What types of long-term incentive awards were granted?

Valero granted two types of awards: restricted shares of common stock, which vest in equal annual installments over three years, and performance shares, which vest based on the company's performance against specific metrics over defined periods.

How will the performance shares be evaluated?

The performance shares will be evaluated based on two key metrics: Valero's Total Shareholder Return (TSR) compared to a peer group (75% weighting) and Valero's Return on Invested Capital (ROIC) versus a target (25% weighting). Both metrics have defined payout ranges based on performance levels.

What is the peer group for TSR performance measurement?

The peer group for measuring relative TSR includes ConocoPhillips, CVR Energy, Inc., Delek US Holdings, EOG Resources, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, Occidental Petroleum Corporation, PBF Energy, Inc., Phillips 66, and the Energy Select Sector SPDR Fund (XLE).

When will the long-term incentive awards be granted in the future?

Beginning in 2020, the timing of annual long-term incentive award grants has been changed from the fourth quarter to the first quarter of the fiscal year. This change is intended to better align with market practices and coincide more closely with base salary changes, which typically occur on January 1.

VLO 8-K: Leadership Changes

Summary

Valero Energy Corporation (VLO) filed an 8-K on March 2, 2020, detailing executive compensation actions approved by the Board of Directors on February 26, 2020. The Compensation Committee granted long-term incentive awards to named executive officers (excluding the CEO) and approved the CEO's compensation arrangements. These awards consist of restricted shares and performance shares, designed to align executive interests with shareholder value creation and company performance. The performance share awards are tied to two key metrics: Valero's Total Shareholder Return (TSR) relative to a peer group and Return on Invested Capital (ROIC). The vesting of these awards is contingent upon achieving specific performance thresholds for TSR (75% weighting) and ROIC (25% weighting) over defined periods. Additionally, the company has updated its annual incentive bonus program to include expanded strategic company performance goals, encompassing a broader range of financial, operational, environmental, social, and governance initiatives. The timing of long-term incentive award grants has also been shifted from the fourth quarter to the first quarter to align with market practices and base salary adjustments.

Key Highlights

1Valero approved long-term incentive awards for named executive officers, excluding the CEO, on February 26, 2020.
2Awards include restricted shares vesting over three years and performance shares tied to TSR and ROIC.
3Performance shares have a 75% weighting for relative TSR against a defined peer group and a 25% weighting for ROIC.
4Performance share payouts range from 0% to 200% of the target award based on achieving TSR percentiles and ROIC targets.
5Dividend equivalents accrued during performance periods may also be awarded based on achievement.
6The annual incentive bonus program now includes expanded strategic company performance goals (ESG, operational, etc.).
7The timing of annual long-term incentive grants has been moved from Q4 to Q1 to better align with market practices and salary changes.

VALERO ENERGY CORP/TX 8-K Report, Executive Changes (Mar 2, 2020)

Summary

Key Highlights

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