Summary
Chevron Corporation filed an 8-K on February 2, 2016, detailing compensation awards granted to its top executives, including the CEO, CFO, and other key officers, effective January 27, 2016. These awards, primarily stock options and performance shares, are designed to align executive interests with long-term shareholder value. The filing outlines the specifics of these grants, including exercise prices, vesting schedules, and performance metrics tied to Total Stockholder Return (TSR) relative to a peer group of major oil and gas companies. This information is crucial for investors seeking to understand executive compensation practices and their potential impact on future performance and governance.
Key Highlights
- 1Grant of 964,800 stock options and 73,600 performance shares to CEO J.S. Watson.
- 2Additional stock options, performance shares, and restricted stock units awarded to other named executive officers, including the CFO.
- 3Stock options have a 10-year term with one-third vesting annually, exercisable at $83.29 per share.
- 4Performance shares are tied to a three-year performance period (2016-2018) and contingent on Chevron's Total Stockholder Return (TSR) relative to peers like BP, ExxonMobil, Shell, and Total.
- 5Performance payouts are determined by a tiered modifier based on TSR ranking, ranging from 0% to 200% of the grant value.
- 6Restricted stock units vest on January 27, 2019, with cash payout based on the closing stock price at vesting.
- 7Specific vesting conditions are detailed for executive separation from service, with accelerated vesting for those meeting certain age and service point thresholds.
Frequently Asked Questions
The filing details grants of stock options, performance shares, and restricted stock units to key executives. Stock options provide the right to purchase Chevron stock at a set price, performance shares offer potential cash payouts based on future company performance, and restricted stock units are a commitment to deliver stock or cash at a future date.
The payout for performance shares depends on Chevron's Total Stockholder Return (TSR) over a three-year period (January 1, 2016, through December 31, 2018) compared to a defined peer group. A performance modifier, based on Chevron's TSR ranking against its peers, will determine the cash payout amount, which can range from zero to 200% of the granted value.
Generally, stock options and performance shares are forfeited if an executive separates from service before the first anniversary of the grant date. However, executives meeting a specific age and service point threshold (90 points) will have unvested portions vest upon separation for reasons other than misconduct after that anniversary. Different rules apply to R.H. Pate regarding separation after August 1, 2019. Restricted stock units vest on January 27, 2019, and are forfeited upon separation prior to vesting.
The stock options granted have an exercise price of $83.29 per share, which was the closing price of Chevron's common stock on January 27, 2016. These options have a ten-year term.