DEF 14A 1 loxy2014_def14a.htm OCCIDENTAL PETROLEUM CORPORATION - DEF14A OCCIDENTAL PETROLEUM CORPORATION - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

 

Exchange Act of 1934 (Amendment No. )

 

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

 

Check the appropriate box:
Preliminary Proxy Statement
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to ss.240.14a-12

 

OCCIDENTAL PETROLEUM CORPORATION

 

 

 

(Name of Registrant as Specified In Its Charter) 

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

 

  Payment of Filing Fee (Check the appropriate box):
  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1) Title of each class of securities to which transaction applies:
  (2) Aggregate number of securities to which transaction applies:
  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):
  (4) Proposed maximum aggregate value of transaction:
  (5) Total fee paid:
  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1) Amount Previously Paid:
  (2) Form, Schedule or Registration Statement No.:
  (3) Filing Party:
  (4) Date Filed:
 
 

  
  
Letter to Stockholders
from the Chairman of the Board and the
President and Chief Executive Officer

 

 

 

 

 


 

DEAR

STOCKHOLDERS

 

On behalf of the Board of Directors, it is our pleasure to invite you to Occidental’s 2014 Annual Meeting of Stockholders, which will be held in Houston, Texas, May 2, 2014, at 10:30 a.m.

 

Before the meeting begins, there will be an opportunity to meet informally with members of Occidental’s management team. Enclosed are the Notice of Annual Meeting and the Proxy Statement, which provides the time and date of the meeting and describes in detail the matters on which you are being asked to vote. These matters include electing the directors, an advisory vote approving executive compensation, modifying the company’s certificate of incorporation to provide for written consent by stockholders, ratifying the selection of independent auditors, and transacting any other business that properly comes before the meeting, including any stockholder proposals.

 

Also enclosed are a Report to Stockholders, which discusses highlights of the year, and Occidental’s Annual Report on Form 10-K. As in the past, at the meeting there will be a report on operations and an opportunity for you to ask questions.

 

Whether you plan to attend the meeting or not, we encourage you to vote promptly so that your shares will be represented and properly voted at the meeting.

 

Sincerely,

 

Edward P. Djerejian Stephen I. Chazen
Chairman of the Board President and
  Chief Executive Officer

 
Notice of Annual Meeting
of Stockholders

 

 

 

 


 

2014

ANNUAL
MEETING

 

March 25, 2014

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To Our Stockholders:

 

Occidental’s 2014 Annual Meeting of Stockholders will be held at 10:30 a.m. on Friday, May 2, 2014, in the Bravo Ballroom, Hotel Derek, 2525 West Loop South, Houston, Texas.

 

At the meeting, stockholders will act on the following matters and will consider all other matters properly brought before the meeting, including stockholder proposals:

 

Proposal 1: Election of directors
Proposal 2: One-year waiver of director age restriction for Edward P. Djerejian, an independent director
Proposal 3: Advisory vote approving executive compensation
Proposal 4: Ability of stockholders to act by written consent
Proposal 5: Separation of the roles of Chairman of the Board and Chief Executive Officer
Proposal 6: Ratification of selection of KPMG LLP as independent auditors
Proposals 7-10: The Board of Directors knows of four stockholder proposals that may be presented

 

These matters are described in detail in the Proxy Statement. The Board of Directors recommends a vote FOR Proposals 1, 2, 3, 4, 5 and 6; and AGAINST Proposals 7, 8, 9 and 10.

 

Stockholders of record at the close of business on March 13, 2014, are entitled to receive notice of, to attend and to vote at the meeting.

 

Whether you plan to attend or not, it is important that you read the Proxy Statement and follow the instructions on your proxy card to submit a proxy by mail, telephone or Internet. This will ensure that your shares are represented and will save Occidental additional expenses of soliciting proxies.

 

Sincerely,

 

Donald P. de Brier

Corporate Executive Vice President and Corporate Secretary
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, CA 90024

 

 

 

 

Table of Contents

 

Proposal 1: Election of Directors 1
   
Corporate Governance 8
   
Board of Directors and its Committees 8
Board and Committee Roles in Risk Oversight 10
Stockholder Policies 11
Executive Compensation 11
Health, Environment and Safety 11
Social Responsibility 11
Other Governance Measures 12
   
Proposal 2: One-Year Waiver of Director Age Restriction for Edward P. Djerejian, an Independent Director 13
   
Compensation Discussion and Analysis 14
   
Business Performance Highlights 14
Overview of Executive Compensation 14
Compensation Program 18
Individual Compensation Considerations 21
Succession Planning 28
Participants in Executive Compensation Process 28
Risk Management of Compensation Policies and Practices 29
Certification of Previously Granted Performance Stock Awards 29
Other Compensation and Benefits 30
Stock Ownership Guidelines 31
Equity Grant Practices 31
Consequences of Misconduct 31
Tax Deductibility Under Section 162(m) 32
Compensation Committee Report 32
   
Executive Compensation Tables 33
   
Summary Compensation Table 33
Grants of Plan-Based Awards 35
Summary of Award Terms 36
Outstanding Equity Awards 37
Option Exercises and Stock Vested in 2013 39
Nonqualified Deferred Compensation 40
Potential Payments Upon Termination or Change of Control 41
   
Director Compensation 46
   
New Program 46
2013 Program 46
   
Security Ownership 48
   
Certain Beneficial Owners and Management 48
Beneficial Ownership of Directors and Executive Officers 48
Section 16(a) Beneficial Ownership Reporting Compliance 49
   
Proposal 3: Advisory Vote Approving Executive Compensation 50
   
Overview of Executive Compensation 50
   
Proposal 4: Ability of Stockholders to Act by Written Consent 52
   
Proposal 5: Separation of the Roles of the Chairman of the Board and the Chief Executive Officer 53
   
Proposal 6: Ratification of Independent Auditors 53
   
Audit and Other Fees 53
Report of the Audit Committee 54
Ratification of Selection of Independent Auditors 54
   
Stockholder Proposals 54
   
General Information 54
Proposal 7: Executives to Retain Significant Stock 55
Proposal 8: Review Lobbying at Federal, State, Local Levels 57
Proposal 9: Quantitative Risk Management Reporting for Hydraulic Fracturing Operations 58
Proposal 10: Fugitive Methane Emissions and Flaring Report 59
   
General Information 61
   
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 2, 2014 61
Admission to the Annual Meeting 61
Voting Instructions and Information 61
Solicitation Expenses 62
Stockholder Proposals for the 2015 Annual Meeting of Stockholders 62
Nominations for Directors for Term Expiring in 2016 62
Annual Report 63
   
Exhibits 64
   
Exhibit A: Proposed Amendment to Restated Certificate of Incorporation (Proposal 4) 64
Exhibit B: Proposed By-Law Amendment (Proposal 4) 66
Exhibit C: By-Law Provision (Proposal 5) 67


 

 

Proposal 1:
Election of Directors
 
   

 

 

PROPOSAL 1: ELECTION OF DIRECTORS

 

Pursuant to Occidental’s by-laws, directors are elected by the majority of votes cast with respect to such director, meaning that the number of votes cast “for” a director must exceed the number of votes cast “against” that director. Any director who receives a greater number of votes “against” his or her election than votes “for” in an uncontested election must tender his or her resignation. Unless accepted earlier by the Board of Directors, such resignation will become effective on October 31st of the year of the election.

 

Unless you specify differently on the proxy card, proxies received will be voted FOR Spencer Abraham, Howard I. Atkins, Eugene L. Batchelder, Stephen I. Chazen, Edward P. Djerejian, John E. Feick, Margaret M. Foran, Carlos M. Gutierrez, William R. Klesse, Avedick B. Poladian and Elisse B. Walter to serve for a one-year term ending at the 2015 Annual Meeting, but in any event, until his or her successor is elected and qualified, unless ended earlier due to his or her death, resignation, disqualification or removal from office. In the event any nominee should be unavailable at the time of the meeting, the proxies may be voted for a substitute nominee selected by the Board of Directors.

 

The Board of Directors has determined that all directors, other than Mr. Chazen, meet the independence standards of Occidental’s Corporate Governance Policies and the New York Stock Exchange Listed Company Manual.

 

The following biographical information is furnished with respect to each of the nominees for election at the 2014 Annual Meeting, together with a discussion of each nominee’s experience, qualifications and attributes or skills that led to the conclusion that such person should serve as a director.

 

Descriptions of the responsibilities of the six standing Board committees follow the biographical information.

 

The Board of Directors recommends a vote FOR all of the nominees.

 

 

SPENCER ABRAHAM

 

Director since 2005

 

Vice Chairman of the Board

 

Committees: Chair of Management Succession and Talent Development Committee; Member of Corporate Governance, Nominating and Social Responsibility Committee; Environmental, Health and Safety Committee; and Executive Compensation Committee

 

Secretary Abraham, 61, is Chairman and Chief Executive Officer of The Abraham Group LLC, an international strategic consulting firm based in Washington, D.C. He is also the Chairman and Chief Executive Officer of Abraham & Roetzel LLC, a bipartisan government affairs and issue management firm. He represented Michigan in the United States Senate prior to President George W. Bush selecting him as the tenth Secretary of

Energy in U.S. history. During his tenure at the Energy Department from 2001 through January 2005, he developed policies and regulations to ensure the nation’s energy security, was responsible for the U.S. Strategic Petroleum Reserve, oversaw domestic oil and gas development policy and developed relationships with international governments, including members of the Organization of the Petroleum Exporting Countries. Secretary Abraham serves as a Director of PBF Energy Inc., where he serves on the Compensation and Nominating & Corporate Governance Committees, and NRG Energy, Inc., where he serves on the Compensation and Nuclear Oversight Committee, and as Chairman of the Advisory Boards of Lynx Global Realty Asset Fund Onshore LLC and Uranium Energy Corp. He was previously a Director of GenOn Energy, Inc. and a Director and a member of the Nominating and Governance and Compensation Committees of ICx Technologies. He also serves on the boards or advisory committees of Sindicatum Sustainable Resources and C3. Secretary Abraham is a member of the Advisory Board of the Churchill Center. He holds a Juris Doctor degree from Harvard Law School and is the author of, “Lights Out!: Ten Myths About (and Real Solutions to) America’s Energy Crisis.”

 

Qualifications: Secretary Abraham’s nearly two decades at the highest levels of domestic and international policy and politics shape the insights he brings to Occidental’s Board of Directors. As a former U.S. Senator and former U.S. Secretary of Energy who directed all aspects of the country’s energy strategy, Secretary Abraham provides the Board unique insight into public policy and energy-related issues. In addition, Secretary Abraham is a Harvard-educated attorney who, while directing the Energy Department, oversaw a budget of nearly $24 billion (FY 2005) and was responsible for the management of senior department personnel. Secretary Abraham’s legal training, and his government service managing complex policy, personnel and strategic issues provide Occidental with exceptional knowledge and perspective in the areas of health, environment and safety, strategy and policy, personnel management and community relations.

 

 

HOWARD I. ATKINS

 

Director since 2010

 

Committees: Chair of Finance and Risk Management Committee; Member of Audit Committee; Executive Compensation Committee; and Management Succession and Talent Development Committee

 

Mr. Atkins, 63, retired as the Senior Executive Vice President and Chief Financial Officer of Wells Fargo & Company, where he was responsible for Wells Fargo’s financial management functions, investment portfolios and corporate properties functions from 2001 to 2011. A 37-year veteran of the financial services industry, Mr. Atkins previously served as Executive Vice President and


 

 

1     2014 Notice of Annual Meeting and Proxy Statement 
Proposal 1:
Election of Directors
   
 

 

Chief Financial Officer of New York Life Insurance Company, Chief Financial Officer of Midlantic Corporation and Corporate Treasurer of Chase Manhattan Bank. Mr. Atkins serves on the Board of Directors of Ingram Micro Inc. where he is a member of the Audit Committee and the Human Resources Committee.

 

Qualifications: With his experience as Chief Financial Officer of Wells Fargo, one of the largest banking institutions in the United States, Mr. Atkins brings to the Board a deep understanding of financial oversight and accountability. In his nearly four decades in the financial services industry, Mr. Atkins has had responsibilities in the areas of financial reporting, tax management, asset-liability management, treasury, corporate development, investor relations and mergers and acquisitions. This experience provides the Board insight into financial management and analysis. Mr. Atkins’ financial acumen, combined with his senior management expertise provides the Board valuable perspective in helping to guide the fiscal management policies that further Occidental’s strategic business goals.

 

 

EUGENE L. BATCHELDER

 

Director since 2013

 

Committees: Member of Audit Committee; and Management Succession and Talent Development Committee

 

Mr. Batchelder, 66, retired as the Senior Vice President and Chief Administrative Officer at ConocoPhillips, an integrated global energy company. In this role, from 2009 until his retirement in 2012, he was responsible for global shared services, human resources, facilities, information technology, security, aviation, executive services, and corporate affairs, which included investor relations, corporate communications and contributions. Mr. Batchelder served as Senior Vice President and Chief Information Officer of ConocoPhillips from 2002 to 2009. Prior to the merger of Conoco and Phillips Petroleum in 2002, Mr. Batchelder was promoted to increasingly senior positions within Phillips Petroleum companies, including information technology and financial management positions. Mr. Batchelder is a past trustee and current governor of the Oklahoma State University Foundation and past president and board member of the Oklahoma State University Alumni Association. Mr. Batchelder holds a bachelor’s degree in Accounting from Oklahoma State University, is a certified public accountant and a member of the American Institute of Public Accountants.

 

Qualifications: With more than 40 years of experience in the energy industry, including two decades in senior executive management, Mr. Batchelder brings an in-depth understanding of key corporate issues, including financial management and information technology. Mr. Batchelder also has insight into human resources, including executive management succession planning and compensation and benefits.

 

STEPHEN I. CHAZEN

 

Director since 2010

 

Mr. Chazen, 67, became President and Chief Executive Officer of Occidental Petroleum Corporation in May 2011. Mr. Chazen served as President and Chief Operating Officer from 2010 to 2011 and as President and Chief Financial Officer from 2007 to 2010. Prior to being named President and Chief Financial Officer, Mr. Chazen was Chief Financial Officer and Senior Executive Vice President from 2004 to 2007, Chief Financial Officer and Executive Vice President-Corporate Development from 1999 to 2004, and Executive Vice President-Corporate Development from 1994 to 1999. Prior to joining Occidental, Mr. Chazen was a Managing Director in Corporate Finance and Mergers and Acquisitions at Merrill Lynch. Mr. Chazen is a Director of Ecolab Inc. He was previously a member of the Board of Directors of Washington Mutual, Inc. Mr. Chazen is Chairman of the American Petroleum Institute’s Board of Directors and serves on the Boards of Aquarium of the Pacific and Catalina Island Conservancy. Mr. Chazen holds a Ph.D. in Geology from Michigan State University, a master’s degree in Finance from the University of Houston and a bachelor’s degree in Geology from Rutgers College.

 

Qualifications: Mr. Chazen, as Chief Executive Officer, is responsible for all operations, the financial management of the company and for creating and implementing the company’s strategy. Since joining Occidental, he has recommended and implemented the company’s acquisition and divestiture strategy, which has been a key factor in Occidental’s transformation into a major oil and gas company. Additionally, Mr. Chazen has been a successful executive in the financial services industry. This financial and management expertise, coupled with his more than thirty years of experience in the oil and gas industry, demonstrate the valuable expertise and perspective that he brings to the Board.

 

 

EDWARD P. DJEREJIAN

 

Director since 1996

 

Chairman of the Board

 

Committees: Member of Corporate Governance, Nominating and Social Responsibility Committee

 

Ambassador Djerejian, 75, served in the U.S. Foreign Service for eight presidents, from John F. Kennedy to William J. Clinton (1962-1994). Prior to his nomination by President Clinton as U.S. ambassador to Israel (1993-1994), he was assistant secretary


 

 Occidental Petroleum Corporation     2
Proposal 1:
Election of Directors
   
 

 

of state for Near Eastern affairs in both the George H.W. Bush and the Clinton administrations (1991-1993). He was the U.S. ambassador to the Syrian Arab Republic (1988-1991). He also served as special assistant to President Ronald Reagan and deputy press secretary for foreign affairs in the White House (1985-1986). After his retirement from government service in 1994, he became, and currently serves as, the founding director of the James A. Baker III Institute for Public Policy at Rice University. His book “Danger and Opportunity: An American Ambassador’s Journey Through the Middle East” was published by Simon & Schuster Threshold Editions in September 2008. He has been awarded the Presidential Distinguished Service Award, the Department of State’s Distinguished Honor Award and numerous other honors, including the Ellis Island Medal of Honor and the Anti-Defamation League’s Moral Statesman Award. He is also a recipient of the Association of Rice Alumni’s Gold Medal, the group’s most prestigious award, for his service to Rice University. In 2011, Ambassador Djerejian was elected a fellow of the American Academy of Arts and Sciences. He is also a member of the Board of Trustees of the Carnegie Corporation of New York. Ambassador Djerejian previously served as a director of Baker Hughes Incorporated and Global Industries, Ltd., where he was Chairman of the Governance Committee.

 

Qualifications: Ambassador Djerejian is a leading expert on the complex political, security, economic, religious and ethnic issues of the Middle East. His experience brings valuable insight that enhances the Board’s ability to assess operations and business opportunities in the company’s important Middle East/North Africa region. Throughout his distinguished career, he has developed an in-depth knowledge of a broad range of public policy issues, and expertise in foreign policy, geopolitics of energy and corporate governance. He also has experience serving on several public, private and nonprofit boards.

 

Waiver of Age Restriction: All of the directors have requested that Mr. Djerejian remain as independent Chairman for one additional one-year term for the reasons described under “Board of Directors and its Committees” beginning on page 8. His re-election will require that the stockholders also waive the current age 75 restriction for him for one term. See Proposal 2 on page 13.

 

 

JOHN E. FEICK

 

Director since 1998

 

Committees: Chair of Environmental, Health and Safety Committee; Member of Audit Committee; Executive Compensation Committee; and Finance and Risk Management Committee

 

Mr. Feick, 70, is the Chairman and a significant stockholder of Matrix Solutions Inc., a provider of environmental remediation and reclamation services. Until 2011, he was Chairman and a significant stockholder of Kemex Engineering Services, Ltd., which offers

engineering and design services to the petrochemical, refining and gas processing industries. From 1984 to 1994, Mr. Feick was President and Chief Operating Officer of Novacor Chemicals, a subsidiary of Nova Corporation. He is a member of the Board of Directors of Graham Construction. He previously served as Chairman of the Board of Directors of Oak Point Energy Ltd., an oil sands exploration and development company, and was a director of Veresen Inc.

 

Qualifications: Mr. Feick possesses a deep understanding of both the oil and gas and chemicals industries along with broad experience in environmental compliance and remediation. He has served as President and Chairman of a company specializing in environmental services and served as Chairman of an oil and gas and petrochemicals specialty engineering firm. As President and Chief Operating Officer of Novacor Chemicals, he was responsible for the company’s investments and operations and established the company as a leader in plant reliability, utilization rates, occupational health and safety, and environmental performance in North America. In addition to industry knowledge and expertise, Mr. Feick’s experience brings the Board exceptionally valuable insight into the environmental, health and safety area.

 

 

MARGARET M. FORAN

 

Director since 2010

 

Committees: Chair of Corporate Governance, Nominating and Social Responsibility Committee; Member of Audit Committee; Executive Compensation Committee; Environmental, Health and Safety Committee; and Management Succession and Talent Development Committee

 

Ms. Foran, 59, is Chief Governance Officer, Vice President and Corporate Secretary of Prudential Financial, Inc. Prior to joining Prudential, she was Executive Vice President, General Counsel and Corporate Secretary at Sara Lee Corporation from 2008 to 2009; Senior Vice President, Associate General Counsel and Corporate Secretary at Pfizer Inc. from 1997 to 2008; and Vice President and Assistant General Counsel at J.P. Morgan & Co. Ms. Foran is a former Director of The MONY Group Inc. and MONY Life Insurance Company. She served as Co-Chair and a Director of the Council of Institutional Investors (CII) and Co-Chair of the CII International Corporate Governance Committee. She is the former Chair of the American Bar Association Committee on Corporate Governance. Ms. Foran is the former Chair of the Coordinating Committee of the Business Roundtable Corporate Governance Task Force. She previously served two terms on the Standing Advisory Group of the Public Company Accounting Oversight Board (PCAOB) and is a member of the Economic Club of New York. Ms. Foran is also a Trustee of the SEC Historical Society.

 

Qualifications: Ms. Foran is an accomplished attorney with deep expertise in legal affairs and corporate governance. She has held positions of increasing responsibility at four U.S.-based global companies, where for more than a decade she has had


 

3     2014 Notice of Annual Meeting and Proxy Statement 
Proposal 1:
Election of Directors
   
 

 

a leading role in strengthening corporate governance principles and practices, ensuring regulatory compliance and developing programs to broaden investor communications. Having been a senior executive in the financial services, food and beverage and pharmaceutical industries, Ms. Foran has a broad range of experience in shareholder services, mergers and acquisitions, SEC reporting, capital markets, derivatives, risk management, internal audit procedures and insurance matters as well as environmental, safety and social responsibility programs. Ms. Foran’s corporate experience, in addition to her work with various investor groups and corporate trade associations, provides the Board exceptional acumen and insight on governance, investor and legal policies and practices.

 

 

CARLOS M. GUTIERREZ

 

Director since 2009

 

Committees: Chair of Executive Compensation Committee; Member of Corporate Governance, Nominating and Social Responsibility Committee; Environmental, Health and Safety Committee; Finance and Risk Management Committee; and Management Succession and Talent Development Committee

 

Secretary Gutierrez, 60, is Co-Chair of Albright Stonebridge Group, a commercial diplomacy and strategic advisory firm. He also serves as Chairman of Republicans for Immigration Reform, a political action committee. Prior to that he was Vice Chairman of the Institutional Clients Group and a member of the Senior Strategic Advisory Group at Citigroup Inc. from 2011 to February 2013. He joined Citigroup from communications and public affairs consulting firm APCO Worldwide Inc., where he was Chairman of the Global Political Strategies division in 2010. He served as U.S. Secretary of Commerce in the administration of President George W. Bush from February 2005 to January 2009. Prior to his government service, Secretary Gutierrez was with Kellogg Company for 30 years. He became Kellogg’s Chief Executive Officer in 1999 and was named Chairman of the Board from 2000 to 2005. Secretary Gutierrez serves on the Boards of Directors of MetLife, Inc., where he serves on the Finance and Investment and Governance Committees, and Time Warner Inc., where he serves on the Audit Committee. He previously served as a Director of Corning Incorporated, United Technologies Corporation and Lighting Science Group Corp., where he served on the Audit Committee. In addition to serving as a trustee of the Woodrow Wilson International Center for Scholars and a National Trustee to the University of Miami Board of Trustees, Secretary Gutierrez is a non-resident scholar at the University of Miami’s Institute for Cuban and Cuban-American Studies and is a Co-Chairman of the Regional Migration Study Group. He is also a co-founder of TheDream.US, a scholarship fund for undocumented students.

Qualifications: Secretary Gutierrez’s highly successful service as Chief Executive Officer and Chairman of Kellogg Company provides him deep insight into the complex challenges faced by a growing organization in a highly competitive business environment. Additionally, his experience as U.S. Secretary of Commerce provides the Board exceptional knowledge and insight into the complex environment of international commerce. Secretary Gutierrez brings valuable business management and operational experience and an international commerce and global economic perspective to the Board.

 

 

WILLIAM R. KLESSE

 

Director since 2013

 

Committees: Member of Environmental, Health and Safety Committee; and Management Succession and Talent Development Committee.

 

Mr. Klesse, 67, is Chairman of the Board and Chief Executive Officer of Valero Energy Corporation, an international manufacturer and marketer of transportation fuels, other petrochemical products and power. He joined the Valero board as Vice Chairman in 2005 and became Chairman in 2007. He has served as Chief Executive Officer since 2006 and served as President from 2008 to 2013. From 2003 to 2005, Mr. Klesse was Valero’s Executive Vice President and Chief Operating Officer. Prior to that, he served as Executive Vice President of Refining and Commercial Operations following Valero’s 2001 acquisition of Ultramar Diamond Shamrock Corporation, where he had been Executive Vice President of the company’s refining operations. Mr. Klesse began his 40-plus year career in the energy industry at Diamond Shamrock Corporation, which merged with Ultramar Corporation in 1996. Mr. Klesse is Chairman of the Board of Valero Energy Partners GP LLC. He is a trustee of the Texas Biomedical Research Institute, the Muscular Dystrophy Association and United Way of San Antonio and Bexar County. Mr. Klesse holds a bachelor’s degree in Chemical Engineering from the University of Dayton and a Master of Business Administration with an emphasis in Finance from West Texas A&M University.

 

Qualifications: Mr. Klesse brings more than four decades of energy industry executive management experience to Occidental’s Board. As Valero’s Chairman and Chief Executive Officer, he leads the Board’s strategic planning and oversees the daily operations of a major global energy company. Mr. Klesse’s experience provides an informed management perspective and insights of global business and energy issues to the board. He also has leadership experience on industry association and nonprofit boards.


 

 Occidental Petroleum Corporation     4
Proposal 1:
Election of Directors
   
 

 

 

AVEDICK B. POLADIAN

 

Director since 2008

 

Committees: Chair of Audit Committee; Member of Executive Compensation Committee; and Finance and Risk Management Committee

 

Mr. Poladian, 62, is Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. In this role, Mr. Poladian oversees human resources, risk management, construction, finance and legal functions across the firm. Mr. Poladian previously served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen from 1974 to 2002 and is a certified public accountant (inactive). He is a past member of the Young Presidents Organization, the Chief Executive Organization, the California Society of CPAs and the American Institute of CPAs. Mr. Poladian is a director of the YMCA of Metropolitan Los Angeles, a member of the Board of Councilors of the University of Southern California School of Policy, Planning, and Development, a member of the Board of Advisors of the Ronald Reagan UCLA Medical Center, and a former Trustee of Loyola Marymount University. He serves as a director of Western Asset Management Funds where he is a member of the Audit Committee and as a member of the Board of Trustees of Public Storage where he is the Chair of the Audit Committee and the Chair of the Nominating/Corporate Governance Committee. He previously served as a director of California Pizza Kitchen.

 

Qualifications: As a certified public accountant with extensive business experience, Mr. Poladian qualifies as one of Occidental’s Audit Committee financial experts and provides the Board expert perspective in financial management and analysis. Having served in a senior management position at one of the world’s largest accounting firms, combined with his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company, Mr. Poladian has deep knowledge of key business issues, including personnel and asset utilization, in addition to all aspects of fiscal management.

 

ELISSE B. WALTER

 

Director since 2014

 

Ms. Walter, 63, was appointed Commissioner of the U.S. Securities and Exchange Commission (SEC) by President George W. Bush, and served in that capacity from 2008 until 2013. President Barack Obama designated her as the 30th Chairman of the SEC in December 2012. Prior to her appointment as an SEC Commissioner, she was with the Financial Industry Regulatory Authority (FINRA) and its predecessor, the National Association of Securities Dealers (NASD), from 1996-2008. She served as Senior Executive Vice President, Regulatory Policy and Programs for FINRA and held the comparable position at NASD before its 2007 consolidation with NYSE Member Regulation. Earlier in her career, she served as the General Counsel of the Commodity Futures Trading Commission from 1994 to 1996 and as Deputy Director of the SEC Division of Corporation Finance from 1986 to 1994. Among the honors Ms. Walter has received are the Presidential Rank Award (Distinguished), the ASECA William O. Douglas Award, the SEC Chairman’s Award for Excellence and the Federal Bar Association’s Philip A. Loomis, Jr., and Manuel F. Cohen Awards. She is a member of the Academy of Women Achievers of the YWCA of the City of New York and the inaugural class of the DirectWomen Institute. She serves on the Board of Directors of the Sustainability Accounting Standards Board and is a member of FINRA’s Investor Issues Committee. Ms. Walter holds a B.A. in Mathematics, cum laude, from Yale University and a J.D., cum laude, from Harvard Law School.

 

Qualifications: Chairman Walter’s long and distinguished record of public service in major leadership roles at key agencies of the federal government has given her unique insight into both business and government. She also brings to Occidental’s board more than 35 years of experience and insight on complex domestic and international regulatory matters. As Chairman of the SEC, Ms. Walter demonstrated a keen understanding of capital markets and related regulatory issues, and led a 4,000-employee federal agency, overseeing its budget and developing policy. Her experience at FINRA provides extensive knowledge with respect to corporate finance and financial regulation and disclosure and her CFTC experience brings to the Board an understanding of commodities markets and regulation.


 

5     2014 Notice of Annual Meeting and Proxy Statement 
Proposal 1:
Election of Directors
   
 

 

Board Committees

 

The Board of Directors has six standing committees, each currently composed solely of independent directors: Audit; Corporate Governance, Nominating and Social Responsibility; Environmental, Health and Safety; Executive Compensation; Finance and Risk Management; and Management Succession and Talent Development. In May 2013, the Board eliminated the Charitable Contributions Committee and the Corporate Governance, Nominating and Social Responsibility Committee assumed its duties. The charters of the Audit Committee; the Corporate Governance, Nominating and Social Responsibility

Committee; the Executive Compensation Committee; and the Finance and Risk Management Committee; and the enabling resolutions for each of the other committees as well as the duties of the Chairman of the Board are available at www.oxy.com or by writing to Occidental’s Corporate Secretary, Occidental Petroleum Corporation, 10889 Wilshire Boulevard, Los Angeles, California 90024. The general responsibilities of the committees are described below. From time to time, the Board of Directors delegates additional duties to the standing committees.


 

Name and Members  Responsibilities  Meetings in 2013
Audit Committee

Howard I. Atkins
Eugene L. Batchelder
John E. Feick
Margaret M. Foran
Avedick B. Poladian (Chair)
 

• hires the independent auditors to audit the consolidated financial statements of Occidental and its subsidiaries

• discusses the scope and results of the audit with the independent auditors

• discusses Occidental’s financial accounting and reporting principles and the adequacy of Occidental’s internal accounting, financial and operating controls with the auditors and with management

• reviews all reports of internal audits submitted to the Audit Committee and management’s actions with respect thereto

• reviews the appointment of the senior internal auditing executive

• oversees all matters relating to Occidental’s Code of Business Conduct compliance program

 

All of the members of the Audit Committee are independent, as defined in the New York Stock Exchange Listed Company Manual. All of the members of the Audit Committee are financially literate and the Board has determined that Messrs. Atkins, Batchelder and Poladian meet the Securities and Exchange Commission’s definition of “audit committee financial expert.” The Audit Committee Report with respect to Occidental’s financial statements is on page 54.

  8 meetings,
including 5 executive
sessions with no members
of management present
Charitable Contributions Committee

Spencer Abraham
Edward P. Djerejian
Rosemary Tomich (Chair)(1)
 

• oversees charitable contributions made by Occidental and its subsidiaries

  2 meetings
(Committee eliminated
effective May 2013)
Corporate Governance,
Nominating and Social
Responsibility Committee


Spencer Abraham
Edward P. Djerejian
Margaret M. Foran (Chair)
Carlos M. Gutierrez
 

• recommends candidates for election to the Board

• responsible for the periodic review and interpretation of Occidental’s Corporate Governance Policies and consideration of other governance issues

• oversees the evaluation of the Board and management

• reviews Occidental’s policies, programs and practices on social responsibility

• oversees compliance with Occidental’s Human Rights Policy

• oversees charitable contributions made by Occidental and its subsidiaries

 

See page 62 for information on how director nominees are selected and instructions on how to recommend nominees for the Board.

  5 meetings

 

(1) Served as Director until May 3, 2013. 

 

 Occidental Petroleum Corporation     6
Proposal 1:
Election of Directors
   
 

 

Name and Members  Responsibilities  Meetings in 2013
Environmental, Health
and Safety Committee


Spencer Abraham
John E. Feick (Chair)
Margaret M. Foran
Carlos M. Gutierrez
William R. Klesse
 

• reviews and discusses with management the status of environmental, health and safety issues, including compliance with applicable laws and regulations

• reviews the results of internal compliance reviews and remediation projects

• reports periodically to the Board on environmental, health and safety matters affecting Occidental and its subsidiaries

  5 meetings
Executive Compensation Committee

Spencer Abraham
Howard I. Atkins
John E. Feick
Margaret M. Foran
Carlos M. Gutierrez (Chair)
Avedick B. Poladian
 

• reviews and approves the corporate goals and objectives relevant to the compensation of the Chief Executive Officer (CEO), evaluates the performance of the CEO and determines and approves the compensation of the CEO

• reviews and approves the compensation of all other executive officers

• administers Occidental’s stock-based incentive compensation plans and periodically reviews the performance of the plans and their rules to assure purposes of the plans are being met

• makes recommendations to the Board with respect to incentive compensation plans and equity-based plans

• advises the Board on the compensation of non-employee directors

• prepares Compensation Committee Report on executive compensation for inclusion in the annual proxy statement

 

The Executive Compensation Committee’s report on executive compensation is on page 32.

  6 meetings,
including 4 executive
sessions with no members
of management present
Finance and Risk Management Committee

Howard I. Atkins (Chair)
John E. Feick
Carlos M. Gutierrez
Avedick B. Poladian
 

• recommends to the Board the annual capital plan, and any changes thereto, and significant joint ventures, long-term financial commitments and acquisitions

• approves policies for authorization of expenditures, cash management and investment and for hedging of commodities and interest rates

• reviews Occidental’s financial strategies, risk management policies (including insurance coverage levels) and financial plans (including planned issuances of debt and equity)

  5 meetings
Management Succession and Talent
Development Committee


Spencer Abraham (Chair)
Howard I. Atkins
Eugene L. Batchelder
Margaret M. Foran
Carlos M. Gutierrez
William R. Klesse
 

• maintains an active CEO succession plan, including time-based replacement scenarios for emergency scenarios and short-term and long-term horizons

• ensures that a robust and timely succession planning process is in place which will provide sufficient management and leadership talent to meet the evolving needs of the Corporation’s business

• leads CEO searches on behalf of the Board and otherwise interface with external recruiters as necessary

• reviews the Corporation’s talent development processes and programs, including recruitment and selection, retention, development and diversity elements

• participates in the assessment of high potential and key personnel

• actively engages in becoming familiar with and evaluating current and potential leaders in senior management

• maintains an awareness of overall organizational talent metrics and indicators

• reports to the Board at least once each year with respect to the foregoing

  3 meetings
(Committee established
July 2013)

 

7     2014 Notice of Annual Meeting and Proxy Statement 
Corporate Governance
   
 

 

CORPORATE GOVERNANCE

 

The Board of Directors is committed to strong corporate governance policies and practices, and continually reviews evolving best practices in governance and seeks input from stockholders. The Corporate Governance Policies, together with information about Occidental’s Code of Business Conduct and

other governance measures adopted by the Board of Directors are available at www.oxy.com, or by writing to Occidental’s Corporate Secretary, Occidental Petroleum Corporation, 10889 Wilshire Boulevard, Los Angeles, California 90024.


 

Board of Directors and its Committees

 

The company is governed by the Board of Directors and six standing Board committees, each of which usually meets at least five times each year. (See page 6.)

 

2013 and 2014 Developments and Highlights

 

Dr. Ray Irani was not reelected to the Board and resigned from the Board. Aziz Syriani, who had been serving as the Lead Independent Director, resigned just prior to the 2013 Annual Meeting.
   
The Board elected former Ambassador Djerejian, an independent director, the Chairman of the Board and modified the by-laws to require that the Chairman be elected from among the independent directors. The Board has asked Mr. Djerejian to serve one more year, which requires stockholders to waive the age restriction for him for one year.
   
The Board and Mr. Chazen agreed he would remain as President and Chief Executive Officer through the 2016 Annual Meeting.
   
The Board elected three new directors, William Klesse and Eugene Batchelder, both with significant industry experience, and Elisse B. Walter, former Chairman of the Securities and Exchange Commission.
The Board and Mr. Chazen began a strategic review of the company’s assets and operations to better execute the company’s long-term strategy and enhance value for stockholders. As a result of this continuing review, the Board authorized the spinoff of the California assets into an independent and separately traded company, the pursuit of the sale of a minority interest in the Middle East/North Africa operations, the pursuit of strategic alternatives for select Midcontinent assets and the sale of the company’s investment in the General Partner of Plains All-American Pipeline, L.P.
   
The annual common stock grant to non-employee directors for the 2013 term was reduced by 25%. In early 2014, the Board completed its review of the director compensation program and revised the program, effective with the 2014 Annual Meeting, to bring it in line with peer companies. Under the new program, the total annual compensation for a director who is not the Chair of a committee will be $350,000. See "Director Compensation" on page 46.


 

 

Board Leadership and Executive Succession Planning

 

Over the past several years, the Board has implemented a number of significant senior management, corporate governance and compensation program changes, largely with input from stockholders. Last year, the company also initiated a strategic review of its assets and operations. Following is a summary of the background, recent developments, and the Board’s current plans for further actions with respect to its leadership structure and executive succession planning.

 

Events of 2010 and 2011. In late 2010, at the urging of some of the company’s institutional investors, and in discussions spearheaded by the California State Teachers’ Retirement System and Relational Investors LLC, the Company began a progression of senior management, corporate governance and compensation program changes. First, the Board announced in October 2010 that Dr. Ray Irani, who had been Chairman and Chief Executive Officer of Occidental for 20 years, would step down as Chief Executive Officer, and that Stephen Chazen, the President and Chief Operating Officer, would become Chief Executive Officer. These changes were effected at the May 2011 Annual Meeting. Dr. Irani remained on the Board, and became Executive Chairman.

At that time, the Board also approved and subsequently implemented several corporate governance changes, including the following:

 

The Board added two independent directors, Howard Atkins, former Senior Executive Vice President and Chief Financial Officer of Wells Fargo & Company, in October 2010, and Margaret Foran, Chief Governance Officer, Vice President and Corporate Secretary of Prudential Financial, Inc., in December 2010.
   
The Board modified the company’s by-laws to adopt a majority vote standard for the election of directors.
   
The Board affirmed its policy that no person 75 or older would be nominated to be a director, unless the age requirement is unanimously waived by the Corporate Governance, Nominating and Social Responsibility Committee and approved by a majority of the independent directors, and confirmed that, with certain exceptions and qualifications, the Board would not give these waivers.


 

 Occidental Petroleum Corporation     8
Corporate Governance
   
 

 

In the process of adopting these corporate governance changes, the Board and stockholders agreed that the Board could modify them in order to exercise its fiduciary duties in the future, and that certain of these measures could be modified at any time with stockholder approval. Nevertheless, the Board has followed these guidelines during the past three years.

 

Events of 2013. In early 2013, the Board announced that it formed a search committee, as part of a succession planning process, to find a candidate to replace Mr. Chazen as Chief Executive Officer. There was significant opposition to this action by major institutional investors, who felt that Mr. Chazen should be given more time to develop the company’s corporate strategy. So, after further consideration, which took into account discussions with stockholders, on April 29, 2013, the Board announced that Mr. Chazen would remain as Chief Executive Officer.

 

At the Annual Meeting of Stockholders on May 3, 2013, Dr. Irani did not receive a majority of votes cast for his election as a director. He resigned from the Board. In addition, Aziz Syriani, who had been serving as the Lead Independent Director, resigned just prior to the 2013 Annual Meeting. During Dr. Irani’s tenure as Chairman, the Board had a Lead Independent Director, a position that would no longer be necessary with the election of an independent Chairman. The Board elected former Ambassador Edward P. Djerejian, an independent director, Chairman of the Board of Directors.

 

Ambassador Djerejian served for a number of years as an independent director of Occidental, and recently chaired the Corporate Governance, Nominating and Social Responsibility Committee. He also played an important leadership role on the Board for many years, possesses a keen understanding of Occidental’s business and strategy, and brings a sophisticated global perspective to the Board. His depth of experience, judgment, and understanding of the company’s business strategy make him the perfect choice to lead the Board. Since his appointment as Chairman, his leadership expertise and interpersonal skills have been significant factors in strengthening the relationship between the Board and the CEO.

 

At the same time, the Board also announced a number of new governance policies, including the following:

 

An independent director will serve as Chairman;
   
The chairs of each Board committee and the independent Chairman will be rotated at least every five years;
   
Former Chief Executive Officers of the company will not be eligible to serve on the Board of Directors; and
   
The Board will create a Committee on Management Succession and Talent Development.

 

After the 2013 Annual Meeting, the Board began to implement these new governance policies and, in October 2013, the Board added two more directors with industry knowledge, William Klesse, Chairman of the Board and Chief Executive Officer of Valero Energy Corporation, and Eugene Batchelder, former Senior Vice President and Chief Administration Officer of ConocoPhillips, to the Board. Additionally, in February 2014, the Board added Elisse B. Walter, former Chairman of the SEC, as a director.

 

2013 Strategic Review. Following the 2013 Annual Meeting, Mr. Chazen and the Board launched a strategic review of the company’s assets and operations with the purpose of streamlining and focusing operations in order to better execute the Company’s long-term strategy and enhance value for stockholders. The following initial actions were announced in October:

 

Pursue the sale of a minority interest in the Middle East/North African operations in a financially efficient manner.
   
Pursue strategic alternatives for select Midcontinent assets, including oil and gas interests in the Williston Basin, Hugoton Field, Piceance Basin and other Rocky Mountain assets.
   
Complete the sale of a portion of the company’s investment in the General Partner of Plains All-American Pipeline, L.P., resulting in pre-tax proceeds of $1.4 billion.
   
Spinoff of the California assets into an independent and separately traded company.

 

Continuity of Board leadership and senior management for 2014 and 2015. In his one year as independent Board Chairman, Ambassador Djerejian has been instrumental in helping the Board to coalesce into a very effective team. The Board has worked together cohesively to make good progress on corporate governance measures, finance, corporate strategy, executive compensation and succession planning, and has developed a strong relationship with the CEO. The Board committees are functioning well, and Committee chairs have been reassigned to leverage directors’ areas of expertise.

 

Working together with the Board, Ambassador Djerejian and Mr. Chazen have also:

 

Expanded and reorganized the senior management team
   
Initiated a major strategic reassessment
   
Worked to enhance Middle East relationships by meeting with partners in the region
   
Added three new Board members
   
Expanded Board interaction with other members of senior management

 

The Board believes it is in the best interests of the company for Mr. Chazen and Ambassador Djerejian to follow through on the corporate strategic plan. To accomplish that, the Board wants Mr. Chazen to remain as Chief Executive Officer through the 2016 Annual Meeting. He will not be a candidate for election to the Board at the 2016 Annual Meeting. The Board also wants Ambassador Djerejian to remain as independent Chairman one more year, from May 2014 to May 2015. He will then retire from the Board, and will not be a candidate for election to the Board at the 2015 Annual Meeting. With one extra year as Chairman, Ambassador Djerejian will be able to build on the progress that he, the Board and Mr. Chazen have made in the past year. These short extensions will provide the Board and executive leadership with continuity, continued alignment, stability and cohesiveness.

 

Stockholders are being asked to vote at this meeting on the election of Messrs. Djerejian and Chazen as directors, as well as the one-year age waiver for Mr. Djerejian. See Proposal 2 on page 13.


 

9     2014 Notice of Annual Meeting and Proxy Statement 
Corporate Governance
   
 

 

Board and Committee Roles in Risk Oversight

 

Board Leadership Structure

 

Following the 2013 Annual Meeting, the Board modified the company’s by-laws to provide for a Chairman of the Board to be elected from the independent directors and elected Ambassador Djerejian to serve in that position. His role is to serve as a liaison between the Board and stockholders. He has the authority to call meetings of the independent directors and chairs executive sessions of the Board at which no members of management are present, to approve the agendas for the Board and committee meetings, to propose a schedule of Board meetings and the information to be provided by management for Board consideration, to recommend the retention of consultants who report directly to the Board, and to assist in assuring compliance with the corporate governance policies and to recommend revisions to the policies. Additionally, he evaluates, along with the members of the Executive Compensation Committee and the full Board, the performance of the Chief Executive Officer, and communicates to him the views of the independent directors and the Board committees with respect to objectives set for management by the Board.

The Board also modified the company’s by-laws to create the position of Vice Chairman to be elected from the independent directors and to perform the duties of the Chairman of the Board in the absence or disability of the Chairman and such other duties as may be delegated to him pursuant to the by-laws. In May 2013, the Board elected Secretary Abraham to serve in that position.

 

Another key component of Board leadership is the role of the Board committees. The Board has divided oversight functions among six committees, which have on average four Board members, usually meet at least five times each year and cover an extensive agenda. These committees regularly report back to the full Board with specific findings and recommendations in their areas of oversight and liaise regularly with the Chairman of the Board. Descriptions of the responsibilities of each of the Board’s six standing committees begin on page 6.


 

Board and Committee Roles in Risk Oversight

 

The Board’s role in risk oversight recognizes the multifaceted nature of risk management. It is a control and compliance function, but it also involves strategic considerations in normal business decision making. It covers legal and regulatory matters, finance, security, safety, health and environmental concerns. The Board has created and empowered several Board committees in aspects of risk oversight. Four Board committees, the Audit Committee; the Corporate Governance, Nominating and Social Responsibility Committee; the Environmental, Health and Safety Committee; and the Finance and Risk Management Committee, all composed entirely of independent directors, are each integral to the control and compliance aspects of risk oversight by the

Board. Each of these committees meets regularly with management to review, as appropriate, compliance with existing policies and procedures and to discuss changes or improvements that may be required or desirable. Each of the committees with risk oversight responsibilities meets at least as often as the regularly scheduled Board meetings. This ensures that each committee has adequate time for in-depth review and discussion of all matters associated with each committee’s area of responsibility. After the committee meetings, each committee reports to the Board, sometimes without the Chief Executive Officer present, for discussion of issues and findings as well as the Board’s recommendations of appropriate changes or improvements.


 

Board and Executive Management

 

Ambassador Djerejian, as an independent Board Chairman, presides at all meetings of the Board and stockholders and works with Mr. Chazen, the President and Chief Executive Officer, to ensure that the views of the Board and its committees are incorporated into corporate strategy.

 

Independence

 

Each of Ms. Foran, Ms. Walter, and Messrs. Abraham, Atkins, Batchelder, Djerejian, Feick, Gutierrez, Klesse and Poladian has been determined by the Board of Directors as meeting the independence standards set forth in Occidental’s Corporate Governance Policies (see www.oxy.com) and the New York Stock Exchange Listed Company Manual. In making its determination

of independence, the Board considered that, as disclosed in the Compensation of Directors table on page 47, Occidental matched the gifts made by certain of the directors to charitable organizations, and the transactions described in Related Party Transactions below. All committees of the Board are currently composed entirely of independent directors.


 

Board and Independent Director Meetings

 

The Board of Directors held six regular meetings and ten special meetings during 2013, including seven executive sessions at which no members of management were present. Mr. Syriani, the Lead Independent Director, who resigned from the Board last May, presided over the executive sessions prior to May 2013 and Ambassador Djerejian, the Chairman presided thereafter. Each incumbent director attended at least 75 percent of the

meetings, held during his or her tenure, of the Board of Directors and the committees of which he or she was a member and was eligible to attend. All of the directors serving at the time, other than Dr. Irani, attended the 2013 Annual Meeting. Attendance at the Annual Meeting of Stockholders is expected of all directors as if it were a regular meeting of the Board.


 

 Occidental Petroleum Corporation     10
Corporate Governance
   
 

 

Stockholder Policies

 

Occidental values stockholder engagement and continues to have productive discussions with stockholders on a variety of topics. The company has established several policies designed to ensure that stockholders’ interests are represented, including the following:

 

Stockholders may call special meetings of stockholders
   
No stockholder rights (“poison pill”) or similar plans
Open communication with the Board of Directors
   
Confidential voting
   
Majority voting for directors and, in uncontested elections, mandatory resignation if a majority vote is not received
   
Stockholders may act by written consent (pending approval of Proposal 4, see page 52)


 

Executive Compensation

 

Occidental has a long-standing commitment to motivate executives to achieve results that benefit the company and stockholders over the long-term. Following are highlights of compensation policies that the company has implemented over many years:

 

Majority of executive compensation is long-term and performance-based
   
Transparent, objective and peer and market comparative performance metrics aligned with stockholder interests
   
Stringent executive stock ownership guidelines
Golden Parachute Policy capping termination benefits
   
No “Golden Coffin” provisions
   
No options backdating or repricing (no option grants since 2006)
   
Independent compensation consultant policy
   
Three-year holding period with respect to 50% of net after-tax shares received by named executive officers under incentive awards

 

 

Health, Environment and Safety

 

The safety and well-being of our workforce, neighbors and operations is a core value of Occidental’s culture. The company is also committed to protecting the environment through conservation and efficiency efforts and by minimizing the impact of our operations on land, habitat and the environment. Below are recent performance statistics in these areas and a history of our Board oversight and policies:

 

Best levels since reporting began for employee injury and illness incidence rate (IIR) of 0.30 in 2013 and a three-year annual average employee IIR of 0.33 (59% better than the company’s target of 0.80)
Contractor IIR of 0.42 in 2013 and a three-year annual average contractor IIR of 0.55 (31% better than the company’s target of 0.80)
   
IIR of less than 1.0 recordable injuries per 100 employees for 18 consecutive years
   
1995 – First annual Health, Environment and Safety Report published
   
1981 – Environmental Committee of Board established
   
1979 – Health Environment and Safety Policy adopted by Board

 

 

Social Responsibility

 

Occidental takes pride in making long-term positive impacts in the regions and communities where the company operates. Following are recent highlights and a history of our policies in this area:

 

Corporate Responsibility Magazine: 100 Best Corporate Citizens for 2013 and Energy Industry Sector Best Corporate Citizens for 2013
   
2012 – Political contribution disclosures added to website
   
2009 – Establishment of annual Social Responsibility goals and objectives
2007 – Adoption of reporting guidance indicators published by the Global Reporting Initiative (GRI) and the American Petroleum Institute and International Petroleum Industry Environmental Conservation Association (API/IPIECA)
   
2004 – Human Rights Policy adopted
   
2003 – First annual Social Responsibility Report published
   
1997 – Code of Business Conduct adopted


 

11     2014 Notice of Annual Meeting and Proxy Statement 
Corporate Governance
   
 

 

Other Governance Measures

 

Related Party Transactions

 

Pursuant to Occidental’s written Conflict of Interest Policy, each director and executive officer has an obligation to avoid any activity, agreement, business investment or interest, or other situation that could be construed either as divergent to or in competition with Occidental’s interest or as an interference with such person’s primary duty to serve Occidental, unless prior written approval has been granted by the Audit Committee of the Board of Directors. Each director and executive officer is required to complete annually a questionnaire that requires disclosure of any transaction between Occidental and the director or executive officer or any of his or her affiliates or immediate family members. A summary of the Conflict of Interest Policy is included in Occidental’s Code of Business Conduct which can be found at www.oxy.com.

In 2013 and 2014, subsidiaries of Occidental engaged in transactions for the purchase and sale of oil, gas and natural gas liquids with Valero Energy Corporation (Valero), where Mr. Klesse, a director of the company, is the Chief Executive Officer and a Director and in which he holds less than 0.3% of the outstanding common stock as of February 1, 2014. As part of the ongoing business of both Occidental and Valero, the companies continue to regularly enter into these and similar types of transactions. The value of the transactions during 2013 and 2014, through February 28, 2014, were as follows (in millions): sales were approximately $2,854 and $621, respectively, and purchases were approximately $545 and $232, respectively.


 

Communications with Board Members

 

Stockholders and other interested parties may communicate with any director by sending a letter or facsimile to such director’s attention in care of Occidental’s Corporate Secretary, Occidental Petroleum Corporation, 10889 Wilshire Boulevard, Los Angeles, California 90024; facsimile number 310-443-6977. The Corporate

Secretary opens, logs and forwards all such correspondence (other than advertisements or other solicitations) to directors unless a director has requested the Corporate Secretary to forward correspondence unopened.


 

Director Education

 

In 2013, directors participated in various corporate director and compliance programs held by universities and corporate director, governance, legal and investor professional organizations, including the New York Stock Exchange, as attendees and as presenters or speakers.

 

 Occidental Petroleum Corporation     12
Proposal 2: One-Year Waiver of Director Age Restriction
for Edward P. Djerejian, an Independent Director
   
 

 

PROPOSAL 2: ONE-YEAR WAIVER OF DIRECTOR AGE RESTRICTION FOR EDWARD P. DJEREJIAN, AN INDEPENDENT DIRECTOR

 

For the reasons described in the section of this Proxy Statement called “Board of Directors and its Committees” beginning on page 8, all of the directors have requested that Mr. Djerejian remain as independent Chairman for one additional one-year term. He has agreed to do so. Mr. Djerejian turned 75 on March 6, 2014. The company agreed, as part of a 2011 settlement of a case entitled Ruby Resnik v. Spencer Abraham, et. al., that, prior to December 31, 2014, it would not change or waive, without the approval of the company’s stockholders, its policy that no person 75 or older be nominated to serve on the Board. Therefore, his re-election will require that he be re-elected by the stockholders as a director, and that the stockholders also waive the current age restriction

for him for one term. Stockholder approval is hereby requested for the limited waiver of the age policy.

 

A majority of shares of common stock represented at the Annual Meeting and entitled to vote at the Annual Meeting must vote FOR this proposal to approve it. Your broker may not vote your shares on this proposal unless you give voting instructions. Abstentions and broker nonvotes have the same effect as votes cast AGAINST the proposal.

 

The Board recommends that you vote FOR the one-year age restriction waiver for Mr. Djerejian. Your proxy will be so voted unless you specify otherwise.


 

13     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Business Performance Highlights

 

Occidental is one of the largest oil and gas companies based in the U.S. measured by market capitalization of approximately $76 billion as of December 31, 2013. A list of key 2013 business performance highlights is below. Please see Occidental’s Annual Report on Form 10-K for the year ended December 31, 2013 (Form 10-K) for more information about these and other performance measures, the factors that affect Occidental’s results and risks associated with future performance.

 

Ended the year with core earnings of $5.6 billion or $6.95 per diluted share1.

 

Increased domestic oil production by 11,000 barrels of oil per day (BOPD) in 2013 to 266,000 BOPD.
Reduced domestic drilling costs by 24% relative to 2012 through a focused drilling program and emphasis on efficiencies.

 

Reduced domestic operating costs by 17% to $14.43 per barrels of oil equivalent (BOE) in 2013.

 

Added 470 million BOE (MMBOE) of reserves, before divestitures, achieving an overall replacement ratio of 169%2 and domestic reserve replacement ratio of 190%2.

 

Delivered Return on Capital Employed3 of 12%, which was an 18% increase from 2012.

 

Increased the annualized dividend by 18.5%3, the twelfth increase over the last 11 years, resulting in a compounded annual increase rate of 16%.


 

Overview of Executive Compensation

 

Response to 2013 Say on Pay Vote

 

While stockholders overwhelmingly approved the executive compensation program with more than 90% of voting stockholders voting in favor in 2011 and 2012, the program, which was virtually unchanged, received the support of approximately 63% of stockholders voting at the 2013 Annual Meeting of Stockholders. Prior to that meeting, the Board announced significant executive

compensation changes based on extensive stockholder feedback, as well as a commitment to further review and modify the program. Those changes, as described in more detail below, demonstrate the company’s commitment to responsiveness to stockholders’ views and to continually reviewing its practices with respect to executive compensation.


 

2013 Developments and Highlights

 

In 2013, based on a review of the executive compensation program and stockholder feedback, the company announced the following compensation changes, many of which have now been implemented:

 

The discretionary portion of the Chief Executive Officer’s bonus will be reduced from 40% to no more than 20%, and in evaluating the Chief Executive Officer’s performance, emphasis will be on the company’s financial performance, as well as a subjective assessment of the officer’s performance in succession planning, talent development and maintaining and improving the company’s achievements on health, environmental and safety matters;

 

Payout of the Total Shareholder Return (TSR) Award (TSR award) under the company’s long-term incentive program has been limited to no more than the target number of performance shares if TSR is negative over the performance period;
Future recruitment incentives/bonuses for senior executive officers will be designed to provide recruits with compensation similar to what they would forgo in order to accept a position with the company and will be paid primarily in equity subject to retention periods; and

 

The design of the long-term incentive program has been reviewed and modified to include additional performance measures, to align the program with those of peers and to reflect best practices. In this regard, Mr. Chazen has agreed that he will not be eligible for any bonus or current earnings-based compensation during his remaining tenure as Chief Executive Officer of Occidental. He has also agreed that he will not receive any grants under the existing TSR-based program.



1 Core results reflect Occidental’s 2013 net income shown on page 44 of the Form 10-K after removing the effect of Significant Items Affecting Earnings described on page 25 of the Form 10-K. The company provides this adjusted measure because it believes it may be useful to investors in evaluating and comparing Occidental’s performance between periods, not as a substitute for net income.
2 Calculated for a specified period by using the applicable oil-equivalent proved reserve additions divided by oil-equivalent production.
3 2013 net income (adding back after-tax interest expense) divided by average debt and equity during 2013.

 

 Occidental Petroleum Corporation     14
Compensation Discussion
and Analysis
   

 

 

Highlights of Compensation Policies Implemented Over Several Years:

 

Majority of executive compensation is long-term and performance-based

 

Transparent, objective and peer and market comparative performance metrics aligned with stockholder interests

 

Stringent executive stock ownership guidelines

 

Golden Parachute Policy capping termination benefits
No “Golden Coffin” provisions

 

No options backdating or repricing (no option grants since 2006)

 

Independent compensation consultant policy

 

Three-year holding period with respect to 50% of net after-tax shares received by named executive officers under incentive awards


 

 

Changes to Executive Compensation Program

 

After the 2013 Annual Meeting, the Compensation Committee changed the compensation program significantly, developing one program for the current Chief Executive Officer, Mr. Chazen, and another for the other named executive officers. As under the prior program, the majority of executive compensation is based

on the long-term performance of the company, as measured by publicly disclosed performance metrics, which is consistent with stockholder interests and the long-term nature of the company’s business. The program also features relatively low levels of non-performance-based compensation.


 

Key Features of 2013 Long-Term Incentive Awards for Named Executive Officers

 

All awards are payable solely in stock.

 

All awards are performance-based.

 

Performance periods are three to seven years.

 

If a change of control occurs, awards vest on a limited basis.

 

Awards have a holding period requirement such that for three years after payout, the executive must hold the equivalent of 50% of the net after-tax shares received.
Awards were allocated approximately 40% to a Return on Capital Employed Incentive Award (ROCE award) or a pair of Return on Asset Incentive Awards (ROA award), 30% to a TSR award, and 30% to Restricted Stock Incentive award (RSI award), based on target performance and grant date stock price. Under the prior program, awards were allocated approximately 80% to a TSR award and 20% to an RSI award, based on maximum performance and grant date stock price.



Mr. Chazen’s Compensation. In April 2013, the Board announced that Mr. Chazen would continue to serve as the company’s President and Chief Executive Officer and that, in addition to his responsibilities for all of the company’s operations, he will assist the Board with its ongoing succession planning and work with the Board on corporate strategy, executive succession planning, executive compensation and talent development. In February 2014, the Board asked Mr. Chazen to remain as Chief Executive Officer beyond 2014. Mr. Chazen agreed to remain through the 2016 Annual Meeting. The Board’s primary goal in determining Mr. Chazen’s compensation package was to help ensure his retention by the company. The Board considered his accumulated company stock holdings of over 2 million shares and decided that those holdings plus an additional performance-based restricted stock award would serve the company’s interest in retaining Mr. Chazen and continue to align his and the company’s interests with stockholder interests. When setting the value of Mr. Chazen’s total compensation package, the Board decided to narrow the gap between the value of his compensation and the value of the average compensation of the other named executive officers with business unit responsibilities.

 

Therefore, the Board and Mr. Chazen agreed to modify his 2013 compensation as follows:

 

Mr. Chazen will not be eligible for any bonus or current earnings-based compensation during his remaining tenure as Chief Executive Officer.
  
Mr. Chazen did not receive a TSR-based incentive award in 2013 and his 2012 TSR-based award was modified to cap any payout at target if the company’s TSR for the performance period is negative.
  
The grant date fair value of the approved compensation package for Mr. Chazen for 2013 was reduced by more than 50% compared to 2012 and 2011.

 

Mr. Chazen’s compensation allocation is 73% long-term performance based incentives, 20% salary and 7% other compensation, assuming performance criteria are met and the stock price on the grant date.

 

Mr. Chazen’s RSI Award, the only incentive award he received in 2013, was set at the same value ($5 million) (based on grant date stock price) as in 2011 and 2012, but the cumulative net income goal was increased from $10 billion to $12 billion. He did not receive any other incentive award.


 

15     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

 

New Executive Compensation Program. The 2013 program for the other named executive officers also continues to base the majority of their overall compensation on the long-term performance of the company and was developed with the assistance of an independent compensation consultant. The following awards were granted under the new executive compensation program for named executive officers other than Dr. Irani, who ceased serving as an executive officer in May and separated from the company in 2013:

 

Elements of Executive Compensation Program(1)

            HOW PAYOUT VALUE    
    ELEMENT   OBJECTIVE   IS CALCULATED   2013 DECISIONS
 FIXED   Base Salary   Reward consistent performance of basic job requirements.   Review of compensation surveys, internal equity and individual responsibilities and performance.   Unchanged for Messrs. Chazen, Chiang and de Brier and Ms. Walker. Increased for Mr. Lowe.
    Annual Incentive   To motivate financial and other performance over a one-year period.   60% of target determined by one-year earnings per share performance (page 19). 40% of target discretionary determined by individual performance (page 19).   Financial performance resulted in payout of 93% of target (page 19). Individual performance resulted in payout average of 123% of target (page 33).
    Long-Term Return on Capital Employed (ROCE) and Return on Assets (ROA) Awards   Reward efficient capital allocation at the company and business unit levels over a three-year period.   ROCE(2) (for corporate executives) and ROA(3) (at division and regional unit levels for operating executives) targets, adjusted to moderate the effect of commodity prices(4).   New award accounting for 40% of value of long-term incentives(5).
VARIABLE   Long-Term Total Shareholder Return (TSR) Award   Over a three-year period, reward higher returns in company stock. Highly aligned with stockholder interests.   Compare TSR to peer group and S&P 500 Index performance with payout capped at target unless TSR is positive and exceeds S&P 500 Index (page 21).  

•   Decreased allocation from 80% to 30% of long-term, incentives(5).

•   Added cap of payout if TSR is negative and decreased absolute values of award (page 21).

    Long-Term Restricted Stock (RSI) Award   Over a three to seven-year period, reward achievement of cumulative net income goal, and retain executives at the company.   Paid at zero if cumulative net income goal not achieved and at 100% if achieved (page 20).  

•   Increased cumulative net income goal from $10 billion to $12 billion.

•   Increased allocation from 20% to 30%(5) of long-term incentives (page 20).

 

(1)Shown for named executive officers other than Dr. Irani who ceased serving as an executive officer in May and separated from the company in 2013. Mr. Chazen did not receive an Annual Incentive, an ROCE/ROA Award or a TSR Award.
(2)Return on Capital Employed (ROCE) for the purposes of this award is the percentage obtained by dividing (i) the sum of annual net income attributable to common stock for the company, after adding back after-tax interest expense, for each year in the performance period, as reported in the company’s Form 10-K by (ii) the sum of the average capital employed (long-term debt plus stockholders’ equity) for each year in the performance period, as reported in the company’s Annual Report on Form 10-K.
(3)Two types of Return on Assets (ROA) awards were granted to named executive officers, based on (i) Return on Assets for the company’s Oil and Gas Segment (ROA – Total), and (ii) Return on Assets for the company’s Oil and Gas Segment (Middle East/North Africa) (ROA – MENA). In each case Return on Assets for the purposes of the award is the percentage obtained by dividing (i) the sum of the Net Income for the respective segment for each year in the performance period by (ii) the sum of the Assets for the respective segment for each year in the performance period. For the purposes of the foregoing calculation, “Net Income” will be Results of Operations for the respective segment for the applicable year and “Assets” will be the Net Capitalized Costs for the respective segment for the applicable year, in each case as reported in the Supplemental Oil and Gas Information contained in the company’s Annual Report on Form 10-K. For the purpose of the foregoing sentence, “Assets” will reflect all acquisitions, divestures and write downs during the performance period unless the senior management of the company recommends exclusion and the Executive Compensation Committee agrees.
(4)The ROCE and all ROA thresholds would have been adjusted up or down by 2% if the three-year average forward strip West Texas Intermediate crude oil (WTI) prices as of December 31, 2013, were at least $10 greater or less than, respectively, the three-year average forward strip WTI prices as of June 30, 2013, but actual WTI prices resulted in no adjustments. All thresholds will be further adjusted up or down by 2% at the end of the performance period if actual average WTI prices over the performance period are at least $10 greater or less than, respectively, the three-year average forward strip WTI prices as of December 31, 2013.
(5)For 2013 grants, based on target performance and grant date stock price and for 2012 grants, based on maximum performance and grant date stock price.

 

 Occidental Petroleum Corporation     16
Compensation Discussion
and Analysis
   
 

 

Named Executive Officer 2013 Compensation Program Allocation. The allocation of the compensation elements awarded in 2013 to all named executive officers is shown below. The allocation of compensation below shows compensation based on grant date fair values of all incentive awards and compensation as reported on the Summary Compensation Table (See page 33).

 

2013 COMPENSATION PROGRAM ALLOCATION FOR NAMED EXECUTIVE OFFICERS(1)

 

CHIEF EXECUTIVE OFFICER   OTHER NAMED EXECUTIVE OFFICERS(1)
     
     

 

(1) Does not include information for Dr. Irani, who ceased serving as an executive officer in May and separated from the company in 2013.

 

17     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

Compensation Program

 

The Compensation Committee measures executive performance by evaluating both long-term performance of the company and the consistent achievement of short-term financial goals. This approach links executive compensation to company performance and helps maximize value creation for stockholders.

 

The Compensation Committee developed a compensation program designed not only to be consistent with industry practice, but also to attract and retain outstanding executives, and to provide incentives to reward them for superior performance that supports Occidental’s long-term strategic objectives.

 

Peer Companies. In 2013, the Compensation Committee reviewed the peer company group used in 2012 to ensure continued comparability to Occidental. The considerations taken into account, as a whole, were:

 

Alternative investment choices in the energy sector, including level of investment analyst coverage;
   
Competitors for projects and acquisitions worldwide;
   
Competitors for employees worldwide;
   
Percentages of total proved reserves and total production attributable to oil and to natural gas;
   
Oil and gas production and reserves;
   
Total revenue and the percentage derived from upstream (exploration and production) activities; and
   
Market capitalization.

 

Within the oil and gas industry, Occidental has a unique combination of revenue, market capitalization and proportion of production and reserves attributable to oil. Investors take this into account when making investment choices in the energy industry and Occidental competes for these investor dollars with companies of varying revenue and market capitalization levels, including companies with much larger levels. Occidental’s level of investment analyst coverage is comparable to many of the peer companies. Occidental competes for talent, projects and acquisitions worldwide against companies with both significantly larger and smaller levels of revenue and market capitalization and very different oil production profiles. This was taken into consideration in formulating an appropriate peer company group for executive compensation purposes.

The peer group does not include companies primarily in energy-related businesses such as (i) refining, (ii) midstream (transportation, storage and logistics) and marketing, or (iii) the sale and distribution of products because these companies have different investor bases, do not compete with Occidental for the same projects, and typically do not compete with Occidental for the same talent. Additionally, publicly traded limited partnerships are not included in the group because they have significantly different investor bases, corporate structures and compensation structures.

 

The Compensation Committee’s review of the 2012 peer group and the factors discussed above resulted in replacing Royal Dutch Shell plc with Marathon Oil Corporation, whose market capitalization, revenues, lines of business and geographical presence are more comparable to Occidental’s. In addition to Occidental, the peer companies (collectively, the peer group), effective beginning with 2013 long-term incentive awards, are:

 

Anadarko Petroleum Corporation

Apache Corporation

Canadian Natural Resources Limited

Chevron Corporation

ConocoPhillips

Devon Energy Corporation

EOG Resources, Inc.
 
ExxonMobil Corporation

Hess Corporation

Marathon Oil Corporation

Total S.A.

 

The Compensation Committee designated this group of companies as the peer group for purposes of the TSR award granted in 2013.

 

The Compensation Committee also reviewed information regarding oil and gas industry and the peer group companies’ executive compensation practices, programs and data that was publicly disclosed or available. Additionally, the Compensation Committee reviewed and considered broad-based compensation surveys and related materials. The purpose of reviewing this information was to evaluate and understand how Occidental’s executive compensation program compares within the oil and gas industry, particularly with respect to types of awards, performance metrics for awards and reported levels of compensation. The information was not used to establish compensation benchmarks and the company does not benchmark executive compensation to a specific percentile within the peer group.


 

Elements of the Program

 

Salary and Other Annual Compensation. The Compensation Committee believes that overall executive compensation should include elements that reward executives for consistent performance of basic job requirements and achievement of certain short-term goals which, over time, contribute to long-term growth of stockholder value. Consistent with the Compensation Committee’s goal of emphasizing long-term compensation, salary and other annual compensation represent the smaller portion of the 2013 compensation packages of the named executive

 

officers. Short-term compensation includes base salary and other compensation, plus an Executive Incentive Compensation Plan (Annual Incentive) award. Certain other compensation and benefits that apply to senior executives are described under “Other Compensation and Benefits” beginning on page 30.

 

Executive Incentive Compensation Plan Award (Annual Incentive). The Annual Incentive is composed of a Non-Equity Incentive portion (60% of target value) and a Bonus portion (40% of target


 

 Occidental Petroleum Corporation     18
Compensation Discussion
and Analysis
   
 

 

value). The Compensation Committee sets target amounts for each senior executive, including the named executive officers, based on a review of commercially available compensation surveys and other publicly available information. In setting targets for each executive, the Compensation Committee considers each executive’s ability to influence Occidental’s performance during the one-year performance period.

 

The Board announced that the Annual Incentive for the Chief Executive Officer in the future would be allocated at least 80% to the Non-Equity Incentive portion and no more than 20% to the Bonus portion. However, the Board and Mr. Chazen agreed that he would not receive an Annual Incentive for 2013 and he has agreed that he not receive one during the remainder of his tenure as Chief Executive Officer.

 

Non-Equity Incentive Award (Performance-Based Portion). The Non-Equity Incentive (NEI) portion (60% of target value) is a performance-based cash award that is based on Occidental’s performance during the year as measured against EPS2 targets established in the first quarter of the year. EPS was chosen as the financial target for all corporate executives, including the named executive officers, because it directly impacts stockholder value, is a readily determinable measure of annual performance and rewards the executives for current operating performance. In early 2013, the Compensation Committee set the 2013 EPS targets with $7.00 per share as the target, $6.26 per share as the threshold for any payout, and $7.75 per share resulting in the maximum payout of 200% of the target value. The payout percentage for EPS values from $6.25 to $7.75 is based on a linear interpolation of values from 0% to 200%. These targets were chosen based on consideration of management’s financial models, as well as a review of analysts’ estimates of Occidental’s earnings per share for 2013 and then-current estimates of global oil prices for 2013. The EPS for 2013 as certified by the Compensation Committee was $6.954, which resulted in a payout percentage of 93% for all executives participating in this bonus program, including the named executive officers.

 

Bonus Award (Discretionary Portion). The Bonus portion (40% of target value) is a discretionary cash award designed to link incentive compensation directly to the performance of the particular executive. Payout is determined by the Compensation Committee’s subjective assessment of an executive’s handling of certain key performance areas within such executive’s area of responsibility, as well as the executive’s response to unanticipated challenges during the year. Key performance areas assessed by the Compensation Committee include:

 

Organizational development;
   
Succession planning;
Governance and ethical conduct;
   
Functional and operating accomplishments;
   
Health, environment and safety responsibilities; and
   
Encouragement of diversity.

 

The Board also announced that in evaluating the Chief Executive Officer’s performance, emphasis will be placed on the company’s financial performance as well as succession planning, talent development and maintaining and improving the company’s achievements in health, environmental and safety matters.

 

Long-Term Compensation. This portion of compensation consists of performance-based awards that provide incentives for achieving results consistent with the goal of sustained growth in stockholder value. The Compensation Committee believes that long-term compensation should represent the largest portion of an executive’s total compensation package and that the levels of payouts should reflect the company’s performance levels. During the process of determining the values of each named executive officer’s compensation package, the Compensation Committee evaluated many factors, including the following:

 

Alignment of executive and stockholder interests in achieving long-term growth in stockholder value,
   
Ensuring that maximum payouts are made only for exceptional performance,
   
Consistency with the compensation programs of peer companies5,
   
Allocation of total compensation between long-term and short-term components, and
   
Satisfaction of the tax deductibility requirements of Section 162(m) of the Internal Revenue Code.

 

This portion of the executive compensation program includes three types of awards for each named executive officer other than the Chief Executive Officer: (i) an incentive based on either return on capital employed (for executives with primarily corporate level responsibilities) or two return on asset awards (one for the oil & gas division as a whole and the other for the regional oil & gas division for which the executive is responsible); (ii) performance incentives based on TSR; and (iii) performance-based restricted stock incentives. For all named executive officers, other than Mr. Chazen, the Compensation Committee awarded long-term incentives in the following percentages: 40% to either one ROCE award or to two ROA awards, 30% to the TSR award and 30% to the RSI award.


 

4 For purposes of the Performance-Based Portion of the Annual Incentive, Core, Basic Earnings Per Share (EPS) is computed by excluding the “Significant Items Affecting Earnings” from Occidental’s Net Income and dividing this amount by the weighted-average basic shares outstanding. For a discussion of “Significant Items Affecting Earnings,” see “Management Discussion and Analysis of Financial Condition and Results of Operations” on page 25 of Occidental’s Annual Report on Form 10-K for the year ended December 31, 2013 (Form 10-K) and, for Basic Earnings Per Common Share see page 44 of the Form 10-K.
5 Based on publicly available 2012 information for peer companies.

 

19     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

The following table summarizes key features of the long-term incentive components of the 2013 compensation program for named executive officers, other than Dr. Irani, who ceased serving as an executive officer in May and later separated from the company in 2013.

 

Summary of Long-Term Incentive Compensation

Compensation
Component
  Return on Capital
Employed Award
  Return on
Assets Awards
  Total Shareholder
Return Award(6)
  Restricted
Stock Award
PERFORMANCE PERIOD   3 Years(2)   3 Years(2)   3 Years   3-7 Years(7)
                   
FORM OF PAYOUT   Stock   Stock   Stock   Stock
                   
PERFORMANCE BASIS   Return on Capital Employed(3)   Return on Assets for Oil and Gas segment as a whole (ROA-Total), or for the Middle East/North Africa region (ROA-MENA)(5)   TSR ranking within peer group, TSR being positive or negative, and TSR of S&P 500 Index   Cumulative Net Income
                   
  Minimum Payout(1)   0%   0%   0%   0%
  Performance Resulting
in Minimum Payout
  ROCE < 9%(4)   ROA-Total < 9%(4)
ROA-MENA < 12%(4)
  TSR ranking of 25th percentile or less   Cumulative Net Income < $12 billion(7)
  Target Payout(1)   100%   100%   100%   100%
PAYOUT
RANGE
Performance Required
for Target Payout
  ROCE = 12%(4)   ROA-Total = 13%(4)
ROA-MENA = 16%(4)
  TSR performance two-thirds of the way between the 25th percentile TSR (0% payout) and the 75th percentile TSR (150% payout)(6)   Cumulative Net Income ≥ $12 billion(7)
  Maximum Payout(1)   200%   200%   150%   100%
  Performance Required for Maximum Payout   ROCE ≥ 18%(4)   ROA-Total ≥ 20%(4)
ROA-MENA ≥ 25%(4)
  TSR ranking of 75th percentile or greater, TSR is positive and exceeds S&P 500 TSR   Cumulative Net Income ≥ $12 billion(7)
       
ADJUSTMENTS   The ROCE and all ROA thresholds would have been adjusted up or down by 2% if the three-year average forward strip West Texas Intermediate crude oil (WTI) prices as of December 31, 2013, were at least $10 greater or less than, respectively, the three-year average forward strip WTI prices as of June 30, 2013, but actual WTI prices resulted in no adjustments. All thresholds will be further adjusted up or down by 2% at the end of the performance period if actual average WTI prices over the performance period are at least $10 greater or less than, respectively, the three-year average forward strip WTI prices as of December 31, 2013.
       
HOLDING PERIOD   For all awards, a number of shares equal to 50% of net after-tax shares received are required to be retained for three years after vesting.
       
TAX DEDUCTIBILITY   All awards are intended to satisfy the tax deductibility requirements of Section 162(m) of the Internal Revenue Code.

 

(1)  Percent of grant for TSR award, RSI award, ROCE award and all ROA awards.
(2) Three-year performance period begins January 1, 2014 and ends December 31, 2016.
(3) ROCE shall be the percentage obtained by dividing (i) the sum of annual net income attributable to common stock for the company, after adding back after-tax interest expense, for each year in the performance period, as reported in the company’s Form 10-K by (ii) the sum of the average capital employed (long-term debt plus stockholders’ equity) for each year in the performance period, as reported in the company’s Form 10-K.
(4) See Adjustments row in chart for threshold adjustments.
(5) ROA shall be the percentage obtained by dividing (i) the sum of the Net Income for the Oil and Gas Segment (Total or MENA) for each year in the performance period by (ii) the sum of the Assets for the Oil and Gas Segment (Total or MENA) for each year in the performance period. For the purposes of the foregoing calculation, “Net Income” shall be Results of Operations for the Oil and Gas Segment (Total or MENA) for the applicable year and “Assets” will be the Net Capitalized Costs (Total or MENA) for the applicable year, in each case as reported in the Supplemental Oil and Gas Information contained in the company’s Annual Report on Form 10-K. For the purpose of the foregoing sentence, “Assets” will reflect all acquisitions, divestures and write downs during the performance period unless the senior management of Occidental recommends exclusion and the Compensation Committee agrees.
(6) Payout percent for the TSR award is determined by performance compared to the peer group and is linearly interpolated between 25th percentile and 75th percentile TSR values.
(7) The shares become non-forfeitable on the later of June 30, 2016, through which date the executive must remain employed by the company, and the  date the Compensation Committee certifies the achievement of the Cumulative Net Income threshold. If the threshold is not met by June 30, 2020, the shares are forfeited entirely.

 

 Occidental Petroleum Corporation     20
Compensation Discussion
and Analysis
   
 

 

Return on Capital Employed Incentive Award. This award is a new award implemented in 2013 to ensure a high level of executive focus on one of the company’s key objectives of ensuring efficient use of capital. This award is denominated in performance shares, each of which is equal to one share of common stock. Key terms of the award are set forth in the table on page 20. At the end of the performance period, dividend equivalents will be paid with respect to the performance share level achieved in an amount equal to the dividends declared per share of common stock during the performance period.

 

Return on Assets Incentive Awards. These new awards were implemented in 2013 to reward operating unit executives for performance within their direct areas of responsibility and influence. These awards are denominated in performance shares, each of which is equal to one share of common stock. Key terms of the awards are set forth in the table on page 20. At the end of the performance period, dividend equivalents will be paid with respect to the performance share level achieved in an amount equal to the dividends declared per share of common stock during the performance period.

 

Total Shareholder Return Incentive Award. The Compensation Committee believes that the comparison of Occidental’s TSR over a specified period of time to peer companies’ returns over that same period is an objective external measure of the company’s effectiveness in translating its results into stockholder returns. TSR is the change in price of a share of common stock plus reinvested dividends, over a specified period of time, and is an indicator of management’s achievement of long-term growth in stockholder value. TSR awards use both comparative peer company (see page 18 for a discussion of the peer group) and S&P 500 Index TSRs to determine payout amounts and are not based on internal performance metrics. The TSR award also takes into account whether the company’s TSR is negative or positive. The TSR awards are designed to:

 

Reward higher returns in Occidental’s stock relative to the peer group stockholder returns, based on a percentile ranking of
  the TSR within the peer group. This approach neutralizes major market variables that impact the entire oil and gas industry, thereby rewarding executives for superior performance compared to peer group companies.
   
Align executive rewards with stockholder returns over a three-year period, which encourages executive focus on long-term returns.
   
Ensure above-target payouts occur only if the company’s TSR is positive and exceeds the TSR of the S&P 500 Index.

 

The TSR awards are denominated in performance share units, each of which is equivalent to one share of common stock. The percentage of such number of performance share units that will be payable at the end of the three-year performance period, which runs from July 1, 2013 through June 30, 2016, will depend on Occidental’s TSR performance as described in the table on page 20.

 

Cumulative dividend equivalents will be paid at the end of the three-year performance period and will be paid only on performance share units earned. Additional terms are summarized in the Summary of Long-Term Incentive Compensation chart on page 20.

 

Restricted Stock Incentive Award. Consistent with the executive compensation programs of a majority of the peer group companies, the Compensation Committee selected Restricted Stock Incentive awards (RSI award) as a component of executive long-term incentive compensation. The RSI award is a grant of shares of the company’s common stock and key terms of the award are set forth in the table on page 20. The Compensation Committee increased the performance goal from the 2012 level of $10 billion in cumulative net income to $12 billion in cumulative net income in order to make the achievement of the goal more challenging. Dividends will be paid on the shares from the grant date. Dividends received by Mr. Chazen are required to be reinvested in Occidental common stock.


 

Individual Compensation Considerations

 

Stephen I. Chazen

 

Mr. Chazen is the President and Chief Executive Officer of Occidental. He is responsible for all operations, financial management of the company, and in coordination with the Board of Directors, for creating and implementing the company’s strategy.

 

In setting the total compensation values for Mr. Chazen, the Compensation Committee considered:

 

Enhanced Value Creation and Consistent Performance: As shown in the “Business Performance Highlights” section on page 14, Occidental had a very successful year and achieved the goals that were set out at the beginning of the year. Led by Mr. Chazen and relying on a disciplined business approach,
 

return-focused capital allocation decisions, and efficiency initiatives, the company: 

 

  - Ended the year with core earnings of $5.6 billion or $6.95 per diluted share.6
     
  - Increased domestic production by 9,000 BOE per day in 2013 to an average 474,000 BOE per day.
     
  - Reduced domestic drilling costs by 24% relative to 2012.
     
  - Reduced operating costs by 17% to $14.43 per BOE in 2013.
     
  - Delivered Return on Equity of 14%, a 20% increase from 2012.


 

6 Core results reflect Occidental’s 2013 net income shown on page 44 of the Form 10-K after removing the effect of Significant Items Affecting Earnings described on page 25 of the Form 10-K. The company provides this adjusted measure because it believes it may be useful to investors in evaluating and comparing Occidental’s performance between periods, not as a substitute for net income.

 

21     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

- Delivered Return on Capital Employed of 12%, which was an 18% increase from 2012.
   
- Reduced the debt to capital ratio from 16% in 2012 to 14% in 2013.
   
- Increased the annualized dividend by 18.5%, the twelfth increase over the last 11 years, resulting in a compounded annual increase rate of 16%.
   
Enhanced Prospects for Future Growth: Mr. Chazen initiated several actions to improve the profitability and returns for the company including streamlining operations to improve efficiency and capitalizing on the large portfolio of growth oriented assets in the United States. He also led a strategic review of the company’s operations with the Board of Directors in order to better execute the company’s long-term strategy and enhance value for shareholders. As a result, the company:
   
- Added 470 MMBOE of reserves, before divestitures, achieving an overall replacement ratio of 169%7 and domestic reserve replacement ratio of 190%7 with over 90% of the additions coming from organic development. Finding and development costs were correspondingly reduced to approximately $17.00 per barrel8.
   
- Generated $1.4 billion as a result of the sale of a portion of the company’s 35-percent interest in Plains All-American Pipeline, L.P. with Occidental’s remaining interest valued at approximately $4 billion as of December 31, 2013. Occidental’s original investment was $1.1 billion.
   
- Purchased approximately 10.6 million shares of the company’s stock.
   
- As part of the strategic review, announced;
   
  -  An intention to sell a minority interest in its Middle East/ North Africa operations.
   
  -  The pursuit of strategic alternatives for select Oil & Gas Midcontinent assets.
   
  -  The planned separation of Occidental’s California assets into an independent and separately traded company.
Identification and Development of Future Leadership: Mr. Chazen worked with the Management Succession and Talent Development Committee of the Board to ensure that the current and future leadership team is positioned to successfully meet the challenges of a dynamic industry. Specific accomplishments include:
   
  - A series of engagement activities with external agencies, investors, and members of the Board to ensure succession readiness of key leaders.
     
  - Continued to expand global management training initiatives and strengthened talent pipelines at all levels of the organization.
     
Organizational Effectiveness: Under the leadership of Mr. Chazen, Occidental’s performance, including the areas of Health, Environment, and Safety, Corporate Governance, Diversity, and Social Responsibility, continued to receive high praise in 2013 as evidenced by:
   
  - Occidental’s 2013 employee injury and illness incidence rate (IIR) was 0.30 and contractor IIR was 0.42. For 18 consecutive years, Occidental’s worldwide employee IIR has been less than 1.0 recordable injury per 100 employees.
     
  - Transition of the internal corporate culture into a more collaborative environment that fostered the team approach that led to significant improvements in drilling and operating costs in 2013.
     
  - Since his appointment as Chief Executive Officer in 2011, Occidental has improved its’ female representation in senior management by over 15%.
     
  - External recognitions, including:
   
    -  

Fortune magazine’s World’s Most Admired Companies: No. 1, Mining, Crude-Oil Production for 2014, for the seventh year in a row.

       
    Corporate Responsibility Magazine: 100 Best Corporate Citizens list for 2013 and Energy Industry Sector Best Corporate Citizens for 2013.
       
    -  

Hispanic Network Magazine: 2013 Best of the Best Lists: Top Energy, Gas and Oil Companies.


 

7 Calculated for a specified period by using the applicable oil-equivalent proved reserve additions divided by oil-equivalent production.
8 Occidental calculates its reserves replacement ratio for a specified period by using the applicable oil-equivalent proved reserves additions divided by oil-equivalent production. Finding costs per unit are calculated by dividing total costs incurred to add reserves for the period, including asset retirement obligations, but excluding acquisition costs, by total reserves additions from all sources for the period, excluding acquisitions. The measure may not include all the costs associated with exploration and development related to reserves added for the period, or may include costs related to reserves added or to be added in other periods, and may differ from the calculations used by other companies.

 

 Occidental Petroleum Corporation     22
Compensation Discussion
and Analysis
   
 

 

Stephen I. Chazen – Mr. Chazen became President and Chief Executive Officer in May 2011. Previously, he had been President and Chief Operating Officer of Occidental since August 2010; President and Chief Financial Officer since 2007; and Chief Financial Officer since 1999. As Chief Executive Officer, Mr. Chazen is responsible for all operations, the financial management of the company, creating and implementing the company’s strategy, assisting the Board with succession planning, and working with the Board on corporate strategy, executive succession planning, executive compensation and talent development.

 

The components of Mr. Chazen’s compensation approved by the Compensation Committee in 2013 are set forth below:

 

    Range of Value on Grant Date      
Compensation Element   Minimum   Target(1)   Maximum     Rationale
Base Salary   $ 1,400,000   $ 1,400,000   $ 1,400,000     Mr. Chazen’s base salary remained unchanged from the 2012 level. Effective January 1, 2014, Mr. Chazen’s base salary was increased to $1,500,000, based on his individual performance and information from commercially available compensation surveys and other publicly available information.
Long-Term Incentive                        
Restricted Stock Award(2)   $ 0   $ 5,000,000   $ 5,000,000  (3)   The Compensation Committee determined that Mr. Chazen’s long-term incentive value should be based on the values used for the Chief Executive Officer in 2011 and 2012.
Retirement Plans   $ 449,235   $ 449,235   $ 449,235     Mr. Chazen participates in the company’s benefit plans on the same basis as all U.S. salaried employees (see page 30).
Other Compensation   $ 38,124   $ 38,124   $ 38,124     Mr. Chazen received personal benefits for tax preparation and financial counseling, excess liability insurance, physical examinations and personal use of company aircraft.
Total Compensation   $ 1,887,359   $ 6,887,359   $ 6,887,359      

 

(1)  Long-Term Incentive values is shown at the target value set by the Compensation Committee, which was divided by the closing stock price of the common stock on the grant date to determine the number of shares payable upon the achievement of the target performance level. For the RSI award, this target value is the same as the grant date fair value which is shown on the Grants of Plan Based Awards table on page 35. All other values are shown at December 31, 2013 values.
(2) RSI award details are described on page 21.
(3) Value shown was calculated using Occidental’s common stock price on the grant date and the maximum number of shares that can be earned. Actual payout value will depend on the number of shares earned (zero or the target number of shares), based on the achievement of the performance measure, and the stock price on the date of certification of the performance achieved.

 

Following is a comparison of the components of Mr. Chazen’s compensation package as awarded and approved by the Compensation Committee for each of the last three years:

 

    Performance-Based Compensation  Non-Performance-Based Compensation  Total 
Year   Non-Equity Incentive
Compensation Plan
Award
   Restricted Stock
Award
   TSR Award   ROCE Award  Salary and Other   Bonus Target  Grant Date
Fair Value
 
2013   $0   $5,000,000   $0   $0  $1,887,359   $0  $6,887,359 
2012   $1,680,000   $5,000,000   $6,000,000    N/A  $2,237,977   $1,120,000  $16,037,977 
2011   $1,680,000   $5,000,000   $6,000,000    N/A  $1,886,060   $1,120,000  $15,686,060 

 

Over the last three years, the grant date fair value of the compensation program elements approved for Mr. Chazen has been reduced by more than 50% and the maximum value at the grant date has been reduced by almost 80%. With his increased focus on succession planning and assisting the Board of Directors in those efforts, as well as his accumulation of over two million shares of company common stock, the Compensation Committee did not grant him a TSR award and granted him only an RSI award at the same grant date fair value level as in 2012 and 2011.

 

The table immediately above compares the elements of Mr. Chazen’s compensation approved in the last three years. All performance-based awards, other than the Non-Equity Incentive, will be paid at the end of the performance period only if performance criteria are met over three to seven years.

Performance-based awards are shown at the grant date fair values as shown in the Summary Compensation Table on page 33. Salary and Other includes the amounts shown in the “Salary”, “Change in Pension Value and Nonqualified Deferred Compensation Earnings” and “All Other Compensation” columns of the Summary Compensation Table on page 33. Grant Date Fair Value “Total” column values assume payout of bonus at target and the performance-based compensation at the grant date fair values.

 

 

23     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

Edward A. Lowe – Mr. Lowe has been Vice President of Occidental since 2008 and President, Oxy Oil and Gas - International Production since 2009. As such, Mr. Lowe is responsible for Occidental’s oil and gas operations other than those in the Americas, and for the oil and gas segment’s international business development and engineering operations.

 

The components of Mr. Lowe’s compensation approved by the Compensation Committee in 2013 are set forth below:

 

   Range of Value on Grant Date(1)   
Compensation Element  Minimum  Target(2)  Maximum   Rationale
Base Salary  $575,000  $575,000  $575,000   Base salaries are reviewed annually based on several factors, including individual performance, internal equity, and information from commercially available compensation surveys and other publicly available information. Based on this review, Mr. Lowe’s base salary was increased to $575,000, effective January 1, 2013 and further increased to $625,000 effective January 1, 2014.
Annual Incentive                
Non-Equity Incentive (Performance-Based Portion)  $0  $450,000  $900,000   An annual incentive award target of $750,000 was established with a performance range of 0% to 200%, allocated between a Non-Equity Incentive and a discretionary Bonus portion as described on page 19. This target level is an increase over the 2012 level due to a review of internal equity and compensation surveys. Actual payouts for both components are shown in the Summary Compensation Table on page 33(3).
Bonus
(Discretionary Portion)
  $0  $300,000  $600,000  
               
               
Long-Term Incentive                
Total Shareholder Return Award(4)  $0  $1,350,000  $2,025,000 (5)  The Compensation Committee determined Mr. Lowe’s long-term incentive target value based on a number of factors, including his individual performance, internal equity compared to other senior executives and a review of industry practices based on commercially available compensation surveys and other publicly available information.
Restricted Stock
Award(6)
  $0  $1,350,000  $1,350,000 (5) 
ROA Awards(7)  $0  $1,800,000  $3,600,000 (5) 
Retirement Plans  $144,050  $144,050  $144,050   Mr. Lowe participates in the company’s benefit plans on the same basis as all U.S. salaried employees (see page 30).
Other Compensation
Personal Benefits
  $16,720  $16,720  $16,720   Mr. Lowe received tax gross-ups related to amounts paid by Occidental for spousal travel.
Total Compensation  $735,770  $5,985,770  $9,210,770    
(1)  Grant date fair values for performance-based incentive awards are not shown on this table, but are shown on the Grants of Plan Based Awards table on page 35. The Summary Compensation Table on page 33 shows grant date fair values for long-term incentive awards granted in 2013 and the payout amounts of the 2013 Annual Incentive.
(2) Long-Term Incentive values are shown at target values determined by the Compensation Committee, which were divided by the closing stock price of the common stock on the grant date to determine the number of shares payable upon the achievement of the target performance level. Annual Incentive values are shown at target values. All other values are shown at December 31, 2013 values.
(3) Payouts of the Discretionary Portion are based on the Compensation Committee’s consideration of Mr. Chazen’s recommendation, which is based on a subjective assessment of the executive’s accomplishments for the year, including the key performance areas for bonuses described on page 19.
(4) TSR award details are described on page 21.
(5) Values shown were calculated using Occidental’s common stock price on the grant date and the maximum number of share units that can be earned. Actual payout values will depend on the number of share units earned, based on the level of achievement of performance measures, and the stock price on the date of certification of the performance level achieved.
(6) RSI award details are described on page 21.
(7) ROA award details are described on page 21.

 

 Occidental Petroleum Corporation     24
Compensation Discussion
and Analysis
   
 

 

Willie C.W. Chiang – Mr. Chiang has been Executive Vice President, Operations since 2012. Prior to that he was with ConocoPhillips from 1996, most recently as Senior Vice President, Refining, Marketing, Transportation and Commercial from 2011 to 2012 and as Senior Vice President, Refining, Marketing and Transportation from 2008 to 2011. As Executive Vice President, Operations, he is responsible for oversight of Occidental’s midstream and marketing businesses, Oil & Gas Reserves, Oil & Gas Engineering, and the company’s capital allocation process.

 

The components of Mr. Chiang’s compensation approved by the Compensation Committee in 2013 are set forth below:

 

   Range of Value on Grant Date(1)   
Compensation Element  Minimum  Target(2)  Maximum   Rationale
Base Salary  $600,000  $600,000  $600,000   Mr. Chiang’s base salary was determined by a review of internal equity and information from commercially available compensation surveys and other publicly available information and was maintained at the same level for 2013 as in 2012. Based on a further review, effective January 1, 2014, his base salary was increased to $625,000.
Annual Incentive                
Non-Equity Incentive (Performance-Based Portion)  $0  $420,000  $840,000   An annual incentive award target of $700,000 was established with a performance range of 0% to 200%, allocated between a Non-Equity Incentive and a discretionary Bonus portion as described on page 19. Actual payouts for both components are shown in the Summary Compensation Table on page 33 (3).
Bonus
(Discretionary Portion)
  $ (3) $280,000  $560,000  
Long-Term Incentive                
Total Shareholder Return Award(4)  $0  $1,350,000  $2,025,000 (5)  The target value of Mr. Chiang’s long–term incentive awards was based on a number of factors, including internal pay equity compared to other senior executives, a review of industry practices based on commercially available compensation surveys and other publicly available information.
Restricted Stock
Award(6)
  $0  $1,350,000  $1,350,000 (5) 
ROCE Award(7)  $0  $1,800,000  $3,600,000 (5) 
Retirement Plans  $174,315  $174,315  $174,315   Mr. Chiang participates in the company’s benefit plans on the same basis as all U.S. salaried employees (see page 30).
Other Compensation                 
Personal Benefits   $32,662  $32,662  $32,662   Mr. Chiang received personal benefits for tax preparation and financial counseling, personal use of company aircraft, excess liability insurance and tax gross-ups related to the amounts paid by Occidental for spousal travel.
Total Compensation  $806,977  $6,006,977  $9,181,977    
(1)  Grant date fair values for performance-based incentive awards are not shown on this table, but are shown on the Grants of Plan Based Awards table on page 35. The Summary Compensation Table on page 33 shows grant date fair values for long-term incentive awards granted in 2013 and the payout amounts of the 2013 Annual Incentive.
(2) Long-Term Incentive values are shown at target values determined by the Compensation Committee, which were divided by the closing stock price of the common stock on the grant date to determine the number of shares payable upon the achievement of the target performance level. Annual Incentive values are shown at target values, and are subject to a minimum guaranteed amount. All other values are shown at December 31, 2013 values.
(3) Payouts of the Discretionary Portion are based on the Compensation Committee’s consideration of the recommendation of Mr. Chazen, which is based on a subjective assessment of the executive’s accomplishments for the year, including the key performance areas for bonuses described on page 19. Mr. Chiang’s offer letter guaranteed a 2013 Annual Incentive payment amount not less than the target amount.
(4) TSR award details are described on page 21.
(5) Values shown were calculated using Occidental’s common stock price on the grant date, and the maximum number of share units that can be earned. Actual payout values will depend on the number of share units earned, based on the level of achievement of performance measures and the stock price on the date of certification of the performance level achieved.
(6) RSI award details are described on page 21.
(7) ROCE award details are described on page 21.

 

25     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

 

Cynthia L. Walker – Ms. Walker has been Executive Vice President and Chief Financial Officer since 2012. Prior to that she was at Goldman, Sachs & Co., where she was most recently a Managing Director from 2010 to 2012, and a member of the Global Natural Resources Group and the Merger Leadership Group. Before becoming a Managing Director, she was a Vice President from 2005 to 2010. As Executive Vice President and Chief Financial Officer, she is responsible for the company’s tax, treasury, controller and planning functions.

 

The components of Ms. Walker’s compensation approved by the Compensation Committee in 2013 are set forth below:

 

   Range of Value on Grant Date(1)   
Compensation Element  Minimum  Target(2)  Maximum   Rationale
Base Salary  $600,000  $600,000  $600,000   Ms. Walker’s base salary was determined by a review of internal equity and information from commercially available compensation surveys and other publicly available information.
Annual Incentive                
Non-Equity Incentive
(Performance-Based Portion)
  $0  $360,000  $720,000   An annual incentive award target of $600,000 was established with a performance range of 0% to 200%, allocated between a Non-Equity Incentive and a discretionary Bonus portion as described on page 19. Actual payouts for both components are shown in the Summary Compensation Table on page 33(3).
Bonus
(Discretionary Portion)
  $0  $240,000  $480,000  
               
Long-Term Incentive                
Total Shareholder Return Award(4)  $0  $630,000  $945,000  (5)  The target value of Ms. Walker’s long-term incentive awards was based on a number of factors, including internal pay equity compared to other senior executives, a review of industry practices based on commercially available compensation surveys and other publicly available information.
Restricted Stock
Award(6)
  $0  $630,000  $630,000 (5) 
ROCE Award(7)  $0  $840,000  $1,680,000 (5) 
Retirement Plans  $159,015  $159,015  $159,015   Ms. Walker participates in the company’s benefit plans on the same basis as all U.S. salaried employees (see page 30).
Other Compensation                
Personal Benefits  $12,355  $12,355  $12,355   Ms. Walker received personal benefits for tax preparation and financial counseling and excess liability insurance.
Total Compensation  $771,370  $3,471,370  $5,226,370    
(1)  Grant date fair values for performance-based incentive awards are not shown on this table, but are shown on the Grants of Plan Based Awards table on page 35. The Summary Compensation Table on page 33 shows grant date fair values for long-term incentive awards granted in 2013 and the payout amounts of the 2013 Annual Incentive.
(2) Long-Term Incentive values are shown at target values determined by the Compensation Committee, which were divided by the closing stock price of the common stock on the grant date to determine the number of shares payable upon the achievement of the target performance level. Annual Incentive values are shown at target values, and are subject to a minimum guaranteed amount. All other values are shown at December 31, 2013 values.
(3) Payouts of the Discretionary Portion are based on the Compensation Committee’s consideration of Mr. Chazen’s recommendation, which is based on a subjective assessment of the executive’s accomplishments for the year, including the key performance areas for bonuses described on page 19.
(4) TSR award details are described on page 21.
(5) Values shown were calculated using Occidental’s common stock price on the grant date, and the maximum number of share units that can be earned. Actual payout values will depend on the number of share units earned, based on the level of achievement of performance measures and the stock price on the date of certification of the performance level achieved.
(6) RSI award details are described on page 21.
(7) ROCE award details are described on page 21.

 

 Occidental Petroleum Corporation     26
Compensation Discussion
and Analysis
   
 

 

Donald P. de Brier – Mr. de Brier is Corporate Executive Vice President and Corporate Secretary. As such, he is responsible for Occidental’s worldwide legal activities; corporate secretary functions; corporate compliance; health, environment and safety; communications and public affairs; and security.

 

The components of Mr. de Brier’s compensation approved by the Compensation Committee in 2013 are set forth below:

 

   Range of Value on Grant Date(1)   
Compensation Element  Minimum  Target(2)  Maximum   Rationale
Base Salary  $550,000  $550,000  $550,000   Mr. de Brier’s base salary remained unchanged from the 2012 level.
Annual Incentive                
Non-Equity Incentive (Performance-Based Portion)  $0  $240,000  $480,000   An annual incentive award target was set at the same level as in 2012, $400,000, with a performance range of 0% to 200%, allocated between a Non-Equity Incentive and a discretionary Bonus portion as described on page 19. Actual payouts for both components are shown in the Summary Compensation Table on page 33(3).
Bonus
(Discretionary Portion)
  $0  $160,000  $320,000  
Long-Term Incentive                
Total Shareholder Return Award(4)  $0  $1,350,000  $2,025,000 (5)   The Compensation Committee determined
Mr. de Brier’s long-term incentive target value based on a number of factors, including his individual ability to affect company performance, internal equity compared to other senior executives and a review of industry practices based on commercially available compensation surveys and other publicly available information.
Restricted Stock
Award(6)
  $0  $1,350,000  $1,350,000 (5) 
ROCE Award(7)  $0  $1,800,000  $3,600,000 (5) 
Retirement Plans  $122,355  $122,355  $122,355   Mr. de Brier participates in the company’s benefit plans on the same basis as all U.S. salaried employees (see page 30).
Other Compensation                 
Personal Benefits   $56,215  $56,215  $56,215   Under the terms of his employment agreement, Mr. de Brier received personal benefits for security services, tax preparation and financial counseling, personal use of company’s aircraft, tax gross-ups related to the amounts paid by Occidental for spousal travel, club dues and excess liability insurance.
Total Compensation  $728,570  $5,628,570  $8,503,570    
(1)  Grant date fair values for performance-based incentive awards are not shown on this table, but are shown on the Grants of Plan Based Awards table on page 35. The Summary Compensation Table on page 33 shows grant date fair values for long-term incentive awards granted in 2013 and the payout amounts of the 2013 Annual Incentive.
(2) Long-Term Incentive values are shown at target values determined by the Compensation Committee, which were divided by the closing stock price of the common stock on the grant date to determine the number of shares payable upon the achievement of the target performance level. Annual Incentive values are shown at target values. All other values are shown at December 31, 2013 values.
(3) Payouts of the Discretionary Portion are based on the Compensation Committee’s consideration of Mr. Chazen’s recommendation, which is based on a subjective assessment of the executive’s accomplishments for the year, including the key performance areas for bonuses described on page 19.
(4) TSR award details are described on page 21.
(5) Values shown were calculated using Occidental’s common stock price on the grant date and the maximum number of share units that can be earned. Actual payout values will depend on the number of share units earned, based on the level of achievement of performance measures, and the stock price on the date of certification of the performance level achieved.
(6) RSI award details are described on page 21.
(7) ROCE award details are described on page 21.

 

27     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   
 

Succession Planning

 

In the weeks prior to the 2013 Annual Meeting of Stockholders, several directors and senior executives discussed succession planning with stockholders and stockholder advisory groups. As a result of these discussions, in April, the Board announced that Mr. Chazen would remain as Chief Executive Officer. Since then, Mr. Chazen has been working closely with Mr. Djerejian, the Chairman of the Board, and the rest of the Board on a strategic review of the company. The Board believes it is in the company’s best interests for Mr. Chazen to complete the review and implement any new strategic direction that results from the review. The Board has asked Mr. Chazen, who has agreed, to remain as Chief Executive Officer through the 2016 Annual Meeting to accomplish this. See “Corporate Governance”, beginning on page 8, for a more detailed discussion of these developments. The Board also announced in April that it would create a Management Succession and Talent Development Committee (Succession Committee) as part of its ongoing commitment to executive succession planning and development. The Succession Committee was formed in May and will maintain an active Chief Executive Officer succession plan, including

 

time-based replacement scenarios for emergency situations and short-term and long-term horizons and will lead Chief Executive Officer searches on behalf of the Board.

 

Additionally, the Succession Committee will:

 

Regularly review the company’s talent development processes and programs, including recruitment and selection, retention, development and diversity elements,
   
Participate in the company’s assessment of high potential and key personnel, and
   
Actively engage in becoming familiar with and evaluating current and potential leaders in senior management.

 

Occidental maintains an active succession plan for its key executive officers and other senior level positions. The succession plan helps ensure the company is not disrupted by changes in key leadership roles and also provides developmental opportunities for highly capable employees who are able to move into roles of increasing responsibility.

 

 

Participants in Executive Compensation Process

 

The Compensation Committee obtains input, advice and information from management, investors, investor advisory groups and compensation consultants as part of the process of determining executive compensation.

 

Role of Management in Executive Compensation

 

The Compensation Committee sets compensation for Occidental’s senior executives. In 2013, Mr. Chazen’s compensation package was set only by the Compensation Committee. Mr. Chazen recommended compensation for Messrs. Lowe, Chiang and de Brier, and Ms. Walker to the Compensation Committee. Mr. Chazen, Dr. Irani and the Executive Vice President - Human Resources were present for a portion of each of the Compensation Committee

 

meetings, but were not present when compensation decisions regarding Mr. Chazen or Dr. Irani were discussed and made. Management interacts with compensation consultants as necessary and prepares materials for each Compensation Committee meeting to assist the committee in its consideration of executive compensation programs and policies and its administration of plans and programs.

 

 

Role of Investors and Stockholder Advisory Groups

 

Occidental maintains an ongoing dialogue with its stockholders and certain stockholder advisory groups. The Chairman of the Compensation Committee, and directors serving on the Corporate Governance, Nominating and Social Responsibility Committee, including the Chair of that committee, participated in meetings with some of Occidental’s institutional investors and stockholder advisory groups in 2013. Meetings were conducted in person and by conference calls. Topics discussed at the meetings included succession planning, selection of performance targets and peer companies, and other compensation practices. Feedback obtained at the meetings was provided to the Compensation Committee and the full Board. Comments from investor meetings have been taken into consideration in Occidental’s ongoing efforts to improve its compensation program and the quality of its compensation disclosures.

 

The following changes to the executive compensation program were made based on specific suggestions or concerns raised directly by stockholders and/or stockholder advisory groups:

 

2013 TSR Awards were changed to cap payouts at the target amount if the company’s TSR result for the performance period is negative, regardless of the company’s TSR rank within the peer group, and against the S&P 500 Index. This modification was also applied retroactively to the Chief Executive Officer’s 2012 TSR award.
   
The discretionary portion of the Chief Executive Officer’s Annual Incentive (Bonus) in the future will be reduced to no more than 20% from 40%, and in evaluating the Chief Executive Officer’s performance, emphasis will be placed on the company’s financial performance as well as succession planning, talent development and maintaining and improving the company’s achievements on health, safety and environmental matters.
   
Future recruitment incentives and bonuses for senior executive officers designed to provide recruits with benefits similar to what they would forgo in order to accept a position with the company will be paid primarily in equity with retention periods.

 


 Occidental Petroleum Corporation     28
Compensation Discussion
and Analysis
   

 

Role of Compensation Consultants

 

In 2013, Occidental participated in compensation surveys conducted by independent compensation consultants in order to better understand general external compensation practices, including executive compensation. From time to time, Occidental, through its executive compensation department or the Compensation Committee, engages a consultant to provide advice on specific compensation issues. The Board’s policy on retention of independent compensation consultants, adopted in 2009, is set forth in Occidental’s corporate governance policies at

 

www.oxy.com. In 2013, the Compensation Committee engaged Pay Governance LLC as compensation consultants to advise and recommend on the design of long-term incentives for executives and on the design of director compensation programs. The Compensation Committee reviewed the independence of Pay Governance LLC under the Securities and Exchange Commission and New York Stock Exchange Listed Company Manual Standards and found it to be independent and without conflicts of interest.

 

 

Risk Management of Compensation Policies and Practices

 

Although the executive compensation program has a high percentage of pay that is performance-based, the Compensation Committee believes the program does not encourage unnecessary or excessive risk-taking. The Compensation Committee believes that the program, through a balanced set of performance metrics, enhances Occidental’s business performance by encouraging appropriate levels of risk-taking by executives. The Compensation Committee believes that any potential risk of the executive compensation program influencing behavior that could be inconsistent with the overall interests of Occidental and its stockholders is mitigated by several factors:

 

Program elements that use both annual and longer-term performance periods, with the most substantial portion having terms of at least three years.
   
Transparent performance metrics that use absolute and relative measures readily ascertainable from public information.
   
Use of external performance metrics, such as TSR, for a significant portion of the long-term performance-based incentive awards.
   
Comparative nature of the TSR performance measure, which neutralizes the potential impact volatile world oil prices could have on the company’s TSR.

 

Use of internal performance metrics, such as ROCE and ROA, that are transparent and publicly disclosed in the Annual Report on Form 10-K, and reported consistently with the Securities and Exchange Commission rules and regulations and United States Generally Accepted Accounting Principles.
   
Adjustment of threshold performance levels for ROCE and ROA awards to moderate the effects of commodity prices on performance levels achieved.
   
Payouts of long-term incentive awards that are 100% in stock rather than cash.
   
Stringent share ownership guidelines for executives and the additional requirement that named executive officers retain a number of shares equal to at least 50% of net after-tax shares acquired through equity awards granted after 2009 for at least three years following vesting of such awards.
   
Forfeiture provisions for unvested awards in the event of violations of Occidental’s Code of Business Conduct.

 

 

Certification of Previously Granted Performance Stock Awards

 

Total Shareholder Return Awards

 

In July 2009, the Compensation Committee granted TSR awards to the then-named executive officers. The TSR awards granted in 2009 were performance-based awards based on Occidental’s TSR compared to the TSR of other peer companies9 over a four-year period, July 15, 2009, through July 14, 2013, and were payable from 0 to 200% depending on Occidental’s performance. The TSR awards were certified for payment in July 2013 by the Compensation Committee. Occidental ranked in the middle third of the peer group with a TSR of 57%, and, as a result, the payout was at 81% of the target share units for each of the participating named executive officers. The amounts earned were: Mr. Chazen - $10,881,855; Mr. Lowe - $1,360,322; Mr. de Brier - $2,176,497; and Dr. Irani - $24,483,994. The amounts were paid 60% in shares of common stock and 40% in cash. The payout amounts are included in the Options Exercised and Stock Vested table on page 39.

 

In October 2010, the Compensation Committee granted TSR awards to the then-named executive officers. The TSR awards granted in 2010 were performance-based awards based on Occidental’s TSR compared to the TSR of other peer companies10 over a three-year period, October 13, 2010, through October 12, 2013, and were payable from 0 to 100% depending on Occidental’s performance. The TSR awards were certified for payment in October 2013 by the Compensation Committee. Occidental ranked eighth in the peer group with a TSR of 25%, and, as a result, the payout was at 20% of the performance share units for all of the participating named executive officers. The amounts earned were: Mr. Chazen - $3,625,278; Mr. Lowe - $1,268,871; Mr. de Brier - $1,450,111; and Dr. Irani - $4,531,573. The amounts were paid 50% in shares of common stock and 50% in cash. The payout amounts are included in the Options Exercised and Stock Vested table on page 39.

 

 

9 The peer companies were Anadarko Petroleum Corporation, Apache Corporation, BP p.l.c., Chevron Corporation, ConocoPhillips, Devon Energy Corporation, ExxonMobil Corporation and Royal Dutch Shell p.l.c.
10 In addition to Occidental, the peer companies were Anadarko Petroleum Corporation, Apache Corporation, Canadian Natural Resources Limited, Chevron Corporation, ConocoPhillips, Devon Energy Corporation, EOG Resources, Inc., ExxonMobil Corporation, Hess Corporation, Marathon Oil Corporation and Royal Dutch Shell p.l.c.

 

29     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   

 

Restricted Stock Awards

 

In October 2010, the Compensation Committee granted RSI awards to the then-named executive officers. The RSI awards granted  in 2010 were performance-based awards based on Occidental’s cumulative reported net income amount during the period October 1, 2010, and ending no later than September 30, 2017. The shares were designed to become non-forfeitable on the later of October 12, 2013, provided the executive remained employed through that date, and the date the Compensation Committee certified the achievement of the performance goal. In

 

October 2013, the Compensation Committee certified that the performance goal had been met with a cumulative net income of $16.8 billion during the performance period, which exceeded the threshold of $10 billion, resulting in a payout of 100% of the shares granted. The amounts earned were: Mr. Chazen - $4,531,573; Mr. Lowe - $1,586,089; Mr. de Brier - $1,812,687; and Dr. Irani - $5,664,467. The payout amounts are included in the Options Exercised and Stock Vested table on page 39.

 

 

Other Compensation and Benefits

 

Occidental does not have a defined benefit pension program that provides salaried employees a fixed monthly retirement payment.

 

Qualified Defined Contribution Plans

 

All salaried employees on the U.S. dollar payroll, including the named executive officers, are eligible to participate in one or more tax-qualified, defined contribution plans. The defined contribution retirement plan provides for periodic contributions by Occidental based on annual cash compensation and age, up to certain levels pursuant to Internal Revenue Service (IRS) regulations. For 2013, the defined contribution 401(k) savings plan permitted employees to save a percentage of their annual salary up to the $255,000 limit set by IRS regulations, and the employee pre-tax contribution was limited to $17,500. Employees may direct their contributions to a variety of investments. Occidental generally

 

matches employee contributions with Occidental common stock on a dollar-for-dollar basis, in an amount up to 6% of the employee’s base salary. The amounts contributed to the qualified plans on behalf of the named executive officers are detailed under “All Other Compensation” in the Summary Compensation Table on page 33. As of December 31, 2013, the aggregate balances under the qualified plans were: Mr. Chazen - $2,155,785; Mr. Lowe - $2,810,044; Mr. Chiang - $79,034; Ms. Walker - $7,808; Mr. de Brier - $3,788,225; and Dr. Irani - $5,090,480. The named executive officers, other than Ms. Walker and Mr. Chiang, are fully vested in their account balances under the qualified plans.

 

 

Nonqualified Defined Contribution Retirement Plan

 

Occidental’s nonqualified retirement plan is described on page 40. The amounts contributed to the nonqualified retirement plan on behalf of the named executive officers are detailed under “All Other Compensation” in the Summary Compensation Table

 

on page 33. Company contributions, aggregate earnings and aggregate balances for the named executive officers in the nonqualified retirement plan are included in the Nonqualified Deferred Compensation table on page 40.

 

 

Nonqualified Deferred Compensation Plan

 

Occidental’s nonqualified deferred compensation plan is described on page 40. The amounts of salary and bonuses deferred by the named executive officers are included as compensation in the “Salary,” “Bonus” and “Non-Equity Incentive Compensation” columns of the Summary Compensation Table on page 33, as appropriate, in the year of deferral. The above-market portion of the accrued interest on deferred amounts is reported in the “Change in

 

Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table. Contributions, aggregate earnings and aggregate balances for the named executive officers for the nonqualified deferred compensation plans are shown in the Nonqualified Deferred Compensation table on page 40.

 

 

Employment Arrangements

 

Employment agreements, offer letters or retention and severance arrangements may be offered to key executives for recruitment and retention purposes and to ensure the continuity and stability of management. The employment agreements for Mr. Chazen and Mr. de Brier, the only named executive officers with employment

 

agreements, the offer letters for Ms. Walker and Mr. Chiang, the retention payment and separation benefit arrangements for Mr. Lowe, and Dr. Irani’s Settlement Agreement are discussed under “Potential Payments Upon Termination or Change of Control” beginning on page 41.

 

 

Security

 

Personal security services, including home detection and alarm systems and personal security guards, are provided to certain executives to address perceived risks, at allocated costs based on actual charges and presented to the Compensation Committee.

 

Tax Preparation and Financial Planning

 

A select group of executives, including each of the named executive officers, is eligible to receive reimbursement for financial planning and investment advice, including legal advice related to tax and financial matters, and in Dr. Irani’s case, investment

 

services. Eligible executives are required to have their personal tax returns prepared by a tax professional qualified to practice before the Internal Revenue Service in order to ensure compliance with applicable tax laws.

 

 

 Occidental Petroleum Corporation     30
Compensation Discussion
and Analysis
   

 

Corporate Aircraft Use

 

Executives and directors may use corporate aircraft for personal travel, if space is available. The named executive officers and directors reimburse Occidental for personal use of company

 

aircraft, including any guests accompanying them, at not less than the standard industry fare level rate (which is determined in accordance with IRS regulations).

 

 

Insurance

 

Occidental offers a variety of health coverage options to all employees. Senior executives participate in these plans on the same terms as other employees. In addition, for all employees above a certain job level, Occidental will pay for an annual physical examination. The company provides all salaried employees with

 

life insurance equal to twice the employee’s base salary. For certain senior employees, Occidental increases that to three times base salary. Occidental also provides senior executives with excess liability insurance coverage.

 

 

Other

 

Other benefits are included under “All Other Compensation” in the Summary Compensation Table on page 33.

 

Stock Ownership Guidelines

 

Occidental has had minimum stock ownership guidelines for Occidental’s senior management since 1996. For more information on Occidental’s stock ownership guidelines, see www.oxy.com. The target ownership level for the Chief Executive Officer is ten times annual base salary and for the other named executive officers is five times annual base salary. As of February 28, 2014, each of the currently employed named

 

executive officers held stock in excess of the guidelines, holding from 10 to 151 times annual base salary (see “Beneficial Ownership of Directors and Officers” on page 48). Additionally, named executive officers are required to retain a number of shares equal to 50% of the net after-tax shares received pursuant to equity awards granted after 2008 for at least three years after the vesting date.

 

 

Equity Grant Practices

 

The Compensation Committee generally grants equity awards at its regularly scheduled July meeting, normally held the day before the regularly scheduled Board meeting. Board meeting dates are set in the prior year. Mr. Chazen’s grant was made at the regularly scheduled July meeting of the Compensation Committee. However, due to the Board’s review of and modifications to the executive compensation program, in 2013, the grants for the named executive officers other than Mr. Chazen were made at the end of July, several weeks after the regularly scheduled Board meeting. The grant date value of Occidental stock is based on the closing price on the New York Stock Exchange on the day the Compensation Committee grants equity awards. As specifically authorized by the terms of the 2005 Long-Term Incentive Plan, the Compensation Committee has delegated to the Chief Executive Officer, as a Director, the authority to grant awards in the event a new employee is hired between Compensation Committee meeting dates, and an equity award has been deemed to be an important element in persuading the employee to join Occidental. In such cases, the award is

 

generally made on the date the employee starts employment. Any such award granted to an executive officer is subsequently reported to the Compensation Committee.

 

The Compensation Committee does not anticipate granting any additional options or stock appreciation rights to Occidental’s named executive officers at this time. To the extent that any such awards are granted in the future, such grants would vest on a pro rata basis in the event of the grantee’s death; and, if such awards are performance-based, payout of any vested portion would continue to be subject to satisfaction of the performance objective. Beginning in 2010, equity grants vest on a limited basis in the event of a change of control, as described in “Summary of Award Terms” on page 36.

 

The 2005 Long-Term Incentive Plan provides that no individual may be granted awards under that Plan in excess of the specified Plan limits. For purposes of applying the share limit, the target incentive value of awards, regardless of whether equity or cash awards, may be converted to a share unit equivalent.

 

 

Consequences of Misconduct

 

In 1997, Occidental’s Board of Directors adopted a Code of Business Conduct that prohibits any officer, employee or director from violating or circumventing any law of the United States or a foreign country during the course of his or her employment. The Audit Committee of the Board of Directors oversees compliance with the Code of Business Conduct and has put in place procedures, including a compliance hotline, to ensure that all violations or suspected violations of the Code of Business Conduct are reported promptly, without fear of retaliation. In general, misconduct may have several consequences, including the following:

 

If a named executive officer were found to have violated the Code of Business Conduct, the officer would be subject to disciplinary action, which may include termination, referral for criminal prosecution and reimbursement to Occidental or others for any losses or damages resulting from the violation.
   
Stock awards may be forfeited in whole or in part in the case of an employee’s termination for cause.
   
Beginning with the awards granted in 2008, awards for continuing employees may be forfeited in whole or in part for violations of the Code of Business Conduct or other provisions of the award agreement.

 

 

31     2014 Notice of Annual Meeting and Proxy Statement 
Compensation Discussion
and Analysis
   

 

Tax Deductibility Under Section 162(m)

 

Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, places a limit of $1 million on the amount of non-performance-based compensation that Occidental may deduct in any one year with respect to certain of its highest-paid executive officers. Certain qualified performance-based compensation is not subject to the deduction limit. The ROCE awards, both forms of the ROA awards, TSR awards and RSI awards, but not the Annual

 

Incentive awards, granted in 2013 to executive officers subject to Section 162(m) are expected to be tax deductible. Although tax consequences are considered in its compensation decisions, the Compensation Committee has not adopted a policy that all compensation must be deductible. Rather, the Compensation Committee gives priority to the overall compensation objectives discussed above.

 

 

Compensation Committee Report

 

The Executive Compensation Committee of the Board has reviewed and discussed with management the Compensation Discussion and Analysis for the year ended December 31, 2013. Based on these reviews and discussions, the Executive Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement for the 2014 Annual Meeting of Stockholders.

 

Respectfully submitted,

 

THE EXECUTIVE COMPENSATION COMMITTEE

 

Carlos M. Gutierrez (Chair)
Spencer Abraham
Howard I. Atkins
John E. Feick
Margaret M. Foran
Avedick B. Poladian

 

 Occidental Petroleum Corporation     32
Executive Compensation Tables
   
 

 

EXECUTIVE COMPENSATION TABLES

 

Executive Compensation Tables

 

Set forth below are tables and information showing for Mr. Chazen, Occidental’s principal executive officer; Ms. Walker, Occidental’s principal financial officer; the three other most highly compensated named executive officers who were serving as executive officers on December 31, 2013; and Dr. Irani, who ceased serving as an executive officer in May 2013, and is included because he would have been among the three most highly compensated executive officers had he been an executive officer on December 31, 2013: (1) in summary form, the compensation attributed to such executives for 2013, 2012 and 2011, as applicable; (2) the equity and non-equity incentive awards granted to such executives in 2013; (3) the outstanding

equity awards held by such executives as of December 31, 2013; (4) the options exercised by such executives and their stock awards vested during 2013; (5) the required information related to the nonqualified deferred compensation plans for such executives; and (6) the required information related to potential payments upon termination or change of control for such executives. The compensation tables should be read in conjunction with the Compensation Discussion and Analysis (see page 14), which explains Occidental’s compensation plans and philosophy and provides information about the compensation decisions made with respect to the named executive officers in 2013.

 

 

Summary Compensation Table

 

The table below and the accompanying footnotes summarize the 2013, 2012 and 2011 compensation, as applicable, for the principal executive officer, the principal financial officer and the other named executive officers.

 

Summary Compensation Table

                         Non-Equity          
                 Stock    Option    Incentive Plan      All Other    
         Salary    Bonus    Awards    Awards    Compensation              Compensation    Total
Name   Year   ($)(1)    ($)(2)   ($)(3)    ($)   ($)(4)     ($) (5)    ($)
Stephen I. Chazen
President and Chief
Executive Officer
  2013   $ 1,400,000     $ 0     $ 5,000,000   (6)   $ 0     $ 0     $ 487,359     $ 6,887,359  
  2012   $ 1,400,000     $ 1,120,000     $ 17,795,076     $ 0     $ 7,366,000     $ 837,977     $ 28,519,053  
  2011   $ 1,266,667     $ 1,340,000     $ 18,137,049     $ 0     $ 10,497,000     $ 486,060     $ 31,726,776  
Edward A. Lowe
Vice President
and President,
Oxy Oil and Gas -
International
Production
  2013   $ 575,000     $ 300,000     $ 4,755,373   (7)   $ 0     $ 420,000     $ 160,770     $ 6,211,143  
  2012   $ 550,000     $ 260,000     $ 3,520,000     $ 0     $ 2,211,750     $ 219,747     $ 6,761,497  
  2011   $ 500,000     $ 170,000     $ 3,520,000     $ 0     $ 1,269,000     $ 192,020     $ 5,651,020  
Willie C.W. Chiang
Executive Vice
President, Operations
  2013   $ 600,000     $ 808,000   (8)   $ 4,757,581   (9)   $ 0     $ 392,000     $ 206,977     $ 6,764,558  
  2012   $ 336,364     $ 978,000     $ 5,320,081     $ 0     $ 122,000     $ 54,358     $ 6,810,803  
Cynthia L. Walker
Executive Vice
President and Chief
Financial Officer
  2013   $ 600,000     $ 264,000     $ 2,220,345   (10)   $ 0     $ 336,000     $ 171,370     $ 3,591,715  
  2012   $ 243,182     $ 1,007,560     $ 3,878,240     $ 0     $ 122,000     $ 26,540     $ 5,277,522  
Donald P. de Brier
Corporate Executive
Vice President and
Corporate Secretary
  2013   $ 550,000     $ 276,000     $ 4,757,581   (11)   $ 0     $ 224,000     $ 178,570     $ 5,986,151  
  2012   $ 550,000     $ 160,000     $ 3,520,000     $ 0     $ 2,800,000     $ 219,399     $ 7,249,399  
  2011   $ 550,000     $ 160,000     $ 3,520,000     $ 0     $ 3,334,800     $ 226,328     $ 7,791,128  
Ray R. Irani
Former Executive
Chairman(12)
  2013   $ 2,175,000  (13)   $ 0     $ 0     $ 0     $ 1,395,000     $ 17,078,988  (14)   $ 20,648,988  
  2012   $ 1,300,000     $ 1,000,000     $ 25,688,833     $ 0     $ 15,798,750     $ 1,821,437     $ 45,609,020  
  2011   $ 1,300,000     $ 1,250,000     $ 26,458,255     $ 0     $ 19,058,250     $ 1,700,189     $ 49,766,694  

 

33     2014 Notice of Annual Meeting and Proxy Statement 
Executive Compensation Tables
   
 

 

(1) The amounts shown in 2013 reflect increases for Mr. Lowe due to internal equity, market and performance considerations. For information on salaries see page 18 and the individual compensation tables on pages 23 to 27.
(2) The 2013 amounts shown represent the discretionary portion of the executive’s Annual Incentive award, which is paid in the first quarter of the following year, and, for Mr. Chiang, 2013 includes a $500,000 cash sign-on bonus paid on the one-year anniversary of his employment by the company.
(3) Awards that are payable in stock or based on stock value are stated at the grant date fair value, which incorporates the value of Occidental’s stock as well as the estimated payout percentage as of the grant date. See Note 12 to Consolidated Financial Statements in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2013 regarding assumptions underlying valuation of equity awards.
(4) For 2013, the amounts represent only the performance-based portion of the executive’s Annual Incentive award. The payout related to the Annual Incentive award was determined based on Occidental’s attainment of specified earnings per share targets. For information on the payment of this award, see “Compensation Discussion and Analysis” on page 19. For 2012 and 2011, includes the cash portion of payouts for long-term performance-based awards that were granted in 2008 and 2009 under a prior compensation program.
(5) The following table shows “All Other Compensation” amounts for 2013 for Named Executive Officers other than Dr. Irani, who ceased serving as an executive officer in May and separated from the company in 2013, and whose “All Other Compensation” amounts are set forth in footnote 14 below.

 

All Other Compensation
  Stephen I. Chazen Edward A. Lowe Willie C.W. Chiang Cynthia L. Walker Donald P. de Brier
Savings Plan(a)  $15,300   $14,375   $15,300   $   $15,300 
Supplemental Retirement Plan II(b)  $433,935   $129,675   $159,015   $159,015   $107,055 
Personal Benefits  $38,124  (c)  $16,720 (d)  $32,662 (e)  $12,355 (f)  $56,215 (g)
Total  $487,359   $160,770   $206,977   $171,370   $178,570 
(a) The amount shown is the company’s contribution to the Occidental Petroleum Corporation Savings Plan (the “Savings Plan”) described on page 30.
(b) The amount shown is the company’s contribution to the Occidental Petroleum Corporation Supplemental Retirement Plan II (the “Supplemental Retirement Plan II”) described on page 40.
(c) Includes tax preparation and financial counseling, excess liability insurance, physical examinations and personal use of company aircraft. The value of aircraft usage is the estimated incremental cost of personal use of the aircraft, less the reimbursement amount paid to the company. Incremental costs include landing fees, fuel and additional flight staff costs, such as hotel accommodations and meals, and any repositioning of aircraft for personal usage.
(d) Represents tax gross-ups related to the amounts paid by Occidental for spousal travel.
(e) Includes tax preparation and financial counseling, personal use of company aircraft, excess liability insurance, and tax gross-up related to the amounts paid by Occidental for spousal travel ($1,881). See footnote (c) above for calculation of value of aircraft usage.
(f) Includes tax preparation and financial counseling and excess liability insurance.
(g) Includes security services, tax preparation and financial counseling ($30,000), personal use of company’s aircraft, tax gross-ups related to the amounts paid by Occidental for spousal travel ($3,953), club dues and excess liability insurance.

 

(6) The amount shown reflects the grant date fair value of the 2013 RSI award.
(7) The amount shown includes the grant date fair values of the 2013 TSR, RSI, ROA–Total and ROA–MENA awards. The maximum number of Occidental stock and share equivalents that can be issued under the ROA (Total) and ROA (MENA) awards is 39,144 shares, and, under the TSR award is 22,019, which, using $91.97, the closing price of Occidental common stock on the New York Stock Exchange on the grant date, would have a value of approximately $3.6 million and $2.0 million, respectively. The ultimate payout value may be significantly less than the maximum and the amount shown on the table, with the possibility of no payout, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(8) Includes a $500,000 cash sign-on bonus paid on the one-year anniversary of Mr. Chiang’s employment by the company, and $308,000 for the discretionary portion of his Annual Incentive award.
(9) The amount shown includes the grant date fair values of the 2013 TSR, RSI and ROCE awards. The maximum number of Occidental stock and share equivalents that can be issued under the ROCE award is 39,144 shares, and, under the TSR award is 22,019, which, using $91.97, the closing price of Occidental common stock on the New York Stock Exchange on the grant date, would have a value of approximately $3.6 million and $2.0 million, respectively. The ultimate payout value may be significantly less than the maximum and the amount shown on the table, with the possibility of no payout, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(10) The amount shown includes the grant date fair values of the 2013 TSR, RSI and ROCE awards. The maximum number of Occidental stock and share equivalents that can be issued under the ROCE award is 18,268 shares, and, under the TSR award is 10,277, which, using $91.97, the closing price of Occidental common stock on the New York Stock Exchange on the grant date, would have a value of approximately $1.68 million and $945,176, respectively. The ultimate payout value may be significantly less than the maximum and the amount shown on the table, with the possibility of no payout, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(11) The amount shown includes the grant date fair values of the 2013 TSR, RSI and ROCE awards. The maximum number of Occidental stock and share equivalents that can be issued under the ROCE award is 39,144 shares, and, under the TSR award is 22,019, which, using $91.97, the closing price of Occidental common stock on the New York Stock Exchange on the grant date, would have a value of approximately $3.6 million and $2.0 million, respectively. The ultimate payout value may be significantly less than the maximum and the amount shown on the table, with the possibility of no payout, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(12) Dr. Irani was an executive officer of the company until May 2013 and resigned from the Board of Directors on May 15, 2013. He was separated from the company effective December 31, 2013, as described in Potential Payments Upon Termination or Change of Control (see page 41).
(13) Includes salary of $1,300,000 and unused vacation pay of $875,000 paid in accordance with the terms of the Settlement Agreement covering his separation from the company effective as of December 31, 2013. See Potential Payments Upon Termination or Change of Control (see page 45).
(14) The amount includes a $14,000,000 payment in connection with his separation from the company (see Potential Payments Upon Termination or Change of Control on page 45), $15,300 credited pursuant to the Savings Plan; $394,215 credited pursuant to the Supplemental Retirement Plan II; $92,031 for life insurance premiums; and $2,577,442 in the aggregate for personal benefits. Personal benefits include security service ($572,503), tax preparation and financial planning services ($433,764), legal fees ($896,361), excess liability insurance and personal use of company aircraft ($673,699).The value of aircraft usage is the estimated incremental cost of personal use of the aircraft, less the reimbursement amount paid to the company.

 

 Occidental Petroleum Corporation     34
Executive Compensation Tables
   
 

 

Grants of Plan-Based Awards

 

The table below summarizes the plan-based awards granted by the Compensation Committee to the named executive officers in 2013: Executive Incentive Compensation Plan (Non-Equity Incentive Portion) – EICP, Total Shareholder Return Incentive Awards – TSR, Restricted Stock Incentive Awards – RSI, Return on Capital Employed Awards – ROCE, Return on Assets Awards–Total – ROA-T, and Return on Assets Awards–MENA – ROA-M. Summary tables of key terms of the award agreements are on pages 20 and 36. For additional information on the performance objectives and determination of threshold, target and maximum payouts for these

awards, see Compensation Discussion and Analysis beginning on page 14. For the actual amounts earned under the EICP awards, see the Summary Compensation Table on page 33.

 

The equity incentive awards listed below are the only stock awards granted to the named executive officers in 2013. No option awards or non-performance-based stock awards were granted in 2013. Option awards have not been granted since 2006.

 

 

Grants of Plan-Based Awards

      Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
   Estimated Future Payouts Under
Equity Incentive Plan Awards
   All Other
Stock
Awards:
Number of
  All Other
Option
Awards:
Number of
Securities
  Exercise or
Base Price
   Grant
Date Fair
Value of
Stock and
Name/
Type of
Grant
  Grant
Date
  Threshold
$
   Target
$
   Maximum
$
   Threshold
# Shares
   Target
# Shares
   Maximum
# Shares
   Shares or
Units
(# Shares)
  Underlying
Options
(# Shares)
  of Option
Awards
($)
   Option
Awards
($)
Stephen I. Chazen    
EICP   (1)     $0   $0   $0                              
RSI   (2)  7/10/13                       56,004                 $ 5,000,000
Edward A. Lowe    
EICP   (1)     $6,000   $450,000   $900,000                               
TSR   (3)  7/22/13                  147    14,679    22,019            $ 918,045
RSI   (2)  7/22/13                       14,679                 $ 1,350,000
ROA-T   (4)  7/22/13                  1,224    4,893    9,786            $ 579,687
ROA-M   (4)  7/22/13                  3,670    14,679    29,358            $ 1,907,641
Willie C.W. Chiang    
EICP   (1)     $5,600   $420,000   $840,000                               
TSR   (3)  7/22/13                  147    14,679    22,019            $ 918,045
RSI   (2)  7/22/13                       14,679                 $ 1,350,000
ROCE   (4)  7/22/13                  4,893    19,572    39,144            $ 2,489,536
Cynthia L. Walker    
EICP   (1)     $4,800   $360,000   $720,000                               
TSR   (3)  7/22/13                  69    6,851    10,277            $ 428,488
RSI   (2)  7/22/13                       6,851                 $ 630,000
ROCE   (4)  7/22/13                  2,284    9,134    18,268            $ 1,161,857
Donald P. de Brier    
EICP   (1)     $3,200   $240,000   $480,000                               
TSR   (3)  7/22/13                  147    14,679    22,019            $ 918,045
RSI   (2)  7/22/13                       14,679                 $ 1,350,000
ROCE   (4)  7/22/13                  4,893    19,572    39,144            $ 2,489,536
Ray R. Irani
EICP   (1)     $20,000   $1,500,000   $3,000,000                               
(1) Payout at threshold assumes EPS of $6.26.
(2) Dollar value shown represents the estimated grant date fair value of the full number of shares granted which become non-forfeitable on the later of the vesting date (July 9, 2016 for Mr. Chazen and July 21, 2016 for the other named executive officers), through which date the executive must remain employed by the company, and the date the Compensation Committee certifies the achievement of the performance goal, which must be met no later than June 30, 2020. The RSI award does not have threshold to maximum payout ranges.
(3) Actual payout may range from zero to the maximum number of performance share units. Awards will be paid out 100% in stock in a number of shares equal to the number of performance share units earned on the date of certification of the attainment of the performance goals. The target shares represent the target number of performance shares granted on the grant date, representing a payout of 100%. Threshold shares represent Occidental’s performance just above the 25th percentile, resulting in an assumed payout of 1% of the target number of performance share units. The actual percentage payout would be linearly interpolated between the 25th percentile TSR performance (0% payout) and the 75th percentile TSR performance (150% payout). The estimated fair value of the TSR at the grant date is based on the projected performance at the grant date for Occidental indicating a payout of 68% of the target number of performance share units . See Note 12 to Consolidated Financial Statements in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2013, regarding assumptions underlying valuation of equity awards.
(4) Dollar value shown represents the estimated grant date fair value of the target number of performance share units granted. The estimated fair value of the ROCE, ROA-T, and ROA-M is based on the projected performance at the grant date for Occidental indicating payouts of approximately 138%, 129%, and 141%, respectively. The actual payout may range from 0% to 200% of the target number of performance share units and will be paid out 100% in stock. Threshold shares represent a 25% payout percentage, which would be achieved with a return meeting the minimum threshold of 9% ROCE, 9% ROA-T, and 12% ROA-M.

 

35     2014 Notice of Annual Meeting and Proxy Statement 
Executive Compensation Tables
   
 

 

Summary of Award Terms

 

The table on page 20 sets forth terms of the long-term incentive awards granted in 2013 and the description in “Executive Incentive Compensation Plan Award (Annual Incentive)” on pages 18 to 19 sets forth the terms of the Annual Incentive. The following table sets forth the forfeiture and change in control features of the awards.

 

Summary of Award Terms    
   Executive Incentive
Compensation Plan
(Non-Equity

Incentive Portion)
  Total Shareholder Return,
Return on Capital Employed
and all Return on
Asset Awards
  Restricted Stock
Awards
FORFEITURE
PROVISIONS
  The Chief Executive Officer may determine eligibility for target awards and any payout to participants who exit employment during the plan year.  

If the grantee dies, becomes permanently disabled, retires with the consent of the company less than 12 months after the grant date(1), or is terminated for the convenience of Occidental during the performance period, then the grantee will forfeit a pro rata portion of the payout based on the days remaining in the performance period after the termination event.

 

If the grantee fails to comply with any provision of Occidental’s Code of Business Conduct or any provision of the grant agreement, the company may reduce the award.

 

Shares of stock will become non-forfeitable on the later of the vesting date (July 9, 2016 in the case of the CEO and July 21, 2016 in the case of the other NEOs) and the certification by the Compensation Committee of the achievement of reported Cumulative Net Income of $12 billion for the period beginning with July 1, 2013. The Cumulative Net Income threshold must be reached by June 30, 2020, or the shares will be forfeited in their entirety.

 

If the grantee dies, becomes permanently disabled, retires with the consent of the company, or is terminated for the convenience of Occidental prior to the vesting date (July 9, 2016 in the case of the CEO and July 21, 2016 in the case of the other NEOs), then the grantee will forfeit a pro rata portion of the shares based on the days remaining until the vesting date (July 9, 2016 in the case of the CEO and July 21, 2016 in the case of the other NEOs) after the termination event(1).

 

If the grantee fails to comply with any provision of Occidental’s Code of Business Conduct or any provision of the grant agreement, the company may reduce the award.

CHANGE IN
CONTROL
  The Plan may be amended as a result of acquisition, divestiture or merger with Occidental.   In the event of a Change in Control(2) during the performance period, the target number of performance shares convert to an equivalent number of shares of restricted stock with 50% of such shares received on a net after-tax basis subject to a 3-year holding period through the earlier of the date of the grantee’s termination as a result of the Change in Control or the last day of the performance period.   In the event of a Change in Control(2) prior to July 21, 2016, a pro rata portion of the shares based on the days remaining until the vesting date (July 9, 2016 in the case of the CEO and July 21, 2016 in the case of the other NEOs) following the later of the date of the change in control and the date of the termination of the grantee’s employment will become non-forfeitable(1). The remaining shares will be forfeited.

 

In the event of a Change in Control after the vesting date (July 9, 2016 in the case of the CEO and July 21, 2016 in the case of the other NEOs), but prior to certification of the performance threshold, the shares of stock will become non-forfeitable.

 

(1) Mr. Chazen’s RSI award provides that if prior to the vesting date of July 9, 2016, he retires with the consent of the company, then the number of shares shall not be reduced.
(2) A Change in Control Event under the 2005 Long-Term Incentive Plan generally includes a 20% or more change in ownership, certain changes in a majority of the Board, certain mergers or consolidations, sale of substantially all of Occidental’s assets or stockholder approval of a liquidation of Occidental.
 Occidental Petroleum Corporation     36
Executive Compensation Tables
   
 

 

Outstanding Equity Awards

 

The table below sets forth the outstanding equity awards held by the named executive officers as of December 31, 2013, including Restricted Stock Incentive Awards, Total Shareholder Return Incentive Awards, Return on Capital Employed Awards, Return on Asset (Total) Awards, Return on Asset (MENA) Awards, Restricted Stock Recruitment Awards and options.

 

The Restricted Stock Incentive Awards (RSI), Total Shareholder Return Incentive Awards (TSR), Return on Capital Employed Awards (ROCE), Return on Asset (Total) Awards (ROA-T), Return on Asset (MENA) Awards (ROA-M) are performance-based awards with payouts that depend on the outcome of the performance

criteria and the price of Occidental’s stock on the award certification date, with the possibility of no payout if performance criteria are not met. These are long-term awards with three-year and three-to seven-year performance periods, as applicable, that, based on achievement of performance criteria, will vest or become nonforfeitable between 2014 and 2020. The values shown for the TSR, ROCE, ROA-T, and ROA-M awards in the table below are shown at threshold, target, estimated performance, or maximum levels, as described below. Actual payouts, if any, will reflect actual performance, which may be at lower or higher levels than shown below, and on the price of the company’s stock at the time of payout.


 

Outstanding Equity Awards at December 31, 2013

 

      Option Awards  Stock Awards 
Name /
Type
of Award
  Grant
Date
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
   Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
    Market Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1)
   Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
(#) 
  Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares,
Units or Other Rights
That Have Not Vested
($)(1)
 
Stephen I. Chazen                     
RSI  7/13/11                       48,558  (2)                   $ 4,617,866(2) 
RSI  7/11/12                        59,123  (3)  $ 5,622,597(3) 
RSI  7/10/13                        56,004  (4)  $ 5,325,980(4) 
TSR  7/13/11                        19,424  (5,6)  $ 1,847,222(5) 
TSR  7/11/12                        23,650  (5,7)  $ 2,249,115(5) 
Edward A. Lowe                          
RSI  7/13/11                        15,539  (2)  $ 1,477,759(2) 
RSI  7/11/12                        18,920  (3)  $ 1,799,292(3) 
RSI  7/22/13                        14,679  (4)  $ 1,395,973(4) 
TSR  7/13/11                        6,216  (5,6)  $ 591,142(5) 
TSR  7/11/12                        7,568  (5,7)  $ 719,717(5) 
TSR  7/22/13                        14,679  (5,8)  $ 1,395,973(5) 
ROA-M  7/22/13                        3,670  (9)  $ 349,017(9) 
ROA-T  7/22/13                        1,224  (9)  $ 116,402(9) 
Willie C.W. Chiang                       
RSI  7/11/12                        18,920  (3)  $ 1,799,292(3) 
RSI  7/22/13                        14,679  (4)  $ 1,395,973(4) 
TSR  7/11/12                        7,568  (5,7)  $ 719,717(5) 
TSR  7/22/13                        14,679  (5,8)  $ 1,395,973(5) 
ROCE  7/22/13                        4,893  (9)  $ 465,324(9) 
Cynthia L. Walker                    
RSI  8/06/12                        9,065  (3)  $ 862,082(3) 
RSI  7/22/13                        6,851  (4)  $ 651,530(4) 
RSRA  8/06/12               10,000 (10)  $951,000        $   
TSR  8/06/12                        3,626  (5,7)  $ 344,833(5) 
TSR  7/22/13                        6,851  (5,8)  $ 651,530(5) 
ROCE  7/22/13                        2,284  (9)  $217,208(9) 

 

37     2014 Notice of Annual Meeting and Proxy Statement 
Executive Compensation Tables
   
 

 

      Option Awards  Stock Awards 
Name /
Type
of Award
  Grant
Date
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
   Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
    Market Value
of Shares
or Units of
Stock That
Have Not
Vested
($)(1)
   Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
(#) 
  Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares,
Units or Other Rights
That Have Not Vested
($)(1)
 
Donald P. de Brier                       
RSI  7/13/11                        15,539  (2)  $ 1,477,759(2) 
RSI  7/11/12                        18,920  (3)  $ 1,799,292(3) 
RSI  7/22/13                        14,679  (4)  $ 1,395,973(4) 
TSR  7/13/11                        6,216  (5,6)  $ 591,142(5) 
TSR  7/11/12                        7,568 (5,7)  $ 719,717(5) 
TSR  7/22/13                        14,679  (5,8)  $ 1,395,973(5) 
ROCE  7/22/13                        4,893  (9)  $ 465,324(9) 
Ray R. Irani                    
RSI  7/13/11                        40,008  (2)  $ 3,804,761(2) 
RSI  7/11/12                        29,103  (3)  $2,767,695(3) 
TSR  7/13/11                        14,594  (5,6)  $1,387,889(5) 
TSR  7/11/12                        10,672  (5,7)  $1,014,907(5) 

 

(1) The amounts shown represent the product of the number of shares or units shown in the column immediately to the left and the closing price on December 31, 2013 of Occidental common stock as reported in the NYSE Composite Transactions, which was $95.10.
(2) The shares are forfeitable until the later of July 12, 2014 and the certification by the Compensation Committee that the achievement of the performance threshold is met no later than June 30, 2018.
(3) The shares are forfeitable until the later of July 10, 2015 and the certification by the Compensation Committee that the achievement of the performance threshold is met no later than June 30, 2019.
(4) The shares are forfeitable until the later of the vesting date (July 9, 2016 for Mr. Chazen and July 21, 2016 for the other named executive officers) and the certification by the Compensation Committee that the achievement of the performance threshold is met no later than June 30, 2020.
(5) For TSRs granted in 2011 and 2012, the values shown reflect an estimated payout of a number of shares based on the threshold performance level which also reflects the performance of the company through December 31, 2013, and would result in payouts of 10%. For TSRs granted in 2013, the values shown reflect an estimated payout of the target number of shares since the performance of the company through December 31, 2013 exceeds the threshold payout level, but is less than the level required to attain target payout. However, the ultimate payout may be significantly less or more than the amounts shown, with the possibility of no payout, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(6) The performance period for the TSR ends June 30, 2014.
(7) The performance period for the TSR ends June 30, 2015.
(8) The performance period for the TSR ends June 30, 2016.
(9) For ROA awards and ROCE awards granted in 2013, payout values shown are at the threshold payout level of 25% since the performance periods begin January 1, 2014. However, the ultimate payout may be significantly less (zero) or more than the amounts shown, depending on the outcome of the performance criteria and the value of Occidental stock on the award certification date.
(10) 5,000 shares vest on each of the second and third anniversaries of the grant date, subject to Ms. Walker’s continued employment.
 Occidental Petroleum Corporation     38
Executive Compensation Tables
   
 

 

Option Exercises and Stock Vested in 2013

 

The following table summarizes, for the named executive officers, the stock awards vested during 2013. See pages 29 and 30 for information regarding the certification of these awards. The amounts reported as value realized are shown on a before-tax basis. No option awards vested.

The stock awards that vested in 2013 for Messrs. Chazen, Lowe and de Brier, and Dr. Irani, were TSR awards granted in 2009 and 2010 and RSI awards granted in 2010. Ms. Walker’s vested award was a Restricted Stock Recruitment Award granted in connection with her recruitment to Occidental in 2012.


 

 

Previously Granted Vested Option Awards Exercised and Previously Granted Stock Awards Vested in 2013

 

   Option Awards   Stock Awards 
   Number of Shares   Value Realized   Number of Shares   Value Realized 
   Acquired on Exercise   on Exercise   Acquired on Vesting   on Vesting 
Name  (#)   ($)(1)   (#)   ($)(2) 
Stephen I. Chazen      $    206,789   $19,038,706 
Edward A. Lowe   500   $ 37,584 (3)   45,070   $4,215,282 
Willie C.W. Chiang      $       $ 
Cynthia L. Walker      $    5,000 (4)  $440,750 
Donald P. de Brier      $    58,444   $5,439,295 
Ray R. Irani      $    379,852   $34,680,034 

 

(1) The amount represents the difference between the closing price of the common stock on the New York Stock Exchange on the exercise date and the option exercise price multiplied by the number of shares exercised.
(2) The amount represents the product of the number of shares vested and the closing price of the common stock on the New York Stock Exchange on the vesting date.
  The following table shows the number of shares of each type of award that vested, other than Ms. Walker’s Restricted Stock Recruitment Award described in footnote 4 below.