Board believes this leadership structure is appropriate because it allows the Company to take advantage of Mr. Hamm’s considerable Company and industry experience, while expanding the
Company’s base of leadership and furthering the Company’s succession planning. Through the Harold Hamm Family LLC (the “Family LLC”), a limited liability company owned by Harold G. Hamm, members of his family and trusts
established for their benefit and for which Mr. Hamm serves as manager, Mr. Hamm exercises voting and dispositive power over approximately 77.04% of our outstanding shares of Common Stock as of March 24, 2021. The Board believes
Mr. Hamm’s considerable ownership stake in the Company also supports the Board’s view that Mr. Hamm’s leadership role as Executive Chairman is appropriate.
Lead
Director The Board has appointed Mr. McNabb to serve as lead director with the following responsibilities similar to those typically performed by an independent
Chairman: (i) preside at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent directors; (ii) act as a key liaison between the Executive Chairman, Chief Executive Officer
and the independent directors; (iii) provide input into the materials to be delivered to the directors in advance of each Board meeting; (iv) provide feedback regarding the quality, quantity, and timeliness of those materials; and
(v) communicate Board member feedback to the Executive Chairman and the Chief Executive Officer. At the February 2021 Board meeting, Mr. McNabb was reappointed to serve as lead director, effective immediately following the Annual Meeting,
for a period extending through the 2022 Annual Meeting.
Risk
Oversight The Company employs a formal enterprise risk management process. The Board is responsible for overseeing our Company’s management of
risk. The Board strives to effectively oversee our enterprise-wide risk management in a way that balances managing risks while enhancing the long-term value of our Company for the benefit of our shareholders. The Board understands its focus on
effective risk oversight is critical to setting our Company’s tone and culture towards effective risk management. To administer its oversight function, the Board seeks to understand our Company’s risk philosophy by having regular
discussions with management to establish a mutual understanding of our Company’s overall appetite for risk. The Board maintains an active dialogue with management, including the Executive Chairman, Chief Executive Officer, Chief Financial
Officer, and Chief Risk Officer, about existing risk management processes and how management identifies, assesses and manages our most significant risk exposures, including commodity price risk, liquidity risk, reputational risk, operational risk,
safety risk, cybersecurity risk, compliance risk and legal risk. The Board appointed Eric S. Eissenstat in May 2014 as Chief Risk Officer to further enhance the Company’s enterprise risk management. Mr. Eissenstat is primarily responsible
for instituting risk management practices consistent with our overall business strategy and risk profile. The Board expects, and receives, regular updates from Mr. Eissenstat and other members of our management team about our most significant
risks to enable it to evaluate whether management is responding appropriately. Senior management attends Board meetings and is available to address any questions or concerns raised by our Board on risk management-related and other matters. In
addition, our Board receives presentations from senior management on strategic matters.
The Board also relies on each of its committees to help oversee the
risk management responsibilities relating to the functions performed by such committees. The Audit Committee considers risks related to financial reporting including overseeing our internal controls and interacting with our independent public
accounting firm at least quarterly. The Compensation Committee oversees our compensation practices to ensure they do not encourage unnecessary and excessive risk taking by management. The Nominating Committee oversees risks relating to our corporate
governance and compliance programs and assists the Board and management in promoting an organizational culture that encourages commitment to ethical conduct and a commitment to compliance with the law. Each of the Board’s committees report
regularly to the Board on risk-related matters within its responsibilities. While the Board does not directly consider the Company’s risk profile and management program in assessing its leadership structure, a board member’s ability to
oversee the risks associated with the matters supervised by a committee is considered in making committee appointments.
ESG Matters The Company has a long established ESG record and is committed to ongoing
efforts to develop and implement thoughtful, systematic programs and practices to address ESG stewardship. We believe our ESG program makes an important contribution to the long-term success of the Company.
In developing our approach to ESG reporting, the Company conducted a thorough assessment to identify and prioritize those topics having the most significant
impact on our stakeholders and the operations of our Company, which included research, peer benchmarking, and interviews with internal and external stakeholders. We also considered guidance from existing ESG frameworks. However, we believe the
existing frameworks have shortcomings and do not adequately consider the contributions the energy industry makes to the security and well-being of the United States and the rest of the world. As a result, we have adopted a framework that considers
these contributions and presents a more societal view of the contribution hydrocarbons make to modern life.
11
Certain Relationships and Related
Party Transactions
Our Audit Committee Charter provides the Audit Committee shall review all related party transactions (as defined
below) and recommend approval or disapproval to the Board of any such transaction.
The Charter defines a “related party transaction” as a
transaction, proposed transaction, or series of similar transactions, in which (a) we are a participant, (b) the amount involved exceeds $120,000 annually and (c) a related person (as defined below) has or will have a direct or
indirect material interest. A “related person” is (a) any person who is, or at any time since the beginning of our last fiscal year was, a director, executive officer, or nominee to become a director, (b) a person known to
beneficially own 5% or more of any class of our voting securities, (c) an immediate family member of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law), and (d) any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee for director or greater than 5% beneficial owner. The Audit
Committee considers the adequacy of disclosure and fairness to us of the matters considered.
The Audit Committee has adopted a written policy which includes
factors for committee members to consider in exercising their business judgment including (a) terms of the transaction with the related party, (b) availability of comparable products or services from unrelated third parties, (c) terms
available from unrelated third parties and (d) the benefits to us. The Audit Committee recommends for approval only those related party transactions that are, in its business judgment, in our best interests and on terms no less favorable to us
than we could have achieved with an unaffiliated party.
In 2020, we participated in the related party transactions described below. Based upon the review and recommendations
of our Audit Committee, or of our Board, or other committee thereof in the case of the transactions described in the following sentence, we believe the transactions described below are in our best interests and are on terms no less favorable to us
than we could have achieved with an unaffiliated party. Our Audit Committee reviewed and recommended each of the transactions described below except that a Special Committee of the Board reviewed and recommended the registration rights agreement
described below under “Registration Rights Agreements—Wheatland Transaction Registration Rights Agreement;” and the full Board reviewed and recommended the registration rights agreement described below under “Registration Rights
Agreements—Initial Public Offering Registration Rights Agreement.”
Royalty and Common Ownership
In 2020, we received approximately $305,000 from the Harold G. Hamm Trust (the “Hamm Revocable Trust”), a trust of which
Harold G. Hamm, our Executive Chairman, is the trustee and sole beneficiary, for billings on interests owned in various oil and gas wells which we operate. We also disbursed to the Hamm Revocable Trust approximately $229,000 in 2020 for
the Hamm Revocable Trust’s share of oil and gas sales attributed to these interests which were received from the purchasers of production. At December 31, 2020, approximately $17,000 was due from the Hamm Revocable Trust and approximately
$18,000 was due to the Hamm Revocable Trust.
Aircraft Related Matters
From time to time, we have used the aircraft of Transwestern Transports, LLC (“Transwestern”), an entity owned by Mr. Hamm, pursuant to a dry lease
agreement which contains terms customary in the air transport industry to facilitate efficient transportation of personnel. In 2020, we paid Transwestern approximately $158,000 for use of its aircraft and reimbursement of expenses and do not
owe anything to Transwestern at December 31, 2020. We also have a similar dry lease agreement to use an aircraft owned by Berriere Capital LLC, an entity owned by Mr. Berry, but this agreement went into effect in February of 2021 and there
has been no activity under this agreement as of April 8, 2021.
17
Registration Rights Agreements
Initial Public Offering Registration Rights Agreement. In connection with the closing of our initial public offering in May 2007, we entered into a
registration rights agreement with the Hamm Revocable Trust and the two irrevocable trusts established for the benefit of Mr. Hamm’s children pursuant to which we granted to the trusts certain demand and “piggyback” registration
rights. The Hamm Revocable Trust and the two irrevocable trusts identified above transferred the securities subject to this registration rights agreement to the Family LLC in September 2015 (the “September Transfer”). As a result, the
rights of the Hamm Revocable Trust and the two irrevocable trusts under this registration rights agreement may be assigned to the Family LLC at the direction of these entities. Under the registration rights agreement, each holder of securities
covered by the registration rights agreement has the one time right to require us to file a registration statement for the public sale of all or part of the shares of Common Stock owned by it at any time if at least six months have passed since the
last demand registration statement. In connection with a demand by any such holder, the non-demanding parties have the right to participate in such registration process. However, in the event securities are to
be sold in an underwritten offering pursuant to such demand registration statement and the managing underwriter thereof advises the participants the amount of securities to be offered thereby should be limited, such limitation shall be satisfied
first from the securities allocated to participants other than the demanding party.
If we sell any shares of our Common Stock in a registered underwritten
offering, each holder of securities covered by the registration rights agreement has the right to include its shares in that offering. The underwriters of any such offering have the right to limit the number of shares to be included in such sale. We
will pay all expenses relating to any demand or piggyback registration, except for underwriters’ or brokers’ commissions or discounts. The securities covered by the registration rights agreement will no longer be registrable under the
registration rights agreement if they have been sold to the public either pursuant to a registration statement or under Rule 144 promulgated under the Securities Act of 1933, as amended.
Wheatland Transaction Registration Rights Agreement. In March 2012, the Company entered into a Reorganization and Purchase and Sale Agreement (the
“Purchase and Sale Agreement”) with Wheatland Oil Inc. (“Wheatland”) and the shareholders of Wheatland. Wheatland was owned 75% by the Hamm Revocable Trust and 25% by Jeffrey B. Hume, the Company’s Vice Chairman of Strategic
Growth Initiatives.
Pursuant to the Purchase and Sale Agreement, we entered into a registration rights agreement granting the Hamm Revocable Trust and
Mr. Hume registration rights for the shares of Common Stock they received, at the direction of Wheatland, upon the closing of the acquisition (the “Registrable Securities”). The Hamm Revocable Trust transferred the Registrable
Securities held by it to the Family LLC as part of the September Transfer. As a result, the rights of the Hamm Revocable Trust under this registration rights agreement may be assigned to the Family LLC at the direction of the Hamm Revocable Trust
and Family LLC. Under the registration rights agreement, each holder of Registrable Securities has demand and “piggyback” registration rights. The demand rights enable each of the holders of Registrable Securities to require us to register
their respective shares of Registrable Securities with the SEC at any time, subject to certain limited exceptions, including the requirement that the aggregate proceeds from the demand registration exceed $40 million (net of underwriting
discounts and commissions) and the Company is not required to effect more than four demand registrations in any three-year period. The piggyback rights allow each of the holders of Registrable Securities to register their Registrable Securities
along with any shares we register with the SEC. These registration rights are subject to customary conditions and limitations, including the right of the underwriters of an offering to limit the number of shares.
Shelly Lambertz Compensation
During 2020, until the promotion described in the paragraph below, in connection with her service as the Company’s Vice President, Human Resources,
Ms. Lambertz received the following compensation: (i) annual base pay of approximately $267,000, with an annual cash incentive bonus target of 40% of her annual base pay; (ii) a target annual stock grant value of $400,000; and
(iii) participation in the Company’s benefits programs on terms consistent with the Company’s standard practices for employees hired at Ms. Lambertz’s level.
In February, 2020, Ms. Lambertz was promoted to Chief Culture Officer and Senior Vice President, Human Resources. In connection with her promotion,
Ms. Lambertz received the following compensation: (i) annual base pay of $308,000, with an annual cash incentive bonus target of 50% of her annual base pay; (ii) a target annual stock grant value of $550,000; and
(iii) participation in the Company’s benefits programs on terms consistent with the Company’s standard practices for employees hired at Ms. Lambertz’s level. In association with the promotion, Ms. Lambertz also received
an additional aggregate amount of $180,375 added to existing restricted
18
stock awards vesting from 2020 to 2022, with $18,000, $13,500, $90,000, $31,500 and $27,375 in value being added to the shares vesting in each of May 2020, November 2020, May 2021,
November 2021, and February 2022, respectively. The grant related to the additional amount described above was made in February 2020 and was in addition to a grant made at the same time corresponding in value to the target annual stock grant value
for her role as Chief Culture Officer and Senior Vice President, Human Resources. The total number of shares of restricted Common Stock held by Ms. Lambertz at December 31, 2020 was 28,881 shares. Due to the economic environment during the
pandemic, Ms. Lambertz elected to forego any increase in her base salary resulting from her promotion effective March 8, 2020, and continuing through February 6, 2021. Ms. Lambertz is the daughter of Mr. Hamm.
Justin Rangel Compensation
In
January 2020, Justin Rangel, the son of Ramiro Rangel, one of our former executive officers, joined the Company as a crude oil scheduler. The compensation package awarded to Mr. Rangel during 2020 was as follows: (i) annual base pay of
$84,500, with an annual cash incentive bonus target of 15% of his annual base pay; (ii) a target annual stock grant value of $14,000; and (iii) participation in the Company’s benefits programs on terms consistent with the
Company’s standard practices for employees hired at Mr. Rangel’s level. When employees are hired they typically receive a stock grant equivalent to three years of their annual target value, vesting ratably over a three-year
period. Mr. Rangel has received such a grant. The value of the stock awarded to Mr. Rangel in connection with his employment was consistent with the Company’s typical practice. The total number of shares of restricted Common
Stock held by Mr. Rangel at December 31, 2020 was 1,296 shares.
19
Director Compensation
The Compensation Committee reviews annually the total compensation paid to our
non-employee directors. The purpose of the review is to ensure the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform
our Board’s duties, and to fairly compensate our directors for their service. This review includes consideration of qualitative and quantitative factors. To ensure directors are compensated relative to the scope of their responsibilities, the
Compensation Committee considers: (a) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (b) the risks associated with serving on the Board; and
(c) the compensation paid to directors at a peer group of companies as reported by the Compensation Committee’s compensation consultant.
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2020 Director Compensation Table
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The following table summarizes the compensation of non-employee directors for the year
ended December 31, 2020:
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Name(1)
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Fees Earned or
Paid in Cash
($)
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Stock Awards
($) (2)(3)
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Total
($)
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Lon
McCain
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96,820
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—
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96,820
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John T.
McNabb, II
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112,904
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—
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112,904
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Mark E.
Monroe
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94,899
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—
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94,899
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Timothy G.
Taylor
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94,855
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$
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211,255
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306,110
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(1)
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This table lists the individuals who served as non-employee directors
during 2020. Directors who are also full-time employees receive no compensation for serving as directors. As a result, the compensation information for Messrs. Hamm and Berry and Ms. Lambertz is not reported in the table above. Messrs.
Hamm’s and Berry’s compensation for their service as employees during 2020 is fully reported within the Summary Compensation Table at page 36. A summary of Ms. Lambertz’s compensation as our Chief Culture
Officer and Senior Vice President, Human Resources during 2020 appears in “Certain Relationships and Related Party Transactions—Shelly Lambertz Compensation” at pages 18 and 19.
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(2)
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The amounts in this column represent the aggregate grant date fair value for grants in fiscal year 2020 computed
in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“ASC Topic 718”), disregarding the estimate of potential forfeitures. See “Equity-Based Compensation” below. A
discussion of the grant date fair value calculation can be found in Note 14 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed
with the SEC. Mr. Taylor received a stock award of 16,288 restricted shares of Common Stock on May 14, 2020, which vests May 15, 2021. Other than Mr. Taylor, none of the directors listed in the table above received a stock award
in 2020. This was due to a decision by the Board to transition stock awards to non-employee directors away from stock awards which vest three years from the grant date to awards which vest one year from the
grant date. As a result, it is anticipated that each of the directors listed above, including Mr. Taylor, will receive their next stock award in May 2021, assuming continued service on the Board. The Board made the decision to transition away
from stock awards with three year vesting in order to align non-employee director compensation with year-long terms, and in anticipation of shareholder approval of a proposal to declassify our Board in May of
2020, which was approved at the 2020 Annual Meeting.
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(3)
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The following restricted stock awards were outstanding as of December 31, 2020: Mr. McCain, 4,183
shares; Mr. McNabb, 4,183 shares; Mr. Monroe, 4,183 shares; and Mr. Taylor, 16,288 shares. Unvested shares receive cash dividends, if any, at the same rate as other shareholders and all
non-employee directors receive payment in connection with accrued dividend payments at the time the shares related to any accrued dividends vest.
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We reimburse all directors for reasonable out-of-pocket expenses incurred in
connection with their services as directors in accordance with our general expense reimbursement policies. Non-employee directors may participate in our medical and dental benefit programs,
20
which are available to all full-time employees, as well as the Company’s non-qualified deferred compensation program (“DCP”). No non-employee director participated in the DCP during 2020. Information regarding Mr. Hamm’s participation in the DCP can be found in the 2020 Nonqualified Deferred Compensation Table on page
39.
Prior to October 1, 2020 (the effective date of the current retainer structure approved in July 2020), the amount of the base
annual retainer was $60,500. During this time, the amount of the annual retainer paid to the chair of the Audit Committee was $25,000; the amount of the annual retainer paid to the chair of the Compensation Committee was $15,000; and the amount of
the annual retainer paid to the chair of the Nominating Committee was $16,000. During 2020, prior to October 1, 2020, the annual retainer for Audit Committee members was $21,875; the annual retainer for Compensation Committee members was
$11,765; and the annual retainer for Nominating Committee members (except for Mr. Hamm and Ms. Lambertz) was $10,765.
Effective October 1,
2020, the retainer structure was changed so that all non-employee directors receive a base annual retainer of $97,000. The Lead director also receives an annual retainer described below. No other cash
compensation is paid to our non-employee directors under the current structure, which remains in effect as of April 8, 2021.
Any applicable annual retainer was paid quarterly on a pro-rata basis and the amounts appearing in the table above
reflect the retainer rate applicable to the quarter in which it was paid.
During 2020, the amount of the annual retainer for the position of Lead Director
was $12,000 and this amount remains in effect as of April 8, 2021.
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Equity-Based Compensation
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In addition to cash compensation, we have awarded and intend to continue to award restricted Common Stock to each of our non-employee directors, as described in Footnote 2 to the 2020 Director Compensation Table on page 20. On May 14, 2020, Mr. Taylor received a grant of 16,288 shares; which vests on May 15, 2021.
Historically, we have granted each non-employee director shares of restricted stock annually, with such shares vesting three years after the date of grant. The Board is transitioning stock awards to non-employee directors away from shares which vest three years from the grant date to shares which vest one year from the grant date. The Board made the decision to transition away from stock awards with three year
vesting in order to align director compensation with year-long terms, and in anticipation of shareholder approval of a proposal to declassify our Board in May of 2020, which was approved at the 2020 Annual Meeting. The number of shares of any future
award will be impacted by the value of our stock at the time of the award and other relevant factors. Through the grant of equity-based compensation, we are able to align a portion of our non-employee
directors’ compensation with the performance of our Common Stock.
We have adopted a Common Stock ownership requirement for non-employee directors and any employee director who is not an executive officer. Each non-employee director is required to own shares of our Common Stock with a market value
equal to at least five times the base annual retainer. In addition, we have a policy which prohibits certain employees and directors from holding our securities in a margin account or pledging our securities as collateral, unless permission is
received from our General Counsel in writing. We also have a policy prohibiting non-employee directors from engaging in transactions which may hedge the value of our securities held by them. For a more
detailed discussion of the policy described in the prior sentence, see “Hedging Policy” on page 35 below.
Until the stock ownership guideline is
achieved, each non-employee director and each employee director who is not an executive officer is required to retain 100% of the shares received as a result of restricted shares granted under our 2013
Long-Term Incentive Plan (the “2013 Plan”). The requirement for employee directors who are not executive officers is five times annual base salary. The stock ownership calculation is determined as of December 31 each year based upon
the average closing price of the Common Stock for the year compared to the non-employee director’s base annual retainer as of such date. Compliance with the guidelines is also determined each time each non-employee director and each employee director who is not an executive officer sells shares, based on the closing price of our Common Stock on the date clearance to sell the relevant shares is granted. Shares
owned directly by, or held in trust for, the non-employee director or his or her immediate family members residing in the same household and unvested restricted shares are included in the calculation. The
Compensation Committee reviewed the non-employee directors’ stock ownership and determined as of December 31, 2020, each non-employee director was in
compliance with the stock ownership guidelines.
21
Executive Compensation and Other
Information
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Information About Our Executive Officers
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Our current executive officers are named below:
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Name
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Age
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Position
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Harold G.
Hamm
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75
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Executive Chairman
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William B.
Berry
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68
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Chief Executive Officer
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Jack H.
Stark
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66
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President and Chief Operating Officer
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Jeffrey B.
Hume
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69
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Vice-Chairman, Strategic Growth Initiatives
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John D.
Hart
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53
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Senior Vice President, Chief Financial Officer and
Chief Strategy Officer
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Eric S.
Eissenstat
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63
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Senior Vice President, General Counsel, Chief Risk
Officer and Secretary
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Patrick W.
Bent
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65
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Senior Vice President, Operations
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Robert
Hagens
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63
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Senior Vice President, Land
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The information appearing in the table above is as of April 8, 2021.
For a description of the business background and other information concerning Messrs. Hamm and Berry see “Proposal 1: Election of
Directors—General” above.
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Jack H. Stark
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has served as our President and Chief Operating Officer since January 2020. Prior to his appointment as
President
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and Chief Operating Officer, he served as our President from September 2014 to December 2019. He also served
as the Company’s Chief Operating Officer from September 2014 to May 2017. Prior to his appointment as President and Chief Operating Officer, Mr. Stark served as our Senior Vice President of Exploration from May 1998 to September 2014. He
joined the Company in June 1992 as Vice President of Exploration and served on the Board from May 1998 until his term expired in May 2008. Prior to joining us, Mr. Stark was Exploration Manager for the Western
Mid-Continent Region for Pacific Enterprises from 1988 to 1992 and held various staff and middle management positions with Cities Service Company, Texas Oil and Gas and Western Nuclear from 1978 to 1988.
Mr. Stark currently serves as a director of Cypress Environmental Partners, L.P., a position he has held since April 2020. Mr. Stark holds a Master of Science in Geology from Colorado State University and is a member of the American
Association of Petroleum Geologists, The Petroleum Alliance of Oklahoma, Rocky Mountain Association of Geologists, Houston Geological Society and the Oklahoma City Geological Society.
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Jeffrey B. Hume
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became our Vice Chairman of Strategic Growth Initiatives in June 2012. He previously served as our President
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from November 3, 2009 until June 2012. From November 2008 to June 2012, Mr. Hume also served as our
Chief Operating Officer after serving as our Senior Vice President of Operations since November 2006. He was previously appointed as Senior Vice President of Resource and Business Development in October 2005, Senior Vice President of Resource
Development in July 2002, and served as Vice President of Drilling Operations from 1996 to 2002. Prior to joining us in May 1983 as Vice President of Engineering and Operations, Mr. Hume held various engineering positions with Sun Oil Company,
Monsanto Company, and FCD Oil Corporation. Mr. Hume is a Registered Professional Engineer and member of the Society of Petroleum Engineers, The Petroleum Alliance of Oklahoma, and the Oklahoma and National Professional Engineering Societies.
Mr. Hume graduated from Oklahoma State University with a Bachelor of Science in Petroleum Engineering Technology.
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22
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John D. Hart
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joined us as Vice President, Chief Financial Officer and Treasurer in November 2005. He was promoted to Senior
Vice
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President in May 2009 and served in that capacity to mid-March 2021.
In March 2021, his title was changed to Senior Vice President, Chief Financial Officer and Chief Strategy Officer. Prior to joining us, he was a Senior Audit Manager with Ernst & Young LLP. Mr. Hart was employed by Ernst &
Young LLP from April 1998 to November 2005 and by Arthur Andersen LLP from December 1991 to April 1998, working with numerous public companies in a wide variety of securities and exchange matters and capital markets activities. He is a member of the
American Institute of Certified Public Accountants and The Petroleum Alliance of Oklahoma. Mr. Hart serves on the executive board of the Greater Oklahoma City Chamber of Commerce, and the board of directors of the Myriad Gardens Foundation.
Additionally, he serves on the Casady School Board of Trustees and the Oklahoma State University Foundation Board of Governors. Mr. Hart is a Certified Public Accountant and received a Bachelor of Science in Accounting and Finance and a
Master’s of Science in Accounting from Oklahoma State University.
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Eric S. Eissenstat
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joined us as Senior Vice President and Chief Legal Officer in December 2010. In August 2011, his title was
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changed to Senior Vice President, General Counsel and Secretary and in May 2014 his role was expanded to
include the position of Chief Risk Officer. He joined the Company with 27 years of experience in complex business and commercial matters, oil and gas, and litigation. Prior to joining the Company, he served as director with Fellers, Snider,
Blankenship, Bailey & Tippens, and PC in Oklahoma City from 1983 to 2010. Mr. Eissenstat is a Fellow of the Litigation Counsel of America, has received numerous awards and honors for his work in the legal profession, has held
leadership positions in the Oklahoma Bar Association and Oklahoma County Bar Association, and is a member of The Petroleum Alliance of Oklahoma. Mr. Eissenstat serves on the boards of directors of Leadership Oklahoma City (Treasurer), YMCA of
Greater Oklahoma City, Downtown Oklahoma City (Chair elect), Skyline Urban Ministry and on the Board of Governors for the Oklahoma State University Foundation. He also serves as a Trustee for United Way of Central Oklahoma. Mr. Eissenstat
earned his Bachelor of Science with honors in Political Science from Oklahoma State University, where he was selected as a 2016 Distinguished Alumni, and his Juris Doctor with honors from the University of Oklahoma where he was awarded Order of the
Coif.
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Patrick W. Bent
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is Senior Vice President, Operations, a position he has held since June 2019. Prior to this, Mr. Bent
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served as Senior Vice President, Drilling, from November 2015 to June 2019 and as Vice President, Northern
Region Drilling and Completions from March 2014 to November 2015. Mr. Bent joined Continental as Vice President, Drilling and served in this capacity from August 2012 to March 2014. From 2006 until he joined Continental in August 2012,
Mr. Bent served as the General Manager of Implementation for Burlington Resources and subsequently as Manager of Implementation for ConocoPhillips’ San Juan Basin Unit in New Mexico, one of ConocoPhillips’ largest business units.
Mr. Bent has more than 37 years of industry experience in petroleum engineering and operations. Mr. Bent earned his B.S. degree in Petroleum Engineering from the University of Wyoming in 1980.
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Robert
Hagens
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is Senior Vice President, Land, a position he took when he joined Continental in October 2020. Mr. Hagens
has
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over 37 years of experience. Over the years, he has engaged in all levels of leadership within land, land
administration and regulatory. Mr. Hagens started his career as a Landman with Atlantic Richfield Company (“ARCO”) in Midland, Texas and has held positions of increasing responsibility across multiple offices within the lower 48 and
Alaska with ARCO and its subsidiaries. Shortly following the merger with BP plc (“BP”) in 2000, Mr. Hagens assumed the position of U.S. Onshore Land Manager with BP. Prior to joining the Company, he spent the previous 15 years as Vice
President and Senior Vice President of Land for Pioneer Natural Resources Company. Mr. Hagens holds a degree in Petroleum Land Management from the University of Texas at Austin.
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Compensation
Discussion and Analysis
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The purpose of this Compensation Discussion and Analysis is to explain the Company’s and Compensation Committee’s
approach to determining the compensation program for the Company’s Chief Executive Officer, Chief Financial Officer and the other named executive officers appearing in the tables following this discussion (“NEOs”) and to discuss how
the 2020 compensation package for these executives was determined. Following this discussion are tables that include compensation information for the NEOs. The NEOs for 2020 are as follows:
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Harold G. Hamm, Executive Chairman;
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William B. Berry, Chief Executive Officer;
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Jack H. Stark, President and Chief Operating Officer;
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John D. Hart, Senior Vice President, Chief Financial Officer and Chief Strategy Officer; and
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Patrick W. Bent, Senior Vice President, Operations
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23
Executive Summary
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Company Compensation Philosophy and Components
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Because we operate in a highly competitive environment, we have designed
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our executive compensation program to attract, retain and motivate experienced, talented individuals. We also
designed our executive compensation program to reward our executives for achieving the strategic and business objectives determined to be important to help the Company create and maintain advantage in a competitive environment.
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In determining individual compensation, we consider the performance of the Company against specific operational and financial
factors determined to be relevant for the period in question. We consider competitive market compensation paid by other companies comparable to us in size, geographic location and operations. We maintain and incorporate flexibility into our
compensation programs and in the assessment process, which we believe is particularly important in a changing commodity price environment. As such, we do not apply rigid formulas in determining the amount and mix of compensation elements.
For 2020, the Compensation Committee evaluated how the following elements (collectively, the “Primary Compensation Elements”) of our compensation
program compare to similar compensation awarded by the then current compensation survey group, with the Compensation Committee considering how the elements of our compensation compare to the compensation for executives of similarly situated
companies. The Compensation Committee’s analysis consists of comparing the market data of base salary, cash bonus, long-term incentive equity awards and total compensation at the 25th, 50th and 75th percentiles of the current compensation survey group to the compensation of each of our NEOs. Total compensation for each NEO is
structured to target compensation levels near the 50th percentile, taking into account responsibilities and duties, experience, individual performance, and time in position. The 2020 target levels
were designed to emphasize compensation elements whose value depends on Company performance.
Based on the strength of 2019’s accomplishments, the need
to ensure the Company’s compensation remains competitive with its industry peers and a review of the information customarily provided in connection with the compensation process, the Compensation Committee determined it was appropriate to
adjust salaries in February 2020. With respect to 2020, bonus payments were also made based on the Company’s strong financial and operational performance. In determining the 2020 Performance Factors (as defined below) to be used in the bonus
calculation, the Compensation Committee considered the Company’s performance with respect to the seven bonus pool metrics and the additional factors described below in the discussion of the 2020 bonus. In light of the unprecedented events
associated with the pandemic, the Compensation Committee placed substantially greater weight on the additional factors than in prior years. The Compensation Committee did this in order to appropriately reflect its evaluation of the response of the
Company’s management, including the NEOs, to challenges posed by the pandemic. Rapid adjustments to the Company’s operational plans and improvisation by management were needed in order to allow the Company to quickly mitigate the impact of
the unprecedented decrease in crude oil prices occurring early in 2020. The price decrease resulted from the combined effects of: (x) reduced global demand for hydrocarbons due to the pandemic and (y) increased production of oil resulting
from the decisions of the Organization of Petroleum Exporting Countries and Russia to increase production. After considering these items, the Compensation Committee determined a Company performance factor of 70% of target appropriately
reflected a balance of (x) the results achieved in connection with the seven bonus pool metrics, (y) the Committee’s assessment of the Company’s performance with respect to the additional factors described below (and in the case
of each award an individual’s contribution to the outcome of such factors) (“x” and “y” are collectively referred to herein as the “2020 Performance Factors”), and (z) the financial impact of the unprecedented
drop in crude oil prices occurring in early 2020 and corresponding impact on the Company’s revenues and earnings. The approach described in connection with the 2020 bonus in this paragraph is referred to herein as the “2020 Bonus
Framework”.
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Company Performance
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Highlights of the Company’s 2020 performance include:
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Generated $1.42 billion in cash flow from operations.
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Reduced costs in response to the pandemic, with production expenses averaging $3.27 per Boe for 2020.
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Reduced non-acquisition related capital expenditures to
$1.16 billion, a 56% reduction compared to 2019 and 3% below a revised budget, while delivering production in line with or better than targets.
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Dramatically curbed production in the first half of 2020, in response to the pandemic, allowing us to preserve
resources for sale in a more favorable commodity price environment.
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Successfully pivoted in the second half of 2020 to restore curbed production and achieve 2020 fourth quarter
average production of 339 MBoepd, positioning the Company to benefit from recent improvements in commodity prices in 2021.
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Achieved targeted reductions in all-in completed well costs in the Bakken
and Oklahoma for 2020.
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Navigated the pandemic, and preserved our team for more favorable market conditions.
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Implemented effective work-place health and safety measures, allowing our teams to operate at a high level
throughout the pandemic.
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Reduced air emissions by increasing gas capture to 98.3% in 2020 versus 96.2% in 2019 and issued a comprehensive
report regarding ESG stewardship.
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A discussion of how the factors described above impacted awards made under the Company’s 2020
annual cash bonus plan appears under the heading, “Annual Cash Bonus” below.
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Compensation Actions
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The following is a summary of the material compensation decisions made by the Compensation Committee
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for 2020:
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Base Salary – The base salaries of our NEOs were adjusted, in conjunction with our standard annual cycle, on
average, 2.20% during 2020, based on the Company’s strong 2019 performance (salary adjustments occurred in February 2020).
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Cash Bonus – For 2020, the individual bonus target levels for Mr. Hamm, Mr. Stark, Mr. Hart,
and Mr. Bent remained as set in 2019. Mr. Berry’s 2020 bonus target level was set in December of 2019 in preparation for starting his role as our Chief Executive Officer in January 2020. During 2020, the Compensation Committee did not
adjust the bonus target levels for these individuals from those described above as their existing targets were both competitive by comparison to the defined survey group as well as internally equitable. The targets for 2020 are set forth in the
table below.
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Name
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2020 Bonus Target
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Harold G.
Hamm
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150%
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William B.
Berry
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125%
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Jack H.
Stark
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100%
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John D.
Hart
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100%
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Patrick W.
Bent
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80%
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Long-term incentive equity awards – In February 2020, long-term incentive equity awards of restricted stock
were made to each of our NEOs, except for Mr. Hamm and Mr. Berry, with three-year cliff vesting at a level generally consistent with the targeted percentiles described above. As part of transitioning to his role as Executive Chairman,
which went into effect on January 1, 2020, Mr. Hamm no longer receives grants of equity awards as part of his regular compensation package. When employees are hired they typically receive a stock grant equivalent to three years of their
annual target value, as of the grant date, vesting ratably over a three-year period. Mr. Berry received such a grant on January 1, 2020. The value of the stock awarded to Mr. Berry in connection with his employment was consistent
with the Company’s typical practice and resulted in a larger restricted stock award for Mr. Berry relative to the other NEOs in 2020.
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In addition, awards made to each of the NEOs other than Mr. Hamm, also reflected the Compensation Committee’s evaluation of the performance of each of
the NEOs with respect to the 2020 Performance Factors and other factors described below in connection with the discussion of each of the Primary Compensation Elements.
25
The following charts illustrate the various components of total annual compensation for our Chief Executive
Officer and the other NEOs as a group, and reflect the following: (i) base salary received by the NEO during 2020; (ii) the cash bonus for 2020 paid in March 2021; (iii) the grant date fair value of the long-term equity incentive
awards granted to the NEOs, other than Mr. Hamm in 2020 (which is the value of the awards based on accounting principles on the date of grant, and not necessarily reflective of the amounts the NEOs may receive at the time of settlement); and
(iv) the other compensation for each NEO included in the Summary Compensation Table below.
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(1)
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Chart includes the impact of the initial award made to Mr. Berry in connection with assuming the CEO role in
January 2020, which reflected three times his annual target value, as of the grant date, and vests ratably over three years. If one third of the value of his initial stock award was included, it would equal 79% of his total compensation.
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Key Executive Compensation Policies and Practices
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Key executive compensation policies and practices include:
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Independent compensation consultants engaged by the Compensation Committee;
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No individual employment agreements;
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Majority of compensation is restricted stock awards for all NEOs, except Mr. Hamm, with vesting periods
designed to align interests of executives and shareholders;
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Clawback policy applies to all executive officers;
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Robust stock ownership requirements – 5x of base salary for the Executive Chairman, Chief Executive Officer
and President and 3x of base salary for the other executive officers;
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Industry-specific peer compensation data considered in establishing compensation;
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Minimal perquisites; and
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Hedging of Company securities by executive officers is not allowed.
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Executive Compensation Philosophy
We operate in a highly competitive environment for securing trained and qualified personnel. We believe the loss of the services of members of our senior
management could impact our ability to achieve our business goals. Accordingly, we have designed our executive compensation program to attract, retain and motivate experienced, talented individuals to achieve our primary business goals, using the
business strategies discussed in greater detail in our Annual Report on Form 10-K. We have also designed our executive compensation program to reward our executives for achieving the strategic and business
objectives determined to be important to help the Company create and maintain an advantage in a competitive environment. Specifically, the Primary Compensation Elements of our executive compensation program are designed to reward the achievement of
these objectives and to maximize the alignment of the executive and shareholder interests by:
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providing objective-driven compensation opportunities that incentivize executives to achieve superior results for
the Company and its shareholders;
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aligning compensation with the Company’s short- and long-term business objectives; and
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emphasizing the use of equity-based compensation to motivate the long-term retention of executives and align their
interests with those of shareholders.
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We do not apply rigid formulas in determining the amount and mix of compensation elements. For 2020 cash
bonuses paid in March 2021, we considered the achievement of financial and operational goals only as part of establishing the aggregate bonus pool from which bonuses were paid to the NEOs and in connection with the determination of the Company
multiplier described below in the discussion of the annual cash bonus. With respect to establishing the size of the aggregate bonus pool and determining the final Company multiplier, the Compensation Committee used the 2020 Bonus Framework. During
2020, in determining individual bonus compensation, the Compensation Committee and our management also employed the 2020 Bonus Framework, focusing on each individual’s contribution toward achieving the additional factors included in the 2020
Performance Factors. This was determined to be appropriate for the individual award process since the additional factors were viewed as key to the Company’s largely successful efforts to mitigate the impact of the events associated with the
2020 pandemic. We consider competitive market compensation paid by other companies comparable to us in size, geographic location and operations, but do not exclusively rely on such data to determine compensation for the NEOs. We maintain flexibility
with respect to our compensation programs and the assessment process. This approach allows us to adjust to an evolving business environment and account for individual performance, which we believe is particularly important in the current dynamic
commodity price environment. The total compensation of the Chief Executive Officer, which is significantly higher than our other NEOs, is commensurate with his responsibility for the overall performance and future success of the Company.
Compensation Setting Process
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Role of Compensation Committee
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The Compensation Committee is responsible for overseeing and administering all aspects of our
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benefit and compensation plans, and programs for our executive officers. The Compensation Committee annually
reviews and determines the individual elements of total compensation of the NEOs who appear in the compensation tables of this Proxy Statement as well as our other executive officers. Because our compensation programs are relatively simple, and we
do not have complex equity plans or significant change in control or severance obligations, the Compensation Committee does not use tally sheets in analyzing the compensation of our NEOs, but does review each element of compensation as described in
this Proxy Statement in evaluating and approving the total compensation of each of our NEOs. When making awards with respect to each element of our compensation program, the Compensation Committee considers how the award of that particular element
will impact the overall compensation package awarded to each NEO. As a result, the award made with respect to each element of our compensation program may be impacted by the awards made with respect to the other elements of our compensation
program.
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In general, the Compensation Committee evaluates how the Primary Compensation Elements of our compensation program compare to
similar compensation awarded by the then current compensation survey group. Although the Compensation Committee’s general approach is to award each element of compensation to align as closely as possible to the percentile indicated above, the
Compensation Committee considers an individual executive officer’s performance and the external business environment, and any final compensation reflects the Compensation Committee’s discretion. The Compensation Committee believes
targeting near the 50th percentile for base salary, cash bonus and long-term incentive equity results in competitive cash and equity compensation and aligns overall pay with shareholder interests while preserving considerable upside potential should
Company and individual executive performance merit higher compensation. The Committee believes Mr. Hamm’s majority ownership of our Common Stock is sufficient to align his interests with our shareholders, without granting him additional
long-term incentive equity awards in connection with his service as Executive Chairman. Additional detail regarding the actions of the Compensation Committee with respect to each of the Primary Compensation Elements appears in the discussion of
“Elements of Compensation” below.
At the 2020 Annual Meeting, shareholders approved through a non-binding
advisory vote, the compensation of our named executive officers. Following the 2017 Annual Meeting, the Board determined to hold an advisory shareholder vote on the compensation of the Company’s named executive officers annually. This pattern
will continue until the next required advisory vote on the frequency of shareholder votes on the compensation of executives, which will occur no later than our Annual Meeting of Shareholders in 2023. The Compensation Committee views the 98% vote in
favor of approving the compensation of the Company’s named executive officers received in 2020 as a validation of the Company’s approach to executive compensation and determined, subject to the modifications discussed below, it was
appropriate to continue structuring the compensation of the Company’s NEOs consistent with its compensation philosophy. A non-binding advisory vote will be conducted again in connection with the Annual
Meeting.
For 2020, the Compensation Committee considered individual performance in connection with the 2020 Bonus Framework as described above. Variations
in individual awards made to each of the NEOs are impacted by the Compensation Committee’s evaluation of a given NEO’s performance. In addition, in 2020, with respect to all elements of compensation for 2020, the Compensation Committee
considered
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input provided by our Executive Chairman, Chief Executive Officer, and President and Chief Operating Officer as described under “Role of Management” below and this process also drives
variation in individual awards made to each of the NEOs, with respect to such compensation.
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Role of Management
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Since the Family LLC which is managed by Mr. Hamm, and in which he has a substantial interest, beneficially
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owns a substantial majority of our outstanding shares of Common Stock, he provided the Compensation Committee a significant amount
of input regarding the compensation of our executive officers (other than himself).
For 2020 related compensation, the Compensation Committee, as well as our Executive Chairman, Chief Executive Officer and our President and Chief Operating
Officer, reviewed the Meridian report described below regarding the analysis of market compensation. Our Executive Chairman, Chief Executive Officer and our President and Chief Operating Officer were then responsible for making recommendations of
compensation for individual executive officers of the Company, other than themselves. With respect to 2020 compensation, our Executive Chairman, Chief Executive Officer and President and Chief Operating Officer made recommendations for the other
executive officer’s bonus amounts. The Executive Chairman made a recommendation with respect to our Chief Executive Officer’s 2020 compensation. The Executive Chairman and our Chief Executive Officer made a joint
recommendation with respect to our President and Chief Operating Officer’s 2020 compensation. Our Chief Executive Officer made a recommendation with respect to our Executive Chairman’s 2020 compensation. In making
recommendations for executive officer compensation, our Executive Chairman, Chief Executive Officer and our President and Chief Operating Officer relied on the Meridian report and took into account other factors including, but not limited to, the
following:
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the overall performance of the Company;
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the executive’s contribution to the overall performance of the Company;
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the executive’s business responsibilities;
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the executive’s compensation relative to other executives;
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the executive’s current compensation arrangements; and
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the executive’s contribution to enhancing the ability of the Company to generate long-term shareholder value.
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For 2020, once our Executive Chairman, Chief Executive Officer and President and Chief Operating Officer made their compensation
recommendations as described above, the Compensation Committee reviewed their recommendations and determined the appropriate final level of compensation. In the case of our Executive Chairman and Chief Executive Officer, the Compensation Committee
then presented all compensation approved by the Committee with respect to these individuals to the Board for final approval, as required by this Committee’s charter. The independent members of our Board unanimously affirmed the cash bonus award
and other compensation set by the Compensation Committee, without adjustment, for our Executive Chairman and Chief Executive Officer, in respect of their respective service during 2020.
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Role of the Compensation Consultants
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During 2020 the Compensation Committee retained the services of an independent
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compensation consulting firm, Meridian. Meridian reported directly to the Compensation Committee. During 2020, Meridian provided an analysis of market compensation for directors
and executive officers based upon its review of compensation paid by exploration and production companies comparable to us in terms of revenues, total assets, geographic location and market capitalization. This analysis was contained in the report
referred to above in the discussion appearing under the heading “Role of Management” and was used by the Compensation Committee, our Executive Chairman, Chief Executive Officer and President and Chief Operating Officer as described in that
discussion. During 2020, Meridian provided no services other than the director and executive officer compensation studies requested by the Compensation Committee, except for analysis of market compensation with respect to a limited number of
positions on an ad hoc basis, resulting in total fees of less than $120,000.
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The Compensation Committee has assessed the independence of Meridian in accordance with standards set forth in rules established
by the NYSE and promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and concluded no conflict of interest exists that prevented Meridian from independently representing the Compensation Committee.
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Compensation Survey Group
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The following table lists the companies included in the peer group used by the Compensation
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Committee for evaluating the 2020 compensation of the NEOs (the “2020 Survey Group”):
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2020 Survey Group Companies
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Apache Corporation
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EOG Resources, Inc.
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Cabot Oil & Gas Corporation
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Hess Corporation
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Chesapeake Energy Corporation
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Marathon Oil Company
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Cimarex Energy Co
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Noble Energy, Inc.
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Concho Resources, Inc.
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Oasis Petroleum Inc.
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Continental Resources, Inc.
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Pioneer Natural Resources Company
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Devon Energy Corporation
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WPX Energy, Inc.
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In selecting the 2020 Survey Group, the Compensation Committee considered the location of operations, market capitalization,
revenue, assets, net income, production profile of oil versus gas, as well as other factors to determine the most relevant subset of the E27 Survey Group member companies for comparison purposes. The E27 Survey Group is a group of energy companies
assembled for the purpose of providing industry participants survey information to be used in making compensation decisions. The companies in the 2020 Survey Group had a median revenue of approximately $5.0 billion as of year-end 2019, which is comparable to the Company’s revenue of approximately $4.6 billion for 2019.
Elements of Compensation
The table below describes each of our Primary Compensation Elements, the purpose of each
element, and how each element fits within the Company’s compensation philosophy and objectives.
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Compensation Element
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Description
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Purpose and Philosophy
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Base
Salary
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Fixed cash compensation
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Provides a stable, fixed element of cash
compensation.
Attract and retain executive officers by paying a wage commensurate with
such officer’s experience, skills and responsibilities. It also recognizes and considers the internal value of the position within the Company, the officer’s leadership potential and demonstrated performance.
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Annual Cash Bonus
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Annual cash bonus related to individual contribution toward
achievement of annual financial and operating results
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Rewards executives for the achievement of specific
annual financial, operating and strategic goals and individual performance.
Allows the
Compensation Committee to evaluate both objective and subjective considerations when exercising discretion to determine final payout amounts.
Important to the Company’s ability to attract, motivate and retain the Company’s executive officers.
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Long-term Incentive
Equity Awards
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Restricted Stock
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Aligns the executive’s long-term interests with
those of shareholders.
Important to the Company’s ability to attract, motivate and
retain the Company’s executive officers.
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Role of Discretion in Determining Primary Compensation Elements
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All base salary adjustments and long-term incentive awards
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for NEOs have been determined on a discretionary basis and while not linked to specific corporate goals or
objectives, the overall performance of the Company as well as individual performance was considered in determining pay. The Compensation Committee retains discretion over all aspects of the CLR Bonus Plan (defined below) and awards made thereunder.
For 2020, the Final Pool Size (as described below) and Company performance factor reflect the exercise of discretion and were determined using the 2020 Bonus Framework. The individual multiplier used in the CLR Bonus Plan is based on a
subjective evaluation of an individual’s performance in contributing to the additional factors included in the 2020 Performance Factors.
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Base Salary
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Base salary is intended to provide each NEO a regular source of income and compensate him for performing the
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responsibilities associated with his position. It also serves the purposes listed in the table above. Due to
the pandemic, Mr. Hamm requested that his base salary be reduced to the amount needed each pay period to allow him to cover the expenses associated with the benefits we have customarily made available to all employees, during the period from
April 5, 2020 through the end of 2020. Base salary also impacts annual cash bonus awards in that the target size of these awards is expressed as a percentage of base earnings, which is primarily comprised of salary. The table below shows the
salary set by the Compensation Committee applicable to each of the NEOs during 2020.
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NEO
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Salary During 2020
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Harold G.
Hamm
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$1,360,376
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Willam B.
Berry
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$1,000,000
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Jack H.
Stark
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$ 753,247
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John D.
Hart
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$ 617,000
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Patrick W.
Bent
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$ 541,000
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With the exception of Mr. Berry, the salaries listed above went into effect in February 2020, and remained in effect for the
remainder of the year. Mr. Berry’s salary was in effect when he commenced service as our Chief Executive Officer on January 1, 2020. In the future, we expect the base salaries of the NEOs will be reviewed on an annual basis and
adjusted as necessary to remain competitive.
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Annual Cash Bonus
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Our NEOs may earn annual cash bonuses as a reward for their individual contribution to the achievement of
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annual financial and operating results as determined by the Compensation Committee. On February 22, 2013,
the Compensation Committee approved a cash bonus plan that applies to certain employees of the Company, including the Company’s executive officers (the “CLR Bonus Plan”). The CLR Bonus Plan is designed to reward the Company’s
employees and executive officers for achieving annual performance and strategic goals. The CLR Bonus Plan provides for the annual payment of cash bonuses, subject to the discretion of the Compensation Committee. The individual cash bonuses paid to
NEOs for 2020 were paid pursuant to the CLR Bonus Plan. The Compensation Committee exercises complete discretion in administering the CLR Bonus Plan, and the individual awards to our NEOs for 2020 were determined following the process described
below.
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Under the CLR Bonus Plan, the bonus pool is initially set based on the aggregate target bonus amount of all employees
participating in the CLR Bonus Plan (referred to herein as the “Target Pool Size”). For the 2020 bonus, paid in March 2021, the Compensation Committee continued using the factors used to pay the bonuses for 2019 (paid in February 2020)
(referred to herein as the “2019 Factors”), in combination with the additional factors (which were given substantially greater weight than in the past), to determine the final size of the bonus pool. For 2020, the additional factors
centered on the direction given by the Committee to our management in responding to the events precipitated by the pandemic as discussed below. The 2019 factors were: net cash provided by operating activities (25%); return on capital employed (25%);
production growth (15%); relative total shareholder return (10%); reserve growth (10%); health, safety and environmental performance (10%); and proved developed finding and development cost per barrel of oil equivalent (5%). The Compensation
Committee has complete discretion to increase, decrease or leave the size of the pool unchanged. The size of the bonus pool as determined by the Compensation Committee is referred to herein as the “Final Pool Size.” The ratio of the Final
Pool Size to the Target Pool Size is used to determine the Company multiplier in the calculation of an individual’s bonus amount under the CLR Bonus Plan.
In determining to continue the factors from 2019 in 2020, the Compensation Committee was aware of the issues and challenges confronting the Company in relation
to the pandemic, and it realized a successful response to such a rapidly evolving situation would necessarily require the Company’s management to respond to conditions that were volatile and highly unpredictable. Accordingly, the Compensation
Committee did not believe it would be useful to adjust the bonus metrics it had previously adopted, since it was unclear what actions would be needed in order to allow the Company to best mitigate the unprecedented impacts anticipated as a result of
the pandemic and to put the Company in the best competitive position to move forward once the pandemic and its effects were mitigated and better understood. The Compensation Committee concluded it would be prudent to carry-forward the factors that
were deemed appropriate prior to the onset of the pandemic and then to use the discretion afforded by the CLR Bonus Plan’s structure to evaluate management’s response to the pandemic. It took this approach with the understanding it would
evaluate the Company’s success based on management’s performance in: (x) ESG, protecting employees and preserving Company assets for more favorable market conditions, (y) reducing costs and capital expenditures to preserve
financial flexibility and liquidity and (z) generating the maximum amount of cash
30
flow possible under the circumstances. The Compensation Committee, after being briefed on management’s assessment of business priorities, indicated its support of the objectives outlined
above, which would be treated as additional factors for purposes of the CLR Bonus Plan and these factors would be given substantially greater weight than in the past years in determining bonus payouts under the CLR Bonus Plan for 2020 paid in March
2021. The Compensation Committee concluded this approach would give management the flexibility to take the actions required by the pandemic and allow the Committee to reward employees for their initiative. The Compensation Committee felt this
approach would be an appropriate exercise of the discretion allowed to the Compensation Committee under the CLR Bonus Plan.
For 2020, the Compensation
Committee set the Company performance factor based on the following estimates provided to the Compensation Committee in connection with the seven metrics: net cash provided by operating activities—$1.42 billion; return on capital
employed—(3.6)%; production growth—(12)%; relative total shareholder return – 8th relative to the peer group listed below; reserve growth was negative; health, safety and
environmental performance of 173% of target; and proved developed finding and development cost per barrel of oil equivalent—$10.45. In light of the challenges posed by the pandemic, the Company’s performance in these areas was consistent
with internal expectations, with the exception of health, safety and environmental performance, which greatly exceeded expectations. The Compensation Committee also reviewed Company performance against the additional factors described in the
paragraph above in relationship to the pandemic. After considering these items, the Compensation Committee determined a Company performance factor of 70% of target was an appropriate result of balancing the factors contained in the 2020 Bonus
Framework. Proved developed finding and development cost per barrel of oil equivalent represents the Company’s net exploration and development costs incurred for operated wells having first production in 2020 divided by the net estimated
recoverable reserves for those wells expressed in barrels of oil equivalent. Return on capital employed represents net income attributable to the Company before non-cash gains and losses on derivatives, income
taxes, non-cash equity compensation expense, interest expense, and gains and losses on extinguishment of debt, the result of which is divided by average capital employed for the year, with capital employed
representing the sum of total debt and total shareholders’ equity attributable to the Company. Relative total shareholder return represents the percentage change in the Company’s stock price as compared to the companies listed in the table
below. For 2020, we compared the 60 day moving average price at 2020 year-end to the 60 day moving average price at 2019 year-end. The table below lists the companies
other than the Company used to determine relative total shareholder return for the bonus for 2020 paid in March 2021:
|
|
|
|
|
|
|
2020 Relative Total Shareholder Return Companies
|
|
|
|
|
Cimarex Energy
Co.
|
|
EOG Resources, Inc.
|
|
|
|
|
Concho Resources,
Inc.
|
|
Hess Corporation
|
|
|
|
|
ConocoPhillips
|
|
Marathon Oil Corporation
|
|
|
|
|
Devon Energy
Corporation
|
|
Pioneer Natural Resources Company
|
Individual awards for participants in the CLR Bonus Plan in connection with the bonuses for 2020 which were paid in March 2021,
were calculated utilizing the following formula:
Base Earnings x Target Bonus x Company Multiplier x Individual Multiplier = Initial Bonus
Amount
For purposes of this formula, “base earnings” refers to the actual amount paid in respect of salary during 2020. Except for Mr. Hamm
and Mr. Berry, the individual multiplier for the 2020 bonuses was based on the Compensation Committee’s review of the 2020 Survey Group and the subjective evaluation of each of the NEO’s supervisor or supervisors. Mr. Hamm’s
and Mr. Berry’s individual multiplier was determined based on the subjective evaluation of the Compensation Committee. The subjective evaluation of each NEO was primarily based on an evaluation of each NEO’s contributions to the
Company’s performance with respect to the 2020 Performance Factors relevant to that NEO, with substantially greater weight than in past being placed on the additional factors component of the 2020 Performance Factors. For 2020, after
calculating the Company multiplier based on the measures and methodology described above, individual differences resulted from the subjective evaluation of performance that determined each NEO’s individual multiplier. In making its evaluation,
where applicable, the Compensation Committee places significant weight on input provided by our Executive Chairman, Chief Executive Officer and our President and Chief Operating Officer, as described above.
Once the NEOs’ Initial Bonus Amounts were calculated, they were presented by Messrs. Hamm, Berry and Stark to the Compensation Committee for review,
and in the case of Messrs. Hamm and Berry also presented to the Board, both of which had the discretion to increase
31
or decrease individual Initial Bonus Amounts and determine final awards. Using the factors described previously, the Compensation Committee determined the final awards were appropriate and
approved the bonuses for 2020 as presented by management.
The following table shows target annual cash bonus amounts as a percentage of base earnings for
each of the NEOs in connection with the bonuses for 2020 which were paid in March 2021 under the CLR Bonus Plan:
|
|
|
|
|
|
|
|
NEO
|
|
2020 Target
Bonus %
|
|
|
|
|
Harold G.
Hamm
|
|
150
|
|
|
|
|
William B.
Berry
|
|
125
|
|
|
|
|
Jack H.
Stark
|
|
100
|
|
|
|
|
John D.
Hart
|
|
100
|
|
|
|
|
Patrick W.
Bent
|
|
80
|
Annual cash bonuses for the NEOs are determined concurrently with the year-end audited
financial statements and reserve report. We have adopted a clawback policy that is applicable to the bonus for 2020 paid in March 2021 and to future awards under the CLR Cash Bonus Plan. For more information regarding the clawback policy, please see
“CLR Clawback Policy” on page 34 below.
|
|
|
|
|
Long-Term Incentive Awards
|
|
The objective of our long-term incentive awards is to retain and motivate our executives over the long-
|
|
term and to align their interests with those of our shareholders. In February 2020, the NEOs, other than Hamm
and Mr. Berry, received long-term incentive awards of restricted Common Stock, indicated in the table below, which vest on February 15, 2023. Mr. Berry received the total number of shares listed in the table below on January 1,
2020, in connection with assuming the role of our Chief Executive Officer on that date. Mr. Berry’s award vests as follows: 261,695, 261,695 and 261,694 shares on February 15, 2021, 2022 and 2023, respectively. As part of
transitioning to his role as Executive Chairman, which went into effect on January 1, 2020, Mr. Hamm no longer receives grants of equity awards as part of his regular compensation package. This change was deemed appropriate given his
majority ownership of our Common Stock, the Compensation Committee’s desire to minimize compensation expense for the Company and the change in the scope of his responsibilities. The table below presents the total number of shares of restricted
Common Stock awarded to each NEO, other than Mr. Hamm during 2020.
|
|
|
|
|
|
|
|
|
NEO
|
|
2020 Restricted Stock Award (shares)
|
|
|
|
|
William B.
Berry
|
|
785,084
|
|
|
|
|
Jack H.
Stark
|
|
123,419
|
|
|
|
|
John D.
Hart
|
|
83,308
|
|
|
|
|
Patrick W.
Bent
|
|
58,624
|
The awards for each of the NEOs other than Mr. Berry were approved by the Compensation Committee. Mr. Berry’s
awards were approved by the Compensation Committee and by the full Board based on the recommendation of the Compensation Committee.
The long-term incentive
award for each NEO is determined at the discretion of the Compensation Committee using the approach described above under “Executive Summary—Compensation Philosophy and Components.” Differences in long-term incentive awards are based
on the Compensation Committee’s subjective evaluation of the expected relative individual contribution to the achievement of our long-term financial and operating results.
The vesting provisions of the awards encourage our officers to remain in our employ in order to realize these forms of compensation. Our current equity programs
consist of restricted stock awards, which we believe are an effective motivational tool which aligns executive interests’ with shareholders.
The
restricted stock awards provide for immediate vesting upon a change in control, as defined by the 2013 Plan. We would likely need the assistance of several key employees to successfully conclude a transaction resulting in a change in control. We
believe immediately vesting the awards may serve to reduce concerns, other than continued employment, such employees may have with respect to any potential change in control transaction and may motivate them to complete the transaction.
32
We have a policy which prohibits our directors and certain employees, including our executive officers, from
holding our securities in a margin account or pledging our securities as collateral, unless permission is received from our General Counsel in writing. We also have a policy that prohibits the same group from hedging any Company securities held by
them. For a discussion of our hedging policy, see “Hedging Policy” on page 35 below.
The Company has a Common Stock ownership requirement for our
executive officers. Each such officer is required to own shares of our Common Stock at least equal to a specified multiple of such officer’s base salary. The table below lists base salary multiples applicable to the different positions within
this group:
|
|
|
|
|
|
|
|
Officer
|
|
Required Stock Ownership –
Multiple of Annual Base Salary
|
|
Executive
Chairman
|
|
5x
|
|
Chief
Executive Officer
|
|
5x
|
|
President
|
|
5x
|
|
Other
Executive Officers
|
|
3x
|
Until the stock ownership guideline is achieved, each such officer is required to retain 100% of the “net shares”
received as a result of restricted shares granted under our 2013 Plan. “Net shares” are the number of shares that remain after shares are sold or withheld to pay withholding taxes. The calculation is determined as of December 31 each
year based upon the average closing price of the Common Stock for the year compared to the officer’s base salary as of such date. Shares owned directly by, or held in trust for, the officer or his or her immediate family members residing in the
same household and unvested restricted shares are included in the calculation.
The Compensation Committee reviews the compliance of each executive officer
with the stock ownership guidelines each year and it may choose to reduce or eliminate future restricted stock grants under the 2013 Plan for any executive officer not in compliance with the stock ownership guidelines. Compliance with the guidelines
is also determined each time any executive officer sells shares, based on the closing price of our Common Stock on the date clearance to sell the relevant shares is granted. The Compensation Committee reviewed the NEOs’ and other applicable
officers’ stock ownership as of December 31, 2020 and determined each NEO and other applicable officers were in compliance with the guidelines.
|
|
|
|
|
Deferred Compensation Plan
|
|
On September 20, 2013, the Board, based upon the recommendation of the Compensation Committee,
|
|
established the DCP. The Board appointed the Compensation Committee to act as Plan Administrator of the DCP
(the “DCP Administrator”).
|
The purpose of the DCP is to (i) give DCP participants, including the NEOs, an additional tool to use in planning their
savings and for retirement; and (ii) provide a vehicle to allow employee DCP participants, all of whom are limited in their participation in the Company’s 401(k) (as defined below) due to limits imposed under federal tax rules
(“Limits”), to receive similar benefits in connection with Company matching contributions as employees whose ability to receive Company matching contributions is not impacted by the Limits. The DCP permits the Company to make discretionary
matching and other contributions to an employee participant’s account, although the Company did not make any such contributions to the NEOs’ accounts during the 2020 year. For a description of the material features of the DCP see the
narrative “Description of Deferred Compensation Plan” on pages 39 and 40 below.
|
|
|
|
|
Other
|
|
Compensation and benefits that are outside of our three main compensation elements are designed to attract and
retain
|
|
employees by enhancing our overall compensation package. During 2020, we provided automobiles and fuel cards
to certain NEOs and certain other employees for business and personal use. The personal use is valued according to IRS guidelines and reported as taxable income to the individuals. We value vehicle usage for disclosure in our proxy statement based
upon the aggregate incremental cost to us adjusted to reflect each individual’s personal use of the vehicle. Fuel card usage is reported based on its incremental cost.
|
In 2020, we allowed Mr. Hamm and Mr Berry to use the corporate aircraft for personal trips. The value of such trips is
calculated according to IRS guidelines and reported as taxable income to him. On occasion the spouses and guests of NEOs may accompany them on business-related trips. Aircraft usage and travel by spouses and guests are valued for disclosure in our
proxy statement based on the aggregate incremental cost to us.
33
We have a defined contribution retirement plan (“401(k)”) covering all full-time employees. Our
contributions to the plan are discretionary and based on a percentage of eligible compensation. The 401(k) provides for Company dollar for dollar matching of up to a maximum of 10% of a covered employee’s eligible compensation, depending on the
employee’s level of contribution into the employee’s account and subject to IRS limits. During 2020, the match was suspended from April 1, 2020 through the end of the year as part of the cost control measures implemented by the
Company in response to the deteriorating economic environment created by the pandemic.
In connection with Mr. Berry’s relocation to the
Company’s headquarters as a result of assuming the position of CEO, the Company offered a relocation package to Mr. Berry described below in the Summary Compensation Table appearing on page 36 of this proxy statement. The values reported
in this table are based on their incremental cost to us.
All full-time employees may participate in our health and welfare benefit programs, including
medical, dental, vision care, life insurance and disability insurance. We provide all full-time employees with life insurance coverage of the lesser of two times base salary or $1,000,000 and allow them to purchase supplemental coverage. We
do not sponsor any qualified or non-qualified defined benefit plans.
|
|
|
|
|
CLR Clawback Policy
|
|
On August 3, 2018 the Board approved a clawback policy pursuant to which cash and equity-based
incentive
|
|
compensation awards to executive officers granted after August 3, 2018 may be recovered if the
Company is required to restate all or a portion of its publicly reported financial statements and it is determined such restatement was proximately caused by the fraud, gross negligence, intentional misconduct, embezzlement, theft or breach of
fiduciary duty committed by or attributable to any current or former executive officer of the Company (such conduct is referred to herein as “wrongful conduct”). The policy also applies if an executive has knowledge of wrongful
conduct and fails to take reasonable steps to prevent it.
|
In order to be subject to recovery, an award must have been based in whole or in part on measures impacted by the
restatement. The amount to be recovered is any excess value received by the executive officer as a result of the measures impacted by the restatement. Any matching award under the Company’s DCP impacted by the measures subject to
restatement is also subject to recovery. The Compensation Committee has discretion to determine how recovery is to be achieved, which may include, among other things, seeking reimbursement, cancelling other outstanding equity awards or reducing
future compensation. Simple interest will be applied to any recovery amount.
Since all current outstanding equity awards are restricted stock awards
subject to time-based vesting, and we have not made matching awards under the DCP since 2015, the only compensation that may be subject to the policy as of the date of this proxy statement are awards made under the CLR Bonus Plan. In order to
receive a CLR Bonus Plan award, each executive officer must execute an agreement agreeing to abide by the terms of the clawback policy. Each executive officer executed such an agreement in connection with the bonus for 2020, paid in March 2021.
The clawback policy is administered by the Compensation Committee. The Compensation Committee has discretion to waive or limit the amount to be recovered
under the clawback policy if it determines such action is justified in its business judgment. Among others, circumstances that may be considered by the Compensation Committee in exercising discretion to waive or limit recovery are the passage of
time, whether the cost of recovery outweighs the benefit to the Company, and whether the recovery will remedy the wrongful conduct or aid in preventing its recurrence.
Impact of Accounting and Tax Treatment
We believe it is important to have flexibility in designing the compensation program in a manner to achieve the objectives described above under
“Compensation Objectives.” Therefore, while we consider the accounting and tax treatment of certain forms of compensation in the design of our compensation program, the accounting and tax treatment is not a determinative factor.
Prior to 2018, under Section 162(m) of the Internal Revenue Code, a publicly-held company could deduct for federal tax purposes no more than $1,000,000 of
annual compensation paid to its principal executive officer and each of its three other most highly-paid officers other than the principal financial officer, unless the compensation was “performance-based compensation.” Beginning with
2018, Section 162(m) of the Code generally does not contain an exception for “performance-based compensation.” Therefore, we do not expect the restrictions of Section 162(m) of the Code to play any role in our compensation
decisions going forward.
34
Our insider trading policy provides that certain employees and all directors may not purchase or sell puts or calls to sell or buy
our securities or engage in short sales with respect to our securities. Certain employees and all directors are also prohibited from holding our securities in a margin account or pledging our securities as collateral for a loan, unless
permission is received from our General Counsel in writing. The purchase or sale of stock by our officers, directors and certain employees may only be made during a window of time described in our policy and after approval by our General Counsel.
We have a policy that prohibits our directors and certain employees, including our executive officers, from engaging in
transactions which may hedge the value of our securities, including, without limitation, buying or selling puts and calls for, or engaging in short sales of, our securities. While the policy does not specifically address prepaid variable forward
contracts, equity swaps, collars and exchange funds, in applying the policy, the Company would consider these transactions to be hedging transactions. This policy applies to all types of awards under our 2013 Plan, including awards of restricted
Common Stock, which are the only types of awards currently outstanding under our 2013 Plan and also applies to Company securities otherwise acquired by our directors, executive officers and certain other employees. Employees, including our executive
officers, are selected to be subject to this policy based on their access to material information about our Company, as part of their day-to-day responsibilities.
Directors are also included in this policy based on their access to material information about the Company. The purpose of the prohibition against hedging is to align the interests of our directors and the employees described above with the
performance and prospects of the Company.
|
|
|
|
|
Compensation Committee Report
|
|
|
In accordance with its written charter adopted by the Board, the Compensation Committee of the Board is responsible for
overseeing awards to employees of stock or other equity compensation and determining and approving the individual elements of the total compensation of the Chief Executive Officer, the other NEOs and other senior executive officers and recommending
the compensation of the Chief Executive Officer for approval by the Board. The Compensation Committee is also obligated to communicate to shareholders information regarding the factors and criteria on which the Chief Executive Officer’s
compensation was based, including the relationship of the Company’s performance to the Chief Executive Officer’s compensation, and the specific relationship of corporate performance to executive compensation overall.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) above with management. Based on this review
and discussion, the Compensation Committee recommended to the Board that this CD&A be included in this Proxy Statement.
|
|
|
|
|
|
|
/s/ John McNabb
|
|
/s/ Mark Monroe
|
|
/s/ Timothy G. Taylor
|
|
John McNabb
Committee Chairman
|
|
Mark Monroe
Committee Member
|
|
Timothy G. Taylor
Committee Member
|
35
|
|
|
|
|
Summary Compensation Table
|
|
|
The following table sets forth the compensation of our Principal Executive Officer, Principal Financial Officer, and the three
other most highly compensated executive officers during 2020. We refer to these five individuals collectively as the “NEOs” for 2020. Mr. Hamm served as our Chief Executive Officer during 2019 and 2018, and assumed his current role as
our Executive Chairman on January 1, 2020. Mr. Berry started service as our Chief Executive Officer on January 1, 2020. Compensation is shown for years 2018, 2019 and 2020, as applicable for years in which the individual was deemed to
be an NEO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($) (1)
|
|
|
Bonus
($) (1)
|
|
|
Stock
Awards
($) (2)
|
|
|
All Other
Compensation
($) (3)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Harold G. Hamm
|
|
|
2020
|
|
|
$
|
457,694
|
|
|
$
|
1,785,494
|
|
|
$
|
—
|
|
|
$
|
94,858
|
|
|
$
|
2,338,046
|
|
|
Executive Chairman
|
|
|
2019
|
|
|
|
1,309,472
|
|
|
|
3,019,970
|
|
|
|
8,349,062
|
|
|
|
67,584
|
|
|
|
12,746,088
|
|
|
|
|
|
2018
|
|
|
|
1,255,987
|
|
|
|
3,442,974
|
|
|
|
8,556,833
|
|
|
|
76,618
|
|
|
|
13,332,412
|
|
|
|
|
|
|
|
|
|
|
William B. Berry
Chief Executive Officer
|
|
|
2020
|
|
|
|
992,308
|
|
|
|
1,085,337
|
|
|
|
26,928,381
|
|
|
|
227,169
|
|
|
|
29,233,195
|
|
|
|
|
|
|
|
|
|
|
Jack H. Stark
|
|
|
2020
|
|
|
|
777,931
|
|
|
|
680,690
|
|
|
|
3,165,697
|
|
|
|
30,297
|
|
|
|
4,654,615
|
|
|
President and Chief Operating Officer
|
|
|
2019
|
|
|
|
725,060
|
|
|
|
1,114,780
|
|
|
|
3,879,015
|
|
|
|
38,237
|
|
|
|
5,757,092
|
|
|
|
|
2018
|
|
|
|
695,445
|
|
|
|
1,270,927
|
|
|
|
4,040,112
|
|
|
|
33,819
|
|
|
|
6,040,303
|
|
|
|
|
|
|
|
|
|
|
John D. Hart
|
|
|
2020
|
|
|
|
637,462
|
|
|
|
557,780
|
|
|
|
2,136,850
|
|
|
|
29,602
|
|
|
|
3,361,694
|
|
|
Senior Vice President, Chief
|
|
|
2019
|
|
|
|
595,673
|
|
|
|
915,848
|
|
|
|
2,812,276
|
|
|
|
25,489
|
|
|
|
4,349,286
|
|
|
Financial Officer and Chief Strategy Officer
|
|
|
2018
|
|
|
|
573,462
|
|
|
|
1,040,000
|
|
|
|
2,929,122
|
|
|
|
29,233
|
|
|
|
4,571,817
|
|
|
|
|
|
|
|
|
|
|
Patrick W. Bent
|
|
|
2020
|
|
|
|
559,692
|
|
|
|
420,000
|
|
|
|
1,503,706
|
|
|
|
26,489
|
|
|
|
2,509,887
|
|
|
Senior Vice President, Operations
|
|
|
2019
2018
|
|
|
|
509,825
471,482
|
|
|
|
610,000
650,000
|
|
|
|
1,935,204
1,515,042
|
|
|
|
25,489
24,989
|
|
|
|
3,080,518
2,661,513
|
|
|
(1)
|
Amounts shown for salary reflect the impact of having 27 pay periods during 2020, instead of the usual 26. None of
the NEOs elected to participate in the Company’s DCP with respect to 2020 compensation and amounts reported in the table above do not include any amounts deferred pursuant to the Company’s DCP. All bonuses were paid pursuant to the CLR
Bonus Plan in March 2021 for 2020. Due to the pandemic, Mr. Hamm’s salary was reduced, at his request, to the amount needed each pay period to allow him to cover the expenses associated with the benefits we have customarily made available
to all employees, during the period from April 5, 2020 through the end of, 2020. Mr. Hamm requested this reduction as a cost saving measure during the pandemic and the amount reported for Mr. Hamm reflects the impact of this
request during 2020. As a result of Mr. Berry’s start date, the amount reported for his salary reflects a partial pay period as a result of his start date occurring in the middle of a pay period.
|
|
(2)
|
The amounts under “Stock Awards” reflect the aggregate grant date fair value computed in accordance with
ASC Topic 718, disregarding any estimate for forfeitures, for awards granted during the indicated year. A discussion of the grant date fair value calculation can be found in Note 14 to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2020, filed with the SEC. As noted above, in connection with the transition to serving as our Executive Chairman, commencing January 1, 2020,
Mr. Hamm did not receive a stock award in 2020. When employees are hired they typically receive a stock grant equivalent to three years of their annual target value, vesting ratably over a three-year period. Mr. Berry received such a grant
on January 1, 2020. The value of the stock awarded to Mr. Berry in connection with his employment was consistent with the Company’s typical practice and results in a larger restricted stock award for Mr. Berry relative to the
other NEOs in 2020.
|
36
|
(3)
|
All Other Compensation for 2020 includes the following elements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Personal Use of
Company Aircraft
($) (a)
|
|
|
Personal Use of
Company Vehicle/Fuel
Card
($) (b)
|
|
|
Contributions
to 401(k) Plan
($)
|
|
|
Relocation
Expense
|
|
|
Total
($) (c)
|
|
|
Harold G.
Hamm
|
|
|
2020
|
|
|
$
|
61,062
|
|
|
$
|
7,307
|
|
|
$
|
26,000
|
|
|
|
—
|
|
|
$
|
94,858
|
|
|
William B.
Berry(d)
|
|
|
2020
|
|
|
|
47,782
|
|
|
|
—
|
|
|
|
3,077
|
|
|
$
|
175,821
|
|
|
|
227,169
|
|
|
Jack H.
Stark
|
|
|
2020
|
|
|
|
—
|
|
|
|
3,808
|
|
|
|
26,000
|
|
|
|
—
|
|
|
|
30,297
|
|
|
John D.
Hart
|
|
|
2020
|
|
|
|
—
|
|
|
|
3,113
|
|
|
|
26,000
|
|
|
|
—
|
|
|
|
29,602
|
|
|
Patrick W.
Bent
|
|
|
2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,000
|
|
|
|
—
|
|
|
|
26,489
|
|
|
(a)
|
We calculate the incremental cost to the Company of any personal use of corporate aircraft based on the cost of
fuel, trip-related maintenance, crew travel expenses, on-board catering, landing fees, trip-related hangar and parking costs, and other variable costs. Occasionally, spouses and guests of NEOs ride along when
an aircraft is already going to a destination for a business purpose. This use has minimal costs to the Company and, where applicable, only the direct variable costs associated with the additional passenger (for example fuel and catering) are
included in determining the aggregate incremental cost to the Company. Since the Company-owned aircraft is used primarily for business travel, we do not include the fixed costs that do not change based on usage, such as pilots’ salaries and the
purchase costs of Company-owned aircraft.
|
|
(b)
|
We calculate the incremental cost to the Company of any personal use of Company vehicles, including fuel,
maintenance, insurance, lease payments and depreciation. For Mr. Hart the total amount shown above reflects the use of a Company fuel card in 2020.
|
|
(c)
|
Total amount includes nominal cost of industry club membership.
|
|
(d)
|
Includes $11,591 for temporary living and mileage expenses, $103,313 for expenses associated with maintaining
duplicate households, and $9,450 for home purchase assistance. All items were grossed up for applicable employment taxes at an additional cost of $51,467. In connection with his relocation, the Company also agreed to provide Mr. Berry customary
loss protection on the purchase of a home near the Company’s offices in Oklahoma City. The loss protection resulted in no costs to the Company during 2020 and the amount of the Company’s obligation in connection with this item is not
determinable at this time.
|
|
|
|
|
|
2020 Grants of Plan Based Awards
|
|
|
The following table reflects information concerning awards of restricted stock granted to our NEOs, except Mr. Hamm, during
the fiscal year ending December 31, 2020 under the Company’s 2013 Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
|
Stock
Awards:
Number of Shares (1)
|
|
|
Grant Date Fair Value
of Stock
Awards
($) (2)
|
|
|
William B.
Berry
|
|
|
1/01/2020
|
|
|
|
785,084
|
(3)
|
|
$
|
26,928,381
|
|
|
Jack H.
Stark
|
|
|
2/10/2020
|
|
|
|
123,419
|
(4)
|
|
|
3,165,697
|
|
|
John D.
Hart
|
|
|
2/10/2020
|
|
|
|
83,308
|
(4)
|
|
|
2,136,850
|
|
|
Patrick W.
Bent
|
|
|
2/10/2020
|
|
|
|
58,624
|
(4)
|
|
|
1,503,706
|
|
|
(1)
|
All awards will vest on an accelerated basis in the event of a change in control. Unvested shares receive cash
dividends, if any, at the same rate as other shareholders and all Company employees receive payment in connection with accrued dividend payments at the time the shares related to any accrued dividends vest.
|
|
(2)
|
The aggregate grant date fair value of each equity award is computed in accordance with ASC Topic 718,
disregarding any estimate for forfeitures.
|
|
(3)
|
Mr. Berry’s award vests as follows: 261,695, 261,695 and 261,694 shares on February 15, 2021, 2022
and 2023, respectively.
|
|
(4)
|
The shares underlying this award vest on February 15, 2023, subject to the NEOs’ continued service.
|
37
|
|
|
2020 Narrative Disclosure
to the Summary Compensation Table and Grants of Plan Based Awards
|
The following table shows the percentage of base salary and bonus that each NEO received or earned with respect to 2020 as
compared to that NEO’s total compensation for 2020:
|
|
|
|
|
|
|
|
Name
|
|
Percentage of Salary and
Bonus to Total
Compensation
|
|
Harold G.
Hamm
|
|
96%
|
|
William B.
Berry
|
|
7%
|
|
Jack H.
Stark
|
|
31%
|
|
John D.
Hart
|
|
36%
|
|
Patrick W.
Bent
|
|
39%
|
|
|
|
|
|
Outstanding Equity Awards as of
December 31, 2020
|
|
|
The following table reflects unvested restricted stock held by our NEOs as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
Name
|
|
Number of Shares of Stock that
Have Not Vested (1)
|
|
|
Market Value of Shares of
Stock that Have Not Vested ($) (2)
|
|
|
Harold G.
Hamm
|
|
|
353,456
|
|
|
$
|
5,761,333
|
|
|
William B.
Berry
|
|
|
785,084
|
|
|
|
12,796,869
|
|
|
Jack H.
Stark
|
|
|
289,752
|
|
|
|
4,722,958
|
|
|
John D.
Hart
|
|
|
203,900
|
|
|
|
3,323,570
|
|
|
Patrick W.
Bent
|
|
|
131,973
|
|
|
|
2,151,160
|
|
|
(1)
|
These shares represent restricted stock awards. Unvested shares will vest as follows: (i) 167,093 shares on
February 15, 2021 and 186,363 shares on February 15, 2022, for Mr. Hamm; (ii) 261,695 shares on February 15, 2021, 261,695 shares on February 15, 2022, and 261,694 shares on February 15, 2023 for Mr. Berry; (iii) 78,632
shares on February 15, 2021, 87,701 shares on February 15, 2022, and 123,419 shares on February 15, 2023, for Mr. Stark; (iv) 57,009 shares on February 15, 2021, 63,583 shares on February 15, 2022, and 83,308 shares on
February 15, 2023, for Mr. Hart; and (v) 33,755 shares on February 15, 2021, 39,594 shares on February 15, 2022, and 58,624 shares on February 15, 2023 for Mr. Bent.
|
|
(2)
|
Market value is based on the closing price of $16.30 of our Common Stock as of December 31, 2020.
|
|
|
|
|
|
Options Exercised and Restricted Stock
Vested During 2020
|
|
|
The following table reflects information concerning shares of restricted stock held by NEOs, except Mr. Berry (who had no
shares vest during 2020), that vested during 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
Name
|
|
Number of
Shares Acquired
on Vesting
|
|
|
Value Realized
on Vesting
($)
(1)
|
|
|
Harold G.
Hamm
|
|
|
165,049
|
|
|
$
|
4,324,284
|
|
|
Jack H.
Stark
|
|
|
77,670
|
|
|
|
2,034,954
|
|
|
John D.
Hart
|
|
|
54,369
|
|
|
|
1,424,468
|
|
|
Patrick W.
Bent
|
|
|
28,292
|
|
|
|
741,250
|
|
|
(1)
|
Value realized on vesting is calculated by multiplying the number of shares by the closing price upon day of
vesting.
|
38
|
|
|
|
|
2020 Nonqualified Deferred
Compensation
|
|
|
The following table sets forth our NEOs’ information regarding the DCP, including, with respect to each officer (other than
Mr. Berry, who has not participated in the DCP): (i) the aggregate contributions made by the officer; (ii) the employer contribution; (iii) the aggregate interest or other earnings accrued; (iv) aggregate withdrawals and
distributions; and (v) the total balance of the officer’s account.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in 2020 ($) (1)
|
|
|
Registrant
Contributions
in 2020 ($) (2)
|
|
|
Aggregate
Earnings
in 2020 ($)
|
|
|
Aggregate
Withdrawals/
Distributions
in 2020
($)
|
|
|
Aggregate
Balance at End
of 2020
($) (3)
|
|
|
Harold G.
Hamm
|
|
|
—
|
|
|
|
—
|
|
|
$
|
208,360
|
|
|
|
—
|
|
|
$
|
781,285
|
|
|
Jack H.
Stark
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,980
|
)
|
|
|
—
|
|
|
|
274,734
|
|
|
John D.
Hart
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,370
|
)
|
|
|
—
|
|
|
|
337,440
|
|
|
Patrick W.
Bent
|
|
|
—
|
|
|
|
—
|
|
|
|
42,414
|
|
|
|
—
|
|
|
|
229,723
|
|
|
(1)
|
None of the NEOs listed above elected to participate in the DCP with respect to 2020 compensation.
|
|
(2)
|
The Company suspended all matching under the DCP for 2020 for the reasons described below in the fifth paragraph
under “Description of Deferred Compensation Plan.” The matching suspension also applied to the bonus paid in March 2021 for 2020 under CLR’s Cash Bonus Plan.
|
|
(3)
|
Includes the following aggregate amounts previously reported, as applicable, as compensation for 2014, 2015, 2016,
2017, 2018 and 2019 in the Summary Compensation table for each of the NEOs: $314,639 for Mr. Hamm; $199,920 for Mr. Stark; $214,130 for Mr. Hart; and $0 for Mr. Bent. Mr. Bent’s amount is zero since Mr. Bent has
not had deferred compensation previously reported in the Summary Compensation Table.
|
|
|
|
|
|
Description of Deferred Compensation
Plan
|
|
|
On September 20, 2013, the Board, based upon the recommendation of the Compensation Committee, established the DCP.
The purpose of the DCP is to (i) give DCP participants and non-employee directors an additional tool to use in their
personal financial planning; and (ii) provide a vehicle to allow employee DCP participants, all of whom are limited in their participation in the Company’s 401(k) plan due to the Limits, to receive similar benefits in connection with
Company matching contributions as employees whose ability to receive Company matching contributions is not impacted by the Limits. The DCP permits the Company to make discretionary matching and other contributions to a participant’s account and
the matching and discretionary contributions approved in connection with the DCP are intended to facilitate the purpose described in (ii) above.
The
DCP is not intended to constitute a “qualified plan” subject to the limitations of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), nor is it a “funded plan” for purposes of the Code.
Benefits under the DCP constitute an unfunded general obligation of the Company. The DCP is designed to provide directors and select management or highly compensated employees of the Company the opportunity to defer the payment of all or a portion
of their base pay and cash incentive awards (to the extent a participant is eligible to receive such awards).
Each year the DCP permits participants to
elect to defer: (i) up to 100% of base pay (cash fees in the case of directors) for a calendar year and (ii) up to 100% of any cash incentive award received by the employee participant for a performance year. DCP participants are 100%
vested in any amounts they deferred pursuant to the alternatives described in the prior sentence. The DCP permits discretionary contributions by the Company, which are subject to a vesting schedule, as described below, at the discretion of the DCP
Administrator.
As permitted by the DCP, matching contributions have been approved enabling employee participants to receive matching under the DCP for up to
10% of their total cash compensation, including salary and bonus deferrals. The approved match was intended to align with the amount employee participants would have received under the 401(k) plan, but for the Limits and is given subject to terms
and conditions applicable to matching contributions under the 401(k) plan. As a result of the continued volatile commodity price environment, the Company suspended the match described above and all matching has been suspended since 2016.
Distribution of DCP amounts deferred in connection with 2014 will occur upon a participant’s separation from service with the Company. The Company requires
a six month delay in the payment of DCP benefits if the participant is a “specified employee” pursuant
39
to Section 409A of the Code at the time of his or her separation from service with the Company, and an earlier payment would result in the imposition of an excise tax on the participant if
the amounts were received at the time of his or her separation (the “Specified Employee Delay”). In addition, in connection with amounts deferred in respect of 2014, distribution of DCP accounts and vesting of any Company contributions
will result from any of the following events: (i) Change of Control (as defined in the DCP); (ii) a participant’s death or Disability (as defined in the DCP); (iii) a participant’s Normal Retirement (as defined in the DCP);
and (iv) a participant’s Involuntary Termination (as defined in the DCP).
Distribution of DCP amounts deferred after 2014 will occur, subject to
limited exceptions, based on the election of the participant to receive a distribution upon a fixed date chosen by the DCP participant, the participant’s Termination of Employment (as defined in the DCP), or a Change of Control. In addition,
distribution of DCP amounts deferred after 2014 will occur in the event of the participant’s death or Disability. In connection with these distribution events, participants can choose, except in the case of death or Disability, to receive
distributions in a lump sum or installments. In the case of death or Disability, the distribution will be made in a lump sum. Participants also have the ability to elect a lump sum distribution if a Change of Control or Involuntary Termination
occurs after a participant has started to receive distributions after a fixed date. Distributions described above are also subject to the Specified
Employee
Delay. Finally, vesting restrictions on any amounts deferred after 2014 will lapse in connection with any of the following events: (i) Change of Control; (ii) participant’s death or Disability; and (iii) a participant’s
achievement of Normal Retirement Age (as defined in the DCP).
Earnings reflect the returns produced by the investments selected by the applicable named
executive officer. The investment options available to the NEOs are a sub-set of the investment options available under the Company’s 401K Plan. As of December 31, 2020, investment options consisted
of the following (returns for 2020 noted in parentheses): Fidelity® High Income (2.44%),TRP Retirement 2005 (11.24%), TRP Retirement 2010 (11.90%), TRP Retirement 2015 (12.57%), TRP Retirement
2020 (13.19%), TRP Retirement 2025 (14.69%), TRP Retirement 2030 (15.9%), TRP Retirement 2035 (17.05%), TRP Retirement 2040 (18.11%), TRP Retirement 2045 (18.65%), TRP Retirement 2050 (18.68%), TRP Retirement 2055 (18.55%), TRP Retirement 2060
(18.47%), Fidelity® Contrafund® K (32.53%), Fidelity Spartan® 500 Index Advtg® (18.40%), Fidelity® Low-Priced Stock (9.40%), MFS Mid-Cap
Value Equity I (4.40%), Fidelity Spartan® Extnd Mkt Idx Advtg (32.16%), Driehaus Emrg Mkts (27.34%), Eagle Mid CP Grth R6 (40.34%), Metwest Total Return Bond (9.18%), Fidelity Spartan® Intl Idx Advtg (8.17%), American Beacon Small Cp Val Inst (4.05%), American Funds EuroPacific Growth Fund (25.27%), JH Disciplined Value Fund R6 (1.74%), Loomis Sayles Small Cap Growth Fund CN
(34.27%) and Fidelity Government Money Market Fund (0.26%). The Company does not guarantee a level of investment return.
|
|
|
|
|
Potential Payments Upon Termination or
Change in Control
|
|
|
We do not maintain employment, severance or change in control agreements with our NEOs outside of the potential acceleration
provisions described below with respect to our equity awards. We discussed our rationale for providing change in control equity vesting above under “Compensation Discussion and Analysis.”
Vesting of Restricted Stock on Change in Control. All of our employees’ and directors’ unvested shares of restricted stock will vest if a
change in control occurs as defined in their respective stock award agreements. These agreements are subject to the provisions of the 2013 Plan. The 2013 Plan contains customary change in control provisions.
Listed in the following table is the value of unvested shares of restricted stock held by our NEOs as of December 31, 2020, which would fully vest and be
immediately available in the event of a change in control under the 2013 Plan. The table assumes a change in control occurred on December 31, 2020 and the per-share value is $16.30, the closing price of
our Common Stock as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Change in
Control Vesting of
Restricted Stock
($)
|
|
|
Termination
Payment
($)
|
|
|
Total
($)
|
|
|
Harold G.
Hamm
|
|
|
$5,761,333
|
|
|
|
—
|
|
|
|
$ 5,761,333
|
|
|
William B.
Berry
|
|
|
12,796,869
|
|
|
|
—
|
|
|
|
12,796,869
|
|
|
Jack H.
Stark
|
|
|
4,722,958
|
|
|
|
—
|
|
|
|
4,722,958
|
|
|
John D.
Hart
|
|
|
3,323,570
|
|
|
|
—
|
|
|
|
3,323,570
|
|
|
Patrick W.
Bent
|
|
|
2,151,160
|
|
|
|
—
|
|
|
|
2,151,160
|
|
40
Distributions in Connection with DCP. Under the terms of our DCP, distributions of deferred
compensation and accelerated vesting of Company contributions may occur in connection with change of control or a participant’s termination. A description of such distributions and accelerated vesting, as well as the circumstances triggering
these events with respect to Messrs. Hamm, Stark, Hart, and Bent appear above on pages 39 and 40 in the description of our DCP appearing under the heading “Description of Deferred Compensation Plan.”
|
|
|
|
|
Indemnification Agreements
|
|
|
Our officers, directors, and certain other employees have entered into customary indemnification agreements with us, pursuant to
which we have agreed to indemnify our officers and directors to the fullest extent permitted by law.
|
|
|
|
|
Risk Assessment Related to our
Compensation Structure
|
|
|
We believe our executive compensation program is appropriately structured and not reasonably likely to result in risks that could
have a material adverse effect on us. We believe our approach of subjectively evaluating performance results of each executive assists in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives. Several
features of our programs reflect sound risk management practices. We believe we have allocated our compensation among base salary and short and long-term compensation opportunities in such a way as to discourage excessive risk-taking. Further, one
of the primary factors we take into consideration in setting compensation is the performance of the Company as a whole. This is based on our belief that applying Company-wide metrics encourages decision-making that is in the best long-term interests
of the Company and our shareholders as a whole. Finally, the time-based vesting over a multi-year period for our long-term incentive awards ensures our employees’ interests align with those of our shareholders for the long-term performance of
our Company.
The 2020 compensation disclosure ratio of the median total compensation of all Company employees to the annual total compensation
of Mr. Berry, our Chief Executive Officer, who was our principal executive officer at December 31, 2020, is as follows:
|
|
|
2020 median employee total annual compensation: $112,646
|
|
|
|
2020 Chief Executive Officer total annual compensation: $29,233,195
|
|
|
|
2020 ratio of total annual compensation of Chief Executive Officer to median employee: 260:1
|
The ratio reported above is larger than it has been in past years due to the impact of the initial share grant made to Mr. Berry on
January 1, 2020. When employees are hired, they typically receive a stock grant equivalent to three years of their annual target value, vesting ratably over a three-year period. Mr. Berry’s initial award was made consistent with this
practice and resulted in the larger ratio appearing above. If calculated based on one year’s annual target value, which is our practice following the initial grant, the ratio would have been 100:1.
With respect to the ratio calculation, we identified the median employee by examining the 2020 compensation reported on Form
W-2 for all individuals, excluding our Chief Executive Officer, who were employed by us (whether on a full-time, part time, seasonal or temporary basis) on December 31, 2020, the last day of our previous
fiscal year. For such employees we did not make any annualizations, assumptions, adjustments (including cost-of-living adjustments) or estimates with respect to the
compensation reflected on the Form W-2s.
After identifying the median employee, we calculated the total annual
compensation for such employee using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table appearing on page 36 of this proxy statement.
Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the ratio reported above should not be used
as a basis for comparison between companies.
41
Security Ownership of Certain
Beneficial Owners and Management
|
|
|
|
|
Security Ownership of Certain Beneficial
Owners
|
|
|
The following table sets forth certain information concerning the beneficial ownership of our shares of Common Stock, as of
March 24, 2021, by each person (other than our directors and executive officers) known by us to be the beneficial owner of more than 5% of the issued and outstanding Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Number of Shares
|
|
|
Percent of Class (1)
|
|
Harold Hamm
Family LLC (2)
|
|
|
283,116,538
|
|
|
77.04%
|
|
(1)
|
Based on total shares outstanding of 367,493,626 on March 24, 2021.
|
|
(2)
|
The Family LLC acting through its manager, Mr. Hamm, our Executive Chairman, has sole voting and dispositive
power over the indicated shares. The shares held by the Family LLC are included in the shares reported as owned by Mr. Hamm in the table below. The business address of the Family LLC is Harold Hamm Family LLC, c/o Hartzog Conger Cason, 201
Robert S. Kerr Avenue, Suite 1600, Oklahoma City, Oklahoma 73102.
|
|
|
|
|
|
Security Ownership of Directors and
Executive Officers
|
|
|
The following table sets forth certain information concerning the beneficial ownership of our shares of Common Stock as of
March 24, 2021 by (a) each of our directors and director nominees, (b) each of the executive officers, and (c) all of our directors, director nominees and executive officers as a group. Each of the aforementioned persons has sole
voting and dispositive power with respect to the shares listed in the table, except as otherwise indicated below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
|
|
|
|
Name of Director or Executive Officer
|
|
Number of Shares (1)
|
|
|
Percent of Class (2)
|
|
|
Patrick W.
Bent
|
|
|
313,834
|
|
|
|
*
|
|
|
William B.
Berry
|
|
|
1,303,811
|
|
|
|
*
|
|
|
Eric S.
Eissenstat
|
|
|
248,404
|
|
|
|
*
|
|
|
Robert
Hagens
|
|
|
129,413
|
|
|
|
*
|
|
|
Harold G.
Hamm (3)
|
|
|
296,243,894
|
|
|
|
80.61
|
%
|
|
John D.
Hart
|
|
|
515,711
|
|
|
|
*
|
|
|
Jeffrey B.
Hume (4)
|
|
|
2,249,227
|
|
|
|
*
|
|
|
Shelly
Lambertz (5)
|
|
|
252,765
|
|
|
|
*
|
|
|
Lon
McCain
|
|
|
53,490
|
|
|
|
*
|
|
|
John T.
McNabb, II (6)
|
|
|
47,800
|
|
|
|
*
|
|
|
Mark E.
Monroe
|
|
|
252,746
|
|
|
|
*
|
|
|
Jack H.
Stark (7)
|
|
|
982,272
|
|
|
|
*
|
|
|
Timothy G.
Taylor
|
|
|
46,743
|
|
|
|
*
|
|
|
All
Directors, executive officers and NEOs as a group (13 persons)
|
|
|
302,640,110
|
|
|
|
82.35
|
%
|
42
|
(1)
|
Beneficial ownership is determined in accordance with the SEC’s rules and regulations and generally includes
voting or dispositive power with respect to securities. The following persons have sole voting and dispositive power with respect to the restricted stock included in the number of shares listed opposite each person’s name in the table above,
subject to the terms of the documents relevant to each restricted stock award: Mr. Bent – 186,591 shares; Mr. Berry – 895,483 shares; Mr. Eissenstat – 148,939 shares; Mr. Hagens – 129,413 shares; Mr. Hamm
– 186,363 shares; Mr. Hart – 272,473 shares; Mr. Hume – 70,982 shares; Ms. Lambertz – 54,463 shares; Mr. McCain – 4,183 shares; Mr. McNabb – 4,183 shares; Mr. Monroe – 4,183 shares;
Mr. Stark – 397,167 shares; Mr. Taylor – 16,288 shares; and all directors, executive officers and NEOs as a group – 2,370,711 shares.
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(2)
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Based on total shares outstanding of 367,493,626 on March 24, 2021.
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(3)
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Includes 283,116,538 shares held by the Family LLC for which Mr. Hamm is the sole manager and as such has
sole voting and dispositive power over the shares held by the Family LLC. The shares held by the Family LLC and included in Mr. Hamm’s total are also reported as owned by the Family LLC in the table above. Also includes 64,452 shares held
by Transwestern Transports LLC (“Transwestern”), an entity of which the Hamm Revocable Trust is the sole member. Mr. Hamm has sole voting and dispositive power over the shares held by Transwestern.
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(4)
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Includes 2,021,839 shares held by a limited liability company owned by Mr. Hume and his wife.
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(5)
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Includes 178,783 shares held through a trust and 2,300 shares held by Ms. Lambertz’s spouse.
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(6)
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Includes 2,000 shares held by a charitable foundation qualified under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, of which Mr. McNabb and his wife are officers and with respect to which Mr. McNabb and his wife share voting and dispositive power. Mr. McNabb and his wife have no pecuniary interest in the shares
held by the charitable foundation.
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(7)
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Includes 585,105 shares held by a limited liability company owned by Mr. Stark and his wife.
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Proposal 2:
Ratification of Selection of
Independent Registered Public
Accounting Firm
The Audit Committee has directed us to submit the selection of our independent registered public accounting firm for ratification
by the shareholders at the Annual Meeting. The Audit Committee evaluates the selection of our independent registered public accounting firm each year, and has reappointed Grant Thornton as the Company’s independent registered public accounting
firm to audit the consolidated financial statements of the Company for the year ended December 31, 2021. In determining to reappoint Grant Thornton as the Company’s independent auditor, the Audit Committee took into consideration a number
of factors, including, but not limited to: Grant Thornton’s performance on prior Company audits; the quality and timeliness of the services and informative communications provided by Grant Thornton; the results of regulatory inspections
performed on Grant Thornton audits; an assessment of Grant Thornton’s resources and expertise; Grant Thornton’s knowledge of the Company’s business and industry; Grant Thornton’s independence, objectivity and adherence to
professional and ethical standards; the appropriateness of Grant Thornton’s fees relative to the services provided; and the frequency and quality of Grant Thornton’s interactions with the Audit Committee and the Company’s management.
Grant Thornton has served as our independent registered public accounting firm since 2004.
Our Bylaws and other governing documents or law do not require
shareholder ratification of the selection of Grant Thornton as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Grant Thornton to the shareholders for ratification as a matter of good
corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether to retain Grant Thornton. Even if the selection is ratified, the Audit Committee may in its discretion direct the appointment of a
different independent registered public accounting firm at any time during the year if it determines such a change would be in our and our shareholders’ best interest.
The Board recommends the shareholders vote “for” the ratification of the selection of Grant Thornton as our independent registered public accounting
firm for the year ending December 31, 2021.
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In accordance with its written charter adopted by the Board, the Audit Committee of the Board assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of our accounting, auditing, and financial reporting practices. In addition to overseeing the audit of our financials by our independent registered public accounting firm, the Audit Committee
reviews our unaudited quarterly financials with management. The Audit Committee is also responsible for oversight of the Company’s internal audit function and the Audit Committee meets periodically with the Company’s Director of Internal
Audit to review the effectiveness of the internal audit function, internal audit plan and related internal audit activities. Lastly, the Audit Committee is tasked with overseeing the Company’s major financial risk exposures.
The Audit Committee is composed entirely of independent directors. Messrs. McCain and McNabb have been determined by the Board to be financial experts. The Audit
Committee’s charter can be found in the Corporate Governance section of our website at www.CLR.com. A printed copy of the charter will be made available to any shareholder who requests it from our Secretary.
The Audit Committee reviewed and discussed our audited financial statements as of and for the fiscal year ended December 31, 2020, with Grant Thornton, our
independent auditor, with and without management present. Management has the primary responsibility for our financial statements and the overall reporting process, including assuring we develop and maintain adequate financial controls and procedures
for monitoring and assessing compliance with those controls and procedures, including internal control over financial reporting. Our independent auditor is responsible for auditing the annual financial statements prepared by management, expressing
an opinion as to whether those financial statements fairly present our financial position, results of operations and cash flows in conformity with generally accepted accounting principles, and discussing with the Audit Committee any issues it
believes should be raised. Grant Thornton also audited our internal control over financial reporting as of December 31, 2020 and issued a separate report thereon.
The Audit Committee is responsible for the appointment, compensation and oversight of our independent auditor. In discharging its oversight responsibility as to
the audit process, the Audit Committee obtained from the independent auditor a formal written statement describing all relationships between the auditor and us that might bear on the auditor’s independence consistent with applicable
requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding the independent auditor’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with the auditor any
relationships that may impact its objectivity and independence, and satisfied itself as to the auditor’s independence. The independent auditor reviewed its audit plans, audit scope, and identification of audit risks with the Audit Committee.
The Audit Committee also discussed with management and the independent auditor the quality and adequacy of our internal controls. Further, the Audit Committee discussed and reviewed with the independent auditor all applicable communications required
by the PCAOB and the SEC.
Based on the above-mentioned review and discussions with management and the independent auditor, the Audit Committee recommended
to the Board and the Board approved the Audit Committee’s recommendation that the audited financial statements of the Company be included in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, for filing with the SEC. The Audit Committee also approved and recommended to the Board, and the Board ratified the reappointment of the independent auditor for 2021.
The preceding report is presented by the members of the Audit Committee.
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/s/ Lon McCain
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/s/ John T. McNabb, II
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/s/ Timothy G. Taylor
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Lon McCain
Committee Chairman
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John T. McNabb
Committee Member
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Timothy G. Taylor
Committee Member
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44
Grant Thornton served as our independent registered public accounting firm during 2020 and 2019. The aggregate fees for various
services performed by Grant Thornton for the years ended December 31, 2020 and 2019 are set forth below:
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2020
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2019
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Audit
Fees
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$
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1,051,377
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$
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1,290,756
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Audit-Related Fees
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—
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—
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Tax
Fees
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—
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—
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All Other
Fees
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—
|
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|
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—
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Total
Fees
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$
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1,051,377
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$
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1,290,756
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Fees for audit services include fees associated with our annual consolidated and subsidiary audits, the review of our quarterly
reports on Form 10-Q, Sarbanes Oxley Act compliance review, accounting consultations and services normally provided by the accounting firm in connection with statutory or regulatory filings. Audit fees for
2020 include amounts incurred in connection with our November 2020 issuance of 5.75% Senior Notes due 2031 and related services associated with the preparation of comfort letters and consents.
As necessary, the Audit Committee considers whether the provision of non-audit services by Grant Thornton is compatible
with maintaining auditor independence and has adopted a policy that requires pre-approval of all audit and non-audit services. Such policy requires the Audit Committee
to approve services and fees in advance and requires documentation regarding the specific services to be performed. All 2020 audit fees were approved in advance in accordance with the Audit Committee’s policies.
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Attendance at Annual Meeting
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Representatives of Grant Thornton are expected to be present at the Annual Meeting, with the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
Proposal 3:
Approve, by a Non-Binding Vote,
The Compensation of the
Named Executive Officers
The Company is providing shareholders an advisory vote
on the compensation of our named executive officers as required by Section 14A(a)(1) of the Exchange Act. Section 14A(a)(1) was added to the Exchange Act by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank Act”). In January 2011, the SEC issued final rules to implement the requirements of Exchange Act Section 14A(a)(1).
The
Company’s last advisory vote was held at the 2020 Annual Meeting of Shareholders. Following the 2017 Annual Meeting of Shareholders, our Board determined to hold an advisory vote on the compensation of our named executive officers on an annual
basis. This pattern will continue until the next required advisory vote on the frequency of shareholder votes on the compensation of executives, which will occur no later than our Annual Meeting of Shareholders in 2023. As a result, this proposal is
being submitted for a non-binding vote at the Annual Meeting.
The advisory vote on compensation of our named
executive officers is a non-binding vote on the compensation of the Company’s NEOs, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation,
and the accompanying narrative disclosure set forth in this Proxy Statement. The advisory vote on executive compensation is not a vote on the Company’s general compensation policies, compensation of the Company’s Board, or the
Company’s compensation policies as they
45
relate to risk management, as described under “Risk Assessment Related to our Compensation Structure” on page 41. The Dodd-Frank Act and related SEC regulations and guidance require the
Company to hold the advisory vote on compensation of our NEOs at least once every three years.
The Company’s executive compensation programs are
designed to attract, retain, and motivate experienced, talented individuals to increase shareholder value by finding and developing crude oil and natural gas reserves at costs that provide an attractive rate of return on our investment. During 2020,
the Company: (i) generated $1.42 billion in cash flows from operations; (ii) reduced costs in response to the pandemic, with production expenses averaging $3.27 per Boe for 2020; (iii) reduced non-acquisition related capital expenditures to $1.16 billion, a 56% reduction compared to 2019 and 3% below a revised budget, while delivering production in line with or better than targets;
(iv) dramatically curbed production in the first half of 2020, in response to the pandemic, allowing us to preserve resources for sale in a more favorable commodity price environment; (v) successfully pivoted in the second half of 2020
to restore curbed production and achieve 2020 fourth quarter average production of 339 MBoepd, positioning the Company to benefit from recent improvements in commodity prices in 2021; (vi) achieved targeted reductions in all-in completed well costs in the Bakken and Oklahoma for 2020; (vii) navigated the pandemic, without lay-offs, preserving our team for more favorable market
conditions; and (viii) implemented effective work-place health and safety measures, allowing our teams to operate at a high level throughout the pandemic. The Compensation Committee believes the Company’s executive compensation programs
reflect a strong pay-for-performance philosophy and are well aligned with the shareholders’ long-term interests. The Compensation Discussion and Analysis section
starting on page 23 provides a more detailed discussion of our executive compensation program.
This advisory vote on executive compensation is not binding
on the Company’s Board. However, the Board will take into account the result of the vote when determining future executive compensation arrangements.
Accordingly, the Board recommends the shareholders approve the compensation of our named executive officers by voting “for” the following advisory
resolution:
“RESOLVED, that the shareholders of Continental Resources, Inc. approve, on an advisory basis, the compensation of the
individuals identified in the Summary Compensation Table, as disclosed in the Continental Resources, Inc. proxy statement for the 2021 annual meeting of shareholders pursuant to the compensation disclosure rules of the Securities and Exchange
Commission, which disclosure includes the Compensation Discussion and Analysis section, the compensation tables and the accompanying footnotes and narrative within the Executive Compensation and Other Information section of such proxy
statement.”
Delinquent Section 16(a) Reports
Ms. Lambertz, inadvertently failed to report all shares granted in connection with a restricted stock grant awarded to her on February 10, 2020 on the
Form 4 filed on February 12, 2020. This error was corrected in an amended filing made on March 24, 2020.
46
Annual Report to Shareholders
Our Annual Report to Shareholders for the year ended December 31, 2020, including audited financial statements, accompanies this Proxy Statement. The Annual
Report is not incorporated by reference into this Proxy Statement or deemed to be a part of the materials for the solicitation of proxies.
Copies of the
exhibits omitted from the Annual Report on Form 10-K accompanying this Proxy Statement are available to shareholders without charge upon written request to our Secretary at 20 N. Broadway, Oklahoma City,
Oklahoma 73102.
Shareholders Sharing
the Same Address
Some banks, brokers and other nominee record holders may
be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our Notice and Proxy Statement, Annual Report or Notice of Internet Availability may have been sent to multiple
shareholders in your household. We will promptly deliver a separate copy of our Annual Report, Notice and Proxy Statement and/or Notice of Internet Availability to you if you call or write us at the following address or phone number: Continental
Resources, Inc., 20 N. Broadway, Oklahoma City, Oklahoma 73102, Attn: Secretary, (405) 234-9000. If you would like to receive separate copies of the Annual Report and Notice and Proxy Statement in the
future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number.
Proposals of Shareholders
The Board will consider properly presented proposals of
shareholders intended to be presented for action at the Annual Meeting. Such proposals must comply with the applicable requirements of the SEC and our Bylaws. Under our Bylaws a matter can properly be brought before an annual meeting by a
shareholder of the Company who is a shareholder of record at the time notice of the proposal is given and who is entitled to vote at such annual meeting. The proposing shareholder must give timely notice of his or her proposal in writing to the
Secretary of the Company and satisfy the other requirements set forth in the Bylaws. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Company at 20 N. Broadway, Oklahoma
City, Oklahoma 73102 not later than ninety (90) days or more than one hundred twenty (120) days prior to the one year anniversary date of the preceding year’s annual meeting of shareholders of the Company (which for our 2022 Annual
Meeting will be February 19, 2022, and January 20, 2022, respectively); provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the
anniversary of the preceding year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth (90th)
day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. A shareholder’s notice to the Secretary must
comply with all applicable requirements set forth in our Bylaws, and shall set forth as to each matter: (a) a brief description of the business desired to be brought before the annual meeting (which, if the proposal is for any alteration,
amendment, rescission or repeal of the Company’s Certificate of Incorporation or Bylaws, shall include the text of the resolution which will be proposed to implement the same); (b) the reasons for conducting such business at the annual
meeting; (c) the identity of any beneficial owner or owners on whose behalf the proposal is being made; (d) the name and address, as they appear on the Company’s books, of the shareholder proposing such business and the name and
address of any beneficial owner on whose behalf he or she may by acting; (e) the acquisition date, the class and the number of shares of voting stock of the Company which are owned beneficially by the shareholder and by any beneficial owner on
whose behalf he or she may be acting; (f) any material interest of the shareholder in such business; (g) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of
such shareholder or any beneficial owner on whose behalf he or she may be acting, or any other agreement,
47
arrangement or understanding (including any derivative or short positions, profit interests, options or
borrowed or loaned shares) has been made, the effect or intent of which is to manage the risk or benefit of share price changes in the stock price of the Company for such shareholder or beneficial owner, to mitigate loss with respect to any share of
stock of the Company, or to increase or decrease the voting power of such shareholder or beneficial owner with respect to any share of the stock of the Company; (h) a description of all arrangements or understandings between such shareholder
and any other person or persons (including their names) in connection with the proposal of such business by such shareholder; (i) a representation such shareholder intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting; and (j) an undertaking by the shareholder giving the notice to update the information required pursuant to this paragraph as of the record date for the meeting promptly following the later of the record date for the
meeting or the date notice of the record date is first publicly disclosed.
A shareholder proposal submitted pursuant to Rule
14a-8 under the Exchange Act and intended to be included in our proxy statement relating to the 2022 Annual Meeting must be received no later than December 9, 2021. For a proposal to be considered for
presentation at the 2022 Annual Meeting, although not included in the proxy statement for such meeting, it must be received within the time period set forth in our Bylaws as described above. In addition, the proxy solicited by the Board for the 2022
Annual Meeting will confer discretionary authority to vote on any such shareholder proposal presented at the 2022 Annual Meeting unless we are provided with notice of such proposal no later than ninety days prior to the date of the 2022 Annual
Meeting.
Questions and Answers About This
Proxy Material and Voting
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Why am I receiving these
materials?
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This Proxy Statement, the accompanying Notice of Annual Meeting and proxy card and our Annual Report are provided to you because
our Board is soliciting your proxy to vote at the Annual Meeting. You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the Annual Meeting to vote your shares.
Under rules adopted by the SEC, we are furnishing proxy materials to our shareholders primarily via the internet. On or about April 8, 2021, we plan to mail to beneficial owners of shares registered in the name of a Broker (who constitute the
majority of our shareholders), a Notice of Internet Availability containing instructions on how to access our proxy materials and to shareholders of record, printed copies of our proxy materials. The Notice of Internet Availability also instructs
shareholders on how to vote online. This process is designed to expedite shareholders’ receipt of proxy materials, help conserve natural resources and lower the cost of the Annual Meeting. However, if you prefer to receive printed proxy
materials, please follow the instructions included in the Notice of Internet Availability.
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Who can vote at the Annual
Meeting?
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Shareholders on March 24, 2021 (the Record Date) are eligible to vote their shares at the Annual Meeting. On that date, we
had 367,493,626 shares of our Common Stock outstanding and eligible to vote.
There are three proposals scheduled for a vote:
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Election of seven directors to our Board of Directors to serve until the Annual Meeting of Shareholders in 2022
and until their respective successors are duly elected and qualified or until their earlier resignation or removal (Item 1 on the proxy card);
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Ratification of selection of Grant Thornton as our independent registered public accounting firm (Item 2 on the
proxy card); and
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To approve, by a non-binding vote, the compensation of our named executive
officers (Item 3 on the proxy card).
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48
For Proposal 1, you may either vote “for” a nominee to the Board or you may “withhold authority” regarding
your vote for any nominee you specify. For Proposals 2, and 3, you may vote “for” or “against” or “abstain” from voting. The procedures for voting are as follows:
Shareholder of Record: Shares Registered in Your Name
If on March 24, 2021 your shares were registered directly in your name with our transfer agent, AST (as defined below), or if you hold shares of our Common
Stock that have not vested pursuant to a restricted stock grant, then you are a shareholder of record. If you are a shareholder of record and you have not elected to receive notice of how to access proxy materials over the internet, you may vote in
person over the internet during the Annual Meeting, by proxy using the proxy card or over the internet in advance of the Annual Meeting. If you have elected to receive notice of how to access proxy materials over the internet, you may vote in person
over the internet during the Annual Meeting or over the internet in advance of the Annual Meeting. Whether you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted.
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To vote in person over the internet, attend the Annual Meeting and follow the instructions below under the
question below “How do I vote shares at the virtual meeting?” using the control number that will be provided with the proxy materials you will receive.
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To vote using the proxy card, complete, sign, and date the proxy card and return it promptly in the envelope
provided. If you return your signed proxy card before the Annual Meeting, we will vote your shares as you direct.
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To vote online in advance of the Annual Meeting, please follow the instructions included on your proxy card or in
any notice regarding how to access proxy materials over the internet. If you vote online, you do not need to complete and mail a proxy card.
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Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Nominee Record Holder
If you are a
beneficial owner of shares registered in the name of your Broker, you should have received either a Notice of Internet Availability containing instructions on how to access our proxy materials and vote online or a voter information form and voting
instructions with these proxy materials from that organization rather than from us. Simply follow the instructions to vote online (or by telephone if you received a voter information form), or complete and return the voter information form in
accordance with the instructions provided to ensure your vote is counted. If you received a Notice of Internet Availability, you can elect to request to receive a paper copy of proxy materials which will include a voter information form. To vote in
person over the internet at the Annual Meeting, follow the instructions below under the question “How do I vote shares at the virtual meeting?” However, you will first need to register to attend the meeting by following the instructions
below under the question “How do I register to attend the virtual meeting as a beneficial owner?”. Registering to attend the virtual meeting as a beneficial owner will enable you to obtain a control number that will be necessary to vote
your shares at the Annual Meeting.
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How many votes do I
have?
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On each proposal, you have one vote for each share of Common Stock you own as of March 24, 2021.
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Who is paying for this proxy
solicitation?
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We are paying for the entire cost of soliciting proxies. In addition to these proxy materials, our directors, employees, and
agents may also solicit proxies in person or by other means of communication. Directors and employees will not be paid any special compensation for soliciting proxies. We may reimburse brokerage firms, banks, dealers and other agents for the cost of
forwarding proxy materials to beneficial owners.
49
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What does it mean if I
receive more than one Notice of Internet
Availability, proxy card or voter information form?
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If you receive more than one Notice of Internet Availability, proxy card or voter information form, your shares are registered in
more than one name or are registered in different accounts. Please respond to each Notice of Internet Availability or please complete, sign, and return each proxy card or voter information form to ensure all of your shares are voted.
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Can I change my vote after
submitting my proxy?
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Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your
shares, you may revoke your proxy in any one of three ways:
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You may enter a new vote over the internet in advance of the Annual Meeting or by submitting another properly
completed proxy card with a later date. To request a new proxy card, you should call our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”) at (800) 937-5449 or
mail a request to our transfer agent at 6201 15th Avenue, Brooklyn, NY 11219, Attn: Shareholder Services Dept.
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You may send a written notice revoking your proxy to Continental Resources, Inc., 20 N. Broadway, Oklahoma City,
Oklahoma 73102, Attn: Eric S. Eissenstat, Secretary.
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You may attend the Annual Meeting and vote in person over the internet during the meeting. Simply attending the
meeting will not, by itself, revoke your proxy.
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If your shares are held by your Broker, you should follow the instructions provided by
your Broker to revoke your proxy.
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What is the quorum requirement?
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A quorum of shareholders is necessary to hold a valid meeting. A quorum is present if at least a majority of the issued and
outstanding shares entitled to vote are represented by shareholders present at the Annual Meeting or by proxy. On the Record Date, there were 367,493,626 shares issued and outstanding and entitled to vote. Therefore, 183,746,814 shares must be
represented by shareholders present at the Annual Meeting or by proxy to have a quorum.
Your shares will be counted towards the quorum only if you submit a
valid proxy (or one is submitted on your behalf by your Broker), or if you vote in person over the internet at the Annual Meeting. Abstentions and withhold authority votes will be counted towards the quorum requirement and broker non-votes (discussed immediately below) will be counted toward the quorum requirement assuming the Broker is entitled to vote the applicable shares on at least one discretionary proposal. If there is no quorum, the
Chairman of the Annual Meeting may adjourn the Annual Meeting to another date.
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What are broker
non-votes?
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A broker non-vote occurs when the Broker is unable to vote the shares it holds on behalf
of a beneficial owner (such shares are said to be held in “street name”) because a proposal is not routine and the beneficial owner has not provided any voting instructions on that matter. NYSE rules determine whether proposals are
routine. If a proposal is routine, a Broker holding shares in street name may vote on the proposal without voting instructions. If a proposal is not routine, the Broker may vote on the proposal only if the beneficial owner has provided voting
instructions. If a Broker does not receive instructions for a non-routine proposal, the Broker will return a proxy card without a vote on that proposal, which is commonly referred to as a “broker non-vote.” The ratification of Grant Thornton’s appointment is a routine proposal, but the election of directors and say on pay proposal are not routine proposals under applicable NYSE rules.
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How do I register to attend the virtual
meeting as a shareholder of record?
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You can attend the meeting and register to participate in the Annual Meeting by
accessing https://web.lumiagm.com/294221297 and selecting the button “I have a Control Number.” You will then be directed to a screen where you will enter:
(i) the 11-digit control number on the proxy card previously sent to you by AST; and (ii) the meeting password “continental2021”. Please note the meeting
50
password is case sensitive. Once you have completed these steps, select the “login” button, which will take you to the Annual Meeting page where you can vote, submit written questions
and listen to the meeting (referred to herein as the “Meeting Page”).
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How do I register to attend the virtual
meeting as a beneficial owner?
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If you were a beneficial owner of record as of March 24, 2021 (i.e., you held your shares in an account at a brokerage firm,
bank or other similar agent), you will need to obtain a legal proxy from your broker, bank or other agent to register to participate in the Annual Meeting. Note it can take up to two weeks to obtain a legal proxy from your broker, bank or agent.
Once you have received a legal proxy from your broker, bank or other agent, it should be emailed to our transfer agent, AST, at proxy@astfinancial.com, and should be labeled “request for Co. # 15389 control number” in the subject
line. Requests for registration must be received by AST no later than 5:00 p.m. Eastern Daylight Time, on Thursday, May 13, 2021. You will then receive a confirmation of your registration, with
an 11-digit control number, by email from AST. At the time of the meeting, follow the directions appearing above under the question “How do I register to attend the virtual meeting as a
shareholder of record?”, except you will enter the 11-digit control number received as a result of submitting your legal proxy to AST.
Only shareholders of record and beneficial owners of record who have registered as described above will be allowed to vote and ask questions during the Annual
Meeting.
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How do I vote shares at the virtual
meeting?
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If you are attending the Annual Meeting as a shareholder of record or beneficial owner and you have registered for the meeting,
you can vote over the internet during the meeting by clicking the link “Proxy Voting Site” on the Meeting Page, once you have registered to attend the meeting as a shareholder of record or beneficial owner as described above, and following
the prompts.
Whether you plan to attend the Annual Meeting, we urge you to vote in advance of the meeting by one of the methods described above.
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How do I ask questions at the virtual
meeting?
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If you are attending the Annual Meeting as a shareholder of record or beneficial owner, who has registered for the meeting, you
can ask questions by clicking the messaging icon on the right side of the toolbar appearing at the top of the Meeting Page and then typing and submitting your question.
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How do I attend the virtual meeting as a
guest?
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If you are a record holder or beneficial owner and would like to enter the Annual Meeting as a guest in listen-only mode, go
to https://web.lumiagm.com/294221297 and select the button “I am a guest”. Please note you will not have the ability to ask questions or vote during the meeting if you participate as a guest.
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What vote is required to approve the election of directors
(Item 1 on the proxy card)?
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Directors are elected by a plurality of the votes cast at the Annual Meeting (that is the seven director nominees receiving the
greatest number of votes cast will be elected). While votes “withheld” will not have an effect on the outcome of the elections, our Bylaws provide that, if a nominee for director receives a greater number of votes “withheld” from
his or her election than votes “for” such election, he or she must submit his or her offer of resignation for consideration by the Nominating Committee. Broker non-votes will not have an effect on
the outcome since they do not count as a vote in favor of a nominee under the plurality standard.
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What vote is required to approve the ratification
of the selection of Grant Thornton LLP as our independent registered public accounting firm (Item 2 on the proxy card)?
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Under Oklahoma state law the ratification of the selection of Grant Thornton as our independent registered public accounting firm
requires a majority of the shares present in person or represented by proxy and entitled to vote on the matter vote “for” the proposal. If you “abstain” from voting, it will have the same effect as an “against” vote
because abstentions are treated as entitled to vote under Oklahoma state law.
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What vote is required to approve the compensation
of the named executive officers (Item 3 on the proxy card)?
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Oklahoma state law requires the proposal to approve the compensation of the named executive officers be approved by a majority of
the shares present in person or represented by proxy and entitled to vote on the matter. If you “abstain” from voting, it will have the same effect as an “against” vote on the proposal to approve, by a non-binding vote, the compensation of the Company’s named executive officers, because abstentions are treated as entitled to vote under state law. Since this proposal is not a routine proposal, broker non-votes will not be treated as entitled to vote on the matter and accordingly will have no impact on the outcome of this vote.
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What if I do not mark a voting choice
for some of the matters listed on my proxy card?
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If you return a signed proxy card without indicating your vote, your shares will be voted in accordance with the Board’s
recommendation for each proposal with respect to which a voting choice is not indicated.
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Could other matters be decided at the Annual
Meeting?
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We do not know of any other matters that will be considered at the Annual Meeting. If any other matters arise at the meeting,
proxies will be voted at the discretion of the proxy holders.
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What happens if the Annual Meeting is postponed
or adjourned?
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If the Annual Meeting is postponed or adjourned, your proxy will still be valid and may be voted at the rescheduled meeting. You
may change or revoke your proxy until it is voted. As always, we encourage you to vote your shares prior to the Annual Meeting.
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How does the Board recommend I vote on the
proposals?
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The Board recommends you vote:
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FOR the seven nominees for director (Item 1 on the proxy card);
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FOR the ratification of the selection of Grant Thornton as our independent registered public accounting
firm for the fiscal year ending December 31, 2021 (Item 2 on the proxy card); and
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FOR approval, by a non-binding vote, of the compensation of our
named executive officers (Item 3 on the proxy card).
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Who will serve as the inspector of election
at the Annual Meeting?
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We anticipate Eric S. Eissenstat, our Senior Vice President, General Counsel, Chief Risk Officer and Secretary, will serve as the
inspector of election and will tabulate the proxies and ballots at the Annual Meeting.
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How can I find out the results of the
voting at the Annual Meeting?
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Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Form 8-K filed within four business days after the Annual Meeting.
52
Other Matters
Our Board does not know of any other matters to be presented for action at the Annual Meeting other than those listed in the Notice of Annual Meeting of
Shareholders and referred to herein. If any other matters properly come before the Annual Meeting or any adjournment thereof, it is intended the proxy solicited hereby be voted as to any such matter in accordance with the recommendations of our
Board.
53
ANNEX A
NYSE Independence Standards Generally Applicable to Directors
The Board of Directors uses the independence standards of the New York Stock Exchange (“NYSE”) generally applicable to directors to determine the
independence of its members. These are set forth below, omitting commentary and definitions. Defined terms are marked with asterisks and have the meanings set forth in Section 303A.02 of the NYSE Listed Company Manual.
No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the
*listed company* (either directly or as a partner, shareholder or officer of an organization that has a relationship with the *company*).
In addition, in
affirmatively determining the independence of any director who will serve on the compensation committee of the listed company’s board of directors, the board of directors must consider all factors specifically relevant to determining whether a
director has a relationship to the listed company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:
(A) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such
director; and
(B) whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a
subsidiary of the listed company.
In addition, a director is not independent if:
(i) The director is, or has been within the last three years, an employee of the listed company, or an *immediate family member* is, or has been
within the last three years, an *executive officer*, of the listed company.
(ii) The director has received, or has an immediate family member
who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way on continued service).
(iii) (A) The director is a current partner or
employee of a firm that is the listed company’s internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current
employee of such a firm and personally works on the listed company’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the listed
company’s audit within that time.
(iv) The director or an immediate family member is, or has been within the last three years, employed
as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on that company’s compensation committee.
(v) The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or
received payments from, the listed company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
A-1
ANNUAL MEETING OF SHAREHOLDERS OF
CONTINENTAL RESOURCES, INC.
May 20, 2021
NOTICE
OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Notice of Meeting, Proxy Statement, Proxy Card and the Annual
Report
are available at https://materials.proxyvote.com/212015
Please sign, date and mail
your proxy card in the
envelope provided as soon
as
possible.
i Please detach along perforated line and mail in the envelope provided.
i
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∎
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20730300000000000000 9
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052021
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You may withhold the authority of the Proxies to vote for any nominee to be elected as
a director of the Company by marking the WITHHOLD AUTHORITY box set forth next to such nominee’s name.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
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1. Election of Directors:
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2.
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Ratification of selection of Grant Thornton
LLP as independent registered public accounting firm.
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FOR
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AGAINST
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ABSTAIN
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☐
☐
☐
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FOR ALL NOMINEES
WITHHOLD
AUTHORITY
FOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below)
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NOMINEES:
¡
William B. Berry
¡ Harold G. Hamm
¡
Shelly Lambertz
¡ Lon McCain
¡ John
T. McNabb, II
¡ Mark
E. Monroe
¡ Timothy G. Taylor
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FOR
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AGAINST
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ABSTAIN
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3.
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Approve, by a non-binding vote, the compensation of the named executive officers.
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☐
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☐
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☐
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In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting or any adjournment thereof. If any other business is presented at the Annual Meeting, this Proxy shall be voted in accordance with the recommendations of the Board. The shares
represented by this Proxy when properly executed will be voted in the manner directed herein by the undersigned Shareholder(s). If no direction
is made, this Proxy will be voted FOR
Proposals 1, 2 and 3.
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INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: 🌑
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
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☐
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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∎
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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∎
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ANNUAL MEETING OF SHAREHOLDERS OF
CONTINENTAL RESOURCES, INC.
May 20, 2021
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PROXY VOTING INSTRUCTIONS
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INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web
page.
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Vote online until 11:59 PM EST the day before the meeting.
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MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
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VIRTUALLY AT THE MEETING - The company will be hosting the meeting live via the Internet this Year. To attend the meeting via the Internet, please visit https://web.lumiagm.com/294221297 (password: continental2021) and
be sure to have your control number available.
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GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy materials, statements and other eligible documents online, while reducing costs, clutter and paper waste.
Enroll today via www.astfinancial.com to enjoy online access.
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COMPANY NUMBER
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ACCOUNT NUMBER
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Notice of Meeting, Proxy Statement, Proxy Card and the Annual Report
are available at https://materials.proxyvote.com/212015
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i Please detach along perforated line and mail in the envelope provided IF you are not voting via the
Internet. i
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∎
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20730300000000000000 9
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052021
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You may withhold the authority of the Proxies to vote for any nominee to be elected as
a director of the Company by marking the WITHHOLD AUTHORITY box set forth next to such nominee’s name.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
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1. Election of Directors:
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2.
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Ratification of selection of Grant Thornton
LLP as independent registered public accounting firm.
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FOR
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AGAINST
☐
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ABSTAIN
☐
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☐
☐
☐
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FOR ALL NOMINEES
WITHHOLD AUTHORITY
FOR ALL NOMINEES
FOR ALL
EXCEPT
(See instructions below)
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NOMINEES:
¡
William B. Berry
¡ Harold G. Hamm
¡
Shelly Lambertz
¡ Lon McCain
¡ John
T. McNabb, II
¡ Mark
E. Monroe
¡ Timothy G. Taylor
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FOR
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AGAINST
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ABSTAIN
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3.
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Approve, by a non-binding vote, the compensation of the named executive officers.
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☐
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☐
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☐
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In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any
adjournment thereof. If any other business is presented at the Annual Meeting, this Proxy shall be voted in accordance with the recommendations of the Board. The shares represented by this Proxy when properly executed will be voted in the manner
directed herein by the undersigned Shareholder(s). If no direction is made, this Proxy will be voted FOR Proposals 1, 2 and 3.
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INSTRUCTIONS: To withhold authority to vote for any individual
nominee (s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:
🌑
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To change the address on your account, please check the box at right and indicate your new
address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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☐
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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∎
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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∎
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0
∎
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONTINENTAL RESOURCES, INC.
20 N. Broadway
Oklahoma
City, Oklahoma 73102
(405) 234-9000
The undersigned hereby appoints Eric Eissenstat and John Hart, and each of them, as proxies (the
“Proxies”), each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of stock of Continental Resources, Inc. held of record by the undersigned on the record
date at the Annual Meeting of Shareholders to be held on May 20, 2021, or any postponement or adjournment thereof.
(Continued and to be
signed on the reverse side)
Continental Resources (NYSE:CLR)
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