8-KLeadership Changes

Baker Hughes Co 8-K Report, Executive Changes (Jan 26, 2018)

Filed January 26, 2018For Securities:BKR

Summary

Baker Hughes, a GE company, announced on January 26, 2018, that its Compensation Committee approved equity incentive awards for its executive leadership team and other employees. These awards, granted under the 2017 Long-Term Incentive Plan, are designed to align executive compensation with shareholder value creation. The structure of these awards, with 75% being performance-based (50% PSUs and 25% stock options), emphasizes a direct link between executive pay and the company's financial performance and market valuation. The Performance Share Units (PSUs) are particularly noteworthy, with 50% tied to Total Shareholder Return (TSR) and 50% to Return on Invested Capital (ROIC) over a three-year period ending December 31, 2020. These PSUs will be earned based on Baker Hughes' ranking against a peer group in the PHLX Oil Service Sector index plus TechnipFMC plc. This performance-based compensation structure aims to incentivize executives to drive superior results and enhance long-term shareholder returns.

Key Highlights

  • 1Baker Hughes' Compensation Committee approved equity incentive awards for executives and employees on January 22, 2018.
  • 2Awards are structured with 50% Performance Share Units (PSUs), 25% Restricted Stock Units (RSUs), and 25% stock options.
  • 375% of the executive awards are performance-based, linking compensation directly to company performance and stock appreciation.
  • 4PSUs are split equally between Total Shareholder Return (TSR) and Return on Invested Capital (ROIC) metrics.
  • 5Performance for PSUs will be measured over a three-year period ending December 31, 2020.
  • 6Awards are contingent on performance relative to a defined peer group and require continued employment, with specific provisions for change in control events.
  • 7The PSU awards have a target payout range of 0% to 150% of target, with minimum performance thresholds required to earn any PSUs.

Frequently Asked Questions

The primary purpose of these equity awards is to align executive compensation with shareholder value creation. By making a significant portion of compensation performance-based, the company aims to incentivize executives to achieve specific financial and market performance goals that benefit shareholders.

The PSUs are measured based on Baker Hughes' Total Shareholder Return (TSR) and Return on Invested Capital (ROIC) over a three-year period ending December 31, 2020. Performance is ranked against a peer group consisting of companies in the PHLX Oil Service Sector index plus TechnipFMC plc.

Executives must generally remain employed through the end of the three-year performance period (December 31, 2020) to earn the PSUs. There are provisions for specific types of terminations of employment. In the event of a change in control, the performance condition is deemed met at target, but the service requirement typically still applies.

Yes, there are several limitations. No PSUs are earned unless the company ranks at least at the 25th percentile for TSR or ROIC compared to its peers. For TSR PSUs, if the company's TSR is negative, the payout is capped at 100% of target. Additionally, if the value of shares delivered based on performance exceeds five times the value at the grant date, the number of shares delivered is capped at that five-times value. Dividend equivalents are not paid on TSR PSUs.