8-KLeadership ChangesExhibits & Filings

CHEVRON CORP 8-K Report, Executive Changes (Dec 12, 2006)

Filed December 12, 2006For Securities:CVX

Summary

Chevron Corporation filed an 8-K on December 12, 2006, detailing significant amendments to several executive compensation and benefits plans, effective December 6, 2006. The primary focus of these changes is to reduce or eliminate certain benefits for senior executive officers (specifically in salary grades 44 and above) in the event of a change in control. This includes the removal of severance payments, a minimum bonus guarantee under the Management Incentive Plan, and specific performance-based payout modifiers for outstanding performance shares under the Long-Term Incentive Plan. Additionally, a tax gross-up provision under the Benefit Protection Program was removed. Furthermore, Chevron also made amendments to its Management Incentive Plan, Long-Term Incentive Plan, and Non-Employee Directors' Equity Compensation and Deferral Plan to ensure compliance with Section 409A of the Internal Revenue Code. The company also froze its existing Deferred Compensation Plan for Management Employees as of January 1, 2005, and introduced a new, compliant plan with identical terms except for Section 409A modifications. These changes specifically target senior executives and do not affect the broader employee population.

Key Highlights

  • 1Chevron amended its Change In Control Surplus Employee Severance Program (CIC SESP) to remove severance benefits for senior executives in salary grades 44 and above.
  • 2Amendments were made to the Management Incentive Plan (MIP) to eliminate the guaranteed minimum bonus payment for these senior executives in a change-in-control scenario.
  • 3The Long-Term Incentive Plan (LTIP) was modified to remove a provision that ensured a minimum modifier of 100% for performance shares upon a change in control.
  • 4The Benefit Protection Program (BPP) had its tax gross-up provision for senior executives removed.
  • 5Several plans (MIP, LTIP, Non-Employee Directors' Equity Compensation and Deferral Plan) were updated to comply with Section 409A of the Internal Revenue Code.
  • 6The Deferred Compensation Plan for Management Employees was frozen as of January 1, 2005, and a new plan compliant with Section 409A was adopted.
  • 7These changes specifically target senior executive officers in salary grades 44 and above and are not applicable to the general employee workforce.

Frequently Asked Questions

The primary purpose of these amendments is to reduce or eliminate certain benefits for senior executive officers (salary grades 44 and above) in the event of a change in control. This aims to align executive compensation more closely with shareholder interests during such significant corporate events and to ensure compliance with tax regulations.

The changes are targeted at senior executive officers in salary grades 44 and above. Benefits like change-in-control severance payments, guaranteed bonuses, and specific performance share payout modifiers are being removed or reduced for this group. The broad-based employee population is not affected by these particular amendments.

Section 409A of the Internal Revenue Code deals with non-qualified deferred compensation plans. Amendments were necessary for several plans, including the MIP, LTIP, Non-Employee Directors' Equity Compensation and Deferral Plan, and the Deferred Compensation Plan, to ensure compliance with these complex tax regulations and avoid potential penalties for both the company and the executives.

The freezing of the original Deferred Compensation Plan for Management Employees as of January 1, 2005, signifies that no new contributions or accruals will occur under that specific plan structure after that date. A new, compliant plan (Deferred Compensation Plan for Management Employees II) was adopted on the same date to replace it, ensuring that deferred compensation arrangements continue to operate within the new regulatory framework of Section 409A.