8-KLeadership ChangesExhibits & Filings

VALERO ENERGY CORP/TX 8-K Report, Executive Changes (Oct 29, 2014)

Filed October 29, 2014For Securities:VLO

Summary

Valero Energy Corporation (VLO) filed an 8-K on October 29, 2014, detailing compensatory arrangements for its named executive officers, specifically long-term incentive awards approved by the board on October 23, 2014. These awards, granted under the 2011 Omnibus Stock Incentive Plan, are structured to align executive compensation with shareholder value creation and company performance. The awards include stock options, restricted shares, and performance shares, each with specific vesting and performance criteria designed to incentivize long-term growth and stock price appreciation. Investors should note the performance-based nature of a significant portion of these awards. Stock options require a 25% increase in market price to become exercisable, restricted shares vest over three years, and performance shares are tied to total shareholder return (TSR) relative to peers, with payout potential ranging from 0% to 200%. This structure aims to encourage executives to focus on delivering superior returns to shareholders over the long term.

Key Highlights

  • 1Valero's board approved long-term incentive awards for named executive officers on October 23, 2014.
  • 2Awards granted under the 2011 Omnibus Stock Incentive Plan include stock options, restricted shares, and performance shares.
  • 3Stock options have a 10-year term, vest annually starting in October 2015, and require a 25% increase in stock price over the exercise price to become exercisable.
  • 4Restricted shares vest in one-third increments annually over three years, beginning October 23, 2015.
  • 5Performance shares are tied to Valero's Total Shareholder Return (TSR) compared to peers over one, two, and three-year periods.
  • 6Performance share payouts can range from zero to 200% of the granted amount, with potential for additional awards based on TSR rankings.
  • 7Specific grant details, including the number of stock options, restricted shares, and performance shares for each named executive officer, are disclosed.

Frequently Asked Questions

The primary purpose of these long-term incentive awards is to align the compensation of Valero's named executive officers with the interests of shareholders. By linking a significant portion of their compensation to stock price appreciation and relative total shareholder return (TSR), the company aims to incentivize executives to drive long-term value creation and improve company performance.

The awards have different vesting structures. Stock options and restricted shares vest in one-third increments annually over three years, starting in October 2015. However, stock options only become exercisable if Valero's stock price increases by 25% above the exercise price. Performance shares vest based on Valero's TSR relative to its peers over specified performance periods, with payouts varying from 0% to 200%.

Yes, there is a significant performance condition for Valero's stock options. They will only become exercisable if the market price of Valero's common stock on the NYSE increases to a price that is 25 percent greater than the options' exercise price. This is in addition to their annual vesting schedule.

Total Shareholder Return (TSR) measures the total return an investor would receive over a period, including stock price appreciation and reinvested dividends. For Valero's performance shares, executive payouts are determined by comparing Valero's TSR to that of a defined peer group over one, two, and three-year performance periods. Stronger relative TSR performance leads to higher payouts.