DEF 14A 1 loxy2017_def14a.htm OCCIDENTAL PETROLEUM CORPORATION - DEF 14A OCCIDENTAL PETROLEUM CORPORATION - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

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Occidental Petroleum Corporation

2017 Proxy Statement

Notice of Annual Meeting of Stockholders

 

Annual Meeting | Friday, May 12, 2017

Occidental Petroleum Conference Center | 5 Greenway Plaza, Houston, Texas

 

 

 

DEAR STOCKHOLDERS,

 

On behalf of the Board of Directors, we are pleased to invite you to attend Occidental’s 2017 Annual Meeting of Stockholders, which will be held at the Occidental Petroleum Conference Center, 5 Greenway Plaza, Houston, Texas 77046, on Friday, May 12, 2017, at 9:00 a.m.

 

Before the meeting begins, there will be an opportunity to meet informally with members of Occidental’s management team. As in the past, there will be a report on operations and an opportunity for you to ask questions at the meeting.

 

2016 was a significant year for Occidental, as we continued the strategic review started in 2013 and focused our organization on areas where we have sustainable competitive advantages due to our portfolio, technology and people. Despite the challenging commodity price environment, we grew our production from ongoing operations, successfully executed major long-term projects and meaningfully lowered our production costs while demonstrating our commitment to the dividend.

 

Looking ahead, we will remain committed to disciplined capital allocation. While recent improvements in oil prices are encouraging, we will stay focused on cost improvements and operating efficiencies. Our goal is to grow profitably and safely.

 

A meeting agenda and details follow, as well as voting instructions. We encourage you to vote promptly so that your shares will be represented and properly voted at the meeting.

 

  Sincerely,  
     
 
     
 
     
  Vicki Hollub Eugene L. Batchelder
  President and Chief Executive Officer Chairman of the Board
 

 

2017 ANNUAL MEETING

  Notice of Annual Meeting of Stockholders

 

Occidental’s 2017 Annual Meeting of Stockholders will be held at 9:00 a.m. on Friday, May 12, 2017, at the Occidental Petroleum Conference Center, 5 Greenway Plaza, Houston, Texas 77046.

 

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

 

  Proposal 1: Election of 11 directors to serve until the 2018 Annual Meeting  
       
  Proposal 2: Advisory vote approving executive compensation  
       
  Proposal 3: Advisory vote on the frequency of future advisory votes approving executive compensation  
       
  Proposal 4: Ratification of the selection of KPMG LLP as independent auditors  
       
  Proposals 5-8: Four stockholder proposals, if properly presented at the meeting  
       
  To transact such other business as may properly come before the meeting  

 

Stockholders of record at the close of business on March 14, 2017 are entitled to receive notice of, attend and to vote at the meeting. Admittance to the meeting will require an admission ticket. Please see “Admission to the Annual Meeting” on page 66 for details.

 

Whether you plan to attend the meeting or not, it is important that you vote by following the Internet or telephone instructions provided in the Notice of Internet Availability. If you received a paper copy of the proxy materials or a voting instruction form, you may also vote by marking, signing and returning the proxy or voting instruction card in the envelope provided. This will ensure that your shares are represented and will save Occidental additional expenses of soliciting proxies.

 

By Order of the Board,

 

 

H. Elliott Heide
Vice President and Corporate Secretary

 

Occidental Petroleum Corporation
5 Greenway Plaza, Suite 110
Houston, Texas 77046

 

 

TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY 5
   
PROPOSAL 1: ELECTION OF DIRECTORS 9
Director Nominees 9
Election Requirements 9
Director Independence 9
About the Director Nominees 9
   
CORPORATE GOVERNANCE 16
Corporate Governance Highlights 16
Board of Directors and its Committees 16
Other Governance Matters 19
   
COMPENSATION DISCUSSION AND ANALYSIS 20
Overview 20
Highlights of Compensation Program Policies and Practices 20
2016 Business Performance Highlights 21
Stockholder Approval of Executive Compensation and Ongoing Engagement 22
Executive Compensation Program Objectives 22
Compensation Program Considerations and Actions 23
Overview of the 2016 Compensation Program Elements 24
Allocation of Compensation Elements 25
Participants in the Decision-Making Process 25
Risk Assessment of Compensation Policies and Practices 26
Elements of the 2016 Compensation Program 26
Summary of 2016 Long-Term Incentive Program 29
Individual Compensation Considerations 30
Status of Previously-Granted Performance Stock Awards 33
Other Compensation and Benefits 34
Stock Ownership Guidelines 35
Equity Grant Practices 35
Potential Recoupment of Compensation Due to Misconduct 36
Compensation Committee Report 36
   
EXECUTIVE COMPENSATION TABLES 37
Summary Compensation 37
Grants of Plan-Based Awards 38
Outstanding Equity Awards 40
Options Exercised and Stock Vested in 2016 43
Nonqualified Deferred Compensation 43
Potential Payments upon Termination or Change in Control 44

 

DIRECTOR COMPENSATION 48
   
SECURITY OWNERSHIP 50
Certain Beneficial Owners and Management 50
Section 16(a) Beneficial Ownership Reporting Compliance 51
   
PROPOSAL 2: ADVISORY VOTE APPROVING EXECUTIVE COMPENSATION 52
   
PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES APPROVING EXECUTIVE COMPENSATION 54
   
PROPOSAL 4: RATIFICATION OF INDEPENDENT AUDITORS 55
Audit Related Matters 55
Report of the Audit Committee 55
Ratification of Selection of Independent Auditors 56
   
STOCKHOLDER PROPOSALS 57
General Information 57
   
PROPOSAL 5: CLIMATE CHANGE ASSESSMENT REPORT 58
   
PROPOSAL 6: LOWER THRESHOLD TO CALL SPECIAL SHAREOWNER MEETINGS 60
   
PROPOSAL 7: METHANE EMISSIONS AND FLARING TARGETS 62
   
PROPOSAL 8: POLITICAL CONTRIBUTIONS AND EXPENDITURES REPORT 64
   
GENERAL INFORMATION 66
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 12, 2017 66
Admission to the Annual Meeting 66
Voting Instructions and Information 66
Stockholder Proposals for the 2018 Annual Meeting of Stockholders 67
Nominations for Directors for Term Expiring in 2019 68
Annual Report 69
   
 

PROXY STATEMENT SUMMARY

 

This section highlights certain important information presented in this Proxy Statement and is intended to assist you in evaluating the matters to be voted on at the meeting. We encourage you to read the Proxy Statement in its entirety before you cast your vote. For more information regarding Occidental’s 2016 performance, please review Occidental’s Annual Report on Form 10-K for the year ended December 31, 2016 (the Annual Report).

 

Matters to be Voted on

 

      Board Vote
Recommendation
  Page Reference
(for more detail)
Proposal 1:  Election of Directors  FOR each Director
Nominee
  9
Proposal 2:  Advisory Vote Approving Executive Compensation  FOR  52
Proposal 3:  Advisory Vote on the Frequency of Future Advisory  FOR every ONE  54
   Votes Approving Executive Compensation  year   
Proposal 4:  Ratification of the Selection of the Independent Auditors  FOR  55
Proposals 5-8:  Stockholder Proposals  AGAINST  57

 

Corporate Governance Highlights

 

The Board of Directors is committed to strong corporate governance policies and practices and continually reviews evolving best practices in governance and seeks input on governance matters from Occidental’s stockholders. Occidental’s corporate governance highlights, which are discussed in more detail beginning on page 16, include:

 

Independent Chairman of the Board   Policy prohibiting hedging of Occidental’s common stock
Annual elections of the entire Board   Stockholder right to proxy access
Majority voting for directors and, in uncontested elections, mandatory resignation if a majority vote is not received   Ability of stockholders to act by written consent
Standing Board committees comprised entirely of independent directors   Ability of stockholders to call special meetings
Annual evaluation of the Board and its committees   No stockholder rights (poison pill) or similar plan
Director retirement age policy of 75   Demonstrated commitment to Board refreshment
Meaningful stock ownership guidelines for directors and executive officers   Confidential Voting Policy

 

How to Vote

 

You can vote by any of the following methods:

 

ONLINE   CALL   MAIL   IN PERSON
Online using
your smartphone or computer at www.proxyvote.com
  By telephone call to
1-800-690-6903
  Completing, signing and returning your proxy or voting instruction card in the postage-paid envelope   If you plan to attend the Annual Meeting in person, you must request an admission ticket. Please see page 66 for details regarding how to request an admission ticket, and materials you must bring with you to the Annual Meeting.

 

 


 

 

Occidental Petroleum Corporation   5

 

Director Nominees

 

                    Committee
Memberships
    Name   Principal Occupation   Director
since
  Independent        
    Spencer Abraham   Chairman and Chief Executive Officer, The Abraham Group LLC   2005              
    Howard I. Atkins   Former Senior Executive Vice President and Chief Financial Officer, Wells Fargo   2010              
    Eugene L. Batchelder   Former Senior Vice President and Chief Administrative Officer, ConocoPhillips   2013                
    John E. Feick   Chairman, Matrix Solutions Inc.   1998            
    Margaret M. Foran   Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial   2010              
    Carlos M. Gutierrez   Co-Chair, Albright Stonebridge Group   2009              
    Vicki Hollub   President and Chief Executive Officer, Occidental   2015                  
    William R. Klesse   Former Chief Executive Officer and Chairman of the Board, Valero Energy   2013              
  Jack B. Moore   Former President and Chief Executive Officer, Cameron International   2016              
    Avedick B. Poladian   Former Executive Vice President and Chief Operating Officer, Lowe Enterprises   2008              
    Elisse B. Walter   Former Chairman, U.S. Securities and Exchange Commission   2014              
             
  Chair Audit Committee Corporate Governance, Nominating and Social Responsibility
             
  Member Environmental, Health and Safety Committee Executive Compensation Committee

 

Composition Highlights of Director Nominees

 

The Board of Directors annually evaluates the Board’s standing committees and the overall Board to assess, among other things, whether the Board is functioning effectively and possesses the necessary diversity of skills, backgrounds and experiences to meet Occidental’s needs.

 

INDEPENDENCE TENURE GENDER DIVERSITY
     
Occidental requires that at least two-thirds of its Board members must be independent. All of the director nominees are independent, except Ms. Hollub. All standing committees of the Board are composed entirely of independent directors. The average tenure of the director nominees is approximately seven years, which reflects a balance of company experience and new perspectives. In 2016, Occidental’s board appointed a new director, Mr. Moore, who has over thirty years of experience in the energy industry. The Board is committed to achieving a diverse and broadly inclusive membership. 3 of our 11 director nominees are women.
     

 

 


 

 

2017 Notice of Annual Meeting and Proxy Statement   6

 

2016 Business Performance Highlights

 

(for more detail, please see the Annual Report)

 

Despite the challenging commodity price environment, Occidental significantly reduced its operating costs while increasing Occidental’s worldwide production from ongoing operations. Occidental demonstrated its commitment to the dividend as the Board increased the dividend by $0.04 per share on an annualized basis. Management successfully continued the strategic review it started in 2013, and international operations are now focused on four core countries where Occidental has decades of experience – Oman, Qatar, and the United Arab Emirates in the Middle East and Colombia in Latin America.

 

SPENDING LESS PRODUCING MORE DIVIDEND COMMITMENT
     
Total spend per barrel (TSPB), an operational efficiency metric Occidental uses to calculate overhead, operating and capital cost per barrel of production, fell over 30% in 2016, from $40.24 in 2015, to $28.37. This represents a decrease in TSPB of over 50% since 2014. Occidental’s production from ongoing operations grew from 565,000 barrels of oil equivalent (BOE) per day in 2015, to 602,000 BOE per day in 2016, an increase of approximately 7%. In 2016, for the fourteenth consecutive year, Occidental’s Board of Directors increased the dividend, returning $2.3 billion to Occidental’s stockholders in 2016.
     
     

 

Executive Compensation Program

 

In 2016, the Compensation Committee strived to develop a compensation program designed not only to be consistent with industry practice, but also to attract and retain outstanding executives by providing incentives to reward them for superior performance that supports Occidental’s long-term strategic objectives. The 2016 executive compensation program is intended to:

 

Be highly aligned with stockholder interests;
   
Preserve performance accountability in both strong and weak commodity price environments;
   
Build long-term share ownership;
   
Provide a consistent retention incentive;
   
Simplify the executive compensation program;
   
Address the recent need to grant one-time awards, which are intended only for exceptional circumstances; and
   
Match or exceed prevailing governance standards for performance-based compensation.

 

The 2016 executive compensation program is described in detail in the Compensation Discussion and Analysis section, beginning on page 20.

 

 


 

 

Occidental Petroleum Corporation   7

 

Elements of Executive Compensation

 

Consistent with Occidental’s philosophy on executive compensation, the majority of named executive officer compensation is performance-based, and can only be realized if Occidental meets applicable performance goals. The allocation of the compensation elements in 2016 to the named executive officers is shown below and is based on compensation as reported in the Summary Compensation Table (see page 37).

 

ALLOCATION OF COMPENSATION ELEMENTS IN 2016(1)

 

 

(1) Amounts shown reflect salary paid in 2016, Annual Cash Incentive awards for 2016, which were paid in 2017 based on 2016 performance, and the grant date value of the Long-Term Incentive awards granted in 2016. The compensation arrangements of Mr. Stephen I. Chazen, the former Chief Executive Officer, were the result of an agreement between Mr. Chazen and the Board and were unique to him. As a result, Mr. Chazen’s compensation is not included.

 

Highlights of Executive Compensation Program Policies and Practices

 

The executive compensation program for the named executive officers includes many best-practice features that are intended to enhance the alignment of compensation with the interests of Occidental’s stockholders:

 

What We Do   What We Don’t Do
Majority of named executive officer compensation linked to performance   No automatic single-trigger vesting of equity awards in the event of a change-in-control
         
Long-term incentive awards payable solely in shares of common stock   No individual change-in-control contracts
         
Objective TSR metric underlying the performance-based portion of the long-term incentive award aligned with stockholder interests   No backdating or repricing of stock options
         
Meaningful stock ownership guidelines for executive officers   No payout of the TSR award if Occidental’s TSR ranks in the bottom quarter of the peer group
         
Golden Parachute Policy capping golden parachute payments in excess of 2.99 times base salary and bonus, unless approved by stockholders   No hedging of Occidental’s stock
         
Clawback provisions in the 2015 Long-Term Incentive Plan and the plan underlying the Annual Cash Incentive for misconduct   No “golden coffin” provisions
         
Independent Compensation Consultant Policy requiring that the compensation consultant be independent from management   No individual supplemental executive retirement arrangements

 

 


 

 

2017 Notice of Annual Meeting and Proxy Statement   8

 
PROPOSAL 1:ELECTION OF DIRECTORS

 

Director Nominees

 

The Board of Directors is nominating the eleven individuals identified below for election as directors. Unless you specify differently, proxies received will be voted FOR Spencer Abraham, Howard I. Atkins, Eugene L. Batchelder, John E. Feick, Margaret M. Foran, Carlos M. Gutierrez, Vicki Hollub, William R. Klesse, Jack B. Moore, Avedick B. Poladian and Elisse B. Walter to serve for a one-year term ending at the 2018 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. All of the nominees are currently directors of Occidental who were elected by stockholders at the 2016 Annual Meeting, except for Mr. Moore, who was appointed to the Board of Directors in July 2016. In the event any nominee should be unavailable to serve at the time of the meeting, the proxies may be voted for a substitute nominee selected by the Board of Directors or the Board of Directors may reduce the number of directors to eliminate the vacancy.

 

Election Requirements

 

Pursuant to Occidental’s by-laws, in an uncontested election, 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. Your broker may not vote your shares on this proposal unless you give voting instructions. Abstentions and broker non-votes have no effect on the vote. 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.

 

Director Independence

 

The Board of Directors has determined that all director nominees, other than Ms. Hollub, meet the independence standards set forth in the New York Stock Exchange (NYSE) Listed Company Manual. All committees of the Board are currently composed entirely of independent directors.

 

About the Director Nominees

 

Biographical information with respect to each of the director nominees, 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, is presented below.

 

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

 

Occidental Petroleum Corporation   9

 

SPENCER ABRAHAM

 

Director since 2005 | Age 64 | Independent

 

Committees:

 

  Environmental, Health and Safety

 

  Executive Compensation

 

Secretary Abraham is Chairman and Chief Executive Officer of The Abraham Group LLC, an international strategic consulting firm based in Washington, D.C. As a Senior Analyst for Potomac Research Group, Secretary Abraham provides predictive analysis on energy policy, energy markets and the geopolitics of energy to institutional investors in the energy space. He represented Michigan in the United States Senate prior to President George W. Bush selecting him as the 10th 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 and Corporate Governance Committees; NRG Energy, Inc., where he serves on the Compensation and Nuclear Oversight Committees; Two Harbors Investment Corp., where he is Chairman of the Compensation Committee and a member of the Nominating and Corporate Governance Committee; and as Chairman of the Board of 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 board of C3 Energy, a private company. Secretary Abraham is a member of the Advisory Board of the Churchill Center, a member of the Board of Trustees of the California Institute of Technology, and is the Chairman of the American Task Force for Lebanon. 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 of experience 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 | Age 66 | Independent

 

Committees:

 

  Audit

 

  Environmental, Health and Safety

 

Mr. Atkins 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, investor relations, capital management 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 Chief Financial Officer of New York Life Insurance Company, Chief Financial Officer of Midlantic Corporation and Corporate Treasurer of Chase Manhattan Bank. Mr. Atkins previously served on the Board of Directors of Ingram Micro Inc., where he served as Chairman of the Human Resources Committee and as a member of the Audit 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.

 

2017 Notice of Annual Meeting and Proxy Statement   10

 

EUGENE L. BATCHELDER

 

Director since 2013 | Age 69 | Independent Chairman since 2015

 

Committee:

 

  Corporate Governance, Nominating and Social Responsibility

 

Mr. Batchelder retired in 2012 as the Senior Vice President and Chief Administrative Officer at ConocoPhillips, an integrated global energy company. In this role, from 2009 until his retirement, 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 Director of Laurel’s Army Foundation, 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 (inactive) and a member of the American Institute of Certified 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.

 

JOHN E. FEICK

 

Director since 1998 | Age 73 | Independent

 

Committees:

 

  Environmental, Health and Safety (Chair)

 

  Corporate Governance, Nominating and Social Responsibility

 

  Executive Compensation

 

Mr. Feick 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 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. and Graham Construction.

 

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.

 

Occidental Petroleum Corporation   11

 

MARGARET M. FORAN

 

Director since 2010 | Age 62 | Independent

 

Committees:

 

  Executive Compensation (Chair)

 

  Corporate Governance, Nominating and Social Responsibility

 

Ms. Foran is Chief Governance Officer, Senior 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 a Trustee of the Committee for Economic Development, as well as a member of the Notre Dame Law School Advisory Council.

 

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 a leading role in strengthening corporate governance, environmental and sustainability 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 | Age 63 | Independent

 

Committees:

 

  Corporate Governance, Nominating and Social Responsibility (Chair)

 

  Audit

 

Secretary Gutierrez is Co-Chair of Albright Stonebridge Group, a commercial diplomacy and strategic advisory firm. 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 served as Chairman of the Board from 2000 to 2005. Secretary Gutierrez serves on the Board of Directors of MetLife, Inc., where he serves on the Finance and Investment and Governance Committees, Time Warner Inc., where he serves on the Audit Committee, and Viridis, Inc., a privately held company. He previously served as a Director of Corning Incorporated, United Technologies Corporation, Colgate-Palmolive Lighting Science Group Corp., where he served on the Audit Committee, and iGPS, a privately held company. In addition to serving as Chairman of the U.S.-Cuba Business Council of the U.S. Chamber of Commerce, Secretary Gutierrez is a member of the Human Freedom Advisory Council at the George W. Bush Institute and is Chairman of the Board of Trustees of the Meridian International Center. He is also a co-founder of The Dream.US, a scholarship fund for undocumented students, and is a member of the Board of the U.S.-Mexico Foundation.

 

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.

 

2017 Notice of Annual Meeting and Proxy Statement   12

 

VICKI HOLLUB

 

Director since 2015 | Age 57

 

Ms. Hollub has held the position of President and Chief Executive Officer of Occidental since April 2016 and has been a member of the Board of Directors since December 2015. Ms. Hollub has been an employee of Occidental for over 35 years, and has held a variety of technical and leadership roles, both domestic and international, over the course of her career. Ms. Hollub most recently served as President and Chief Operating Officer from December 2015 to April 2016 and Senior Executive Vice President and President – Oxy Oil and Gas from May 2015 to December 2015. Prior to that, Ms. Hollub served as Executive Vice President and President – Oxy Oil and Gas, Americas; Vice President and Executive Vice President, U.S. Operations, Oxy Oil and Gas; and as Executive Vice President, California Operations. Ms. Hollub serves on the boards of the American Petroleum Institute and Khalifa University for Science and Technology in Abu Dhabi. A graduate of the University of Alabama, Ms. Hollub holds a B.S. in Mineral Engineering. She was inducted into the University of Alabama College of Engineering 2016 class of Distinguished Engineering Fellows.

 

Qualifications: As Occidental’s President and Chief Executive Officer, Ms. Hollub is responsible for Occidental’s operations, strategy, and financial management. Ms. Hollub brings to the Board over 35 years of experience in the oil and gas industry, including extensive international experience, having previously held a variety of management and technical roles on three continents, including roles in Russia, Venezuela and Ecuador. Throughout her tenure at Occidental, Ms. Hollub has been instrumental in efficiently and profitably growing Occidental’s oil and gas business. Ms. Hollub’s extensive leadership and operational experience brings valuable perspective to the Board.

 

WILLIAM R. KLESSE

 

Director since 2013 | Age 70 | Independent

 

Committees:

 

  Environmental, Health and Safety

 

  Executive Compensation

 

Mr. Klesse is the former Chief Executive Officer and former Chairman of the Board 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 served as Chairman of the Board from 2007 to December 2014. From 2006 to May 2014, he served as Chief Executive Officer of Valero 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 serves on the Board of Directors of MEG Energy. Mr. Klesse is a trustee of the Texas Biomedical Research Institute and United Way of San Antonio and Bexar County and serves on the Advisory Board of the San Antonio Food Bank. 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 former Chairman, he led the Board’s strategic planning and, as Valero’s former Chief Executive Officer, he oversaw the daily operations of a major global energy company. Mr. Klesse’s experience provides an informed management perspective and insights with respect to global business and energy issues to the Board. He also has leadership experience on industry association and nonprofit boards.

 

Occidental Petroleum Corporation   13

 

JACK B. MOORE

 

Director since 2016 | Age 63 | Independent

 

Committees:

 

  Environmental, Health and Safety

 

  Executive Compensation

 

Mr. Moore most recently served as President and Chief Executive Officer of Cameron International Corporation from April 2008 to October 2015 and served as Chairman of the Board of Cameron from May 2011 until it was acquired by Schlumberger in April 2016. Mr. Moore served as Cameron’s President and Chief Operating Officer from January 2007 to April 2008. Mr. Moore joined Cameron in 1999 and, prior to that, Mr. Moore held various management positions at Baker Hughes Incorporated, where he was employed for over 20 years. Mr. Moore serves on the Board of Directors of Rowan Companies plc, where he serves on the Compensation and Health, Safety and Environment committees, ProPetro Holding Corp., where he serves on the Nominating and Corporate Governance committee, and KBR Inc., where he serves on the Compensation and Nominating and Corporate Governance committees. Mr. Moore actively serves in leadership positions within the Petroleum Equipment and Services Association, the University of Houston, the United Way of Greater Houston and Memorial Assistance Ministries. Mr. Moore is a graduate of the University of Houston with a B.B.A. degree and attended the Advanced Management Program at Harvard Business School.

 

Qualifications: Mr. Moore brings over 35 years of energy industry experience to Occidental’s Board and has a deep understanding of oil and gas operations. As a former Chief Executive Officer and Board Chairman, Mr. Moore has extensive executive management and leadership experience, and is knowledgeable in the areas of strategic planning, financial management, mergers and acquisitions and executive compensation. Mr. Moore also has leadership experience on industry association and nonprofit boards.

 

AVEDICK B. POLADIAN

 

Director since 2008 | Age 65 | Independent

 

Committees:

 

  Audit (Chair)

 

  Corporate Governance, Nominating and Social Responsibility

 

Mr. Poladian is a Director and the former Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a privately-held diversified national real estate company active in commercial, residential and hospitality property investment, management and development. Mr. Poladian served in this position from December 2002 to December 2016, and is currently an advisor to the company. During his tenure as Chief Operating Officer, Mr. Poladian oversaw human resources, risk management, construction, finance and legal functions across the firm. 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. Mr. Poladian serves as a Director and on the Audit Committees of two funds managed by Western Asset Management Company. He also serves as a Director of California Resources Corporation, 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.

 

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.

 

2017 Notice of Annual Meeting and Proxy Statement   14

 

ELISSE B. WALTER

 

Director since 2014 | Age 66 | Independent

 

Committees:

 

  Audit

 

  Environmental, Health and Safety

 

Ms. Walter 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 (CFTC) 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, the National Women’s Law Center and the Board of Governors of FINRA. Ms. Walter holds a B.A. in Mathematics, cum laude, from Yale University and a J.D., cum laude, from Harvard Law School.

 

Qualifications: Ms. 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 the 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. Ms. Walter’s 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.

 

Occidental Petroleum Corporation   15

 

CORPORATE GOVERNANCE

 

The Board of Directors is committed to strong corporate governance policies and practices. The Board continually reviews evolving best practices in governance and seeks input from Occidental’s stockholders through Occidental’s ongoing stockholder engagement program. Occidental’s Corporate Governance Policies and Code of Business Conduct, together with information about other governance measures adopted by the Board of Directors and the charters of the four standing Board committees are available at www.oxy.com/Investors/Governance, or by writing to Occidental’s Corporate Secretary.

 

Corporate Governance Highlights

 

Independent Chairman of the Board   Policy Prohibiting hedging of Occidental’s common stock
         
Annual elections of the entire Board   Stockholder right to proxy access
         
Majority voting for directors and, in uncontested elections, mandatory resignation if a majority vote is not received   Ability of stockholders to act by written consent
Standing Board committees comprised entirely of independent directors   Ability of stockholders to call special meetings
Annual evaluation of the Board and its committees   No stockholder rights (poison pill) or similar plan
         
Director retirement age policy of 75   Demonstrated commitment to Board refreshment
         
Meaningful stock ownership guidelines for directors and executive officers   Confidential Voting Policy

 

Board of Directors and its Committees

 

Occidental is governed by the Board of Directors and its four standing committees. The structure and roles of the Board and its committees are described below.

 

  Board Leadership Structure

 

Occidental’s by-laws provide for the Board to annually elect one of its independent directors to be Chairman of the Board to serve as a liaison between the Board and Occidental’s stockholders. In 2016, the Board elected Mr. Batchelder to serve in that position. The Chairman of the Board presides at meetings of stockholders and the Board and has the authority to, among other things:

 

Call meetings of the independent directors and chair executive sessions of the Board at which no members of management are present;
   
Approve the agendas for the Board and committee meetings;
   
Propose a schedule of Board meetings and the information to be provided by management for Board consideration;
   
Recommend the retention of consultants who report directly to the Board;
   
Assist in assuring compliance with the Corporate Governance Policies and to recommend revisions to the policies;
   
Evaluate, along with the members of the Executive Compensation Committee and the other independent directors, the performance of the Chief Executive Officer;
   
Consult with other Board members as to recommendations on membership and chairpersons of the Board committees and discuss recommendations with the Corporate Governance, Nominating and Social Responsibility Committee; and
   
Communicate the views of the independent directors and the Board committees with respect to objectives set for management by the Board.

 

Another key component of the Board’s leadership structure is the role of the Board committees. These committees regularly report specific findings and make recommendations to the full Board in their areas of oversight.

 

2017 Notice of Annual Meeting and Proxy Statement   16

 

  Board Committees

 

To simplify its committee structure, Occidental’s Board of Directors dissolved its Finance and Risk Management Committee and its Management Succession and Talent Development Committee in 2016, and the responsibilities of those committees were reassigned to the other standing committees or the full Board, as appropriate. The standing committees are composed solely of independent directors. The primary responsibilities of the committees are described below. From time to time, the Board of Directors delegates additional duties to the standing committees.

 

Audit Committee   Primary Responsibilities:   Meetings in 2016: 7  

 

Members:

Avedick B. Poladian (Chair)
Howard I. Atkins
Carlos M. Gutierrez
Elisse B. Walter

 

 

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

Discuss the scope and results of the audit with the independent auditors and matters required to be discussed by the Public Company Accounting Oversight Board

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

Review all reports of internal audits submitted to the Audit Committee and responsive actions by management

Review the appointment of the senior internal auditing executive

Review matters relating to financial risk

Evaluate performance and qualifications of individuals providing internal audit services

Evaluate independent auditor’s qualifications, performance and independence

Oversee all matters relating to Occidental’s Code of Business Conduct

The Audit Committee members are independent and financially literate and the Board has determined that Messrs. Atkins and Poladian are ’‘audit committee financial experts’’ within the meaning of the SEC’s regulations.

 

The Audit Committee Report with respect to Occidental’s financial statements is on page 55.

     

Corporate
Governance,
Nominating and
Social
Responsibility
Committee

 

Members:
Carlos M. Gutierrez
(Chair)
Eugene L. Batchelder
John E. Feick
Margaret M. Foran
Avedick B. Poladian

 

Primary Responsibilities:

 

Recommend candidates for election to the Board

Periodically review and interpret Occidental’s Corporate Governance Policies and consider other governance issues

Oversee the evaluation of the executive officers, the Board and its committees

Review Occidental’s policies, programs and practices on social responsibility

Advise the Board on the compensation of non-employee directors

Oversee compliance with Occidental’s Human Rights Policy

Oversee certain charitable contributions made by Occidental and its subsidiaries

See page 68 for information on how to recommend nominees or nominate candidates to the Board.

  Meetings in 2016: 5  

 

Occidental Petroleum Corporation   17

 

Environmental, Health
and Safety Committee

 

Members:
John E. Feick (Chair)
Spencer Abraham
Howard I. Atkins
William R. Klesse
Jack B. Moore
Elisse B. Walter

 

 

Primary Responsibilities:

 

Review and discuss with management the status of environmental, health and safety issues, including compliance with applicable laws and regulations

Review and discuss the results of internal compliance reviews and remediation projects

Review matters relating to operational risk and climate-related risks and opportunities

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

  Meetings in 2016: 5  

Executive
Compensation
Committee

 

Members:
Margaret M. Foran
(Chair)
Spencer Abraham
John E. Feick
William R. Klesse
Jack B. Moore

 

 

Primary Responsibilities:

 

■  

Review and approve the corporate goals and objectives relevant to the compensation of the Chief Executive Officer (CEO), evaluate the performance of the CEO and determine and approve CEO compensation

Review and approve the compensation of all other executive officers

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

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

Review Occidental’s talent development processes and programs, including recruitment, selection and retention

Prepare the Compensation Committee Report on executive compensation

The Executive Compensation Committee’s report on executive compensation is on page 36.

  Meetings in 2016: 5  

 

  Board and Independent Director Meetings

 

The Board of Directors held six regular meetings during 2016. Mr. Batchelder, as Chairman of the Board, presided over the Board’s executive sessions. In 2016, each director, except for Mr. Moore, attended at least 75 percent of the total number of Board and Board committee meetings, on which he or she served, held during his or her tenure. Mr. Moore attended all meetings of the Board and Board committees on which he served following his appointment to the Board in July 2016 other than the December 2016 Board and committee meetings, which he was unable to attend due to a pre-existing conflict known to the Board at the time of his appointment. All of the directors serving at the time attended the 2016 Annual Meeting of Stockholders. Attendance at the Annual Meeting of Stockholders is expected of directors as if it were a regular meeting of the Board.

 

  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, cybersecurity, safety, health and environmental concerns.

 

The Board has empowered its committees with risk oversight responsibilities. The Audit Committee, the Governance Committee and the Environmental, Health and Safety 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 several times each year. 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.

 

2017 Notice of Annual Meeting and Proxy Statement   18

 

Other Governance Matters

 

  Stockholder Nominations of Director Candidates

 

Occidental’s by-laws permit a group of up to 20 stockholders, collectively owning 3% or more of Occidental’s outstanding common stock continuously for at least three years, to nominate and include in Occidental’s proxy materials directors constituting up to 20% of the Board, but not less than two directors, provided that the stockholder(s) and the nominee(s) meet the requirements of the by-laws. For more information on proxy access and other procedures to recommend or nominate candidates to Occidental’s Board of Directors, see “Nominations for Directors for Term Expiring in 2019” on page 68.

 

  Related Party Transactions

 

Pursuant to Occidental’s written Conflict of Interest Policy and Code of Business Conduct, 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. All potential conflicts of interest must be reported to a designated compliance officer. In addition, each director and executive officer is required to complete an annual 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. In 2016, there were no related party transactions in which Occidental or its subsidiaries were participants and in which any director or executive officer of Occidental had a direct or indirect material interest.

 

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/Investors/Governance.

 

  Board Evaluation Process

 

Led by the Governance Committee, the Board of Directors conducts a robust annual evaluation of its performance as well as the performance of each of the Board’s committees. In two of the last three years, the Governance Committee has engaged a third-party facilitator to assist in the evaluation process, which included director interviews. The evaluations in 2016 included written questions, individual director self-assessments and the use of a skills matrix. The findings of the evaluations are presented to the full Board and are used to identify Board and committee strengths and areas capable of improvement, as well as to identify skills or expertise that may be used as criteria when the Board considers director candidates.

 

  Director Education

 

Directors are provided with continuing education, including business-specific learning opportunities through site visits and briefing sessions on topics that are relevant to Occidental. Directors are also encouraged to attend additional continuing education programs designed to enhance the performance of individual directors and the Board of Directors. In 2016, directors participated in various corporate director and compliance programs held by universities and corporate director, governance, legal and investor professional organizations, including the NYSE and the National Association of Corporate Directors, as attendees or as presenters.

 

  Communications with Directors

 

Stockholders and other interested parties may communicate with any director by sending a letter to such director’s attention in care of Occidental’s Corporate Secretary, Occidental Petroleum Corporation, 5 Greenway Plaza, Suite 110, Houston, Texas 77046. 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.

 

Occidental Petroleum Corporation   19

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview

 

This Compensation Discussion and Analysis (CD&A) describes the material elements, objectives and principles of Occidental’s executive compensation program, compensation decisions made in 2016 and the factors the Executive Compensation Committee (the Compensation Committee) considered in making those decisions.

 

Our named executive officers for 2016 appearing in this Proxy Statement are:

 

Name   Position(1)
Vicki Hollub   President and Chief Executive Officer
Edward A. Lowe   Executive Vice President and Group Chairman, Middle East
Marcia E. Backus   Senior Vice President, General Counsel and Chief Compliance Officer
Christopher G. Stavros   Senior Vice President and Chief Financial Officer
Glenn M. Vangolen   Senior Vice President, Business Support
Stephen I. Chazen   Former Chief Executive Officer
(1) On April 29, 2016, as part of a previously disclosed succession plan, Mr. Chazen stepped down as Chief Executive Officer. As a result of two individuals each serving as Chief Executive Officer for a portion of 2016, there are six named executive officers.

 

Highlights of Compensation Program Policies and Practices

 

The executive compensation program for the named executive officers includes many best-practice features that are intended to enhance the alignment of compensation with the interests of Occidental’s stockholders:

 

  What We Do     What We Don’t Do
Majority of named executive officer compensation linked to performance   No automatic single-trigger vesting of equity awards in the event of a change-in-control
         
Long-term incentive awards payable solely in shares of common stock   No individual change-in-control contracts
         
Objective TSR metric underlying the performance-based portion of the long-term incentive award aligned with stockholder interests   No backdating or repricing of stock options
         
Meaningful stock ownership guidelines for executive officers  

No payout of the TSR award if Occidental’s TSR ranks in the bottom quarter of the peer group

 

Golden Parachute Policy capping golden parachute payments in excess of 2.99 times base salary and bonus, unless approved by stockholders   No hedging of Occidental’s stock
         
Clawback provisions in the 2015 Long-Term Incentive Plan and the plan underlying the Annual Cash Incentive for misconduct   No “golden coffin” provisions
         
Independent Compensation Consultant Policy requiring that the compensation consultant be independent from management   No individual supplemental executive retirement arrangements

 

2017 Notice of Annual Meeting and Proxy Statement   20

 

2016 Business Performance Highlights

 

In response to the weak commodity price environment that continued throughout 2016, Occidental maintained its focus on achieving operating efficiencies, cost reductions and economically growing production while maintaining an emphasis on the health and safety of its workforce and maximizing value for its stockholders. Occidental’s senior management team also continued its efforts to optimize the company’s portfolio of assets by reducing Occidental’s exposure in areas that offer less attractive returns, and expanding Occidental’s footprint in the Permian Basin with acquisitions that complement Occidental’s existing operations.

 

Management continued its focus on decreasing costs within its control and maximizing efficiencies throughout the year. Specifically, management was challenged to reduce its Total Spend per Barrel (TSPB) of oil equivalent sold to $28.50 in 2016, which represented an approximate 30% decrease from the prior year’s TSPB of $40.24, and a decrease of over 50% from the TSPB in 2014 of $61.65. The TSPB metric is intended to focus employees on realizing cost reductions, increasing well productivity and optimizing base production. For 2016, TSPB was the sole metric underlying the performance-based portion of the Annual Cash Incentive opportunity for the named executive officers other than Ms. Hollub, whose performance was measured against a basket of key performance metrics, including TSPB, and Mr. Chazen, who was not eligible for an Annual Cash Incentive.

 

Occidental’s TSPB for 2016 was $28.37, achieving the target TSPB set for 2016 of $28.50 or below.

 

 

In 2016, Occidental increased its production volumes from its ongoing operations by 7% over the prior year while reducing its capital expenditures and meaningfully lowering production costs year-over-year. The increases in production came from Occidental’s Permian Resources business unit, the Al Hosn Gas plant in the United Arab Emirates and Oman’s Block 62. Most production cost reductions were the result of sustainable efficiency gains.

 

Achieving production growth was an operational company objective underlying a portion of Ms. Hollub’s Annual Cash Incentive opportunity for 2016, as described beginning on page 26.

 

 

In July 2016, Occidental announced a dividend increase. The current annual dividend rate is $3.04 per share. Occidental’s senior management team views dividends as providing financial discipline, and funding the dividend is a cash flow priority. Through the dividend, Occidental returned $2.3 billion to stockholders in 2016.

 

Maintenance of financial discipline and a strong balance sheet were strategic company objectives underlying a portion of Ms. Hollub’s Annual Cash Incentive opportunity for 2016, as described beginning on page 26.

 

 

Occidental Petroleum Corporation   21

 

Stockholder Approval of Executive Compensation and Ongoing Engagement

 

At the 2016 Annual Meeting, stockholders continued to express their support of Occidental’s executive compensation program, as approximately 96% of stockholders voted FOR Occidental’s advisory vote approving executive compensation. While the Compensation Committee interpreted this level of support as an endorsement of the 2015 executive compensation program by Occidental’s stockholders, the Compensation Committee ultimately determined that modifications to the executive compensation program were warranted in 2016, as discussed in more detail throughout this CD&A. During 2016, Occidental’s management continued to actively engage with stockholders, and expanded company-led engagement efforts with direct outreach to Occidental’s 50 largest stockholders representing a majority of shares of Occidental’s common stock outstanding. Topics discussed included matters related to Board composition and refreshment, executive compensation, the Chief Executive Officer transition and environmental, social and governance issues.

 

Executive Compensation Program Objectives

 

In 2016, the Compensation Committee strived to develop a compensation program designed not only to be consistent with industry practice, but also to attract and retain outstanding executives by providing incentives to reward them for superior performance that supports Occidental’s long-term strategic objectives, whether in an up- or down-cycle commodity price environment. The 2016 executive compensation program is intended to:

 

  Be highly aligned with stockholder interests;
     
  Preserve performance accountability in both strong and weak commodity price environments;
     
  Build long-term share ownership;
     
  Provide a consistent retention incentive;
     
  Simplify the executive compensation program;
     
  Address the recent need to grant one-time awards, which are intended only for exceptional circumstances; and
     
  Match or exceed prevailing governance standards for performance-based compensation.

 

2017 Notice of Annual Meeting and Proxy Statement   22

 

Compensation Program Considerations and Actions

 

In modifying the executive compensation program for the named executive officers in 2016 to meet the Compensation Committee’s objectives for the program, as discussed above, the Compensation Committee focused on the following key considerations and took responsive actions. In the current dynamic commodity price environment, the Compensation Committee continues to evaluate the optimal weightings and metrics underlying the long-term incentive program and the plan underlying the Annual Cash Incentive.

 

Consideration   Action

■ 

The absolute financial targets underlying the majority of the 2015 long-term incentive program and the Annual Cash Incentive award not accommodating a sharp and sustained decline in commodity prices, which have a substantial impact on Occidental’s financial performance.

Under the 2015 executive compensation program, a significant majority of Occidental’s long-term incentive awards and the Annual Cash Incentive award were based on achieving absolute financial goals, which were largely dependent on the prices Occidental receives for its products. Meaningful targets with respect to these goals proved difficult to set in a volatile commodity price environment, as results were largely a reflection of commodity price movements.

■  

Focus the long-term incentive program on relative Total Shareholder Return (TSR), rather than absolute financial targets, which incentivizes superior performance throughout the commodity price cycle. An emphasis on TSR preserves performance accountability in both strong and weak commodity price environments, and is aligned with stockholder interests.

■  

The Compensation Committee retained a modifier on the TSR award that limits payout of the award to target if Occidental’s absolute TSR is negative over the performance period to align pay with performance.

 

■  

The recent use of off-cycle, special awards to recognize performance and maintain an alignment of Occidental’s pay to its performance.

In recent years, the Compensation Committee awarded supplemental long-term incentive awards to recognize operational excellence, incentivize retention, and to address the consequence of the collapse in commodity prices on outstanding long-term incentive awards, which had the effect of negating the value of many of the long-term incentive awards for reasons outside of management’s control.

 

■  

The inclusion of a time-vesting restricted stock unit award in the long-term incentive program is intended, in part, to provide predictability to the program. The two-year holding period aligns the interests of the named executive officers with Occidental’s long-term stockholders.

■  

The majority of the target long-term incentive award opportunity remains subject to performance-based vesting criteria (70% for Ms. Hollub and 55% for the other named executive officers).

 

■  

Occidental’s CEO transition and the desire for a conventional, performance-based compensation strategy for its new CEO.

Mr. Chazen was not eligible for an Annual Cash Incentive or Total Shareholder Return award in 2014, 2015 and 2016. These recent compensation arrangements were the result of an agreement between Mr. Chazen and the Board and were unique to him.

 

■  

The Compensation Committee felt that it was appropriate for Ms. Hollub to be eligible for an Annual Cash Incentive award with the significant majority of the target value (80%) tied to company performance, with the remainder tied to an assessment of individual performance.

■  

Ms. Hollub also participates in the long-term incentive program, and 70% of her target long-term incentive award is tied to creating value for the company’s stockholders through a TSR award.

■  

Monitoring of compensation surveys, peer group data and other materials regarding executive officer compensation.

The Compensation Committee regularly reviews compensation surveys, peer group data and other general and executive compensation materials shared or prepared by the Compensation Committee’s independent compensation consultant.

 

■  

The Compensation Committee determined that the 2016 program matched or exceeded prevailing governance standards for performance-based compensation.

■  

While the Compensation Committee does not benchmark pay for the executive officers to any specific level relative to peers, the Compensation Committee found that overall pay magnitude for the named executive officers was reasonable.

 

     
     

 

Occidental Petroleum Corporation   23

 

Overview of the 2016 Compensation Program Elements

 

The majority of compensation for the named executive officers is based on the long-term performance of Occidental. The elements of our 2016 executive compensation program are summarized in the table below and are described further under “Elements of the 2016 Compensation Program” on page 26.

 

  Element(1) Objective Form of
Payout
How Payout Value
is Calculated
2016 Decisions
FIXED Base Salary ■  Provide a competitive level of fixed compensation to attract and retain employees. Cash Review of compensation surveys, publicly available peer company data, internal pay equity, individual responsibilities and performance assessment. Base salaries are reviewed annually and as circumstances warrant. Mses. Hollub and Backus and Messrs. Stavros and Vangolen each received salary increases in 2016; Mr. Chazen’s salary decreased as a result of his transition from the position of Chief Executive Officer to strategic advisor. Mr. Lowe’s salary remained unchanged.

These decisions are described in more detail under “Individual Compensation Considerations” beginning on page 30.
VARIABLE Annual Cash Incentive

■  Motivate financial and operational performance over a one-year period.

 

■  Align executives with performance metrics that are critical to   Occidental’s success.

 

Cash

Target amounts based on compensation surveys, publicly available peer company data and each executive’s ability to influence Occidental’s performance for the year.

 

The Annual Cash Incentive award is described in more detail under “Elements of the 2016 Compensation Program—Annual Cash Incentive” beginning on page 26.

 

For the Chief Executive Officer:

 

■  80% of target value is linked to a basket of key company performance metrics; 20% of target value is based on an assessment of individual performance (described further on page 28).

 

For the other Named Executive Officers:

 

■  60% of target value is linked to Total Spend per Barrel (TSPB); 40% of target value is based on an assessment of the named executive officer’s individual performance (described further on page 28).

 

Long-Term Total Shareholder Return (TSR) Award

■  Reward higher returns in Occidental’s common stock over a three-year performance period.

 

■  Align executives with the interests of stockholders.

 

Stock

A comparison of Occidental’s TSR to that of the peer group over a three-year performance period. In addition, if Occidental’s absolute TSR is negative for the period, payout of the award is capped at no more than target.

 

The terms and conditions of the TSR award are described in more detail under “Summary of 2016 Long-Term Incentive Program” beginning on page 29.

 

For the Chief Executive Officer:

 

■  The TSR award accounts for 70% of the target 2016 long-term incentive award value.

 

For the other Named Executive Officers:

 

■  The TSR award accounts for 55% of the target 2016 long-term incentive award value.

 

Long-Term Restricted Stock Unit (RSU) Award

■  Provide a retention incentive that promotes sustained stock ownership.

 

■  Tie ultimate value realized to performance of Occidental’s common stock.

 

Stock

Vesting in three equal tranches over a three-year period, subject to continued employment. The named executive officers are required to hold the vested shares for a two-year period following the vesting of each tranche. No above-target payout may be earned.

 

The terms and conditions of the RSU award are described in more detail under “Summary of 2016 Long-Term Incentive Program” beginning on page 29.

 

For the Chief Executive Officer:

 

■  The RSU award accounts for 30% of the target 2016 long-term incentive award value.

 

For the other Named Executive Officers:

 

■  The RSU award accounts for 45% of the target 2016 long-term incentive award value.

 

(1) Pursuant to an agreement between Mr. Chazen and the Board, Mr. Chazen was not eligible for an Annual Cash Incentive award in 2016 and did not participate in the 2016 Long-Term Incentive Program.

 

2017 Notice of Annual Meeting and Proxy Statement   24

 

Allocation of Compensation Elements

 

Consistent with Occidental’s philosophy on executive compensation, the majority of named executive officer compensation is performance-based, and can only be realized if Occidental meets applicable performance goals. The allocation of the compensation elements to the named executive officers in 2016 is shown below and is based on compensation as reported in the Summary Compensation Table (see page 37).

 

ALLOCATION OF COMPENSATION ELEMENTS IN 2016(1)

 

 

 

(1) Amounts shown reflect salary paid in 2016, Annual Cash Incentive awards for 2016, which were paid in 2017 based on 2016 performance, and the grant date value of the Long-Term Incentive awards granted in 2016. Mr. Chazen’s compensation arrangements were the result of an agreement between Mr. Chazen and the Board and were unique to him. As a result, Mr. Chazen’s compensation is not included.

 

Participants in the Decision-Making Process

 

Role of the Independent Compensation Committee. The Compensation Committee, comprised of independent members of the Board, is responsible for annually reviewing all aspects of the Chief Executive Officer’s compensation, as well as annually reviewing and approving the compensation of all other named executive officers. In performing these duties, the Compensation Committee obtains input, advice and information from senior management, members of Occidental’s Human Resources team and an independent compensation consultant, as further described below, throughout the year. The Compensation Committee also considers the views expressed by Occidental’s investors and stockholder advisory groups in making executive compensation decisions. The Compensation Committee uses publicly available data regarding the executive compensation practices of its peer group (defined below) as an additional tool, but does not benchmark executive compensation to a specific percentile within the peer group.

 

Role of Senior Management. The Chief Executive Officer made recommendations regarding the compensation package for each of the other named executive officers to the Compensation Committee. The Chief Executive Officer and the senior executive responsible for Human Resources were present for a portion of each of the Compensation Committee meetings, but were not present when compensation decisions regarding the Chief Executive Officer were discussed and made. The Chief Executive Officer’s compensation package is set only by the Compensation Committee. Senior members of the Human Resources team and other members of senior management interact with the compensation consultant as necessary and prepare materials for each Compensation Committee meeting to assist the Compensation Committee in its consideration of executive compensation programs and policies and its administration of plans and programs.

 

Role of the Independent Compensation Consultant. In 2016, Occidental participated in compensation surveys conducted by compensation consultants, including the Compensation Committee’s independent compensation consultant, in order to better understand general external compensation practices, including with respect to executive compensation. In 2016, the Compensation Committee engaged Meridian Compensation Partners, LLC (Meridian) as its compensation consultant to provide advice on various executive compensation matters. The Compensation Committee reviewed the independence of Meridian under the Securities and Exchange Commission rules, the New York Stock Exchange (NYSE) Listed Company Manual standards, and Occidental’s Independent Compensation Consultant Policy and found Meridian to be independent and without conflicts of interest.

 

Occidental Petroleum Corporation   25

 

Role of Peer Companies. In order 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 Compensation Committee reviewed information regarding oil and gas industry and peer company executive compensation practices, programs and data that were publicly disclosed or available. Additionally, the Compensation Committee reviewed and considered broad-based compensation surveys and related materials. The information was used merely as a reference and not to establish compensation benchmarks, as Occidental does not benchmark executive compensation to a specific percentile within the peer group.

 

Occidental’s peer group consists of the following companies:

 

Company Ticker
Anadarko Petroleum Corporation APC
Apache Corporation APA
Canadian Natural Resources Limited CNQ
Chevron Corporation CVX
ConocoPhillips COP
Devon Energy Corporation DVN
EOG Resources, Inc. EOG
ExxonMobil Corporation XOM
Hess Corporation HES
Marathon Oil Corporation MRO
Occidental Petroleum Corporation OXY
Total S.A. TOT

 

The Compensation Committee also designated this group of companies as the peer group for purposes of the TSR awards granted in 2016.

 

Risk Assessment of Compensation Policies and Practices

 

Although the majority of the executive compensation program pay is performance-based, the Compensation Committee believes the program does not encourage unnecessary or excessive risk-taking. 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, including:

 

Program elements that use both annual and longer-term performance periods;
   
Use of a transparent, external performance metric, TSR, for a majority of the long-term incentive program opportunity;
   
Relative nature of the TSR performance measure, which minimizes the impact that volatile commodity prices have on Occidental’s TSR award;
   
Forfeiture and recoupment provisions for awards in the event of violations of Occidental’s Code of Business Conduct;
   
Payouts of long-term incentive awards that are 100% in stock rather than cash; and
   
Meaningful stock ownership guidelines for executives that encourage a long-term perspective.

 

Elements of the 2016 Compensation Program

 

Salary and Other Annual Compensation. The Compensation Committee believes that overall executive compensation should include elements that reward executives on a market-competitive basis for consistent performance of job requirements and achievement of certain short-term goals, which, over time, contribute to long-term growth of stockholder value. Excluding Mr. Chazen, who had compensation arrangements unique to him, short-term compensation represented, on average, less than 30% of the 2016 compensation packages of the named executive officers, which is reflective of the Compensation Committee’s goal of emphasizing long-term compensation. Short-term compensation includes base salary, an Annual Cash Incentive award, perquisites and certain other annual compensation and employee benefits, which are described under “Other Compensation and Benefits” beginning on page 34. For a discussion regarding salary decisions for each named executive officer in 2016, please see “Individual Compensation Considerations” beginning on page 30.

 

Annual Cash Incentive. The Compensation Committee sets a target Annual Cash Incentive award amount for each of the named executive officers based on a review of commercially available compensation surveys, other publicly available information, internal pay equity and total compensation objectives. In addition, the Compensation Committee considers each executive’s ability to influence Occidental’s performance during the one-year performance period. The Annual Cash Incentive is composed of a company performance portion and an individual performance portion.

 

Company Performance. Payout of the company performance portion of the Annual Cash Incentive award is based on Occidental’s performance during the year as measured against an established company performance metric or set of metrics. In 2016, 80% of the Chief Executive Officer’s Annual Cash Incentive award was subject to a basket of key company performance metrics as described in more detail below. For the other named executive officers eligible for an Annual Cash Incentive award in 2016, the company performance portion of the Annual Cash Incentive award represented 60% of the target Annual Cash Incentive award opportunity, and achievement was measured against a Total Spend per Barrel (TSPB) target of $28.50, as described further below.

 

2017 Notice of Annual Meeting and Proxy Statement   26

 

The Compensation Committee determined that a basket of key performance metrics was appropriate to underlie Ms. Hollub’s company performance portion because, as Chief Executive Officer, her leadership directly affects all aspects of the company’s performance. In contrast, the Compensation Committee determined to limit the company performance metric underlying the Annual Cash Incentive award for the other named executive officers to TSPB because of the overall, company-wide focus on reducing costs and economically improving production in a period of weak commodity prices.

 

Individual Performance. The individual performance portion of the Annual Cash Incentive award for the named executive officers is designed to link incentive compensation directly to the performance of the particular executive. Payout is determined by the Compensation Committee’s assessment of an executive’s handling of certain key performance areas within that executive’s area of responsibility, as well as the executive’s response to unanticipated challenges. For 2016, the potential payout of the individual performance portion of the Annual Cash Incentive ranged from 0% - 80% of the target Annual Cash Incentive award for named executive officers other than Ms. Hollub, whose potential payout of the individual performance portion of her Annual Cash Incentive award ranged from 0% - 40% of her target Annual Cash Incentive award. In evaluating an executive officer’s performance, the Compensation Committee considered the following performance areas:

 

Effective organizational development within the executive’s department;
   
Contributions to succession planning efforts;
   
Functional and operating accomplishments within the executive’s department;
   
Demonstration of ethical conduct;
   
Commitment to health, environment and safety principles; and
   
Dedication to collaboration and inclusion.

 

For a detailed discussion of the Compensation Committee’s considerations with respect to each named executive officer’s individual performance and resulting payouts, please see “Individual Compensation Considerations – Performance Assessment” beginning on page 30.

 

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Chief Executive Officer. In 2016, Ms. Hollub’s Annual Cash Incentive award was determined by the company and individual performance measures discussed below. For more details on the indicators and performance, see “Individual Compensation Considerations” beginning on page 30.

 

    Weight Possible      
    (% of Payout     Indicated
  Objectives Target) Range Metrics Indicators Payout
  Safety 12.5% 0-25%

■  Combined Employee / Contractor Injury & Illness Incidence Rate (IIR)

 

■  Combined Employee / Contractor Days Away, Restricted or Transferred Rate (DART)

 

■  Beat target IIR with an IIR of 0.28

 

■  Beat target DART with a DART of 0.16

 

25%
Operational 27% 0-54%

■  Total Spend per Barrel

 

■  Production Growth

 

■  Beat target TSPB of $28.50 with a TSPB of $28.37

 

■  Exceeded target production growth from ongoing operations (grew volumes by 7% year-over-year)

 

40.5%
Strategic 35% 0-70%

■  Development and Execution of Market-Driven Strategy

 

■  Maintenance of Financial Discipline and Strong Balance Sheet

 

■  Achieved Colombia growth milestones

 

■  Portfolio optimization on track

 

■  Construction projects on-budget and on-schedule

 

■  Achieved mixed financial target results

 

35%
Organizational 5.5% 0-11% ■  Improvement of Organizational Effectiveness

■  Significant progress in growing Occidental’s unconventional expertise

 

■  Increased talent in the geoscience and petrophysics areas

 

■  Reorganized business units as a result of portfolio optimization

 

5.5%
  Individual 20% 0-40%

■  Oversight of succession planning process

 

■  Effective leadership and communication

 

■  Oversight of health, environment and safety responsibilities

 

■  Overall contribution to company achievements

 

■  For details, see the discussion of Ms. Hollub’s performance assessment beginning on page 30 20%
TOTAL 100% 0-200%     126%
NEGATIVE ADJUSTMENT         -26%
ACTUAL PAYOUT         100%

 

Compensation Committee’s Exercise of Negative Discretion. Ms. Hollub’s performance indicated an Annual Cash Incentive award payout of 126% of target. While Ms. Hollub’s performance was strong in many key areas, the Compensation Committee determined to exercise negative discretion to reduce the payout of Annual Cash Incentive award by 26% to 100% of target in light of the continued effect of low commodity prices on Occidental’s results of operations and Occidental’s stock price performance.

 

Other Named Executive Officers. For 2016, payout of the company performance portion of the Annual Cash Incentive award for the other named executive officers was based solely on TSPB, an internal performance metric. The Compensation Committee determined that TSPB was appropriate to underlie the entirety of the company performance portion of the Annual Cash Incentive award because of Occidental’s increased focus on maximizing operating efficiencies and reducing costs, particularly in response to the continued weak commodity price environment. TSPB is a measure of the total spend per barrel of oil equivalent produced, and is defined by the formula below:

 

 

 

(1) Excludes cost of acquisitions, environmental cost centers and the chemicals business

 

2017 Notice of Annual Meeting and Proxy Statement   28

 

In February 2016, the Compensation Committee set the target TSPB at $28.50 and retained discretion for awarding payouts for achievement above or below the target TSPB from 0% to 200% of target. The Compensation Committee believed this to be a challenging target that would reflect a significant reduction in costs, as TSPB for 2015 was $40.24.

 

Occidental’s TSPB at year-end 2016 was $28.37, achieving the target TSPB set for 2016 of $28.50 or below and representing a reduction in TSPB of over 54% from 2014. As a result, the Compensation Committee determined that the company performance portion of the Annual Cash Incentive awards for Ms. Backus and Messrs. Lowe, Stavros and Vangolen were earned at target. For a detailed discussion of the Compensation Committee’s considerations with respect to each named executive officer’s individual performance and resulting payout of the individual performance portion of the Annual Cash Incentive award, please see “Individual Compensation Considerations – Performance Assessment” beginning on page 30.

 

Long-Term Incentive Compensation. In 2016, this portion of the executive compensation program consisted of a performance-based TSR award and a time-based RSU award, which are each payable solely in shares of common stock. The long-term incentive awards are intended to provide incentives for achieving results consistent with the goal of maximizing stockholder value and to retain and motivate Occidental’s executives. The Compensation Committee believes that long-term compensation should represent the largest portion of each executive’s total compensation package and that the levels of payout should reflect Occidental’s performance, on a relative and absolute basis. During the process of determining the value of the long-term incentive component of each named executive officer’s compensation package for 2016, the Compensation Committee evaluated many factors, including:

 

Alignment of executive and stockholder interests in achieving long-term growth in stockholder value;
   
Linkage of any above-target payouts to superior performance and absolute returns;
   
Comparability with the compensation programs of peer companies;
   
Alignment of the named executive officers’ compensation with Occidental’s performance;
   
Impact of depressed commodity prices on Occidental’s stock price and financial performance;
   
Allocation of total compensation between long-term and short-term components; and
   
Tax deductibility under Section 162(m).

 

Summary of 2016 Long-Term Incentive Program

 

2016 Long-Term Incentive Program. The 2016 long-term incentive program consisted of a performance-based relative TSR award and time-based RSU award, with the majority of the target long-term incentive award opportunity weighted toward performance, as indicated below:

 

 

 

Total Shareholder Return (TSR) 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 Occidental’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. Payout of the TSR award is based on Occidental’s TSR against the companies within the peer group. The TSR award is denominated in performance stock units (PSUs), each of which is equivalent to one share of common stock. The percentage of such number of PSUs that will be payable at the end of the three-year performance period, which began July 1, 2016 and ends June 30, 2019, will depend on Occidental’s relative TSR performance. However, if Occidental’s absolute TSR is negative over the performance period, then, irrespective of Occidental’s ranking within the peer group, the payout of the TSR award is capped at no more than target. A table illustrating the potential payouts based on relative and absolute TSR performance is set forth below:

 

TSR Ranking % of Target PSUs Earned(1)
  Top 1-2 ranked companies 200%
  Top 3-8 ranked companies Linearly interpolated between 25% and 200%
  9th ranked company 25%
  Bottom 3 ranked companies 0%
(1) If Occidental’s absolute TSR is negative over the performance period, the payout of the TSR award is capped at no more than target, irrespective of Occidental’s ranking within the peer group.

 

Occidental Petroleum Corporation   29

 

The cap on payout of the TSR award in instances of negative TSR performance over the performance period is intended to reinforce the pay for performance nature of the program. The TSR award comprised 70% and 55% of Ms. Hollub’s and the other named executive officers’ target long-term incentive award opportunity for 2016, respectively. Mr. Chazen did not participate in the 2016 long-term incentive program. Cumulative dividend equivalents will be paid in cash at the end of the three-year performance period and will be paid only on the number of PSUs earned. The TSR award is intended to satisfy the tax deductibility requirements of Section 162(m). Forfeiture and change in control provisions applicable to the TSR award are discussed in more detail in the “Potential Payments” tables and the footnotes thereto, beginning on page 44.

 

Restricted Stock Unit (RSU) Award. The Compensation Committee determined that a time-based restricted stock unit (RSU) award was appropriate to comprise the remainder of the named executive officers’ 2016 long-term incentive award in light of the considerations discussed on page 23. The RSU award vests ratably over three years with one-third vesting on each of July 12, 2017, 2018 and 2019, subject to continued employment. The RSU award is denominated in restricted stock units, each of which is equivalent to one share of common stock. Payment for a vested RSU award will be made solely in shares of common stock. The shares of stock ultimately received by the named executive officer pursuant to the RSU award is subject to a two-year holding period and, after the expiration of the holding period, the named executive officer must continue to retain ownership of the shares until he or she satisfies the applicable stock ownership guidelines, as described on page 35. The RSU award comprised 30% and 45% of Ms. Hollub’s and the other named executive officers’ target long-term incentive award opportunity for 2016, respectively. Mr. Chazen did not participate in the 2016 long-term incentive program. Dividend equivalents are payable in cash at the time that dividends are paid on the company’s common stock. Forfeiture and change in control provisions applicable to the RSU award are discussed in more detail in the “Potential Payments” tables and the footnotes thereto, beginning on page 44.

 

Individual Compensation Considerations

 

In making executive compensation decisions for a given year, the Compensation Committee considers, among other factors, the performance of Occidental and the individual contributions of each named executive officer to Occidental’s overall performance and the performance of the executive’s business unit, as applicable.

 

  Vicki Hollub, President and Chief Executive Officer

 

Current Role. Ms. Hollub assumed the role of Chief Executive Officer at Occidental’s 2016 Annual Meeting on April 29, 2016 and has served as Occidental’s President and as a member of the Board of Directors since December 2015. As Chief Executive Officer, Ms. Hollub is responsible for all operations, the financial management of Occidental, implementing Occidental’s strategy, and assisting the Board with, among other matters, corporate strategy development, executive succession planning, executive compensation and talent development.

 

Tenure. Ms. Hollub has been an employee of Occidental for over 35 years, and has held increasingly significant leadership and technical positions.

 

Performance Assessment. In assessing Ms. Hollub’s accomplishments, the Compensation Committee considered the following accomplishments and actions:

 

Enhanced the value of Occidental’s portfolio of assets, with a focus on profitable growth opportunities for the oil and gas segment, both domestically and internationally. Throughout 2016, Occidental made a series of asset investment decisions, including those which will allow Occidental to focus its oil and gas development in areas where Occidental has depth and scale in order to fuel future growth. Results of those efforts included:

 

Permian Resources business unit fulfilling its role as a growth driver for Occidental;
   
Entered into an agreement with the Abu Dhabi National Oil Company (ADNOC) and OMV of Austria to explore and develop Abu Dhabi’s oil and gas field offshore northwest Abu Dhabi;
   
Acquired producing and non-producing oil and gas property leasehold acreage, CO2 properties and related infrastructure in the Permian Basin resulting in production additions of approximately 7,000 net barrels of oil equivalent (BOE) per day to the Permian Resources portfolio and 4,000 BOE per day to the Permian EOR portfolio;
   
On-time and on-budget construction of the Ingleside ethylene cracker, which began operations in the first quarter of 2017, and on-time and on-budget construction of the Ingleside oil terminal;
   
Initiated construction on a new unit at the OxyChem Geismar plant that will manufacture a next-generation raw material for use in production of an advanced climate-friendly refrigerant;
   
Began technical work required for the expansion of the Al Hosn Gas plant to increase capacity by 50%; and
   
Completed the sale of the South Texas Eagle Ford non-operated properties.

 

Completed Board-approved strategic review action items in a timely, beneficial, and efficient manner. As part of a multi-year process to streamline and focus operations to better execute Occidental’s long-term strategy and enhance value for stockholders, under the leadership of Ms. Hollub, Occidental:

 

Exited non-strategic operations in the Middle East in Bahrain, Iraq, Libya, and Yemen, thus improving the profitability and cash flow generation of our Middle East operations as Occidental focuses on its core regional assets in the United Arab Emirates, Qatar, and Oman;
   
Distributed Occidental’s remaining shares of California Resources Corporation through a special stock dividend; and
   
Completed the sale of the Piceance Basin operations in Colorado.

 

2017 Notice of Annual Meeting and Proxy Statement   30

 

Focused on optimizing long-term return on invested capital by investing strategically, with an emphasis on lowering finding and development costs, operating costs and realizing capital efficiency. Led by Ms. Hollub and relying on a disciplined business approach and return-focused capital allocation decisions, Occidental:

 

Continued to decrease capital and operating costs with a focused development program, specifically:
   
  Came in below the 2016 capital program budget of $3.0 billion at $2.9 billion, which represented a nearly 50% reduction in the capital program compared to the $5.6 billion spent during 2015, excluding acquisition costs;
     
  Focused on drilling efficiency, as Permian Resources reduced well drilling time by 12%;
     
  Improved year-over-year operating costs of 6% per BOE for Permian EOR;
     
  Achieved domestic drilling cost reductions of 21% year-over-year and production cost reductions for ongoing operations of 11% year-over-year; and
     
  Overall, lowered Occidental’s TSPB from $40.24 at year-end 2015 to $28.37 at year-end 2016, achieving Occidental’s target TSPB for 2016 of $28.50 or below;
     
Increased worldwide production volumes from ongoing operations by 7% to an average of 602,000 BOE per day for 2016;
   
Increased Permian Resources production 13% to an average 124,000 BOE per day in 2016, including an 8% increase in Permian Resource oil production to an average of 77,000 BOE per day;
   
Increased international production from ongoing operations by 13% to an average 302,000 BOE per day in 2016 with improved production from Al Hosn Gas in the UAE and the ramp-up of production from Oman’s Block 62;
   
Maintained financial discipline, a strong balance sheet, and high liquidity; and
   
Increased the annualized dividend to $3.04, the 14th consecutive increase over the last 13 years.

 

Continued emphasis on identifying and developing Occidental’s future leadership. Ms. Hollub has worked with other members of senior management and 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:

 

Conducted an in-depth talent review, with a continued focus on diverse representation in leadership positions, to ensure that the next generation of leaders have been identified and are being appropriately developed for positions of increasing responsibility;
   
Formed new organizational teams to advance business objectives, and reorganized the oil and gas and midstream segments around core work projects, which resulted in cost savings and increased technical competencies which positively impacted production;
   
Increased Occidental’s talent level in the areas of geoscience and petrophysics;
   
Marked progress on unconventional expertise, and focus on expansion of long-term access to CO2;
   
In conjunction with the Board, implemented an executive succession plan, including an in-depth CEO succession planning process;
   
Implemented and personally socialized Occidental’s core values and culture traits throughout the organization and leveraged  Occidental’s recognition award program to reinforce and drive the cultural initiative;
   
Inspired company-wide enthusiasm and focus on pivotal behavioral and cultural traits that are intended to accelerate company success;
   
Named to Fortune Magazine’s 2016 “Most Powerful Women in Business” list; and
   
Named to Institutional Investors 2016 All-America Executive Team.

 

Maintained focus on the Company’s commitment to safety, health, the environment, diversity, governance, social responsibility, and the highest standards of ethical conduct and to foster a collaborative culture. Under the leadership of Ms. Hollub, Occidental’s performance in these areas continued to receive high praise in 2016 as evidenced by:

 

Occidental’s 2016 combined employee/contractor injury and illness incidence rate (IIR) was 0.28 and the combined employee/contractor Days Away, Restricted or Transferred Rate (DART) was 0.16. For over 20 consecutive years, Occidental’s worldwide employee IIR has been less than 1.0 recordable injury per 100 employees;
   
Fortune Magazine ranked Occidental No. 1 among its 2016 Most Admired Companies in the “Mining, Crude Oil Production” category for the ninth year in a row;
   
Corporate Responsibility Magazine ranked Occidental among the 100 Best Corporate Citizens for 2016, one of the world’s top corporate responsibility rankings. This is the seventh year in a row that Occidental has made this list. Occidental is the second highest-ranked oil and gas company. Companies are evaluated on their performance in environment, climate change, human rights, employee relations, corporate governance, philanthropy, financial performance and community support; and
   
For the second consecutive year, Occidental was named E&P Company of the Year at the Texas Oil & Gas Awards. The award recognized Occidental as a standout operator that has demonstrated operational excellence and commitment to environmental stewardship.

 

Compensation Decisions. In recognition of the significant increase in Ms. Hollub’s responsibilities following her promotion to Chief Executive Officer, and in light of the accomplishments detailed above, the Compensation Committee set Ms. Hollub’s compensation package in 2016 as follows:

 

Base salary: 39% increase effective April 29, 2016 in connection with Ms. Hollub’s promotion to Chief Executive Officer. The Compensation Committee determined this increase was

 

Occidental Petroleum Corporation   31

 
  appropriate in light of Ms. Hollub’s increasing responsibilities, personal accomplishments and a review of compensation surveys and publicly available peer company data.
   
Annual Cash Incentive: The Compensation Committee’s decision with respect to the company performance portion of the Annual Cash Incentive award is discussed on page 28. Based on the achievements described under “Performance Assessment,” the Compensation Committee determined that the individual performance portion of the Annual Cash Incentive award was earned at target.
   
Long-Term Incentives awards granted in 2016 are included in the Grants of Plan-Based Awards table on page 38

 

  Edward A. Lowe, Executive Vice President and Group Chairman, Middle East

 

Current Role. Mr. Lowe has been Executive Vice President of Occidental since February 2015 and Group Chairman, Middle East since August 2016. Prior to that, Mr. Lowe served as President, Oxy Oil and Gas — International since 2009. Mr. Lowe is responsible for growing Occidental’s business in the Middle East, including strategy, business development, contract extensions and partner relationships.

 

Tenure. Mr. Lowe has been an employee of Occidental for over 33 years.

 

Performance Assessment. In assessing Mr. Lowe’s accomplishments, the Compensation Committee considered his contributions to the successful exit or sale of assets in Libya, Bahrain, Iraq and Yemen; Mr. Lowe’s involvement in the signing of an agreement with the Abu Dhabi National Oil Company (ADNOC) and OMV of Austria to explore and develop Abu Dhabi’s oil and gas fields in offshore northwest Abu Dhabi; and his oversight of the Al Hosn Gas plant, which received a “Project Execution of the Year” award from the “Oil and Gas Year Abu Dhabi 2016” for recognition of successful commissioning of the Shah Gas Development Project at year-end 2015.

 

Compensation Decisions. The Compensation Committee set Mr. Lowe’s compensation package in 2016 as follows:

 

Base salary: Mr. Lowe’s base salary was unchanged.
   
Annual Cash Incentive: The Compensation Committee’s decision with respect to the company performance portion of the Annual Cash Incentive award is discussed on page 29. Based on the achievements described under “Performance Assessment,” the Compensation Committee determined that the individual performance portion of the Annual Cash Incentive award was earned at target.
   
Long-Term Incentive awards granted in 2016 are included in the Grants of Plan-Based Awards table on page 38.

 

  Marcia E. Backus, Senior Vice President, General Counsel and Chief Compliance Officer

 

Current Role. Ms. Backus has been General Counsel since October 2013 and Senior Vice President since May 2014. Ms. Backus is responsible for overseeing Occidental’s legal and compliance departments.

 

Tenure. Ms. Backus has been an employee of Occidental since October 2013. Previously, Ms. Backus was a partner at the law firm Vinson & Elkins L.L.P, heading the firm’s Energy Transactions/Projects Practice Group and serving in key leadership positions.

 

Performance Assessment. In assessing Ms. Backus’ accomplishments, the Compensation Committee considered her instrumental contributions to Occidental’s mergers and acquisitions activity, including the divestment of Occidental’s non-core domestic operations in the Piceance Basin and the divestment of non-core international operations in Libya, Bahrain, Iraq and Yemen. The Compensation Committee also considered her contributions to the successful acquisition of producing and non-producing leasehold acreage, CO2 properties and related infrastructure in the Permian Basin; management of ongoing litigation matters; and overseeing the disposition of Occidental’s remaining shares of California Resources. In addition, Ms. Backus successfully secured payments of approximately $1 billion from Ecuador owed to Occidental pursuant to a November 2015 arbitration award.

 

Compensation Decisions. The Compensation Committee set Ms. Backus’ compensation package in 2016 as follows:

 

Base salary: 27% increase from 2015, which the Compensation Committee determined was appropriate in light of a review of her individual responsibilities and performance assessment, compensation surveys, publicly available peer company data and internal pay equity.
   
Annual Cash Incentive: The Compensation Committee’s decision with respect to the company performance portion of the Annual Cash Incentive award is discussed on page 29. Based on the achievements described under “Performance Assessment,” the Compensation Committee determined that the individual performance portion of the Annual Cash Incentive award was earned at target.
   
Long-Term Incentive awards granted in 2016 are included in the Grants of Plan-Based Awards table on page 38.

 

  Christopher G. Stavros, Senior Vice President and Chief Financial Officer

 

Current Role. Mr. Stavros has been Senior Vice President since February 2015 and Chief Financial Officer since July 2014. Mr. Stavros is responsible for Occidental’s tax, treasury and controller functions as well as investor relations, communications, public affairs and government relations.

 

Tenure. Mr. Stavros has been an employee of Occidental for over 12 years.

 

Performance Assessment. In assessing Mr. Stavros’ accomplishments, the Compensation Committee considered his leadership and management of Occidental’s accounting, treasury, investor relations and finance functions, including his involvement in the issuance of senior unsecured notes in 2016; the disposition of Occidental’s remaining shares of California Resources; leadership in cost reduction efforts and his

 

2017 Notice of Annual Meeting and Proxy Statement   32

 

maintenance of a conservative balance sheet despite depressed commodity prices, which were critical to Occidental’s maintenance of an “A” credit rating with the major ratings agencies, and resulted in a relative credit spread highly competitive with that of our peers. In addition, Mr. Stavros successfully maintains ongoing relationships with institutional investors and oversees corporate communications and government relations activities.

 

Compensation Decisions. The Compensation Committee set Mr. Stavros’ compensation package in 2016 as follows:

 

Base salary: 8% increase from 2015, which the Compensation Committee determined was appropriate in light of a review of his individual responsibilities and performance assessment, compensation surveys, publicly available peer company data and internal pay equity.
   
Annual Cash Incentive: The Compensation Committee’s decision with respect to the company performance portion of the Annual Cash Incentive award is discussed on page 29. Based on the achievements described under “Performance Assessment,” the Compensation Committee determined that the individual performance portion of the Annual Cash Incentive award was earned at target.
   
Long-Term Incentive awards granted in 2016 are included in the Grants of Plan-Based Awards table on page 38.

 

  Glenn M. Vangolen, Senior Vice President, Business Support

 

Current Role. Mr. Vangolen has been Senior Vice President, Business Support since February 2015, and, prior to that role, held positions of increasing responsibility in the oil and gas and corporate segments. In his current role, Mr. Vangolen is responsible for human resources; health, environment and safety; and information technology functions.

 

Tenure. Mr. Vangolen has been an employee of Occidental for over 36 years.

 

Performance Assessment. In assessing Mr. Vangolen’s accomplishments, the Compensation Committee considered Mr. Vangolen’s role in the launch of Occidental’s Re-Imagined Oilfield (RIO) project, an initiative aimed at driving innovation by valuing novel ideas and creating a platform for ideation with the goal of empowering employees to participate in shaping the future of Occidental; various honors and achievements bestowed on Occidental in 2016 under Mr. Vangolen’s leadership for safety, including seven OxyChem and OxyVinyls plants recognized by the Vinyl Institute for excellence in worker safety and environmental protection, based on performance against guidelines and standards established by federal agencies; and the achievement of unprecedentedly low injury rates at Colombia’s Cano Limon and Caricare fields, which achieved 365 days without a recordable injury.

 

Compensation Decisions. The Compensation Committee set Mr. Vangolen’s compensation package in 2016 as follows:

 

Base salary: 4.5% increase from 2015 which the Compensation Committee determined was appropriate in light of a review of his individual responsibilities and performance assessment, compensation surveys, publicly available peer company data and internal pay equity.
   
Annual Cash Incentive: The Compensation Committee’s decision with respect to the company performance portion of the Annual Cash Incentive award is discussed on page 29. Based on the achievements described under “Performance Assessment,” the Compensation Committee determined that the individual performance portion of the Annual Cash Incentive award was earned at target.
   
Long-Term Incentive awards granted in 2016 are included in the Grants of Plan-Based Awards table on page 38.

 

  Stephen I. Chazen, Former Chief Executive Officer

 

Current Role. Mr. Chazen is currently serving as strategic advisor and served as Chief Executive Officer from May 2011 to April 2016 and served as Occidental’s President from 2007 to December 2015. Mr. Chazen has served on Occidental’s Board of Directors since 2010.

 

Tenure. Mr. Chazen has been an employee of Occidental for over 23 years.

 

Compensation Decisions. The Compensation Committee made the following compensation decisions with respect to Mr. Chazen’s compensation package in 2016:

 

Base salary: 50% reduction commensurate with his stepping down as Chief Executive Officer into his current role of strategic advisor.
   
Annual Cash Incentive: None.
   
Long-Term Incentives: None.

 

Status of Previously-Granted Performance Stock Awards

 

  2013 Long-Term Incentive Awards

 

In July 2013, the Compensation Committee granted long-term incentive awards to the then-named executive officers, which were allocated approximately 40% to a Return on Capital Employed Incentive Award (ROCE award) or a pair of Return on Asset Incentive Awards (ROA awards), 30% to a TSR award, and 30% to a performance-based Restricted Stock Incentive award (PRSI award), based on target performance and grant date stock price, except for Mr. Chazen, who received only an RSI award. Occidental’s returns and earnings metrics were greatly influenced by the decline in commodity prices that began in late 2014 and continued through 2016, which affected the payout of the 2013 long-term incentive awards. A table illustrating the payouts of the 2013 long-term incentive awards is shown below:

 

Occidental Petroleum Corporation   33

 
PAYOUT OF 2013 LONG-TERM INCENTIVE AWARDS   
     
2013 Long-Term Incentive Awards Performance Period Payout as a Percentage of Target
ROCE Award January 1, 2014 to December 31, 2016 0%
ROA Awards January 1, 2014 to December 31, 2016 0%
TSR Award July 1, 2013 to June 30, 2016 100%(1)
PRSI Award July 1, 2013 to June 30, 2016(2) 0%
(1) As described further below, payout of the TSR award was capped at target because Occidental’s absolute TSR performance was negative over the performance period.
(2) Payout of the PRSI award is based on achieving a threshold cumulative net income goal of at least $12 billion. If the threshold is not met by June 30, 2020, the shares are forfeited entirely.

 

Total Shareholder Return Award. In July 2013, the Compensation Committee granted TSR awards denominated in PSUs, each of which was equivalent to one share of common stock, to the then-named executive officers. The TSR awards granted in 2013 were payable in shares of common stock from zero to 150% of the target number of PSUs granted based on Occidental’s relative TSR performance compared to the TSR performance of its peer group. Additionally, if Occidental’s absolute TSR performance was negative over the performance period, payout of the award was capped at no more than the target number of PSUs granted. The performance period began July 1, 2013, and ended June 30, 2016.

 

In July 2016, the Compensation Committee certified Occidental’s TSR over the performance period, with Occidental ranking fifth out of the twelve companies in the peer group. While the interpolation formula as per the terms of the TSR award indicated a payout of 116.7% of the target number of PSUs granted in shares of common stock, payout of the TSR award was capped at the target number of PSUs granted because Occidental’s TSR performance over the performance period was negative. The number of shares earned, and the corresponding value realized by the named executive officers, are included in the “Options Exercised and Stock Vested” table on page 43. Not less than 50% of the net after-tax shares received pursuant to the TSR award are subject to a three-year holding period. The capping of the payout of the TSR awards at target, resulting from negative TSR performance over the performance period despite above-average relative performance, illustrates the pay-for-performance nature of Occidental’s executive compensation program and the alignment of the program with the interests of Occidental’s stockholders.

 

Other Compensation and Benefits

 

  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. Currently, none of the named executive officers have an employment agreement with Occidental.

 

Retention Benefits. In February 2013, as part of the succession planning process for the Chief Executive Officer, Occidental provided written arrangements regarding retention payments (Retention Benefits) in certain circumstances for Messrs. Lowe and Stavros, who do not have employment agreements with Occidental. Pursuant to the Retention Benefits, Mr. Lowe will receive a retention payment of two times, and Mr. Stavros three times, the executive’s then-current annual base salary in one lump sum payment on the one-year anniversary of the appointment of the new Chief Executive Officer, provided the covered executive remains employed by Occidental on that date. It is expected that Messrs. Lowe and Stavros will earn the Retention Benefits on April 29, 2017, the one-year anniversary of Ms. Hollub’s appointment as Chief Executive Officer.

 

  Qualified Defined Contribution Plans

 

Occidental does not have a defined benefit pension plan that provides named executive officers a fixed monthly retirement payment. Instead, 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.

 

Savings Plan. For 2016, the defined contribution 401(k) savings plan (Savings Plan) permitted employees to save a percentage of their annual salary up to the $265,000 limit set by IRS regulations, and employee pre-tax contributions were limited to $18,000. Employees may direct their contributions to a variety of investments. Occidental matches two dollars for every one dollar the employee contributes up to 2% of eligible pay, plus an additional dollar-for-dollar match on the next 3% of eligible pay. The named executive officers are fully vested in their account balances under the Savings Plan. The amounts contributed by Occidental to the Savings Plan are included in the “All Other Compensation” column of the Summary Compensation Table on page 37.

 

Retirement Plan. The defined contribution retirement plan (Retirement Plan) is funded annually through a reallocation process from the employee’s Supplemental Retirement Plan II (SRP II) account balance (described below). Because it is not possible to determine the exact amount that could be contributed to the Retirement Plan without exceeding governmental limits until the end of the year, the reallocation process has been developed to maximize the amount contributed each year to a tax-qualified defined contribution plan. The Retirement Plan is company-funded, and employees may not contribute to the Retirement Plan. The named executive officers are fully vested in their account balances under the Retirement Plan. The amounts allocated to the Retirement Plan are included in the SRP II contributions by Occidental in the “All Other Compensation” column of the Summary Compensation Table on page 37.

 

2017 Notice of Annual Meeting and Proxy Statement   34

 

  Nonqualified Deferred Compensation Plans

 

Occidental maintains two nonqualified deferred compensation plans: (i) the SRP II, and (ii) the Modified Deferred Compensation Plan (MDCP). The purpose of the SRP II is to provide eligible employees, including the named executive officers, with benefits to compensate them for maximum limits imposed by law on the amount of contributions that may be made to Occidental’s tax-qualified defined contribution plans. The purpose of the MDCP is to provide key management and highly compensated employees the ability to accumulate additional retirement income through deferrals of compensation.

 

Additional information regarding the terms and conditions of the SRP II and the MDCP is described on page 43. Amounts contributed to the SRP II on behalf of the named executive officers are included in the “All Other Compensation” column of the Summary Compensation Table on page 37. Amounts of salary and bonus deferred by named executive officers who participate in the MDCP are included as compensation in the “Salary,” and “Non-Equity Incentive Compensation” columns of the Summary Compensation Table on page 37, as applicable. In addition, the contributions, aggregate earnings, withdrawals and aggregate balances for the named executive officers in the SRP II and MDCP with respect to the 2016 fiscal year are shown in the “Nonqualified Deferred Compensation” table on page 44. No above market earnings were paid in 2016 under either the SRP II or the MDCP.

 

  Perquisites

 

Occidental provides a limited number of perquisites for its named executive officers, which consist principally of tax preparation fees, corporate aircraft use, excess liability insurance, annual physical examinations, relocation benefits in excess of Occidental’s company-wide policy and certain tax gross-ups.

 

Tax Preparation. Certain executives, including each of the named executive officers, are eligible to receive reimbursement for tax preparation. Eligible executives are required to have their personal tax returns prepared by a tax professional qualified to practice before the IRS in order to ensure compliance with applicable tax laws.

 

Corporate Aircraft Use. Directors and executive officers may use corporate aircraft for personal travel, if space is available. The director or executive reimburses 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. The named executive officers participate in these plans on the same terms as other employees. Occidental provides all salaried employees with life insurance equal to twice the employee’s base salary. In addition, for all employees above a certain grade level, Occidental will pay for an annual physical examination. Occidental also provides certain executives, including the named executive officers, with excess liability insurance coverage.

 

Stock Ownership Guidelines

 

Occidental’s stock ownership guidelines are intended to more closely align the interests of the named executive officers with those of the company’s stockholders. The ownership requirements range from six times to three times the officer’s annual base salary, based on position, as illustrated below:

 

Position Multiple of Base Salary
Chief Executive Officer 6
Chief Financial Officer 4
Executive Vice Presidents 4
Senior Vice Presidents 3

 

Unvested performance-based stock awards and performance-based stock units do not count toward satisfaction of the stock ownership guidelines. Officers subject to the guidelines are expected to comply within five years from the later of the effective date of the guidelines or the date the individual is named to a participating position. As of February 28, 2017, each of the named executive officers was in compliance with the guidelines (see “Beneficial Ownership of Directors and Executive Officers” table on page 50).

 

Equity Grant Practices

 

In 2016, the Compensation Committee granted a special, off-cycle restricted stock unit award to the named executive officers at its regularly scheduled February meeting to recognize the accomplishments of the executives in 2015, which contributed to Occidental’s strong production growth, lowered cost structure, continued execution of the company’s strategic review, preservation of a strong balance sheet during a time of challenging market conditions, and to incentivize retention. The Compensation Committee made equity grants pursuant to the long-term incentive program at its regularly scheduled July meeting. The grant date fair value of the restricted stock unit awards is based on the closing price of Occidental’s common stock on the NYSE on the day the Compensation Committee grants the award. The grant date fair value of the TSR award incorporates the closing price of Occidental’s common stock on the NYSE on the day the Compensation Committee grants the award, as well as the estimated payout percentage as of the grant date. As specifically authorized by the terms of the 2015 Long-Term Incentive Plan (2015 LTIP), the Compensation Committee has delegated to Ms. Hollub the authority to grant awards in certain circumstances to new employees.

 

Occidental Petroleum Corporation   35

 

Potential Recoupment of Compensation Due to Misconduct

 

Occidental may recoup certain compensation from the executive officers in the event of misconduct pursuant to the terms of Occidental’s Code of Business Conduct, the terms of the plan underlying the Annual Cash Incentive awards and the terms of the 2015 LTIP. Occidental’s Code of Business Conduct prohibits any officer, employee or director from violating or circumventing any law of the United States or a foreign country or engaging in unethical conduct 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 was 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.
   
Stock awards and the Annual Cash Incentive award may be forfeited or reduced for violations of the Code of Business Conduct or other provisions of the award agreements.

 

In addition, the 2015 LTIP includes a provision that gives Occidental the contractual right to recoup awards (i) where a participant has breached Occidental’s Business Code of Conduct by violating applicable law or company policy or engaging in unethical conduct or (ii) pursuant to a policy to be adopted by Occidental to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which will generally require recoupment of incentive-based compensation if Occidental is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement.

 

Compensation Committee Report

 

The Compensation Committee of the Board of Directors has reviewed and discussed with management the preceding Compensation Discussion and Analysis section for the year ended December 31, 2016. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement for the 2017 Annual Meeting of Stockholders.

 

Respectfully submitted,

 

THE EXECUTIVE COMPENSATION COMMITTEE

 

Margaret M. Foran (Chair)

Spencer Abraham

John E. Feick

William R. Klesse

Jack B. Moore

 

2017 Notice of Annual Meeting and Proxy Statement   36

 

EXECUTIVE COMPENSATION TABLES

 

Summary Compensation

 

SUMMARY COMPENSATION TABLE

Name and
Principal Position
  Year  Salary    Bonus    Stock Awards(1)    Option Awards(2)    Non-Equity
Incentive Plan
Compensation(3)
   All Other
Compensation(4)
   Total  
Vicki Hollub
President and Chief
Executive Officer
  2016  $1,143,314   $0   $9,765,802   $0   $1,875,000   $214,379   $12,998,495 
  2015  $687,500   $0   $4,062,500   $722,500   $0   $123,865   $5,596,365 
  2014  $519,697   $200,000   $2,745,022   $0   $0   $196,600   $3,661,319 
Edward A. Lowe
Executive Vice President
and Group Chairman,
Middle East
  2016  $625,000   $0   $4,029,783   $0   $750,000   $127,035   $5,531,818 
  2015  $625,000   $0   $3,250,000   $170,000   $0   $147,973   $4,192,973 
  2014  $625,000   $400,000   $2,745,022   $0   $0   $213,797   $3,983,819 
Marcia E. Backus
Senior Vice President,
General Counsel and
Chief Compliance Officer
  2016  $646,970   $0   $4,059,535   $0   $800,000   $118,336   $5,624,841 
  2015  $541,667   $500,000   $1,787,500   $170,000   $0   $135,841   $3,135,008 
                                      
Christopher G. Stavros
Senior Vice President and
Chief Financial Officer
  2016  $650,000   $0   $4,059,535   $0   $800,000   $185,777   $5,695,312 
  2015  $600,000   $0   $2,437,500   $425,000   $0   $795,794   $4,258,294 
  2014  $507,860   $200,000   $1,525,039   $0   $0   $118,544   $2,351,443 
Glenn M. Vangolen
Senior Vice President,
Business Support
  2016  $575,000   $0   $3,258,557   $0   $600,000   $103,097   $4,536,654 
                                      
                                      
Stephen I. Chazen
Former Chief
Executive Officer
  2016  $1,000,000   $0   $0   $0   $0   $2,283,914   $3,283,914 
  2015  $1,500,000   $0   $5,000,000   $0   $0   $294,616   $6,794,616 
  2014  $1,500,000   $0   $5,000,000   $0   $0   $292,704   $6,792,704 

 

(1) For 2016, values shown in the Stock Awards column represent the grant date fair value of the TSR and RSU awards granted pursuant to the 2016 long-term incentive program and a special, off-cycle restricted stock unit grant (SRSU award). In accordance with SEC rules, the SRSU award is included in the 2016 Stock Awards column; however, this award was intended to recognize 2015 achievements and is not part of the 2016 long-term incentive program. The grant date fair value of the SRSU award and the RSU award is equal to the number of stock units granted multiplied by Occidental’s closing stock price on the grant date, $70.63 and $76.83, respectively.
  The grant date fair value of the TSR award incorporates Occidental’s closing stock price on the grant date of $76.83, as well as the estimated payout percentage as of the grant date. See Note 12 to the Consolidated Financial Statements in Occidental’s Annual Report on Form 10-K regarding assumptions underlying the valuation of the TSR award. The maximum value of the TSR award as of the grant date for Ms. Hollub, Mr. Lowe, Ms. Backus, Mr. Stavros and Mr. Vangolen are approximately $11.2 million, $3.9 million, $3.3 million, $3.3 million and $3.0 million, respectively. The RSU award and SRSU award have no above-target payout scenarios.
(2) The named executive officers did not receive a stock option grant in 2016 or 2014.
(3) The amounts shown represent amounts earned pursuant to the Annual Cash Incentive award. For more information regarding the 2016 Annual Cash Incentive award, see “Compensation Discussion and Analysis–Elements of the 2016 Compensation Program–Annual Cash Incentive” on page 26.
(4) The following table shows “All Other Compensation” amounts for 2016 for the named executive officers. In accordance with SEC rules, benefits that are generally available to all full-time salaried U.S. dollar employees, such as medical, dental and life insurance and health savings and flexible spending accounts are not shown.

 

   Vicki
Hollub
   Edward A.
Lowe
  Marcia E.
Backus
   Christopher G.
Stavros
  Glenn M.
Vangolen
  Stephen I.
Chazen
 
Savings Plan(a)  $18,550   $18,550   $18,550   $18,550   $17,500   $18,550 
SRP II(b)  $195,829   $95,535   $99,786   $100,372   $85,597   $168,098 
Personal Benefits  $   $12,950(c)   $   $66,855(d)   $   $2,097,266(e) 
Total  $214,379   $127,035   $118,336   $185,777   $103,097   $2,283,914 

 

  (a) The amount shown is the company’s contribution to the Occidental Petroleum Corporation Savings Plan (Savings Plan) described on page 34.
  (b) The amount shown is the company’s contribution to the Supplemental Retirement Plan II (SRP II) described on page 43.
  (c) Tax preparation, executive physical, and excess liability insurance.
  (d) Relocation benefits in excess of Occidental’s relocation policy ($44,308) and a related tax gross-up ($14,647), tax preparation, executive physical, and excess liability insurance.
  (e) Payment for accrued but unused vacation ($2,006,971) which, pursuant to an agreement between Mr. Chazen and the Compensation Committee, was paid to Mr. Chazen at the time he stepped down as Chief Executive Officer, tax preparation, travel to outside board meetings, and excess liability insurance.

 

Occidental Petroleum Corporation   37

 

Grants of Plan-Based Awards

 

The table below shows the plan-based awards granted by the Compensation Committee to the named executive officers in 2016. The awards are abbreviated in the table as follows: (i) the Annual Cash Incentive award (ACI); (ii) a special, off-cycle restricted stock unit award (SRSU); (iii) a Restricted Stock Unit award (RSU) pursuant to the 2016 long-term incentive program; and (iv) a performance-based Total Shareholder Return award (TSR) pursuant to the 2016 long-term incentive program. For a summary of the key terms of the awards granted pursuant to the 2016 long-term incentive program, please see “Summary of 2016 Long-Term Incentive Program” beginning on page 29. For the actual amounts earned under the Annual Cash Incentive award, see the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 37.

 

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: # of
 Shares of
  Grant Date
Fair Value of
Stock
 
Name/ Type
of Grant(1)
  Grant
Date
  Threshold
$
   Target
$
  Maximum
$
  Threshold
# Shares
   Target
# Shares
   Maximum
# Shares
   Stock or
Units
  Awards
($)
 
Vicki Hollub                           
ACI(2)       $0   $1,875,000   $3,750,000                          
SRSU(3)  02/17/16                                 25,000   $1,765,750 
RSU(4)  07/13/16                                 31,238   $2,400,016 
TSR(5)  07/13/16                  21,045    84,179    168,358        $5,600,036 
Edward A. Lowe                                           
ACI(6)     $0   $750,000   $1,500,000                          
SRSU(3)  02/17/16                                 7,500   $529,725 
RSU(4)  07/13/16                                 20,500   $1,575,015 
TSR(5)  07/13/16                  7,235    28,937    57,874        $1,925,043 
Marcia E. Backus                                           
ACI(6)     $0   $800,000   $1,600,000                          
SRSU(3)  02/17/16                                 15,000   $1,059,450 
RSU(4)  07/13/16                                 17,572   $1,350,057 
TSR(5)  07/13/16                  6,201    24,803    49,606        $1,650,028 
Christopher G. Stavros                                           
ACI(6)     $0   $800,000   $1,600,000                          
SRSU(3)  02/17/16                                 15,000   $1,059,450 
RSU(4)  07/13/16                                 17,572   $1,350,057 
TSR(5)  07/13/16                  6,201    24,803    49,606        $1,650,028 
Glenn M.Vangolen                                           
ACI(6)     $0   $600,000   $1,200,000                          
SRSU(3)  02/17/16                                 7,200   $508,536 
RSU(4)  07/13/16                                 16,107   $1,237,501 
TSR(5)  07/13/16                  5,684    22,736    45,472        $1,512,520 

 

2017 Notice of Annual Meeting and Proxy Statement   38

 
(1) Mr. Chazen was not granted any plan-based awards in 2016.
(2) For 2016, payout of Ms. Hollub’s Annual Cash Incentive award was based on Occidental’s performance with respect to a basket of key performance metrics and the Compensation Committee’s assessment of individual performance, as described further under “Compensation Discussion and Analysis–Elements of the 2016 Compensation Program–Annual Cash Incentive” on page 26. Amounts shown represent the “target” and “maximum” amounts payable to Ms. Hollub under the Annual Cash Incentive award. Actual payout of the Annual Cash Incentive award is shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 37.
(3) On February 17, 2016, the Compensation Committee granted a special, off-cycle restricted stock unit award (SRSU award) to the named executive officers, excluding Mr. Chazen, to recognize the accomplishments of the executives in 2015, which contributed to Occidental’s strong production growth, lowered cost structure, continued execution of the company’s strategic review, preservation of a strong balance sheet during a time of challenging market conditions, and to incentivize retention. In accordance with SEC rules, the SRSU award is reflected in the Summary Compensation Table and this Grants of Plan-Based Awards Table because it was granted in 2016, but, as described above, the SRSU award was intended to recognize 2015 accomplishments so it is not considered an element of the 2016 compensation program.
  The grant date fair value of the SRSU award is equal to the number of restricted stock units granted multiplied by $70.63, the closing price of Occidental’s common stock on the NYSE on the grant date, February 17, 2016. The SRSU award vests ratably over three years with one-third vesting on each of February 28, 2017, 2018 and 2019, subject to continued employment, and is payable in shares of common stock upon vesting. The value of the SRSU award at vesting will depend on the closing price of Occidental’s common stock on each vesting date multiplied by the number of stock units vested.
(4) The grant date fair value of the RSU award is equal to the number of restricted stock units granted multiplied by $76.83, the closing price of Occidental’s common stock on the NYSE on the grant date, July 13, 2016. The RSU award vests ratably over three years with one-third vesting on each of July 12, 2017, 2018 and 2019, subject to continued employment, and is payable in shares of common stock upon vesting. The value of the RSU award at vesting will depend on the closing price of Occidental’s common stock on each vesting date multiplied by the number of stock units vested. The vested shares are subject to a two-year holding period. For more information regarding the RSU award, please see “Summary of 2016 Long-Term Incentive Program–Restricted Stock Unit (RSU) Award” on page 30.
(5) The grant date fair value of the TSR award is based on a Monte Carlo simulation in accordance with FASB ASC 718 indicating a projected payout of approximately 87% of the target number of PSUs granted. Actual payout of the TSR award may be zero, 25%, or a range from 25% to 200% of the target number of PSUs granted based on Occidental’s TSR ranking at the end of the three-year performance period and Occidental’s absolute TSR during the period. For more information regarding the payout possibilities of the TSR award, please see “Summary of 2016 Long-Term Incentive Program–Total Shareholder Return (TSR) Award” on page 30.
(6) For 2016, payout of the Annual Cash Incentive award for Mr. Lowe, Ms. Backus, and Messrs. Stavros and Vangolen was based on Occidental’s performance with respect to total spend per barrel (TSPB), an internal company performance metric aimed at achieving cost reductions and maximizing operational efficiencies, and the Compensation Committee’s assessment of the officer’s individual performance, as described further under “Compensation Discussion and Analysis–Elements of the 2016 Compensation Program–Annual Cash Incentive” on page 26. Amounts shown represent the “target” and “maximum” amounts payable to the executives under the Annual Cash Incentive award. Actual payout of the Annual Cash Incentive award is shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 37.

 

Occidental Petroleum Corporation   39

 

Outstanding Equity Awards

 

The table below sets forth the outstanding equity awards held by the named executive officers as of December 31, 2016.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016

      Option Awards    Stock Awards  
Name/Type of Award  Grant Date  Number
of Securities
Underlying
Unexercised
Options (#)
Un-exercisable
  Number
of Securities
Underlying
Unexercised
Options (#) Exercisable
  Option
Exercise
Price
($)
 Option
Expiration
Date
  Number of
restricted
stock units
that have not
vested
(#)
   Market
value of
restricted
stock units
that have
not vested
(#)
(1)   Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#)
   Equity Incentive
Plan Awards:
Market or
Payout Values of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)
(1) 
Vicki Hollub                                     
NQSO(2)  02/11/2015  28,334  56,666  $79.98   2/11/2022                    
SRSU(3)  02/17/2016                 25,000   $1,780,750           
RSU(3)  07/13/2016                 31,238   $2,225,083           
RSI(4)  07/22/2013                           4,470   $318,398 
RSI(4)  07/09/2014                           13,955   $994,015 
ROA(5)  07/09/2014                           4,652   $331,362 
ROCE(5)  07/08/2015                           4,308   $306,859 
PRI(6)  07/08/2015                           34,464   $2,454,871 
TSR(7)  07/09/2014                           13,955   $994,015 
TSR(7)  07/08/2015                           22,169   $1,579,098 
TSR(7)  07/13/2016                           21,045   $1,499,035 
Edward A. Lowe                                    
NQSO(2)  02/11/2015  6,667  13,333  $79.98   2/11/2022                    
SRSU(3)  02/17/2016                 7,500   $534,225           
RSU(3)  07/13/2016                 20,500   $1,460,215           
RSI(4)  07/11/2012                           19,938   $1,420,184 
RSI(4)  07/22/2013                           15,469   $1,101,857 
RSI(4)  07/09/2014                           13,955   $994,015 
ROA(5)  07/09/2014                           4,652   $331,362 
ROA(5)  07/08/2015                           690   $49,149 
MENA(8)  07/08/2015                           22,058   $1,571,191 
PRI(6)  07/08/2015                           27,571   $1,963,882 
TSR(7)  07/09/2014                           13,955   $994,015 
TSR(7)  07/08/2015                           17,735   $1,263,264 
TSR(7)  07/13/2016                           7,234   $515,278 
Marcia E. Backus                                    
NQSO(2)  02/11/2015  6,667  13,333  $79.98   2/11/2022                    
SRSU(3)  02/17/2016                 15,000   $1,068,450           
RSU(3)  07/13/2016                 17,572   $1,251,654           
RSI(4)  10/01/2013                           20,096   $1,431,438 
RSI(4)  07/09/2014                           6,203   $441,840 
ROCE(5)  07/09/2014                           2,068   $147,304 
ROCE(5)  07/08/2015                           1,896   $135,052 
PRI(6)  07/08/2015                           15,165   $1,080,203 
TSR(7)  07/09/2014                           6,203   $441,840 
TSR(7)  07/08/2015                           9,755   $694,849 
TSR(7)  07/13/2016                           6,201   $441,697 

 

2017 Notice of Annual Meeting and Proxy Statement   40

 
      Option Awards  Stock Awards 
Name/Type of Award  Grant Date  Number
of Securities
Underlying
Unexercised
Options (#)
Un-exercisable
  Number
of Securities
Underlying
Unexercised
Options (#)
Exercisable
  Option
Exercise
Price
($)
   Option
Expiration
Date
  Number of
restricted
stock units
that have not
vested
(#)
  Market
value of
restricted
stock units
that have
not vested
(#)
(1)  Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#)
  Equity Incentive
Plan Awards:
Market or
Payout Values of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)
(1) 
Christopher G. Stavros
                            
NQSO(2)  02/11/2015  16,667  33,333  $  79.98   2/11/2022                
SRSU(3)  02/17/2016                15,000  $ 1,068,450        
RSU(3)  07/13/2016                17,572  $ 1,251,651        
RSI(4)  07/11/2012                        9,471  $674,619 
RSI(4)  07/22/2013                        8,709  $620,342 
RSI(4)  07/09/2014                        7,753  $552,246 
ROCE(5)  07/09/2014                        2,584  $184,058 
ROCE(5)  07/08/2015                        2,585  $184,130 
PRI(6)  07/08/2015                        20,679  $1,472,965 
TSR(7)  07/09/2014                        7,753  $552,246 
TSR(7)  07/08/2015                        13,302  $947,501 
TSR(7)  07/13/2016                        6,201  $441,697 
Glenn M. Vangolen                               
NQSO(2)  02/11/2015  11,667  23,333  $  79.98   2/11/2022                
SRSU(3)  02/17/2016                7,200  $ 512,856        
RSU(3)  07/13/2016                16,107  $ 1,147,302        
RSI(4)  07/09/2014                        4,963  $353,514 
ROCE(5)  07/09/2014                        1,654  $117,814 
ROCE(5)  07/08/2015                        2,068  $147,304 
PRI(6)  07/08/2015                        16,543  $1,178,358 
TSR(7)  07/09/2014                        4,963  $353,514 
TSR(7)  07/08/2015                        10,641  $757,958 
TSR(7)  07/13/2016                        5,684  $404,871 
Stephen I. Chazen                               
RSI(4)  07/11/2012                        62,304  $4,437,914 
RSI(4)  07/10/2013                        59,018  $4,203,852 
RSI(4)  07/09/2014                        41,346  $2,945,076 
ROCE(5)  07/09/2014                        10,337  $736,305 
ROCE(5)  07/08/2015                        13,786  $981,977 
PRI(6)  07/08/2015                        55,142  $3,927,765 

 

Occidental Petroleum Corporation   41

 
(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 of Occidental’s common stock on the NYSE on December 30, 2016, which was $71.23.
(2) The non-qualified stock option (NQSO) awards vest ratably over a three-year period with one-third becoming exercisable on each of February 11, 2016, 2017, and 2018. Occidental’s closing stock price on December 31, 2016 was not in excess of the strike price of the NQSO award.
(3) The SRSU and RSU awards vest ratably over a three-year period, subject to continued employment, with one-third of the SRSU award vesting on each of February 28, 2017, 2018 and 2019 and one-third of the RSU award vesting on each of July 12, 2017, 2018 and 2019. The SRSU and RSU awards are payable solely in shares of common stock.
(4) The shares underlying the RSI awards granted in 2012, 2013 and 2014 are forfeitable until the certification by the Compensation Committee that the achievement of the performance goal is met. If the performance goal for the RSI awards granted in each of 2012, 2013 and 2014 is not met by June 30, 2019, 2020 and 2021, respectively, then the shares underlying the award will forfeit in their entirety. Pursuant to SEC rules, the values shown reflect a target payout of the RSI awards, but, based on the performance of Occidental through December 31, 2016, each of the 2012, 2013 and 2014 RSI awards are not expected to pay out.
(5) For the return on asset (ROA) and return on capital employed (ROCE) awards granted in 2014 and 2015, the values shown reflect an estimated payout of a number of shares or units based on achievement of the threshold performance level; however, based on the performance of Occidental through December 31, 2016, each of the 2014 and 2015 ROA and ROCE awards are not expected to pay out. The ROA and ROCE awards vest based on the achievement of the applicable performance goal over the applicable performance period. 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’s common stock on the award certification date. The performance periods for the ROA awards and ROCE awards granted in 2014 and 2015 end on December 31, 2017 and 2018, respectively.
(6) The performance retention incentive (PRI) award vests in four equal annual tranches, subject to continued employment through the applicable vesting date. If the performance goal is not met by June 30, 2022, the shares will forfeit in their entirety. Based on the performance of Occidental through December 31, 2016, the first tranche of the award is not expected to pay out.
(7) For TSR awards granted in 2014 and 2015, the values shown reflect an estimated payout at the target number of shares or units granted, based on the performance of Occidental through December 31, 2016. For TSR awards granted in 2016, the values shown reflect an estimated payout of the threshold number of shares because Occidental’s performance through December 31, 2016 would result in no payout. 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. The TSR awards vest based on the achievement of the applicable performance goal over the performance period. The performance periods for the 2014, 2015 and 2016 TSR awards end on June 30, 2017, 2018 and 2019, respectively.
(8) For the MENA award granted in 2015, the value shown reflects an estimated payout of the maximum number of units granted, since the performance of Occidental through December 31, 2016 indicated a payout above the target level. The ultimate payout may be significantly less than the amount 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. The MENA award vests based on the achievement of the applicable performance goal over the performance period. The performance period of the MENA award ends on December 31, 2018.

 

2017 Notice of Annual Meeting and Proxy Statement   42

 

Options Exercised and Stock Vested in 2016

 

The following table summarizes, for the named executive officers, the stock awards vested during 2016. The amounts reported as value realized are shown on a pre-tax basis, and do not include any reduction in value associated with the cancellation of shares to satisfy taxes. The amounts reflected below show the number of shares of common stock acquired at the time of vesting. No option awards were exercised by the named executive officers in 2016.

 

PREVIOUSLY GRANTED VESTED OPTION AWARDS EXERCISED AND PREVIOUSLY GRANTED STOCK AWARDS VESTED IN 2016

   Stock Awards 
Name  Number of Shares
Acquired on Vesting
(#)
(1)   Value Realized
on Vesting
($)
(2) 
Vicki Hollub   4,470   $343,430 
Edward A. Lowe   15,469   $1,188,483 
Marcia E. Backus   0   $0 
Christopher G. Stavros   4,355   $334,595 
Glenn M. Vangolen   1,145   $86,711 
Stephen I. Chazen   0   $0 
(1) The stock award that vested in 2016 for each of Ms. Hollub and Messrs. Lowe and Stavros was the TSR award granted in 2013, as further described under “Status of Previously Granted Performance Stock Awards – Total Shareholder Return Award” on page 34. While amounts in the table are expressed in an estimated cash value, the TSR award was payable solely in shares of common stock. At least 50% of the net after-tax shares received by the named executive officer are subject to a three-year holding period. Mr. Vangolen’s vested award was the last tranche of a time-based restricted stock award granted in 2013.
(2) For each of Ms. Hollub and Messrs. Lowe and Stavros, the amount shown represents the product of the number of shares vested and the closing price of Occidental’s common stock on the NYSE on the award’s certification date. For Mr. Vangolen, the amount shown represents the product of the number of shares vested and the closing price of Occidental’s common stock on the NYSE on the vesting date. In each case, the amount shown does not include any reduction in value associated with the cancellation of shares to satisfy taxes.

 

Nonqualified Deferred Compensation

 

  Supplemental Retirement Plan II

 

Employees whose participation in Occidental’s tax-qualified defined contribution plans is limited by applicable tax laws are eligible to participate in Occidental’s Supplemental Retirement Plan II (SRP II), which provides additional retirement benefits outside of those limitations.

 

Annual plan allocations for each participant restore the amounts that would have accrued for salary and Annual Cash Incentive under the qualified plans, but for the tax law limitations. Account balances are fully vested after three years of service and are payable following separation from service, or upon attainment of a specified age elected by the participant, as described below.

 

As of August 2016, interest on SRP II accounts is allocated daily to each participant’s account. The amount of interest earnings is calculated using a rate equal to the five-year U.S. Treasury Note rate on the last business day of the processing month plus 2%, converted to a monthly allocation factor.

 

In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allows in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan.

 

  Modified Deferred Compensation Plan

 

Under the Modified Deferred Compensation Plan (MDCP), the maximum amount of an executive officer’s salary or Annual Cash Incentive that may be deferred for any one year is limited to $75,000. A participant’s overall plan balance must be less than $1 million at the end of any given year to enable a participant to defer compensation for the subsequent year. Deferred amounts earn interest at a rate equal to the five-year U.S. Treasury Note rate plus 2%, except for amounts deferred prior to 1994, which continue to earn interest at a minimum interest rate of 8%.

 

The following table sets forth for 2016 the contributions, earnings, withdrawals and balances under the SRP II and the MDCP, to the extent the named executive officers participate in such plans. Each of the named executive officers is fully vested in their respective aggregate balances shown below. The footnotes provide information about other amounts that were reported as earned in the Summary Compensation Table on page 37 for 2016 and prior years.

 

Occidental Petroleum Corporation   43

 

NONQUALIFIED DEFERRED COMPENSATION

 

             Aggregate    
    Executive  Occidental  Aggregate  Withdrawals/  Aggregate 
    Contributions  Contributions  Earnings  Distributions in  Balance at 
Name Plan in 2016(1)  in 2016(2)  in 2016  2016(3)  12/31/16(4) 
Vicki Hollub SRP II $  $195,829  $25,569  $  $953,420 
  MDCP $  $  $7,816  $  $247,086 
Edward A. Lowe SRP II $  $95,535  $49,439  $  $1,624,317 
  MDCP $  $  $31,733  $  $1,003,226 
Marcia E. Backus SRP II $  $99,786  $9,273  $  $361,994 
  MDCP $  $  $  $  $ 
Christopher G. Stavros SRP II $  $100,372  $30,226  $  $1,022,051 
  MDCP $  $  $20,827  $  $658,420 
Glenn M. Vangolen SRP II $  $85,597  $26,665  $  $915,919 
  MDCP $75,000  $  $25,262  $  $837,482 
Stephen I. Chazen SRP II $  $168,098  $2,726  $268,380  $170,065 
  MDCP $  $  $65,889  $  $2,082,405 
(1)No employee contributions are permitted to the SRP II. The amount reported with respect to the MDCP was deferred at the election of the named executive officer and is included in the amount reported in the “Salary” column of the Summary Compensation Table for 2016.
(2)Amounts represent Occidental’s 2016 contributions to the SRP II, which are reported under “All Other Compensation” in the Summary Compensation Table on page 37.
(3)Mr. Chazen made specified age elections such that the balance in his SRP II account, shown above, was distributed in February 2016. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are distributed in the first 70 days of each following year.
(4)The aggregate balance for each named executive officer who participates in the SRP II and/or the MDCP, as applicable, reflects the cumulative value, as of December 31, 2016, of the contributions to the named executive officer’s account, and any earnings on those contributions, since the named executive officer began participating in the applicable plan or, for those participants in the SRP II who have made a specified age election, since the named executive officer’s last specified age distribution. We previously reported contributions for the named executive officers in the Summary Compensation Table for fiscal years prior to 2016 in the following aggregate amounts: Mr. Chazen — $4,944,771; Ms. Hollub — $249,200; Mr. Lowe — $1,203,975; Mr. Stavros — $187,168 and Ms. Backus - $107,075.

 

Potential Payments upon Termination or Change in Control

 

Payments and other benefits provided to named executive officers in various termination circumstances or in connection with a change in control are subject to certain policies, plans and agreements. The following is a summary of the material terms of these arrangements. Except as described in this summary and under “Potential Payments,” Occidental does not have any other agreements or plans that will require it to provide compensation to named executive officers in the event of a termination of employment or a change in control.

 

Golden Parachute Policy. Occidental’s Golden Parachute Policy provides that, subject to certain exceptions, Occidental will not grant Golden Parachute Benefits (as defined in the Policy) to any senior executive that exceed 2.99 times his or her salary plus Annual Cash Incentive pay, unless the grant of such benefits is approved by a vote of the corporation’s stockholders. The complete Golden Parachute Policy is available at www.oxy.com.

 

Notice and Severance Pay Plan. Under Occidental’s Notice and Severance Pay Plan, employees terminated in certain circumstances without cause or as a result of a change in control are eligible for up to 12 months’ base salary depending on years of service, two months of contributions pursuant to the Savings Plan and the SRP II, and continued medical and dental coverage for the 12-month notice and severance period at the active employee rate.

 

Outstanding Equity Awards. Awards granted under Occidental’s 2015 LTIP are subject to double-trigger vesting upon a “change in control” (as defined in the 2015 LTIP). Payout under each of the outstanding equity awards based on various termination circumstances or in connection with a change in control are described in more detail in the footnotes to the “Potential Payments” tables on page 47.

 

  Potential Payments

 

In the tables that follow, payments and other benefits provided in connection with various termination and change in control situations are set out as if the conditions for payment had occurred and the applicable triggering events took place on December 31, 2016, and reflect the terms of applicable plans and arrangements then in effect. The amounts set forth below are estimates and assume, if applicable, that the price of Occidental’s common stock was $71.23 per share, which was the closing price of Occidental’s common stock on the NYSE on December 30, 2016. In addition, for purposes of stock awards, the tables assume that the performance goals underlying the awards are ultimately achieved at levels estimated based on Occidental’s performance as of December 31, 2016.

 

2017 Notice of Annual Meeting and Proxy Statement    44

 

The amounts shown in the following tables are in addition to the payments and benefits that are potentially available to all full-time salaried U.S. dollar payroll employees, such as amounts vested under the Savings Plan and other tax-qualified retirement plans, amounts vested under Occidental’s nonqualified deferred compensation plans, payment for accrued vacation up to a maximum accrual ceiling of 296 hours, and disability benefits, among others.

 

Actual amounts to be paid will depend on several factors, such as the date of each named executive officer’s separation from Occidental or the occurrence of an actual change in control event, Occidental’s ultimate achievement of performance goals underlying the awards and the price of Occidental’s common stock when such awards are earned, if at all. The disclosures below do not take into consideration any requirements under Section 409A of the Internal Revenue Code, which could affect, among other things, the timing of payments and distributions.

 

While amounts reported in the following tables are expressed in an estimated cash value, all of the amounts reported are payable solely in shares of common stock, if at all. In addition, in circumstances of retirement, disability, death, or termination without cause, payout of the long-term incentive awards is not accelerated, as such awards will not be paid out unless and until the performance goals underlying the awards are satisfied. As described further in the footnotes to the tables on page 47, based on Occidental’s performance as of December 31, 2016, the performance goals underlying several of the outstanding performance-based long-term incentive awards are not expected to be achieved.

 

Vicki Hollub            
           Change in 
  Retirement  Disability, Death     Control and 
  with Occidental  or Termination  Change in  Qualifying 
  Consent  without Cause  Control  Termination 
Equity Compensation(1),(2)            
PRSI Awards(3) $  $  $318,398  $1,141,033 
RSU Awards(4) $847,210  $847,210  $  $847,210 
ROA Awards(5) $  $  $1,325,377  $1,325,377 
ROCE Award(5) $  $  $  $1,227,435 
PRI Award(6) $988,174  $988,174  $  $2,454,871 
TSR Awards(7) $2,115,174  $1,392,529  $994,015  $8,569,183 
Total $3,950,558  $3,227,913  $2,637,790  $15,565,109 
For footnotes, see page 47.                
                 
Edward A. Lowe            
           Change in 
  Retirement  Disability, Death     Control and 
  with Occidental  or Termination  Change in  Qualifying 
  Consent  without Cause  Control  Termination 
Equity Compensation(1),(2)            
PRSI Awards(3) $  $  $2,522,041  $3,344,676 
RSU Awards(4) $378,730  $378,730  $  $378,730 
ROA Awards(5) $1,561,764  $521,674  $1,325,377  $2,307,425 
PRI Award(6) $790,582  $790,582  $  $1,963,882 
TSR Awards(7) $1,890,932  $1,280,003  $994,015  $4,318,461 
Total $4,622,008  $2,970,989  $4,841,433  $12,313,174 
For footnotes, see page 47.                

 

Occidental Petroleum Corporation    45

 
Marcia E. Backus            
           Change in 
  Retirement  Disability, Death     Control and 
  with Occidental  or Termination  Change in  Qualifying 
  Consent  without Cause  Control  Termination 
Equity Compensation(1),(2)            
PRSI Awards(3) $  $  $1,431,438  $1,797,133 
RSU Awards(4) $495,262  $495,262  $  $495,262 
ROCE Awards(5) $  $  $589,072  $1,129,209 
PRI Award(6) $434,859  $434,859  $  $1,080,203 
TSR Awards(7) $935,182  $616,507  $441,840  $2,903,406 
Total $1,865,303  $1,546,628  $2,462,350  $7,405,213 
For footnotes, see page 47.                
 
Christopher G. Stavros                
              Change in 
  Retirement  Disability, Death     Control and 
  with Occidental  or Terminati