8-K/ALeadership ChangesCorporate ChangesExhibits & Filings

VALERO ENERGY CORP/TX 8-K/A Report, Executive Changes (Sep 18, 2007)

Filed September 18, 2007For Securities:VLO

Summary

This Form 8-K/A filing from Valero Energy Corporation is an amendment to a previous 8-K, primarily correcting details regarding the compensation structure for non-employee directors. Key changes include an increase in the annual retainer fee from $60,000 to $75,000, an increase in the per-meeting attendance fee for in-person attendance, and a new $20,000 annual retainer for a designated lead director. Additionally, the annual equity grant for non-employee directors has been doubled from $80,000 to $160,000, with revised vesting schedules aimed at further aligning director interests with shareholders. The filing also updates executive compensation, including base salary increases for senior officers and amendments to the Supplemental Executive Retirement Plan (SERP). The amendments to executive compensation and director compensation are designed to ensure Valero remains competitive in attracting and retaining talent and to strengthen the alignment between management and board members with shareholder interests. The changes to the SERP, particularly the shift from annuity to lump sum payments and compliance with Section 409A of the IRS code, represent an administrative update. Furthermore, the company has updated its bylaws to adopt a majority voting standard for director elections in uncontested situations, which is a governance enhancement. Investors should note that these compensation adjustments and governance updates are effective from mid-July 2007. The significant increase in director equity grants and the substantial enhancement of severance packages for key executives under change-of-control scenarios are particularly important for shareholders to consider regarding potential dilution and executive retention incentives. The adoption of majority voting in director elections signifies a move towards more shareholder-friendly governance practices.

Key Highlights

  • 1Amendment to Form 8-K filed on July 11, 2007, correcting details on non-employee director compensation.
  • 2Annual retainer for non-employee directors increased to $75,000 (from $60,000).
  • 3Per-meeting attendance fee for in-person meetings increased to $2,000 (from $1,500).
  • 4New annual retainer of $20,000 for the designated lead director.
  • 5Annual equity grant for non-employee directors doubled to $160,000, with adjusted vesting schedules.
  • 6Base salaries for senior executive officers were increased effective July 12, 2007.
  • 7Amendments to the Supplemental Executive Retirement Plan (SERP) to change benefit payment to lump sum and comply with IRS Section 409A.

Frequently Asked Questions

The primary purpose of this amended 8-K filing is to correct and clarify information previously disclosed regarding Valero Energy Corporation's compensation programs for its non-employee directors. It also includes updates on executive compensation and amendments to the company's bylaws.

Non-employee director compensation has been significantly enhanced. The annual retainer increased to $75,000, the fee for attending meetings in person rose to $2,000, a $20,000 annual retainer was introduced for the lead director, and the annual equity grant value was doubled to $160,000, with revised vesting periods designed to better align director incentives with long-term shareholder value.

Effective July 12, 2007, Valero's senior executive officers received base salary increases. Additionally, the company amended its Supplemental Executive Retirement Plan (SERP) to change the benefit payment form from an annuity to a lump sum, effective January 1, 2008, and to ensure compliance with IRS Section 409A. Key executives also moved to more robust 'Tier I' Change of Control Severance Agreements, providing for enhanced severance benefits in the event of termination following a change of control.

Yes, Valero amended its bylaws to implement a majority voting standard in uncontested director elections, effective July 12, 2007. This means that in director elections where there are no opposing candidates, directors must receive a majority of the votes cast to be elected. The bylaws also include a resignation procedure for directors who do not receive a majority vote.