

•  review and approve the company’s overall compensation and human capital management philosophy;

 

•  establish performance goals and objectives for the company’s chief executive officer and reviews the goals set by the company’s chief executive officer for the other named executive officers;

 

•  review the performance and approve the compensation of the company’s chief executive officer and other named executive officers;

 

•  provide oversight and monitor the company’s compensation and benefit programs, including the company’s pension, savings, bonus, medical, health and wellness plans;

 

•  administer and make awards of stock-based compensation under the company’s long-term incentive plans;

 

•  review management development and succession programs;

 

•  oversee the assessment of potential risks to the company from its compensation programs and policies;

 

•  approve the retention and review the performance and independence of compensation consultants to the committee; and

 

•  prepare an annual report on executive compensation for the company’s proxy statement.

 

Executive Compensation. The committee’s processes for determining executive compensation are described in “Compensation Discussion and Analysis” on page 20.

 

 

Corporate Governance and Nominating Committee

 

 

LOGO                 

Ms. Holiday (Chair)

Mr. Checki

Mr. Coleman

Mr. Duato

 

All committee

members are

independent

  

 

6 meetings in 2020

 

  

The committee’s principal responsibilities are to:

 

•  develop and recommend to the board the criteria for board membership;

 

•  identify and recommend individuals to the board for nomination as members of the board and its committees consistent with criteria approved by the board;

 

•  review and make recommendations to the board regarding the size and composition of the board of directors and the establishment and composition of committees;

 

•  oversee board, committee and chair performance evaluations;

 

•  identify and recommend to the board potential continuing education opportunities for directors;

 

•  periodically review and, if appropriate, make recommendations to the board relating to board practices and corporate governance; and

 

•  develop, recommend to the board and periodically review a set of corporate governance principles applicable to the company.

 

Director Candidates. This committee recommends for election as directors qualified, diverse candidates identified through a variety of sources, as described on page 6.

 

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Proposal 1: Election of Directors + Committees of the  Board

 

 

Audit Committee

 

 

LOGO                 

Mr. Checki (Chair)

Dr. Meyers

Ms. Ovelmen*

Mr. Quigley*

Mr. Schrader

 

*Audit committee

financial expert

 

All committee

members are

independent and

financially literate.

 

 

6 meetings in 2020, plus 3 additional reviews of quarterly financial results

 

 

The audit committee’s principal responsibility is to provide assistance to the board of directors in fulfilling its oversight responsibility to the stockholders, the investment community and others, including to:

 

•  review and discuss with management, internal audit and the independent registered public accountants matters relating to the company’s financial statements, earnings releases and annual and quarterly reports;

 

•  meet with management, internal audit and the independent registered public accountants to review and discuss the company’s financial reporting practices and accounting policies and systems, including the appropriateness of management’s application of those policies;

 

•  review and discuss with management, internal audit and the independent registered public accountants the adequacy and effectiveness of the company’s internal controls over financial reporting and disclosure controls and procedures;

 

•  appoint and oversee the independent registered public accountants, determine their compensation and review their qualifications, performance and independence from management when deciding whether to retain the independent registered public accountants;

 

•  review the scope and results of the internal audit program and the performance of the internal audit function;

 

•  review and discuss with management the company’s policies with respect to risk assessment and risk management, including cyber-security and the company’s overall insurance coverage; and

 

•  review compliance with legal and regulatory requirements and company policies and procedures and discuss the effectiveness of the company’s legal, regulatory and ethical compliance programs.

 

   

No member of the audit committee serves on the audit committees of more than three public companies, including ours.

    

 

 

 

Environmental, Health and Safety Committee

 

 

LOGO                 

Dr. Meyers (Chair)

Mr. Coleman

Mr. McManus

Mr. Schrader

 

All committee

members are

independent

 

 

5 meetings in 2020

 

 

The committee’s principal responsibilities are to:

 

•  assist the board’s oversight of the company’s sustainability and EHS practices, so that sustainability and EHS risks and opportunities are taken into account when making strategic decisions, including those with the potential to affect the people, environment or communities where we operate;

 

•  develop recommendations to the board for the formulation and adoption of policies, programs and practices to address sustainability and EHS risks and opportunities, including climate-change related issues, trends and developments;

 

•  review and monitor the company’s compliance with policies, programs and practices concerning sustainability, EHS and climate-change related issues;

 

•  identify, evaluate and monitor sustainability, EHS and climate-related risks, domestic and international, which affect or could affect the company’s business activities, performance and reputation;

 

•  periodically review sustainability, EHS and climate-change related legislative and regulatory issues affecting the company’s business and operations; and

 

•  review emergency response planning procedures for EHS events, including the company’s ongoing response to COVID-19.

 

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Proposal 1: Election of Directors + Report of the Audit Committee

    

 

Report of the Audit Committee

 

The audit committee of the board of directors oversees the company’s financial reporting on behalf of the board. Management is responsible for the system of internal controls and for preparing financial statements. Ernst & Young LLP, the company’s independent registered public accountants, are responsible for expressing an opinion on the effectiveness of internal controls over financial reporting and the fair presentation of the financial statements in conformity with generally accepted accounting principles. The audit committee is composed of independent directors and operates in accordance with a charter approved by the board of directors, which is available at www.hess.com. The charter sets forth the audit committee’s responsibilities, which are summarized under “Committees of the Board” on page 11. The committee reviews its charter annually and, when appropriate, makes recommendations for changes to the board.

2020 Actions of the Audit Committee

The audit committee met six times during 2020 and met in executive session after each of those meetings. Additionally, the audit committee met three times to review quarterly financial results, with one quarterly review occurring during a regular meeting in 2020.

During 2020, the audit committee met with management, Ernst & Young LLP and internal auditors and among other things:

 

   

reviewed and discussed with management and Ernst & Young LLP our audited financial statements included in our annual report on Form 10-K and quarterly unaudited financial statements included in quarterly reports on Form 10-Q prior to filing with the SEC;

 

   

discussed with management and Ernst & Young LLP accounting policies and management’s application of those policies as they relate to the company’s financial results, significant judgments inherent in the financial statements, disclosures, and other matters required by generally accepted auditing standards;

 

   

discussed with Ernst & Young LLP all matters and communications required to be discussed by applicable Public Company Accounting Oversight Board (“PCAOB”) standards, including matters related to independence, received the written disclosures and the letter from Ernst & Young LLP required by the PCAOB regarding their independence and “critical audit matters” identified by the Ernst & Young LLP arising from the audit of the company’s financial statements;

 

   

reviewed and discussed with management the processes undertaken to evaluate the accuracy and fair presentation of our consolidated financial statements and the effectiveness of our systems of disclosure controls and procedures and internal control over financial reporting, including changes in light of increasing remote communications and other work-from-home practices due to COVID-19;

 

   

reviewed and discussed with management, the internal auditor, and Ernst & Young LLP, management’s assessment of the effectiveness of our internal control over financial reporting and Ernst & Young LLP’s opinion about the effectiveness of our internal control over financial reporting;

 

   

reviewed and discussed matters related to risk, risk controls and compliance and inquired about significant financial risk exposures, assessed the steps management is taking to mitigate these risks, and reviewed our policies for risk assessment and risk management, including the company’s overall insurance coverage;

 

   

met with management regarding our technology systems and cyber-security incident detection, defense and response, including changes in light of increasing remote communications and other work-from-home practices due to COVID-19;

 

   

reviewed and assessed the overall adequacy and effectiveness of our legal, regulatory and ethical compliance programs, including concerns raised on the company’s whistleblower reporting system; and

 

   

reviewed with the general counsel legal and regulatory matters that may have a material impact on the consolidated financial statements or internal control over financial reporting.

The audit committee also met separately with Ernst & Young LLP and the internal auditors without management present.

 

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Proposal 1: Election of Directors + Report of the Audit  Committee

 

Assessment of Independent Registered Public Accountants

The audit committee reviews the scope of and overall plans for the annual audit and negotiates fees and approves the other terms of Ernst & Young LLP’s engagement letter. The audit committee also oversees the periodic required rotation of the lead audit partner, as required by SEC rules, and is directly involved in the selection of such partner.

The audit committee discussed with Ernst & Young LLP their independence from management and the company and considered the compatibility of all non-audit services with the auditors’ independence. The audit committee also assessed the qualifications and performance of Ernst & Young LLP in determining whether to retain them. In conducting this assessment, the audit committee considered, among other things: information relating to audit effectiveness, including the results of PCAOB inspection reports; the depth and expertise of the audit team, including their demonstrated understanding of the company’s businesses, significant accounting practices, and system of internal control over financial reporting; the quality and candor of Ernst & Young LLP’s communications with the audit committee and management; the accessibility, responsiveness, technical competence, and professionalism of the lead audit partner and other members of the audit team assigned to our account; the impact to the company of changing auditors; the appropriateness of Ernst & Young LLP’s fees; and Ernst & Young LLP’s ability to employ professional skepticism, objectivity, integrity, and trustworthiness.

The audit committee reviewed the audited December 31, 2020 financial statements of the company with management and the independent registered public accountants. Management represented to the committee that the financial statements were prepared in accordance with generally accepted accounting principles. In reliance on the reviews and discussions with management and the independent registered public accountants, the audit committee recommended to the board of directors, and the board approved, the inclusion of the audited financial statements in the annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC. Based on its assessment and review as described in this report, the audit committee has determined that selecting Ernst & Young LLP as independent registered public accountants for 2021 is in the best interest of the company and its stockholders. The board has unanimously proposed that the stockholders ratify this selection at the annual meeting.

Committee Members:

Terrence J. Checki, Chair

Kevin O. Meyers

Karyn F. Ovelmen

James H. Quigley

William G. Schrader

The Report of the Audit Committee does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the company specifically incorporates the Report of the Audit Committee by reference therein.

 

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Proposal 1: Election of Directors + Stockholder Engagement

    

 

Stockholder Engagement

 

We engage with our stockholders on a regular basis to ensure we fully understand the factors they consider to be most important when evaluating our company. The purpose of our stockholder engagement program is to discuss and solicit stockholder views on our strategy, business plan, EHS & SR matters, human capital management, diversity, corporate governance and other matters of concern, including executive compensation.

During 2020, our CEO and other members of senior management, at times accompanied by our independent chairman, conducted a broad outreach effort to investors representing, in the aggregate, approximately 70% of our outstanding shares. In light of the ongoing health and safety concerns and in order to protect our stockholders, employees and others and align with relevant gathering and travel restrictions, meetings were held virtually after mid-March 2020.

Robust stockholder engagement program throughout the year

 

 

  ü  Participated in 17 major investor conferences

     

 

ü

 

 

 

Presented at CERAWeek, a premier energy conference attended by institutional investors, industry leaders and policymakers

 

       

 

  ü  CEO participated in over 150 meetings with institutional investors

 

     

 

ü   

 

 

 

Participated in conferences hosted by Council of Institutional Investors

 

 

Topics Covered

 

LOGO

 

 

Strategy, Performance and COVID-19 Response

 

 

 

LOGO

 

 

Environment, Sustainability and Climate

 

 

 

LOGO

 

Human Capital Management,

including Diversity,

Equity and Inclusion

 

 

 

LOGO

 

 

Governance and Risk Oversight

 

 

LOGO

 

 

Executive

Compensation

 

 

Management and the chairman provide feedback from these meetings to the full board on a regular basis.

 

Risk Oversight

 

The board of directors has oversight of the company’s risk management policies with an emphasis on understanding the key enterprise risks affecting the company’s business and the ways in which the company attempts to prudently mitigate such risks, to the extent reasonably practicable and consistent with the company’s long-term strategies. Additionally, each of the board’s committees is assigned with overseeing risk management specific to their scope of responsibilities, as illustrated below. Management applies a comprehensive, standardized approach to identifying and managing risks of all types across our operations. Our enterprise risk management process is used to develop a holistic risk profile for each asset and major project, drawing input from subject matter experts, performance data, incident investigations, lessons learned and recent internal audits. In these risk assessments, we identify each risk and assess its likelihood and potential impact to people, the environment, our reputation and our business, as well as other risks as appropriate.

Periodically, the chief risk officer presents a comprehensive review of the company’s enterprise levels risks, the status of the enterprise risk program and risk management strategies utilized by the company under its corporate risk policy to the audit committee, which has been delegated primary responsibility for oversight of the company’s risk management practices. The audit committee and the board will also receive updates at meetings during the year on any particular matters relating to specific risks that management believes needs to be brought to the attention of the committee or the board. In addition, the company conducts an annual risk assessment to determine the extent, if any, to which the company’s compensation programs and practices may create incentives for excessive risk-taking. For a discussion of this assessment, see “Compensation and Risk” on pages 47-48.

 

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Proposal 1: Election of Directors + Risk Oversight

 

Cyber-security is an integral part of risk management at Hess. The board appreciates the rapidly evolving nature of threats presented by cyber-security incidents and is committed to the prevention, timely detection, and mitigation of the effects of any such incidents on the company. The audit committee receives an annual report and quarterly updates from management regarding cyber-security, including the nature of threats, defense and detection capabilities, incident response plans and employee training activities. The company has not experienced a material cyber-security breach within the past three years. The company has an ongoing information security training and compliance program that occurs quarterly and is mandatory for all employees, maintains property and casualty insurance that may cover damages caused as a result of a cyber-security event, and is externally audited based on corporate standards aligned to the NIST Cybersecurity Framework.

 

 

LOGO

Board Oversight of Corporate Culture and Human Capital Management

We are committed to having an engaged, diverse and inclusive workplace that fosters learning, development and innovation. The board is actively engaged in overseeing our values and its connection to our long-term strategy. Directors have the opportunity to participate in our culture first-hand through interactions with employees and visits to our assets and offices. Through the compensation and management development committee, the board meets with management to understand and monitor company culture and its alignment with our values and strategic business priorities. Employee turnover, diversity, equity and inclusion and leadership development metrics, along with qualitative data are considered by our Diversity, Equity and Inclusion Council at the executive level and are also discussed at the compensation and management development committee regularly throughout the year and shared with our board of directors. The entire board attends the compensation and management development committee meetings that involve reviews and discussions of CEO performance objectives, evaluations, management succession and compensation.

 

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Proposal 1: Election of Directors + Ownership of Voting Securities by Certain  Beneficial Owners

    

 

Ownership of Voting Securities by Certain Beneficial Owners

 

The following table sets forth, as of April 12, 2021 for Messrs. Hess, Brady, Kean and Goodwillie and as of December 31, 2020 for the other beneficial owners identified in the table, information as to the ownership of more than 5% of any class of the company’s voting securities by beneficial owners known by the company to hold more than 5% of any such class:

 

 

  Name and address

  of beneficial owner

 

  

 

Amount and nature

of beneficial ownership(a)

 

 

 

Percent
of class

 

 

 

Common Stock

 

 

 

John B. Hess

 

  

 

31,644,408(b)(c)(d)(e)

 

 

 

 

 

 

10.23

 

 

 

 

 

Nicholas F. Brady

 

  

 

17,284,757(b)(c)(f)

 

 

 

 

 

 

5.60

 

 

 

 

 

Thomas H. Kean

 

  

 

23,703,178(b)(c)(d)(g)

 

 

 

 

 

 

7.69

 

 

 

 

 

Eugene W. Goodwillie, Jr.

c/o Hess Corporation

1185 Avenue of the Americas

New York, NY 10036

 

  

 

27,012,628(b)(c)(d)(e)(h)

 

 

 

 

8.76

 

 

 

FMR LLC

245 Summer Street

Boston, MA 02210

 

  

 

30,744,642(i)

 

 

 

 

10.01

 

 

 

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

 

  

 

29,309,897(j)

 

 

 

 

9.54

 

 

 

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

 

  

 

20,917,031(k)

 

 

 

 

6.80

 

 

 

Dodge & Cox

555 California Street, 40th Floor

San Francisco, CA 94104

 

  

 

17,204,589(l)

 

 

 

 

5.60

 

 

 

State Street Corporation

State Street Financial Center

One Lincoln Street

Boston, MA 02111

 

  

 

16,557,066(m)

 

 

 

 

5.39

 

 

(a)

The individual amounts and percentages shown for Messrs. Hess, Brady, Kean and Goodwillie should not be added because they reflect shared beneficial ownership. Information with respect to FMR LLC was obtained from a Schedule 13G/A filed by such person with the SEC on February 8, 2021. Information with respect to The Vanguard Group was obtained from a Schedule 13G/A filed by such person with the SEC on February 10, 2021. Information with respect to BlackRock, Inc. was obtained from a Schedule 13G/A filed by such person with the SEC on January 29, 2021. Information with respect to Dodge & Cox was obtained from a Schedule 13G filed by such person with the SEC on February 11, 2021. Information with respect to State Street Corporation was obtained from a Schedule 13G filed by such person with the SEC on February 10, 2021. Mr. Hess may be deemed to be a control person of the company by virtue of his beneficial ownership of common stock as described below.

 

(b)

This amount includes 8,429,037 shares held by a charitable lead annuity trust established under the will of Leon Hess. Mr. John B. Hess has sole voting power over the stock held by this trust and shares dispositive power over such stock with Messrs. Brady, Kean and Goodwillie.

 

(c)

This amount includes 8,817,802 shares held by a limited partnership. Messrs. Hess, Brady, Kean and Goodwillie serve on the management committee of the general partner of this limited partnership and share, inter alia, voting and dispositive power with respect to shares held by the limited partnership.

 

(d)

This amount includes 6,436,881 shares held by the Hess Foundation, Inc. of which Messrs. Hess, Kean and Goodwillie are directors and as to which Mr. Hess has sole voting power and shares dispositive power with Messrs. Kean and Goodwillie.

 

(e)

This amount includes:

 

   

208,009 shares owned directly by Mr. Hess;

 

   

735,235 shares held by two annuity trusts for the benefit of Mr. Hess and his heirs, as to which Mr. Hess is sole trustee and has sole voting and dispositive power;

 

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Proposal 1: Election of Directors + Ownership of Voting Securities by  Certain Beneficial Owners

 

   

28,753 shares held by a family limited liability company controlled by Mr. Hess, as to which Mr. Hess has sole voting power and dispositive power;

 

   

964,092 shares underlying options to purchase common stock, as to which Mr. Hess has no voting or dispositive power until they are acquired upon exercise of the options;

 

   

68,973 shares vested in the name of Mr. Hess under the employees’ savings plan as to which he has sole voting and dispositive power;

 

   

1,008,401 shares held by a trust for the benefit of Mr. Hess, of which he and Mr. Goodwillie are co-trustees, as to which Mr. Hess has sole voting power and shares dispositive power with Mr. Goodwillie;

 

   

15,660 shares held by a trust as to which Mr. Hess shares voting and dispositive power;

 

   

1,627,217 shares held by Mr. Hess’ siblings or their children, or by trusts for the benefit of Mr. Hess’ siblings or their children, as to which Mr. Hess has sole voting power pursuant to shareholders agreements among Mr. Hess and his siblings or their children and as to 678,471 shares of which he shares dispositive power pursuant to a shareholder’s agreement among Mr. Hess and a sibling and others. 315,000 of these shares (representing approximately 0.1% of Hess common stock outstanding) have been pledged by certain of the trusts. Mr. Hess has no financial or economic interest in the shares pledged by the trusts;

 

   

1,008,402 shares held by a trust for the benefit of Mr. Hess’ sibling, of which Mr. Hess has sole voting and shared dispositive power; and

 

   

2,295,946 shares held by trusts as to which Mr. Hess has sole voting power and as to which Mr. Goodwillie has shared dispositive power. These shares (representing approximately 0.7% of Hess common stock outstanding) have been pledged by certain of the trusts. Mr. Hess is not a trustee of these trusts and has no financial or economic interest in the shares pledged by the trusts.

 

(f)

This amount includes 37,918 shares held directly by Mr. Brady, as to which he has sole voting and dispositive power.

 

(g)

This amount includes 19,458 shares held directly by Mr. Kean, as to which he has sole voting and dispositive power.

 

(h)

This amount includes 24,561 shares held by a trust of which Mr. Goodwillie has sole voting and dispositive power.

 

(i)

This amount includes (y) 5,010,940 shares over which FMR LLC has sole voting power and (z) 30,744,642 shares over which FMR LLC has sole dispositive power.

 

(j)

This amount includes (x) 28,132,246 shares over which The Vanguard Group has sole dispositive power, (y) 440,338 shares over which The Vanguard Group has shared voting power and (z) 1,177,651 shares over which The Vanguard Group has shared dispositive power.

 

(k)

This amount includes (y) 18,370,169 shares over which Blackrock, Inc. has sole voting power and (z) 20,917,031 shares over which BlackRock, Inc. has sole dispositive power. The shares are held by subsidiaries of Blackrock, Inc.

 

(l)

This amount includes (y) 16,270,063 shares over which Dodge & Cox has sole voting power and (z) 17,204,589 shares over which Dodge & Cox has sole dispositive power.

 

(m)

This amount includes (y) 15,532,380 shares over which State Street Corporation has shared voting power and (z) 16,527,335 shares over which State Street Corporation has shared dispositive power. The shares are held by subsidiaries of State Street Corporation.

 

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Table of Contents

 

Proposal 1: Election of Directors + Ownership of Equity Securities by  Management

    

 

Ownership of Equity Securities by Management

 

The table below sets forth as to each director, nominee and named executive officer, and all directors, nominees and executive officers as a group, information regarding their ownership of equity securities of the company on April 12, 2021. The persons listed below have sole voting and investment power as to all shares indicated except as set forth in the footnotes to the table. Where no information appears in the column “Percent of outstanding shares of common stock owned,” the securities held represent less than 1% of the common stock outstanding.

 

Name

Total number of shares
beneficially owned
and nature of
beneficial ownership(a)
Percent of
outstanding
shares of
common stock
owned

Of total number of

shares beneficially

owned, number of

option shares

Checki, Terrence J.

 

23,576

 

 

Coleman, Leonard S.

 

17,033

 

 

Duato, Joaquin

 

6,392

 

 

Goodell, Timothy B.

 

288,038

 

 

147,882

Hess, John B.

 

31,644,408

(b)

 

10.23

 

964,092

Hill, Gregory P.

 

405,583

 

 

268,039

Holiday, Edith E.

 

59,131

 

 

Lowery-Yilmaz, Barbara

 

177,417

 

 

98,514

Lipschultz, Marc S.

 

16,184

 

 

McManus, David

 

35,530

 

 

Meyers, Kevin O.

 

32,661

 

 

Ovelmen, Karyn F.

 

3,089

 

 

Quigley, James H.

 

26,991

 

 

Rielly, John P.

 

429,542

 

 

148,232

Schrader, William G.

 

28,038

 

 

All directors and executive officers as a group (18 persons)

 

33,458,781

 

10.79

 

1,766,473

(a)

These figures include 68,973 shares vested in the name of Mr. Hess, 4,808 shares vested in the name of Mr. Rielly and 73,781 shares vested for all executive officers and directors as a group under the employees’ savings plan as to which these individuals and the group have voting and dispositive power. These amounts also include 13,713 shares held in escrow under Hess Corporation’s long-term incentive plans for Mr. Goodell, 33,223 shares held in escrow under these plans for Mr. Hill, 14,114 shares held in escrow under these plans for Mr. Rielly, and 102,774 shares held in escrow under these plans for all executive officers and directors as a group. As to these shares, these individuals and the group have voting power but not dispositive power. Holders of stock options do not have the right to vote or any other right of a stockholder with respect to shares of common stock underlying such options until they are exercised.

 

(b)

See footnotes (b), (c), (d) and (e) to the table under the caption “Ownership of Voting Securities by Certain Beneficial Owners.”

 

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Table of Contents
    

 

Proposal 1: Election of Directors + Director Compensation

 

Director Compensation

 

The following table shows compensation for services rendered by our non-employee directors during 2020.

 

Name

Fees Earned or
Paid in Cash
($)
Stock
Awards(1)
($)

All other
Compensation(2)

($)

Total

($)

Chase, Rodney F.

 

63,462

 

74,133

 

11,226

 

148,820

Checki, Terrence J.

 

165,000

 

175,014

 

2,472

 

342,486

Coleman, Leonard S.

 

125,000

 

175,014

 

2,985

 

302,999

Duato, Joaquin

 

121,538

 

175,014

 

516

 

297,068

Holiday, Edith E.

 

130,000

 

175,014

 

1,524

 

306,538

Lavizzo-Mourey, Risa

 

55,000

 

74,133

 

762

 

129,895

Lipschultz, Marc S.

 

125,769

 

175,014

 

276

 

301,060

McManus, David

 

125,000

 

175,014

 

1,524

 

301,538

Meyers, Kevin O.

 

150,000

 

175,014

 

12,027

 

337,041

Ovelmen, Karyn F.

 

21,277

 

27,941

 

5,081

 

54,299

Quigley, James H.

 

324,423

 

175,014

 

2,549

 

501,987

Schrader, William G.

 

140,000

 

175,014

 

1,305

 

316,319

(1)

Stock awards consist of 3,520 common shares granted to non-employee directors on March 6, 2020, which were fully vested on the grant date. The aggregate grant date value for 2020 stock awards was computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). Mr. Chase and Mses. Lavizzo-Mourey and Ovelmen received pro-rated awards of 1,491, 1,491 and 757 common shares, respectively, based on their length of service on the board in 2020.

 

(2)

Amounts in this column consist of (i) annual life insurance premiums for each director, (ii) medical benefits of $9,478 for Mr. Chase and Dr. Meyers and $4,739 for Ms. Ovelmen, and (iii) dental benefits of $513 for Messrs. Chase, Coleman and Schrader, $1,025 for Dr. Meyers and Mr. Quigley and $256 for Ms. Ovelmen.

Each director who was not an employee of the company or any of its subsidiaries receives an annual cash retainer of $110,000 for membership on the board of directors and the independent chairman of the board receives an additional annual cash retainer of $185,000. Directors receive an additional annual cash fee of $25,000 for service on the audit committee, $5,000 for service on the EHS committee and $10,000 for service on each of the other committees of the board of directors on which such director serves. The chairperson of the audit committee receives an annual cash fee of $30,000, the chairperson of the EHS committee receives an annual cash fee of $10,000 and the chairperson of each of the other board committees receives an annual cash fee of $15,000. In addition, each non-employee director receives shares of fully vested common stock constituting approximately $175,000 in value on the date of award. These awards are made from shares purchased by the company in the open market. For 2020, Mr. Chase and Mses. Lavizzo-Mourey and Ovelmen received a pro-rated retainer based on their length of service on the board in 2020.

 

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Table of Contents

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and 2020 compensation decisions for our named executive officers (“NEOs”). The compensation and management development committee of our board of directors (the “compensation committee” or the “committee”), with input from its independent compensation consultant, oversees these programs and determines compensation for our NEOs.

For fiscal year 2020, our NEOs were:

 

   

John B. Hess, Chief Executive Officer (“CEO”)

 

   

Gregory P. Hill, Chief Operating Officer and President, Exploration & Production (“COO & President E&P”)

 

   

Timothy B. Goodell, Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer (“EVP & GC”)

 

   

John P. Rielly, Executive Vice President and Chief Financial Officer (“EVP & CFO”)

 

   

Barbara Lowery-Yilmaz, Senior Vice President and Chief Exploration Officer (“SVP & Chief Exploration Officer”)

A Special Note Regarding COVID-19

This CD&A describes our executive compensation programs including pay and performance outcomes for 2020. In early March 2020, the committee approved 2020 compensation decisions for our NEOs, including title and salary updates and establishing 2020 AIP targets and LTI targets, as described below. Payouts under the AIP and PSU programs are determined based on attainment of pre-established metrics and are highly sensitive to shareholder returns and our operational performance. Shortly thereafter, COVID-19, in conjunction with global oil market disruptions, severely impacted demand for oil. In response, the company implemented a number of cost-saving measures, including reducing its E&P capital and exploratory spend, ending the year at $1.8 billion, representing a 40% reduction from the original budget of $3.0 billion. The committee observed that global economic conditions warranted changes to the previously approved 2020 AIP. When assessing possible changes, the committee focused on (i) finding opportunities to reduce the company’s cash expense in-line with the company’s other cost saving measures, and (ii) ensuring that the AIP continued to serve as a performance driver, with rigorous but attainable goals.

In support of these objectives, in June 2020, the committee determined to reduce the maximum payout under the AIP from 200% to 50% of target. The committee believed that limiting the AIP payout for 2020 to 50% of target ensured that management shared in the necessary sacrifices to achieve our critical strategic initiative of preserving cash while also maintaining salaries and benefits for employees across the company. In addition, the committee approved adjustments to weightings and targets for certain annual enterprise-level metrics to reflect the company’s shift in priorities given the dramatically changed economic and oil price environment. Revised AIP targets were intended to preserve the rigor of initial 2020 incentive targets in this context to continue incentivizing management to make positive progress during a year of significant market uncertainty.

CD&A Table of Contents

 

Executive Summary

    21  

Summary of Business and Strategy

    21  

Compensation Actions as a Result of Proactive Stockholder Engagement

    21  

Compensation Actions in 2021

    22  

Corporate Performance

    22  

Summary of Hess’ 2020 Executive Compensation Program

    24  

Pay Mix

    24  

Compensation Program Key Practices Promote Alignment with Stockholder Interests

    25  

Compensation Objective and Philosophy

    26  

2020 Total Direct Compensation

    26  

Peer Group

    33  

Process for Determining Compensation and Role of Compensation Consultants

    34  

Additional Information

    34  

Compensation Committee Report

    37  

Compensation Committee Interlocks and Insider Participation

    37  

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

Executive Summary

Our compensation program is focused on building long-term value in an industry where oil and gas reserves are depleted annually and investments require significant capital and generally take several years before yielding returns. It is critical we maintain and grow our resource base in a capital disciplined manner while ensuring our cost of production is sufficiently low to generate returns for our stockholders in a low oil price environment. The board believes that our compensation program should set short-term targets that lead to long-term success and long-term targets based on shareholder returns, which we believe is the most effective measure of long-term value creation currently available. As a result, our annual incentive plan is designed to maintain an annual focus on management’s day-to-day efforts on outcomes largely within its control, with a strong emphasis on formulaic, metrics-driven enterprise results. Our long-term incentive plan focuses on longer term objectives, including stockholder value creation and alignment of management’s interests with those of our stockholders.

Summary of Business and Strategy. Hess Corporation is a global Exploration and Production (“E&P”) company engaged in the exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. Our strategy is to grow our resource base, have a low cost of supply and sustain cash flow growth – investing in high return, low cost projects to move down the cost curve and be profitable in a lower price environment with increasing cash generation and returns to stockholders. Consistent with this strategy, we have built a differentiated portfolio that is balanced between short cycle and long cycle assets, with Guyana as our growth engine and the Bakken, Gulf of Mexico and Southeast Asia as our cash engines. We are confident in our company’s strategy, positioning us to manage through a low price environment to deliver long-term value to our stockholders.

Compensation Actions as a Result of Proactive Stockholder Engagement. Over the last several years, the committee has implemented a number of changes to our compensation program to align with a low oil price environment, our portfolio changes and feedback we received from shareholders, which include increasing the performance contingent component of our NEO’s LTI awards from 50% to 80%, eliminating restricted stock from the CEO’s LTI mix, and adding returns and cash flow metrics to AIP awards, among other changes. In early 2020, COVID-19, along with its economic and oil price impact, led to significant declines in the market value of our stock and that of our peers in the oil and gas sector and presented a challenging business environment.

The committee took the following compensation actions in 2020 and determined 2020 payout results:

 

Timeline

 

Component

 

Action

    

March 2020

Set pay levels and performance targets for
2020

  Salary  

•  No increases for our CEO or COO.

•  Other NEOs received increases of 4.5% to 10.7% to reflect market adjustments and changes in responsibility as described on pages 26-27.

  
  AIP Targets  

•  NEO AIP target value as a percent of salary held flat.

    
  2020 LTI Grants  

•  NEO LTI awards increased 6% to 13% to reflect market adjustments and changes in responsibility.

    

June 2020

Took action in response to
the global pandemic

  AIP Target Adjustment  

•  2020 AIP payout subject to a cap at 50% of target for 2020 due to the global pandemic.

•  The committee approved adjustments to weighting and targets for certain enterprise-level AIP metrics due to uncertainties from the global pandemic.

    

March 2021

Determined payouts for
incentive plans
based on
2020 performance

  2020 AIP Enterprise Payout  

•  AIP achieved at 117% performance, but payout capped at 50% of target due to the global pandemic.

•  Strong year operationally resulted in high final enterprise performance results of annual goals, as described on page 29.

    
  2018-20 PSU
Payout
 

•  PSUs earned at 200% of target.

•  Hess ranked first among peers and was the only company with a positive TSR over the three year performance period.

    

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

The committee follows a rigorous target setting process each year to ensure the enterprise performance metrics of our AIP include challenging, yet attainable, targets for executives designed to align our executives’ interests with those of our stockholders. The committee also considers a number of factors when determining appropriate individual AIP target percentages, including the executive’s position within the company, his or her corresponding responsibilities, and the competitive annual incentive opportunity for similar positions in other companies in our industry. The committee will also assess the outcomes of the prior year in making its decision on the targets for the current year. For 2020, the committee approved adjustments to weightings and targets for certain annual enterprise-level metrics to reflect the company’s shift in priorities given the economic crisis. The revised AIP targets preserved the rigor of the initial 2020 incentive targets while responding decisively to the disruptions in the global oil markets.

Compensation Actions in 2021. The committee approved the addition of two additional peer companies, Cabot Oil & Gas Corporation and EQT Corporation, to diversify the 2021 peer group in light of the consolidation of the company’s existing peers. Additionally, in March 2021, the committee approved changes to the 2021 AIP performance metrics to include a Bakken flaring reduction target, further emphasizing the importance of greenhouse gas emissions reduction and its integration into the company’s strategy and operations.

Corporate Performance. We built upon our strong performance in 2018 and 2019 to achieve a number of important milestones in Guyana and the Bakken, while substantially reducing cash costs and capital and exploratory expenditures in response to the sharp decline in oil prices due to COVID-19. In the first quarter of 2020, we reduced our E&P capital and exploratory budget for 2020 to $1.9 billion, and we ended the year with capital and exploratory expenditures of $1.8 billion, representing a 40% reduction from the original budget of $3.0 billion. This reduction was achieved primarily by shifting from a six rig program to one rig in the Bakken, which was accomplished in May, deferral of some 2020 development activities on the Stabroek Block, offshore Guyana, and deferral of discretionary spending across the portfolio. We also reduced cash operating costs by $275 million from our original 2020 budget. In March 2020, Hess entered into a $1.0 billion three year term loan agreement, and in November 2020, we sold our 28% working interest in the Shenzi Field for a total consideration of $505 million, before closing adjustments.

The enterprise performance metrics of our annual incentive program are designed to reward management for progress made against challenging, measurable goals that align with our overall company strategy that incentivize strong near- and long-term performance, without promoting excessive risk-taking. In 2020, the committee considered the progress made against each of these metrics in determining executive compensation payouts under the annual incentive program:

 

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

   

Strategic Priority

 

 

Annual Incentive Plan Metric

 

 

Environment,

Health and

Safety

 

 

Production

  Exploration Resource Additions   Capital and Exploratory Spend   Controllable Operated Cash Costs   Returns
+ Cash Flow

  1. Invest in high return, low cost opportunities

 

 

We believe that EHS practices are vital for all stakeholders: our investors, employees, partners and the communities in which we do business

     

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  2. Build focused and balanced portfolio – robust at low prices

 

     

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  3. Maintain financial strength and manage for risk

 

         

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  4. Grow free cash flow in disciplined, reliable manner

 

 

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  5. Prioritize return of capital to stockholders

 

 

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We are focused on building long-term value in an industry where investments require significant capital and generally take several years before generating returns. The board believes that total shareholder returns are the most effective measure of long-term value creation currently available. Accordingly, vesting and payouts under our PSUs are tied to relative TSR to effectively measure our performance compared to peers. As we were transitioning our long-term strategy to a pure-play E&P company, our 3-year relative TSR was not as strong as some of our peers and our PSUs paid out at 75%, 63% and 67% of target for the 2016-2018, 2015-2017 and 2014-2016 performance cycles, respectively. For the 2017-2019 and 2018-2020 performance cycles, our 3-year TSR was second and first among peers, respectively, resulting in a PSU payout at 200% of target. Our ability to navigate the low oil price environment and COVID-19 has resulted in our TSR far exceeding our peer companies, as indicated by our 3-year TSR performance as of December 31, 2020.

 

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

Summary of Hess’ 2020 Executive Compensation Program

 

 

Compensation
Element

 

 

 

Form and Objective

 

 

 

2020 Result

 

 

 

Link to Business Strategy

 

   

 

Base salary

 

 

  Fixed rate of pay

 

 

•  Base salaries for our CEO and COO held flat for 2020.

 

•  Other NEO increases were determined in early March 2020 and ranged from 4.5-10.7% to reflect market adjustments and changes in responsibility as described on pages 26-27.

 

 

 

•  Competitive Pay Levels. Generally, we target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median.

 

•  Individual Performance Rewarded. Sustained performance may be recognized in individual pay components, and pay will vary above or below target based primarily on enterprise and, to a lesser degree, individual performance outcomes.

 

 

Annual Incentive Plan (“AIP”)

 

 

  Payout from 0%-200% of target

 

  Payout based on enterprise performance factor (0%-175% of target) and individual performance, subject to maximum payout at 50% of target due to the global pandemic

 

 

•  Enterprise performance result was 117% of target, but payout was capped at 50% of target due to the global pandemic.

 

•  No adjustments for individual performance were made for the NEOs, as described on pages 27 to 32.

 

 

•  Balanced Focus on Controllable Outcomes and Value Creation. In our industry, the macroeconomic environment and oil prices significantly impact our financial results and stock price performance. As a result, our AIP is designed to focus on management’s day-to-day efforts on outcomes largely within its control, with a strong emphasis on formulaic, metrics-driven enterprise results, subject to board oversight and discretion.

 

 
 

 

Long-Term Incentive (“LTI”)

 

 

  60% PSUs; payout from 0%-200% of target is at-risk based on three-year relative TSR performance compared to peers

 

  20% Stock Options (40% for CEO); stock price must appreciate for any value to be realized

 

  20% Restricted Stock (0% for CEO); vesting occurs ratably over three years

 

•  In early March 2020, NEO LTI awards increased 6% to 13% to reflect market adjustments and changes in responsibility.

 

•  Payout of PSUs for the 2018-2020 performance period was 200% of target, given our relative TSR performance, the only company with positive TSR over the period.

 

  Long-term Orientation. Our LTI is delivered using different types of awards to balance both absolute stock price performance and stock price performance relative to peers, over varying time horizons, and retention considerations.

 

  Stockholder Alignment. Mix of long-term awards is heavily performance-contingent (80% to 100%), based on grant date target value, aligning management with the long-term stockholder experience.

 

   

Pay Mix. The majority of NEO compensation is variable and performance based. For our CEO and other NEOs, approximately 88% and 81%, respectively, of 2020 target total direct compensation was variable. Variable pay directly ties each NEO’s pay to company performance outcomes, including financial results, operational results, strategic initiatives, and stock price performance. Mr. Hess’ long-term incentive mix consists of a combination of PSUs and stock options, making 100% of his long-term incentive compensation performance-contingent and closely aligning Mr. Hess’ total compensation to the company’s long-term performance.

 

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

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Compensation Program Key Practices Promote Alignment with Stockholder Interests

At our 2020 annual meeting of stockholders, over 93% of shares present and entitled to vote supported Hess’ executive compensation program, consistent with stockholder support since 2014. In addition, we regularly engage with stockholders to ensure we fully understand the factors they consider to be the most important when evaluating our executive compensation program. During 2020, our CEO and other members of senior management, at times accompanied by our independent chairman, conducted a broad outreach effort to investors representing, in the aggregate, approximately 70% of our outstanding shares. The purpose of our stockholder engagement program is to discuss and solicit stockholder views on our strategy, business plan, EHS & SR matters, human capital management, diversity, corporate governance and other matters of concern, including executive compensation. The key design change to our compensation program in 2020 is the addition of the S&P 500 Total Return Index to the comparator group to determine TSR performance for our PSUs. The committee also capped payout of our AIP to 50% of target due to the market challenges associated with COVID-19. In 2021, the committee approved the addition of two additional peer companies, Cabot Oil & Gas Corporation and EQT Corporation, to diversify the 2021 peer group in light of the consolidation of the company’s existing peers. Additionally, the committee approved changes to the 2021 AIP performance metrics to include a Bakken flaring reduction target, further emphasizing the importance of greenhouse gas emissions reduction and its integration into the company’s strategy and operations.

Our key executive compensation practices are summarized below. We believe these practices promote close alignment with the long-term interests of our stockholders.

 

What We Do

 

  ü

 

Directly link pay to performance outcomes, operational results and stockholder returns

  ü

 

Engage in ongoing dialogue with stockholders to incorporate feedback into our compensation programs

  ü

 

Target total direct compensation (base salary / annual incentive / long-term incentives) within a competitive range of market median

  ü

 

Use a structured approach to CEO performance evaluation and related compensation decisions

  ü

 

Maintain a cap on CEO incentive compensation payments

  ü

 

Emphasize a culture of safety (a weighted metric in the AIP for all employees)

  ü

 

Maintain stock ownership guidelines for senior executives

  ü

 

Conduct annual CEO performance evaluation led by the board

  ü

 

Design compensation plans with provisions to mitigate undue risk

 

  ü

 

Maintain double-trigger change-in-control severance benefits

 

  ü

 

Maintain a compensation clawback policy, which includes recoupment and forfeiture provisions

 

  ü

 

Have an anti-hedging policy and an anti-pledging policy for all executives

 

  ü

 

Employ best-practice share counting and review share utilization annually

 

  ü

 

Provide de minimis perquisites for executives

 

  ü

 

Offer executives the same health and welfare benefit and savings plans as other salaried employees

 

  ü

 

Devote significant time to management succession, corporate culture and leadership development efforts

 

  ü

 

Retain an independent compensation consultant to advise the committee

 
 

 

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Table of Contents

Executive Compensation + Compensation Discussion and Analysis

 

 

What We Don’t Do

 

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No employment contracts for NEOs

 

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No payment of dividends or dividend equivalents on unearned restricted stock or PSUs

 

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No excise tax gross-ups in new change-in-control agreements since 2010

 

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No re-pricing of underwater stock options without stockholder approval

 

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No excessive severance or change-in-control benefits

 
 

Compensation Objective and Philosophy

Compensation Objective. The objective of our executive compensation program is to attract and retain talented executives and motivate them to achieve our business goals through a combination of cash and stock-based compensation. The principal elements of an executive’s total compensation consist of base salary, annual incentive, and long-term incentives.

We are focused on building long-term value in an industry where investments require significant capital and generally take several years before showing returns. The board believes that the compensation program should set short-term targets that lead to long-term success and long-term targets based on total shareholder returns, which we believe to be the most effective measure of long-term value creation currently available.

We also review other elements of compensation, including retirement benefits, health and welfare plans and other benefits offered to employees generally, when evaluating comprehensive executive compensation packages.

Compensation Philosophy. Our compensation program is designed to provide competitive pay to executives, reward individual and company performance, and maintain a long-term orientation that aligns with stockholder interests. The annual incentive plan emphasizes formulaic, metrics-driven enterprise results with a focus on measures largely within management’s control that reflect the core operating functions throughout the business cycle. The long-term incentives balance absolute stock price performance and stock price performance relative to peers, and is designed to support our long-term business strategy, serve as a retention tool and align employees with stockholder interests.

Generally, we target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median. Sustained performance may be recognized in individual pay components and pay will vary above or below target based primarily on actual enterprise performance and, to a lesser degree, individual performance. Variations in total direct compensation among the NEOs reflect differences in competitive pay for their respective positions as well as the size and complexity of the groups or functions they oversee, the performance of those groups or functions, and individual performance. The committee also considers market conditions in our industry when making compensation decisions.

2020 Total Direct Compensation

We structure NEO total direct compensation so that the majority is delivered in the form of long-term incentive awards in order to provide incentives to work toward growth of long-term profitability that will enhance stockholder returns. We also structure NEOs’ cash compensation so that a significant portion is at risk under the company’s annual incentive plan, payable primarily based on enterprise results, and to a lesser degree individual performance. We further detail each component of total direct compensation below.

Base Salary. We review base salaries annually, but we do not necessarily make adjustments to NEO salaries each year. In determining base salary levels for NEOs, the committee considers the following qualitative and quantitative factors: job level and responsibilities, relevant experience, individual performance, recent corporate and business unit performance, internal equity and our objective of paying competitive total direct compensation if performance is met.

From time to time base salaries may be adjusted other than as a result of an annual review in order to address competitive pressures or in connection with a change in responsibility. In early March 2020, the committee increased salaries for Messrs. Goodell and Rielly for the first time since 2013 due to market adjustments and in recognition of their elevation from senior vice president to executive vice president during 2020. Ms. Lowery-Yilmaz received a salary increase and was elevated to chief exploration officer in recognition of increased responsibility and the strong success of our exploration program.

 

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       Salary  

Name

 

    

2020

 

      

2019

 

      

% Increase

2019-2020

 

 

Hess, John B.

CEO

    

$

1,500,000

 

    

$

1,500,000

 

    

 

0.0%

 

Hill, Gregory P.

COO & President E&P

    

$

1,100,000

 

    

$

1,100,000

 

    

 

0.0%

 

Goodell, Timothy B.

EVP & GC

    

$

790,000

 

    

$

750,000

 

    

 

5.3%

 

Rielly, John P

EVP & CFO

    

$

810,000

 

    

$

775,000

 

    

 

4.5%

 

Lowery-Yilmaz, Barbara

SVP & Chief Exploration Officer

    

$

675,000

 

    

$

610,000

 

    

 

10.7%

 

Annual Incentive Plan. We establish an annual incentive target for employees, including each executive officer, based upon his or her position within the company, corresponding responsibilities and competitive annual incentive opportunity for similar positions in other companies in our industry. Payouts are in cash and may range from 0% to 200% of the target annual incentive opportunity based on actual enterprise and individual performance outcomes. Annual incentive target percentages as a percent of base salary for our NEOs and other senior executives have generally been held flat over the last four years. The table reflects the determination in June 2020 by the committee to cap maximum payout at 50% of target in 2020 due to COVID-19 and its global oil market disruptions.

 

       2020 Annual Incentive Plan Opportunity ($)     

2020 Capped
Amount ($)

(50% of target)

 

 

Name

 

    

Minimum

(0% of target)

      

Target

(100% of target)

 

    

Maximum

(200% of target)

 

Hess, John B.

CEO

    

 

$0       

    

$2,250,000
(150% of salary)

    

$4,500,000

    

 

$1,125,000

 

Hill, Gregory P.

COO & President E&P

    

 

$0       

    

$1,430,000
(130% of salary)

    

$2,860,000

    

 

$   715,000

 

Goodell, Timothy B.

EVP & GC

    

 

$0       

    

$735,000
(93% of salary)

    

$1,470,000

    

 

$   367,500

 

Rielly, John P.

EVP & CFO

    

 

$0       

    

$735,000
(91% of salary)

    

$1,470,000

    

 

$   367,500

 

Lowery-Yilmaz, Barbara

SVP & Chief Exploration Officer

    

 

$0       

    

$405,000
(60% of salary)

    

$   810,000

    

 

$   202,500

 

2020 AIP Design. Our annual incentive program is designed to motivate and reward employees for achieving the key business objectives that drive Hess’ long-term value creation. In our industry, the macroeconomic environment and oil prices have a significant impact on our financial results and stock price performance. As a result, our AIP is designed to focus management’s day-to-day efforts on outcomes largely within its control. The AIP payout for executive officers is primarily determined based on enterprise performance results that align with the company’s business strategy and apply to all employees. The committee’s change in weightings and targets from early March 2020 to June 2020 were to reflect increased focus on capital discipline and controlling cash costs in response to the sharp decline in oil prices due to COVID-19, as provided in the chart below. The committee also removed Leadership Site Visits & Safety Observations from the EHS metrics due to COVID-19 related travel restrictions.

 

2020 Enterprise Metrics

Initial

Weighting

Final
Weighting

Environment, Health & Safety (4 measures, revised to 3 measures)

 

20%

 

 

15%

 

Production

 

20%

 

 

15%

 

Capital and Exploratory Spend

 

15%

 

 

20%

 

Controllable Operated Cash Costs

 

15%

 

 

20%

 

Returns and Cash Flow (2 measures)

 

15%

 

 

15%

 

Exploration Resource Additions

 

15%

 

 

15%

 

Total

 

100%

 

 

100%

 

 

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Payouts under the AIP depend on enterprise performance results and can range from 0% to 175% of target. An individual performance multiplier can reduce the annual incentive payout down to zero or increase it by up to 25% of target based on actual individual performance results measured against pre-defined individual performance goals. There will be no payout associated with an enterprise metric if the threshold level for the metric is not achieved. The payout is typically capped at 200% of the target award, but for 2020 awards the committee capped payout at 50% of the target award due to COVID-19 and related disruptions in the global oil markets.

The enterprise performance metrics are selected each year to reflect the core operating functions of our management team through the business cycle and are approved by the committee. The metrics provide a balance of annual and long-term objectives for the business, as described below:

 

   

Environment, Health and Safety: Direct inclusion in our AIP underscores the importance of sustainability, health and safety and its integration into our strategy and operations, incentivizing management to continue to build on our industry leading performance in these areas.

 

   

Production and Operated Cash Costs tie to our annual financial results. The management team is incentivized to meet or exceed production goals but not at the expense of profitability or safety.

 

   

Capital Spend, Exploration Resource Additions, Cash Returns and EBITDAX primarily tie to our future results. In the offshore industry, it takes several years from the exploration of a resource to the generation of revenue. The board believes combining incentives for growing the resource base while also requiring adherence to a set capital budget with an emphasis on returns and cash flow, properly incentivizes management to grow our resource base without over-spending to achieve a short-term target.

ILLUSTRATION OF AIP DESIGN

 

 

Target Cash

Incentive

Opportunity

($)

 

 

  X  

 

 

Enterprise Performance

Payout Range:

0%-175% of target

 

 

  X  

 

 

Individual Performance

Modifier

(0% - 114%)

 

 

  =  

 

 

Actual Cash

Incentive Award

($)

Actual Cash Incentive Awards. The following table shows actual performance as a percent of target based on the 2020 results for each component of the AIP, and the actual cash incentive award for each NEO. The following discussion explains how the payouts for each component were determined. No individual performance adjustments were made for our NEOs. Additionally, in June 2020, the committee determined to reduce the maximum payout under the AIP from 200% to 50% of target in response to COVID-19.

 

Name

 

  

2020 Target
Cash
Incentive
Opportunity

 

    

X

2020 Payout as
% of Target (1)

 

    

X

2020 Individual
Performance
Modifier

 

 

=

 

    

2020 Actual
Cash

Incentive
Award (1)

 

 

Hess, John B.

CEO

  

$

2,250,000

 

  

 

50%

 

  

100%

    

$

1,125,000

 

Hill, Gregory P.

COO & President E&P

  

$

1,430,000

 

  

 

50%

  

100%

    

$

715,000

 

Goodell, Timothy B.

EVP & GC

  

$

735,000

 

  

 

50%

  

100%

    

$

367,500

 

Rielly, John P.

EVP & CFO

  

$

735,000

 

  

 

50%

  

100%

    

$

367,500

 

Lowery-Yilmaz, Barbara

SVP & Chief Exploration Officer

  

$

405,000

 

  

 

50%

  

100%

          

$

202,500

 

(1)

Enterprise performance results were 117% of target. Actual payouts were capped at 50% of target in 2020 due to COVID-19.

 

Rigorous Target Setting for Enterprise Performance Metrics. The committee follows a rigorous target setting process each year to ensure the AIP includes challenging, yet achievable, targets for executives. The enterprise metrics are selected each year to reflect the core operating functions of our management team through the business cycle. Given the evolution of our portfolio, including significant divestitures over the last several years, comparing

 

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changes in target levels on a year-over-year basis is not representative of the level of difficulty in achieving these targets. The committee relied on a thorough process and believes that targets for 2020 were set with sufficient rigor to create the proper incentives for the executive team for each of the enterprise performance metrics. The committee reconsidered the effectiveness of the goals set in early March, and revised its goals in June to reflect changes to the company’s guidance and budget to account for the impacts of COVID-19. The committee also reweighted the metrics to increase focus on capital discipline and controlling cash costs in response to the sharp decline in oil prices due to COVID-19, as described above.

2020 Enterprise Performance Metrics. The following table details our final 2020 goals for enterprise performance metrics and actual results. The below weightings and targets were established by the committee in June 2020 in consideration of the company’s shift in priorities due to COVID-19 and related disruptions in the global oil markets. The committee removed from the EHS metrics Leadership Site Visits & Safety Observations due to COVID-related travel restrictions during 2020.

 

2020 Metric

  Rationale for Use  

2020

Threshold /Target/
Maximum

 

2020

Result

   

Metric

Payout

 

Environment, Health &

Safety (3 measures)(1)

 

•  Protects employees, contractors, communities, reputation and ensures safe operations

 

Varies by measure

   

 

93

Production

 

•  Aligned to growth

•  Primary output of E&P investments

 

318 / 323 / 328 (MBOED)

 

 

327

(2) 

 

 

151

Capital and Exploratory

Spend(3)

 

•  Aligned to sustainability and profitability

 

1,900 / 1,800, / 1,700 ($MM)

 

 

1,786

 

 

 

111

Controllable Operated Cash Costs

 

•  Management of expenses to maximize cash margin

•  Controllable component of cash margin

 

1,098 / 1,046 / 994 ($MM)

 

 

1,059

 

 

 

81

Returns and Cash Flow

 

•  Measure company’s use of capital (CROCE)

 

10.4 / 11.0 / 11.5 (%)

 

 

11.0

 

 

 

107

(2 measures, CROCE & EBITDAX)

 

 

•  Measure ability to generate cash from operations (EBITDAX)

 

2,315 / 2,420 / 2,525 ($MM)

 

 

2,421

 

 

 

101

Exploration Resource Additions(4)

 

•  Aligned to sustainability

•  Aligned to growth

 

85 / 100 / 127 (%)

 

 

Maximum

 

 

 

175

(1)  Includes 3 measures (equally weighted): SAP Performance Standard Test Compliance, Severe + Significant Safety Incident Rate, and Severe + Significant Environment Incident Rate.

 

 

Total:

 

 

 

117

%(5) 

(2)  Excludes Libya. 2020 result is rounded.

(3)  Excludes Midstream.

(4)  Target performance goal reflects risked, net entitlement volumes for wells drilled in 2020. Performance above target required exceptional results and caused a payout above target.

(5)  Actual payouts were capped at 50% of target in 2020 due to COVID-19.

   

2020 Enterprise Performance. EHS remains a core focus of management, and the company delivered ahead of expectations on two of the three EHS measures. We delivered slightly below maximum performance under the SAP Performance Standard Test Compliance metric and above target for the Severe and Significant Safety Incident Rate. As a result of our setting our targets at a stretch level, we missed the threshold performance level set for our Severe and Significant Environmental Incident Rate.

To emphasize our production delivery and capital budget, the threshold for payout on the Production and Capital and Exploratory Spend metrics are based on our public guidance range. The target and maximum payout levels were set above our budget and the top end of guidance. In 2020, we exceeded our public guidance for production, bolstered by strong performance of plug and perf completions and increased natural gas capture in the Bakken, and our spending was below guidance, resulting in above target payout on the Production metric and Capital and Exploratory Spend metric.

We controlled costs and delivered on our strategic priorities in light of COVID-19. Our Controllable Operated Cash Costs targets were set at ambitious, stretch levels in response to the low oil price environment during 2020, resulting in below target payout levels driven by our production exceeding target, notwithstanding our disciplined approach to improving operational efficiencies and our cost per barrel of oil equivalent (“boe”) being below target. Cash Return on Capital Employed and EBITDAX approximated target performance, due to strong production performance offsetting lower commodity prices.

The Exploration Resource Addition metric far exceeded the target goal and paid out at the maximum level, driven by our continued exploration success in Guyana, including three oil discoveries in the Stabroek Block during 2020.

 

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The committee maintains discretion to reduce the AIP payouts below achievement levels, and in 2020 capped the maximum payout at 50% of target in response to the sharp decline in oil prices due to COVID-19. The committee believes that management continued strong performance in 2020 despite the challenging business environment.

Assessment of Individual Performance. We assess individual performance based on goals set at the beginning of each year, specific to each NEO. Following year-end, achievement of these pre-defined performance goals is assessed. The CEO conducts performance reviews for his direct reporting NEOs and makes compensation recommendations to the committee based on these reviews, with the committee making the final award determination. The cumulative assessment against these objectives for each NEO determines the modifier used (if any) to influence the final payout of their annual incentive award. The target LTI value for any NEO can be adjusted down to zero or increased by up to 25%, based on each individual performance assessment. This review can also influence the grant date dollar value of LTI compensation and base salary adjustments for the subsequent year.

The committee chairperson and chairman of the board facilitate a process with the full board of directors to review the CEO self-assessment of prior year performance and discuss specific feedback on that performance against pre-established operational, financial and organizational performance objectives. Upon review of this collective feedback, the committee makes CEO award determinations for base salary increases, annual incentive awards and long-term incentive award dollar values. Other considerations by the committee in the compensation determinations include external market reference points and overall enterprise and share price performance.

In March 2020, the committee approved the individual performance objectives for our CEO and other NEOs. The CEO’s performance goals were reaffirmed during his mid-year review in September. None of the objectives had specific weighting, but rather each objective is intended to be used together with other information the committee determines relevant to develop a holistic evaluation of individual performance. In the first quarter of 2021, the committee evaluated 2020 performance for each NEO against the approved performance objectives and in light of external market trends and enterprise performance. For Mr. Hess, the committee conducted the process described above, reviewed and considered his 2020 performance self-assessment, collectively discussed feedback on the performance objectives outlined below and concluded that his 2020 performance met or exceeded expectations.

 

 

Performance vs. Goals for our Chief Executive Officer

 

   

 

Strategic Initiatives

• Established and executed the company’s strategy to preserve cash, preserve capability and preserve the long-term value of our assets to address the significant decline in oil prices resulting from COVID-19.

 

• Reduced 2020 E&P capital and exploratory spend by 40% from $3 billion to $1.8 billion, primarily by reducing Bakken drilling rigs from six to one; reduced cash operating costs by $275 million; oversaw company’s 2020 hedging program covering 80% of oil production with put options for 130,000 bopd at $55 per barrel WTI and 20,000 bopd at $60 per barrel Brent.

 

• Maximized the value of production and enhanced cash flow by chartering three Very Large Crude Carriers (“VLCCs”) to store and transport more than six million barrels of Bakken crude oil to high value markets in Asia; all three cargoes were sold at a premium to Brent.

 

• Successfully established COVID-19 response measures and an effective communications plan, which were key to maintaining safe and reliable operations, achieving capital and operating expense reductions, supporting a productive remote working environment and instilling employee confidence in company actions related to COVID-19 and the low oil price environment.

 

• Sanctioned a third oil development on the Stabroek Block at Payara, which will have the capacity to produce up to 220,000 gross bopd with first oil expected in 2024.

 

• Enhanced the Guyana asset value with three successful exploration and appraisal wells underpinning a 4th potential development on the Stabroek Block and increasing the estimate of discovered recoverable resources by approximately 1 billion boe.

 

• Completed the sale of our Shenzi asset in the Gulf of Mexico for a total consideration of $505 million, before closing adjustments.

 

 

 

 

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Performance vs. Goals for our Chief Executive Officer (Continued)

 

   

Annual Operations and Financial Goals

• Met or exceeded all targets for corporate and Bakken production, cash costs, cash flow and capital and exploratory expenditures in 2020.

 

• Overall production, excluding Libya, of 327 Mboepd exceeded 2020 revised guidance of 320 Mboepd.

 

• Bakken production of 193 Mboepd exceeded 2020 revised guidance of 175 Mboepd.

 

• Net proved reserve additions in 2020 of 117 million boe and exceeded exploration resource target.

 

• E&P capital and exploratory spend of $1.8 billion was under the revised guidance of $1.9 billion and down 40% from the original budget of $3 billion.

 

Environment, Health, Safety and Sustainability

• Surpassed 2020 greenhouse gas (“GHG”) emissions intensity and flaring intensity reduction targets of 25% and 50% respectively from 2014 baseline; progressed Sustainability and Climate Change Strategy update with new 2025 GHG and methane emission intensity reduction targets of 44% and 50% from 2017 baseline; Hess GHG Taskforce evaluating additional medium and long term emission reduction opportunities; conducted carbon asset risk scenario planning.

 

• Published our 23rd annual sustainability report; Hess’ sustainability practices continue to be recognized by third party organizations: earned leadership status for the 12th consecutive year in CDP’s 2020 Global Climate Analysis, Hess’ score A- vs. E&P and global average score of C; included in 3BL’s 100 Best Corporate Citizens for the 13th consecutive year as the No. 1 oil and gas company and No. 9 overall; the Dow Jones sustainability Index for North America for the 11th consecutive year and the only U.S. oil and gas company to achieve a 4-Star rating in the Transition Pathway Initiative 2020 report.

 

• Continued to support the Salk Institute’s Harnessing Plants Initiative research and development program to advance the process to enhance the natural abilities of plants to store CO2 by endowing a chair for key senior leader working in the area of plant science.

 

• Advanced a multi-pronged approach to enhancing our Diversity, Equity and Inclusion efforts internally and externally: established internal task forces for Recruiting, Employee Development and Supplier Diversity; launched HessVOICES employee listening sessions; increased support in underserved areas in Hess communities in Houston; and initiated a partnership with the Jackie Robinson Foundation to support young minority college students with intern and mentoring programs.

 

Corporate Reputation and Relationship Building

• Maintained robust dialogue with investors, including more than 150 investor meetings.

 

• Continued meaningful engagement with employees during the pandemic through virtual town halls, leadership meetings and periodic written updates.

 

• Advanced Hess’ interests as a spokesperson for the industry, including speaking at CERAWeek, keynote speaker at JP Morgan, Bank of America and Wood MacKenzie energy conferences, among others, and conducted numerous interviews with trade media about industry challenges.

 

• Maintained strong relationships with global industry leaders and government officials on corporate and industry issues.

 

 

Messrs. Hill, Goodell and Rielly and Ms. Lowery-Yilmaz contributed to the positive outcomes listed above. In addition, specific to each individual, the committee considered, among other things, the items listed below, as well as input from the CEO and other members of the board of directors.

Mr. Hill managed the delivery of rapid responses to oil price volatility, organizational changes and enterprise cost reductions. He was instrumental in continuing the exploration success in Guyana and ensuring stable, commercial

production at the Liza Field. Mr. Hill stewarded overall company production, costs and capital and exploratory expenditures that met or exceeded assigned targets. He continued to improve our environmental incident rates and advance our safety culture in the face of challenges posed by COVID-19. Mr. Hill oversaw our full transition to plug and perf completions in the Bakken, leading to increased annualized production rates while significantly reducing the costs to drill and complete these wells. In addition to managing the relationships with our strategic production partners, Mr. Hill is a crucial presence in investor meetings and community engagements.

Mr. Goodell delivered key business targets as evidenced by the company’s recognized excellence in corporate governance and world-class sustainability practices. Mr. Goodell is responsible for our global legal strategy regarding

 

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compliance, governance and litigation matters. Mr. Goodell also oversees our external affairs activities, internal communications teams and plays a critical role in the company’s diversity, equity and inclusion program.

Mr. Rielly delivered key business and financial targets as set forth in his performance goals. He played a critical role in our investor engagement activities, representing the company at various investor and industry conferences and was integral to the reduction in cash operating costs of $275 million and the chartering of the VLCCs. Mr. Rielly oversaw the completion of a $1.0 billion three year term loan in a difficult credit market in March 2020 as well as the company’s 2020 hedging program that hedged over 80% of oil production with put options for 130,000 barrels of oil per day at $55 per barrel WTI and 20,000 barrels of oil per day at $60 per barrel Brent.

Ms. Lowery-Yilmaz delivered key business results as set forth in her performance goals as Chief Exploration Officer. Ms. Lowery-Yilmaz has strategic responsibility for the global exploration program which was successful in exceeding reserves replacement targets, ensuring a robust pipeline of high-quality exploration prospects and ensuring stable oil production from the Liza field in Guyana. She is instrumental in maximizing exploration and development expenditures for the highest commercial value throughout the portfolio. Ms. Lowery-Yilmaz has also played a leadership role in our HESSVoices sessions with under-represented employees and the company’s broader diversity and inclusion programs.

After reviewing the 2020 pre-defined individual performance goals in light of the overall enterprise financial performance, the committee made no individual adjustments to annual incentive payments for the NEOs, as described above.

LTI Program Structure. Long-term incentive compensation is an important tool to drive behavior that supports our long-term business strategy. LTI compensation is also an important retention tool and aligns employee interests with stockholder interests. As a result, LTI compensation represents the largest portion of each executive officer’s target total direct compensation package. When determining the appropriate mix of LTI awards, the committee considers the typical time horizons of investment decisions for Hess’ business and industry, the current commodity price environment, the current performance metric for PSUs and market practice. For 2020, the committee determined to maintain the long-term incentive mix for Mr. Hess, which links 100% of his target LTI compensation to performance. As a result, 60% of Mr. Hess’ target LTI award was in the form of PSUs and 40% in the form of stock options. The committee also maintained the LTI mix for the company’s other NEOs for 2020. For such NEOs, 80% of the target LTI compensation was performance-contingent, with 60% in the form of PSUs, 20% in the form of stock options and the remaining 20% in the form of restricted stock.

 

 

LOGO

Payout of PSUs is contingent upon the company’s TSR compared with that of our peer companies, identified on pages 33-34, over a three-year period. In addition, our TSR must be positive during the three-year performance period for payout to exceed target, even if the company outperforms peers. Use of stock options, which remain exercisable for ten years, is supported by the company’s capital intensive industry, where the time horizon for investment decisions often extends over many years. Stock options, which only provide value upon absolute stock price appreciation, also reinforce a balance between relative and absolute stock price performance goals, given that the PSU payout is primarily based on relative TSR. Use of restricted stock promotes retention and aligns long-term interests of employees and stockholders.

 

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Timing of LTI Awards. In general, awards of restricted stock, stock options and PSUs to the NEOs are made in early March after our financial statements have been audited by our independent public accountants. However, the committee retains discretion to vary the timing of awards as it deems appropriate.

Terms of LTI Awards. Restricted stock awards and stock options vest annually in equal installments over a three-year period from the date of grant and stock options remain exercisable for ten years after the date of grant. PSUs, if earned, vest 100% following the completion of the three-year performance period. We believe these vesting periods are appropriate and are generally consistent with market practice. Generally, all our awards are subject to continued employment.

Shares of restricted stock are entitled to dividend equivalents if and when such dividend equivalents are paid on shares of common stock. Dividends accrued on shares of restricted stock are paid upon vesting. To the extent earned, performance share units will be paid in shares of common stock which will vest and be issued following the end of the performance period. Dividend equivalents for PSUs will only be paid on earned PSUs, after the completion of the applicable performance period.

Value of LTI Awards. We aim to provide long-term incentive awards such that together with total cash compensation, target total direct compensation is within a competitive range of market median. Compensation is intended to vary based on company and individual performance outcomes. The committee determines individual award levels based on comparative market data for the executive’s position, award levels of comparably-situated executives, and an assessment of individual potential and sustained performance. In making awards to any individual, the committee does not consider his or her gains made, or failure to achieve gains, on prior restricted stock, stock option or performance share unit awards.

The chart below reflects the payout matrix for the 2020 PSU awards based on the company’s 2020 peer group, described below. In defining the PSU payout schedule, the following guiding principles were used: for maximum payout, performance must be approximately top 15% versus our peers; for target payout, performance must exceed median; for threshold payout, approximately 25th percentile must be achieved and no payout is earned for performance below 25th percentile. In addition, as described above, the payout can only exceed target if our TSR during the performance measurement period is positive, regardless of relative positioning versus peers.

 

 

LOGO

 

  (1)

Includes Hess Corporation

2018 PSU Award Payout. In February 2021, the committee certified performance results with respect to the January 2018 to December 2020 performance period and determined that 200% of PSUs were earned with respect to the 2018 award to be paid out in 2021, illustrating exceptional performance of the company’s stock relative to peer companies. Hess ranked first among peers for the performance period and was the only company with a positive TSR over this period.

Peer Group

The committee engages with our compensation consultant annually to identify a peer group that is an appropriate comparative group from a compensation and performance perspective. To make this determination, the committee focuses primarily on domestic E&P companies and looks at factors including revenue, market capitalization, total assets, production, and whether the company lists Hess as a peer.

 

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In early 2020, the committee approved the addition of the S&P 500 Total Return Index as a comparator for evaluating performance of the 2020 PSU awards. The inclusion of the S&P 500 Total Return Index provides a unique and challenging metric that extends the comparator group beyond industry peers and measures the company’s performance against the broader market. The committee also removed Chesapeake Energy Corporation from the peer group due to the substantial decrease in its market capitalization and its business focus no longer being comparable to the company. The committee believes these changes further align executive pay with long-term stockholder interests. In October 2020, Noble Energy, Inc. was excluded from the peer group after it was acquired by Chevron Corporation, reducing the company’s 2020 final peer group to 9 comparator companies plus the S&P 500 Total Return Index.

2020 Peer Group

 

 

9 Companies

 

Apache Corporation

  

Devon Energy Corporation

  

Murphy Oil Corporation

ConocoPhillips

  

EOG Resources, Inc.

  

Occidental Petroleum Corporation

Continental Resources, Inc.

 

  

Marathon Oil Corporation

 

  

Pioneer Natural Resources Co.

 

 

+ S&P 500 Total Return Index

 

As discussed above, we generally target total direct compensation (salary, annual incentive and long-term incentives) within a competitive range of market median. Overall, our review found that target total direct compensation of our NEOs was aligned with our executive compensation philosophy.

2021 Peer Group. In early 2021, the committee approved the addition of two additional peer companies, Cabot Oil & Gas Corporation and EQT Corporation, to diversify the peer group in light of the consolidation of the company’s existing peers.

Process for Determining Compensation and Role of Compensation Consultants

The committee has exclusive authority for approving the compensation of the CEO and the other NEOs. Human resources management, acting under the supervision of the CEO, develops compensation recommendations for all officers and employees, including the NEOs, in accordance with the compensation philosophy and policies more fully described elsewhere in this CD&A.

To assist in its review of the compensation recommendations, the committee directly engaged the firm Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant. Semler Brossy reported exclusively to the committee, which has sole authority to engage, dismiss and approve the terms of engagement of its consultant. During 2020, Semler Brossy did not provide any additional services to the company. The committee assessed the independence of Semler Brossy pursuant to SEC and NYSE rules, and concluded that no conflict of interest concerns exist.

The compensation consultant’s principal responsibility is to advise the committee on compensation recommendations for the NEOs, as well as on general matters relating to executive compensation strategy and programs. The CEO meets with the committee and the compensation consultant to discuss performance objectives and review compensation recommendations for executive officers directly reporting to him, including the other NEOs. Thereafter, the committee meets privately with the independent compensation consultant to review the compensation recommendations. Final decisions on compensation for the NEOs are made solely by the committee.

Additional Information

Other Benefits. We have adopted certain broad-based employee benefit plans in which executive officers are permitted to participate on the same terms as other eligible employees of the company, subject to applicable limits imposed on contributions and benefits under applicable law. Our objective is that the value of these benefits be competitive with what is offered by companies in our peer group. In addition to group life insurance and health and welfare plans, we have a savings plan under which participants can elect to invest (subject to contribution limits imposed by law) up to 50% of pre-tax or after-tax salary in a variety of funds, one of which invests in our common stock, and the company provides matching contributions up to approximately 6% of pre-tax salary for each participant, which are invested at the discretion of the participant.

Pension Benefits. As explained elsewhere in this proxy statement, all of our employees hired prior to January 1, 2017 are eligible for both a qualified defined benefit pension plan and a non-qualified supplemental plan (the restoration plan referred

 

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to in the Pension Benefits table) that provides only the benefits that would otherwise be paid to participants under the qualified pension plan but for limitations imposed by the Internal Revenue Code (the “Code”). On January 1, 2017, we closed the existing final average pay formula pension plan to new employees and introduced a cash balance pension plan for new hires which has a restoration component. Employees are eligible to participate in our pension plans after one year of service and vest in the final average pay retirement benefit after five years of service. The vesting requirement for the cash balance plan is three years. All of our NEOs are participants in the final average pay formula pension plan. While benefits from the qualified final average pay formula pension plan are payable as monthly annuities beginning at retirement, benefits from the restoration plan are payable in a single lump sum at first retirement eligibility, but no earlier than six months following termination of employment. The value of the lump sum payment is determined by the benefit formula and various assumptions, including the interest rate which is used to determine the equivalent present value of the amount that would be payable monthly if the restoration plan paid annuities. Benefits from the cash balance pension plan are payable as a lump sum or annuity, per the employee’s election.

Prior to 2010, the committee granted additional years of credited service under our pension restoration plan to Messrs. Hill and Rielly as part of the compensation packages necessary to recruit them. In 2009, the committee gave Mr. Hill credit for ten years of service with his prior employer, upon completion of five years of service with the company. Mr. Hill worked for over 25 years with Royal Dutch Shell plc and its affiliates, most recently in senior executive positions. This agreement was intended to compensate Mr. Hill for the difference between the pension benefits he would have received from his prior employer had he retired from his prior employment at age 60 and the pension benefits he would have received, absent such credited service, under the company’s pension plans for his retirement at the same age. The additional years of service for Mr. Rielly are equal to his service with his prior employer, and his supplemental benefits are offset by his pension benefits from his prior employer. Mr. Rielly had more than 16 years of experience with Ernst & Young LLP. He had a successful career at his prior employer and would have continued to accrue years of service under the pension plan of his prior employer. Again, the committee believed that an award of credited service was necessary to compensate this executive for the loss of pension benefits and to induce him to join the company.

Perquisites. The company did not provide perquisites or personal benefits valued at $10,000 or more to any of our NEOs in 2020. While we from time to time offer a very limited amount of perquisites and other personal benefits to our NEOs, perquisites are not a material part of our compensation program. The committee periodically reviews the levels of perquisites and other personal benefits provided to our NEOs.

Management Stock Ownership Guidelines. In order to further align the interests of senior management and stockholders, we maintain stock ownership guidelines for corporate officers. The guidelines provide that each corporate officer should attain a specified level of ownership of shares of the company’s common stock equal in value to a multiple of the their base salary within five years of the later of the date of adoption of the guidelines and the officer’s first election to his or her role.

 

Role

Requirement

(multiple of base salary)

Chief Executive Officer

6x

Chief Operating Officer

4x

Executive and Senior Vice Presidents

3x

Vice Presidents

1x

Our NEOs maintain significant ownership in Hess stock. Mr. Hess, our CEO, beneficially owns approximately 10.23% of our outstanding shares, and the other NEOs, on average, own approximately fourteen times base salary. This reflects significant alignment of interests between our NEOs and our stockholders. Currently, shares owned outright by an executive, restricted stock and stock held in an executive’s savings plan account are counted for purposes of determining stock ownership levels. Stock options and unvested performance share units are not counted.

Anti-hedging and Anti-pledging Policies. Under our hedging policy, we prohibit directors and all employees (including executive officers) from trading in derivative or other instruments in order to hedge the economic risks of holding the company’s stock received as long-term equity incentive awards under our compensation programs. Our hedging policy does not allow any type of hedge strategy that involves creating downside protection, or that will

 

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Executive Compensation + Compensation Discussion and Analysis

 

 

generate an offsetting gain, in the event of a decline in the value of our stock including, but not limited to, transactions involving purchasing put or selling call options, collars or forward sales contracts. However, derivative strategies that only increase downside risk and upside gains are permitted. Employees may not hedge movements in company stock held in our employee’s savings plan, issued stock or stock options they own even if they are fully vested. The purpose of our hedging policy is to align the interests, including the economic risk of ownership, of directors, employees and stockholders. In addition, we do not permit our executives to pledge shares of company stock in which they have a financial interest.

Recoupment (“Clawback”) Policy. In the event that the company is required to prepare an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under U.S. securities laws, the company has the right to recover from any current or former executive officer (not only NEOs) of the company who received incentive-based compensation (including stock options awarded as compensation) during the three-year period preceding the date on which the company is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement. The committee has full authority and discretion to administer this policy and all determinations of the committee are final and binding. This policy operates in addition to any compensation recoupment provided for by law or by the company’s long-term incentive plans. Once final rules are effective regarding clawback requirements under the Dodd-Frank Act, the company intends to review its compensation recoupment policy and, if necessary, amend such policy to comply with the new mandates.

In addition, in the event of misconduct by an employee that results in material noncompliance with financial reporting requirements, we reserve the right to take all appropriate action to remedy the misconduct, discipline such officer or employee and prevent its recurrence, including (i) termination of employment of such officer or employee and forfeiture of outstanding equity awards, (ii) commencing an action for breach of fiduciary duty and/or (iii) seeking reimbursement of any compensation paid in excess of that which would have been paid in the absence of such noncompliance, either by legal action or by offsetting other amounts owed by the company to such officer or employee to the extent permissible.

Change-in-Control Agreements. As explained in greater detail elsewhere in this proxy statement, we have change-in-control agreements with certain executives, including our NEOs, that provide for a lump sum cash payment equal to a multiple of the executive’s compensation, as well as other benefits, if (1) there is a change in control, as defined in the agreements, and (2) the executive is actually or constructively terminated within 24 months following a change in control (“double-trigger”). We believe these agreements are necessary to remain competitive with the overall compensation packages afforded by companies in our peer group. We also believe these agreements work to provide security to our executives, many of whom would have key roles in negotiating and implementing a potential change-in-control transaction, and further align their interests with the best long-term interests of stockholders. In 2010, the committee decided to eliminate “golden parachute” excise tax gross-up provisions from any such agreements entered into in the future. As a result, our change-in-control agreement with Ms. Lowery-Yilmaz, which was entered into during 2015, does not contain a tax gross up provision.

Tax Deductibility of Compensation. Section 162(m) of the Internal Revenue Code places a limit of $1 million per year on the amount of compensation paid to certain of our executive officers that the company may deduct from our federal income tax return for any single taxable year. There was an exception to the $1 million limitation for performance-based compensation meeting certain requirements. The material terms of our incentive plans that were previously approved by stockholders allowed us to grant certain cash incentive compensation and LTI awards that were designed to meet the definition of performance-based compensation which qualified for the exception to the $1 million deduction limit. The Tax Cuts and Jobs Act of 2017 repealed the performance-based compensation exception described in this paragraph. Following enactment of the Tax Cuts and Jobs Act of 2017, we generally expect that compensation paid to our CEO, CFO and other applicable covered employees in excess of $1 million will not be deductible, subject to a transition rule for compensation provided pursuant to a binding written contract in effect as of November 2, 2017 that is not materially modified after such date. To the extent applicable to our existing plans and previously granted awards, the company may avail itself of this transition rule. However, because of uncertainties as to the application and interpretation of the transition rule, no assurances can be given at this time that our existing plans and previously granted awards, even if in place on November 2, 2017, will meet the requirements of the transition rule. To maintain flexibility in compensating executive officers in a manner designed to promote varying

 

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Executive Compensation + Compensation Discussion and Analysis

 

 

corporate goals in the best interest of the company, the committee does not limit its actions with respect to executive compensation to preserve deductibility under Section 162(m) if the committee determines that doing so is in the best interests of the company.

Accounting Implications. In designing our compensation and benefit programs, the committee reviews and considers the accounting implications of its decisions, including the accounting treatment of amounts awarded or paid to executives.

Compensation Committee Report

The committee has reviewed and discussed this Compensation Discussion and Analysis with management, and based on this review and discussion, the committee recommended to the board of directors that this Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the 2020 annual report on Form 10-K.

Compensation and Management Development Committee Members:

Marc S. Lipschultz, Chair

Terrence J. Checki

Joaquin Duato

David McManus

James H. Quigley

Compensation Committee Interlocks and Insider Participation

None of the current members of the compensation and management committee (whose names appear under “Compensation Committee Report”) is, or has ever been, an officer or employee of the company or any of its subsidiaries. In addition, during the last fiscal year, no executive officer of the company served as a member of the board of directors or the compensation committee of any other entity that has one or more executive officers serving on our board of directors or our compensation and management committee.

 

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Executive Compensation + Summary Compensation Table

    

 

Summary Compensation Table

 

The following table sets forth information regarding compensation paid to or accrued for the last three fiscal years to the CEO, the chief financial officer and the three other most highly compensated executive officers, for services in all capacities to the company and its subsidiaries.

 

Name &

Principal Position

(a)

Year
(b)

Salary
($)

(c)

Bonus(1)

($)

(d)

Stock
Awards(2)
($)

(e)

Option
Awards(3)
($)
(f)

Non-Equity

Incentive

Plan
Compensation(1)

($)

(g)

Change
in Pension
Value  &
Nonqualified
Deferred
Compensation
Earnings(4)
($)

(h)

All Other

Compensation(5)

($)

(i)

Total
($)

(j)

Hess, John B.

CEO

 

2020

 

1,500,000

 

—  

 

5,099,983

 

3,399,997

 

1,125,000

 

 

22,743

 

11,147,723

 

2019

 

1,500,000

 

—  

 

4,499,973

 

2,999,996

 

3,280,500

 

1,190,848

 

22,344

 

13,493,661

 

2018

 

1,500,000

 

—  

 

4,499,996

 

2,999,999

 

3,550,500

 

 

21,945

 

12,572,440

Hill, Gregory P.

COO & President E&P

 

2020

 

1,100,000

 

—  

 

4,140,046

 

1,035,005

 

715,000

 

2,561,733

 

22,743

 

9,574,527

 

2019

 

1,100,000

 

—  

 

3,780,026

 

945,005

 

2,084,900

 

3,710,906

 

22,344

 

11,643,181

 

2018

 

1,100,000

 

—  

 

3,780,007

 

944,993

 

2,256,500

 

619,341

 

21,945

 

8,722,787

Goodell, Timothy B.

EVP & GC

 

2020

 

790,000

 

—  

 

1,700,017

 

424,996

 

367,500

 

581,116

 

22,743

 

3,886,372

 

2019

 

750,000

 

—  

 

1,600,053

 

400,002

 

1,020,600

 

765,098

 

22,344

 

4,558,097

 

2018

 

750,000

 

—  

 

1,599,987

 

399,994

 

1,104,600

 

251,703

 

21,945

 

4,128,229

Rielly, John P.

EVP & CFO

 

2020

 

810,000

 

—  

 

1,760,033

 

439,997

 

367,500

 

2,247,800

 

22,743

 

5,648,073

 

2019

 

775,000

 

—  

 

1,600,053

 

400,002

 

1,020,600

 

3,182,625

 

22,344

 

7,000,624

 

2018

 

775,000

 

—  

 

1,599,987

 

399,994

 

1,104,600

 

77,224

 

21,945

 

3,978,750

Lowery-Yilmaz, Barbara

SVP & Chief Exploration Officer(6)

 

2020

 

675,000

 

—  

 

1,640,001

 

409,995

 

202,500

 

535,727

 

22,743

 

3,485,966

(1)

The amounts shown in column (d) represent the discretionary component of the Annual Incentive Plan (“AIP”), reflecting individual performance. No discretionary adjustments were made in 2020. See “Assessment of Individual Performance” in the CD&A. The amounts shown in column (g) represent the components of the AIP relating to the attainment of enterprise performance metrics, paid to the NEOs, as discussed more fully under “2020 Enterprise Performance Metrics” in the CD&A.

 

(2)

Represents the aggregate grant date fair value of PSUs and restricted stock computed in accordance with ASC 718. A discussion of the valuation assumptions is in Note 14, Share-based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.

 

(3)

Represents the aggregate grant date fair value for stock options computed in accordance with ASC 718. A discussion of the valuation assumptions is in Note 14, Share-based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.

 

(4)

As described in the CD&A, Hess offers pension benefits to all U.S. employees consisting of the Employee’s Pension Plan (“EPP”) and the Pension Restoration Plan (“PRP”). There were no changes to either the EPP or PRP during 2020. In general, the value of the unreduced early retirement benefits decreases with age due to the decrease in life expectancy. The Pension Value for Mr. Hess decreased by $210,301 in 2020, primarily due to a decrease in his annual bonus average, which was partially offset by the decrease in discount rate to value lump sums under the PRP. The Pension Value for Mr. Hess decreased by $4,266,688 in 2018 primarily due to the increase in the assumed discount rate used to value lump sums under the PRP and due to the fact that Mr. Hess has met the age and service requirements for unreduced early retirement benefits and remained in employment at Hess.

 

(5)

Represents matching contributions by the company credited to the NEOs under the company’s employees’ savings plan.

 

(6)

Ms. Lowery-Yilmaz became a NEO in 2020 and, in accordance with SEC rules, only compensation information for 2020 is provided in the Summary Compensation Table.

 

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Executive Compensation + Grants of Plan-Based Awards

 

 

Grants of Plan-Based Awards

 

On March 3, 2020, the committee established target bonuses and approved awards of performance shares, stock options and restricted stock to the NEOs. The following table sets forth information concerning potential payouts under the AIP and for performance share awards made under our long-term incentive plan for 2020 and individual grants of restricted stock and stock options made under our long-term incentive plan for 2020 to each of the NEOs:

 

                

 

Estimated Future Payouts
Under Non-Equity Incentive
              Plan Awards(1)              

    Estimated Future Payouts
Under Equity Incentive
              Plan Awards(2)              
   

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)

(j)

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

(k)

   

Exercise
Price of
Option
Awards
($ / Sh)

(l)

   

Grant Date
Fair Value of
Stock &
Option
Awards(3)($)

(m)

 

Name

(a)

 

Award Type

(b)

 

Grant
Date

(c)

   

Threshold
($)

(d)

   

Target
($)

(e)

   

Maximum
($)

(f)

   

Threshold
(#)

(g)

   

Target
(#)

(h)

   

Maximum
(#)

(i)

 

Hess, John B.

 

Performance Shares

 

 

06-Mar-20

 

       

 

43,860

 

 

 

87,719

 

 

 

175,438

 

       

 

5,099,983

 

 

Stock Options

 

 

06-Mar-20

 

               

 

237,762

 

 

 

49.72

 

 

 

3,399,997

 

 

AIP

   

 

1,125,000

 

 

 

2,250,000

 

 

 

3,937,500

 

             

Hill, Gregory P.

 

Performance Shares

 

 

06-Mar-20

 

       

 

26,703

 

 

 

53,406

 

 

 

106,812

 

       

 

3,105,025

 

 

Restricted Stock

 

 

06-Mar-20

 

             

 

20,817

 

     

 

1,035,021

 

 

Stock Options

 

 

06-Mar-20

 

               

 

72,378

 

 

 

49.72

 

 

 

1,035,005

 

 

AIP

   

 

715,000

 

 

 

1,430,000

 

 

 

2,502,500

 

             

Goodell, Timothy B.

 

Performance Shares

 

 

06-Mar-20

 

       

 

10,965

 

 

 

21,930

 

 

 

43,860

 

       

 

1,275,010

 

 

Restricted Stock

 

 

06-Mar-20

 

             

 

8,548

 

     

 

425,007

 

 

Stock Options

 

 

06-Mar-20

 

               

 

29,720

 

 

 

49.72

 

 

 

424,996

 

 

AIP

   

 

367,500

 

 

 

735,000

 

 

 

1,286,250

 

             

Rielly, John P.

 

Performance Shares

 

 

06-Mar-20

 

       

 

11,352

 

 

 

22,704

 

 

 

45,408

 

       

 

1,320,011

 

 

Restricted Stock

 

 

06-Mar-20

 

             

 

8,850

 

     

 

440,022

 

 

Stock Options

 

 

06-Mar-20

 

               

 

30,769

 

 

 

49.72

 

 

 

439,997

 

 

AIP

   

 

367,500

 

 

 

735,000

 

 

 

1,286,250

 

             

Lowery-Yilmaz, Barbara

 

Performance Shares

 

 

06-Mar-20

 

       

 

10,578

 

 

 

21,156

 

 

 

42,312

 

       

 

1,230,010

 

 

Restricted Stock

 

 

06-Mar-20

 

             

 

8,246

 

     

 

409,991

 

 

Stock Options

 

 

06-Mar-20

 

               

 

28,671

 

 

 

49.72

 

 

 

409,995

 

   

AIP

         

 

202,500

 

 

 

405,000

 

 

 

708,750

 

                                                       
(1)

The amount shown in columns (d), (e) and (f) above represent the threshold, target and maximum payouts for the components of the 2020 AIP relating to the attainment of enterprise performance metrics. “Threshold” represents the lowest payout if the threshold level of performance is achieved for every performance metric. “Maximum” represents a payout at 175% of target. The actual amounts paid for 2020 relating to these components are shown in column (g) of the Summary Compensation Table. In June 2020, the committee capped payout of the 2020 AIP at 50% of the target award due to COVID-19 and related disruptions in the global oil markets, as discussed more fully under “Annual Incentive Plan” in the CD&A.

 

(2)

Relates to PSU awards issued under the Hess Corporation 2017 Long-Term Incentive Plan. Actual payout of shares earned will range from 0 to 200% of the units granted based on the relative performance of the company’s TSR over the three-year performance period ending December 31, 2022, compared with that of the company’s peer group described on pages 33-34 and payouts, if any, will occur following the committee’s certification of performance results in 2023 upon the completion of the three-year performance period. “Target” is the number of PSUs awarded in 2020. “Threshold” represents the lowest possible payout if a payout is made (50% of the units granted).

 

(3)

The grant date fair value of restricted stock awards is determined by multiplying the number of shares of stock awarded as shown in column (j) by the closing price of the company’s common stock on the date of grant. A discussion of the valuation assumptions is in Note 14, Share-based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020. The grant date fair value of PSUs granted is determined by multiplying the number of units granted as shown in column (h) by the fair value of the award as determined by a Monte Carlo valuation model ($58.14). The grant date fair value of Stock Options granted is determined by multiplying the number of options granted by the Black-Scholes Value. A discussion of the valuation assumptions is in Note 14, Share-based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.

Equity awards under our long-term incentive plans are discussed in the “Compensation Discussion and Analysis” under the heading “LTI Program Structure.” Non-equity incentive plan awards are discussed in the “Compensation Discussion and Analysis” under the heading “Annual Incentive Plan.”

 

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Executive Compensation + Outstanding Equity Awards at Fiscal Year End

    

 

Outstanding Equity Awards at Fiscal Year End

 

The following table shows outstanding equity awards held by the NEOs at the end of the last fiscal year.

 

                                                       Stock Awards                                             
                                         Option Awards                                                  Restricted Stock                  Performance  Share Units      

Name

(a)

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(4)

(c)

Option
Exercise
Price
($)
(d)
Option
Expiration
Date
(e)

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)(9)
(f)

Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(9)
(g)

Number of
Unearned
Shares,
Units or
Other Rights
That Have Not
Vested

(#)(15)

(h)

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

($)(16)
(i)

Hess, John B.

 

150,930

 

—  

 

83.88

 

02-Feb-21

 

301,668

(10)

 

15,925,054

 

73,885

 

—  

 

80.35

 

04-Mar-24

 

90,476

 

—  

 

74.49

 

03-Mar-25

 

213,945

 

—  

 

44.31

 

01-Mar-26

 

176,775

 

—  

 

51.03

 

06-Mar-27

 

146,092

 

73,046

(1)

 

48.48

 

06-Mar-28

 

55,309

 

110,620

(2)

 

56.74

 

06-Mar-29

 

—  

 

237,762

(3)

 

49.72

 

06-Mar-30

Hill, Gregory P.

 

62,145

 

—  

 

83.88

 

02-Feb-21

 

38,419

(5)

 

2,028,139

 

188,194

(11)

 

9,934,761

 

41,028

 

—  

 

80.35

 

04-Mar-24

 

45,000

 

—  

 

74.49

 

03-Mar-25

 

7,090

 

—  

 

44.31

 

01-Mar-26

 

65,127

 

—  

 

51.03

 

06-Mar-27

 

46,018

 

23,010

(1)

 

48.48

 

06-Mar-28

 

17,422

 

34,846

(2)

 

56.74

 

06-Mar-29

 

—  

 

72,378

(3)

 

49.72

 

06-Mar-30

Goodell, Timothy B.

 

35,505

 

—  

 

83.88

 

02-Feb-21

 

15,999

(6)

 

844,587

 

78,983

(12)

 

4,169,513

 

17,385

 

—  

 

80.35

 

04-Mar-24

 

19,048

 

—  

 

74.49

 

03-Mar-25

 

30,009

 

—  

 

44.31

 

01-Mar-26

 

27,567

 

—  

 

51.03

 

06-Mar-27

 

19,478

 

9,740

(1)

 

48.48

 

06-Mar-28

 

7,374

 

14,750

(2)

 

56.74

 

06-Mar-29

 

—  

 

29,720

(3)

 

49.72

 

06-Mar-30

Rielly, John P.

 

35,505

 

—  

 

83.88

 

02-Feb-21

 

16,301

(7)

 

860,530

 

79,757

(13)

 

4,210,372

 

17,385

 

—  

 

80.35

 

04-Mar-24

 

19,048

 

—  

 

74.49

 

03-Mar-25

 

30,009

 

—  

 

44.31

 

01-Mar-26

 

27,567

 

—  

 

51.03

 

06-Mar-27

 

19,478

 

9,740

(1)

 

48.48

 

06-Mar-28

 

7,374

 

14,750

(2)

 

56.74

 

06-Mar-29

 

—  

 

30,769

(3)

 

49.72

 

06-Mar-30

Lowery-Yilmaz, Barbara

 

14,762

 

—  

 

74.49

 

03-Mar-25

 

14,021

(8)

 

740,169

 

65,372

(14)