Summary
SLB Limited/NV (SLB) filed an 8-K on July 23, 2020, detailing significant adjustments to its 2020 annual cash incentive plan for executive officers. These changes, approved by the Compensation Committee on July 22, 2020, were driven by the impact of the COVID-19 pandemic and industry-wide challenges. The primary goal was to recalibrate incentive structures to motivate executives towards aggressive performance targets in the latter half of 2020, reflecting the evolving business environment. The most notable modification involves replacing the previously used Adjusted EPS (Earnings Per Share) metric with Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as a key performance indicator for executive compensation. The company believes Adjusted EBITDA better reflects the quality of earnings and company valuation in the current operating landscape. Additionally, the minimum threshold for cash flow generation targets was adjusted to align with the company's revised cash dividend policy and updated 2020 outlook.
Key Highlights
- 1Executive compensation structure for 2020 has been modified due to the COVID-19 pandemic's impact.
- 2The Adjusted EPS performance metric for executive bonuses has been replaced with Adjusted EBITDA.
- 3Management believes Adjusted EBITDA is a more relevant indicator of earnings quality and company valuation in the current market.
- 4The changes aim to align executive incentives with aggressive performance targets for the second half of 2020.
- 5The minimum threshold for cash flow generation targets has been revised to align with the new cash dividend policy and updated 2020 outlook.
- 630% of the target annual cash incentive opportunity remains tied to pre-established key personal objectives.
- 7The modified plan ensures alignment of executive incentives with those for the broader employee base for H2 2020.