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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary Proxy Statement Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement Definitive Additional Materials Soliciting Material Pursuant to §240.14a-12 CONOCOPHILLIPS (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): No fee required. Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: Fee paid previously with preliminary materials. Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: |
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2015 PROXY STATEMEN T accountability+ performance WORKFORCE expertise E&P EXPLORATION SPIRIT Values Australia Pacific LNG INNOVATION viable GROWTH EXCELLENCE CULTURE global APPRAISAL EAGLE FORD KEATHLEY CANYON CASH FLOW NEUTRALITY SUSTAINABLE core holding KEBABANGAN MARGINS dividend technical capability resilient safety low cost of supply diverse portfolio SOCIAL RESPONSIBILITY exports INDEPENDENT CD5 bakken GULF OF MEXICO BRITANNIA LTC Siakap NorthPetai foster creek CHARITABLE INVESTMENTS SURMONT FLEXIBLE GUMUSUT oil sands SENEGAL STAKEHOLDER ENGAGEMENT COLLABORATIVE eldfisk II SHALE DURABLE BRAND |
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Electronic Delivery of Proxy Statement and Annual Report Materials |
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Notice of 2015 Annual Meeting of Stockholders and Proxy Statement |
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ConocoPhillips 2015 PROXY STATEMENT VII Increased 2014 production from continuing operations, excluding Libya, downtime and dispositions, by 4 percent compared with 2013. Using the same convention, 2013 production increased by 2 percent compared with 2012. 4% Production Growth 2014 v. 2013 2012-2014 Highlights From the date of the spinoff through December 2014, we have successfully executed our strategic plan and delivered on our strategic objectives. Highlights include: Looking Ahead Although we delivered on our commitments to stockholders and met or exceeded our strategic objectives in 2014, oil and gas prices began a precipitous decline in late 2014 that has continued into 2015. In response to the dramatic downturn in prices, the Company took decisive action in anticipation of low prices through 2015. In January we exercised our capital flexibility and reduced our 2015 capital expenditures budget to $11.5 billion, a decrease of more than 30 percent compared with 2014 spending. We will continue to fund maintenance capital to preserve the strength of our base production, as well as the operating and asset integrity of our portfolio. Most importantly, we will maintain our focus on personal and process safety. At our revised capital level we expect to deliver 2 to 3 percent production growth in 2015 from continuing operations, excluding Libya. The Company also announced in early 2015 that it would take measures to reduce controllable costs across the Company. In addition to broad-based measures aimed at eliminating discretionary expenditures, management made the difficult, but necessary, decision to eliminate annual salary adjustments in 2015. This was viewed as a 2015 action and does not represent a change in overall compensation philosophy. The Company is actively monitoring oil and gas prices and assessing its future capital investment plans. We are prepared to exercise additional flexibility in the future if lower prices persist in order to protect our dividend, achieve cash flow neutrality in 2017, where cash from operations funds capital expenditures and dividends, and preserve value. Growth rates may be adjusted, as appropriate, to reflect investment levels in any given year. To the extent the Company makes any changes to its strategy or strategic objectives in response to the downturn, the changes will be communicated to stockholders through our quarterly conference calls, investor presentations and periodic filings with the SEC. Delivered strong reserve replacement, with a three-year average organic reserve replacement ratio of 153 percent. 153% 3-Year Organic Reserve Replacement Ratio Completed strategic non-core asset disposition program that generated $14 billion in proceeds. $14B Disposition Proceeds Achieved top-quartile safety performance. Top-Quartile Safety Production is in MBOED and is from continuing operations, excluding Libya. Cash margins are price normalized using published sensitivities from our 2014 and 2013 Analyst Meetings. Organic reserve replacement ratio excludes sales and purchases. Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap. 2013 1,472 2014 1,532 Increased our quarterly dividend by 5.8 percent in 2014 and 4.5 percent in 2013. 5.8% 2014 Dividend Increase 2013 4.5 2014 5.8 Grew price-normalized cash margins by 8 percent in 2014 compared with 2013. Using the same convention, year-over-year margin growth was 9 percent in 2013. Margin Growth 2014 v. 2013 % Life Saving Rules Delivered cumulative Total Shareholder Return (TSR) of 33.8 percent from the date of the spinoff through December 2014, which is the highest of our 10 performance peers (calculated using 20-day average share price at the beginning and end of the period). We ranked second in full-year TSR in 2014 and first in 2013 and 2012. 33.8% Cumulative TSR Spinoff Through 2014 |
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X ConocoPhillips 2015 PROXY STATEMENT of target for each of our Named Executive Officers Corporate Performance 120% of target for each of our Named Executive Officers Award Unit Performance 112% adjustments for each of our Named Executive Officers Individual Performance 10% to 15% Based on the performance of the Company, which included top-quartile TSR performance for both the one- and three-year performance periods, we paid out performance-based programs as follows (see “Process for Determining Executive Compensation” beginning on page 39 and “2014 Executive Compensation Analysis and Results” beginning on page 47): Long-Term Incentive: Performance Share Program (PSP) In connection with the spinoff of Phillips 66 in 2012, we established new performance periods that began following the spinoff. In 2012, the HRCC approved a new performance period and performance metrics for PSP X running from May 2012 – December 2014. The HRCC delayed the commencement of this performance period until after the spinoff; however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012. We measure results only for the period beginning after the spinoff, since the results from the first four months of 2012 would have been impacted by the financial and operational differences occurring as a result of our transition from an integrated energy company to an independent exploration and production company. The HRCC determined that performance merited the following base awards as a percent of target awards: Annual Incentive – Variable Cash Incentive Program (VCIP) The VCIP payout is calculated using the following formula, subject to HRCC approval and discretion to set the award: ELIGIBLE EARNINGS TARGET PERCENTAGE FOR THE SALARY GRADE ANY INDIVIDUAL PERFORMANCE ADJUSTMENT OF CORPORATE PERFORMANCE ADJUSTMENT 50% OF AWARD UNIT PERFORMANCE ADJUSTMENT 50% To prepare the HRCC to make informed payout decisions for the 2014 VCIP and PSP X, its members received comprehensive performance updates from senior management in July and December 2014 and twice in February 2015. The HRCC’s view is that the combination of appropriate targets and relative metrics, periodic reviews and updates during the performance period and rigorous evaluation of actual performance leads to appropriate payout decisions. The HRCC believes that multiple metrics more appropriately drive the desired short- and long-term performance, as compared to a few simple performance metrics. PSP X Results: May 2012 – December 2014 adjustments for each of our Named Executive Officers of target for each of our Named Executive Officers Corporate Performance 156% Individual Performance 10% Proxy Summary |
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The current membership and primary responsibilities of the committees are summarized below: Number of Meetings Committee Members Primary Responsibilities in 2014 James E. Copeland, Jr.* 11 Charles E. Bunch John V. Faraci Gay Huey Evans Arjun N. Murti Ryan M. Lance* 1 Richard H. Auchinleck James E. Copeland, Jr. Robert A. Niblock Harald J. Norvik Robert A. Niblock* 7 Richard H. Auchinleck Jody Freeman Harald J. Norvik William E. Wade, Jr.(1) Richard H. Auchinleck* 6 Richard L. Armitage Robert A. Niblock William E. Wade, Jr.(1) Harald J. Norvik* 6 Richard L. Armitage Jody Freeman * Committee Chairperson (1) Mr. Wade is scheduled to retire on May 12, 2015. • Discusses with management, the independent auditors, and the internal auditors the integrity of the Company’s accounting policies, internal controls, financial statements, financial reporting practices, and select financial matters, covering the Company’s capital structure, financial risk management, retirement plans and tax planning. • Reviews, and coordinates the review by other committees of, significant corporate risk exposures and steps management has taken to monitor, control and report such exposures. • Monitors the qualifications, independence and performance of our independent auditors and the qualifications and performance of our internal auditors. • Monitors our compliance with legal and regulatory requirements and corporate governance, including our Code of Business Ethics and Conduct. • Maintains open and direct lines of communication with the Board and our management, internal auditors, independent auditors and the global compliance and ethics organization. • Assists the Board in fulfilling its oversight of enterprise risk management, particularly with regard to market based risks, financial reporting, effectiveness of the Company’s compliance programs, information systems and cybersecurity, commercial trading and procurement. • Exercises the authority of the full Board between Board meetings on all matters other than (1) those matters expressly delegated to another committee of the Board, (2) the adoption, amendment or repeal of any of our By-Laws and (3) matters which cannot be delegated to a committee under statute or our Certificate of Incorporation or By-Laws. • Oversees our executive compensation policies, plans, programs and practices and reviews the Company’s retention strategies. • Assists the Board in discharging its responsibilities relating to the fair and competitive compensation of our executives and other key employees. • Annually reviews the performance (together with the Lead Director) and sets the compensation of the CEO. • Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with the Company’s compensation programs and practices and retention strategies. • Selects and recommends director candidates to the Board to be submitted for election at the Annual Meeting and to fill any vacancies on the Board. • Recommends committee assignments to the Board. • Reviews and recommends to the Board compensation and benefits policies for non-employee directors. • Monitors the orientation and continuing education programs for directors. • Conducts an annual assessment of the qualifications and performance of the Board and each of the directors. • Reviews and reports to the Board annually on succession planning for the CEO and senior management. • Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with the Company’s governance policies and procedures. • Advises the Board on current and emerging domestic and international public policy issues. • Assists the Board in the development and review of policies and budgets for charitable and political contributions. • Reviews and makes recommendations to the Board on, and monitors the Company’s compliance with, its policies, programs and practices with regard to, among other things, health, safety and environmental protection and government relations. • Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with social, political, safety and environmental, operational integrity, and public policy aspects of the Company’s business and the communities in which it operates. Board Meetings and Committees continued Executive Audit and Finance Human Resources and Compensation Directors’ Affairs Public Policy 10 ConocoPhillips 2015 PROXY STATEMENT |
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Cash Compensation In 2014, each non-employee director received $115,000 annual cash compensation. Non-employee directors serving in certain specified committee positions also received the following additional cash compensation: • Lead Director—$35,000 • Chair of the Audit and Finance Committee—$25,000 • Chair of the Human Resources and Compensation Committee—$20,000 • Chair of any other committee—$10,000 • All other Audit and Finance Committee members—$10,000 • All other Human Resources and Compensation Committee members—$7,500 • All other committee members—$5,000 The total annual cash compensation is payable in monthly installments. Directors may elect, on an annual basis, to receive all or part of their cash compensation in unrestricted stock or in restricted stock units (such unrestricted stock or restricted stock units are issued on the last business day of the month valued using the average of the high and the low market prices of ConocoPhillips common stock on such date), or to have the amount credited to the director’s deferred compensation account. The restricted stock units issued in lieu of cash compensation are subject to the same restrictions as the annual restricted stock units granted since 2005 and described on page 11 under “Equity Compensation.” Due to differences in the tax laws of other countries, the Board, at its July 1, 2003 meeting, approved modification of the compensation for directors who are taxed under the laws of other countries. Effective in 2004, Canadian directors (currently, Mr. Auchinleck) are able to elect to receive cash compensation either in cash or in restricted stock units, redeemable only upon retirement, death, or loss of office, and Norwegian directors (currently, Mr. Norvik) receive compensation that would otherwise have been received as cash only as restricted stock units. Non-Employee Director Compensation continued Deferral of Compensation Directors can elect to defer their cash compensation into the Deferred Compensation Program for Non-Employee Directors of ConocoPhillips (“Director Deferral Plan”). Deferred amounts are deemed to be invested in various mutual funds and similar investment choices (including ConocoPhillips common stock) selected by the director from a list of investment choices available under the Director Deferral Plan. Mr. Auchinleck (from Canada) and Mr. Norvik (from Norway) do not have the opportunity to defer cash compensation in this manner. Directors’ Matching Gift Program All active and retired directors are eligible to participate in the Directors’ Annual Matching Gift Program. This program provides a dollar-for-dollar match of a gift of cash or securities, up to a maximum of $15,000 per donor for active directors and $7,500 per donor for retired directors during any one calendar year, to charities and educational institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries. Other Compensation Spouses and other guests of directors and executive officers attend certain meetings at the encouragement of the Board. The Board believes that this creates a collegial environment that enhances the effectiveness of the Board, and therefore the Company reimburses directors for the out of pocket cost of the spousal or other guest travel and related incidental expenses. The Company’s reimbursement of the cost of such attendance is treated by the Internal Revenue Service as income, and as such is taxable to the recipient. In May 2014, the Committee on Directors’ Affairs eliminated gross-ups to directors of the resulting income taxes on any spousal or other guest expenses arising when a spouse or other guest accompanies a director to a meeting. Amounts representing the reimbursements are contained in the All Other Compensation column of the Non-Employee Director Compensation Table. 12 ConocoPhillips 2015 PROXY STATEMENT |
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Stock Ownership Directors are expected to own Company stock in the amount of the aggregate annual equity grants during their first five years on the Board. Directors are expected to reach this level of target ownership within five years of joining the Board. Actual shares of stock, restricted stock, or restricted stock units, including deferred stock units, may be counted in satisfying the stock ownership guidelines. The holdings of each of our directors currently meet or exceed the guidelines. Non-Employee Director Compensation Table Change in Pension Non-Equity Value and Nonqualified Fees Earned or Option Incentive Plan Deferred Compensation All Other Paid in Cash Stock Awards Awards Compensation on Earnings Compensation Total Name ($)(1) ($)(2)(3) ($) ($) ($) ($)(4) ($) R.L. Armitage $125,000 $220,054 $ – $ – $ – $ 6,500 $351,554 R.H. Auchinleck 167,500 220,054 – – – 4,427 391,981 C.E. Bunch(5) 83,333 – – – – 15,000 98,333 J.E. Copeland, Jr. 140,000 220,054 – – – 13,926 373,980 J. Freeman 125,000 220,054 – – – 9,000 354,054 G. Huey Evans 125,000 220,054 – – – 15,000 360,054 R.A. Niblock 135,000 220,054 – – – 15,695 370,749 H.J. Norvik 132,500 220,054 – – – 5,075 357,629 W.E. Wade, Jr. 131,667 220,054 – – – 15,492 367,212 (1) Reflects 2014 annual cash compensation of $115,000 payable to each non-employee director. In 2014, non-employee directors serving in specified committee positions also received the following additional cash compensation: Lead Director—$35,000 Chair of the Audit and Finance Committee—$25,000 Chair of the Human Resources and Compensation Committee—$20,000 Chair of any other committee—$10,000 All other Audit and Finance Committee members—$10,000 All other Human Resources and Compensation Committee members—$7,500 All other committee members—$5,000 Amounts shown include prorated amounts attributable to committee reassignments, which may occur during the year. Amounts shown in the Fees Earned or Paid in Cash column include any amounts that were voluntarily deferred to the Director Deferral Plan, received in ConocoPhillips common stock, or received in restricted stock units. Messrs. Auchinleck, Niblock and Norvik received 100% of their cash compensation in restricted stock units in 2014 with an aggregate grant date fair value as shown in the table. All other directors received their cash compensation in cash or deferred such amounts into the Director Deferral Plan. Messrs. Faraci and Murti were elected to the Board effective January 15, 2015, and were not eligible for any compensation in 2014. (2) Amounts represent the aggregate grant date fair value of stock awards granted under our non-employee director compensation program. On January 15, 2014, each non-employee director received a 2014 annual grant of restricted stock units with an aggregate value of $220,000 on the date of grant based on the average of the high and low price for our common stock, as reported on the NYSE on the grant date. These grants are made in whole shares with fractional share amounts rounded up, resulting in a grant of shares with a value of $220,054 to each person who was a director on January 15, 2014. Mr. Bunch was elected to the Board effective May 13, 2014 and, therefore, was not eligible for the annual grant of restricted stock units under our program. Messrs. Faraci and Murti were elected to the Board effective January 15, 2015, and were not eligible for any compensation in 2014. (3) The following table reflects, for each director, the aggregate number of stock awards outstanding as of December 31, 2014: Number of Shares or Units of Stock That Have Not Vested Name (#) R.L. Armitage 23,099 R.H. Auchinleck 85,607 C.E. Bunch(5) – J.E. Copeland, Jr. 41,247 J. Freeman 6,493 G. Huey Evans 3,352 R.A. Niblock 18,388 H.J. Norvik 42,820 W.E. Wade, Jr. 29,688 ConocoPhillips 2015 PROXY STATEMENT 13 |
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The following table lists vesting of director stock awards in 2014: Stock Awards Number of Shares Value Realized Acquired on Vesting Upon Vesting Name Security (#) ($) R.L. Armitage – $ – R.H. Auchinleck – – C.E. Bunch – – J.E. Copeland, Jr. – – J. Freeman – – G. Huey Evans – – R.A. Niblock – – H.J. Norvik – – W.E. Wade, Jr. – – (4) The following table reflects, for each director, the items contained in All Other Compensation: Tax Meeting Travel Reimbursement Reimbursements & Matching Gifts Name Gross-Up(a) Meeting Perquisites (b) Amounts (c) Total R.L. Armitage $ – $ – $ 6,500 $ 6,500 R.H. Auchinleck – 4,427 – 4,427 C.E. Bunch – – 15,000 15,000 J.E. Copeland, Jr. 908 518 12,500 13,926 J. Freeman – – 9,000 9,000 G. Huey Evans – – 15,000 15,000 R.A. Niblock – 695 15,000 15,695 H.J. Norvik 464 4,611 – 5,075 W.E. Wade, Jr. – 492 15,000 15,492 (a) The amounts shown are for payments by the Company relating to certain taxes incurred by the director for imputed income. These primarily occur when the Company requests spouses or other guests to accompany the director to Company functions, including Board and committee meetings, and as a result, the director is deemed to make a personal use of Company assets (for example, when a spouse accompanies a director on a Company aircraft or when a spouse accompanies a director and the commercial air travel cost is paid or reimbursed by the Company) or when a retirement presentation is made to a retiring director. In such circumstances, if the director is imputed income in accordance with the applicable tax laws, the Company will generally reimburse the director for the increased tax costs. All such tax reimbursements have been included above, regardless of whether the corresponding perquisite or personal benefit is required to be reported pursuant to SEC rules and regulations. Gross-ups to directors of resulting income taxes on any spousal or other guest expenses arising when a spouse or other guest accompanies a director to a meeting were eliminated in May 2014. (b) The amounts shown are primarily for payments by the Company relating to travel costs when the Company requests spouses or other guests to accompany the director to Company functions, and as a result, the director is deemed to make a personal use of Company assets. (c) The Company maintains a Matching Gift Program under which we match certain gifts by directors to charities and educational institutions, excluding religious, political, fraternal, or athletic organizations, that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of the United States or meet similar requirements under the applicable law of other countries. For directors, the program matches up to $15,000 in each program year. Administration of the program can cause more than $15,000 to be paid in a single fiscal year of the Company, due to processing claims from more than one program year in that single fiscal year. The amounts shown are for the actual payments by the Company in 2014. Mr. Lance is eligible for the program as an executive of the Company, rather than as a director. Information on the value of matching gifts for Mr. Lance is provided on the Summary Compensation Table on page 55 and the notes to that table. (5) Mr. Bunch was elected to the Board effective May 13, 2014. The amounts in the tables above include his prorated compensation reflecting the portion of 2014 in which he served as a director. He received cash compensation beginning May 2014. He received no equity compensation for 2014, as he did not join the Board until after the grant date for equity compensation in January 2014. Non-Employee Director Compensation continued 14 ConocoPhillips 2015 PROXY STATEMENT |
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The following are some of the key qualifications and skills the Committee on Directors’ Affairs considered in evaluating the director nominees. The table and individual biographies below provide additional information about each nominee’s specific experiences, qualifications and skills. • CEO or senior officer experience. We believe that directors with CEO or senior officer experience provide the Company with valuable insights. These individuals have a demonstrated record of leadership qualities and a practical understanding of organizations, processes, strategy, risk and risk management and the methods to drive change and growth. Through their service as top leaders at other organizations, they also bring valuable perspectives on common issues affecting both their company and ConocoPhillips. • Financial reporting experience. We believe that an understanding of finance and financial reporting processes is important for our directors. The Company measures its operating and strategic performance by reference to financial targets. In addition, accurate financial reporting and robust auditing are critical to the Company’s success. We seek to have a number of directors who qualify as audit committee financial experts, and we expect all of our directors to be financially knowledgeable. We also believe it is important to have knowledge and experience in capital markets, both debt and equity, given our position as a large publicly traded company. • Industry experience. We seek to have directors with leadership experience as executives or directors, or experience in other capacities, in the energy industry. These directors have valuable perspective on issues specific to the Company’s business. • Global experience. As a global energy company, the Company’s future success depends, in part, on its success in growing its businesses outside the United States. Our directors with global business or international experience provide valued perspective on our operations. • Environmental/Regulatory experience. The perspective of directors who have experience within the environmental regulatory field is valued as we implement policies and conduct operations in order to ensure that our actions today will not only provide the energy needed to drive economic growth and social well-being, but also secure a stable and healthy environment for tomorrow. The energy industry is heavily regulated and directly affected by governmental actions and decisions, and the Company believes that directors with government experience offer valuable insight in this regard. Election of Directors and Director Biographies continued The lack of a for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. We look to each director to be knowledgeable in these areas; however, the indicates that the item is a specific qualification, characteristic, skill or experience that the director brings to the Board. Armitage Auchinleck Bunch Copeland Faraci Freeman Huey Evans Lance Murti Niblock Norvik CEO/Senior Officer Experience Financial Reporting Experience Industry Experience Global Experience Environmental/ Regulatory Experience 16 ConocoPhillips 2015 PROXY STATEMENT |
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Who are this year’s nominees? The following directors are standing for annual election this year to hold office until the 2016 Annual Meeting of Stockholders. Included below is a listing of each nominee’s name, age, tenure and qualifications. Richard L. Armitage Richard H. Auchinleck, Lead Director Age: 69 Director since: March 2006 ConocoPhillips Committees: Committee on Directors’ Affairs; Public Policy Committee Other current directorships: ManTech International Corporation Mr. Armitage has served as President of Armitage International since March 2005. He is a former U.S. Deputy Secretary of State and held a wide variety of high ranking U.S. diplomatic positions from 1989 to 1993 including: Special Mediator for Water in the Middle East; Special Emissary to King Hussein of Jordan during the 1991 Gulf War; and Ambassador, directing U.S. assistance to the newly independent states of the former Soviet Union. He served as Assistant U.S. Secretary of Defense for International Security Affairs from 1983 to 1989. He serves on the board of ManTech International Corporation and previously served on the board of Transcu, Ltd. and is a member of The American Academy of Diplomacy as well as a member of the Board of Trustees of the Center for Strategic Studies. Skills and Qualifications: Mr. Armitage’s experience in a wide range of high ranking diplomatic positions qualify him to provide valuable insight and expertise in the context of the Company’s global operations with substantial governmental interface. Mr. Armitage has specific expertise in many of the Company’s key operating regions. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Age: 63 Director since: August 2002 ConocoPhillips Committees: Human Resources and Compensation Committee; Committee on Directors’ Affairs (Chair); Executive Committee Other current directorships: Telus Corporation(1) Mr. Auchinleck began his service as a director of Conoco Inc. in 2001 prior to its merger with Phillips Petroleum Company in 2002. He served as President and Chief Executive Officer of Gulf Canada Resources Limited from 1998 until its acquisition by Conoco in 2001. Prior to his service as CEO, he was Chief Operating Officer of Gulf Canada from 1997 to 1998 and Chief Executive Officer for Gulf Indonesia Resources Limited from 1997 to 1998. Mr. Auchinleck currently serves on the board of Telus Corporation and previously served on the board of Enbridge Income Fund Holdings Inc. Skills and Qualifications: Mr. Auchinleck has served as a director of ConocoPhillips and its predecessors since Gulf Canada Resources was acquired by Conoco in 2001. His extensive experience in the industry and as a CEO of an energy company provides him with valuable insights into the Company’s business. In addition, Mr. Auchinleck has extensive industry experience in Canada, the location of many key Company assets and operations. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. (1) Not a U.S. based company. “ We continually assess whether the composition of our Board appropriately relates to the Company’s evolving strategic needs. We believe the right mix of skills, experiences, knowledge and independence are necessary to best position the Board for effective decision-making and risk oversight. We strive to balance the continuity of the Board with fresh perspectives, and believe that the result is a diverse Board that protects your interests as stockholders.” Richard H. Auchinleck, Lead Director ConocoPhillips 2015 PROXY STATEMENT 17 |
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James E. Copeland, Jr. Age: 70 Director since: February 2004 ConocoPhillips Committees: Audit and Finance Committee (Chair); Executive Committee Other current directorships: Equifax Inc.; Time Warner Cable Inc. Mr. Copeland served as Chief Executive Officer of Deloitte & Touche and Deloitte Touche Tohmatsu from 1999 to 2003. Mr. Copeland formerly served as Senior Fellow for Corporate Governance with the U.S. Chamber of Commerce and as a Global Scholar with the Robinson School of Business at Georgia State University. Mr. Copeland is currently a member of the boards of Equifax Inc., Time Warner Cable Inc. and BASS, LLC, and previously served on the board of Coca-Cola Enterprises from 2003 to 2008. Skills and Qualifications: As the former CEO of one of the “Big Four” accounting firms, Mr. Copeland provides a wealth of financial and accounting expertise. In addition, Mr. Copeland’s experience as a CEO at a large global corporation allows him to provide valuable insight on managing a global business. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Election of Directors and Director Biographies continued John V. Faraci Age: 65 Director since: January 2015 ConocoPhillips Committees: Audit and Finance Committee Other current directorships: PPG Industries, Inc.; United Technologies Corporation Mr. Faraci served as Chairman and Chief Executive Officer of International Paper Co. from 2003 until his retirement in 2014. He spent his career of more than 40 years at International Paper, also serving as the company’s Chief Financial Officer and in various other financial, planning and management positions. Mr. Faraci serves on the board of directors for PPG Industries, Inc. and United Technologies Corporation. He is also a trustee of the American Enterprise Institute, Denison University and the National Fish and Wildlife Foundation. Skills and Qualifications: The Board values Mr. Faraci’s experience as a director and CEO. His international business experience at a large public company allows him to provide the Board with valuable operational and financial expertise and an informed management perspective of global business issues. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Age: 65 Director since: May 2014 ConocoPhillips Committees: Audit and Finance Committee Other current directorships: PPG Industries, Inc.; PNC Financial Services Group Mr. Bunch has served as Chairman and Chief Executive Officer of PPG Industries, Inc. since 2005. He was President and Chief Operating Officer of PPG from July 2002 until he was elected President and Chief Executive Officer in March 2005 and Chairman and Chief Executive Officer in July 2005. Before becoming President and Chief Operating Officer, he was Executive Vice President of PPG from 2000 to 2002 and Senior Vice President, Strategic Planning and Corporate Services, of PPG from 1997 to 2000. Mr. Bunch has a 35-year history with PPG, holding positions in finance and planning, marketing, and general management in the United States and Europe. He currently serves on the board of PNC Financial Services Group. He previously served as a director of H.J. Heinz Company and as chairman of the Federal Reserve Bank of Cleveland, the National Association of Manufacturers, and the American Coatings Association and as a member of the University of Pittsburgh’s board of trustees. Skills and Qualifications: The Board values Mr. Bunch’s experience as a director and CEO in a highly-regulated industry as well as his management and finance experience. Additionally, Mr. Bunch has a strong background in management development and compensation. His international business experience with global issues facing a large, multinational public company allows him to provide the Board with valuable operational and financial expertise. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Charles E. Bunch 18 ConocoPhillips 2015 PROXY STATEMENT |
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Jody Freeman Age: 51 Director since: July 2012 ConocoPhillips Committees: Human Resources and Compensation Committee; Public Policy Committee Ms. Freeman is the Archibald Cox Professor of Law at Harvard Law School and founding director of the Harvard Law School Environmental Law and Policy Program. Before joining the Harvard faculty in 2005, Ms. Freeman formerly served as Counselor for Energy and Climate Change in the White House from 2009 to 2010 and as an independent consultant to the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling in 2010. Ms. Freeman is a member of the Administrative Conference of the United States and the American College of Environmental Lawyers. Skills and Qualifications: Ms. Freeman’s expertise in environmental law and policy, and her unique experiences in shaping federal environmental and energy policy, especially in matters critical to the Company’s operations, enable her to provide valuable insight into the Company’s policies and practices. The Board believes her experience and expertise in these matters make her well qualified to serve as a member of the Board. Age: 52 Director since: April 2012 ConocoPhillips Committees: Executive Committee (Chair) Mr. Lance was appointed Chairman and Chief Executive Officer in April 2012, having previously served as Senior Vice President, Exploration and Production—International from May 2009. Prior to that he served as President, Exploration and Production—Asia, Africa, Middle East and Russia/ Caspian since April 2009, having previously served as President, Exploration and Production—Europe, Asia, Africa and the Middle East since September 2007. Prior thereto, he served as Senior Vice President, Technology beginning in February 2007, and prior to that served as Senior Vice President, Technology and Major Projects beginning in 2006. He served as President, Downstream Strategy, Integration and Specialty Businesses from 2005 to 2006. Skills and Qualifications: Mr. Lance’s service as Chairman and Chief Executive Officer of ConocoPhillips makes him well qualified to serve both as a director and Chairman of the Board. Mr. Lance’s extensive experience in the industry as an executive in our exploration and production businesses, and as the global representative of ConocoPhillips, make his service as a director invaluable to the Company. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Ryan M. Lance Gay Huey Evans Age: 60 Director since: March 2013 ConocoPhillips Committees: Audit and Finance Committee Other current directorships: Aviva plc (1) (2); Itau BBA International Limited (1) (2); The Financial Reporting Council (1) (2); Standard Chartered (1) (2) (effective April 1, 2015) Ms. Huey Evans currently serves as a non-executive director of Aviva plc, where she is a member of the Risk and Remuneration and Nomination committees, and Bank Itau BBA International Limited, where she is a member of the Risk and Remuneration committees and Chairman of the Audit Committee. She also currently serves as Deputy Chairman of The Financial Reporting Council, where she is a member of the Nomination Committee, and Chair of the Beacon Awards. Effective April 1, 2015, she will serve as a non-executive director of Standard Chartered. She was formerly Vice Chairman of the Board and Non- Executive Chairman, Europe, of the International Swaps and Derivatives Association, Inc. from 2011 to 2012. She was former Vice Chairman, Investment Banking and Investment Management at Barclays Capital from 2008 to 2010. She was previously head of governance of Citi Alternative Investments (EMEA) from 2007 to 2008 and President of Tribeca Global Management (Europe) Ltd. from 2005 to 2007, both part of Citigroup. From 1998 to 2005, she was director of the markets division and head of the capital markets sector at the U.K. Financial Services Authority. She previously held various senior management positions with Bankers Trust Company in New York and London. Ms. Huey Evans previously served on the boards of The London Stock Exchange Group plc. and Falcon Private Wealth Ltd. Skills and Qualifications: Ms. Huey Evans’ in-depth knowledge of, and insight into, global capital markets from her extensive experience in the financial services industry brings valuable expertise to the Company’s businesses. The Board believes her experience and expertise in these matters make her well qualified to serve as a member of the Board. (1) Not a U.S. based company. (2) Not required to file periodic reports under the Securities Exchange Act of 1934. ConocoPhillips 2015 PROXY STATEMENT 19 |
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Election of Directors and Director Biographies continued Robert A. Niblock Harald J. Norvik Age: 68 Director since: July 2005 ConocoPhillips Committees: Human Resources and Compensation Committee; Public Policy Committee (Chair); Executive Committee Other current directorships: Petroleum Geo-Services ASA(1) Mr. Norvik currently serves as Vice Chairperson of Petroleum Geo-Services ASA. He is also on the board of Deep Ocean Group and Umoe ASA. He was Chairman and a partner at Econ Management AS from 2002 to 2008 and was a strategic advisor there from 2008 to 2010. He served as Chairman of Aschehoug ASA from 2003 to 2014, as Chairman of the Board of Telenor ASA from 2007 to 2012, and as Chairman, President & CEO of Statoil from 1988 to 1999. Skills and Qualifications: As a former CEO of an international energy corporation, Mr. Norvik brings valuable experience and expertise in industry and operational matters. In addition, Mr. Norvik provides valuable international perspective as a citizen of Norway, a country in which the Company has significant operations. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Age: 52 Director since: February 2010 ConocoPhillips Committees: Human Resources and Compensation Committee (Chair); Committee on Directors’ Affairs; Executive Committee Other current directorships: Lowe’s Companies, Inc. Mr. Niblock is Chairman, President and Chief Executive Officer of Lowe’s Companies, Inc. He has served as Chairman and CEO of Lowe’s Companies, Inc. since January 2005 and he reassumed the title of President in 2011, after having served in that role from 2003 to 2006. Mr. Niblock became a member of the board of directors of Lowe’s when he was named Chairman and CEO-elect in 2004. Mr. Niblock joined Lowe’s in 1993 and, during his career with the company, has served as Vice President and Treasurer, Senior Vice President, and Executive Vice President and CFO. Before joining Lowe’s, Mr. Niblock had a nine-year career with accounting firm Ernst & Young. Mr. Niblock has been a member of the board of directors of the Retail Industry Leaders Association since 2003, and has served as its Secretary since 2012. He previously served as its chairman in 2008 and 2009 and served as vice chairman in 2006 and 2007. Skills and Qualifications: Mr. Niblock became a member of the Board in 2010. The Committee on Directors’ Affairs values his experience as a CEO and in financial reporting matters. Mr. Niblock’s experience as an activelyserving CEO of a large public company allows him to provide the Board with valuable operational and financial expertise. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. (1) Not a U.S. based company. Age: 45 Director since: January 2015 ConocoPhillips Committees: Audit and Finance Committee Mr. Murti served as a Partner at Goldman Sachs from 2006 until his retirement in 2014. Prior to becoming Partner, he served as Managing Director from 2003 to 2006 and as Vice President from 1999 to 2003. During his time at Goldman Sachs, Mr. Murti worked as a sell-side equity research analyst covering the energy sector. He was also co-director of equity research for the Americas from 2011-2014. Previously, Mr. Murti held equity analyst positions at JP Morgan Investment Management from 1995 to 1999 and at Petrie Parkman from 1992 to 1995. Skills and Qualifications: Mr. Murti brings to the Board a deep understanding of financial oversight and accountability with his experience as a Partner at Goldman Sachs, one of the largest banking institutions. He has spent more than 20 years in the financial services industry with an extensive focus, both domestic and global, on the energy industry. This experience provides the Board valuable insight into financial management and analysis. The Board believes his experience and expertise in these matters make him well qualified to serve as a member of the Board. Arjun N. Murti 20 ConocoPhillips 2015 PROXY STATEMENT |
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21 What vote is required to approve this proposal? Each nominee requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. What if a director nominee does not receive a majority of votes cast? Our By-Laws require directors to be elected by the majority of the votes cast with respect to such director (i.e., the number of votes cast “for” a director must exceed the number of votes cast “against” that director). If a nominee who is serving as a director is not elected at the Annual Meeting and no one else is elected in place of that director, then, under Delaware law, the director would continue to serve on the Board as a “holdover director.” However, under our By-Laws, the holdover director is required to tender his or her resignation to the Board. The Committee on Directors’ Affairs then would consider the resignation and recommend to the Board whether to accept or reject the tendered resignation, or whether some other action should be taken. The Board of Directors would then make a decision whether to accept the resignation taking into account the recommendation of the Committee on Directors’ Affairs. The director who tenders his or her resignation will not participate in the Board’s decision. The Board is required to disclose publicly (by a news release, filing with the SEC or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. What does the Board recommend? THE BOARD RECOMMENDS YOU VOTE “FOR” EACH NOMINEE STANDING FOR ELECTION AS DIRECTOR. PROPOSAL 1 4-6 Board Recommendation Election of Directors FOR ConocoPhillips 2015 PROXY STATEMENT |
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24 Proposal to Ratify the Appointment of Ernst & Young LLP continued The Audit and Finance Committee has considered whether the nonaudit services provided to ConocoPhillips by Ernst & Young impaired the independence of Ernst & Young and concluded they did not. The Audit and Finance Committee has adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other nonaudit services that may be provided by Ernst & Young to the Company. The policy (a) identifies the guiding principles that must be considered by the Audit and Finance Committee in approving services to ensure that Ernst & Young’s independence is not impaired; (b) describes the audit, audit-related, tax and other services that may be provided and the non-audit services that are prohibited; and (c) sets forth pre-approval requirements for all permitted services. Under the policy, all services to be provided by Ernst & Young must be pre-approved by the Audit and Finance Committee. The Audit and Finance Committee has delegated authority to approve permitted services to its Chair. Such approval must be reported to the entire committee at the next scheduled Audit and Finance Committee meeting. Will a representative of Ernst & Young be present at the meeting? Yes, one or more representatives of Ernst & Young will be present at the meeting. The representatives will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions from the stockholders. What vote is required to approve this proposal? Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. If the appointment of Ernst & Young is not ratified, the Audit and Finance Committee will reconsider the appointment. What does the Board recommend? THE AUDIT AND FINANCE COMMITTEE RECOMMENDS YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2015. PROPOSAL 2 4-6 Board Recommendation Ratification of Independent Registered Public Accounting Firm FOR |
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Overview of Our Compensation Programs Our executive compensation programs include a mix of fixed and variable pay with performance periods ranging from one to ten years. Performance metrics for short- and long-term incentive programs include a balance of relative and absolute targets established to align with the Company’s strategy. Management and the HRCC believe pay and performance are best aligned through a rigorous performance review process that includes four in-depth reviews with members of the HRCC during the year. This process allows the Committee to make informed decisions to positively or negatively adjust payouts where warranted. Our executive compensation program has four primary elements, as shown in the chart below: Salary Annual Cash Incentive Performance Shares Stock Options * See “Process for Determining Executive Compensation – Performance Criteria” beginning on page 44 for details regarding the specific performance metrics within each category. Performance Period Annual 3 years Up to 10 years 50% corporate metrics: 40% TSR TSR, financial, operational, 40% financial and Performance Measures Individual goals strategic, health, safety and operational Stock price appreciation environmental 20% strategic* 50% award unit metrics* Generally 0% – 130% Salary grade of target; no above target Payout Limits minimum/maximum 0% – 250% of target 0% – 200% of target awards in prior three years Form of Delivery Cash Shares/Cash Options Payout Fixed Variable/At Risk – HRCC determines payouts based on performance against targets Target Compensation Determined by HRCC after consultation with independent consultant Eligibility All NEOs ConocoPhillips 2015 PROXY STATEMENT 29 |
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Health, Safety and Environmental Compensation Discussion and Analysis continued Following the spinoff of Phillips 66 in 2012, ConocoPhillips became the world’s largest independent E&P company, based on production and proved reserves. Throughout the repositioning and emergence of the new ConocoPhillips, we presented a unique value proposition for stockholders, offering both growth and returns. The Company identified five strategic objectives at that time: (1) maintain a relentless focus on safety and execution; (2) offer a compelling dividend; (3) deliver 3 to 5 percent compound annual production growth; (4) deliver 3 to 5 percent compound annual cash margin growth and (5) achieve ongoing improvements in financial returns. Our compensation programs are designed to attract and retain high quality talent, reward executives for performance that successfully executes the Company’s long-term strategy, and align compensation with the long-term interests of our stockholders. As a result, our executive compensation programs closely tie pay to performance. We believe the following categories of performance metrics have appropriately assessed the corporate performance of the Company relative to its strategy as an independent E&P company, focusing on the five strategic objectives listed above: Health, Safety and Environmental; Operational; Financial; Strategic Plan and Initiatives and Total Shareholder Return. Performance metrics for our short- and long-term incentive programs include a balance of relative and increasingly challenging absolute targets established to align with the Company’s strategy. For example, the annual production and cash margin growth increases reflected in our strategy also translate into year-over-year performance target increases for compensation purposes. Executive compensation in 2014 is reflective of performance during both our short- and long-term incentive program periods. Performance highlights include: How Our Performance Affected Our Pay • Improved performance on key safety metrics. • Achieved top-quartile safety performance. • Recognized HSE industry leader. • Delivered strong reserve replacement, with a three-year average organic reserve replacement ratio of 153 percent. Achieved a 124 percent organic reserve replacement ratio in 2014 from proved reserve additions of approximately 0.7 billion barrels of oil equivalent (BBOE). • Increased 2014 production from continuing operations, excluding Libya, downtime and dispositions, by 4 percent compared with 2013. Using the same convention, 2013 production increased by 2 percent compared with 2012. • Grew price-normalized cash margins by 8 percent in 2014 compared with 2013. Using the same convention, year-over-year margin growth was 9 percent in 2013. • Completed the spinoff of Phillips 66 and established an independent ConocoPhillips. • Increased our quarterly dividend by 5.8 percent in 2014 and 4.5 percent in 2013. • Completed strategic non-core asset disposition program that generated $14 billion in proceeds. • Delivered cumulative Total Shareholder Return (TSR) of 33.8 percent from the date of the spinoff through December 2014, which is the highest of our 10 performance peers (calculated using 20-day average share price at the beginning and end of the period). We ranked second in full-year TSR in 2014 and first in 2013 and 2012. Organic reserve replacement ratio excludes sales and purchases. Cash margins are price normalized using published sensitivities from our 2014 and 2013 Analyst Meetings. Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap. Operational Financial Strategic Plan and Initiatives Total Shareholder Return 2012–2014 Performance Highlights 30 ConocoPhillips 2015 PROXY STATEMENT |
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Based on the Company’s strong performance, we paid out VCIP as follows: ELIGIBLE EARNINGS TARGET PERCENTAGE FOR THE SALARY GRADE ANY INDIVIDUAL PERFORMANCE ADJUSTMENT OF CORPORATE PERFORMANCE ADJUSTMENT 50% OF AWARD UNIT PERFORMANCE ADJUSTMENT 50% Annual Incentive – Variable Cash Incentive Program (VCIP) The VCIP payout is calculated using the following formula for all Senior Officers, subject to HRCC approval and discretion within established limits: of target for each of our Named Executive Officers Corporate Performance 120% of target for each of our Named Executive Officers Award Unit Performance 112% adjustments for each of our Named Executive Officers Individual Performance Long-Term Incentive – Performance Share Program (PSP) In connection with the spinoff of Phillips 66 in 2012, we established new performance periods that began following the spinoff. In 2012, the HRCC approved a new performance period and performance metrics for PSP X running from May 2012 – December 2014. The HRCC delayed the commencement of this performance period until after the spinoff; however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012. We measure results only for the period beginning after the spinoff, since the results from the first four months of 2012 would have been impacted by the financial and operational differences occurring as a result of our transition from an integrated energy company to an independent exploration and production company. For the PSP X performance period (May 2012 – December 2014), the Company delivered strong results against the approved metrics. The Committee determined that performance merited the following base awards as a percent of target awards: PSP X Results: May 2012 – December 2014 adjustments for each of our Named Executive Officers of target for each of our Named Executive Officers Corporate Performance 156% Individual Performance 10% See “Process for Determining Executive Compensation” on page 39 and “2014 Executive Compensation and Analysis and Results” on page 47. 10% to15% ConocoPhillips 2015 PROXY STATEMENT 31 |
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Compensation Discussion and Analysis continued At our 2014 Annual Meeting, approximately 94% of stockholders who cast an advisory vote on the Company’s say on pay proposal voted in favor of the Company’s executive compensation programs. Since then, the Company actively engaged in dialogue with a significant number of large stockholders to continue to reinforce our understanding of our stockholder’s views regarding the Company’s compensation programs. The Company is committed to maintaining regular dialogue with its investors designed to: 2014 Say on Pay Vote Result and Engagement Report stockholder views directly to the HRCC and Board. Solicit their feedback on executive compensation and governance-related matters; As a result of this engagement process, the Company learned the following: Evaluate the Company’s compensation programs; and 1 2 3 The Board and the Committee value these discussions and also encourage stockholders to provide feedback about our executive compensation programs as described under “Communications with the Board of Directors.” The HRCC carefully considers the views of these stockholders as part of its annual compensation review process. Conversations the Company had with its investors and proxy advisory firms following the 2014 advisory vote on executive compensation were considered along with current market practices and general investor concern over certain pay practices. See “Process for Determining Executive Compensation – Human Resources and Compensation Committee” on page 39. Stockholders emphasized the continued importance of transparency and readability of the Company’s disclosure in the proxy statement. Stockholders are generally pleased with the Company’s compensation programs and believe executive compensation has historically been wellaligned with long-term company performance; and Explaining how our incentive program metrics relate directly to the Company’s strategy; and Illustrating alignment between CEO compensation and corporate and individual performance relative to our 10 performance peers (pages IX and 36); Additional emphasis on communicating the thoroughness involved in the annual compensation decision-making process to ensure pay is appropriately aligned with performance for the relevant period (page 40); 1 2 3 Demonstrating that our absolute metrics include increasingly challenging targets. 4 Resulting changes to our programs included formalization of the Company’s already existing practice of capping VCIP and PSP payouts at 250% and 200% of target, respectively. We have also incorporated feedback on the importance of transparent and readable disclosure in drafting this proxy statement, including: 32 ConocoPhillips 2015 PROXY STATEMENT |
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Our Compensation and Governance Practices Our executive compensation philosophy is focused on pay for performance and is designed to reflect appropriate governance practices aligned with the needs of our business. Below is a summary of compensation practices we have adopted, and a list of problematic pay practices that we avoid. WHAT WE DO Pay for Performance: We align executive compensation with corporate, award unit and individual performance on both a short-term and long-term basis. The majority of our target total direct compensation for Senior Officers comprises variable compensation through our annual and long-term incentive compensation. Actual total direct compensation varies based on the extent of achievement of, among other things, safety, operational and financial performance goals and stock performance. Stock Ownership Guidelines: Our Stock Ownership Guidelines require directors and executives to own stock and/or have an interest in restricted stock units valued at a multiple of base salary, ranging from 1.8 times salary for lower-level executives to 6 times salary for the CEO. All of our current directors and Named Executive Officers meet or exceed these requirements. Mitigation of Risk: Our compensation plans have provisions designed to mitigate undue risk, including caps on the maximum level of payouts, clawback provisions, varied performance measurement periods, and multiple performance metrics. In addition, the Board and management perform an annual risk assessment to identify potential undue risk created by our incentive plans. We do not believe any of our compensation programs create risks that are reasonably likely to have a material adverse impact on the Company. Clawback Policy: Executives’ incentives are subject to a clawback that applies in the event of certain financial restatements. This is in addition to provisions contained in our award documents pursuant to which we can suspend their right to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine is detrimental to the Company. Independent Compensation Consultant: The Committee retained Frederic W. Cook & Co., Inc. (“FWC”) to serve as its independent executive compensation consultant. During 2014, FWC provided no other services to the Company. Double Trigger: Beginning with option awards granted in 2014 and performance share programs beginning in 2014, equity awards do not vest in the event of a change in control unless also accompanied by a qualifying termination of employment. Limited Payouts: In 2014, the Committee formalized the Company’s already existing practice of capping VCIP and PSP payouts at 250% and 200% of target, respectively. WHAT WE DON’T DO No Excise Tax Gross-Ups for Future Change in Control Plan Participants: In 2012, we eliminated excise tax gross-ups for future participants in our Change in Control Severance Plan. No Current Payment of Dividend Equivalents on Unvested Long-Term Incentives: Dividend equivalents on unvested restricted stock units are only paid out to the extent that the underlying award is ultimately earned. No Repricing of Underwater Stock Options: Our plans do not permit us to reprice or exchange underwater options without stockholder approval. No Pledging, Hedging, Short Sales, or Derivative Transactions: Company policies prohibit our directors and executives from pledging of or hedging or trading in derivatives of the Company’s stock. No Employment Agreements for Our Named Executive Officers: All compensation for these officers is established by the Committee. ConocoPhillips 2015 PROXY STATEMENT 33 |
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Alignment of CEO Compensation and Performance Using the process described beginning on page 39, positive and negative adjustments have been made by the HRCC where appropriate to maintain proper alignment between CEO compensation and corporate and individual performance. The graph below illustrates the alignment of pay and performance relative to our 10 performance peers by comparing performance-based pay reported in the Summary Compensation Table to TSR as measured by the compound annual appreciation in share price plus the dividends returned to shareholders. The graph shows the Alignment of CEO Pay and TSR 1/1/2012 - 12/31/2013 100% 0% 25% 50% 75% 0% 25% 50% 75% 100% COP percentile ranking for TSR and CEO compensation from January 1, 2012, through December 31, 2013, for each of the 10 performance peers and ConocoPhillips; 2014 peer compensation data is not yet available. As indicated, ConocoPhillips has peer-leading TSR and ranks approximately in the 75th percentile, or third among peers, for pay. Generally, compensation exceeded performance for companies positioned above the red line and performance exceeded compensation for companies positioned below. Performance Percentile (TSR) Compensation Percentile (Pay) “ Our executive compensation philosophy is focused on pay for performance. It is designed to reflect appropriate governance practices, align with the needs of our business, and maintain a strong link between executive pay and Company performance.” Robert A. Niblock, Chairman, Human Resources and Compensation Committee 36 ConocoPhillips 2015 PROXY STATEMENT |
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Performance-Based Pay Programs Annual Incentive The Variable Cash Incentive Program (“VCIP”) is an annual incentive program that is broadly available to our employees throughout the world, and it is our primary vehicle for recognizing Company, award unit, and individual performance for the past year. We believe that having an annual “at risk” compensation element for all employees, including executives, gives them a financial stake in the achievement of our business objectives and therefore motivates them to use their best efforts to ensure the achievement of those objectives. We also believe that one year is a time period over which all participating employees can have the opportunity to establish and achieve their specified goals. The base award is weighted equally for corporate and award unit performance for the Named Executive Officers, and the Named Executive Officers receive an average of performance measured under all award units. See “Process for Determining Executive Compensation – Performance Criteria” beginning on page 43 for details regarding performance criteria. The HRCC has discretion to adjust the base award up or down based on individual performance and makes its decision based on the input of the CEO for all Named Executive Officers, other than the CEO, and based on its evaluation of the CEO, conducted jointly with the Lead Director, for the CEO. Long-Term Incentives Our primary long-term incentive compensation programs for executives are the Performance Share Program (“PSP”) and the Stock Option Program. Our programs target approximately 50% of the long-term incentive award in the form of restricted stock units awarded under the PSP and 50% in the form of stock options. Performance Share Program—PSP rewards executives based on the performance of the Company and their individual performance over a three-year period. Each year the Committee establishes a threeyear performance period over which it compares the performance of the Company with that of its performance-measurement peer group using pre-established criteria. Thus, in any given year, there are three overlapping performance periods. Use of a multi-year performance period helps to focus management on longer-term results. Each executive’s individual award under the PSP is subject to a potential positive or negative performance adjustment at the end of the performance period up to a maximum PSP payout of 200% of target. The adjustment is determined by the HRCC following several detailed reviews of Company performance during the performance period. Final awards are based on the Committee’s evaluation of the Company’s performance relative to the established metrics (discussed under “Process for Determining Executive Compensation – Performance Criteria”) and of each executive’s individual performance. The Committee reviews and determines compensation for the CEO and considers input from the CEO with respect to the Named Executive Officers other than himself. Targets for participants whose salary grades are changed during a performance period are prorated for the period of time such participant remained in each respective salary grade. Stock Option Program—The Stock Option Program is designed to maximize medium- and long-term stockholder value. The practice under this program is to set option exercise prices at not less than 100 percent of the Company stock’s fair market value at the time of the grant. Because the option’s value is derived solely from an increase in the Company’s stock price, the value of a stockholder’s investment in the Company must appreciate before an option holder receives any financial benefit from the option. Options under our program have three-year vesting provisions and ten-year terms in order to incentivize our executives to increase the Company’s share price over the long term. The combination of the PSP and the Stock Option Program, along with our Stock Ownership Guidelines described elsewhere in this proxy statement, provides a comprehensive package of medium- and longterm compensation incentives for our executives that align their interests with those of our long-term stockholders. Off-Cycle Awards—In 2014, no off-cycle awards were made to any of our Named Executive Officers. Pursuant to the Committee’s charter, any off-cycle awards to Senior Officers must be approved by the HRCC. ConocoPhillips may make awards outside the PSP or the Stock Option Program (off-cycle). Off-cycle awards are granted outside the context of our regular compensation programs. Currently, off-cycle awards are generally granted to certain incoming executive personnel for one or more of the following reasons: (1) to induce an executive to join the Company (occasionally replacing compensation the executive will lose by leaving the prior employer); (2) to induce an executive of an acquired company to remain with the Company for a certain period of time following the acquisition; or (3) to provide a pro rata equity award to an executive who joins the Company during an ongoing performance period for which he or she is ineligible under the standard PSP or Stock Option Program provisions. In these cases, the HRCC has sometimes approved a shorter period for restrictions on transfers of restricted stock units than those issued under the PSP or Stock Option Program. Components of Executive Compensation continued 38 ConocoPhillips 2015 PROXY STATEMENT |
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Management The Company’s Human Resources department supports the Committee in the execution of its responsibilities and manages the development of the materials for each Committee meeting, including market data, individual and Company performance metrics and compensation recommendations for consideration by the Committee. The CEO considers performance and makes individual recommendations to the Committee on base salary, annual incentive and long-term equity compensation with respect to Senior Officers, including all Named Executive Officers other than himself. The Committee reviews, discusses, modifies and approves, as appropriate, these compensation recommendations. No member of the management team, including the CEO, has a role in determining his or her own compensation. February Meeting • HRCC approves program design, including subsequent performance period metrics • 2nd performance review (year-end) • HRCC reviews ISS/Glass Lewis reports • Compensation program risk analysis • Review market best practices • 1st performance review (year-to-date) • Consultant benchmarks CEO payouts and reviews market trends Process ensures alignment of performance metrics/targets and payouts with strategy Rigor applied when establishing targets Four performance reviews allow HRCC members to make informed decisions All HRCC decisions reviewed with independent compensation consultant Review program design and alignment with strategic objectives Review best practices and market trends Say on Pay vote Annual Meeting Stockholder outreach File proxy Stockholder outreach Process for Determining Executive Compensation continued HRCC Annual Compensation Cycle BOARD APPROVES BUSINESS STRATEGY BOARD APPROVES BUDGET • 3rd performance review (early February) • 4th & final performance review (mid-February) • Approve incentive payouts • Consultant review of peer target compensation • Establish upcoming performance targets and target compensation • Consider compensation consultant independence December Meeting October Meeting July Meeting May Meeting 40 ConocoPhillips 2015 PROXY STATEMENT |
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Compensation Consultants As set forth in its charter, which can be found on our website, the Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the compensation of the Chairman, the CEO and the Senior Officers, and has sole authority to approve such consultant’s fees and other retention terms. The foregoing authority includes the authority to retain, terminate and obtain advice and assistance from external legal, accounting or other advisors and consultants. The Committee retained Frederic W. Cook & Co., Inc. (“FWC”) to serve as its independent executive compensation consultant in 2014. The Committee has adopted specific guidelines for outside compensation consultants, which (1) require that work done by such consultants for the Company at management’s request be approved in advance by the Committee; (2) require a review of the advisability of replacing the independent consultant after a period of five years and (3) prohibit the Company from employing any individual who worked on the Company’s account for a period of one year after leaving the employ of the independent consultant. FWC has provided an annual attestation of its compliance with these guidelines. Separately, management retained Mercer to, among other things, assist it in compiling compensation data, conducting analyses, providing consulting services, and supplementing internal resources for market analysis. The Committee considered whether any conflict of interest exists with either FWC or Mercer in light of SEC rules. The Committee assessed the following factors relating to each consultant in its evaluation: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; (5) any Company stock owned by the individual consultants involved in the engagement and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Both FWC and Mercer provided the Committee with appropriate assurances addressing such factors. Based on such information, the Committee concluded that the work of each of the consultants did not raise any conflict of interest. The Committee also took into consideration all factors relevant to FWC’s independence from management, including those specified in Section 303A.05(c) of the NYSE Listed Company Manual and determined that FWC is independent, and performs no other services for the Company. Peers and Benchmarking With the assistance of our outside compensation consultants, we set target compensation by referring to multiple relevant compensation surveys that include, but are not limited to, large energy companies. We then compare that information to our salary grade targets (both for base salary and for incentive compensation) and make any changes needed to bring the cumulative target for each salary grade to broadly the 50th percentile for similar positions as indicated by the survey data. For our Named Executive Officers, we conduct benchmarking, using available data, for each individual position. For example, although we determine targets by benchmarking against other large, publicly held energy companies, in setting targets for our executives, we also consider broader categories, such as mid-sized, publicly held energy companies and other large, publicly held companies outside the energy industry. This position benchmarking exercise considers peer market data from the Company’s compensation consultant, Mercer, after which, the Committee’s independent consultant, FWC, reviews and independently advises on the conclusions reached as a result of this benchmarking. The Committee uses the results of these sources of compensation information as a factor in setting compensation structure and targets relating to our Named Executive Officers. The HRCC uses two separate categories of primary peer groups in designing our compensation programs: the compensation peer group and the performance peer group. ConocoPhillips utilizes compensation peer groups in setting compensation targets because these companies are broadly reflective of the industry in which it competes for business opportunities and executive talent, and because we believe these peers provide a good indicator of the current range of executive compensation. Performance peers are those companies in our industry in relation to which we believe we can best measure performance concerning financial and business objectives and opportunities. The companies chosen as compensation and performance peers have the following characteristics that led to their selection: complex organizations; publicly traded (and not directed by a government or governmental entity); very large market capitalization; very large production and reserves; competitors for exploration prospects and competitors for the same talent pool of potential employees. ConocoPhillips 2015 PROXY STATEMENT 41 |
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Process for Determining Executive Compensation continued Compensation and Performance Peers The following table shows the companies that we currently consider our peers, together with their market capitalization and production: Market Cap As of 12/31/2014(1) 2013 Production Compensation Performance Company Name Symbol ($ Billions) (MBOED)(2) Peer Peer Exxon Mobil Corporation XOM 391 4,175 4 4 Royal Dutch Shell plc RDSA 216 3,199 4 4 Chevron Corporation CVX 212 2,597 4 4 TOTAL SA TOT 122 2,299 4 BP plc BP 117 3,230 4 4 ConocoPhillips COP 85 1,502(3) Occidental Petroleum OXY 63 763 4 4 BG Group BG.L 46 633 4 Anadarko Petroleum Corporation APC 42 781 4 4 Devon Energy DVN 25 693 4 4 Apache Corporation APA 24 761 4 4 Fortune 100 Industrials (for CEO & staff executives) 4 (1) Source: Bloomberg. (2) Based on publicly available information. (3) Production from continuing operations. Setting Compensation Targets—Compensation Peer Group At the February 2014 HRCC meeting, in setting total compensation targets and targets within each individual program, the HRCC used the compensation peer group indicated in the table above for benchmarking purposes. The HRCC also utilized this group of peer companies for benchmarking the compensation of ConocoPhillips’ Named Executive Officers. In addition, for the CEO and staff executive positions, the HRCC considers other Fortune 100 Industrials non-financial companies when setting target compensation. Staff executive positions include executives who have duties not solely or primarily related to our operations, such as finance, legal, accounting and human resources. Measuring Performance—Performance Peer Group The HRCC believes our performance is best measured against both large independent E&P companies and the largest publicly held, international, integrated oil and gas companies against which we compete in our business operations. Therefore, for our performance-based programs, the Committee assessed our actual performance for a given period by using the performance peer group indicated in the table above. Once an overall target compensation level is established, the Committee considers the weighting of each of our primary compensatory programs (Base Salary, VCIP, PSP and Stock Option Program) within the total targeted compensation, as discussed under “Salary Grade Structure” and “Internal Pay Equity.” 42 ConocoPhillips 2015 PROXY STATEMENT |
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Salary Grade Structure Management, with the assistance of its outside compensation consultant, thoroughly examines the scope and complexity of jobs throughout ConocoPhillips and studies the competitive compensation practices for such jobs. As a result of this work, management has developed a compensation scale under which all positions are designated with specific “salary grades.” For our executives, the base salary midpoint increases as the salary grade increases, but at a lesser rate than increases in target incentive compensation percentages. The result is an increased percentage of “at risk” compensation as the executive’s salary grade is increased. Any changes in compensation for our Senior Officers resulting from a change in salary grade are approved by the HRCC. Internal Pay Equity We believe our compensation structure provides a framework for an equitable compensation ratio between executives, with higher targets for jobs at salary grades having greater duties and responsibilities. Taken as a whole, our compensation program is designed so that the individual target level rises as salary grade level increases, with the portion of performance-based compensation rising as a percentage of total targeted compensation. One result of this structure is that an executive’s actual total compensation as a multiple of the total compensation of his or her subordinates is designed to increase in periods of above-target performance and decrease in times of below-target performance. In addition, the HRCC also reviews the compensation of Senior Officers periodically to ensure the equitable compensation of officers with similar levels of responsibilities. Developing Performance Measures We believe our performance metrics have appropriately assessed the performance of the Company relative to its strategy as an independent E&P company, focusing on the following strategic objectives established following the spinoff of Phillips 66 in 2012: • Maintain a relentless focus on safety and execution; • Offer a compelling dividend; • Deliver 3 to 5 percent compound annual production growth; • Deliver 3 to 5 percent compound annual cash margin growth; and • Achieve ongoing improvements in financial returns. Consistent with this focus, the HRCC has approved a balance of metrics, some of which measure performance relative to our peer group and some of which measure progress in executing our strategic objectives. For example, the annual production and cash margin growth increases reflected in our strategy also translate into year-over-year performance target increases for compensation purposes. We have selected multiple metrics, as described herein, because we believe no single metric is sufficient to capture the performance we are seeking to drive, and any metric in isolation is unlikely to promote the well-rounded executive performance necessary to enable us to achieve long-term success. While the Committee reassesses performance metrics periodically, it has maintained the same metrics that were established in 2012 to assess the performance of the Company relative to its strategy as an independent E&P company. Oil and gas prices began a precipitous decline in late 2014 that has continued into 2015. In response to the dramatic downturn in prices, the Company took decisive action in anticipation of low prices through 2015. Our plan for delivering the strategic objectives was based on capital expenditures of approximately $16 billion annually. In January we exercised our capital flexibility and reduced our 2015 capital expenditures budget to $11.5 billion, a decrease of more than 30 percent compared with 2014 spending. At our revised capital level we expect to deliver 2 to 3 percent production growth in 2015 from continuing operations, excluding Libya. The Company is actively monitoring oil and gas prices and assessing its future capital investment plans. We are prepared to exercise additional flexibility in the future if lower prices persist in order to protect our dividend, achieve cash flow neutrality in 2017, where cash from operations funds capital expenditures and dividends, and preserve value. Growth rates may be adjusted, as appropriate, to reflect investment levels in any given year. To the extent the Company makes any changes to its strategy or strategic objectives in response to the downturn, the changes will be communicated to stockholders through our quarterly conference calls, investor presentations and periodic filings with the SEC. The Committee will continue to reassess our performance metrics and targets on an ongoing basis to ensure they continue to support the Company’s longterm strategy. ConocoPhillips 2015 PROXY STATEMENT 43 |
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Process for Determining Executive Compensation continued Performance Criteria We use corporate and award unit performance criteria in determining individual payouts. In addition, our programs contemplate that the Committee will exercise discretion in assessing and rewarding individual performance. The HRCC considers all the elements described below before making a final determination. For VCIP and PSP, the HRCC approved certain metrics and the weight considered for each metric, consistent with our strategy and focus as an independent E&P company. This is reflected in the charts below. The HRCC assigned approximately the following weights to the measures under VCIP and PSP: Corporate Performance Criteria We utilize multiple measures of performance under our programs to ensure that no single aspect of performance is driven in isolation. For a discussion of the reconciliation of these measures with generally accepted accounting principles, refer to Appendix A and the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Metrics: The HRCC has approved certain corporate-level performance criteria to reflect the circumstances of the Company as an independent E&P company. The HRCC makes the determination, in judging how well the Company achieves these metrics, of the ultimate payout of our programs. The performance measures are as follows: • Health, Safety and Environmental (“HSE”)—We seek to be a good employer, good community member and good steward of the environmental resources we manage. Therefore, we incorporate multiple HSE metrics to comprehensively assess our performance. • Operational—This measure was adopted to focus on various operational elements. For VCIP, these include absolute targets for Production, Capital Expenditures, Operating & Overhead Costs, Direct Operating Efficiency (a measure of operational up-time), Reserve Replacement Ratio, and milestones for Exploration. For PSP, the elements include absolute targets for Production and Reserve Replacement Ratio. Although management may set internal targets for such elements in accordance with the budget and strategic plans, review of this measure and determination of performance success is made by the HRCC. • Financial—This measure comprises several financial measures. For VCIP, it includes review of cash and net income margins, both absolute and relative to peers, as well as ROCE (discussed below) and CROCE (discussed below), both absolute and in terms of relative improvement. For PSP, the elements include cash margins, both absolute and relative to peers, ROCE/CROCE, both absolute and relative to peers, and Production per Debt Adjusted Share, relative to peers. Although management may set internal targets for such elements in accordance with the budget and strategic plans, review of this measure and determination of performance success is made by the HRCC. 20% 40% 40% % TSR % Operational & Financial % Strategic Plan VCIP PSP 50% 10% 10% 10% 10% 10% % TSR % Financial % Strategic Plan and Initiatives % Operational % HSE % Award Unit Metrics 44 ConocoPhillips 2015 PROXY STATEMENT |
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Relative Adjusted Return on Capital Employed—Our businesses are capital intensive, requiring large investments, in most cases over a number of years, before tangible financial returns are achieved. Therefore, we believe that a good indicator of long-term Company and management performance, both absolute and relative to our performance peer group, is the measure known as return on capital employed (“ROCE”). Relative ROCE is a measure of the profitability of our capital employed in our business compared with that of our peers. We calculate ROCE as a ratio, the numerator of which is net income plus after-tax interest expense, and the denominator of which is average capital employed (total equity plus total debt). In calculating ROCE, we adjust the net income of the Company and our peers for certain noncore earnings impacts. Relative Improvement in Adjusted Cash Return on Capital Employed— Similar to ROCE, adjusted cash return on capital employed (“CROCE”) measures the Company’s performance in efficiently allocating its capital. However, while ROCE is based on adjusted net income, CROCE is based on cash flow, measuring the ability of the Company’s capital employed to generate cash. CROCE is calculated by dividing adjusted EBIDA (earnings before interest, depreciation and amortization, adjusted for non-core earnings impacts) by average capital employed (total equity plus total debt). Our improvement in CROCE is compared against that of our peers. Production per Debt Adjusted Share—Production per share after adjusting for outstanding debt per share. The formula is: • Strategic Plan and Initiatives—This measure is an analysis made by the HRCC of the Company’s progress in implementing its strategic plan over a given performance period. This measure contains several distinct elements. For VCIP, these include Organization (functional excellence), Culture Enhancement (collaboration and retention), Portfolio Optimization, Long-Term Growth Options and Stakeholder Relationships. For PSP, in addition to those elements, it also includes Governance, Diversity, Opportunity Capture, Policies/Controls and Reputation. • Relative Total Shareholder Return—Total shareholder return (“TSR”) represents the percentage change in a company’s common stock price from the beginning of a period of time to the end of the stated period, and assumes common stock dividends paid during the stated period are reinvested into that common stock. We use a total shareholder return measure because it is the most tangible measure of the value we have provided to our stockholders during the relevant program period. We seek to mitigate the influence of industry-wide or marketwide conditions on stock price by using total shareholder return relative to our performance peer group. Consistent with market practice, for programs beginning in 2012 or later, this percentage is measured using a 20-trading day simple average prior to the beginning of a period of time and a 20-trading day simple average prior to the end of the stated period, and assumes common stock dividends paid during the stated period are reinvested. Differences between the VCIP and PSP programs reflect the differences in the employee populations participating in the programs: VCIP is broadly based, with virtually all of our employees participating, while PSP is confined to senior management. In addition, VCIP uses a one-year performance period, while PSP uses a three-year performance period. Award Unit Performance Criteria With regard to VCIP, we measure the performance of the award units to which employees are assigned. There are approximately 39 discrete award units within the Company designed to measure performance and to reward employees according to business outcomes relevant to the award group. Although most employees participate in a single award unit designated for the operational or functional group to which such employee is assigned, a Senior Officer may participate in a blend of the results of more than one of these award units depending on the scope and breadth of his or her responsibilities over the performance period. Members of our executive leadership team, which includes all of the Named Executive Officers, are handled somewhat differently, with the results from all award units being blended together on a salary-weighted basis (that is, the proportion of the total salaries of employees in that award unit to the total salaries paid by the Company) to determine the expected payout for the award unit portion of VCIP, subject to the discretion of the HRCC to set the payout otherwise. Performance criteria are goals consistent with the Company’s operating plan and include quantitative and qualitative metrics specific to each award unit, such as production, control of costs, health, safety and environmental performance, support of corporate initiatives, and various milestones set by management. At the conclusion of a performance period, management makes a recommendation based on the unit’s performance for the year against its performance criteria. The HRCC then reviews management’s recommendation regarding each award unit’s performance and has discretion to adjust any such recommendation in approving the final awards. Average (Total Production per Quarter) * 4 Average (Outstanding Shares + Debt Shares) Debt Shares = Outstanding Debt Quarter Ending Share Price ConocoPhillips 2015 PROXY STATEMENT 45 |
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Process for Determining Executive Compensation continued For PSP, the criteria for the 2012-2014 program period required that the Company meet one of the following measures as a threshold to an award being made to any Named Executive Officer: (1) Among the top seven of eleven specified companies in total shareholder return; (2) Among the top seven of eleven specified companies in return on capital employed (normalized for Special Items); (3) Among the top seven of eleven specified companies in cash margins (E&P results normalized for Special Items); or (4) Cash from operations (normalized for the impact of asset sales and assumptions made in our budgeting process as to price for oil equivalents and excluding non-cash working capital) of at least $31.1 billion. For both the 2014 VCIP and the PSP 2012-2014 program period, the specified companies for comparison were ConocoPhillips, ExxonMobil, Royal Dutch Shell, Chevron, Total, BP, Occidental, BG Group, Anadarko, Devon and Apache. The performance criteria for this purpose are set by the HRCC and may change from year to year, although the criteria must come from a list of possible criteria set forth in the stockholder-approved 2011 Omnibus Stock and Performance Incentive Plan (the 2014 Omnibus Stock and Performance Incentive Plan for performance periods beginning after May 13, 2014). The award ceilings are also set by the HRCC each year, although they may not exceed limits set in the applicable stockholderapproved Omnibus Stock and Performance Incentive Plan. Determination of whether the criteria are met is made by the HRCC after the end of each performance period. While this design is intended to preserve deductibility, the Committee reserves the right to grant non-deductible compensation and there is no guarantee that compensation payable pursuant to any of the Company’s compensation programs will ultimately be deductible. Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap. Individual Performance Criteria Individual adjustments for our Named Executive Officers are approved by the HRCC, based on the recommendation of the CEO (other than for himself ). The CEO’s individual adjustment is determined by the Committee taking into account the prior review of the CEO’s performance, which is conducted jointly by the HRCC and the Lead Director. The HRCC considers individual adjustments for each Named Executive Officer based on a subjective review of the individual’s personal leadership and contribution to the Company’s financial and operational success. The HRCC considers the totality of the executive’s performance in deciding on any positive or negative individual adjustment. Tax-Based Program Criteria Our incentive programs are also designed to conform to the requirements of section 162(m) of the Internal Revenue Code, which allows for deductible compensation in excess of $1 million if certain criteria, including the attainment of pre-established performance criteria, are met. In order for a Named Executive Officer to receive any award under either VCIP or PSP, certain threshold criteria must be met. This tier of performance measure and methodology is designed to meet requirements for deductibility of these items of compensation under section 162(m) of the Internal Revenue Code. Pursuant to this tier, maximum payments for the performance period under VCIP and PSP are set, but they are subject to downward adjustment through the application of the generally applicable methodology for VCIP and PSP awards previously discussed, effectively establishing a ceiling for VCIP and PSP payments to each Named Executive Officer. Threshold performance criteria for VCIP and PSP differed, due primarily to the different lengths in the threshold performance periods. For 2014 VCIP, the criteria required that the Company meet one of the following measures as a threshold to an award being made to any Named Executive Officer: (1) Among the top seven of eleven specified companies in total shareholder return; (2) Reserve replacement (normalized for the impact of assets sales and assumptions made in our budgeting process) of at least 100%; or (3) Cash from operations (normalized for the impact of asset sales and assumptions made in our budgeting process as to price for oil equivalents and excluding non-cash working capital) of at least $10.7 billion. 46 ConocoPhillips 2015 PROXY STATEMENT |
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In determining award payouts under VCIP in 2014, members of the Committee met four times with management to review progress and performance against the measures and the approved metrics. The Committee considered the following quantitative and qualitative performance measures and made the following payout decisions: WEIGHTS AND GOALS 20% Health, Safety and Environmental • Total Recordable Rate • Lost Workday Rate • Process Safety 20% Operational • Production • Capital • Operating & Overhead (“O&O”) • Direct Operating Efficiency • Reserve Replacement Ratio • Exploration & Development Milestones 20% Financial • ROCE • CROCE • Cash/Net Income Margin 20% Strategic Plan • Portfolio Optimization • Culture Enhancement (collaboration and retention) • Organizational and Functional Excellence • Long-Term Growth Options • Stakeholder Relationships 20% Total Shareholder Return RESULTS Achieved top-quartile safety performance; 35% reduction in Significant and High Risk events; Reduction in hydrocarbon spills; 21% improvement in Lost Workday Case Rates; Recognized HSE industry leader; Total Recordable Rate performance was impaired 8%. Produced 1,532 thousand barrels of oil equivalent per day (MBOED) from continuing operations, excluding Libya, growing production more than 4% from 2013; Exceeded O&O target; Exceeded reserve replacement target with 124 percent organic reserve replacement ratio from proved organic reserve additions of approximately 0.7 billion barrels of oil equivalent (BBOE); Exceeded Lower 48 development milestones; however, had mixed results in major projects and exploration milestones; Did not meet capital and direct operating efficiency targets. Exceeded all absolute targets; Fourth in performance peer group relative percent cash margin improvement with cash margins improved 8 percent year over year based on normalized prices; Third in performance peer group relative percent net income margin improvement. Completed non-core asset disposition program with the closing of the Nigeria transactions in July; Increased dividend by 5.8 percent; Added new growth opportunities in Canada and Gulf of Mexico, among others; Expanded employee skills and capabilities through the opening of a centralized learning center and launching programs for early Petrotech employees and leadership development; Reduced attrition. Ranked second in full-year TSR relative to our 10 performance peers (calculated using 20-day average share price). Corporate Payout This compared with VCIP corporate performance for the prior six periods ranging from 70% to 180%. Organic reserve replacement ratio excludes sales and purchases. Production growth represents continuing operations, excluding Libya, downtime and dispositions. Cash margins are price normalized using published sensitivities from our 2014 and 2013 Analyst Meetings. Use of non-GAAP financial information—This proxy statement includes financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures are included to help facilitate comparisons of company operating performance across periods and with peer companies. A reconciliation determined in accordance with U.S. GAAP is shown in Appendix A and at www.conocophillips.com/nongaap. 135% 90% 120% 140% 115% 120% 2014 Executive Compensation Analysis and Results continued 48 ConocoPhillips 2015 PROXY STATEMENT |
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Award Unit Performance The award units were subject to the following metrics: • Operating Award Units – 30% Production, 30% Unit Cost, 25% Milestones/Strategic Corporate Initiatives and 15% HSE • Non-Operating Award Units – 60% Milestones/Strategic Corporate Initiatives, 15% Unit Cost, 10% Production and 15% HSE • Staff – 65%–75% Milestones/Strategic Corporate Initiatives, 20% E&P Award Unit Average and 5%–15% HSE The Committee approved an average award unit payout of 112% of target for each of our Named Executive Officers. Award unit performance payouts for our 39 award units ranged from 80% to 140% in 2014. Individual Performance Adjustments Finally, the Committee considered individual adjustments for each Named Executive Officer’s 2014 VCIP award based upon a subjective review of the individual’s impact on the Company’s financial and operational success during the year. The Committee considered the totality of the executive’s performance in deciding the individual adjustments. Based on the foregoing, the Committee approved individual performance adjustments of between 10% and 15% for each of our Named Executive Officers. The individual adjustments for these officers reflect the Committee’s recognition of the individual’s personal leadership and contribution to the Company’s financial and operational success in 2014. of target for each of our Named Executive Officers Award Unit Performance 112% adjustments for each of our Named Executive Officers Individual Performance 10% to15% ConocoPhillips 2015 PROXY STATEMENT 49 |
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2014 Executive Compensation Analysis and Results continued Corporate Performance In 2012, the Committee approved three corporate performance measures (TSR, Operational/Financial and Strategic Plan) by which it would judge performance. In determining award payouts under PSP X, members of the Committee met several times with management to review progress and performance against the measures and the approved metrics. The Committee considered the following quantitative and qualitative performance measures and made the following payout decisions: WEIGHTS AND GOALS 40% Total Shareholder Return 40% Operational/Financial • HSE • Production • Reserve Replacement Ratio • Cash Margins • ROCE/CROCE • Production per Debt Adjusted Share 20% Strategic Plan • Culture, Organization, Governance, Diversity, Opportunity Capture, Reputation, Relationships, Policies/Controls, Asset Sales RESULTS Ranked first in TSR during the performance period relative to our 10 performance peers (calculated using 20-day average share price). Achieved top-quartile safety performance, with improvements in almost all safety metrics; Recognized HSE industry leader; Achieved 4 percent production growth in 2014 and 2 percent production growth in 2013, both from continuing operations, excluding Libya, downtime and dispositions; Achieved a 153 percent organic reserve replacement ratio (3-year); Achieved all absolute financial metrics except ROCE slightly below target; Middle of performance peer group in relative financial metrics. Successfully completed the spinoff of Phillips 66 and established an independent ConocoPhillips; Successfully progressed strategy to deliver both 3 to 5 percent compound annual production and cash margin growth; Completed non-core asset dispositions that generated $14 billion in combined proceeds; Increased dividend twice by 4.5 percent and 5.8 percent; Met significant talent demands needed to support growth including Petrotech skills; Reduced attrition. Corporate Payout This compared with three-year performance under PSP for the prior six periods ranging from 60% to 180%. Organic reserve replacement ratio excludes sales and purchases. Long-Term Incentive: Performance Share Program (PSP) In connection with the spinoff of Phillips 66 in 2012, we established new performance periods that began following the spinoff. In 2012, the HRCC approved a new performance period and performance metrics for PSP X running from May 2012 – December 2014 (the HRCC delayed the commencement of this performance period until after the spinoff; however, we still consider the program period for PSP X to provide compensation for the period beginning in January 2012). We measure results only for the period beginning after the spinoff, since the results from the first four months of 2012 would have been impacted by the financial and operational differences occurring as a result of our transition from an integrated energy company to an independent exploration and production company. 200% 110% 160% 156% 50 ConocoPhillips 2015 PROXY STATEMENT |
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Individual Performance Adjustments With respect to individual adjustments, similar to the 2014 VCIP program, the Committee considered PSP individual adjustments for each Named Executive Officer in recognition of the individual’s personal leadership and contribution to the Company’s financial and operational success over the performance period. Based on the foregoing, the Committee approved individual performance adjustments of 10% for such Named Executive Officers. 2015 Stock PSP XIII Total 2015 2015 VCIP Option Award (2015-2017) Target Name Salary Target Value Target Value Target Value Compensation R.M. Lance $1,700,000 $2,720,000 $5,790,000 $5,790,000 $16,000,000 J.W. Sheets 888,000 888,000 1,731,600 1,731,600 5,239,200 M.J. Fox 1,241,000 1,427,150 2,730,200 2,730,200 8,128,550 A.J. Hirshberg 1,096,000 1,260,400 2,411,200 2,411,200 7,178,800 D.E. Wallette, Jr. 874,000 874,000 1,704,300 1,704,300 5,156,600 Long-Term Incentive: 2014 Stock Option Awards Although the Committee retains discretion to adjust stock option awards by up to 30 percent from the specified target, the Committee did not elect to exercise such discretion with respect to the stock option awards granted in February 2014. All awards under the Stock Option Program for 2012, 2013 and 2014 were made at target. 2015 Target Compensation In addition to determining the 2014 compensation payouts, the HRCC established the targets for 2015 compensation for our Named Executive Officers under our four primary compensation programs. As a result of weakening commodity prices and economic uncertainty, the Company’s management has implemented certain measures to reduce controllable costs for 2015. Management made the difficult, but necessary, decision to eliminate annual salary adjustments in 2015 for employees, including the NEOs. As discussed under “Components of Executive Compensation” beginning on page 37, with the exception of salary, the targeted amounts shown below are performance-based and, therefore, actual amounts received under such programs, if any, may differ from these targets. adjustments for each of our Named Executive Officers Individual Performance 10% ConocoPhillips 2015 PROXY STATEMENT 51 |
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Executive Compensation Governance continued Clawback Policy In 2012, the Committee approved a clawback policy providing that the Company shall recoup any incentive compensation (cash or equity) paid or payable to any executive by the Company to the extent such recoupment is required or contemplated by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley Act, or any other applicable law or listing standards, which allows the Board to recoup compensation paid in the event of certain business circumstances, including a financial restatement. This policy operates in addition to provisions already contained in our award documents supporting grants under PSP, the Stock Option Program, and other compensatory programs using Company equity pursuant to which we can suspend rights to exercise, refuse to honor the exercise of awards already requested, or cancel awards granted if an executive engages in any activity we determine is detrimental to the Company, including acts of misconduct, such as embezzlement, fraud, theft or disclosure of confidential information, or other acts that harm our business, reputation, or employees, as well as misconduct resulting in the Company having to prepare an accounting restatement. Once final rules are released regarding clawback requirements under the Dodd-Frank Act, we intend to review our policies and plans and, if necessary, amend them to comply with the new mandates. To date, no Named Executive Officers have been subject to reductions or withdrawals of prior grants or payouts of restricted stock, restricted stock units, or stock option awards. Anti-Hedging and Anti-Pledging The Company has a policy that prohibits our directors and executives from hedging or trading in derivatives of the Company’s stock. This policy was amended in 2013 to include a prohibition against pledging of company stock by directors or executives. This policy, together with the Stock Ownership Guidelines discussed above, helps to assure that our Named Executive Officers and other Senior Officers remain subject to the risks, as well as the rewards, of stock ownership. Equity Grant Practices When the Committee grants Performance Share Units, options, or other equity grants to its Named Executive Officers, the Committee uses an average of the stock’s high and low prices on the date of grant (or the preceding business day, if the markets are closed on the date of grant) to determine the value of the units or the exercise price of the options or other equity. Grants of Performance Share Units and option grants are generally made at the HRCC’s February meeting (the date of which is determined at least a year in advance) or, in the case of new hires, on the date of commencement of employment or the date of Committee approval, whichever is later. Statutory and Regulatory Considerations In designing our compensatory programs, we take into account the various tax, accounting and disclosure rules associated with various forms of compensation. The HRCC also reviews and considers the deductibility of executive compensation under section 162(m) of the Internal Revenue Code and designs its deferred compensation programs with the intent that they comply with section 409A of the Internal Revenue Code. The Committee generally seeks to preserve tax deductions for executive compensation. Nonetheless, the Committee has awarded compensation that is not fully tax deductible when it believes that doing so is in the best interests of our stockholders and reserves the right to do so in the future. There is no guarantee that compensation payable pursuant to any of the Company’s compensation programs will ultimately be deductible by the Company. 54 ConocoPhillips 2015 PROXY STATEMENT |
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(3) Amounts shown represent the aggregate grant date fair value of awards made under the Performance Share Program (“PSP”) during each of the years indicated, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 17 in the Notes to Consolidated Financial Statements in the Company’s 2014 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. The amounts shown for stock awards are from our PSP or for off-cycle awards. No off-cycle awards were granted to any of the Named Executive Officers during 2013 and 2014. The amounts shown for awards from PSP relate to the respective three-year performance periods that began in each of the years presented. Performance periods under PSP generally cover a three-year period and, as a new performance period has begun each year since the program commenced, there are three overlapping performance periods ongoing at any time. Due to the spinoff in 2012, two ongoing performance periods (PSP VIII for the performance period January 2010 – December 2012 and PSP IX for the performance period January 2011 – December 2013) were terminated early and paid out on a pro rata basis. The performance program for the January 2012 – December 2014 period (PSP X) as well as the remaining prorated targets in the two performance program periods that were terminated early (PSP VIII Tail for the performance period May 2012 – December 2012 and PSP IX Tail for the performance period May 2012 – December 2013) were approved by the HRCC post-spin. Only promotional incremental targets associated with the post-spin PSP VIII Tail and IX Tail program periods for previously reported NEOs are included in the Stock Awards amount; for new NEOs the full target is reported. Targets set for PSP VIII Tail for the performance period May 2012 – December 2012, due to its short nature, paid out at target. The amounts shown for 2013 include the full initial target for the 2013 PSP XI for the performance period January 2013 – December 2015, as well as any incremental targets set during 2013 with regard to any ongoing performance period as a result of promotions. The amounts shown for 2014 include the full initial target for the 2014 PSP XII for the performance period January 2014 – December 2016, as well as any incremental targets set during 2014 with regard to any ongoing performance period as a result of promotions. Amounts shown are targets set for awards for each year since it is most probable at the setting of the target for the applicable performance periods that targets will be achieved. If payout was made at maximum levels for company performance and excluding any individual adjustments, the amounts shown would double from the targets shown, although the value of the actual payout would be dependent upon the stock price at the time of the payout. If payout was made at minimum levels, the amounts would be reduced to zero. No adjustment is made to the target shown for prior years based upon any change in probability subsequent to the time the target is set. Changes to targets resulting from promotion or demotion of a Named Executive Officer are shown as awards in the year of the promotion or demotion, even though the awards may relate to a program period that began in an earlier year. Actual payouts with regard to the targets for PSP X (May 2012 – December 2014, the commencement having been postponed until after the spinoff ), were approved by the HRCC at its February 2015 meeting, at which the Committee determined the payouts to be made to Senior Officers (including the Named Executive Officers) for the performance period that began in May 2012 and ended in December 2014. Those payouts were as follows (with values shown at fair market value on the date of payout): Mr. Lance, 162,965 units valued at $11,310,586; Mr. Sheets, 48,613 units valued at $3,373,985; Mr. Fox, 74,172 units valued at $5,147,908; Mr. Hirshberg, 63,634 units valued at $4,416,518; and Mr. Wallette, 43,777 units valued at $3,038,343. Historically, awards under PSP were settled in restricted stock or restricted stock units that will generally be forfeited if the employee is terminated prior to the end of the escrow period set in the award (except in the cases of termination due to death, layoff, or retirement, or after disability or a change in control). For target awards for program periods beginning in 2008 and earlier, the escrow period lasts until separation from service, except in the cases of termination due to death, layoff, or retirement, or after disability or a change in control, when the escrow period ends at the exceptional termination event. For target awards for program periods beginning in 2009 and later, the escrow period lasts five years from the settlement of the award (which would be more than eight years after the beginning of the program period, when measured including the performance period) unless the employee makes an election prior to the beginning of the program period to have the escrow period last until separation from service instead; except that in the cases of termination due to death, layoff, or retirement, or after disability or a change in control, the escrow period ends at the exceptional termination event. In the event of termination due to layoff or retirement after age 55 with five years of service, a value for the forfeited restricted stock or restricted stock units will generally be credited to a deferred compensation account for the employee for awards made prior to 2005; for later awards, restrictions lapse in the event of termination due to layoff or early retirement after age 55 with five years of service, unless the employee has elected to defer receipt of the stock until a later time. For programs beginning in 2012 and later, settlement will be made in cash rather than unrestricted shares. Mr. Fox became an employee of ConocoPhillips on January 1, 2012. As an inducement to his employment, the HRCC approved the grant of 79,102 restricted stock units (valued at $4,399,989), effective on the date of employment, the restrictions on which lapse as to one-half of the units on the fourth anniversary of his employment, while the remainder lapse on the fifth anniversary of his employment. Termination for any reason other than layoff, death, or disability results in forfeiture to the extent the award is not vested. On May 8, 2012, each Named Executive Officer who remained an active employee of the Company received grants during the year to reflect his or her increased duties and responsibilities. These awards were made as restricted stock units, used in lieu of stock options. The number of units and aggregate grant date fair value were as follows: Mr. Lance, 46,100 units, $2,471,421; Mr. Sheets, 1,908 units, $102,288; Mr. Fox, 10,703 units, $573,788; Mr. Hirshberg, 4,687 units, $251,270; and Mr. Wallette, 6,109 units, $327,503. The restrictions lapse on the third anniversary of the grant date. Termination for any reason other than retirement or layoff at least six months after the grant date, death, or disability results in forfeiture to the extent the award is not vested. A layoff between six months and one year from the grant date would have resulted in a pro-rated award, but there was no such event. For Mr. Fox, an additional grant of 20,518 units (valued at $1,099,970) was made to provide value for certain compensation forgone due to his termination from his prior employer. The restrictions lapse on the third anniversary of the grant date. Termination for any reason other than layoff, death, or disability results in forfeiture to the extent the award is not vested. (4) Amounts represent the dollar amount recognized as the aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 17 in the Notes to Consolidated Financial Statements in the Company’s 2014 Annual Report on Form 10-K for a discussion of the relevant assumptions used in this determination. All such options were awarded under the Company’s Stock Option Program. Options awarded to Named Executive Officers under that program generally vest in three equal annual installments beginning with the first anniversary from the date of grant and expire ten years after the date of grant. However, if a Named Executive Officer has attained the early retirement age of 55 with five years of service, the value of the options granted is taken in the year of grant or over the number of months until the executive attains age 55 with five years of service. Option awards are made in February of each year at a regularly-scheduled meeting of the HRCC. Occasionally, option awards may be made at other times, such as upon the commencement of employment of an individual. In determining the number of shares to be subject to these option grants, the HRCC uses a Black-Scholes-Merton-based methodology to value the options. (5) Includes amounts paid under VCIP and amounts that were voluntarily deferred to the Company’s Key Employee Deferred Compensation Plan. See also note 2 above. (6) Amounts represent the actuarial increase in the present value of the Named Executive Officer’s benefits under all pension plans maintained by the Company determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. Interest rate assumption changes have a significant impact on the pension values with periods of lower interest rates having the effect of increasing the actuarial values reported and vice versa. Furthermore, with the increase in pensionable earnings that occurred with the promotions of the Named Executive Officers as a result of increased responsibilities upon the spinoff, the three-year final average earnings used as a factor in the benefit accrual has increased, resulting in a significant increase in the actuarial values reported each year until the three-year period has passed. This applies to each of the Named Executive Officers other than Mr. Fox, who is not in a final average earnings title of the Company’s U.S. pension plans. See Pension Benefits beginning on page 62 of this proxy statement for further information. (7) As discussed in Compensation Discussion and Analysis beginning on page 28 of this proxy statement, ConocoPhillips provides its executives with a number of compensation and benefit arrangements. The tables below reflect amounts earned under those arrangements. We have excluded arrangements that are generally available to our U.S.-based salaried employees, such as our medical, dental, life and accident insurance, disability, and health savings and flexible spending account arrangements, since all of our Named Executive Officers are U.S.-based salaried employees. Certain of the amounts reflected below were paid in local currencies for Named Executive Officers with foreign compensation, which we value in this table in U.S. dollars using a monthly currency valuation for the month in which costs were incurred. All Other Compensation includes the following amounts, which were determined using actual cost paid by the Company unless otherwise noted: Executive Compensation Tables continued 56 ConocoPhillips 2015 PROXY STATEMENT |
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Company Contributions Matching to Personal Executive Meeting Contributions Nonqualified Use of Group Life Tax Presentations & Matching Under the Defined Company Home Insurance Reimbursement Meeting Travel Gift Tax-Qualified Contribution Aircraft(a) Security(b) Premiums(c) Gross-Up(d) Relocation(e) Expatriate(f) Reimbursement(g) Program(h) Savings Plans(i) Plans(j) ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) R.M. Lance 2014 200,846 50,934 4,692 20,055 – 22,078 – 15,000 23,400 129,600 2013 330,869 94,591 4,600 14,151 – 305,108 1,665 – 22,950 211,188 2012 91,048 29,507 3,474 6,752 – 97,780 752 15,500 31,671 85,974 J.W. Sheets 2014 – – 4,582 2,470 – – – 15,000 23,400 56,520 2013 – – 4,546 9,580 – – 1,665 15,000 22,950 98,408 2012 – – 1,946 5,761 – – – 15,000 31,619 48,817 M.J. Fox 2014 – 10,231 3,425 43,043 – – – 1,000 28,947 88,290 2013 – – 3,388 35,206 – – 6,350 4,000 17,403 144,837 2012 – – 2,369 19,575 91,525 – – 6,000 28,580 18,621 A.J. Hirshberg 2014 1,283 – 2,997 26,870 – – – 15,000 25,166 74,310 2013 – – 2,831 25,748 – – 1,665 29,500 21,184 124,626 2012 – – 2,509 34,705 – – – 1,475 31,671 71,189 D.E. Wallette, Jr. 2014 – 7,260 4,510 9,436 – 30,456 – 25,597 55,260 2013 – – 4,201 1,827 – 745,349 1,665 – 20,753 83,907 2012 – – 1,703 669 103,290 613,085 – – 31,478 26,307 (a) Amounts in this column represent the approximate incremental cost to ConocoPhillips for personal use of the aircraft, including travel for any family member or guest. Approximate incremental cost has been determined by calculating the variable costs for each aircraft during the year, dividing that amount by the total number of miles flown by that aircraft, and multiplying the result by the miles flown for personal use during the year. However, where there were identifiable costs related to a particular trip—such as airport landing fees or food and lodging for aircraft personnel who remained at the location of the personal trip—those amounts are separately determined and included in the table above. The amounts shown include incremental costs associated with flights to the Company hangar or other locations without passengers (commonly referred to as “deadhead” flights) which related to the non-business use of the aircraft by a Named Executive Officer. Upon Mr. Lance becoming the CEO, the Company’s Comprehensive Security Program required that Mr. Lance fly on Company aircraft, unless the Manager of Global Security determines that other arrangements represent an acceptable risk. (b) The use of a home security system is required as part of ConocoPhillips’ Comprehensive Security Program for certain executives and employees, including the Named Executive Officers, based on risk assessments made by the Company’s Manager of Global Security. Amounts shown represent the approximate incremental cost to ConocoPhillips for the installation and maintenance of the home security system with features required by the Company in excess of the cost of a “standard” system typical for homes in the neighborhoods where the Named Executive Officers’ homes are located. The Named Executive Officer pays the cost of the “standard” system himself. (c) The amounts shown are for premiums paid by the Company for executive group life insurance provided by the Company, with a value equal to the employee’s annual salary. In addition, certain employees of the Company, including the Named Executive Officers, are eligible to purchase group variable universal life insurance policies for which the employee pays all costs, at no incremental cost to the Company. (d) The amounts shown are for payments by the Company relating to certain taxes incurred by the employee. These taxes arise primarily when the Company requests family members or other guests to accompany the employee to Company functions and, as a result, the employee is deemed to make a personal use of Company assets (for example, when a spouse accompanies an employee on a Company aircraft) or when a retirement presentation is made to an employee. The Company believes that such travel is appropriately characterized as a business expense and, if the employee has imputed income in accordance with the applicable tax laws, the Company will generally reimburse the employee for any increased tax costs. (e) These amounts reflect relocation expenses approved by the HRCC in connection with the hiring of Mr. Fox. Mr. Wallette relocated from Singapore to our Houston office in connection with his appointment as Executive Vice President, Commercial, Business Development and Corporate Planning in 2012. The amounts were calculated pursuant to the standard relocation policy of the Company. (f ) Messrs. Lance and Wallette were previously on assignment in Singapore, and Mr. Fox was previously on assignment in Canada related to service prior to his re-joining the Company in January 2012. These amounts reflect net expatriate benefits under our standard policies for such service outside the United States, and these amounts include payments for increased tax costs related to such expatriate assignments and benefits. Amounts shown in the table above also reflect amended tax equalization and similar payments under our expatriate services policies that were made to and from, or on behalf of, the Named Executive Officer that were paid or received during a given year but apply to earnings of prior years, but which were unknown or not capable of being estimated with any reasonable degree of accuracy in prior years. These amounts are returned to the Company when they are known or received through the tax reporting and filing process. Not included in the table are amounts less than $0 that primarily relate to tax amounts returned to the Company in the normal course of the expatriate tax protection process that may relate to a prior period. The amounts noted for Mr. Fox would have been negative $41,455 in 2014. (g) The amounts in this column represent the cost of presentations made to employees and their spouses at Company meetings and reimbursements for the cost of spousal attendance at such meetings. The amounts shown reflect invoiced cost to the Company. (h) The Company maintains a Matching Gift Program under which certain gifts by employees to qualified educational or charitable institutions are matched. For executives, the program matches up to $15,000 with regard to each program year. Administration of the program can cause more than $15,000 to be paid in a single fiscal year of the Company, due to processing claims from more than one program year in that single fiscal year. The amounts shown are for the actual payments by the Company during the year. (i) Under the terms of its tax-qualified defined contribution plans, the Company makes matching contributions and allocations to the accounts of its eligible employees, including the Named Executive Officers. Included in the amounts shown for 2014 are additional contributions by the Company required under the terms of the ConocoPhillips Savings Plan made on February 21, 2014, with regard to the 2013 plan year, to the accounts of the following Named Executive Officers: Mr. Fox, $5,547; Mr. Hirshberg, $1,766; and Mr. Wallette, $2,197. Also included in the amounts shown for 2014 are additional contributions by the Company required under the terms of the ConocoPhillips Savings Plan made on February 26, 2015, with regard to the 2014 plan year, to the accounts of the following Named Executive Officers: Mr. Fox, $6,150; and Mr. Wallette, $2,700. (j) Under the terms of its nonqualified defined contribution plans, the Company makes contributions to the accounts of its eligible employees, including the Named Executive Officers. See the narrative, table, and notes to the Nonqualified Deferred Compensation Table for further information. ConocoPhillips 2015 PROXY STATEMENT 57 |
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All Other All Other Exercise Exercise Stock Option or Base or Base Awards: Awards: Price of Price of Estimated Future Payouts Number of Number of Options Options Grant Date Estimated Future Payouts Under Under Equity Incentive Plan Shares of Securities Awards Awards Fair Value of Non-Equity Incentive Plan Awards (2) Awards (3) Stock or Underlying Average Closing Stock and Grant Threshold Target Maximum Threshold Target Maximum Units Options Price Price Options Name Date(1) ($) ($) ($) (#) (#) (#) (#) (#) ($Sh)(4) ($Sh)(5) Awards(6) R.M. Lance $ – 2,720,000 $6,800,000 – – – – – $ – $ – $ – 2/18/2014 – – – – – 569,400 65.46300 65.37 5,790,798 2/18/2014 – – 93,439 186,878 – – – – 6,116,797 J.W. Sheets – 888,000 2,220,000 – – – – – – – – 2/18/2014 – – – – – 170,300 65.46300 65.37 1,731,951 2/18/2014 – – 27,944 55,888 – – – – 1,829,298 M.J. Fox – 1,427,150 3,567,875 – – – – – – – – 2/18/2014 – – – – – 268,500 65.46300 65.37 2,730,645 2/18/2014 – – 44,060 88,120 – – – – 2,884,300 A.J. Hirshberg – 1,221,375 3,053,438 – – – – – – – – 2/18/2014 – – – – – 198,300 65.46300 65.37 2,016,711 2/18/2014 – – 32,539 65,078 – – – – 2,130,101 3/1/2014 – – 3,556 7,112 – – – – 236,794 3/1/2014 – – 6,793 13,586 – – – – 452,346 3/1/2014 – – 6,018 12,036 – – – – 400,738 D.E. Wallette, Jr. – 874,000 2,185,000 – – – – – – – – 2/18/2014 – – – – – 167,600 65.46300 65.37 1,704,492 2/18/2014 – – 27,504 55,008 – – – – 1,800,494 (1) The grant date shown is the date on which the HRCC approved the target awards or in the case of pro-rated promotional awards under the PSP program, the effective date of the promotion. (2) Threshold and maximum awards are based on the program provisions under VCIP. Actual awards earned can range from zero to 200 percent of the target awards for corporate and award unit performance, with a further possible adjustment of up to 50 percent of the target awards for individual performance. Amounts reflect estimated possible cash payouts under VCIP after the close of the performance period. The estimated amounts are calculated based on the applicable annual target and base salary for each Named Executive Officer in effect for the 2014 performance period. If threshold levels of performance are not met, then the payout can be zero. The HRCC also retains the authority to make awards under the program at its discretion. Actual payouts under VCIP for 2014 are based on actual base salaries earned in 2014 and are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 55. (3) Threshold and maximum awards are based on the program provisions under the PSP. Actual awards earned can range from zero to 200 percent of the target awards. The HRCC retains the authority to make awards under the program at its discretion, including awards greater than the maximum payout, although at its December 2014 meeting, the HRCC adopted a resolution limiting the award to 200 percent of target for future awards. The promotion approved for Mr. Hirshberg by the HRCC on February 18, 2014, and effective March 1, 2014, was, under the terms of PSP, taken into account in calculating the pro-rated increases to his target awards for PSP X, PSP XI and PSP XII, respectively. (4) The exercise price is the average of the high and low prices of ConocoPhillips common stock, as reported on the NYSE, on the date of the grant (or on the last preceding date for which there was a reported sale, in the absence of any reported sales on the grant date). Accordingly, the option has no immediately realizable value on the grant date, and any potential payout reflects an increase in share price after the grant date. The Company’s stockholder-approved 2014 Omnibus Stock and Performance Incentive Plan provides for the use of such an average price in setting the exercise price on options, unless the HRCC directs otherwise. The immediate predecessor plans, the stockholder-approved 2004, 2009, and 2011 Omnibus Stock and Performance Incentive Plans, had the same provision. Grants made before May 13, 2009, were made under the 2004 Plan, grants made before May 11, 2011, but after May 12, 2009, were made under the 2009 Plan, and grants made before May 13, 2014, but after May 11, 2011, were made under the 2011 Plan. (5) The closing price is the closing price of ConocoPhillips common stock, as reported on the NYSE, on the date of the grant. (6) For equity incentive plan awards, these amounts represent the grant date fair value at target level under PSP as determined pursuant to FASB ASC Topic 718. For option awards, these amounts represent the grant date fair value of the option awards using a Black-Scholes-Merton-based methodology to value the options. Actual value realized upon vesting of the PSP award or option exercise depends on market prices at the time of exercise. For other stock awards, these amounts represent the grant date fair value of the restricted stock or restricted stock unit awards determined pursuant to FASB ASC Topic 718. See the “Employee Benefit Plans” section of Note 17 in the Notes to Consolidated Financial Statements in the Company’s 2014 Annual Report on Form 10-K, for a discussion of the relevant assumptions used in this determination. ConocoPhillips 2015 PROXY STATEMENT 59 |
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(1) All options shown in the table have a maximum term for exercise of ten years from the grant date. Under certain circumstances, the terms for exercise may be shorter, and in certain circumstances, the options may be forfeited and cancelled. All awards shown in the table have associated restrictions upon transferability. (2) The options shown in this column vested and became exercisable in 2014 or prior years (although under certain termination circumstances, the options may still be forfeited). Options become exercisable in one-third increments on the first, second, and third anniversaries of the grant date. (3) Represents the final one-third vesting of the February 9, 2012, grant, which became exercisable on February 9, 2015. (4) Represents the final two-thirds vesting of the February 5, 2013, grant, half of which became exercisable on February 5, 2015, and the remainder to become exercisable on February 5, 2016. (5) Represents the February 18, 2014, grant, one-third of which became exercisable on February 18, 2015, one-third of which will become exercisable on February 18, 2016, and the final third of which will become exercisable on February 18, 2017. (6) No stock awards were made to the Named Executive Officers in 2014 except as a long-term incentive award under the PSP (shown in the columns labeled “Stock Awards”) or pursuant to elections made by a Named Executive Officer to receive cash compensation in the form of restricted stock units. Amounts above include PSP awards for the performance period beginning after the spinoff that completed in December 2014 (PSP X), shown at adjusted target. At its February 17, 2015, meeting, the HRCC approved final payout levels for the Named Executive Officers with regard to PSP X, as follows: Mr. Lance, 162,965 shares; Mr. Sheets, 48,613 shares; Mr. Fox, 74,172 shares; Mr. Hirshberg, 63,634 shares; and Mr. Wallette, 43,777 shares. Stock awards shown in the columns entitled Number of Shares or Units of Stock That Have Not Vested and Market Value of Shares or Units of Stock That Have Not Vested continue to have restrictions upon transferability. Under the PSP, stock awards are made in the form of restricted stock units or restricted stock, the former having been used in the most recent awards. The terms and conditions of both are substantially the same, requiring restriction on transferability until separation from service from the Company, although for performance periods beginning after 2008 and before 2013, restrictions will lapse five years from the anniversary of the grant date unless the employee has elected prior to the beginning of the performance period to defer the lapsing of such restrictions until separation from service from the Company and for performance periods beginning after 2012, restrictions will lapse on the third anniversary of the award date. Except in cases where the five-year provision applies, forfeiture is expected to occur if the separation is not the result of death, disability, layoff, retirement after the executive has reached the age of 55 with five years of service, or after a change of control, although the HRCC has the authority to waive forfeiture. Restricted stock awards have voting rights and pay dividends. Restricted stock unit awards have no voting rights and pay dividend equivalents, but no dividend equivalents are paid or accrued for awards made under the PSP until after the applicable performance period has ended. Dividend equivalents, if any, on restricted stock units held are paid in cash or credited to each officer’s account in the form of additional stock units. Neither pays dividends or dividend equivalents at preferential rates. Restricted stock held by the Named Executive Officers prior to November 17, 2001, was converted to restricted stock units prior to the completion of the merger of Conoco Inc. and Phillips Petroleum Company, with the original restrictions still in place. Awards for ongoing performance periods under PSP beginning prior to 2015 (PSP XI [January 2013 – December 2015] and PSP XII [January 2014 – December 2016]) are shown at target levels in the columns entitled Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested and Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested. There is no assurance that these awards will be granted at, below, or above target after the end of the relevant performance periods, as the determination of whether to make an actual grant and the amount of any actual grant for Named Executive Officers is within the discretion of the HRCC. Until an actual grant is made, these target awards have no voting rights and pay no dividends or dividend equivalents. Stock awards shown reflect the closing price of ConocoPhillips common stock, as reported on the NYSE, on December 31, 2014 ($69.06), the last trading day of 2014. Amounts presented in Number of Shares or Units of Stock That Have Not Vested and Market Value of Shares or Units of Stock That Have Not Vested represent restricted stock and restricted stock unit awards granted with respect to prior periods. The plans and programs under which such grants were made provide that awards made in the form of restricted stock and restricted stock units be held in such form until the recipient retires (with respect to awards made before 2009) or eight years (with respect to awards made from 2009 through 2012), with the possible election to hold until retirement, or three years (with regard to awards made in 2013 or later), with payouts for the last to be made in cash (unless voluntarily deferred to an account in the Company’s Key Employee Deferred Compensation Plan). If such awards immediately vested upon completion of the relevant performance period, as we are informed by our compensation consultant is more typical for restricted stock programs, the amounts reflected in this column would be zero for awards made in years prior to 2012. (7) Includes 7,624 restricted shares for LTIP VIII – PSP I initial payout for which restrictions lapse at retirement; includes 5,834 restricted stock units for LTIP VIII – LTIP IX for which restrictions lapse at retirement; includes 106,204 restricted stock units related to grants for PSP I final payout – PSP VI for which restrictions lapse following separation from service; includes 99,538 restricted stock units related to grants for PSP VII – PSP IX for which restrictions lapse five years from grant date; includes 31,939 restricted stock units related to grants for PSP VIII Tail, 117,833 restricted stock units related to grants for PSP IX Tail, and 94,968 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; and includes 46,100 restricted stock units for which restrictions lapse on May 8, 2015. For certain awards, Mr. Lance has voluntarily elected to defer the lapsing of restrictions until separation from service. Subsequent elections may also impact the final timing of the payout of these awards. (8) Includes 5,724 restricted shares for LTIP X and PSP I initial payout for which restrictions lapse at retirement; includes 11,079 restricted stock units for LTIP VII – LTIP IX for which restrictions lapse at retirement; includes 61,433 restricted stock units related to grants for PSP I final payout – PSP VI for which restrictions lapse following separation from service; includes 66,429 restricted stock units related to grants for PSP VII – PSP IX for which restrictions lapse five years from grant date; includes 7,021 restricted stock units related to grants for PSP VIII Tail, 30,251 restricted stock units related to grants for PSP IX Tail, and 28,329 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; and includes 1,908 restricted stock units for which restrictions lapse on May 8, 2015. For certain awards, Mr. Sheets has voluntarily elected to defer the lapsing of restrictions until separation from service. Subsequent elections may also impact the final timing of the payout of these awards. (9) Includes 5,684 restricted stock units related to grants for PSP VIII and IX for which restrictions lapse five years from grant date; includes 11,303 restricted stock units related to grants for PSP VIII Tail, 49,591 restricted stock units related to grants for IX Tail, and 43,224 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; includes 31,221 restricted stock units for which restrictions lapse on May 8, 2015; also includes 79,102 restricted stock units for which restrictions lapse 50 percent on January 1, 2016, and 50 percent on January 1, 2017. Subsequent elections may also impact the final timing of the payout of these awards. (10) Includes 63,407 restricted stock units related to grants for PSP VII – PSP IX for which restrictions lapse five years from grant date; includes 10,698 restricted stock units related to grants for PSP VIII Tail, 38,322 restricted stock units related to grants for PSP IX Tail, and 37,083 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; includes 4,687 restricted stock units for which restrictions lapse on May 8, 2015. Subsequent elections may also impact the final timing of the payout of these awards. (11) Includes 31,099 restricted stock units related to grants for PSP I final payout – PSP VI for which restrictions lapse following separation from service; includes 38,061 restricted stock units related to grants for PSP VII – PSP IX for which restrictions lapse five years from grant date; includes 6,528 restricted stock units related to grants for PSP VIII Tail, 27,522 restricted stock units related to grants for PSP IX Tail, and 25,511 restricted stock units related to grants for PSP X, for which restrictions lapse five years from grant date of final approved award and that will be settled in cash; and includes 6,109 restricted stock units for which restrictions lapse on May 8, 2015. For certain awards, Mr. Wallette has voluntarily elected to defer the lapsing of restrictions until separation from service. Subsequent elections may also impact the final timing of the payout of these awards. (12) Reflects potential stock awards under ongoing performance periods for the PSP, for the performance periods from January 2013 through December 2015 (Mr. Lance, 116,946 target units; Mr. Sheets, 29,888 target units; Mr. Fox, 48,624 target units; Mr. Hirshberg, 41,609 target units; and Mr. Wallette, 29,302 target units) and January 2014 through December 2016 (93,439 target units; Mr. Sheets, 27,944 target units; Mr. Fox, 44,060 target units; Mr. Hirshberg, 38,557 target units; and Mr. Wallette, 27,504 target units). There is no assurance that these awards will be granted at, below, or above target after the end of the relevant performance periods, as the determination of whether to make an actual grant and the amount of any actual grant for Named Executive Officers is within the discretion of the HRCC. ConocoPhillips 2015 PROXY STATEMENT 61 |
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Eligible pension compensation generally includes salary and annual incentive compensation. However, under Title I, if an eligible employee receives layoff benefits from the Company, eligible pension compensation includes the annualized salary for the year of layoff, rather than actual salary, and years of credited service are increased by any period for which layoff benefits are calculated. Furthermore, certain foreign service as an employee of Phillips Petroleum Company is counted as time and a quarter when determining the service element in the benefit formula under Title I. Among the Named Executive Officers, only Mr. Wallette had any time credited for such foreign service. The notes to the table below provide further detail on that credited service. The plan was amended so that no extra service is credited with regard to foreign assignments after 1991. Benefits under Title II are based on monthly pay and interest credits to a cash balance account created on the first day of the month after a participant’s hire date. Pay credits are equal to a percentage of total salary and annual incentive compensation. Participants whose combined years of age and service total less than 44 receive a 6 percent pay credit, those with 44 through 65 receive a 7 percent pay credit, and those with 66 or more receive a 9 percent pay credit. Normal retirement age is 65, but participants may receive their vested benefit upon termination of employment at any age. Eligible pension compensation under Titles I and II is limited in accordance with the Internal Revenue Code. In 2014, that limit was $260,000. The Internal Revenue Code also limits the annual benefit (expressed as an annuity) available under Titles I and II. In 2014, that limit was $210,000 (reduced actuarially for ages below 62). In addition to participation in the U.S.-based plans as described above, Mr. Fox is a participant in the ConocoPhillips UK Pension Plan (the UK Plan), a defined benefit pension plan that is funded through a trust, with regard to the time he was on the U.K. payroll. The UK Plan is a U.K. registered plan with Her Majesty’s Revenue and Customs. The UK Plan consists of 2 sections: the ConocoPhillips section and the Heritage Conoco section. The ConocoPhillips section is contributory. The Heritage Conoco section is non-contributory. Mr. Fox is vested in and will be eligible for a benefit as a deferred vested participant in the Heritage Conoco section. Mr. Fox is not retirement eligible until age 55. The UK Plan provides a final-averageearnings type of pension benefit for eligible employees payable at normal pension age or early retirement upon approval by the Pension Board of Trustees. Under the provisions of the Plan, normal retirement occurs upon termination and after age 60 and entitles the recipient to full benefits. Early retirement may occur after termination and age 55, but results in reduced benefits for each year prior to age 60 that benefits are paid. In general, retirement benefits are calculated as the product of 1.75% times years of credited service times final pensionable salary. Final pensionable salary is basic annual salary plus pensionable allowances earned in the 12 months before active membership in the UK Plan ceased. The UK Plan allows participants a choice of taking a full annuity or a tax free cash lump sum up to 25% of the benefit and a reduced annuity. Both choices are actuarially equivalent and the lump sum is capped at 25% of the lifetime allowance. As a registered pension plan, the maximum total increase in value that can occur in a tax year under all U.K. registered pension plans is equal to the annual allowance, plus any unused allowances from the three prior tax years. The annual allowance for each of tax years 2012/2013, 2013/2014 and 2014/2015 is £50,000. Annual additions in excess of the maximum total increase are subject to tax charge. In addition, a lifetime allowance is imposed. The standard lifetime allowance for each of tax years 2012/2013, 2013/2014 and 2014/2015 is £1.5 million. If the total value of U.K. registered pension benefits exceeds a participant’s lifetime allowance, legislation dictates the excess will incur a tax penalty. In addition, the Company maintains several nonqualified pension plans. These are funded through the general assets of the Company, although the Company also maintains trusts of the type generally known as “rabbi trusts” that may be used to pay benefits under the nonqualified pension plans. The plan available to the Named Executive Officers is the ConocoPhillips Key Employee Supplemental Retirement Plan (“KESRP”). This plan is designed to replace benefits that would otherwise not be received due to limitations contained in the Internal Revenue Code that apply to qualified plans. The two such limitations that most frequently impact the benefits to employees are the limit on compensation that can be taken into account in determining benefit accruals and the maximum annual pension benefit. In 2014, the former limit was set at $260,000, while the latter was set at $210,000. The KESRP determines a benefit without regard to such limits, and then reduces that benefit by the amount of benefit payable from the related qualified plan, the CPRP. Thus, in operation the combined benefits payable from the related plans for the eligible employee equals the benefit that would have been paid if there had been no limitations imposed by the Internal Revenue Code. Benefits under KESRP are generally paid in a single sum at the later of age 55 or six months after retirement. When payments do not begin until after retirement, interest at then current six-month Treasury-bill rates, under most circumstances, will be credited on the delayed benefits. Distribution may also be made upon a determination of death or disability. Certain foreign service as an employee of Phillips Petroleum Company is counted as time and a quarter when determining the service element in the benefit formula under KESRP. Among the Named Executive Officers, only Mr. Wallette had any time credited for such foreign service. The notes to the table below provide further detail on that credited service. Each of the Named Executive Officers is eligible for, and is vested in, KESRP. ConocoPhillips 2015 PROXY STATEMENT 63 |
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Executive Compensation Tables continued Number of Years Present Value of Payments During Credited Service Accumulated Benefits Last Fiscal Year Name Plan Name (#) ($)(1) ($) R.M. Lance Title I - ConocoPhillips Retirement Plan 31 874,459 – ConocoPhillips Key Employee Supplemental Retirement Plan 31 20,161,038 – J.W. Sheets Title I - ConocoPhillips Retirement Plan 35 1,563,486 – ConocoPhillips Key Employee Supplemental Retirement Plan 35 10,476,684 – M.J. Fox(2) Title II - ConocoPhillips Retirement Plan 29 282,167 – ConocoPhillips UK Pension Plan 20 1,239,018 – ConocoPhillips Key Employee Supplemental Retirement Plan 29 594,624 – A.J. Hirshberg(3) Title II - ConocoPhillips Retirement Plan 4 88,605 – ConocoPhillips Key Employee Supplemental Retirement Plan 32 11,122,267 – D.E. Wallette, Jr.(4) Title I - ConocoPhillips Retirement Plan 34 1,517,360 – ConocoPhillips Key Employee Supplemental Retirement Plan 34 9,101,675 – (1) In determining the present value of the accumulated benefit for each Named Executive Officer, the eligible pension compensation, as defined on pages 62 through 64, used to calculate the amounts in this column as of December 31, 2014, for each Named Executive Officer is: Mr. Lance, $4,233,359; Mr. Sheets, $1,853,835; Mr. Fox, $3,190,604; Mr. Hirshberg, $2,298,126; and Mr. Wallette, $1,640,061. Mr. Fox’s UK pension benefit and eligible pension compensation was converted to U.S. dollars at an exchange rate per British Pound Sterling of $1.5579 as of December 31, 2014. (2) Mr. Fox became an employee of ConocoPhillips on January 1, 2012. Prior to joining ConocoPhillips, Mr. Fox was an employee of Nexen Inc. None of the benefits earned by Mr. Fox as an employee of Nexen are included in the table. The service credited to Mr. Fox does not include his time of service with Nexen. However, prior to his service at Nexen, Mr. Fox had been an employee of ConocoPhillips and ConocoPhillips UK. Mr. Fox’s service shown in the table includes that prior service with ConocoPhillips, in accordance with the standard terms and conditions of the applicable plans. Under Title II, and related provisions in KESRP, Mr. Fox received pay credits equal to 9% of his pension compensation in 2014, when his combined age and years of service exceeded 65. See the narrative above for a discussion of this feature. For these purposes, years of service would include total years of service with ConocoPhillips, which, in Mr. Fox’s case, are 29. (3) Mr. Hirshberg became an employee of ConocoPhillips on October 6, 2010. Prior to joining ConocoPhillips, Mr. Hirshberg was employed by ExxonMobil and participated in its defined benefit plans. None of the benefits earned by Mr. Hirshberg as an employee of ExxonMobil are included in the table. The service credited to Mr. Hirshberg does not include his time of service with ExxonMobil with regard to calculation of his benefit under Title II, but, pursuant to the offer letter and resolutions approved by the HRCC in connection with his hire, service credited to Mr. Hirshberg with regard to calculation of his benefit under KESRP does include his time of service with ExxonMobil. This is reflected in the table by showing different service crediting periods for Mr. Hirshberg with regard to each of the plans. The service crediting period for Title II is also included in the service crediting period for KESRP. (4) Includes additional credited service for Mr. Wallette of 7.25 months related to foreign service. Mr. Lance was an employee of ARCO Alaska, which was acquired by Phillips Petroleum Company in 2000. As such, a special provision applies in calculating pension benefits for such employees under Title I. First, the Company calculates a benefit under the Title I formula using service with both ARCO and ConocoPhillips, subtracting from the result the value of the benefit under the ARCO plan through the time of the acquisition (for which the BP Retirement Accumulation Plan remains liable, after the acquisition of ARCO by BP and certain plan mergers). Next, the Company calculates a benefit under the Title I formula using only service with ConocoPhillips. The Company compares the results of the two methods and the employee receives the larger benefit. For Mr. Lance, that calculation currently provides a larger benefit under the first method. The table reflects that benefit, showing only the value payable from the plan of ConocoPhillips, not from the BP Retirement Accumulation Plan. Mr. Fox was previously an employee of Conoco UK, which merged with a Phillips subsidiary in 2002, at the merger of Conoco Inc. and Phillips Petroleum Company. Upon leaving the Company in 2003, Mr. Fox earned a deferred vested pension benefit in the ConocoPhillips UK Pension Plan. When Mr. Fox returned to ConocoPhillips, he became a participant in the U.S. CPRP Title II. The deferred vested benefit earned as a participant in the ConocoPhillips UK Pension Plan is taken into account when determining his Title II benefit in CPRP and his KESRP benefit. Mr. Hirshberg was previously an employee of Exxon Mobil Corporation. In connection with his hiring by ConocoPhillips, the Company agreed to provide Mr. Hirshberg with a benefit under KESRP equal to the benefit calculated under KESRP for a participant in Title I of CPRP, reduced by actual benefits payable from CPRP or other ConocoPhillips plans and by estimated benefits payable from the plans of ExxonMobil. Mr. Hirshberg is vested in the benefit payable under KESRP. The table reflects that benefit, showing only the values payable from the plans of ConocoPhillips, not from the plans of ExxonMobil. Except where otherwise noted, assumptions used in calculating the present value of accumulated benefits in the table are found in Note 17 in the Notes to Consolidated Financial Statements in the Company’s 2014 Annual Report on Form 10-K. 64 ConocoPhillips 2015 PROXY STATEMENT |
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Executive Compensation Tables continued Executive Registrant Aggregate Aggregate Aggregate Beginning Contributions Contributions Earnings Withdrawals/ Balance Balance in Last FY in Last FY in Last FY Distributions at Last FYE Name Applicable Plan(1) ($) ($)(2) ($)(3) ($)(4) ($) ($)(5) R.M. Lance Defined Contribution Make-Up Plan of ConocoPhillips $1,022,484 $ – $129,600 $ 40,815 $ – $1,192,898 Key Employee Deferred Compensation Plan of ConocoPhillips 2,166,815 170,000 – 111,420 – 2,448,234 J.W. Sheets Defined Contribution Make-Up Plan of ConocoPhillips 558,434 – 56,520 5,127 – 620,082 Key Employee Deferred Compensation Plan of ConocoPhillips 3,759,000 – – 259,648 – 4,018,648 M.J. Fox Defined Contribution Make-Up Plan of ConocoPhillips 183,408 – 88,290 14,545 – 286,243 Key Employee Deferred Compensation Plan of ConocoPhillips – – – – – – A.J. Hirshberg Defined Contribution Make-Up Plan of ConocoPhillips 275,628 – 74,310 6,779 – 356,717 Key Employee Deferred Compensation Plan of ConocoPhillips – – – – – – D.E. Wallette, Jr. Defined Contribution Make-Up Plan of ConocoPhillips 283,284 – 55,260 1,351 – 339,895 Key Employee Deferred Compensation Plan of ConocoPhillips 3,869,334 437,000 – 267,569 – 4,573,903 (1) Our primary defined contribution deferred compensation programs for executives (KEDCP and DCMP) make a variety of investments available to participants. As of December 31, 2014, there were a total of 97 investment options, 39 of which were the same as those available in the Company’s primary tax-qualified defined contribution plan for employees (its 401(k) plan, the ConocoPhillips Savings Plan) and 58 of which were other various mutual fund options approved by an administrator designated by the relevant plan. (2) Reflects deferrals by the Named Executive Officer under the KEDCP in 2014 (included in the Salary column of the Summary Compensation Table for Messrs. Lance and Wallette). In addition to the amounts shown for 2014, deferrals by the NEO under the KEDCP for earlier years (included in the Salary column or Non-Equity Incentive Plan Compensation column, as noted, for the respective years) were as follows: In 2013, Mr. Lance, elected to defer $166,667 in salary and Mr. Wallette elected to defer $576,459 in 2012 VCIP; and in 2012, Mr. Sheets elected to defer $768,972 in 2011 VCIP and Mr. Wallette elected to defer $154,288 in salary and $518,920 in 2011 VCIP. (3) Reflects contributions by the Company under the DCMP in 2014 (included in the All Other Compensation column of the Summary Compensation Table on page 55 for 2014). In addition to the amounts shown for 2014, contributions by the Company under the DCMP in earlier years (included in the All Other Compensation column of this Summary Compensation Table for those respective years) were as follows: In 2013, for Mr. Lance, $211,188, for Mr. Sheets, $98,408, for Mr. Fox, $144,837, for Mr. Hirshberg, $124,626, and for Mr. Wallette, $83,907; and in 2012, for Mr. Lance, $85,974, for Mr. Sheets, $48,817, for Mr. Fox, $18,621, for Mr. Hirshberg, $71,189, and for Mr. Wallette, $26,307. (4) None of these earnings are included in the Summary Compensation Table for 2014. (5) Reflects contributions by our Named Executive Officers, contributions by the Company, and earnings on balances prior to 2014; plus contributions by our Named Executive Officers, contributions by the Company, and earnings for 2014, less any distributions. 66 ConocoPhillips 2015 PROXY STATEMENT |
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Executive Compensation Tables continued The CICSP covers executives in salary grades generally corresponding to vice president and higher. Under the CICSP if the employment of a participant in the plan is terminated by the Company within two years after a “change in control” of ConocoPhillips, other than for cause, or by the participant for good reason, as such terms are defined in the plan, upon executing a general release of liability, the participant will be entitled to: • A lump-sum cash payment equal to two or three times the sum of the employee’s base salary and the higher of current target VCIP compensation or previous two years’ average VCIP compensation; • A lump-sum cash payment equal to the present value of the increase in pension benefits that would result from the crediting of an additional two or three years to the employee’s number of years of age and service under the applicable pension plan; • A lump-sum cash payment equal to the Company cost of certain welfare benefits for an additional two or three years; • Continuation in eligibility for a pro rata portion of the annual VCIP compensation for which the employee is eligible in the year of termination; and • If necessary, a gross-up payment sufficient to compensate the participant for the amount of any excise tax imposed on payments made under the plan or otherwise pursuant to section 4999 of the Internal Revenue Code and for any taxes imposed on this additional payment, although if the applicable payments are not more than 110 percent of the “safe harbor” amount under section 280G of the Internal Revenue Code, the payments are “cut back” to the safe harbor amount rather than a grossup payment being made. Employees who became participants in the plan after the spinoff of the Company are not eligible for this gross-up payment. Upon a change in control, each participant’s equity awards will vest and any applicable restrictions will lapse. Participants will continue to be able to exercise stock options for their remaining terms, but exercisability of stock options will not be accelerated. No distributions are made with respect to restricted stock units until after the participant separates from service. After a change in control, the CICSP may not be amended or terminated if such amendment would be adverse to the interests of any eligible employee, without the employee’s written consent. Amounts payable under the plan will be offset by any payments or benefits that are payable to the severed employee under any other plan, policy, or program of ConocoPhillips relating to severance, and amounts may also be reduced in the event of willful and bad faith conduct demonstrably injurious to the Company, monetarily or otherwise, or if required by law to be “clawed back,” such as may be the case in certain circumstances under the Sarbanes-Oxley Act or the Dodd-Frank Act. Effective January 1, 2014, the CICSP has been amended to modify the accelerated vesting provisions for equity awards. As of the effective date, accelerated vesting for any equity awards granted after December 31, 2013, attributable to performance periods beginning on or after January 1, 2014, that are assumed, or substituted for, by an acquirer, will occur only following both a change in control and a termination of employment. Termination of employment includes involuntary termination for cause or voluntary termination for good reason. This plan revision does not apply to any awards granted prior to or attributable to performance periods prior to January 1, 2014. ConocoPhillips Key Employee Change in Control Severance Plan Other Arrangements Mr. Hirshberg became an employee of ConocoPhillips on October 6, 2010. The HRCC approved an offer letter to him which described the terms and conditions of employment, including the fact that he would serve as an at-will employee. The letter also provided certain protections against termination events. He will be considered to have been terminated by the Company if the Company terminates his employment either without cause or if his employment is terminated by mutual agreement, or if he initiates the termination of his employment (but only if given good reason to do so), prior to attaining age 55. Any severance benefits to which he may become entitled prior to attainment of age 55 will not be less than the severance benefits provided under the letter, the CPESP, and the CICSP as those plans were in effect on the date of the letter. 68 ConocoPhillips 2015 PROXY STATEMENT |
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Quantification of Severance Payments The tables below reflect the amount of incremental compensation payable in excess of the items listed above to each of our Named Executive Officers in the event of termination of such executive’s employment other than as a result of voluntary resignation. The amount of compensation payable to each Named Executive Officer upon involuntary not-for-cause termination, for-cause termination, termination following a change-incontrol (“CIC”) (either involuntarily without cause or for good reason) and in the event of the death or disability of the executive is shown below. The amounts shown assume that such termination was effective as of December 31, 2014, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company. The following tables reflect additional incremental amounts to which each of our Named Executive Officers would be entitled if their employment were terminated due to the events described above. Involuntary Involuntary or Executive Benefits and Not–for–Cause For–Cause Good Reason Payments Upon Termination Termination (Not CIC) Termination* Termination (CIC) Death Disability R.M. Lance† Base Salary $ 3,400,000 $ – $ 5,100,000 $ – $ – Short–term Incentive 5,440,000 – 10,642,301 – – Variable Cash Incentive Program 2,720,000 – 2,720,000 2,720,000 2,720,000 January 2012 – December 2014 (performance period) 11,254,363 – 11,254,363 11,254,363 11,254,363 January 2013 – December 2015 (performance period) 5,384,194 – 8,076,291 5,384,194 5,384,194 January 2014 – December 2016 (performance period) 2,150,943 – 6,452,897 2,150,943 2,150,943 Restricted Stock/Units from prior periods 35,911,291 – 28,261,976 35,911,291 35,911,291 Stock Options/SARs: Unvested and Accelerated 6,659,495 – 6,830,173 6,830,173 6,830,173 Incremental Pension 13,226,484 – 15,107,483 – – Post–employment Health & Welfare 34,119 – 51,299 – – Life Insurance – – – 3,400,000 – 280G Tax Gross–up – – 25,423,893 – – 86,180,889 – 119,920,676 67,650,964 64,250,964 Involuntary Involuntary or Executive Benefits and Not–for–Cause For–Cause Good Reason Payments Upon Termination Termination (Not CIC) Termination* Termination (CIC) Death Disability J.W. Sheets† Base Salary $1,776,000 $ – $ 2,664,000 $ – $ – Short–term Incentive 1,776,000 – 3,454,860 – – Variable Cash Incentive Program – (888,000) – – – January 2012 – December 2014 (performance period) – (3,357,214) – – – January 2013 – December 2015 (performance period) – (1,376,021) 688,044 – – January 2014 – December 2016 (performance period) – (643,225) 1,286,588 – – Restricted Stock/Units from prior periods – – – – – Stock Options/SARs: Unvested and Accelerated – (2,099,731) – – – Incremental Pension 2,536,611 – 3,850,051 – – Post–employment Health & Welfare 34,415 – 51,622 – – Life Insurance – – – 1,776,000 – 280G Tax Gross–up – – 5,694,494 – – 6,123,026 (8,364,191) 17,689,659 1,776,000 – ConocoPhillips 2015 PROXY STATEMENT 69 |
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Executive Compensation Tables continued Involuntary Involuntary or Executive Benefits and Not–for–Cause For–Cause Good Reason Payments Upon Termination Termination (Not CIC) Termination* Termination (CIC) Death Disability M.J. Fox† Base Salary $ 2,482,000 $ – $ 3,723,000 $ – $ – Short–term Incentive 2,854,300 – 4,842,681 – – Variable Cash Incentive Program 1,427,150 – 1,427,150 1,427,150 1,427,150 May 2012 – December 2013 (performance period) 5,122,318 – 5,122,318 5,122,318 5,122,318 January 2012 – December 2014 (performance period) 2,238,649 – 3,357,973 2,238,649 2,238,649 January 2013 – December 2015 (performance period) 1,014,215 – 3,042,784 1,014,215 1,014,215 Restricted Stock/Units from prior periods 12,420,626 – 12,216,783 12,420,626 12,420,626 Stock Options/SARs: Unvested and Accelerated 2,976,582 – 3,057,065 3,057,065 3,057,065 Incremental Pension 555,326 – 846,639 – – Post–employment Health & Welfare 39,200 – 62,524 – – Life Insurance – – – 2,482,000 – 280G Tax Gross–up – – 7,604,998 – – 31,130,366 – 45,303,916 27,762,023 25,280,023 Involuntary Involuntary or Executive Benefits and Not–for–Cause For–Cause Good Reason Payments Upon Termination Termination (Not CIC) Termination* Termination (CIC) Death Disability A.J. Hirshberg† Base Salary $ 2,192,000 $ – $ 3,288,000 $ – $ – Short–term Incentive 2,520,800 – 4,250,833 – – Variable Cash Incentive Program 1,260,400 – 1,260,400 1,260,400 1,260,400 May 2012 – December 2013 (performance period) 4,394,564 – 4,394,564 4,394,564 4,394,564 January 2012 – December 2014 (performance period) 1,816,140 – 2,873,518 1,816,140 1,816,140 January 2013 – December 2015 (performance period) 871,192 – 2,662,746 871,192 871,192 Restricted Stock/Units from prior periods 10,361,070 – 8,087,893 10,361,070 10,361,070 Stock Options/SARs: Unvested and Accelerated 2,428,863 – 2,488,303 2,488,303 2,488,303 Incremental Pension 6,182,572 – 7,486,863 – – Post–employment Health & Welfare 129,530 – 195,723 – – Life Insurance – – – 2,192,000 – 280G Tax Gross–up – – 8,813,844 – – 32,157,130 – 45,802,687 23,383,669 21,191,669 70 ConocoPhillips 2015 PROXY STATEMENT |
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Involuntary Involuntary or Executive Benefits and Not–for–Cause For–Cause Good Reason Payments Upon Termination Termination (Not CIC) Termination* Termination (CIC) Death Disability D.E. Wallette, Jr.† Base Salary $ 1,748,000 $ – $ 2,622,000 $ – $ – Short–term Incentive 1,748,000 – 3,126,344 – – Variable Cash Incentive Program – (874,000) – – – May 2012 – December 2013 (performance period) – (3,023,240) – – – January 2012 – December 2014 (performance period) – (1,312,416) 711,180 – – January 2013 – December 2015 (performance period) – (633,142) 1,266,284 – – Restricted Stock/Units from prior periods – – – – – Stock Options/SARs: Unvested and Accelerated – (1,744,879) – – – Incremental Pension 2,224,873 – 3,373,483 – – Post–employment Health & Welfare 33,047 – 49,571 – – Life Insurance – – – 1,748,000 – 280G Tax Gross–up – – 5,345,919 – – 5,753,920 (7,587,677) 16,494,781 1,748,000 – * As discussed in the narrative preceding the tables above, the amounts shown indicate the difference in compensation arising from the stated type of termination in comparison to a voluntary resignation. In the case of a For-Cause Termination, we have assumed that the Company would act to invoke the “detrimental activity” clause contained in our equity awards and compensation programs. For more about the detrimental activity clause, see “Executive Compensation Governance—Clawback Policy” on page 54. For a Named Executive Officer who has not reached the retirement age and service threshold contained in those equity awards and compensation programs (age 55 with 5 years of service), voluntary resignation would prevent earning awards for ongoing performance periods under VCIP, PSP, and the Stock Option Program, and would cause the loss of prior awards under PSP (or other restricted stock or restricted stock units) and stock options. For a Named Executive Officer who has reached the retirement age and service threshold in those programs, a voluntary resignation would be deemed a retirement and thus, no loss of those awards would normally occur. However, prior to the awards actually being delivered as cash or stock (including upon the exercise of an option), the awards remain at risk, even for a Named Executive Officer who has reached the age and service threshold. If the Company were to invoke the detrimental activity clause, amounts that would normally be paid in connection with a voluntary resignation to a Named Executive Officer who had reached the age and service threshold would instead be forfeited. The negative amounts shown above represent the value of awards that Messrs. Sheets and Wallette would forfeit in such a case, since Messrs. Sheets and Wallette have reached that threshold. † Notes Applicable to All Termination Tables—In preparing each of the tables above, certain assumptions have been made. Benefits that would be available generally to all or substantially all salaried employees on the U.S. payroll are not included in the amounts shown. The following assumptions were also made: • Base Salary—For the base salary amounts, in the event of an involuntary not-for-cause termination not related to a change in control (“regular involuntary termination”), the amount reflects two times base salary, while in the event of an involuntary or good reason termination related to a change in control (“CIC termination”), the amount reflects three times base salary. • Short-Term Incentives—For the short-term incentive amounts, in the event of a regular involuntary termination, the amount reflects two times current VCIP target, while in the event of a CIC termination, the amount reflects three times current VCIP target or three times the average of the prior two VCIP payouts. • Variable Cash Incentive Program—For the VCIP amounts, in the event of a regular involuntary termination or a CIC termination, the amount reflects the employee’s pro rata current VCIP target. Targets for VCIP are for a full year and are pro rata for the Named Executive Officers based on time spent in their respective positions. • Long-Term Incentives—For the performance periods related to PSP, amounts for the May 2012 - December 2014 period are shown at the payout amount that was awarded in February 2015, while amounts for other ongoing performance periods are shown at target, including any adjustments for promotion or demotion made since the target awards were granted. For restricted stock and restricted stock units awarded under PSP, amounts reflect the closing price of ConocoPhillips common stock on the last trading day of 2014 (December 31, 2014), as reported on the NYSE, of $69.06, the last trading day of 2014. In the Change-in-Control column it is assumed that a CIC event will not trigger acceleration of any Phillips 66 equity awards that were awarded as part of the equity conversion upon the spinoff. • Stock Options—For stock options where the December 31, 2014, ConocoPhillips common stock price was higher than the option exercise price, the amounts reflect the intrinsic value as if the options had been exercised on December 31, 2014, but only regarding the options that the executive would have retained for the specific termination event. For options with respect to which the December 31, 2014, ConocoPhillips common stock price was lower than the option exercise price, the amounts reflect a zero intrinsic value regarding the options that the executive would have retained for the specific termination event. • Incremental Pension Values—For the incremental pension value, the amounts reflect the single sum value of the increment due to an additional two years of age and service with associated pension compensation in the event of a regular involuntary termination (three years in the event of a CIC termination), regardless of whether the value is provided directly through a defined benefit plan or through the relevant severance plan. • 280G Tax Gross-up—Each Named Executive Officer is entitled, under the CICSP, to an associated “excise tax gross-up” to the extent any CIC payment triggers the golden parachute excise tax provisions under Section 4999 of the Internal Revenue Code (within certain limitations). While this provision does not apply to any employee who began participation in the plan following the spinoff, all of the Named Executive Officers were participants in the plan at that time. The following material assumptions were used to estimate excise taxes and associated tax gross-ups: • Options are valued using a Black-Scholes-Merton-based option methodology; • PSP X awards are treated as earned awards that would be subject to time-vesting conditions only given the performance measurement period closed on December 31, 2014; • Parachute payments for time-vested stock options, restricted stock and restricted stock units were valued using Treas. Reg. Section 1.280G-1 Q&A 24(b) or (c) as applicable; and • Calculations assume certain performance-based pay such as PSP awards still in an ongoing performance period and pro rata VCIP payments are reasonable compensation for services rendered prior to the CIC based on the portion of the performance period that would have elapsed through December 31, 2014. ConocoPhillips 2015 PROXY STATEMENT 71 |
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Stockholder Proposal: Report on Lobbying Expenditures continued What does the Board recommend? THE BOARD RECOMMENDS YOU VOTE “AGAINST” THIS PROPOSAL FOR THE FOLLOWING REASONS: AGAINST Board Recommendation Against Proposal 4-6 4 ConocoPhillips complies with all lobbying disclosure requirements under federal, state and local laws and regulations. We continually provide our stockholders with useful information about our political and lobbying activities. For example, a description of the Company’s Political Policies, Procedures and Giving, which includes our policies on lobbying and grassroots related activities, is posted on our website at www.conocophillips.com, along with itemized political contributions to candidates and to other political entities, which are updated every six months. The Board believes it has a responsibility to stockholders and employees to be engaged in the political process, in order to protect and promote their shared interests. The Board believes that such engagement further upholds ConocoPhillips’ support of political free speech by individuals, companies and organizations, including trade associations, who hold positions with which we agree or may sometimes disagree. The Board believes it is in the best interest of stockholders to support the legislative process by making prudent corporate political contributions to political organizations when such contributions are consistent with business objectives and are permitted by federal, state and local laws. The Board also believes in making the Company’s political contributions transparent to interested parties, as evidenced by our regular disclosures of this information on the ConocoPhillips website. According to the Center for Political Accountability’s 2014 CPA-Zicklin Index of Corporate Political Disclosure and Accountability, which rates corporate political transparency, ConocoPhillips’ political spending policies and procedures rank in the first tier among the top 300 companies in the S&P 500 index. The Company further complies with the federal reporting of lobbying activities, which are filed quarterly with the Office of the Clerk, and are viewable on the website of the U.S. House of Representatives at http://lobbyingdisclosure.house.gov/ and the U.S. Senate website at / http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm. All state lobbying disclosure requirements—which vary by jurisdiction— are met, with some states publishing those reports on their respective websites. Several components of the special report requested within this proposal are already provided in our public disclosures, including payments for direct lobbying and our policies, procedures, management oversight and decision making related to lobbying activities. ConocoPhillips has adopted and published our Political Policies, Procedures and Giving information on our website regarding political contributions to candidates and other political entities, as well as lobbying and grassroots activities. The Company also files publicly available disclosure reports with the U.S. House of Representatives, the U.S. Senate, the Federal Election Commission, and the ethics/campaign finance agencies operated by the states where we lobby and/or make corporate contributions to candidates. With respect to trade association contributions, the Company’s primary purpose in joining groups such as the National Association of Manufacturers, the U.S. Chamber of Commerce, and the American Petroleum Institute is not for political purposes, nor does the Company agree with all positions taken by trade and industry associations on issues. In fact, ConocoPhillips publicly acknowledges that we do take contrary positions from time to time. The greater benefits we receive from trade and industry association memberships are the general business, technical and industry standard-setting expertise that these organizations provide—as well as having a voice in support of our own corporate objectives when policy priorities are established. A list of the organizations to which ConocoPhillips has contributed $50,000 or more in dues annually is available on our public website, in addition to a discussion of our objectives for engagement with such organizations. Furthermore, as with prior reporting periods, ConocoPhillips again stipulated that none of our trade association dues be applied to independent expenditures focused on the election or defeat of any federal candidates for the period January 1, 2014 – December 31, 2014. The Board is confident that the Company’s political and lobbying activities are aligned with its long-term interests and does not believe that a special report beyond our current voluntary and mandatory lobbying disclosures is either necessary or an efficient use of Company resources. Therefore, the adoption of this resolution is unnecessary and the Board recommends you vote AGAINST this proposal. 76 ConocoPhillips 2015 PROXY STATEMENT |
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AGAINST Board Recommendation Against Proposal 4-6 5 At ConocoPhillips, approximately 70% of the Named Executive Officers’ compensation is granted in the form of equity-based awards. The value is divided equally between stock options and restricted stock units granted pursuant to the Performance Share Program, or PSP. This mix of equity results in a high level of pay at risk and a greater alignment of pay-for-performance than companies with less performance-oriented equity mixes, some of which may include up to 100% time-vested restricted stock. Prior to 2011, shares granted pursuant to the PSP included restrictions on transfer of the underlying shares following the satisfaction of performance targets at the end of the 3-year performance period from a minimum of 5 years to retirement of the executive in some cases. For these awards, the Board believes that it is appropriate to provide that these awards vest immediately upon change in control, because the performance period has been completed, performance assessed and appropriately rewarded; however, the terms and conditions of those awards continue to place restrictions on transfer and allow forfeiture in certain cases for the lengthy periods that the restrictions remain. The Board believes that these awards have been earned by the employees and should not be at risk of reduction as a result of a change in control. The terms of such awards allow vesting upon change in control, although no distribution of shares would occur until the end of the restriction period. This proposal includes these historical awards and asserts that the Company’s practices may permit a “windfall unrelated to an executive’s performance” and implies that these performance shares were not earned. The Board does not believe that this description accurately reflects our programs. In 2012, the Committee changed the PSP program so that payouts occurred after the completion of the performance period without further restrictions. In 2014, stockholders approved the 2014 Omnibus Stock and Incentive Plan of ConocoPhillips (the “Plan”) with approximately 90% of votes cast in favor of the Plan. The Plan provided for accelerated vesting of equity awards in connection with a “double trigger,” or upon an involuntary termination of the executive’s employment following change in control. Beginning in 2014, all equity grants now have double trigger vesting upon a change in control. We believe the overwhelming stockholder approval of the Plan further supports the Board’s position that the Company’s current practices with respect to vesting upon a change in control are reasonable and serve to align the executive’s interests with that of stockholders. Further, the Board believes that having a distinct policy of acceleration following a change in control reduces uncertainty and incentivizes management to remain with the Company through the change in control. A change in control creates uncertainty surrounding the plans of new management and whether, through a change in ownership, employees will forfeit their ability to realize the full value from unvested equity awards. The risk of that loss creates distractions for current management that can impact the consideration, negotiation and implementation of the change in control transaction. The Board believes the Company’s current policies for treating equity compensation following a change in control assure participants that they will realize the full value of their awards if their employment is terminated following a change in control. The Board believes this structure will help to maintain continuity and focus of the management team throughout a potentially challenging time, thus increasing stockholder value and maintaining a proper alignment with the interests of stockholders. With respect to the pro rata vesting required by the proposal, as the Company learned during the spinoff of Phillips 66 in 2012, measuring performance in the middle of a performance period is difficult and problematic. This is especially true with regard to multi-year performance periods where results are unlikely to be ratable over the performance period. In addition, many performance metrics are based on results relative to peers and this data may not be available in the middle of a performance period. Therefore, given the difficulty with accurately measuring performance prior to the performance period end, the Board believes that vesting at target upon a change in control is appropriate. Finally, attracting and retaining highly qualified employees is extremely competitive, particularly in the oil and gas industry. The Board believes that adoption of this proposal would unnecessarily limit the discretion of the Committee with respect to the compensation arrangements it can offer to potential executives, limiting the Company’s ability to effectively compete for these high level employees. The Board believes these compensation decisions should be made by a compensation committee composed of independent directors, allowing the Company the flexibility to respond to changing conditions in the marketplace for executive talent. Taking all these factors into account, the Board believes the Company’s current plan design is appropriate and effective, is in the best interest of the Company and its stockholders, and is the right program design for ConocoPhillips. Therefore, the Board recommends that you vote AGAINST this proposal. Stockholder Proposal: No Accelerated Vesting Upon Change in Control continued 78 ConocoPhillips 2015 PROXY STATEMENT |
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AGAINST Board Recommendation Against Proposal 4-6 6 Within the five performance metrics listed above, the Committee established the following various Operational measures, (i) for VCIP, our annual incentive program—absolute targets for Production, Capital Expenditures, Operating & Overhead Costs, Direct Operating Efficiency (a measure of operational up-time), Reserve Replacement Ratio, and milestones for Exploration and (ii) for PSP, which represents 50% of our long-term incentive program—absolute targets for Production and Reserve Replacement Ratio and absolute and relative targets for HSE. The Committee believes that the use of Reserve Replacement Ratio as a metric is critical to the Company’s long-term growth strategy and is consistent with the Company’s focus as an independent E&P company. The Committee also believes that Reserve Replacement Ratio is an important measure of the Company’s operational success and should apply to all employees in the same manner in order to preserve the historical integrity of the Company’s incentive plans. This proposal is limited to senior executive officers which would require the Company to maintain separate compensation processes and procedures for nonexecutive employees, fundamentally altering its compensation principles. To maintain or grow our production volumes, we must continue to add to our proved reserve base. The recording and reporting of proved reserves are governed by criteria established by regulations of the SEC and FASB. Data used in calculating proved reserves estimates includes pertinent seismic information, geologic maps, well logs, production tests, material balance calculations, reservoir simulation models, well performance data, operating procedures and relevant economic criteria. We have a company-wide, comprehensive, SEC-compliant internal policy that governs the determination and reporting of proved reserves. As part of our internal control process, each business unit’s reserve processes and controls are reviewed annually by an internal team which is headed by the Company’s Manager of Reserves Compliance and Reporting. This team, composed of internal reservoir engineers, geologists, finance personnel and a senior representative from DeGolyer and MacNaughton (a thirdparty petroleum engineering consulting firm), reviews the business units’ reserves for adherence to SEC guidelines and company policy and ensures reserves are calculated using consistent and appropriate standards and procedures. This team is independent of business unit line management and is responsible for reporting its findings to senior management and our internal audit group. The Committee relies on the Company’s adherence to regulations and internal policies that govern the determination of proved reserves. Such reliance allows the Committee to make informed decisions and appropriately adjust compensation positively or negatively to reflect performance. To deviate from the Company’s internal policy to calculate proved reserves as would be required under this proposal would be in direct conflict with the Company’s philosophy to align executive compensation with the performance of the Company relative to its strategy and integrate all elements of compensation into a comprehensive package that aligns goals, efforts, and results throughout the organization. Furthermore, it could cause confusion in the marketplace, lead to inconsistent comparisons with the Company’s performance and compensation peers and potentially cause uncertain results. The Company’s use of Reserve Replacement Ratio as a metric is consistent with market practice and well understood by industry analysts. The Committee believes that the SEC- and FASB-compliant calculation methodology described above is appropriate to measure performance against this important metric, and does not believe that adopting a policy specifying an arbitrary price for Brent Crude that may be contrary to relevant economic criteria would appropriately reward executives for performance. Further, the Company notes that currently and at year end, the price of Brent Crude was significantly lower than the adjustment price dictated by the proposal. The Board believes that a requirement to adjust the Reserves Replacement Ratio to reflect a specific higher-than-market price under a “Demand Reduction Scenario” would only serve to increase the likelihood of confusing and uncertain results. Additionally, ConocoPhillips actively engages with its stockholders. Throughout the past year, the Company engaged in dialogue with a significant number of large stockholders to better understand stockholder views regarding the Company’s compensation programs and has received strong, positive feedback. As a result of this engagement process, the Company learned that these stockholders are generally pleased with the Company’s compensation programs and believe executive compensation has historically been well aligned with the Company’s long-term strategy, including the Company’s use of multiple metrics that appropriately incentivize performance. The Committee values this input. The Committee is confident that the Company’s incentive programs are appropriate and well aligned with our long-term strategy. The Board does not believe that a policy requiring that the Company make an adjustment to its proved reserves calculation under a “Demand Reduction Scenario” in order to determine the amount of executive compensation as described in this proposal is either necessary or in the best interests of the Company. Therefore, the Board recommends that you vote AGAINST this proposal. Stockholder Proposal: Policy on Using Reserves Metrics to Determine Incentive Compensation continued 80 ConocoPhillips 2015 PROXY STATEMENT |
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several avenues to voice their opinions to, and influence, the Board. For example, to ensure director accountability, we have implemented a number of key protections, including: • all directors are elected annually; • directors are elected by a majority vote standard, with a requirement that directors offer to resign if they fail to receive the requisite number of votes to be elected; • ten of our eleven director nominees are independent under NYSE rules; and • directors may be removed with or without cause by a majority of the shares entitled to vote. In addition to accountability, our governance policies and practices provide stockholders with the ability to effectively voice their opinions to the Board. Our stockholders are able to: • propose director nominees to the Committee on Directors’ Affairs; • communicate with the Board or with the directors serving on the Board; • nominate directors pursuant to the Company’s bylaws and solicit proxies for director nominees under federal proxy rules; • submit proposals for consideration at an annual meeting and for inclusion in the Company’s proxy statement, subject to certain conditions and Securities and Exchange Commission rules; and • express their views on our executive compensation program through our annual “Say on Pay” vote. Moreover the Company has an active program of engagement with stockholders. We seek out the views of stockholders regularly with respect to important matters involving governance and operations. We therefore believe the Company’s existing policies and procedures ensure Board accountability to stockholders, while striking an appropriate balance that also enables the Board to oversee the Company’s business and affairs effectively and efficiently in order to serve the long-term benefit of our stockholders. These structures are designed to foster responsiveness to stockholders while allowing the Board to devote the time and attention necessary to oversee the execution of the Company’s strategy. The proposal would undermine the important role of the independent Committee on Directors’ Affairs. The Committee on Directors’ Affairs is focused on nominating and retaining those directors that together reflect the mix of skills, experiences, knowledge and independence that will best position the Board for effective decision-making and risk oversight related to the business. Accordingly, the Committee on Directors’ Affairs balances interests in continuity with the need for fresh perspectives and diversity that board refreshment and director succession planning can bring. This process is a combination of conducting deliberate searches for directors with specific skills and experiences to fill gaps and vacancies as needed, as well as making opportunistic additions when exceptional individuals become available. In seeking director candidates, the Committee on Directors’ Affairs considers individuals recommended by stockholders as well as those recommended by directors or search firms retained by the Committee on Directors’ Affairs. This thoughtful, annual assessment of nominee qualifications is one of the essential tools employed by the Committee on Directors’ Affairs to achieve a cohesive Board capable of successfully responding to our unique challenges. The Committee on Directors’ Affairs regularly evaluates the size and composition of the Board and continually assesses whether the composition appropriately relates to the Company’s strategic needs, which change as our business environment evolves. Since the spinoff of Phillips 66 in 2012, we have added one new Board member in each of 2012, 2013 and 2014, and have added two new Board members in 2015. We have a diverse Board with expertise in the areas of energy, finance, environmental, public policy, international business and leadership. The gradual addition of new members to the Board has proven effective in providing sufficient time for each new director to become oriented to the business and strategy of ConocoPhillips, as well as allowing for adjustments in boardroom dynamics. Allowing stockholders to nominate competing candidates for directors in our proxy statement without the benefit of the rigorous assessment described above could undermine the role of the independent Committee on Directors’ Affairs and our Board in the election of directors. The Committee on Directors’ Affairs and the Board are best situated to assess the particular characteristics and qualifications of potential director nominees and determine whether they will contribute to a well-rounded and well-functioning Board of Directors that operates both openly and collaboratively and provides effective oversight of management. This process ensures that each of our Board members represents the interests of all stockholders, not just those with special interests. The proposal could have a number of other significant adverse consequences. The Board believes that proxy access may have a number of significant adverse consequences and could harm our Company, Board and stockholders by: Lowering the Commitment Necessary of Stockholders Seeking to Influence Corporate Control. In the absence of proxy access, a stockholder seeking to elect its own nominee to the Board should undertake the expense of Stockholder Proposal: Proxy Access continued 82 ConocoPhillips 2015 PROXY STATEMENT |
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AGAINST Board Recommendation Against Proposal 4-6 7 soliciting proxies on its nominee’s behalf. This additional cost increases the likelihood that those seeking to influence decision-making at the Board level are serious about their involvement in the future of the Company and are willing to demonstrate their commitment when asking the Company and other stockholders to provide them with a significant role in the oversight and direction of the business. It is appropriate to expect this level of commitment from a stockholder or group of stockholders who seek to influence the future of the Company although they have not been elected by its stockholders and owe no duty to the Company or other stockholders. Increasing the Influence of Special Interest Groups. Proxy access allows a stockholder with a special interest to use the proxy access process to promote a specific agenda rather than the interests of all stockholders, creating the risk of politicizing the Board election process at virtually no cost to the proponent. Candidates placed directly into nomination by holders or groups of holders of as little as 3% of our outstanding shares, who would only need to win a plurality of votes to be elected in a contested election, may serve the special interests and particular agendas of those holders and fail to represent the best interests of the Company’s stockholders as a whole. Indeed, at least one of our stockholders has advised us that a 3% threshold is too low given the potential costs and disruption that could result from a proxy access regime. Unlike the members of the Committee on Directors’ Affairs, who owe fiduciary duties to all of our stockholders when recommending director candidates, a stockholder making a nomination through the proposed proxy access process has no fiduciary obligations to the Company or other stockholders and may look to serve only its own interests, disrupting the Board in its efforts to promote the long-term interests of all stockholders. Encouraging Short-Termism while Significantly Disrupting Company and Board Operations. With proxy access, contested director elections could become routine. Divisive proxy contests could occur every year and substantially disrupt Company affairs and the effective functioning of our Board without adding significant value to the current process. This may harm ConocoPhillips in various ways. High annual turnover could create an inexperienced Board lacking sufficient knowledge and understanding of our current and past business to provide meaningful and effective oversight of our operations and long-term strategies. Abrupt and frequent changes in the composition of our Board could also encourage a shortterm focus to the management of the business that would not be in the interests of our stockholders. In addition, ConocoPhillips’ management and directors would be required to divert their time from managing and overseeing Company business to focusing on proxy contests in the election of directors. Encouraging short-termism and creating frequent material distractions to management and the Board are very high costs to pay for a regime for which there is no demonstrated need. Indeed, in 2011, the SEC tried to implement proxy access, only to have the United States Court of Appeals for the District of Columbia overturn it precisely because it determined that the SEC had not adequately assessed the expense and distraction proxy contests would entail (and the SEC still has not done so). Discouraging Highly Qualified Director Candidates from Serving. The prospect of routinely standing for election in a contested situation may deter highly qualified individuals from service on the Board. The prospect of a perennial campaign also may cause incumbent directors to become excessively risk averse, thereby impairing their ability to provide sound and prudent guidance with respect to our operations and interests. Under the process overseen by the Committee on Directors’ Affairs, we currently have a well-functioning team of directors with a diverse range of expertise and experience. The Board believes that the existing measures it employs for the nomination and election of directors have created a Board that is responsive to stockholder input and promotes a strategy of long-term value creation. Disruption of the Board’s functioning could adversely affect the pursuit of our long-term strategy and put stockholder value at risk. For the foregoing reasons, we believe that this proposal is unnecessary, involves the risk of considerable harm to our Company and is not in the best interests of our stockholders. Therefore, the Board recommends you vote AGAINST this proposal. ConocoPhillips 2015 PROXY STATEMENT 83 |
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What are my voting choices for each of the proposals to be voted on at the 2015 Annual Meeting of Stockholders and how does the Board recommend that I vote my shares? * We will provide the name, address and share ownership of the stockholders submitting these proposals, along with the information for any co-filers, promptly upon a stockholder’s request. FOR The Board recommends a vote FOR each of the nominees. 1 Election of Directors For more information see page 15 PROPOSAL • vote in favor of all nominees; • vote in favor of specific nominees; • vote against all nominees; • vote against specific nominees; • abstain from voting with respect to all nominees; or • abstain from voting with respect to specific nominees. FOR The Board recommends a vote FOR the ratification. 4-6 2 Ratification of Independent Registered Public Accounting Firm For more information see page 23 PROPOSAL • vote in favor of the ratification; • vote against the ratification; or • abstain from voting on the ratification. FOR The Board recommends a vote FOR the advisory approval of executive compensation. 4-6 3 Advisory Approval of the Compensation of the Company’s Named Executive Officers For more information see page 27 PROPOSAL • vote in favor of the advisory proposal; • vote against the advisory proposal; or • abstain from voting on the advisory proposal. AGAINST The Board recommends a vote AGAINST the stockholder proposal. 4-6 4 Report of Lobbying Expenditures* For more information see page 75 STOCKHOLDER PROPOSAL • vote in favor of the proposal; • vote against the proposal; or • abstain from voting on the proposal. AGAINST The Board recommends a vote AGAINST the stockholder proposal. 4-6 5 No Accelerated Vesting Upon Change in Control* For more information see page 77 STOCKHOLDER PROPOSAL • vote in favor of the proposal; • vote against the proposal; or • abstain from voting on the proposal. AGAINST The Board recommends a vote AGAINST the stockholder proposal. 7 Proxy Access* For more information see page 81 STOCKHOLDER PROPOSAL • vote in favor of the proposal; • vote against the proposal; or • abstain from voting on the proposal. AGAINST The Board recommends a vote AGAINST the stockholder proposal. 4-6 6 Policy on Using Reserves Metrics to Determine Incentive Compensation* For more information see page 79 STOCKHOLDER PROPOSAL • vote in favor of the proposal; • vote against the proposal; or • abstain from voting on the proposal. Questions and Answers About the Annual Meeting and Voting continued 86 ConocoPhillips 2015 PROXY STATEMENT |
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How many votes are needed to approve each of the proposals? Each of the director nominees and all proposals submitted require the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. As an advisory vote, the proposal to approve executive compensation is not binding upon the Company. However, the Human Resources and Compensation Committee, which is responsible for designing and administering the Company’s executive compensation programs, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions. How do I vote if I hold my stock through ConocoPhillips’ employee benefit plans? If you hold your stock through ConocoPhillips’ employee benefit plans, you must do one of the following: • Vote over the Internet (instructions are in the email sent to you or on the notice and access form); • Vote by telephone (instructions are on the notice and access form); or • If you received a hard copy of your proxy materials, fill out the enclosed voting instruction card, date and sign it, and return it in the enclosed postage-paid envelope. You will receive a separate voting instruction card for each employee benefit plan under which you hold stock. Please pay close attention to the deadline for returning your voting instruction card to the plan trustee. The voting deadline for each plan is set forth on the voting instruction card. Please note that different plans may have different deadlines. How can I revoke my proxy? You can revoke your proxy by sending written notice of revocation of your proxy to our Corporate Secretary so that it is received prior to the close of business on May 11, 2015. Can I change my vote? Yes. You can change your vote at any time before the polls close at the Annual Meeting. You can do this by: • Voting again by telephone or over the Internet prior to 11:59 p.m. EDT on May 11, 2015; • Signing another proxy card with a later date and returning it to us prior to the meeting; or • Voting again at the meeting. By Internet Using a Tablet or Smartphone Scan this QR code 24/7 to vote with your mobile device (may require free software) Beneficial Stockholders: If you hold your ConocoPhillips stock in a brokerage account (that is, in “street name”), your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please follow the directions on your proxy card or voting instruction card carefully. Please note that brokers may not vote your shares on the election of directors, compensation matters or stockholder proposals in the absence of your specific instructions as to how to vote. Please provide your voting instructions so your vote can be counted on these matters. If you plan to vote in person at the Annual Meeting and you hold your ConocoPhillips stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting. By Internet Using Your Computer Visit 24/7 www.proxyvote.com By Telephone (800) 690-6903 Dial toll-free 24/7 (800) 690-6903 By Mailing Your Proxy Card If you elected to receive a hard copy of your proxy materials, fill out the enclosed proxy card, date and sign it, and return it in the enclosed postagepaid envelope. Stockholders of Record: You can vote either in person at the meeting or by proxy. Persons who vote by proxy need not, but are entitled to, attend the meeting. Even if you plan to attend the meeting, we encourage you to vote your shares by proxy. This proxy statement, the accompanying proxy card and the Company’s 2014 Annual Report are being made available to the Company’s stockholders on the Internet at www.proxyvote.com through the notice and access process. Vote your shares as follows – in all cases, have your proxy card in hand: How do I vote? ConocoPhillips 2015 PROXY STATEMENT 87 |
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Questions and Answers About the Annual Meeting and Voting continued Who counts the votes? We have hired Broadridge Financial Solutions, Inc. to count the votes represented by proxies and cast by ballot, and Jim Gaughan of Carl T. Hagberg and Associates has been appointed to act as Inspector of Election. When will the Company announce the voting results? We will announce the preliminary voting results at the Annual Meeting of Stockholders. The Company will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four days following the meeting. Will my shares be voted if I do not provide my proxy and do not attend the Annual Meeting? If you do not provide a proxy or vote your shares held in your name, your shares will not be voted. If you hold your shares in street name, your broker has the authority to vote your shares for certain routine matters even if you do not provide the broker with voting instructions. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2015 is considered to be a routine matter. If you do not give your broker instructions on how to vote your shares, the broker will return the proxy card without voting on proposals not considered routine. This is known as a broker non-vote. Without instructions from you, the broker may not vote on any proposals other than the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2015. As more fully described on your proxy card, if you hold your shares through certain ConocoPhillips employee benefit plans and do not vote your shares, your shares (along with all other shares in the plan for which votes are not cast) may be voted pro rata by the trustee in accordance with the votes directed by other participants in the plan who elect to act as a fiduciary entitled to direct the trustee of the applicable plan on how to vote the shares. What if I am a stockholder of record and return my proxy but do not vote for some of the matters listed on my proxy card? If you return a signed proxy card without indicating your vote, your shares will be voted “FOR” each of the director nominees listed on the card, “FOR” the ratification of Ernst & Young LLP as ConocoPhillips’ independent registered public accounting firm, “FOR” the approval of the compensation of our Named Executive Officers and “AGAINST” each of the stockholder proposals. What if I am a beneficial owner and do not give voting instructions to my broker? As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank or broker by the deadline provided in the materials you receive from your bank or broker. If you do not provide voting instructions to your bank or broker, whether your shares can be voted by such person depends on the type of item being considered for vote. Brokers may not vote shares held in street name on non-routine matters unless they have received voting instructions from the beneficial owners on how to vote those shares. The ratification of Ernst & Young LLP as our independent registered public accounting firm for 2015 is the only routine matter to be presented at the Annual Meeting on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions. Could other matters be decided at the Annual Meeting? We are not aware of any other matters to be presented at the meeting. If any matters are properly brought before the Annual Meeting, the persons named in your proxies will vote in accordance with their best judgment. Discretionary authority to vote on other matters is included in the proxy. Who can attend the Annual Meeting? Stockholders of record at the close of business on March 13, 2015 may attend the Annual Meeting. No cameras, recording equipment, laptops, tablets, cellular telephones, smartphones or other similar equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting, and security measures will be in effect to provide for the safety of attendees. You will need a photo ID to gain admission. 88 ConocoPhillips 2015 PROXY STATEMENT |
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Do I need a ticket to attend the Annual Meeting? Yes, you will need an admission ticket or proof of ownership of ConocoPhillips stock to enter the meeting. If your shares are registered in your name, you will find an admission ticket attached to the proxy card sent to you. If your shares are in the name of your broker or bank or you received your materials electronically, you will need to bring evidence of your stock ownership, such as your most recent brokerage statement. All stockholders will be required to present valid picture identification. IF YOU DO NOT HAVE VALID PICTURE IDENTIFICATION AND EITHER AN ADMISSION TICKET OR PROOF THAT YOU OWN CONOCOPHILLIPS STOCK, YOU MAY NOT BE ADMITTED INTO THE MEETING. Does the Company have a policy about directors’ attendance at the Annual Meeting? Pursuant to the Corporate Governance Guidelines, directors are expected to attend the Annual Meeting of Stockholders. All of the persons who were serving as directors at the time attended the 2014 Annual Meeting of Stockholders. How can I access ConocoPhillips’ proxy materials and annual report electronically? This proxy statement, the accompanying proxy card and the Company’s 2014 Annual Report are being made available to the Company’s stockholders on the Internet at www.proxyvote.com through the notice and access process. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. If you own ConocoPhillips stock in your name, you can choose this option and save us the cost of producing and mailing these documents by following the instructions on your proxy card or those provided when you vote by telephone or over the Internet. If you hold your ConocoPhillips stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet. If you choose to view future proxy statements and annual reports over the Internet, you will receive a Notice of Internet Availability next year in the mail containing the Internet address to use to access our proxy statement and annual report. Your choice will remain in effect unless you change your election following the receipt of a Notice of Internet Availability. You do not have to elect Internet access each year. If you later change your mind and would like to receive paper copies of our proxy statements and annual reports, you can request both by phone at (800) 579-1639, by email at sendmaterial@proxyvote.com and through the Internet at www.proxyvote.com. You will need your 12-digit control number located on your Notice of Internet Availability to request a package. You will also be provided with the opportunity to receive a copy of the proxy statement and annual report in future mailings. We also encourage you to visit our Annual Meeting website at www.conocophillips.com/annualmeeting that, among other things, will enable you to learn more about our Company, vote your proxy, listen to a live audio webcast of the meeting and elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. Why did my household receive a single set of proxy materials? SEC rules permit us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more stockholders reside if we believe the stockholders are members of the same family. This benefits both you and the Company, as it eliminates duplicate mailings that stockholders living at the same address receive and it reduces our printing and mailing costs. This rule applies to any annual reports, proxy statements, proxy statements combined with a prospectus or information statements. Each stockholder will continue to receive a separate proxy card or voting instruction card. Your household may have received a single set of proxy materials this year. If you prefer to receive your own copy now or in future years, please request a duplicate set by phone at (800) 579-1639, through the Internet at www.proxyvote.com, by email at sendmaterial@proxyvote.com, or by writing to ConocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholders to consent to such elimination, or through implied consent if a stockholder does not request continuation of duplicate mailings. Since not all brokers and nominees may offer stockholders the opportunity this year to eliminate duplicate mailings, you may need to contact your broker or nominee directly to discontinue duplicate mailings to your household. ConocoPhillips 2015 PROXY STATEMENT 89 |
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Questions and Answers About the Annual Meeting and Voting continued Will my vote be kept confidential? The Company’s Board of Directors has a policy that all stockholder proxies, ballots and tabulations that identify stockholders are to be maintained in confidence. No such document will be available for examination, and the identity and vote of any stockholder will not be disclosed, except as necessary to meet legal requirements and allow the inspectors of election to certify the results of the stockholder vote. The policy also provides that inspectors of election for stockholder votes must be independent and cannot be employees of the Company. Occasionally, stockholders provide written comments on their proxy card that may be forwarded to management. What is the cost of this proxy solicitation? Our Board of Directors has sent you this proxy statement. Our directors, officers and employees may solicit proxies by mail, by email, by telephone or in person. Those persons will receive no additional compensation for any solicitation activities. We will request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation materials to the beneficial owners of common stock held of record by those entities, and we will, upon the request of those record holders, reimburse reasonable forwarding expenses. We will pay the costs of preparing, printing, assembling and mailing the proxy materials used in the solicitation of proxies. In addition, we have hired Alliance Advisors to assist us in soliciting proxies, which it may do by mail, telephone or in person. We anticipate paying Alliance Advisors a fee of $20,000, plus expenses. PM “ When we think about what makes ConocoPhillips unique, and what drives us as an organization, the essence of the ConocoPhillips brand is Accountability + Performance. These two things guide not only what we do, but how we do it. I invite you to attend our Annual Meeting in May to learn more about our brand, our values and our company.” Ryan M. Lance, Chairman and Chief Executive Officer 90 ConocoPhillips 2015 PROXY STATEMENT |
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Appendix A continued Non-GAAP Price Normalized Cash Margin Reconciliation – 2014 $ Millions, Except as Indicated 2014 2013 Net Income Attributable to ConocoPhillips $ 6,869 9,156 Adjustments to exclude special items1 (260) (2,095) Adjusted earnings 6,609 7,061 Adjusted loss for Corporate and Other (non-GAAP)2 963 781 Operating segment depreciation, depletion and amortization (non-GAAP)3 8,225 7,338 Operating segment impairments (non-GAAP)4 29 27 Adjusted dry hole costs and leasehold impairments (non-GAAP)5 782 443 Price adjustment6 755 – Price Normalized Cash Margin $17,363 15,650 Per BOE Calculation Production from continuing operations (MBOED) 1,540 1,502 Production from continuing operations (MMBOE) 562 548 Net Income Attributable to ConocoPhillips per BOE $ 12.22 16.70 Percentage decrease (27)% Price Normalized Cash Margin per BOE $ 30.89 28.55 Percentage increase 8% 1 Adjustment to Exclude Special Items* Special items, pre-tax Net gain on asset sales $ (51) (1,142) Special items impairments (including leasehold impairment)** 1,214 498 Loss on capacity agreements 130 – Qatar depreciation adjustment 28 – Freeport LNG termination 846 – Pension settlement expense – 66 Pending claims and settlements (208) (137) FCCL international financial reporting standards depreciation adjustment – (44) Income from discontinued operations (1,147) (1,461) Special items, pre-tax $ 812 (2,220) Special items, after-tax Net gain on asset sales $ (38) (1,075) Special items impairments (including leasehold impairment)** 641 269 Loss on capacity agreements 83 – Deferred tax adjustment (59) – Qatar depreciation adjustment 28 – Tax benefit on interest expense (61) – Pension settlement expense – 41 Freeport LNG termination 545 – Pending claims and settlements (268) (118) Tax loss carryforward realization – (1) FCCL international financial reporting standards depreciation adjustment – (33) Income from discontinued operations (1,131) (1,178) Special items, after-tax $ (260) (2,095) *Generally, the threshold for special item’s is $25 million after-tax per event. The special items tax impacts were primarily calculated using the statutory rates in effect for each jurisdiction. **Includes 2014 impairment related exploration expense of $6 million pre-tax and $4 million after-tax. 92 ConocoPhillips 2015 PROXY STATEMENT |
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Non-GAAP Price Normalized Cash Margin Reconciliation continued $ Millions, Except as Indicated 2014 2013 2 Adjusted loss for Corporate and Other Corporate and Other loss $ 874 820 Exclude Corporate and Other special items 89 (39) Adjusted loss for Corporate and Other (non-GAAP) $ 963 781 3 Operating Segment Depreciation, Depletion and Amortization (non-GAAP) Depreciation, depletion and amortization $ 8,329 7,434 Exclude Corporate and Other depreciation, depletion and amortization (104) (96) Operating segment depreciation, depletion and amortization (non-GAAP) $ 8,225 7,338 4 Operating Segment Impairments (non-GAAP) Impairments $ 856 529 Exclude impairments special items (824) (498) Exclude Corporate and Other impairments (3) (4) Operating segment impairments (non-GAAP) $ 29 27 5 Adjusted Dry Hole Costs and Leasehold Impairments (non-GAAP) Dry hole costs and leasehold impairments $ 1,166 443 Exclude leasehold impairment special items (384) – Adjusted dry hole costs and leasehold impairments (non-GAAP) $ 782 443 6 Price Adjustment* Average Industry prices Dated Brent (dollars per barrel) $ 98.99 108.65 WTI (dollars per barrel) 93.17 97.90 Western Canada Select (dollars per barrel) 73.60 72.77 Weighted Average Mt Belvieu natural gas liquids (dollars per barrel) 37.51 38.85 U.S. Henry Hub – first on month (dollars per thousand cubic feet) 4.43 3.65 UK Gas – National Balancing Point (dollars per thousand cubic feet) 8.51 10.45 Net income adjustment ** Dated Brent $ 821 – WTI 177 – Western Canada Select (29) – Weighted Average Mt Belvieu natural gas liquids 17 – U.S. Henry Hub – first of month (328) – UK Gas – National Balancing Point 97 – Price adjustments* $ 755 – *Based on published sensitivities. **Represents the difference in industry prices multiplied by the midpoint of the Annualized Net Income Sensitivities, below. Annualized Net Income Sensitivities The following sensitivities were published during the 2014 ConocoPhillips Analyst Meeting: Crude Oil Brent/Alaska North Slope: $80-90 million change for $1 per barrel change ($85 million midpoint). West Texas Intermediate: $35-40 million change for $1 per barrel change ($37.5 million midpoint). Western Canada Select : $30-40 million change for $1 per barrel change ($35 million midpoint). Western Canada Select price represents a volumetric weighted average of Shorcan and Net Energy indices. North American NGL Representative blend: $10-15 million change for $1 per barrel change ($13.5 million midpoint). Natural Gas Henry Hub: $100-110 million change for $0.25 per thousand cubic feet change ($105 million midpoint). International gas: $10-15 million change for $0.25 per thousand cubic feet change ($12.5 million midpoint). ConocoPhillips 2015 PROXY STATEMENT 93 |
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Appendix A continued Non-GAAP Price Normalized Cash Margin Reconciliation – 2013 $ Millions, Except as Indicated 2013 2012 Net Income Attributable to ConocoPhillips $ 9,156 8,428 Adjustments to exclude special items1 (2,095) (1,694) Adjusted earnings 7,061 6,734 Adjusted loss for Corporate and Other (non-GAAP)2 781 813 Operating segment depreciation, depletion and amortization (non-GAAP)3 7,338 6,494 Operating segment impairments (non-GAAP)4 27 (23) Adjusted dry hole costs and leasehold impairments (non-GAAP)5 443 310 Price adjustment6 (305) – Price Normalized Cash Margin $15,345 14,328 Per BOE Calculation Production from continuing operations (MBOED) 1,502 1,527 Production from continuing operations (MMBOE) 548 559 Net Income Attributable to ConocoPhillips per BOE $ 16.70 15.08 Percentage increase 11% Price Normalized Cash Margin per BOE $ 27.99 25.64 Percentage increase 9% 1 Adjustment to Exclude Special Items* Special items, pre-tax Net gain on asset sales $ (1,142) (1,593) Special items impairments 498 1,259 Bohai Bay incidents – 119 Deferred tax adjustment – (72) Separation costs – 95 Premium on early debt retirement – 79 Pension settlement expense 66 141 Pending claims and settlements (137) (251) FCCL international financial reporting standards depreciation adjustment (44) – Income from discontinued operations (1,461) (1,762) Special items, pre-tax $ (2,220) (1,985) Special items, after-tax Net gain on asset sales $ (1,075) (1,532) Special items impairments 269 901 Bohai Bay incidents – 89 Deferred tax adjustment – (72) Separation costs – 84 Premium on early debt retirement – 68 Pension settlement expense 41 87 International tax law changes – 167 Tax loss carry forward realization – (236) Pending claims and settlements (118) (235) Tax loss carryforward realization (1) – FCCL international financial reporting standards depreciation adjustment (33) – Income from discontinued operations (1,178) (1,015) Special items, after-tax $ (2,095) (1,694) *Generally, the threshold for special item’s is $25 million after-tax per event. The special items tax impacts were primarily calculated using the statutory rates in effect for each jurisdiction. 94 ConocoPhillips 2015 PROXY STATEMENT |
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Non-GAAP Price Normalized Cash Margin Reconciliation - 2013 continued $ Millions, Except as Indicated 2013 2012 2 Adjusted loss for Corporate and Other Corporate and Other loss $ 820 993 Exclude Corporate and Other special items (39) (180) Adjusted loss for Corporate and Other (non-GAAP) $ 781 813 3 Operating Segment Depreciation, Depletion and Amortization (non-GAAP) Depreciation, depletion and amortization $ 7,434 6,580 Exclude Corporate and Other depreciation, depletion and amortization (96) (86) Operating segment depreciation, depletion and amortization (non-GAAP) $ 7,338 6,494 4 Operating Segment Impairments (non-GAAP) Impairments $ 529 680 Exclude impairments special items (498) (695) Exclude Corporate and Other impairments (4) (8) Operating segment impairments (non-GAAP) $ 27 (23) 5 Adjusted Dry Hole Costs and Leasehold Impairments (non-GAAP) Dry hole costs and leasehold impairments $ 443 874 Exclude dry hole cost special items – (28) Exclude leasehold impairment special items – (536) Adjusted dry hole costs and leasehold impairments (non-GAAP) $ 443 310 6 Price Adjustment* Average Industry prices Dated Brent (dollars per barrel) $108.65 111.58 WTI (dollars per barrel) 97.90 94.16 Western Canada Select (dollars per barrel) 72.77 73.18 Weighted Average Mt Belvieu natural gas liquids (dollars per barrel) 38.85 43.37 U.S. Henry Hub – first on month (dollars per thousand cubic feet) 3.65 2.79 UK Gas – National Balancing Point (dollars per thousand cubic feet) 10.45 9.25 Net income adjustment ** Dated Brent $ 234 – WTI (131) – Western Canada Select 9 – Weighted Average Mt Belvieu natural gas liquids 56 – U.S. Henry Hub – first of month (413) – UK Gas – National Balancing Point (60) – Price adjustments* $ (305) – *Based on published sensitivities. **Represents the difference in industry prices multiplied by the midpoint of the Annualized Net Income Sensitivities, below. Annualized Net Income Sensitivities The following sensitivities were published during the 2013 ConocoPhillips Analyst Meeting: Crude Oil Brent/Alaska North Slope: $75-85 million change for $1 per barrel change ($80 million midpoint). West Texas Intermediate: $30-40 million change for $1 per barrel change ($35 million midpoint). Western Canada Select : $20-25 million change for $1 per barrel change ($22.5 million midpoint). Western Canada Select price represents a volumetric weighted average of Shorcan and Net Energy indices. North American NGL Representative blend: $10-15 million change for $1 per barrel change ($12.5 million midpoint). Natural Gas Henry Hub: $115-125 million change for $0.25 per thousand cubic feet change ($120 million midpoint). International gas: $10-15 million change for $0.25 per thousand cubic feet change ($12.5 million midpoint). ConocoPhillips 2015 PROXY STATEMENT 95 |
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Stockholder Information Annual Meeting The ConocoPhillips annual meeting of stockholders will be held: Tuesday, May 12, 2015 Omni Houston Hotel at Westside 13210 Katy Freeway Houston, TX 77079 Notice of the meeting and proxy materials are being sent to all stockholders. Direct Stock Purchase and Dividend Reinvestment Plan The ConocoPhillips Investor Services Program is a direct stock purchase and dividend reinvestment plan that offers stockholders a convenient way to buy additional shares and reinvest their common stock dividends. Purchases of company stock through direct cash payment are commission free. Please call Computershare to request an enrollment package: Toll-free number: 800-356-0066 You may also enroll online at www.computershare.com/investor. Registered stockholders can access important investor communications online and sign up to receive future stockholders materials electronically by following the enrollment instructions. Principal and Registered Offices 600 N. Dairy Ashford Road Houston, TX 77079 2711 Centerville Road Wilmington, DE 19808 Stock Transfer Agent and Registrar Computershare 211 Quality Circle, Suite 210 College Station, TX 77845 www.computershare.com Information Requests For information about dividends and certificates, or to request a change of address form, stockholders may contact: Computershare P.O. Box 30170 College Station, TX 77842-3170 Toll-free number: 800-356-0066 Outside the U.S.: 201-680-6578 TDD for hearing impaired: 800-231-5469 TDD outside the U.S.: 201-680-6610 www.computershare.com/investor Personnel in the following offices can also answer investors’ questions about the company: Institutional Investors: ConocoPhillips Investor Relations 600 N. Dairy Ashford Road Houston, TX 77079 281-293-5000 investor.relations@conocophillips.com Individual Investors: ConocoPhillips Shareholder Relations 600 N. Dairy Ashford Road, ML3074 Houston, TX 77079 281-293-6800 shareholder.relations@conocophillips.com Compliance and Ethics For guidance, or to express concerns or ask questions about compliance and ethics issues, call ConocoPhillips’ Ethics Helpline toll-free: 877-327-2272, available 24 hours a day, seven days a week. The ethics office also may be contacted via email at ethics@conocophillips.com, the Internet at www.conocophillips.ethicspoint.com or by writing: Attn: Corporate Ethics Office ConocoPhillips 600 N. Dairy Ashford, ML3170 Houston, TX 77079 Copies of Proxy Statement and Annual Report Copies of this proxy statement and the 2014 Annual Report, as filed with the U.S. Securities and Exchange Commission, are available free by making a request on the company’s website, calling 918-661-3700 or writing: ConocoPhillips Reports B-13 Plaza Office Building 315 Johnstone Ave. Bartlesville, OK 74004 Website www.conocophillips.com The site includes resources of interest to investors, including news releases and presentations to securities analysts; copies of ConocoPhillips’ annual reports and proxy statements; reports to the U.S. Securities and Exchange Commission; and data on ConocoPhillips’ health, safety and environmental performance. 96 ConocoPhillips 2015 PROXY STATEMENT |
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www.facebook.com/conocophillips www.linkedin.com/company/conocophillips @conocophillips Explore ConocoPhillips Our vision is to be the E&P company of choice for all stakeholders by pioneering a new standard of excellence. Use these QR codes or URLs to learn more about ConocoPhillips: Follow ConocoPhillips on social media to keep up to date with our latest news and innovations wherever you are. ConocoPhillips is the world’s largest independent E&P company based on production and proved reserves. Headquartered in Houston, Texas, ConocoPhillips had operations and activities in 27 countries, $53 billion in annual revenue, $117 billion of total assets and approximately 19,100 employees as of December 31, 2014. Production from continuing operations, excluding Libya, averaged 1,532 MBOED in 2014, and proved reserves were 8.9 billion BOE as of December 31, 2014. For more information, please visit www.conocophillips.com. Read our 2014 Annual Report www.conocophillips.com/annualreport www.conocophillips.com/investor www.conocophillips.com/annualmeeting www.conocophillips.com/susdev Visit our Investor Relations website Visit our Annual Meeting website Read our Sustainability Reports 2 0 1 5 P R O X Y S T A T E M E N T accountability+ performance WORKFORCE expertise E&P EXPLORATION SPIRIT Values Australia Pacific LNG INNOVATION viable GROWTH EXCELLENCE CULTURE global APPRAISAL EAGLE FORD KEATHLEY CANYON CASH FLOW NEUTRALITY SUSTAINABLE core holding KEBABANGAN MARGINS dividend technical capability resilient safety low cost of supply diverse portfolio SOCIAL RESPONSIBILITY exports INDEPENDENT CD5 bakken GULF OF MEXICO BRITANNIA LTC Siakap NorthPetai foster creek CHARITABLE INVESTMENTS SURMONT FLEXIBLE GUMUSUT oil sands SENEGAL STAKEHOLDER ENGAGEMENT COLLABORATIVE eldfisk II SHALE DURABLE BRAND ConocoPhillips 2015 PROXY STATEMENT 97 |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: THIS VoTIng DIrecTIon carD IS VaLID onLY WHen SIgneD anD DaTeD. M86973-P63627 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain ! ! ! For Against Abstain CONOCOPHILLIPS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-3. 1. ELEcTION Of DIrEcTOrS Nominees: 1a. richard L. Armitage 1b. richard H. Auchinleck 1c. charles E. Bunch 1d. James E. copeland, Jr. 1e. John V. faraci 1f. Jody L. freeman 1g. Gay Huey Evans 1h. ryan M. Lance 1i. Arjun N. Murti 1k. Harald J. Norvik 1j. robert A. Niblock 2. Proposal to ratify appointment of Ernst & Young LLP as conocoPhillips' independent registered public accounting firm for 2015. 3. Advisory Approval of Executive compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 4-7. 5. No Accelerated Vesting Upon change in control. 6. Policy on Using reserves Metrics to Determine Incentive compensation. 7. Proxy Access. 8. In its discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. 4. report on Lobbying Expenditures. 600 N. DAIRY ASHFORD PETROLEUM BUILDING #3038 HOUSTON, TX 77079 ! ! ! ! ! ! ! ! ! VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until the cut-off date. Have your Voting Direction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FuTuRE STOCkHOLDER COMMuNICATIONS If you would like to reduce the costs incurred by conocoPhillips in mailing proxy materials, you can consent to receiving all future proxy statements, Voting Direction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your Voting Direction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your Voting Direction card and return it in the postage-paid envelope we have provided or return it to conocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual report are available at www.proxyvote.com. M86974-P63627 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNuAL MEETING OF STOCkHOLDERS MAY 12, 2015 The stockholder(s) hereby appoint(s) Jeff W. Sheets and Janet Langford Kelly, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common Stock of conocoPhillips that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 a.m., central Time, on May 12, 2015, at the Omni Houston Hotel at Westside, 13210 Katy freeway, Houston, Texas, and any adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECuTED, WILL BE VOTED AS DIRECTED BY THE STOCkHOLDER(S). IF NO SuCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOuNG LLP AS CONOCOPHILLIPS' INDEPENDENT REGISTERED PuBLIC ACCOuNTING FIRM, FOR THE ADVISORY APPROVAL OF EXECuTIVE COMPENSATION, AND AGAINST EACH OF THE STOCkHOLDER PROPOSALS. PLEASE MARk, SIGN, DATE AND RETuRN THIS PROXY CARD PROMPTLY uSING THE ENCLOSED REPLY ENVELOPE Continued and to be signed on reverse side ADMISSION TICkET If you plan on attending the Annual Meeting of Stockholders, you will be required to verify that you are a stockholder by presenting this admission ticket or proof of ownership together with valid picture identification. |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: THIS VoTIng DIrecTIon carD IS VaLID onLY WHen SIgneD anD DaTeD. M87024-Z65173 CONOCOPHILLIPS 600 N. DAIRY ASHFORD PETROLEUM BUILDING #3038 HOUSTON, TX 77079 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain ! ! ! For Against Abstain THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-3. 1. ELEcTION Of DIrEcTOrS Nominees: 1a. richard L. Armitage 1b. richard H. Auchinleck 1c. charles E. Bunch 1d. James E. copeland, Jr. 1e. John V. faraci 1f. Jody L. freeman 1g. Gay Huey Evans 1h. ryan M. Lance 1i. Arjun N. Murti 1k. Harald J. Norvik 1j. robert A. Niblock 2. Proposal to ratify appointment of Ernst & Young LLP as conocoPhillips' independent registered public accounting firm for 2015. 3. Advisory Approval of Executive compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 4-7. 5. No Accelerated Vesting Upon change in control. 6. Policy on Using reserves Metrics to Determine Incentive compensation. 7. Proxy Access. 8. In its discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. 4. report on Lobbying Expenditures. ! ! ! ! ! ! ! ! ! VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 7, 2015. Have your Voting Direction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FuTuRE PROXY MATERIALS If you would like to reduce the costs incurred by conocoPhillips in mailing proxy materials, you can consent to receiving all future proxy statements, Voting Direction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 7, 2015. Have your Voting Direction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your Voting Direction card and return it in the postage-paid envelope we have provided or return it to conocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual report are available at www.proxyvote.com. M87025-Z65173 ConocoPhillips Savings Plan CONFIDENTIAL FIDuCIARY VOTING DIRECTION ConocoPhillips Annual Meeting of Stockholders May 12, 2015 The undersigned hereby directs that Vanguard fiduciary Trust company, Trustee of the conocoPhillips Savings Plan ("cPSP"), vote all shares of stock representing the interest of cPSP participants who fail to give voting direction at the conocoPhillips Annual Meeting of Stockholders to be held at the Omni Houston Hotel at Westside, 13210 Katy freeway, Houston, Texas, on May 12, 2015, at 9:00 a.m., central Time, and at any adjournment thereof, in the manner indicated on the back of this card as to the matters shown and at its discretion as to any other matters that come before the meeting, all as described in the Notice and Proxy Statement. If Broadridge, the Tabulator for the Trustee, Vanguard fiduciary Trust company, does not receive this Voting Direction card by May 7, 2015 at 11:59 p.m. EDT, if you do not fill in any boxes on the back of this card, if you return this card unsigned, and if you do not vote by the Internet or telephone on or before May 7, 2015, any shares in the cPSP that you otherwise could have directed will be directed by other eligible employees who elect to direct such shares. Important Information - I understand that by electing to direct the Trustee's vote of shares which do not represent my own part of the CPSP that I become a fiduciary of the CPSP for voting such shares; that I must act in the best interests of all participants of the CPSP when giving directions for voting shares not representing my part of the CPSP; that I have read and understand my duties as a fiduciary as they are described on pages 32 and 33 of the CPSP Employee Handbook dated January 1, 2011; and that I may decline to accept the responsibility of a fiduciary as to such shares by NOT completing or returning this Voting Direction card or NOT voting by Internet or telephone. ConocoPhillips has acknowledged and agreed to honor the confidentiality of your voting instructions to the Trustee. The Trustee will keep your voting instructions confidential. This package contains your confidential Voting Direction card to instruct the Trustee of the Plan how to vote the shares of conocoPhillips common Stock in the cPSP Plan reflecting the interest of cPSP participants who fail to give voting direction. Also enclosed is the company's 2014 Annual report along with the Notice and Proxy Statement for the 2015 Annual Meeting. Please use these documents to help you decide how to direct the way the Trustee (Vanguard fiduciary Trust company) should vote. CONTINuED AND TO BE SIGNED ON REVERSE SIDE ADMISSION TICKET If you plan on attending the Annual Meeting of Stockholders, you will be required to verify that you are a stockholder by presenting this admission ticket or proof of ownership together with valid picture identification. |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: THIS VoTIng DIrecTIon carD IS VaLID onLY WHen SIgneD anD DaTeD. M87032-Z65174 CONOCOPHILLIPS 600 N. DAIRY ASHFORD PETROLEUM BUILDING #3038 HOUSTON, TX 77079 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain ! ! ! For Against Abstain THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-3. 1. ELEcTION Of DIrEcTOrS Nominees: 1a. richard L. Armitage 1b. richard H. Auchinleck 1c. charles E. Bunch 1d. James E. copeland, Jr. 1e. John V. faraci 1f. Jody L. freeman 1g. Gay Huey Evans 1h. ryan M. Lance 1i. Arjun N. Murti 1k. Harald J. Norvik 1j. robert A. Niblock 2. Proposal to ratify appointment of Ernst & Young LLP as conocoPhillips' independent registered public accounting firm for 2015. 3. Advisory Approval of Executive compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 4-7. 5. No Accelerated Vesting Upon change in control. 6. Policy on Using reserves Metrics to Determine Incentive compensation. 7. Proxy Access. 8. In its discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. 4. report on Lobbying Expenditures. ! ! ! ! ! ! ! ! ! VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 7, 2015. Have your Voting Direction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FuTuRE PROXY MATERIALS If you would like to reduce the costs incurred by conocoPhillips in mailing proxy materials, you can consent to receiving all future proxy statements, Voting Direction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 7, 2015. Have your Voting Direction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your Voting Direction card and return it in the postage-paid envelope we have provided or return it to conocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual report are available at www.proxyvote.com. M87033-Z65174 CONTINuED AND TO BE SIGNED ON REVERSE SIDE ADMISSION TICKET If you plan on attending the Annual Meeting of Stockholders, you will be required to verify that you are a stockholder by presenting this admission ticket or proof of ownership together with valid picture identification. ConocoPhillips Savings Plan CONFIDENTIAL VOTING DIRECTION ConocoPhillips Annual Meeting of Stockholders May 12, 2015 The undersigned hereby directs that Vanguard fiduciary Trust company, Trustee of the conocoPhillips Savings Plan ("cPSP"), vote all shares of conocoPhillips common Stock representing your interest in the cPSP (described on the back of this Voting Direction card) at the conocoPhillips Annual Meeting of Stockholders to be held at the Omni Houston Hotel at Westside, 13210 Katy freeway, Houston, Texas, on May 12, 2015, at 9:00 a.m., central Time, and at any adjournment thereof, in the manner indicated on the back of this card as to the matters shown and at its discretion as to any other matters that come before the meeting, all as described in the Notice and Proxy Statement. If Broadridge, the Tabulator for the Trustee, The Vanguard fiduciary Trust company, does not receive this Voting Direction card by 11:59 p.m. EDT on May 7, 2015, if you do not fill in any boxes on the back of this card, if you return this card unsigned, and if you do not vote by the Internet or telephone on or before May 7, 2015, any shares in the cPSP that you otherwise could have directed will be directed by other eligible employees who elect to direct such shares. ConocoPhillips has acknowledged and agreed to honor the confidentiality of your voting instructions to the Trustee. The Trustee will keep your voting instructions confidential. This package contains your confidential Voting Direction card to instruct the Trustee of the Plan how to vote the shares of conocoPhillips common Stock described on the back of the card representing your interest in the Plan. Also enclosed is the company's 2014 Annual report along with the Notice and Proxy Statement for the 2015 Annual Meeting. Please use these documents to help you decide how to direct the way the Trustee (Vanguard fiduciary Trust company) should vote. |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: THIS VoTIng DIrecTIon carD IS VaLID onLY WHen SIgneD anD DaTeD. M87043-Z65176 CONOCOPHILLIPS 600 N. DAIRY ASHFORD PETROLEUM BUILDING #3038 HOUSTON, TX 77079 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain ! ! ! For Against Abstain THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-3. 1. ELEcTION Of DIrEcTOrS Nominees: 1a. richard L. Armitage 1b. richard H. Auchinleck 1c. charles E. Bunch 1d. James E. copeland, Jr. 1e. John V. faraci 1f. Jody L. freeman 1g. Gay Huey Evans 1h. ryan M. Lance 1i. Arjun N. Murti 1k. Harald J. Norvik 1j. robert A. Niblock 2. Proposal to ratify appointment of Ernst & Young LLP as conocoPhillips' independent registered public accounting firm for 2015. 3. Advisory Approval of Executive compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 4-7. 5. No Accelerated Vesting Upon change in control. 6. Policy on Using reserves Metrics to Determine Incentive compensation. 7. Proxy Access. 8. In its discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. 4. report on Lobbying Expenditures. ! ! ! ! ! ! ! ! ! VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 5, 2015. Have your Voting Direction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FuTuRE PROXY MATERIALS If you would like to reduce the costs incurred by conocoPhillips in mailing proxy materials, you can consent to receiving all future proxy statements, Voting Direction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 5, 2015. Have your Voting Direction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your Voting Direction card and return it in the postage-paid envelope we have provided or return it to conocoPhillips, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual report are available at www.proxyvote.com. M87044-Z65176 ADMISSION TICKET If you plan on attending the Annual Meeting of Stockholders, you will be required to verify that you are a stockholder by presenting this admission ticket or proof of ownership together with valid picture identification. Continued and to be signed on reverse side CONOCOPHILLIPS uK, Australia, Norway Plans CONFIDENTIAL VOTING DIRECTION ConocoPhillips Annual Meeting of Stockholders May 12, 2015 The undersigned hereby directs that EES Trustees Limited, Trustee of the conocoPhillips Share Incentive Plan, conocoPhillips Overseas Stock Savings Plan (Australia or Norway), conoco Stock Ownership Plan, Employee Share Allocation Scheme of Phillips Petroleum company United Kingdom Limited, and/or conoco Employee Share Ownership Plan (the "Plan"), vote all shares of conocoPhillips common Stock (described on the back of this Voting Direction card) at the conocoPhillips Annual Meeting of Stockholders to be held at the Omni Houston Hotel at Westside, 13210 Katy freeway, Houston, Texas, on May 12, 2015, at 9:00 a.m., central Time, and at any adjournment thereof, in the manner indicated on the back of this card as to the matters shown and at its discretion as to any other matters that come before the meeting, all as described in the Notice and Proxy Statement. In order for your vote to be counted, Broadridge, the Tabulator for the Trustee, EES Trustees Limited, must receive this Voting Direction card no later than 11:59 p.m. EDT on May 5, 2015. If Broadridge, the Tabulator for the Trustee, Vanguard fiduciary Trust company, does not receive this Voting Direction card by 11:59 p.m. EDT on May 5, 2015, if you do not fill in any boxes on the back of this card, if you return this card unsigned, and if you do not vote by the Internet or telephone on or before May 5, 2015, any shares held in the conocoPhillips Overseas Savings Plan (Australia or Norway) or the Employee Share Allocation Scheme of Phillips Petroleum company United Kingdom Limited that you otherwise could have directed will be voted in the same proportion as the shares for which the Trustee has received instructions. Any such shares held in the conocoPhillips Share Incentive Plan, the conoco Stock Ownership Plan or the conoco Employee Share Ownership Plan will not be voted by the Trustee. ConocoPhillips has acknowledged and agreed to honor the confidentiality of your voting instructions to the Trustee. The Trustee will keep your voting instructions confidential. This package contains your confidential Voting Direction card to instruct the Trustee of the Plan how to vote the shares of conocoPhillips common Stock described on the back of the card representing your interest in the Plan. Also enclosed is the company's 2014 Annual report along with the Notice and Proxy Statement for the 2015 Annual Meeting. Please use these documents to help you decide how to direct the way the Trustee (EES Trustees Limited) should vote. |
