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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

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Preliminary Proxy Statement

 

 

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Definitive Proxy Statement

 

 

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Definitive Additional Materials

 

 

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Soliciting Material Pursuant to §.240.14a-12

 

 

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CHEVRON CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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LOGO

2020 proxy statement

notice of 2020 annual meeting of stockholders to be held on may 27, 2020

 

 

 


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2020 notice of the chevron corporation

annual meeting of stockholders

wednesday, may 27, 2020

8:00 a.m. PDT

Chevron Park Auditorium, 6001 Bollinger Canyon Road, San Ramon, CA 94583-2324*

record date

Monday, March 30, 2020

agenda

 

 

Elect 10 Directors named in this Proxy Statement;

 

 

Vote on a Board proposal to ratify the appointment of PricewaterhouseCoopers LLC (“PwC”) as our independent registered public accounting firm for 2020;

 

 

Vote on a Board proposal to approve, on an advisory basis, Named Executive Officer (“NEO”) compensation;

 

 

Vote on seven stockholder proposals, each if properly presented at the meeting; and

 

 

Transact any other business that is properly presented at the meeting by or at the direction of the Board.

admission

Stockholders or their legal proxy holders may attend the Annual Meeting. Due to space constraints and other security considerations, we are not able to admit the guests of either stockholders or their legal proxy holders.

 

 

important notice regarding admission to the 2020 annual meeting

 

Attending in Person

 

Stockholders or their legal proxy holders who wish to attend the Annual Meeting must preregister with and obtain an admission letter from Chevron’s Corporate Governance Department. Admission letters will be distributed on a first-come, first-served basis. Requests for admission letters must be received by Chevron no later than 5:00 p.m. PDT on Thursday, May 21, 2020. For complete instructions for preregistering and obtaining an admission letter, see page 92 of this Proxy Statement.

 

* Public Health Concerns of the COVID-19 Outbreak

 

In light of the emerging public health concerns of the COVID-19 (Coronavirus) outbreak, the Company may hold its Annual Meeting via remote telephonic or electronic (“Virtual”) access in lieu of an in-person meeting in San Ramon, CA. The Company would announce a decision to hold a Virtual Annual Meeting in a press release available at www.chevron.com as soon as practicable prior to the Annual Meeting. In that event, the 2020 Annual Meeting of Stockholders would be held in a Virtual meeting format only, on the above date and time, via live audio webcast. Stockholders or their legal proxy holders could participate, submit questions, vote, and examine our stocklist at the Virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/CVX2020 and using their 16-digit control number, but only if the meeting is held in a Virtual format.

 

 

 

voting

Stockholders owning Chevron common stock at the close of business on Monday, March 30, 2020, or their legal proxy holders, are entitled to vote at the Annual Meeting. Please refer to pages 88 through 89 of this Proxy Statement for information about voting at the Annual Meeting.

distribution of proxy materials

On Tuesday, April 7, 2020, we will commence distributing to our stockholders (1) a copy of this Proxy Statement, a proxy card or voting instruction form, and our Annual Report (the “Proxy Materials”), (2) a Notice Regarding the Availability of Proxy Materials, with instructions to access our Proxy Materials and vote on the Internet, or (3) for stockholders who receive materials electronically, an email with instructions to access our Proxy Materials and vote on the Internet.

By Order of the Board of Directors,

 

LOGO

Mary A. Francis

Corporate Secretary and Chief Governance Officer


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LOGO

 

March 31, 2020

Dear Stockholder,

Normally this proxy statement comes to you in a new year amid market conditions that bear some resemblance to those of the prior year. Clearly that is not the case in 2020. We want to update you on how Chevron is responding to the unprecedented challenges the world is currently confronting.

We recognize investors have concerns about the broad decline in equity markets globally, and the uncertainty and turbulence created by the global pandemic. In our industry this exogenous demand shock is exacerbated by an unanticipated supply surge, creating an abrupt imbalance and a sharp downturn in commodity prices. As chairman and lead director, we want to assure you that your Board of Directors is fully engaged, and the company is taking decisive actions in response to these dynamic market conditions.

Your company is positioned to be resilient during these difficult times. Chevron entered this period of turbulence with a strong balance sheet, a low dividend break-even and a disciplined approach to managing capital and costs. We purposely built options into our plan to respond to unexpected conditions, and we’re activating these now.

We are reducing our 2020 capital and exploratory spending guidance by 20 percent by deferring short cycle investments and pacing projects not yet under construction. To maintain balance sheet strength, we’ve suspended our share repurchase program and expect to complete assets sales signed last year. In addition, the company is taking action to deliver $1 billion in cost improvements by the end of 2020.

These moves reflect our long-standing financial priorities and are focused on protecting the dividend, supporting the balance sheet, and prioritizing capital that drives long-term value for stockholders. Even in the face of the current headwinds, we intend to clearly demonstrate Chevron’s resilience to you, the stockholders whose investment supports everything we do.

Sincerely,

 

LOGO

 

Michael K. Wirth

Chairman and CEO

    

LOGO

 

Ronald D. Sugar

Lead Director

 

 

 

Chevron Corporation

6001 Bollinger Canyon Road, San Ramon, CA 94583


Table of Contents

 

table of contents

 

 

proxy statement      1  

public health concerns of the COVID-19 outbreak

     1  

special precautions due to COVID-19 concerns

     1  

items of business

     2  
election of directors (item 1 on the proxy card)      3  

director election requirements

     3  

director qualifications and nomination processes

     3  

nominees for director

     6  

vote required

     15  

your board’s recommendation

     15  
director compensation      16  

overview

     16  

non-employee director compensation

     16  

expenses and charitable matching gift program

     16  

compensation during the fiscal year ended december 31, 2019

     17  
corporate governance      19  

overview

     19  

role of the board of directors

     19  

board leadership structure

     19  

independent lead director

     20  

human capital management

     20  

board oversight of strategy

     21  

board oversight of risk

     21  

board oversight of sustainability

     22  

board oversight of environmental issues

     22  

director independence

     23  

board committees

     24  

board and committee meetings and attendance

     24  

board and committee evaluations

     24  

corporate governance guidelines

     26  

business conduct and ethics code

     26  

hedging, pledging, and other transactions

     26  

environmental, social, and governance engagement

     27  

communicating with the board

     27  

related person transactions

     28  

board nominating and governance committee report

     29  

management compensation committee report

     30  

audit committee report

     30  
executive compensation      31  

compensation discussion and analysis

     31  

summary compensation table

     52  

grants of plan-based awards in fiscal year 2019

     55  

outstanding equity awards at 2019 fiscal year-end

     56  

option exercises and stock vested in fiscal year 2019

     58  

pension benefits table

     60  

nonqualified deferred compensation table

     61  

potential payments upon termination or change-in-control

     65  
equity compensation plan information      67  
CEO pay ratio      68  
board proposal to ratify PwC as the independent registered public accounting firm for 2020 (item 2 on the proxy card)      69  

auditor review and engagement

     69  

PwC’s fees and services

     70  

audit committee preapproval policies and procedures

     70  

PwC’s attendance at the annual meeting

     70  

vote required

     70  

your board’s recommendation

     70  
stock ownership information      71  

security ownership of certain beneficial owners and management

     71  
board proposal to approve, on an advisory basis, named executive officer compensation (item 3 on the proxy card)      72  

vote required

     72  

your board’s recommendation

     72  
rule 14a-8 stockholder proposals (items 4 through 10 on the proxy card)      73  

vote required

     73  

your board’s recommendation

     73  
voting and additional information      88  

vote results

     88  

appointment of proxy holders

     88  

record date; who can vote

     88  

quorum

     88  

how to vote

     89  

revoking your proxy or voting instructions

     89  

confidential voting

     90  

notice and access

     90  

method and cost of soliciting and tabulating votes

     90  

householding information

     91  

email delivery of future proxy materials

     91  

stockholder of record account maintenance

     91  

submission of stockholder proposals for 2021 annual meeting

     91  

preregistering for and attending the annual meeting

     92  
 


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proxy statement

Chevron Corporation

6001 Bollinger Canyon Road

San Ramon, CA 94583-2324

Your Board of Directors is providing you with these Proxy Materials in connection with its solicitation of proxies to be voted at Chevron Corporation’s 2020 Annual Meeting of Stockholders to be held on Wednesday, May 27, 2020, at 8:00 a.m. PDT at Chevron Park Auditorium, 6001 Bollinger Canyon Road, San Ramon, California, and at any postponement or adjournment of the Annual Meeting.

In this Proxy Statement, Chevron and its subsidiaries may also be referred to as “we,” “our,” “the Company,” “the Corporation,” or “Chevron.”

public health concerns of the COVID-19 outbreak

In light of the emerging public health concerns of the COVID-19 (Coronavirus) outbreak, the Company may hold its Annual Meeting via remote telephonic or electronic access in lieu of an in-person meeting in San Ramon, CA. The Company would announce a decision to hold a Virtual Annual Meeting in a press release available at www.chevron.com as soon as practicable prior to the Annual Meeting. In that event, the 2020 Annual Meeting of Stockholders would be held in a Virtual meeting format only, on the above date and time, via live audio webcast. Stockholders or their legal proxy holders could participate, submit questions, vote, and examine our stocklist at the Virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/CVX2020 and using their 16-digit control number, but only if the meeting is held in a Virtual format.

special precautions due to COVID-19 concerns

In order to protect the health and safety of our employees and stockholders, we may take special precautions in connection with the Annual Meeting due to the health impact of the COVID-19 outbreak. These may include limiting the Annual Meeting to the items of business on the 2020 Notice of the Chevron Corporation Annual Meeting of Stockholders (with no separate business update provided) and imposing attendance restrictions in light of public health concerns.

 

Chevron Corporation—2020 Proxy Statement       1


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  proxy statement  

 

 

 

items of business

Your Board is asking you to take the following actions at the Annual Meeting:

 

Item(s)

 

Your Board’s recommendation

 

Vote required

    
Item 1: Elect 10 Directors named in this
Proxy Statement
  Vote FOR  

 

Each Director nominee who receives a majority of the votes cast (i.e., the number of shares voted FOR a Director nominee must exceed the number of shares voted AGAINST that Director nominee, excluding abstentions) will be elected a Director in an uncontested election.

 

   

 

Item 2: Vote to ratify the appointment of the independent registered public accounting firm

 

  Vote FOR  

These items are approved if the number of shares voted FOR exceeds the number of shares voted AGAINST.

   

 

Item 3: Vote to approve, on an advisory
basis, Named Executive Officer
compensation

 

 

Vote FOR

 

Items 4–10: Vote on seven stockholder proposals, if properly presented

 

 

 

Vote AGAINST

If you are a street name stockholder (i.e., you own your shares through a bank, broker, or other holder of record) and do not vote your shares, your bank, broker, or other holder of record can vote your shares at its discretion ONLY on Item 2. If you do not give your bank, broker, or other holder of record instructions on how to vote your shares on Item 1 or Items 3 through 10, your shares will not be voted on those matters. If you have shares in an employee stock or retirement benefit plan and do not vote those shares, the plan trustee or fiduciary may or may not vote your shares, in accordance with the terms of the plan. Any shares not voted on Item 1 or Items 3 through 10 (whether by abstention, broker nonvote, or otherwise) will have no impact on that particular item.

We are not aware of any matters that are expected to be presented for a vote at the Annual Meeting other than those described above. If any other matter is properly brought before the Annual Meeting by or at the direction of the Board, the proxy holders identified in the “Voting and Additional Information—Appointment of Proxy Holders” section of this Proxy Statement intend to vote the proxies in accordance with their best judgment. When conducting the Annual Meeting, the Chairman or his designee may refuse to allow a vote on any matter not made in compliance with our By-Laws and the procedures described in the “Voting and Additional Information—Submission of Stockholder Proposals for 2020 Annual Meeting” section of the 2019 Proxy Statement.

 

2       Chevron Corporation—2020 Proxy Statement


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election of directors

(item 1 on the proxy card)

The Board Nominating and Governance Committee (the “Governance Committee”) recommended, and the Board set, a current Board size of 10 Directors. Each of the 10 nominees was previously elected at Chevron’s 2019 Annual Meeting of Stockholders and is a current Director.

Directors are elected annually and serve for a one-year term or until their successors are elected. If any nominee is unable to serve as a Director—a circumstance we do not anticipate—the Board by resolution may reduce the number of Directors or choose a substitute. Your Board has determined that each non-employee Director is independent in accordance with the New York Stock Exchange (“NYSE”) Corporate Governance Standards and has no material relationship with Chevron other than as a Director.

director election requirements

 

Each Director nominee who receives a majority of the votes cast (i.e., the number of shares voted FOR a Director nominee must exceed the number of shares voted AGAINST that Director nominee, excluding abstentions) will be elected a Director in an uncontested election.

Under Chevron’s By-Laws, in an uncontested election, any Director nominated for re-election who receives more AGAINST votes than FOR votes must submit an offer of

resignation to the Board. The Governance Committee must then consider all relevant facts and circumstances, including the Director’s qualifications, past and expected future contributions, the overall composition of the Board, and whether Chevron would meet regulatory or similar requirements without the Director, and make a recommendation to the Board on the action to take with respect to the offer of resignation.

 

 

director qualifications and nomination processes

 

The Governance Committee is responsible for recommending to the Board the qualifications for Board membership and for identifying, assessing, and recommending qualified Director candidates for the Board’s consideration. The Board membership qualifications and nomination procedures are set forth in Chevron’s Corporate Governance Guidelines, which are available on our website at www.chevron.com/investors/corporate-governance.

 

All Directors should have the following attributes:

 

   

the highest professional and personal ethics and values, consistent with The Chevron Way and our Business Conduct and Ethics Code, both of which are available on Chevron’s website at www.chevron.com;

 

 

   

a commitment to building stockholder value;

 

 

   

business acumen and broad experience and expertise at the policy-making level in one or more of the areas of particular consideration indicated below;

 

 

   

the ability to provide insights and practical wisdom based on the individual’s experience or expertise;

 

 

   

sufficient time to effectively carry out duties as a Director; and

 

 

   

independence (at least a majority of the Board must consist of independent Directors, as defined by the NYSE Corporate Governance Standards).

 

The Governance Committee regularly reviews the skills and characteristics required of Directors in the context of the current composition of the Board, the changing operating requirements of the Company, and the long-term interests of stockholders.

 

 

 

When conducting its review of the appropriate skills and qualifications desired of Directors, the Governance Committee particularly considers:

 

 

   

leadership experience in business as a chief executive officer, senior executive, or leader of significant business operations;

 

 

   

expertise in science, technology, engineering, research, or academia;

 

 

   

extensive knowledge of governmental, regulatory, legal, or public policy issues;

 

 

   

expertise in finance, financial disclosure, or financial accounting;

 

 

   

experience in global business or international affairs;

 

 

   

experience in environmental affairs;

 

 

   

service as a public company director;

 

 

   

diversity of age, gender, and ethnicity; and

 

 

   

such other factors as the Governance Committee deems appropriate, given the current and anticipated needs of the Board and the Company, to maintain a balance of knowledge, experience, background, and capability.

 
 

 

Chevron Corporation—2020 Proxy Statement       3


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  election of directors  

 

 

 

These skills, experiences, and expertise are critical to the Board’s ability to provide effective oversight of the Company and are directly relevant to Chevron’s business, strategy, and operations.

 

 

 

CEO / Senior Executive / Leader of Significant Operations

 

 

 

Chevron employs approximately 45,000 people in business units throughout the world. Chevron’s operations involve complex organizations and processes, strategic planning, and risk management.

 

 

 

Science / Technology / Engineering / Research / Academia

 

 

 

Technology and engineering are at the core of Chevron’s business and are key to finding, developing, producing, processing, and refining oil and natural gas, as well as assessing new energy sources. Our business processes are complex and highly technical.

 

 

 

Government / Regulatory / Legal / Public Policy

 

 

 

Chevron’s operations require compliance with a variety of regulatory requirements in numerous countries and involve relationships with various governmental entities and nongovernmental organizations throughout the world.

 

 

 

Finance / Financial Disclosure / Financial Accounting

 

 

 

 

Chevron’s business is multifaceted and requires complex financial management, capital allocation, and financial reporting processes.

 

 

 

Global Business / International Affairs

 

 

 

Chevron conducts business around the globe. Our business success is derived from an understanding of diverse business environments, economic conditions, and cultures and a broad perspective on global business opportunities.

 

 

 

Environmental

 

 

 

We place the highest priority on the health and safety of our workforce and protection of our assets, the communities where we operate, and the environment. We are committed to continuously improving our environmental performance and reducing the potential impacts of our operations.

 

The following matrix displays the most significant skills and qualifications that each Director possesses. The Governance Committee reviews the composition of the Board as a whole periodically to ensure that the Board maintains a balance of knowledge and experience and to assess the skills and characteristics that the Board may find valuable in the future in light of current and anticipated strategic plans and operating requirements and the long-term interest of stockholders.

 

 

LOGO

 

4       Chevron Corporation—2020 Proxy Statement


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election of directors  

 

 

The Board seeks to achieve diversity of age, gender, and ethnicity and recognizes the importance of Board refreshment to ensure that it benefits from fresh ideas and perspectives. The following charts demonstrate the Board’s commitment to diversity of backgrounds and Board refreshment.

 

LOGO   LOGO
strong board diversity   strong board refreshment
6 New Directors since 2015

The Governance Committee considers Director candidates suggested for nomination to the Board from stockholders, Directors, and other sources. Directors periodically suggest possible candidates, and, from time to time, the Governance Committee may engage a third-party consultant to assist in identifying potential candidates. The Governance Committee has retained director search firms to assist with identifying potential candidates.

 

The Governance Committee considers all potential nominees recommended by our stockholders.

 

   

Stockholders may recommend potential nominees by writing to the Corporate Secretary at 6001 Bollinger Canyon Road, San Ramon, CA 94583-2324, stating the candidate’s name and qualifications for Board membership.

 

 

   

When considering potential nominees recommended by stockholders, the Governance Committee follows the same Board membership qualifications evaluation and nomination procedures discussed in this section.

 

In addition, a qualifying stockholder (or stockholders) may nominate director nominees by satisfying the requirements specified in our By-Laws, which are described in the “Voting and Additional Information—Submission of Stockholder Proposals for 2021 Annual Meeting” section of this Proxy Statement.

 

 

Chevron Corporation—2020 Proxy Statement       5


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  election of directors  

 

 

 

nominees for director

The Governance Committee recommended, and the Board set, a current Board size of 10 Directors. Each of the Director nominees is a current Director.

Your Board recommends that you vote FOR each of these Director nominees.

 

 

      LOGO

 

  

 

Wanda M. Austin

Retired President and Chief Executive
Officer, The Aerospace Corporation   

 

Age: 65

Director Since: December 2016

Independent: Yes

 

 

Chevron Committees:

 

•  Board Nominating and Governance

•  Public Policy (Chair)

 

Current Public Company Directorships:

 

•  Amgen Inc.

•  Virgin Galactic Holdings, Inc.

 

 

Prior Public Company Directorships

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  Horatio Alger Association

•  National Academy of Engineering

•  University of Southern California

Dr. Austin has held an adjunct Research Professor appointment at the University of Southern California’s Viterbi School’s Department of Industrial and Systems Engineering since 2007. She has been Co-founder and Chief Executive Officer of MakingSpace, Inc., a leadership and STEM (science, technology, engineering, and math) consulting firm, since December 2017. She served as Interim President of the University of Southern California from August 2018 until July 2019. She served as President and Chief Executive Officer of The Aerospace Corporation (“Aerospace”), a leading architect for the United States’ national security space programs, from 2008 until her retirement in 2016. From 2004 to 2007, she was Senior Vice President, National Systems Group, at Aerospace. Dr. Austin joined Aerospace in 1979.

skills and qualifications

 

 

 

Business Leadership / Operations: Eight years as CEO of Aerospace. Thirty-seven-year career with Aerospace included numerous senior management and executive positions. CEO of MakingSpace, Inc., since December 2017.

Finance: More than a decade of financial responsibility and experience at Aerospace. Audit Committee member at Amgen Inc.

Global Business / International Affairs: Internationally recognized for her work in satellite and payload system acquisition, systems engineering, and system simulation. Former CEO of a company that provides space systems expertise to international organizations. Director of companies with international operations.

Government / Regulatory / Public Policy: Served on the President’s Council of Advisors on Science and Technology and the President’s Review of U.S. Human Space Flight Plans Committee. Appointed to the Defense Policy Board, the Defense Science Board, and the NASA Advisory Council.

Science / Technology / Engineering:Ph.D. in Industrial and Systems Engineering from the University of Southern California, Master of Science in both Systems Engineering and Mathematics from the University of Pittsburgh. Thirty-seven-year career in national security space programs. Director at Amgen Inc., a biotechnology company, and Virgin Galactic Holdings, Inc., the world’s first commercial space line and vertically integrated aerospace company. Fellow of the American Institute of Aeronautics and Astronautics. Member of the National Academy of Engineering.

Research / Academia:Adjunct Research Professor at the University of Southern California’s Viterbi School of Engineering. Former Interim President of the University of Southern California.

 

6       Chevron Corporation—2020 Proxy Statement


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election of directors  

 

 

 

      LOGO

 

  

 

John B. Frank

Vice Chairman, Oaktree Capital Group, LLC

 

Age: 63

Director Since: November 2017

Independent: Yes

 

 

Chevron Committees:

 

•  Audit – audit committee financial expert

 

Current Public Company Directorships:

 

•  Oaktree Capital Group, LLC

¡   Oaktree Acquisition Corporation

¡  Oaktree Specialty Lending Corporation

¡   Oaktree Strategic Income Corporation

 

 

Prior Public Company Directorships

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  The James Irvine Foundation

•  Wesleyan University

•  XPRIZE Foundation

Mr. Frank has been Vice Chairman since 2014, and Director since 2007, of Oaktree Capital Group, LLC (“Oaktree Capital”), a global investment management company with expertise in credit strategies. He is one of four members of Oaktree Capital’s Executive Committee and was previously the firm’s principal executive officer. Mr. Frank was Oaktree Capital’s Managing Principal from 2005 until 2014, having joined Oaktree Capital in 2001 as General Counsel. Prior to that, he served as a Partner of the Los Angeles law firm of Munger, Tolles & Olson LLP.

skills and qualifications

 

 

Business Leadership / Operations: Nineteen years of service as senior executive of Oaktree Capital, a global investment management company, including service as principal executive officer, Vice Chairman, Director, Managing Principal, and General Counsel.

Finance: More than 20 years of financial responsibility and experience as a senior executive at Oaktree Capital, and as the partner responsible for financial affairs at the law firm of Munger, Tolles and Olson LLP.

Global Business / International Affairs: Senior executive of Oaktree Capital, which conducts business worldwide from 18 offices around the globe. Travels around the world to meet with Oaktree Capital’s institutional clients and speak at international investment forums. Director of companies with international operations.

Government / Regulatory / Public Policy: Two decades of experience working with government officials regarding regulatory and public policy issues, including testimony before the U.S. Senate Finance Committee and as a senior executive of Oaktree Capital. Served as a Legislative Assistant to the Honorable Robert F. Drinan, Member of Congress, and as a law clerk to the Honorable Frank M. Coffin of the U.S. Court of Appeals for the First Circuit.

Legal: Served as General Counsel of Oaktree Capital. Former Partner of Munger, Tolles & Olson LLP. Extensive experience with mergers and acquisitions and strategic, financial, and corporate governance issues. Law degree from the University of Michigan.

 

Chevron Corporation—2020 Proxy Statement       7


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  election of directors  

 

 

 

 

      LOGO

 

  

 

Alice P. Gast

President, Imperial College London

 

Age: 61

Director Since: December 2012

Independent: Yes

 

 

Chevron Committees:

 

•  Board Nominating and Governance

•  Public Policy

 

Current Public Company Directorships:

 

•  None

 

 

Prior Public Company Directorships

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  National Academy of Engineering

•  Royal Academy of Engineering

Dr. Gast has been President of Imperial College London, a public research university specializing in science, engineering, medicine, and business, since 2014. She was President of Lehigh University, a private research university, from 2006 until 2014 and Vice President for Research, Associate Provost, and Robert T. Haslam Chair in Chemical Engineering at Massachusetts Institute of Technology from 2001 until 2006. Dr. Gast was professor of chemical engineering at Stanford and the Stanford Synchrotron Radiation Laboratory from 1985 until 2001.

skills and qualifications

 

 

Environmental Affairs: At Imperial College London, oversees environmental institutes and centers and leads the university crisis management group. At Lehigh University, presided over environmental centers, advisory groups, and crisis management. Expertise in chemical and biological terrorism issues gained through service on several governmental committees.

Finance: Fourteen years of service as president of leading educational institutions, with ultimate responsibility for finance, fundraising, and endowment management.

Global Business / International Affairs: Served as a U.S. Science Envoy for the U.S. Department of State to advise on ways to foster and deepen relationships with the Caucasus and Central Asia. Serves on the Singapore Ministry of Education’s Academic Research Council and on the Global Federation of Competitiveness Councils. Served on the Board of Trustees for the King Abdullah University of Science and Technology in Saudi Arabia.

Government / Regulatory / Public Policy: Served on the Homeland Security Science and Technology Advisory Committee. Chaired the scientific review committee empaneled by the National Research Council at the request of the FBI to conduct an independent review of the investigatory methods used by the FBI in the criminal case involving the mailing of anthrax spores. Served on the Board of UKRI, the UK Research and Innovation funding and policy body.

Research / Academia: More than three decades of service in academia and research at leading educational institutions.

Science / Technology / Engineering: M.A. and Ph.D. in chemical engineering from Princeton University. Former Vice President for Research, Associate Provost, and Robert T. Haslam Chair in Chemical Engineering at Massachusetts Institute of Technology and professor of chemical engineering at Stanford University and the Stanford Synchrotron Radiation Laboratory. Member of the National Academy of Engineering and the Royal Academy of Engineering.

 

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election of directors  

 

 

 

      LOGO

 

  

 

Enrique

Hernandez, Jr.  

Chairman and Chief Executive Officer, Inter-Con Security Systems, Inc.

 

Age: 64

Director Since: December 2008

Independent: Yes

 

 

Chevron Committees:

 

•  Management Compensation (Chair)

•  Public Policy

 

Current Public Company Directorships:

 

•  McDonald’s Corporation

 

 

Prior Public Company Directorships

(within last five years):

 

•  Nordstrom, Inc.

•  Wells Fargo & Company

 

Other Directorships and Memberships:

 

•  Catalyst

•  Harvard College Visiting Committee

•  Harvard University Resources Committee

•  John Randolph Haynes and Dora Haynes Foundation

 

Mr. Hernandez has been Chairman and Chief Executive Officer of Inter-Con Security Systems, Inc. (“Inter-Con”), a global provider of security and facility support services to governments, utilities, and industrial customers, since 1986. He was President of Inter-Con from 1986 until 2018 and was previously Executive Vice President and Assistant General Counsel from 1984 until 1986. He was an associate of the law firm of Brobeck, Phleger & Harrison from 1980 until 1984.

skills and qualifications

 

 

Business Leadership / Operations: More than three decades as Chairman and CEO of Inter-Con. Co-founder of Interspan Communications, a television broadcasting company. Chairman of the Board of McDonald’s Corporation.

Finance: More than three decades of financial responsibility and experience at Inter-Con. Chaired the Audit Committee at McDonald’s Corporation. Former Chair of the Finance Committee and the Risk Committee at Wells Fargo & Company. Former Audit Committee member at Great Western Financial Corporation, Nordstrom, Inc., Washington Mutual, Inc., and Wells Fargo & Company.

Global Business / International Affairs: CEO of a company that conducts business worldwide. Current and former director of companies with international operations.

Government / Regulatory / Public Policy: Trustee of the John Randolph Haynes Foundation, which has funded hundreds of important urban studies in education, transportation, local government elections, public safety, and other public issues. Former appointee and Commissioner and President of the Los Angeles Police Commission. Served on the U.S. National Infrastructure Advisory Committee.

Legal: Served as Executive Vice President and Assistant General Counsel of Inter-Con. Former litigation associate of the law firm of Brobeck, Phleger & Harrison. Law degree from Harvard Law School.

 

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  election of directors  

 

 

 

 

      LOGO

 

  

 

Charles W.

Moorman IV

Senior advisor to Amtrak and Retired Chairman and Chief Executive Officer, Norfolk Southern Corporation

 

Age: 68

Director Since: May 2012

Independent: Yes

 

 

Chevron Committees:

 

•  Audit (Chair) – audit committee financial expert

 

Current Public Company Directorships:

 

•  Duke Energy Corporation

•  Oracle Corporation

 

 

Prior Public Company Directorships 

(within last five years):

 

•  Norfolk Southern Corporation

 

Other Directorships and Memberships:

 

•  Focused Ultrasound Foundation

•  Georgia Tech Foundation Inc.

•  National Academy of Engineering

•  Nature Conservancy of Virginia

Mr. Moorman has been senior advisor to Amtrak, a passenger rail provider since 2018. He previously served as Amtrak’s co–Chief Executive Officer from July 2017 until his retirement in December 2017, and as President and Chief Executive Officer from September 2016 until July 2017. He was Chairman from 2006, and Chief Executive Officer from 2004, of Norfolk Southern Corporation (“Norfolk Southern”), a freight and transportation company, until his retirement in 2015. He served as President of Norfolk Southern from 2004 until 2013. Prior to that, Mr. Moorman was Senior Vice President of Corporate Planning and Services from 2003 until 2004 and Senior Vice President of Corporate Services in 2003. Mr. Moorman joined Norfolk Southern in 1975.

skills and qualifications

 

 

Business Leadership / Operations: Served more than a decade as CEO of Norfolk Southern. Forty-year career with Norfolk Southern included numerous senior management and executive positions, with emphasis on operations. Senior advisor and former CEO of Amtrak.

Environmental Affairs: At Norfolk Southern, gained experience with environmental issues related to transportation of coal, automotive, and industrial products. Former Virginia chapter chair and current Virginia chapter director of The Nature Conservancy, a global conservation organization. Served as a trustee of the Chesapeake Bay Foundation, whose mission is to protect the environmental integrity of the bay.

Finance: Former Chairman and CEO of Fortune 500 company. More than three decades of financial responsibility and experience at Norfolk Southern.

Government / Regulatory / Public Policy: More than four decades of experience in the highly regulated freight and transportation industry.

Science / Technology / Engineering: Forty-year career with Norfolk Southern included numerous senior management and executive positions requiring expertise in engineering and technology. Norfolk Southern builds and maintains track and bridges, operates trains and equipment, and designs and manages complex information technology systems. Member of the National Academy of Engineering.

 

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Dambisa F. Moyo

Chief Executive Officer, Mildstorm LLC

 

Age: 51

Director Since: October 2016

Independent: Yes

 

 

Chevron Committees:

 

•  Audit – audit committee financial expert

 

Current Public Company Directorships:

 

•  3M Company

 

 

Prior Public Company Directorships

(within last five years):

 

•  Barclays plc

•  Barrick Gold Corporation

•  SABMiller plc

•  Seagate Technology

 

Other Directorships and Memberships:

 

•  None

Dr. Moyo has been Chief Executive Officer of Mildstorm LLC, a financial and economics firm, since she founded it in 2015. She is a global economist and commentator analyzing the macroeconomy and international affairs. Since 2008, Dr. Moyo has been engaged in researching, speaking, and writing about international macroeconomics. From 2001 to 2008, she worked at Goldman Sachs, a multinational investment bank and financial services company, in various roles, including as an economist. Prior to that she worked at the World Bank, an international financial institution in Washington, D.C., from 1993 until 1995.

skills and qualifications

 

 

Environmental Affairs: As director at Barrick Gold Corporation, served on the committee that considered and provided oversight on environmental matters.

Finance: Ten years of experience at Goldman Sachs and the World Bank. Ph.D. in economics from the University of Oxford and MBA in finance from the American University. Audit Committee member at 3M Company. Former Audit Committee and Risk Committee member at Barrick Gold Corporation.

Global Business / International Affairs: Traveled to more than 80 countries, with a particular focus on the interplay of international business and the global economy, while highlighting key opportunities for investment. Current and former director of companies with international operations.

Government / Regulatory / Public Policy: Ten years of experience in the highly regulated banking and financial services industry. MPA in Public Administration from John F. Kennedy School of Government, Harvard University.

Research / Academia: Author of four New York Times bestsellers. Dr. Moyo’s writing regularly appears in economics and finance-related publications.

 

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  election of directors  

 

 

 

 

      LOGO

 

  

 

Debra Reed-Klages

Retired Chairman, Chief Executive Officer and President, Sempra Energy

 

Age: 63

Director Since: December 2018

Independent: Yes

 

 

Chevron Committees:

 

•  Management Compensation

•  Public Policy

 

Current Public Company Directorships:

 

•  Caterpillar Inc.

•  Lockheed Martin Corporation

 

 

Prior Public Company Directorships

(within last five years):

 

•  Halliburton Company

•  Oncor Electric Delivery Company LLC

•  Sempra Energy

 

Other Directorships and Memberships:

 

•  The Trusteeship, International Women’s Forum

•  Rady Children’s Hospital and Health Center

•  Rady Children’s Hospital – San Diego, CA

•  State Farm Mutual Board of Directors

•  University of Southern California Viterbi School of Engineering, Board of Councilors

 

Ms. Reed-Klages served as Chairman from 2012, Chief Executive Officer from 2011, and President from 2017 until her retirement in 2018 from Sempra Energy (“Sempra”), an energy services holding company whose operating units invest in, develop, and operate energy infrastructure and provide electric and gas services to customers in North and South America. Prior to that, she was Executive Vice President of Sempra from 2010 to 2011. From 2006 to 2010, she served as President and Chief Executive Officer of San Diego Gas and Electric and Southern California Gas Co. (“SoCalGas”), Sempra’s regulated California utilities. She joined SoCalGas in 1978 as an energy systems engineer.

skills and qualifications

 

 

Business Leadership / Operations: Served seven years as CEO of Sempra. Over three decades of experience in senior management and executive positions at Sempra, including responsibility for utility and infrastructure operations.

Environmental Affairs: As Chairman and CEO of Sempra, oversaw all aspects of Sempra’s environmental and sustainability policies and strategies, which include initiatives to address challenges like limiting water use, improving the quality and efficiency of operations, infrastructure development and access to energy, human health, and environmental safety.

Finance: Former Chairman and CEO of Fortune 500 company. More than a decade of financial responsibility and experience at Sempra. Former CFO of San Diego Gas & Electric and SoCalGas.

Global Business / International Affairs: Former Chairman and CEO of Fortune 500 company that conducts business in Mexico and South America. Current and former director of companies with international operations.

Government / Regulatory / Public Policy: At Sempra, worked with and adhered to the rules established by the California Public Utilities Commission, the principal regulator of Sempra’s California utilities. Served four years on the National Petroleum Council, a federally chartered advisory committee to the U.S. Secretary of Energy.

Science / Technology / Engineering: B.S. in civil engineering from the University of Southern California. Served in a variety of senior management and executive positions at Sempra, requiring expertise in engineering and technology. Director at Caterpillar, a manufacturer of construction and mining equipment, and Lockheed Martin, a global security and aerospace company.

 

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Ronald D. Sugar

Retired Chairman and Chief

Executive Officer, Northrop

Grumman Corporation

 

Lead Director Since: 2015

 

Age: 71

Director Since: April 2005

Independent: Yes

 

 

Chevron Committees:

 

•  Board Nominating and Governance (Chair)

•  Management Compensation

 

Current Public Company Directorships:

 

•  Air Lease Corporation
(retiring May 6, 2020)

•  Amgen Inc.

•  Apple Inc.

•  Uber Technologies, Inc.

 

 

Prior Public Company Directorships 

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  Los Angeles Philharmonic Association

•  National Academy of Engineering

•  UCLA Anderson School of Management Board of Visitors

•  University of Southern California

 

Dr. Sugar is a senior advisor to various businesses and organizations, including Ares Management LLC, a private investment firm; Bain & Company, a global consulting firm; Temasek Americas Advisory Panel, a private investment company based in Singapore; and the G100 Network and the World 50, peer-to-peer exchanges for current and former senior executives and directors from some of the world’s largest companies. He is also an advisor to Northrop Grumman Corporation (“Northrop Grumman”), a global aerospace and defense company, and was previously Northrop Grumman’s Chairman and Chief Executive Officer, from 2003 until his retirement in 2010, and President and Chief Operating Officer, from 2001 until 2003. He joined Northrop Grumman in 2001, having previously served as President and Chief Operating Officer of Litton Industries, Inc., a developer of military products, and earlier as an executive of TRW Inc., a developer of missile systems and spacecraft.

skills and qualifications

 

 

Business Leadership / Operations: Served seven years as CEO of Northrop Grumman. Held senior management and executive positions, including service as COO, at Northrop Grumman, Litton Industries, Inc., and TRW Inc.

Environmental Affairs: As Chairman, CEO, and President of Northrop Grumman, oversaw environmental assessments and remediations at shipyards and aircraft and electronics factories.

Finance: Former CFO of Fortune 500 company. More than three decades of financial responsibility and experience at Northrop Grumman, Litton Industries, Inc., and TRW Inc. Current Audit Committee Chair at Apple Inc. and former Audit Committee Chair at Chevron.

Global Business / International Affairs: Former CEO of Fortune 500 company with extensive international operations. Current and former director of companies with international operations.

Government / Regulatory / Public Policy: At Northrop Grumman, a key government contractor, oversaw development of weapons and other technologies. Appointed by the President of the United States to the National Security Telecommunications Advisory Committee. Former director of the World Affairs Council of Los Angeles.

Science / Technology / Engineering: B.S., M.S., and Ph.D. in engineering from the University of California at Los Angeles. Served in a variety of senior management and executive positions at Northrop Grumman, Litton Industries, Inc., and TRW Inc., requiring expertise in engineering and technology. Director at Amgen Inc., a biotechnology company; Apple Inc., a designer, manufacturer, and marketer of, among other things, personal computers and mobile communication and media devices; Uber Technologies, Inc., a technology company; and former director at BeyondTrust, a global cybersecurity company. Member of National Academy of Engineering.

 

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  election of directors  

 

 

 

 

      LOGO

 

  

 

 

D. James Umpleby III

Chairman and Chief Executive Officer, Caterpillar Inc.

 

Age: 62

Director Since: March 2018

Independent: Yes

 

 

Chevron Committees:

 

•  Board Nominating and Governance

•  Management Compensation

 

Current Public Company Directorships:

 

•  Caterpillar Inc.

 

 

Prior Public Company Directorships

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  Business Roundtable

•  The Business Council

•  National Petroleum Council

•  Peterson Institute for International Economics

•  Rose-Hulman Institute of Technology

•  U.S.-China Business Council

•  U.S.-India Strategic Partnership Forum

 

Mr. Umpleby has been Chairman since 2018, and Chief Executive Officer since 2017, of Caterpillar Inc. (“Caterpillar”), a leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. He was Group President of Caterpillar from 2013 until 2016, with responsibility for Caterpillar’s energy and transportation business segment, and Vice President from 2010 to 2013. He joined Solar Turbines Incorporated, now a Caterpillar subsidiary, in 1980 as an associate engineer.

skills and qualifications

 

 

Business Leadership / Operations: Chairman and CEO of Fortune 100 company. More than three decades of experience in senior management and executive positions at Caterpillar, including responsibility for engineering, manufacturing, marketing, sales, and services.

Environmental Affairs: As Chairman and CEO of Caterpillar, oversees all aspects of Caterpillar’s environmental and sustainability policies and strategies, which include initiatives to address challenges like preventing waste, improving the quality and efficiency of operations, developing infrastructure, and ensuring access to energy, human health, and environmental safety. Served as a member of the Latin America Conservation Council, in partnership with The Nature Conservancy, a global conservation organization. Former director of the World Resources Institute, an international research nonprofit organization working to secure a sustainable future.

Finance: Chairman and CEO of Fortune 100 company. More than a decade of financial responsibility and experience at Caterpillar Inc.

Global Business / International Affairs: Chairman and CEO of Fortune 100 company with extensive international operations. Served in assignments at Caterpillar in Singapore and Kuala Lumpur from 1984 to 1990. Director of the Peterson Institute for International Economics, the U.S.-China Business Council and the U.S.-India Business Strategic Partnership Forum and a former member of the U.S.-India CEO Forum.

Science / Technology / Engineering: B.S. in Mechanical Engineering from the Rose-Hulman Institute of Technology. Has served in a variety of senior management and executive positions at Caterpillar Inc., requiring expertise in engineering and technology.

 

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Michael K. Wirth

Chairman and Chief Executive Officer, Chevron Corporation

 

Age: 59

Director Since: February 2017

Independent: No

 

 

Chevron Committees:

 

•  None

 

Current Public Company Directorships:

 

•  None

 

 

Prior Public Company Directorships

(within last five years):

 

•  None

 

Other Directorships and Memberships:

 

•  American Petroleum Institute

•  American Society of Corporate Executives

•  The Business Council

•  Business Roundtable

•  Catalyst

•  International Business Council of the World Economic Forum

•  National Petroleum Council

 

Mr. Wirth has been Chairman and Chief Executive Officer of Chevron since February 2018. He was Vice Chairman in 2017 and Executive Vice President of Midstream & Development from 2016 until 2018, where he was responsible for supply and trading, shipping, pipeline, and power operating units; corporate strategy; business development; and policy, government, and public affairs. He served as Executive Vice President of Downstream & Chemicals from 2006 to 2015. From 2003 until 2006, Mr. Wirth was President of Global Supply & Trading. Mr. Wirth joined Chevron in 1982.

skills and qualifications

 

 

Business Leadership / Operations: Chairman and CEO of Chevron. Twelve years as Executive Vice President of Chevron. More than three decades of experience in senior management and executive positions at Chevron.

Environmental Affairs: As Chairman and CEO of Chevron, oversees all aspects of Chevron’s environmental policies and strategies. Oversaw environmental policies and strategies of Chevron’s Downstream & Chemicals and shipping and pipeline operations.

Finance: CEO of Fortune 100 company. More than a decade of financial responsibility and experience at Chevron.

Global Business / International Affairs: Chairman and CEO of Fortune 100 company with extensive international operations. Served as President of Marketing for Chevron’s Asia/Middle East/Africa marketing business based in Singapore and served as director of Caltex Australia Ltd. and GS Caltex in South Korea.

Government / Regulatory / Public Policy: More than three decades of experience in highly regulated industry. As Chairman and CEO of Chevron, oversees all aspects of Chevron’s government, regulatory, and public policy affairs.

Science / Technology / Engineering: B.S. in Chemical Engineering from the University of Colorado. More than three decades of experience at Chevron. Joined as a design engineer and advanced through a number of engineering, construction, marketing, and operations roles.

vote required

Each Director nominee who receives a majority of the votes cast (i.e., the number of shares voted FOR a Director nominee must exceed the number of shares voted AGAINST that Director nominee, excluding abstentions) will be elected a Director in an uncontested election. Any shares not voted (whether by abstention or otherwise) will have no impact on the elections. If you are a street name stockholder and do not vote your shares, your bank, broker, or other holder of record cannot vote your shares at its discretion in these elections.

If the number of Director nominees exceeds the number of Directors to be elected—a circumstance we do not anticipate—the Directors shall be elected by a plurality of the shares present in person or by proxy at the Annual Meeting, or any adjournment or postponement thereof, and entitled to vote on the election of Directors.

your board’s recommendation

Your Board recommends that you vote FOR the 10 Director nominees named in this Proxy Statement.

 

Chevron Corporation—2020 Proxy Statement       15


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director compensation

overview

 

Our compensation for non-employee Directors is designed to be competitive with compensation for directors of other large, global energy companies and other large, capital-intensive, international companies; to link rewards to business results and stockholder returns; and to align stockholder and Director interests through increased Director ownership of Chevron common stock. We do not have a retirement plan for non-employee Directors. Our Chief Executive Officer is not paid additional compensation for service as a Director.

The Governance Committee evaluates and recommends to the non-employee Directors of the Board the compensation for non-employee Directors, and the non-employee Directors of the Board approve the compensation. Our executive officers have no role in determining the amount or form of non-employee Director compensation.

In 2019, the Governance Committee retained the services of an independent compensation consultant, Pearl Meyer &

Partners, LLC (“Pearl Meyer”), to assist the Governance Committee with its periodic review of Chevron’s non-employee Director compensation program relative to Chevron’s Oil Industry Peer Group and Non-Oil Industry Peer Group (excluding General Electric, which is not in the Non-Oil Industry Peer Group for 2020 compensation benchmarking), as identified in “Use of Peer Groups” in the “Compensation Discussion and Analysis” section of this Proxy Statement.

Based on this review, the Governance Committee recommended, and the non-employee Directors of the Board agreed, that no changes should be made to Director compensation in 2020.

Pearl Meyer and its lead consultant report directly to the Governance Committee under the terms of the engagement, but they may work cooperatively with management to develop analyses and proposals when requested to do so by the Governance Committee. Pearl Meyer does not provide any services to the Company.

 

 

non-employee director compensation

In 2019, each non-employee Director received annual compensation of $375,000, with 40 percent paid in cash (or stock options at the Director’s election) and 60 percent paid in restricted stock units (“RSUs”). An additional cash retainer, in the amounts described below, is paid to the Lead Director and each Committee Chair. Directors do not receive fees for attending Board or Board Committee meetings, nor do they receive fees for meeting with stockholders. Under the Chevron Corporation Non-Employee Directors’ Equity Compensation and Deferral Plan and Plan Rules (together, the “NED Plan”), Chevron’s Annual Compensation Cycle for its non-employee Directors is the period commencing on the day of the Annual Meeting at which the Director is elected through the day immediately preceding the next Annual Meeting.

 

Position

 

 

Cash Retainer(1)

 

 

RSUs(2)  

 

   

Non-Employee Director

   

$

150,000

   

$

225,000

Lead Director

   

$

30,000

   

 

Audit Committee Chair

   

$

30,000

   

 

Management Compensation Committee Chair

   

$

25,000

   

 

Board Nominating and Governance Committee Chair

   

$

20,000

   

 

Public Policy Committee Chair

   

$

20,000

   

 

 

(1)

Each cash retainer is paid in monthly installments beginning with the date the Director is elected to the Board. Under the NED Plan, Directors can elect to receive nonstatutory/nonqualified stock options instead of any portion of their cash compensation. Directors can also elect to defer receipt of any portion of their cash compensation. Deferral elections must be made by December 31 in the year preceding the year in which the cash to be deferred is earned. Deferrals are credited, at the Director’s election, into accounts tracked with reference to the same investment fund options available to participants in the Chevron Deferred Compensation Plan, including a Chevron Common Stock Fund. Distribution of deferred amounts is in cash except for amounts valued with reference to the Chevron Common Stock Fund, which are distributed in shares of Chevron common stock.

 

(2)

RSUs are granted on the date of the Annual Meeting at which the Director is elected. If a Director is elected to the Board between annual meetings, a prorated grant is made. RSUs are paid out in shares of Chevron common stock unless the Director has elected to defer the payout until retirement. RSUs are subject to forfeiture (except when the Director dies, reaches mandatory retirement age of 74, becomes disabled, changes primary occupation, or enters government service) until the earlier of 12 months or the day preceding the first Annual Meeting following the date of the grant.

expenses and charitable matching gift program

 

Non-employee Directors are reimbursed for out-of-pocket expenses incurred in connection with the business and affairs of Chevron. Non-employee Directors are eligible to participate in Chevron Humankind, our charitable matching gift and community involvement program, which is available

to any employee, retiree, or Director. For employees and Directors, we match contributions to eligible entities and grants for volunteer time, up to a maximum of $10,000 per year.

 

 

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director compensation  

 

 

compensation during the fiscal year ended december 31, 2019

The following table sets forth the compensation of our non-employee Directors for the fiscal year ended December 31, 2019.

 

 

Name

 

 

 

Fees earned or
paid in cash

($)(1)

 

 

 

Stock
awards

($)(2)

 

 

 

Option
awards

($)(3)

 

 

 

All other
compensation

($)(4)

 

 

 

Total

($)

 

Wanda M. Austin

   

$

85,000

(5)(6)

 
   

$

225,000

   

$

 170,000

(6)(7)

 
   

$

10,643

   

$

    490,643

(7)

 

John B. Frank

   

$

75,000

(8)

 
   

$

225,000

   

$

75,000

   

$

10,643

   

$

385,643

Alice P. Gast

   

$

150,000

(8)

 
   

$

225,000

   

 

—      

   

$

10,643

   

$

385,643

Enrique Hernandez, Jr.

   

$

—      

   

$

225,000

   

$

175,000

(6)

 
   

$

10,643

   

$

410,643

Charles W. Moorman IV

   

$

—      

   

$

225,000

   

$

180,000

(6)

 
   

$

10,643

   

$

415,643

Dambisa F. Moyo

   

$

150,000

   

$

225,000

   

 

—      

   

$

643

   

$

375,643

Debra Reed-Klages

   

$

 150,000

(8)

 
   

$

225,000

   

 

—      

   

$

10,643

   

$

385,643

Ronald D. Sugar

   

$

200,000

(6)(8)(9)

 
   

$

225,000

   

 

—      

   

$

    10,643

   

$

435,643

Inge G. Thulin(10)

   

$

 75,000

(11)

 
   

$

225,000

(12)

 
   

 

—      

   

$

643

   

$

300,643

D. James Umpleby III

 

   

$

 

    150,000

 

(8)

 

 
   

$

 

    225,000

 

 

   

 

 

—      

 

 

   

$

 

10,643

 

 

   

$

 

385,643

 

 

 

(1)

Form of compensation elected by a Director, as described above, can result in differences in reportable compensation.

 

(2)

Amounts reflect the aggregate grant date fair value for RSUs granted in 2019 under the NED Plan. We calculate the grant date fair value of these awards in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC Topic 718”), for financial reporting purposes. The grant date fair value of these RSUs was $118.31 per unit, the closing price of Chevron common stock on May 28, 2019. RSUs accrue dividend equivalents, the value of which is factored into the grant date fair value. For purposes of this table only, estimates of forfeitures related to service-based vesting conditions have been disregarded. RSUs are payable in Chevron common stock.

At December 31, 2019, the following Directors had the following number of shares subject to outstanding stock awards or deferrals:

 

Name

 

 

Restricted
stock(a)

 

 

Stock units(a)

 

 

RSUs(a)

 

 

Stock units from
Director’s
deferral of cash
retainer(b)

 

 

Total

 

Wanda M. Austin

                  1,939             1,939

John B. Frank

                  5,114             5,114

Alice P. Gast

                  13,752             13,752

Enrique Hernandez, Jr.

                  16,132       1,291       17,423

Charles W. Moorman IV

                  18,493       10,055       28,548

Dambisa F. Moyo

                  1,939             1,939

Debra Reed-Klages

                  2,904       579       3,483

Ronald D. Sugar

      2,651       8,116       34,944       16,707       62,418

Inge G. Thulin

                  12,332       612       12,944

D. James Umpleby III

 

     

 

 

 

     

 

 

 

     

 

1,939

 

 

     

 

 

 

     

 

1,939

 

 

 

  (a)

Represents awards of restricted stock and dividends and stock units and dividend equivalents from 2005 through 2006, and awards of RSUs and dividend equivalents beginning in 2007, rounded to whole units. Awards of restricted stock are fully vested and are settled in shares of Chevron common stock upon retirement. Awards of stock units and RSUs are settled in shares of Chevron common stock in either one or 10 annual installments following the Director’s retirement, resignation, or death. The terms of awards of RSUs are described above.

 

  (b)

Represents deferred compensation and dividend equivalents, rounded to whole units. Distribution will be made in either one or 10 annual installments. Any deferred amounts unpaid at the time of a Director’s death are distributed to the Director’s beneficiary.

 

(3)

For Directors electing to receive stock options in lieu of all or a portion of the annual cash retainer, the stock options are granted on the date of the Annual Meeting at which the Director is elected, with 50 percent vested on November 29, 2019, and 50 percent vesting on May 26, 2020. The aggregate grant date fair value is being reported as compensation in 2019, the year of grant, notwithstanding the Annual Compensation Cycle covering the period from May 29, 2019, through May 26, 2020. The stock options are exercisable for that number of shares of Chevron common stock determined by dividing the amount of the cash retainer subject to the election by the Black-Scholes value of a stock option on the date of grant. Elections to receive stock options in lieu of any portion of cash compensation must be made by December 31 in the year preceding the year in which the stock options are granted. The stock options have an exercise price based on the closing price of Chevron common stock on the date of grant.

 

  

Amounts reported here reflect the aggregate grant date fair value for stock options granted on May 29, 2019. The grant date fair value was determined in accordance with ASC Topic 718 for financial reporting purposes. The grant date fair value of each option is calculated using the Black-Scholes model. Stock options granted on May 29, 2019, have an exercise price of $116.77 and a grant date fair value of $14.87. The assumptions used in the Black-Scholes model to calculate this grant date fair value were: an expected life of 6.6 years, a volatility rate of 20.6 percent, a risk-free interest rate of 2.12 percent, and a dividend yield of 3.98 percent. For purposes of this table only, estimates of forfeitures related to service-based vesting conditions have been disregarded.

 

  

Dr. Austin and Messrs. Frank, Hernandez, and Moorman each elected to receive all or a part of their 2019 annual cash compensation in the form of stock options. The number of stock options granted in 2019 was 11,432 to Dr. Austin, 5,043 to Mr. Frank, 11,768 to Mr. Hernandez, and 12,104 to Mr. Moorman. One-half of the stock options vested on November 29, 2019, and the remaining half vests on May 26, 2020. Stock options expire after 10 years.

 

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  director compensation  

 

 

 

  

At December 31, 2019, Dr. Austin had 11,432, Mr. Frank had 9,348, Mr. Hernandez had 91,937 and Mr. Moorman had 22,436 outstanding vested and unvested stock options. Under the NED Plan, Directors who retire in accordance with Chevron’s Director Retirement Policy have until 10 years from the date of grant to exercise any outstanding options.

 

(4)

All Other Compensation for 2019 includes the following items:

 

 

Name

 

 

 

Insurance(a)

 

 

 

Perquisites(b)

 

 

 

Charitable(c)

 

Wanda M. Austin

 

$    643

 

 

$    10,000

John B. Frank

 

$    643

 

 

$    10,000

Alice P. Gast

 

$    643

 

 

$    10,000

Enrique Hernandez, Jr.

 

$    643

 

 

$    10,000

Charles W. Moorman IV

 

$    643

 

 

$    10,000

Dambisa F. Moyo

 

$    643

 

 

      –

Debra Reed-Klages

 

$    643

 

 

$    10,000

Ronald D. Sugar

 

$    643

 

 

$    10,000

Inge G. Thulin

 

$    643

 

 

      –

D. James Umpleby III

 

 

$    643

 

 

 

 

$    10,000

 

 

  (a)

Amounts reflect the annualized premium for accidental death and dismemberment insurance coverage paid by Chevron.

 

  (b)

Perquisites and personal benefits did not equal or exceed $10,000 for any Director in 2019.

 

  (c)

Amounts reflect payments made to charitable organizations under Chevron Humankind, our charitable matching gift and community involvement program, to match donations made by the Directors in 2019.

 

(5)

Reflects Dr. Austin’s cash retainer covering the period from January 1, 2019, through May 28, 2019.

 

(6)

Amount includes the additional retainer paid for serving as a Board Committee Chair during 2019.

 

(7)

Dr. Austin elected to receive 100 percent of her cash retainer for the 2019 Annual Compensation Cycle in stock options in lieu of cash. Accordingly, the options were granted on May 29, 2019. As described in Footnote 3 above, this resulted in the aggregate grant date fair value of the options being reported as compensation in 2019, even though the Annual Compensation Cycle covers the period from May 29, 2019, through May 26, 2020.

 

(8)

Director has elected to defer all or a portion of the cash retainer under the NED Plan in 2019. None of the earnings under the NED Plan are above market or preferential.

 

(9)

Amount includes the additional cash retainer paid for serving as Lead Director during 2019.

 

(10)

Mr. Thulin resigned from the Board effective January 1, 2020.

 

(11)

Reflects Mr. Thulin’s cash retainer for the period from May 29, 2019, through December 31, 2019.

 

(12)

Mr. Thulin will not realize any value from his 2019 RSU grant, which was cancelled following his resignation from the Board, in accordance with the NED Plan.

 

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corporate governance

overview

 

Chevron is governed by a Board of Directors and Board Committees that meet throughout the year. Directors discharge their responsibilities at Board and Committee meetings and through other communications with

management. Your Board is committed to strong corporate governance structures and practices that help Chevron compete more effectively, sustain its success, and build long-term stockholder value.

 

 

role of the board of directors

 

Your Board oversees and provides guidance for Chevron’s business and affairs. The Board oversees management’s development and implementation of Chevron’s strategy and business planning process. The Board monitors corporate performance, the integrity of Chevron’s financial controls, and the effectiveness of its legal compliance and enterprise risk

management programs. This is generally a year-round process, culminating in Board reviews of Chevron’s strategic plan, its business plan, the next year’s capital expenditures budget, and key financial and operational indicators. Your Board also oversees management and the succession of key executives.

 

 

board leadership structure

 

Under Chevron’s By-Laws, the positions of Chairman of the Board and Chief Executive Officer are separate positions that may be occupied by the same person at the discretion of the Board. Chevron’s independent Directors select the Chairman of the Board annually. Thus, the Board has great flexibility to choose its optimal leadership structure depending upon Chevron’s particular needs and circumstances and to organize its functions and conduct its business in the most effective manner.

Annually, the Governance Committee conducts an assessment of Chevron’s corporate governance structures and processes, which includes a review of Chevron’s Board leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of Chevron’s stockholders. At present, Chevron’s Board believes that it is in the stockholders’ best interests for the CEO, Michael K. Wirth, to also serve as Chairman of the Board. The Board believes that having Mr. Wirth serve as Chairman fosters an important unity of leadership between the Board and management that is subject to effective oversight by the independent Lead Director and the other independent Directors. The Board believes that it benefits from the significant knowledge, insight, and perspective of Chevron and the energy industry that Mr. Wirth has gained throughout his 37 years with Chevron. Our business is highly complex, and our projects often have long lead times, with many of our major capital projects taking more than 10 years from the exploration phase to first production. The Board believes that Mr. Wirth’s in-depth knowledge of the Company, coupled

with his extensive industry expertise, makes him particularly qualified to lead discussions of the Board. Having Mr. Wirth serve as Chairman also promotes better alignment of Chevron’s long-term strategic development with its operational execution. Also, as a global energy company that negotiates concessions and leases with host-country governments around the world, it is advantageous to the Company for the CEO to represent the Chevron Board in such dialogues as its Chairman.

Significantly, the Board does not believe that combining the roles creates ambiguity about reporting relationships. Given the role of the independent Lead Director discussed below and the fact that the independent Directors, pursuant to their powers under the By-Laws, have affirmatively selected Mr. Wirth for the positions of Chairman and CEO, annually set his compensation, and regularly evaluate his performance, the Board believes it is clear that Mr. Wirth reports and is accountable to the independent Directors. Moreover, the Board does not believe that having the CEO also serve as Chairman inhibits the flow of information and interactions between the Board, management, and other Company personnel. To the contrary, the Board has unfettered access to management and other Company personnel, and the Board believes that having Mr. Wirth in the roles of both Chairman and CEO facilitates the flow of information and communications between the Board and management, which enhances the Board’s ability to obtain information and to monitor management.

 

 

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independent lead director

 

Your Board recognizes the importance of independent Board oversight of the CEO and management and has developed policies and procedures designed to ensure independent oversight. In addition to conducting an annual review of the CEO’s performance, the independent Directors meet in executive session at each regular Board meeting and discuss management’s performance and routinely formulate guidance and feedback, which the independent Lead Director provides to the CEO and other members of management.

Further, when the Board selects the CEO to also serve as Chairman, the independent Directors annually select an independent Lead Director, currently Dr. Sugar. The Board routinely reviews the Lead Director’s responsibilities to ensure that these responsibilities enhance its independent oversight of the CEO and management and the flow of information and interactions between the Board, management, and other Company personnel. Annually the Lead Director leads the independent Directors’ review of candidates for all senior management positions. This succession planning process includes consideration of both ordinary course succession, in the event of planned promotions and retirements, and planning for situations where the CEO or another member of senior management unexpectedly becomes unable to perform the duties of their positions.

The Lead Director and Chairman collaborate closely on Board meeting schedules and agendas and information provided to the Board. These consultations and agendas and the information provided to the Board frequently reflect input and suggestions from other members of the Board and management. You can read more about these particular processes in the “Board Agenda and Meetings” section of Chevron’s Corporate Governance Guidelines.

Any stockholder can communicate with the Lead Director or any of the other Directors in the manner described in the “Communicating with the Board” section of this Proxy Statement.

Also, as discussed in more detail in the “Environmental, Social, and Governance Engagement” section of this Proxy Statement, the Board encourages a robust investor engagement program. During these engagements, Board leadership is a frequent topic of discussion. In general,

investors, including those who are philosophically opposed to combining the positions of Chairman and CEO, have overwhelmingly communicated to Chevron that they have minimal, if any, concerns about your Board or individual Directors or about Chevron’s policies and leadership structure. More specifically, these investors have voiced confidence in the strong counterbalancing structure of the robust independent Lead Director role.

 

 

 

As described in the “Board Leadership and Lead Director” section of Chevron’s Corporate Governance Guidelines, the Lead Director’s responsibilities are to:

 

•  chair all meetings of the Board in the Chairman’s absence;

 

•  chair the executive sessions;

 

•  lead non-management Directors in an annual discussion of the performance evaluation of the CEO as well as communicate that evaluation to the CEO;

 

•  oversee the process for CEO succession planning;

 

•  lead the Board’s review of the Governance Committee’s assessment and recommendations from the Board self-evaluation process;

 

•  lead the individual Director evaluation process;

 

•  serve as liaison between the Chairman and the independent Directors;

 

•  consult with the Chairman on and approve agendas and schedules for Board meetings and other matters pertinent to the Corporation and the Board;

 

•  be available to advise the Committee Chairs of the Board in fulfilling their designated roles and responsibilities;

 

•  participate in the interview process for prospective directors with the Governance Committee;

 

•  call meetings of the independent Directors and special meetings of the Board; and

 

•  be available as appropriate for consultation and direct communication with major stockholders.

 

 
 

 

human capital management

 

Human capital management is critical to ongoing business success. At Chevron “human energy” is the most important element of delivering reliable, affordable and ever-cleaner energy — which requires investing in our people. We strive to create a highly engaged and motivated workforce where employees are inspired by leadership, engaged in purpose-driven, meaningful work, have growth opportunities, and thrive in an environment that embraces diversity and inclusion. Diversity and inclusion are cornerstones of

Chevron’s corporate values and set the tone for an inclusive work environment that values the diversity of our employees’ talents, experiences and ideas.

We conduct an annual employee survey to understand employees’ views, assess Chevron against the attributes of a high-performance organization, and measure the impact of our people development programs. An effective approach to human capital management requires that we invest in talent, training, culture, and employee engagement.

 

 

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In addition, the senior management team and the Board focus on our commitment to the areas where we work around the world by endorsing and monitoring strategic initiatives that enable sustainable development of local workforce, business partners, and communities through investments in health, safety, education, and economic growth.

The Board is also actively involved in reviewing and approving executive compensation, selections, and

succession plans to ensure we have leadership in place with the requisite skills and experience to deliver results the right way. In addition to the annual review led by the Lead Director, the CEO periodically provides the Board with an assessment of senior executives and their potential as successors for the CEO position, as well as perspectives on potential candidates for other senior management positions.

 

 

board oversight of strategy

 

The Board of Directors and the Board Committees provide guidance to and oversight of management with respect to Chevron’s business strategy throughout the year. The Board dedicates at least one Board meeting each year to focus on Chevron’s strategic planning. In 2018 and 2019, the Board participated in expanded offsite strategy sessions that included presentations by third-party experts to discuss energy transition issues. In addition, various elements of strategy are discussed at every Board meeting, as well as at many meetings of the Board’s Committees. The Board also dedicates one Board meeting each year to focus on Chevron’s three-year business plan and to endorse Chevron’s

business plan, performance objectives, and capital and exploratory budget for the coming year. Our strategic plan sets direction, aligns our organization, and differentiates us from the competition. It guides our actions to successfully manage risk and deliver stockholder value. The Board of Directors and the Board Committees oversee fundamental components of our strategic plan, and management is charged with executing the business strategy. In order to assess performance against our strategic plans, the Board receives regular updates on progress and execution and provides guidance and direction throughout the year.

 

 

board oversight of risk

The Board of Directors and the Board Committees oversee Chevron’s risk management policies, processes, and practices to ensure that the appropriate risk management systems are employed throughout the Company. Chevron faces a broad array of risks, including market, operational, strategic, legal, regulatory, political, financial, and cybersecurity risks. The Board exercises its role of risk oversight in a variety of ways, including the following:

 

 

Board of Directors

 

 

•  Monitors overall corporate performance, the integrity of financial and other controls, and the effectiveness of the Company’s legal compliance and enterprise risk management programs, risk governance practices, and risk mitigation efforts, particularly with regard to those risks specified by the Company as “Risk Factors” in its Annual Report on Form 10-K

 

•  Oversees management’s implementation and utilization of appropriate risk management systems at all levels of the Company, including operating companies, business units, corporate departments, and service companies

 

•  Reviews specific facilities and operational risks as part of visits to Company operations

 

•  Reviews portfolio, capital allocation, and geopolitical risks in the context of the Board’s annual strategy session and the annual business plan and capital budget review and approval process

 

•  Receives reports from management on and considers risk matters in the context of the Company’s strategic, business, and operational planning and decision making

 

•  Receives reports from management on, and routinely considers, critical risk topics such as operational, financial, geopolitical/legislative, strategic, geological, security, commodity trading, skilled personnel/human capital, capital project execution, civil unrest, legal, and technology/cybersecurity risk

 

 

 

 

Audit Committee

 

 

•  Assists the Board in fulfilling its oversight of financial risk exposures, including, but not limited to, those related to cybersecurity, the effectiveness of internal controls over financial reporting, and the implementation and effectiveness of Chevron’s compliance programs

 

•  Discusses Chevron’s policies with respect to financial risk assessment and financial risk management

 

•  Meets with Chevron’s Chief Compliance Officer and certain members of Chevron’s Compliance Policy Committee to receive information regarding compliance policies and procedures and internal controls

 

•  Meets with Chevron’s Chief Information Officer to review cybersecurity implications and risk management on financial exposures

 

•  Meets with and reviews reports from Chevron’s independent registered public accounting firm and internal auditors

 

•  Reports its discussions to the full Board for consideration and action when appropriate

 

 

 

 

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Board Nominating and Governance Committee

 

 

•  Assists the Board in fulfilling its oversight of risks that may arise in connection with Chevron’s governance practices and processes

 

•  Conducts an annual evaluation of Chevron’s governance practices with the help of the Corporate Governance Department

 

•  Discusses risk management in the context of general governance matters, including topics such as Board and management succession planning, delegations of authority and internal approval processes, stockholder proposals and activism, and Director and officer liability insurance

 

•  In conjunction with the Public Policy Committee, oversees Chevron’s stockholder engagement program and makes recommendations regarding stockholder engagement

 

•  Reports its discussions to the full Board for consideration and action when appropriate

 

 

 

Management

Compensation

Committee

(“MCC”)

 

 

•  Assists the Board in fulfilling its oversight of risks that may arise in connection with Chevron’s compensation programs and practices

 

•  Reviews the design and goals of Chevron’s compensation programs and practices in the context of possible risks to Chevron’s financial and reputational well-being

 

•  Reviews Chevron’s strategies and supporting processes for executive retention and diversity

 

•  Reports its discussions to the full Board for consideration and action when appropriate

 

 

Public Policy

Committee

 

 

•  Assists the Board in fulfilling its oversight of risks that may arise in connection with the social, political, environmental, human rights, and public policy aspects of Chevron’s business and the communities in which it operates

 

•  Provides oversight and guidance on and receives reports regarding environmental matters in connection with Chevron’s projects and operations

 

•  Discusses risk management in the context of, among other things, legislative and regulatory initiatives (including political activities such as political contributions and lobbying), safety and environmental stewardship, community relations, government and nongovernmental organization relations, and Chevron’s global reputation

 

•  In conjunction with the Governance Committee, oversees Chevron’s stockholder engagement program and makes recommendations regarding stockholder engagement

 

•  Reports its discussions to the full Board for consideration and action when appropriate

 

 

 

board oversight of sustainability

 

Chevron’s sustainability efforts and environmental, social, and governance (“ESG”) priorities are focused on protecting the environment, empowering people, and getting results the right way. The Board oversees Chevron’s performance and management of various ESG issues, including climate change, ESG reporting, lobbying practices, human capital management, cybersecurity, and human rights. The Board also offers guidance on Chevron’s Corporate Responsibility Report and on climate change reports aligned with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”). The Board’s four standing committees provide oversight and guidance over different aspects of ESG issues. For example, the Public Policy Committee assesses and advises on risks that may arise in connection with social, political, environmental, and public policy aspects of Chevron’s business and helps management evaluate trends and potential implications. The Public Policy

Committee is briefed on the work of the Chevron Global Issues Committee, an executive-level committee that is regularly updated on various sustainability issues as well as ESG engagements with stockholders and other stakeholders. The Audit Committee discusses potential financial risk exposures related to sustainability, such as trends in sustainable finance and shifts in capital flows. The Governance Committee discusses maintaining appropriate Board composition to oversee various sustainability and ESG issues and reviews stockholder proposals, many of which are ESG focused. The MCC discusses how to align incentive program design with Chevron’s sustainability strategy. In addition to providing oversight, the Board is committed to fostering long-term and institutionwide relationships with stockholders and listening to their input on sustainability and ESG issues.

 

 

board oversight of environmental issues

 

Chevron operates using four environmental principles that define how we develop energy in an environmentally responsible manner: include environmental impact in decision making, reduce our environmental footprint, operate responsibly, and steward our sites. A description of these principles can be found at www.chevron.com/corporate-responsibility/environment. The Board of Directors, and the

Public Policy Committee in particular, provide oversight and guidance on environmental matters in connection with Chevron’s projects and operations and are regularly briefed by professionals whose focus is on environmental protection and stewardship. Members of the Board regularly visit Chevron operations across the globe and discuss environmental matters specific and relevant to these

 

 

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locations. Significant environmental and process safety issues are reviewed by the Board to ensure compliance with the Company’s rigorous processes. The Public Policy Committee assists the Board in identifying, evaluating, and monitoring public policy trends and environmental issues that could impact the Company’s business activities and performance. It also reviews and makes recommendations for Chevron’s

strategies related to corporate responsibility and reputation management. The Board of Directors and the Public Policy Committee regularly receive reports of stockholder engagements related to environmental issues and incorporate these into the direction they provide to management.

 

 

director independence

 

 

Your Board has determined that each non-employee Director who served in 2019 and non-employee Director nominee is independent in accordance with the NYSE Corporate Governance Standards and that no material relationship exists with Chevron other than as a Director.

 

For a Director to be considered independent, the Board must determine that the Director does not have any material relationship with Chevron, other than as a Director. In making its determinations, the Board adheres to the specific tests for independence included in the NYSE Corporate Governance Standards. In addition, the Board has determined that the following relationships of Chevron Directors occurring within the last fiscal year are categorically immaterial to a determination of independence if the relevant transaction was conducted in the ordinary course of business:

 

 

a director of another entity if business transactions between Chevron and that entity do not exceed $5 million or 5 percent of the receiving entity’s consolidated gross revenues, whichever is greater;

 

 

a director of another entity if Chevron’s discretionary charitable contributions to that entity do not exceed $1 million or 2 percent of that entity’s gross revenues, whichever is greater, and if the charitable contributions are consistent with Chevron’s philanthropic practices; and

 

 

a relationship arising solely from a Director’s ownership of an equity or limited partnership interest in a party that engages in a transaction with Chevron as long as the Director’s ownership interest does not exceed 2 percent of the total equity or partnership interest in that other party.

These categorical standards are contained in our Corporate Governance Guidelines, which are available on our website at www.chevron.com/investors/corporate-governance and are available in print upon request.

Drs. Moyo and Sugar, Ms. Reed-Klages, and Messrs. Hernandez, Moorman, and Umpleby are directors of for-profit entities with which Chevron conducts business in the ordinary course. Other than Dr. Moyo, they and Drs. Austin and Gast, and Mr. Frank are also directors or trustees of, or similar advisors to, not-for-profit entities to which Chevron makes contributions. The Board has determined that all of these transactions and contributions were below the thresholds set forth in the first and second categorical standards described above (except as noted below) and are, therefore, categorically immaterial to the particular Director’s independence.

The Board reviewed the following relationships and transactions that existed or occurred in 2019 that are not covered by the categorical standards described above:

 

 

For Dr. Gast, the Board considered that, in 2019, Chevron made payments and contributions to Imperial College London amounting to less than 0.011 percent of Imperial College’s most recently reported annual gross revenues. Dr. Gast is the President of Imperial College London. The Board concluded that these transactions would not impair Dr. Gast’s independence.

 

 

For Mr. Hernandez, the Board considered that, in 2019, Chevron purchased services from two subsidiaries of Inter-Con Security Systems, Inc., in the ordinary course of business, amounting to less than 1 percent of Inter-Con’s most recent annual consolidated gross revenues. Mr. Hernandez is Chairman and Chief Executive Officer and a significant stockholder of Inter-Con, a privately held business. Mr. Hernandez’s adult son is President of Inter-Con. The Board concluded that these transactions would not impair Mr. Hernandez’s independence.

 

 

Also for Mr. Hernandez, the Board considered that, in 2019, Chevron made contributions to Catalyst Inc., in the ordinary course of business, amounting to less than 13 percent of Catalyst’s most recently reported annual consolidated gross revenues. Mr. Hernandez is a Director of Catalyst, a 501(c)(3) nonprofit organization. The Board concluded that these transactions would not impair Mr. Hernandez’s independence.

 

 

For Mr. Umpleby, the Board considered that, in 2019, Chevron purchased products and services from Caterpillar Inc., in the ordinary course of business, amounting to less than 0.087 percent of Caterpillar’s most recently reported annual consolidated gross revenues, and Caterpillar purchased products and services from Chevron, in the ordinary course of business, amounting to less than 0.015 percent of Chevron’s most recently reported annual consolidated gross revenues. Mr. Umpleby is the Chairman and Chief Executive Officer of Caterpillar Inc. The Board concluded that these transactions would not impair Mr. Umpleby’s independence.

 

 

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board committees

 

Chevron’s Board of Directors has four standing Committees: Audit; Board Nominating and Governance; Management Compensation; and Public Policy. The Audit, Board Nominating and Governance, and Management Compensation Committees are each constituted and operated according to the independence and other requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the NYSE Corporate Governance Standards. Each independent Director, including each member of the MCC, is an “outside” Director for purposes of ensuring that certain pre-2019 grants meet the grandfather rule in Section 162(m) of the Internal Revenue Code of 1986, as amended. In addition, each member of the Audit Committee is financially literate and an “audit committee financial expert,” as such terms are defined under the Exchange Act and related rules and the NYSE Corporate Governance Standards.

Each Committee is chaired by an independent Director who determines the agenda, the frequency, and the length of the

meetings and who has unlimited access to management, information, and outside advisors, as necessary. Each non-employee Director generally serves on one or two Committees. Committee members serve staggered terms, enabling Directors to rotate periodically to different Committees. Four- to six-year terms for Committee Chairs facilitate rotation of Committee Chairs while preserving experienced leadership.

Each Committee operates under a written charter that sets forth the purposes and responsibilities of the Committee as well as qualifications for Committee membership. Each Committee assesses the adequacy of its charter periodically and recommends changes to the Governance Committee. All Committees report regularly to the full Board of Directors with respect to their activities. Committee charters can be viewed on Chevron’s website at www.chevron.com/investors/corporate-governance.

 

 

board and committee meetings and attendance

 

In 2019, your Board held six regular Board meetings and two special Board meetings, with each regular meeting including an executive session of independent Directors led by our independent Lead Director. In addition, 24 Board Committee meetings were held in 2019, which included nine Audit Committee, five Governance Committee, five MCC, three Public Policy Committee and two joint meetings of the Governance and the Public Policy Committees. All incumbent Directors attended 100 percent of their Board and

Committee meetings during 2019. Chevron’s policy regarding Directors’ attendance at the Annual Meeting, as described in the “Board Agenda and Meetings” section of Chevron’s Corporate Governance Guidelines (available at www.chevron.com/investors/corporate-governance), is that all Directors are expected to attend the Annual Meeting, absent extenuating circumstances. All incumbent Directors attended the 2019 Annual Meeting.

 

 

board and committee evaluations

 

Each year, your Board and its Committees perform a rigorous self-evaluation. As required by Chevron’s Corporate Governance Guidelines, the Governance Committee oversees this process. The performance evaluations solicit anonymous input from Directors regarding the performance and effectiveness of the Board, the Board Committees, and individual Directors and provide an opportunity for Directors to identify areas for improvement. In addition, the independent Lead Director has individual conversations with each member of the Board, providing further opportunity for dialogue and improvement. In 2018, the Governance Committee augmented the individual Director evaluation by adding an individual Director performance evaluation questionnaire to more rigorously evaluate individual Director performance. Under this part of the process, each Director sends a confidential individual Director performance evaluation for each independent Director to outside counsel

retained by the Company at the Governance Committee’s request. Outside counsel compiles the results of the evaluations into reports, which are sent to the Lead Director for consideration and use by the Lead Director during individual conversations with each independent Director (the Chair of the Audit Committee receives the report on the Lead Director and meets with the Lead Director regarding that report). The Governance Committee reviews the results and feedback from the evaluation process and makes recommendations for improvements as appropriate. The independent Lead Director leads a discussion of the evaluation results during an executive session of the Board and communicates relevant feedback to the CEO. Your Board has successfully used this process to evaluate Board, Committee, and individual Director effectiveness, and identify opportunities to strengthen the Board.

 

 

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corporate governance  

 

 

     

Committees and membership

 

Committee functions

    

 

Audit

Charles W. Moorman IV, Chair

John B. Frank

Dambisa F. Moyo

 

 

•  Selects the independent registered public accounting firm for endorsement by the Board and ratification by the stockholders

 

•  Reviews reports of the independent registered public accounting firm and internal auditors

 

•  Reviews and approves the scope and cost of all services (including non-audit services) provided by the independent registered public accounting firm

 

•  Monitors the effectiveness of the audit process and financial reporting

 

•  Monitors the maintenance of an effective internal audit function

 

•  Reviews the adequacy of accounting, internal control, auditing, and financial reporting matters

 

•  Monitors implementation and effectiveness of Chevron’s compliance policies and procedures

 

•  Assists the Board in fulfilling its oversight of enterprise risk management, particularly financial risks, including, but not limited to, cybersecurity risk as it relates to financial risk exposures

 

•  Evaluates the effectiveness of the Audit Committee

 

   

 

Board Nominating

and Governance

Ronald D. Sugar, Chair

Wanda M. Austin

Alice P. Gast

D. James Umpleby III

 

 

•  Evaluates the effectiveness of the Board and its Committees and recommends changes to improve Board, Board Committee, and individual Director effectiveness

 

•  Assesses the size and composition of the Board to evaluate the skills and experience that are currently represented, as well as the skills and experience that the Board may find valuable in the future

 

•  Engages in succession planning for the Board and key leadership roles on the Board and its Committees

 

•  Recommends prospective Director nominees

 

•  Oversees the orientation process for new Directors and ongoing education for Directors

 

•  Reviews and approves non-employee Director compensation

 

•  Evaluates and recommends changes as appropriate in Chevron’s Corporate Governance Guidelines, Restated Certificate of Incorporation, By-Laws, and other Board-adopted governance provisions

 

•  Assesses stock ownership guidelines for Directors and the Directors’ ownership relative to the guidelines

 

•  Reviews stockholder proposals and recommends (in conjunction with the Public Policy Committee) Board responses to proposals

 

•  Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with Chevron’s corporate governance practices and processes

 

•  Evaluates the effectiveness of the Governance Committee

 

   

 

Management

Compensation

Enrique Hernandez, Jr., Chair

Debra Reed-Klages

Ronald D. Sugar

D. James Umpleby III

 

 

•  Conducts an annual review of the CEO’s performance

 

•  Reviews and recommends to the independent Directors the salary, short term and long term incentive compensation for the CEO

 

•  Reviews and approves salaries short term and long term incentive compensation for executive officers other than the CEO

 

•  Administers Chevron’s executive incentive and equity-based compensation plans

 

•  Reviews Chevron’s strategies and supporting processes for executive retention and diversity

 

•  Reviews and approves executive compensation philosophy that aligns with Chevron’s strategy and stockholder interest

 

•  Reviews and approves peer group(s) used to benchmark executive compensation levels, program design and practices, and relative performance

 

•  Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with Chevron’s compensation programs

•  Evaluates the effectiveness of the MCC

 

   

 

Public Policy

Wanda M. Austin, Chair

Alice P. Gast

Enrique Hernandez, Jr.

Debra Reed-Klages

 

 

•  Identifies, monitors, and evaluates domestic and international environmental, social, human rights, political, and public policy matters that are relevant to Chevron’s activities and performance

 

•  Assists the Board in devoting appropriate attention and effective response to stockholder concerns regarding such issues

 

•  Recommends to the Board policies, programs, and practices concerning support of charitable, political, and educational organizations

 

•  Reviews annually the policies, procedures, and expenditures for Chevron’s political activities, including political contributions and direct and indirect lobbying

 

•  Reviews stockholder proposals and recommends (in conjunction with the Governance Committee) Board responses to proposals

 

•  Assists the Board in fulfilling its oversight of enterprise risk management, particularly risks in connection with the environmental, social, human rights, political, and public policy aspects of Chevron’s business

 

•  Evaluates the effectiveness of the Public Policy Committee

   

 

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  corporate governance  

 

 

 

corporate governance guidelines

Your Board has adopted Corporate Governance Guidelines to provide a transparent framework for the effective governance of Chevron. The Corporate Governance Guidelines are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Guidelines can be found on our website at www.chevron.com/investors/corporate-governance. The guidelines address, among other topics:

 

 

the role of the Board

 

 

Board succession planning and membership criteria

 

 

Director independence

 

 

Board size

 

 

Director terms of office

 

 

the election of Directors

 

 

other Board memberships

 

 

Director retirement policy

 

 

number and composition of Board Committees

 

 

Board leadership and Lead Director

 

 

executive sessions

 

Business Conduct and Ethics Code

 

 

confidentiality

 

 

succession planning

 

 

Board compensation

 

 

Board access to management

 

 

Director orientation and education

 

 

evaluation of Board performance

 

 

Chief Executive Officer performance review

 

 

Director and officer stock ownership guidelines

 

 

access to outside advisors

 

 

Board agenda and meetings

 

 

business conduct and ethics code

We have adopted a code of business conduct and ethics for Directors, officers (including the Company’s Chief Executive Officer, Chief Financial Officer, and Comptroller), and employees, known as the Business Conduct and Ethics Code, which is available on our website at www.chevron.com and is available in print upon request. We will post any amendments to the code on our website. Directors, officers, and employees certify biennially that they will comply with the code.

hedging, pledging, and other transactions

Members of the Board, members of Chevron’s Management Committee, and the Vice Presidents of Finance for the Upstream and the Downstream & Chemicals are prohibited from:

 

 

engaging in hedging transactions or speculative transactions involving Chevron securities, including, but not limited to, short sales and trading in options, puts, calls, straddles, swaps or other derivative securities;

 

 

purchasing Chevron securities on margin;

 

 

engaging in monetization transactions, such as forward sale contracts involving Chevron securities; and

 

 

pledging Chevron securities as collateral for a loan or any other purpose.

 

 

Employees, other than those listed above, are generally permitted to engage in transactions involving Chevron securities that are designed to hedge or offset market risk.

 

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corporate governance  

 

 

environmental, social, and governance engagement

 

 

 

Your Board believes that fostering long-term and institutionwide relationships with stockholders and other stakeholders and maintaining their trust and goodwill is a core Chevron objective. Chevron conducts extensive engagements with stockholders as an essential part of our commitment to sustainability. These engagements routinely cover governance, compensation, social, safety, environmental, climate change, culture, human rights, human capital management, and other current and emerging issues.

 

In addition, we have an extensive investor relations outreach effort, in which members of senior management routinely meet with major investors to review Company strategies, financial and operating performance, capital allocation priorities, and near-term outlook. We use all of these sessions to ensure that the Board and management understand and address the issues that are important to our stockholders.

 

 

  

In order to continuously improve Chevron’s governance processes and communications, Chevron follows an Annual Engagement Plan and Process. Through this program, we are able to identify and address environmental, social, and governance topics that are raised by our stockholders. The Governance Committee and the Public Policy Committee oversee the stockholder engagement program and make recommendations regarding stockholder engagement.

Since Chevron’s last Annual Meeting, an engagement team consisting of senior executives, subject matter experts on governance, compensation, and environmental and social

issues (“ESG Engagement Team”), and, when appropriate, our independent Lead Director and our Public Policy Committee Chair have continued to lead our robust stockholder outreach program.

 

 

Our ESG Engagement Team had substantive engagements with stockholders representing more than 40 percent of Chevron’s outstanding common stock. Our Chairman and Board members attended several of these meetings.

 

 

In addition, our ESG Engagement Team reached out to every stockholder or their representative who submitted proposals for inclusion in our Proxy Statement and met with each one to discuss their concerns and areas of agreement and disagreement.

During these engagements, Chevron gained valuable feedback on several topics, including:

 

 

expectations about ESG reporting;

 

 

the importance of having a TCFD-aligned climate report;

 

 

Board composition and Director skills and expertise;

 

 

executive compensation and alignment with performance; and

 

 

governance trends, such as growing demands for transparency and increasing scrutiny of company cultures.

This feedback was shared with the Board and its relevant Committees. For more information about these engagements, see the “Independent Lead Director,” and “Compensation Discussion and Analysis” sections of the Proxy Statement.

 

 

communicating with the board

The Governance Committee reviews interested-party communications, including stockholder inquiries directed to non-employee Directors. The Corporate Secretary and Chief Governance Officer compiles the communications, summarizes lengthy or repetitive communications and the responses sent, and takes further action, if any. All communications are available to the Directors.

 

 

 

Interested parties wishing to communicate their concerns or questions about Chevron to the independent Lead Director or any other non-employee Director may do so by mail addressed to the Lead Director or Non-Employee Directors, c/o Office of the Corporate Secretary and Chief Governance Officer, 6001 Bollinger Canyon Road, San Ramon, CA 94583-2324 or by email to corpgov@chevron.com.

 

 

  

 

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  corporate governance  

 

 

 

related person transactions

 

review and approval of related person transactions

It is our policy that all employees and Directors must avoid any activity that is in conflict with, or has the appearance of conflicting with, Chevron’s business interests. This policy is included in our Business Conduct and Ethics Code. Directors and executive officers must inform the Chairman and the Corporate Secretary and Chief Governance Officer when confronted with any situation that may be perceived as a conflict of interest. In addition, at least annually, each Director and executive officer completes a detailed questionnaire specifying any business relationship that may give rise to a conflict of interest.

Your Board has charged the Governance Committee with reviewing related person transactions as defined by U.S. Securities and Exchange Commission (“SEC”) rules. The Governance Committee has adopted written guidelines to assist it with this review. Under these guidelines, all executive officers, Directors, and Director nominees must promptly advise the Corporate Secretary and Chief Governance Officer of any proposed or actual business and financial affiliations involving themselves or their immediate family members that, to the best of their knowledge after reasonable inquiry, could reasonably be expected to give rise to a reportable related person transaction. The Corporate Secretary and Chief Governance Officer will prepare a report summarizing any potentially reportable transactions, and the Governance Committee will review these reports and determine whether to approve or ratify the identified transaction. The Governance Committee has identified the following categories of transactions that are deemed to be preapproved by the Governance Committee, even if the aggregate amount involved exceeds the $120,000 reporting threshold identified in the SEC rules:

 

 

compensation paid to an executive officer if that executive officer’s compensation is otherwise reported in our Proxy Statement and if the executive officer is not an immediate family member of another Chevron executive officer or Director;

 

 

compensation paid to a Director for service as a Director if that compensation is otherwise reportable in our Proxy Statement;

 

 

transactions in which the related person’s interest arises solely as a stockholder and all stockholders receive the same benefit on a pro-rata basis;

 

 

transactions involving competitive bids (unless the bid is awarded to a related person who was not the lowest bidder

   

or unless the bidding process did not involve the use of formal procedures normally associated with our competitive bidding procedures);

 

 

transactions involving services as a common or contract carrier or public utility in which rates or charges are fixed by law;

 

 

transactions involving certain banking-related services under terms comparable with similarly situated transactions;

 

 

transactions conducted in the ordinary course of business in which our Director’s interest arises solely because he or she is a director of another entity and the transaction does not exceed $5 million or 5 percent (whichever is greater) of the receiving entity’s consolidated gross revenues for that year;

 

 

charitable contributions by Chevron to an entity in which our Director’s interest arises solely because he or she is a director, trustee, or similar advisor to the entity and the contributions do not exceed, in the aggregate, $1 million or 2 percent (whichever is greater) of that entity’s gross revenues for that year; and

 

 

transactions conducted in the ordinary course of business and our Director’s interest arises solely because he or she owns an equity or limited partnership interest in the entity and the transaction does not exceed 2 percent of the total equity or partnership interests of the entity.

The Governance Committee reviews all relevant information, including the amount of all business transactions involving Chevron and the entity with which the Director or executive officer is associated, and determines whether to approve or ratify the transaction. A Director will abstain from decisions regarding transactions involving that Director or his or her family members.

related person transactions

An immediate family member of Mr. Joseph C. Geagea, Executive Vice President, Technology, Projects & Services, is employed by Chevron. In 2019, Mr. Geagea’s son, Carl J. Geagea, received compensation of $141,846, including salary, bonus, and customary employee benefits. In 2020, he is expected to receive compensation of approximately $145,000. These amounts reflect compensation that is consistent with the total compensation provided to other employees of the same level with similar responsibilities.

 

 

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corporate governance  

 

 

board nominating and governance committee report

 

The Board Nominating and Governance Committee (the “Committee”) is responsible for recommending to the Board the qualifications for Board membership, identifying, assessing, and recommending qualified Director candidates for the Board’s consideration, assisting the Board in organizing itself to discharge its duties and responsibilities, and providing oversight of Chevron’s corporate governance practices and policies, including an effective process for stockholders to communicate with the Board. The Committee is composed entirely of independent Directors as defined by the New York Stock Exchange Corporate Governance Standards and operates under a written charter. The Committee’s charter is available on Chevron’s website at www.chevron.com/investors/corporate-governance/board-nominating-governance and is available in print upon request.

The Committee’s role in and process for identifying and evaluating prospective Director nominees, including nominees recommended by stockholders, is described in the “Election of Directors” section of this Proxy Statement. In addition, the Committee makes recommendations to the Board concerning Director independence, Board Committee assignments, Committee Chairs, Audit Committee “financial experts,” and the financial literacy of Audit Committee members. The Committee also reviews the process and the results of the annual performance evaluations of the Board, Board Committees, and individual Directors.

The Committee regularly reviews trends and recommends best practices, initiates improvements, and plays a leadership role in maintaining Chevron’s strong corporate governance structures and practices. Among the practices the Committee believes demonstrate the Company’s commitment to strong corporate governance are the following:

 

 

annual election of all Directors;

 

 

supermajority of independent Directors;

 

 

majority vote standard for the election of Directors in uncontested elections, coupled with a Director resignation policy;

 

 

annual election of the Chairman of the Board by independent Directors;

 

 

annual election of an independent Lead Director by independent Directors when the Chief Executive Officer is elected as Chairman;

 

annual performance assessment of the Board, Board Committees, and individual Directors;

 

 

Director retirement policy;

 

 

Director and executive officer succession planning;

 

 

confidential stockholder voting policy;

 

 

robust business conduct and ethics code for all Directors and employees;

 

 

director orientation program for new Directors and ongoing education for Directors;

 

 

minimum stockholding guidelines for Directors and executive officers;

 

 

review and approval or ratification of “related person transactions” as defined by SEC rules;

 

 

policy to obtain stockholder approval of any stockholder rights plan;

 

 

proxy access;

 

 

one vote for each common stock;

 

 

right of stockholders to call for a special meeting; and

 

 

no supermajority voting provisions in the Restated Certificate of Incorporation or By-Laws.

Stockholders can find additional information concerning Chevron’s corporate governance structures and practices in Chevron’s Corporate Governance Guidelines, By-Laws, and Restated Certificate of Incorporation, copies of which are available on Chevron’s website at www.chevron.com/investors/corporate-governance and are available in print upon request.

Respectfully submitted on March 24, 2020, by members of the Board Nominating and Governance Committee of your Board:

Ronald D. Sugar, Chair

Wanda M. Austin

Alice P. Gast

D. James Umpleby III

 

 

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  corporate governance  

 

 

 

management compensation committee report

The Management Compensation Committee (the “Committee”) of Chevron has reviewed and discussed with management the Compensation Discussion and Analysis beginning on page 31 of this Proxy Statement. Based on such review and discussion, the Committee recommended to the Board of Directors of the Corporation that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Corporation’s Annual Report on Form 10-K.

Respectfully submitted on March 24, 2020, by members of the Management Compensation Committee of your Board:

 

Enrique Hernandez, Jr., Chair

Debra Reed-Klages

Ronald D. Sugar

D. James Umpleby III

audit committee report

 

Roles and Responsibilities. The Audit Committee (the “Committee”) assists your Board in fulfilling its responsibility to provide independent, objective oversight of Chevron’s financial reporting and internal control processes. The Committee’s charter can be viewed on Chevron’s website at www.chevron.com under the tabs “Investors” and “Corporate Governance.”

Management is responsible for preparing Chevron’s financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and for developing, maintaining, and evaluating disclosure controls and procedures and internal control over financial reporting.

The Company’s independent registered public accounting firm—PricewaterhouseCoopers LLP (“PwC”)—is responsible for expressing an opinion on the conformity of Chevron’s financial statements with U.S. GAAP and on the effectiveness of Chevron’s internal control over financial reporting.

Required Disclosures and Discussions. In discharging its oversight role, the Committee reviewed and discussed with management and PwC the audited financial statements for the year ended December 31, 2019, as contained in the 2019 Annual Report on Form 10-K, and management’s and PwC’s evaluation of Chevron’s internal control over financial reporting. The Committee routinely met privately with PwC

and discussed issues deemed significant by PwC and/or the Committee. The Committee has discussed with PwC the matters required to be discussed by Auditing Standard 1301, “Communications With Audit Committees,” as adopted by the Public Company Accounting Oversight Board (“PCAOB”).

In addition, the Committee discussed with PwC its independence from Chevron and Chevron’s management; received the written disclosures required by the PCAOB regarding PwC’s independence; and considered whether the provision of non-audit services was compatible with maintaining PwC’s independence.

Committee Recommendation. In reliance on the reviews and discussions outlined above, the Committee recommended to your Board that the audited financial statements be included in Chevron’s Annual Report on Form 10-K for the year ended December 31, 2019, for filing with the U.S. Securities and Exchange Commission.

Respectfully submitted on February 20, 2020, by the members of the Audit Committee of your Board:

Charles W. Moorman IV, Chair

John B. Frank

Dambisa F. Moyo

 

 

30       Chevron Corporation—2020 Proxy Statement


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executive compensation

compensation discussion and analysis

executive summary

This CD&A covers Chevron’s business performance and associated compensation outcomes for the 2019 performance cycle. These compensation decisions reflect the Management Compensation Committee’s disciplined and rigorous application of Chevron’s compensation philosophy, program structure, and performance standards against 2019 Company performance and individual executive performance. The MCC recognizes that, since the end of 2019, Chevron’s stock price has declined significantly due to oil industry macro-economic factors and global concerns about the COVID-19 outbreak. The MCC is committed to exercising the same discipline and rigor for the 2020 performance cycle, which will be discussed in detail in the 2021 Proxy Statement.

business description and context

 

Chevron is a fully integrated company involved in many facets of the energy industry. We explore for, produce, and transport crude oil, natural gas, and natural gas liquids; process and transport liquefied natural gas; refine, market, and distribute transportation fuels and lubricants; manufacture and sell petrochemicals and additives; generate power; and develop and deploy technologies that enhance business value in multiple aspects of the Company’s operations. Our business is capital-intensive and has long investment horizons—most of our resource and manufacturing investments span decades. Most of our product sales are commodities, whose prices can be volatile, leading to fluctuating earnings and cash flow through price

cycles. Following decade-low oil prices in 2016, crude prices strengthened in 2017 and 2018, leading to improved earnings and cash flow. In 2019, Brent oil prices declined 10 percent, on average, versus the prior year amid continued volatility as reduced supply following OPEC production cuts and U.S. sanctions on Iran and Venezuela, was met with demand concerns around a slowing global economy. By late-March 2020, the Brent price was under $30 per barrel, having declined more than 60 percent since December 2019, mainly due to concerns over the breakdown in the OPEC and Russia talks on production curtailments and about demand growth following the COVID-19 outbreak. Brent futures indicate prices through 2020 may remain lower than 2019.

 

 

 

LOGO

Note:

(1)

Brent futures prices are as of March 26, 2020.

 

Chevron is committed to delivering superior results and sustained stockholder value for the long-term. In 2019, the Company again reported strong operating cash flow supported by record production while achieving several important project milestones and maintaining strong safety and environmental performance. Chevron also continued to deliver on its financial priorities, notably simultaneously raising the quarterly dividend

per share by 6 percent, increasing the quarterly share repurchase rate to $1.25 billion, and reducing debt.

In 2019, Chevron’s annual dividend payment per share increased for the 32nd consecutive year. Over the last 10 years, the Company’s dividend growth rate of 6 percent per year was more than three times the peer group1 average.

 

 

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  executive compensation  

 

 

 

While Chevron’s dividend growth rate was lower than the S&P 500 over this period, our dividend yield2 was two times higher than the S&P 500 at year-end. We believe the Company is positioned to sustain and grow the dividend to stockholders in the future. In the first quarter of 2020, Chevron raised its quarterly dividend per share by 8.4 percent. At late-March 2020, our dividend yield3 was about 7 percent, higher than the S&P 500 yield.

 

 

LOGO

Chevron continued to deliver competitive total stockholder return (“TSR”) performance among large-cap integrated energy companies (BP, Chevron, ExxonMobil, Royal Dutch Shell, and Total) over the one-, five-, and 10-year periods through the end of 2019.

The large-cap integrated energy companies underperformed the S&P 500 in TSR over these same periods, reflecting the significant drop in commodity prices since 2014.

Looking forward, we believe the Company is well positioned to win in any environment, leveraging four key differentiators versus our competitors:

 

 

An advantaged portfolio underpinned by attractive investment opportunities;

 

A strong balance sheet, providing resilience through price cycles;

 

 

A disciplined, returns-driven approach to capital allocation; and

 

 

A strong commitment to returning cash to stockholders, with dividends being our top financial priority.

Chevron remains positioned to generate strong operational cash flow, supported by reliable operations and disciplined cost management. We are focused on creating value for stockholders through a disciplined capital program, prioritizing high-return, low-execution-risk investments. We have a sustainable, advantaged Upstream portfolio composed of long-duration, low-production decline assets (such as those in Australia, Kazakhstan, and San Joaquin Valley), flexible, shorter cycle investments (such as the Permian and other shale and tight assets, infill drilling, and tie backs), and an attractive queue of deepwater opportunities (such as Gulf of Mexico, Brazil, and West Africa). We have an efficient, returns-focused Downstream & Chemicals business. Further, we are positioning Chevron to lead in the future of energy by pursuing cost-effective carbon intensity reductions, increasing the use of renewables in support of our business, and making early investments in potential breakthrough technologies. Finally, we have a strong management team, a talented organization, and a results-oriented culture, which we believe enable us to adapt to a dynamic future and remain positioned to win in any environment.

Notes:

1

Peer group: BP, ExxonMobil, Royal Dutch Shell, and Total. Dividends include both cash and scrip share distributions for European peers.

 

2

Dividend yield at year-end reflects Chevron’s annual dividend per share, divided by Chevron’s closing stock price on December 31, 2019.

 

3

Dividend yield at late-March reflects Chevron’s first quarter 2020 dividend per share annualized, divided by Chevron’s closing stock price on March 26, 2020.

 

 

 

LOGO

Note:

(1)

Figures rounded.

 

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executive compensation  

 

 

pay philosophy and plan design

 

The overall objective of our executive compensation program is to attract and retain management who will deliver long-term stockholder value in any business environment. Our compensation programs are designed with several important values and objectives in mind:

 

 

Pay competitively across all salary grades and all geographies; our target compensation is determined by benchmarking comparable positions at other companies of equivalent size, scale, complexity, capital intensity, and geographic footprint. We reference both oil industry peers

   

and non-oil industry peers in this analysis. Refer to page 38 for additional details;

 

 

Balance short- and long-term decision making in support of a long-cycle-time business with a career-oriented employment model;

 

 

Pay for absolute and competitive performance, in alignment with stockholder returns; and

 

 

Apply compensation program rules in a manner that is internally consistent.

 

 

The material components of our executive compensation program are summarized in the following chart.

 

LOGO

 

The graphic below illustrates the timing and key governance elements of the executive compensation planning cycle:

 

 

LOGO

 

 

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  executive compensation  

 

 

 

The MCC believes a large majority of each NEO’s target compensation should be at risk based on Company performance (approximately 91 percent for the CEO and 84 percent for the other NEOs), and the majority of this at-risk compensation should be tied directly to Chevron’s stock price. The amount NEOs eventually earn from their at-risk compensation will align strongly with what stockholders earn over that same period from their investment in Chevron.

 

2019 CEO                 

compensation mix                 

  

2019 other NEOs                    

compensation mix                    

 

 

LOGO

 

  

 

 

LOGO

 

LOGO

*Comprised of the following equity vehicles: 50% Performance Shares, 25% RSUs, 25% Stock Options

2019 named executive officers (NEOs)

 

 Chevron’s Named Executive Officers, or NEOs

 Michael K. Wirth, Chairman and Chief Executive Officer

 Pierre R. Breber, Vice President and Chief Financial Officer*

 Patricia E. Yarrington, Former Vice President and Chief Financial Officer*

 James W. Johnson, Executive Vice President, Upstream

 Joseph C. Geagea, Executive Vice President, Technology, Projects & Services

 Mark A. Nelson, Executive Vice President, Downstream & Chemicals

 

*

Mr. Breber succeeded Ms. Yarrington as Vice President and Chief Financial Officer effective April 1, 2019.

2019 NEO target compensation

The table below summarizes the 2019 target compensation opportunities the Board and the MCC approved for the NEOs. Details of Chevron’s compensation philosophy and design can be found starting on page 38.

 

Name

 

Base salary

 

Target CIP

 

LTIP Target Value

 

 

Target Total  

Compensation  

Michael K. Wirth

   

$

1,600,000

   

$

2,400,000

   

$

15,000,000

   

$

19,000,000

Pierre R. Breber

   

$

1,000,000

   

$

1,100,000

   

$

3,963,120

   

$

6,063,120

James W. Johnson

   

$

1,200,000

   

$

1,440,000

   

$

5,148,000

   

$

7,788,000

Joseph C. Geagea

   

$

1,000,000

   

$

1,100,000

   

$

3,963,120

   

$

6,063,120

Mark A. Nelson

   

$

900,000

   

$

990,000

   

$

3,963,120

   

$

5,853,120

These amounts may differ from those shown in the Summary Compensation Table, based on actual salary received during the calendar year, the actual CIP award resulting from 2019 performance, and differences between the MCC’s target LTIP valuation approach and the grant date fair value calculations as presented in the Summary Compensation Table.

 

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executive compensation  

 

 

The Summary Compensation Table also includes amounts for the change in pension value and all other compensation. The Committee made no changes or adjustments to pension policy or benefits in 2019. The change in pension value is not a current cash payment and reflects a combination of actuarial factors that resulted in higher values relative to earlier years, including:

 

 

Lower interest rates, which increased the present value of pension benefits;

 

 

Recent promotional pay increases, notably for Mr. Wirth who became CEO in February 2018; and

 

 

Higher 2018 CIP awards, which increased the pensionable earnings in 2019.

Pension values will continue to fluctuate up or down, in any given year until an NEO’s retirement, based on actuarial factors.

LOGO

Note:

(1)

Reported compensation refers to the values disclosed in the Summary Compensation Table.

 

 

response to say-on-pay advisory vote and stockholder engagement

 

Chevron follows a robust process to systematically engage with its key stakeholders and proactively address issues of importance. Among the issues routinely discussed in these engagements are Chevron’s executive compensation practices.

In 2019, the Company continued its dialogue with stockholders. We had substantive engagements with stockholders regarding environmental, social, and governance issues, representing more than 40 percent of Chevron’s outstanding common stock. These discussions covered a range of topics, including executive compensation. The CEO, Michael K. Wirth, the independent Lead Director, Dr. Ron Sugar, and the Chair of the Public Policy Committee, Dr. Wanda Austin, participated in engagements with certain major stockholders. Through these engagements, we continued to receive positive feedback for program changes made in 2017. Those changes included modifying our LTIP award mix to be more performance-based, adding the S&P 500 Total Return Index to the LTIP Performance Share Peer Group, capping the CIP award, adjusting weighting of key performance measures, and enhancing CIP disclosure.

Chevron’s 2019 Say-on-Pay vote received over 93 percent support, which demonstrates stockholders’ strong support of our executive compensation practices and pay for performance alignment.

During our engagements, stockholders also expressed an appreciation for Chevron adopting greenhouse gas (“GHG”) related reduction metrics that are tied to compensation. The MCC updated the CIP scorecard in 2019 and again in 2020 to include four GHG performance metrics to reduce net GHG emission intensity. Performance against the GHG metrics will impact CIP payout for approximately 45,000 eligible employees.

Our stockholders’ views on executive compensation are important to us, and the MCC regularly considers the Say-on-Pay vote outcome and stockholder insights in assessing our executive compensation program. We remain committed to continuing the dialogue with stockholders on compensation issues as part of our ongoing engagement.

 

 

2019 performance

 

Chevron delivered solid operational performance for the year, resulting in cash from operating activities of $27.3 billion and record production of 3.058 million barrels of oil-equivalent per day. The Company is positioned to deliver competitive results through capital discipline and its returns-driven approach to investment.

 

 

We made substantial progress in completing and ramping up major capital projects and improving capital efficiency. CO2 injection began at our Gorgon liquefied natural gas (LNG) project. The Tengizchevroil Future Growth Project/ Wellhead Pressure Management Project (“FGP/WPMP”) ramped up field construction activity—main engineering is complete, procurement is nearly complete, and logistics have proved successful, with all pipe rack modules delivered, restacked, and set on foundations. However, project cost and schedule update indicates both are likely to exceed original estimates. In the Permian, unit development costs declined as production and cash flow continued to grow.

 

We posted a five-year reserve replacement ratio of 106 percent, reflecting the sustainability of our business at current prices, and an annual reserve replacement ratio of 44 percent, reflecting the impact of divestitures and capital reductions for Appalachia shale.

 

 

Organic capital and exploratory (“C&E”) spending of $20 billion was in line with budget. Additionally, the Company successfully acquired several inorganic opportunities in 2019, notably the Pasadena refinery in Texas and exploration opportunities in the Gulf of Mexico and Brazil. Including these acquisitions, total C&E spending was less than $21 billion. We also demonstrated a strong commitment to capital discipline by not engaging in a bidding war to acquire Anadarko Petroleum, which would have eroded stockholder value.

 

 

Our asset sale proceeds totaled $2.8 billion in 2019 as we continued to optimize our portfolio. The Company is on track to deliver proceeds within our $5 billion to $10 billion

 

 

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guidance range over the three-year period of 2018–2020. Our divestiture criteria remain unchanged, focusing on strategic fit, ability to compete for capital within our portfolio, resource potential, and receiving good value.

 

 

Operating expense was $25.9 billion, above our 2019 objective, with a slight increase in unit costs.

 

 

We have a strong balance sheet, ending the year with a 16 percent debt ratio.

 

 

The Company grew its annual dividend by 6 percent, or $0.28 per share, to $4.76, representing the 32nd consecutive annual payment increase. At year-end, Chevron’s dividend yield was nearly 4 percent, higher than the dividend yield of the S&P 500 for the same period. We also increased our quarterly share repurchase rate to

   

$1.25 billion. In 2019, we returned $13 billion in dividends and share buybacks to our stockholders.

Looking forward, the Company remains well positioned to deliver competitive results and stockholder returns in any business environment. Our 2020 C&E program continues our disciplined approach to investment. The Company also continues to invest in digital technologies to enhance safety, improve revenues, lower costs, and increase reliability. We believe Chevron’s investment, production, reserves, and cash flow profile offers resilience, even in a low commodity price environment. At the same time, we believe the Company is leveraged to benefit from any future commodity price increases.

 

 

LOGO

 

LOGO

Notes:

(1)

Total capital and exploratory expenditures includes equity in affiliates. Figures rounded.

 

(2)

Operating expenses, selling, general and administrative expenses and other components of net periodic benefit costs as reported in the consolidated statement of income (excludes affiliate spend). Figures rounded.

CEO pay outcome

 

The MCC establishes Mr. Wirth’s target compensation based on several factors, including an external comparison of compensation opportunities for CEOs at companies of comparable size, scope, and complexity, and utilizing a consistent application of Chevron’s internal compensation policies and structure. Mr. Wirth’s actual realized pay outcome is based largely on subsequent Company performance, especially stock price performance.

In 2019, under Mr. Wirth’s leadership, the Company met key financial and operational objectives, including strong cash generation, disciplined capital investment, and record production. As a result, Chevron was able to grow both stockholder distributions and further strengthen the balance sheet in 2019. Additionally, the Company’s decision to acquire Anadarko Petroleum at good value, and the subsequent

decision not to engage in a bidding war that would erode stockholder value, demonstrated management’s commitment to capital discipline. Chevron recognized $10.4 billion in impairments and write-offs driven by capital allocation decisions and a lower commodity price outlook, which negatively impacted earnings, and updated its cost and schedule for Tengizchevroil’s FGP/WPMP—indicating both are likely to exceed original estimates. Looking forward, we believe Chevron remains well positioned to deliver competitive stockholder returns.

The MCC approved a 2019 CIP corporate performance rating of 0.95, against a target of 1.0 and a maximum of 2.0, based on the Company’s overall performance across four categories with assigned weightings. Refer to pages 41–43 for a detailed discussion of 2019 performance and CIP outcome.

 

 

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The three-year performance period for performance shares granted in January 2017 ended on December 31, 2019. For this three-year period, Chevron ranked No. 5 in TSR when compared with the four companies and S&P 500 Total Return Index in the LTIP Performance Share Peer Group, resulting in a payout modifier of 40 percent. Refer to page 46 for details of the 2017–2019 performance share payout.

Pay actions for Mr. Wirth in 2019 and early 2020 included:

 

 

Salary of $1,600,000 effective April 1, 2019, and a further adjustment to $1,650,000 effective April 1, 2020, based on his 2019 performance and competitive positioning relative to his peers.

 

A 2019 CIP award of $2,280,000, down from $3,600,000 in the prior year. His 2020 CIP award target was set to 160 percent of base salary, an increase from 150 percent in 2019.

 

 

A 2019 LTIP award target value of $15,000,000 and a 2020 LTIP award target value of $15,500,000.

 

 

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compensation discussion and analysis in detail

use of peer groups

We are always competing for the best talent with our direct industry peers and with the broader market. Accordingly, the MCC regularly reviews the market data, pay practices, and compensation ranges among both oil industry peers and non-oil industry peers to ensure that we continue to offer a reasonable and competitive executive pay program. Our core peer group is reviewed regularly by the MCC, with input from the MCC’s independent compensation consultant, and updated as appropriate. Throughout this Compensation Discussion and Analysis, we refer to three distinct peer groups, as described below. We source peer company data from compensation consultant surveys and public disclosures.

 

Peer group

  

Description

    

 

Oil industry peer group (12 companies)

  

 

Companies with substantial U.S. or global operations that closely approximate the size, scope, and complexity of our business or segments of our business.

 

This is the primary peer group used to understand how each NEO’s total compensation compares with the total compensation for reasonably similar industry-specific positions.

 

Andeavor was acquired by Marathon Petroleum in October 2018 and was removed from the benchmarks referenced for 2019 compensation actions. Anadarko was acquired by Occidental in August 2019 and was removed from the benchmarks referenced for 2020 compensation actions.

 

The MCC continues to monitor the group composition and considers adjustment when needed.

 

   
Non–oil industry peer group (15 companies)   

Companies that are of significant financial and operational size and that have, among other features, global operations, significant assets and capital requirements, long-term project investment cycles, extensive technology portfolios, an emphasis on engineering and technical skills, and extensive distribution channels.

 

This is the secondary peer group used to periodically compare our overall compensation practices against a broader mix of non-oil companies that are similar to Chevron in size, complexity, and scope of operations.

 

In July 2018, the MCC approved the removal of six companies from the benchmarks referenced for 2019 compensation actions as they were no longer comparable to Chevron in size or other criteria: Duke Energy, Northrop Grumman, Ford, American Electric Power, HP Inc., and International Paper.

 

In March 2019, the MCC approved the removal of GE from the benchmarks referenced for 2020 compensation actions, due to change in its size and comparability.

 

In June 2019, DowDupont split into three companies. The new Dupont de Nemours was retained in the benchmark referenced for 2020 compensation actions. This will be further reviewed by the MCC in 2020.

 

   

LTIP performance share peer group

(four companies and one stock index)

  

Companies used to compare our TSR for the purpose of determining performance share payout: BP, ExxonMobil, Royal Dutch Shell, Total, and S&P 500 Total Return Index.

 

The inclusion of the S&P 500 Total Return Index, effective 2017, broadens the performance benchmark beyond industry peers and requires Chevron to outperform both industry peers and a market-based index in order to receive maximum payout. The MCC believes this further aligns executive pay with long-term stockholder interests.

 

   

 

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The Oil Industry Peer Group companies most similar to Chevron in size, complexity, geographic reach, business lines, and location of operations are BP, ExxonMobil, Royal Dutch Shell, and Total. These companies are key competitors for stockholder investments within the larger global energy sector. We also compete for stockholder investment and employee talent with smaller U.S. companies, including the larger independent exploration and production companies

and the larger independent refining and marketing companies.

The Non–Oil Industry Peer Group includes capital-intensive, global, large-scale, and high-complexity companies. The median market cap (as of 12/31/2019) of the Non–Oil Industry Peer Group was $183 billion (vs. $228 billion for Chevron), and the median sales for 2019 were $67 billion (vs. $140 billion for Chevron).

 

 

 

LOGO

Notes:

(1)

Anadarko was part of the Oil Industry Peer Group in 2019, but was acquired by Occidental in August 2019.

 

(2)

DowDupont split into three companies in June 2019. The new Dupont de Nemours was retained in the peer group for 2020.

components of executive compensation

The material components of our executive compensation program and their purposes and key characteristics are as follows:

 

 

Base salary

 

 

Annual incentive plan (Chevron Incentive Plan)

 

 

Long-Term Incentive Plan, including performance shares, restricted stock units, and stock options

 

Benefits, including retirement plans, savings plans, and other perquisites

 

 

base salary

Base salary is a fixed, competitive component of pay based on responsibilities, skills, and experience. Base salaries are reviewed periodically in light of market practices and changes in responsibilities.

 

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how base salaries are determined

 

Base salaries are determined through market surveys of positions of comparable level, scope, complexity, and responsibility. There is no predetermined target or range within the Oil Industry Peer Group or the Non–Oil Industry Peer Group as an objective for Mr. Wirth’s base salary. Instead, the MCC takes into account the data provided by the MCC’s independent consultant, the relative size, scope, and complexity of our business, Mr. Wirth’s performance and tenure, and the aggregate amount of Mr. Wirth’s compensation package. For the other NEOs, each executive officer is assigned a base salary grade based on competitive

data. The MCC annually reviews the base salary grade ranges and may approve changes in the ranges based on business conditions and comparative peer group data provided by the MCC’s independent consultant. Within each salary grade range, the MCC makes base salary determinations for each NEO taking into account qualitative considerations, such as individual performance, experience, skills, retention objectives, and leadership impact.

The independent Directors of the Board approve the compensation of the CEO and ratify the compensation of the other NEOs.

 

 

adjustments in 2019 base salaries

 

The independent Directors of the Board, upon recommendation of the MCC, increased Mr. Wirth’s salary based on his 2018 performance and the salary of other CEOs among oil and non-oil peer groups. The MCC also adjusted the NEO salary grade ranges by 3 percent for the 2019 compensation cycle after taking into account market conditions and survey data. As to individual NEO salary changes, the MCC made salary adjustments reflective of each

NEO’s 2018 performance, experience and competitive benchmarks. Mr. Nelson was promoted to Executive Vice President, Downstream & Chemicals and received a larger salary increase as a result of his expanded responsibilities.

Mr. Nelson’s salary increase was effective March 1, 2019, the effective date of his promotion. All other NEOs’ salary increases were effective on April 1, 2019.

 

 

Name     Position

 

2018
Base salary*

 

2019
Base salary*

 

Adjustment 

for 2019

 

Michael K. Wirth

 

 

Chairman and Chief Executive Officer

 

 

 

 

 

$1,500,000

 

 

 

 

 

 

 

 

$1,600,000

 

 

 

 

 

 

 

 

6.7%

 

 

 

 

 

Pierre R. Breber

 

 

Vice President and Chief Financial Officer

 

 

 

 

 

$   962,000

 

 

 

 

 

 

 

 

$1,000,000

 

 

 

 

 

 

 

 

4.0%

 

 

 

 

 

Patricia E. Yarrington

 

 

Former Vice President and Chief Financial Officer **

 

 

 

 

 

$1,139,000

 

 

 

 

 

 

 

 

$1,170,000

 

 

 

 

 

 

 

 

2.7%

 

 

 

 

 

James W. Johnson

 

 

Executive Vice President, Upstream

 

 

 

 

 

$1,133,000

 

 

 

 

 

 

 

 

$1,200,000

 

 

 

 

 

 

 

 

5.9%

 

 

 

 

 

Joseph C. Geagea

 

 

Executive Vice President, Technology, Projects & Services

 

 

 

 

 

$   982,000

 

 

 

 

 

 

 

 

$1,000,000

 

 

 

 

 

 

 

 

1.8%

 

 

 

 

 

Mark A. Nelson

 

 

Executive Vice President, Downstream & Chemicals

 

 

 

 

 

$   647,000

 

 

 

 

 

 

 

 

$   900,000

 

 

 

 

 

 

 

 

39.1%

 

 

 

 

 

*

Base salary refers to the approved annual salary rate as of the effective date.

 

**

Ms. Yarrington was succeeded by Mr. Breber as Vice President and Chief Financial Officer effective April 1, 2019 and subsequently retired at the end of April. She received salary increase for the month of April, consistent with Chevron’s pay cycle.

adjustments in 2020 base salaries

 

In January 2020, the independent Directors of the Board, upon recommendation of the MCC, adjusted Mr. Wirth’s salary to $1,650,000 taking into account his 2019 performance and desired compensation level relative to CEOs of both oil and non-oil industry peers.

The MCC adjusted the NEO salary grade ranges by 1 percent for the 2020 compensation cycle based on market conditions

and survey data. As to individual salary changes, the MCC adjusted the other NEOs’ base salaries in 2020 (ranging from 0.8 percent to 5.6 percent) reflective of their 2019 performance, experience, and competitive benchmarks. All salary increases are effective April 1, 2020.

See the Summary Compensation Table on page 52 for more information on base salary changes over time.

 

 

annual incentive plan (chevron incentive plan)

 

The Chevron Incentive Plan is designed to recognize annual performance achievements based on the MCC’s assessment of Company performance across four categories: financial results, capital management, operating performance, and health, environmental and safety performance. Each category contains multiple performance measures, reflecting outcomes of both short-term and long-term measures on absolute and relative performance as well as the performance trend over time. The CIP also recognizes individual leadership through a

factor tied to individual contributions. The award is delivered as an annual cash payment based on target value, which is expressed as a percentage of base salary, multiplied by Corporate Performance Rating and Individual Performance Factor. The CIP award determination process is consistent across approximately 45,000 CIP-eligible Chevron employees, with the award target varying by pay grade. See page 34 for the target CIP value for each NEO.

 

 

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The CIP award for the CEO and the other NEOs is calculated as follows:

 

       

Base Salary    

 

x  

    Award Target        

 

x  

Corporate Performance Rating   

 

x  

  Individual Performance Factor    

 

À À À

 

At the beginning of each performance year, the MCC establishes a CIP Award Target for the CEO and the other NEOs, which is expressed as a percentage of the NEO’s base salary.

 

The MCC sets Award Targets with reference to target opportunities found across our Oil Industry Peer Group. All individuals in the same salary grade have the same target, which provides internal equity and consistency.

 

At the beginning of each performance year, the MCC reviews and approves the annual performance measures, weightings, and goals established with the Business Plan. After the end of the performance year, the MCC reviews and assesses Company performance metrics and sets the Corporate Performance Rating based on a range of measures in four categories.

 

Performance is viewed across multiple parameters (i.e., absolute results; results vs. Business Plan; results vs. Oil Industry Peer Group and/or general industry; performance trends over time). The performance measures are also assessed taking into account the elements that may be market- driven or otherwise beyond the control of management. See pages 42–43 for a discussion of 2019 performance.

 

The minimum Corporate Performance Rating is zero (i.e., no award), and the maximum is two (i.e., 200 percent of target).

 

 

The MCC also takes into account individual performance. This is largely a personal leadership dimension, recognizing the individual’s effort, initiative, and impact.

 

The CEO recommends to the MCC an IPF for each NEO other than himself.

 

The MCC determines the final IPF for the CEO and the other NEOs. The independent Directors of the Board approve the IPF for the CEO and ratify the IPF for the other NEOs.

 

 

Overall award capped at 200 percent of target

 

Chevron goes through a rigorous goal-setting and performance review process to determine the CIP Corporate Performance Rating. Annually, Business Plan objectives are determined after thorough reviews and approvals by the Enterprise Leadership Team Committee (“ELT”), a subcommittee of the Executive Committee, and the Board. The ELT is responsible for setting objectives that challenge the Company to optimize strategies and portfolio

composition and to improve operational performance to create stockholder value. Robust annual performance measures, weightings, and goals are established with the Business Plan, subject to review and approval by the MCC. Mid-year and end-of-year reviews by the Board and the MCC systematically assess progress against these measures. The MCC has discretion in awarding CIP, including discretion to set the award to zero if conditions warrant it.

 

 

2019 CIP corporate performance rating

 

In January 2020, the MCC evaluated Chevron’s 2019 performance across the four CIP categories: financial results, capital management, operating performance, and health, environmental and safety performance. The MCC assigned an overall 2019 CIP Corporate Performance Rating of 0.95 reflecting mixed results across all categories. (see table on page 42 for additional details).

In order to determine the 2019 Corporate Performance Rating, a raw score range was assigned based on the

Company’s actual performance with respect to the particular performance measures comprising each category as measured against the Company’s Plan. This raw score can span from zero (reflecting very poor performance) to two (reflecting outstanding performance) for each category. Category weights are then applied to the raw score ranges to determine an overall range. When determining the Corporate Performance Rating, the MCC may apply discretion when assessing the Company’s performance.

 

 

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Specific inputs to the MCC’s evaluation are summarized below.

 

             
Category   Weight     Performance measures  

 

Year-end results vs. Plan

highlights

“Plan” refers to Board-

approved Business Plan

    Results(1)     Raw score  

  (0.00 - 2.00)   

    Weighted    

score  

           
Financials        40%  

Earnings(2)

 

$2.9 B, significantly below Plan primarily due to impairments. Normalized earnings below Plan. 5-yr EPS performance versus peers negatively impacted by Upstream weighting amid lower oil prices.

  LOGO   0.85 - 0.95    0.34 - 0.38 
 

 

Cash flow(3)

 

 

$27.3 B, in line with Plan. Normalized for price, better than Plan.

 

 

LOGO

 

Divestiture proceeds

 

 

$2.8 B, below Plan. On track to deliver proceeds within $5-$10 B program guidance range (2018-20).

  LOGO  

0.80 - 0.90

 

0.24 - 0.27 

Capital    

management    

  30%  

Return on capital employed(4)(5) (“ROCE”)

 

 

2.0%, significantly below Plan primarily due to impairments. Rolling five-year performance vs. peers continues to be adversely impacted by trailing periods—larger Upstream weighting during price decline.

  LOGO
 

Organic capital and exploratory expenditures (C&E), including equity in affiliates

 

 

$20.2 B; in line with Plan.

 

LOGO

  Major milestones  

Gorgon

 

 

First CO2 injection achieved in 3Q19.

  LOGO
 

FGP/WPMP

 

 

Core Substation milestone completed in 3Q19. High Pressure Early Oil milestone completed in 4Q19. FGP site productivity improved significantly since 2018, but did not meet objective. Project cost and schedule are likely to exceed original estimates.

  Permian  

 

Met average unit development cost objective.

  Asia
Petrochemicals
 

 

Achieved final investment decision in 1Q19.

           

Operating    

performance

  15%  

Net production, excluding impact of divestments

 

 

Annual growth in middle of 4-7% targeted range.

  LOGO   0.95 - 1.05    0.14 - 0.16 
 

Operating expense(6)

 

$25.9 B, above Plan. Unit costs higher than plan.

  LOGO
 

 

Refining utilization, including joint ventures and affiliates

 

 

Short of Plan by 3.7 percentage points.

  LOGO
           

Health,    

environmental    

and safety

  15%  

Personal safety(4)

 

 

Days Away from Work rate led industry and matched record low. Serious Injury count better than Plan and set new record low. Gaps in fatality prevention.

  LOGO   1.10 - 1.20    0.17 - 0.18 
 

Process safety and environmental

 

Loss of containment and spill volumes better than Plan. Some gaps in preventing high-severity incidents.

  LOGO
 

Greenhouse gas management

 

 

On track to achieve flaring and methane intensity reductions.

  LOGO
   
        Corporate Performance Rating Range     0.89 - 0.99 
   
        Final Corporate Performance Rating     0.95

Notes:

(1)

Results refer to met / exceeded Plan (green), met Plan with some gaps (yellow), or did not meet Plan (red).

 

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(2)

Normalized earnings exclude market factors beyond the control of management, including commodity price, foreign exchange, and uncontrollable tax impacts; comparison more accurately measures controllable performance.

 

(3)

Cash Flow from Operating Activities as reported in the 2019 consolidated statement of cash flows; Normalized cash from operating activities excludes the impact of commodity price.

 

(4)

Relative peer comparisons based on externally disclosed results through the end of 3Q19.

 

(5)

See ROCE calculation on page 41 and “Definitions of Selected Financial Terms” in Exhibit 99.1 of the Chevron Annual Report on Form 10-K for the year ended December 31, 2019.

 

(6)

Operating expenses, selling, general and administrative expenses, and other components of net periodic benefit costs as reported in the 2019 consolidated statement of income (excludes affiliate spend). Figures rounded.

financials—40 percent

 

 

Earnings—2019 reported earnings of $2.9 billion was below Plan, reflecting Upstream impairment and write-offs totaling $10.4 billion and weaker Downstream margins. Normalized earnings were below Plan. The Company’s five-year indexed Earnings Per Share performance relative to peers was adversely affected by its Upstream-weighted (vs. Downstream) and oil-weighted (vs. natural gas) portfolio due to lower commodity prices in 2019.

 

 

Cash flow—Chevron delivered operating cash flow of $27.3 billion in 2019, supported by strong production growth.

 

 

Divestiture proceeds—$2.8 billion in asset sales proceeds were realized for the year. The Company is on track to deliver $5 billion to $10 billion in asset sales proceeds over the 2018-2020 time frame.

 

 

Based on the preceding, the raw score range assigned to this category for the 2019 performance year was 0.85-0.95 out of a maximum of 2.0.

capital management—30 percent

 

 

Return on capital employed—Reported ROCE for 2019 of 2.0 percent was below Plan, mainly driven by lower earnings. The Company’s five-year ROCE performance declined, albeit slightly better than the peer average decline. Performance continues to be adversely impacted by trailing periods.

 

 

Capital and exploratory expenditures—2019 organic C&E totaled $20.2 billion, in-line with budget.

 

 

Major milestones per Plan:

 

   

Gorgon —First CO2 injection achieved in 2019.

 

   

Tengizchevroil FGP/WPMP—Achieved core substation and high pressure early oil milestones. Future Growth Project productivity improved significantly in 2019; however, it did not meet our objective. Project cost and schedule are likely to exceed original estimates.

 

   

Permian—Unit development cost met objective.

 

   

Asia Petrochemicals—Achieved final investment decision milestone.

 

Based on the preceding, the raw score range assigned to this category for the 2019 performance year was 0.80-0.90 out of a maximum of 2.0.

operating performance—15 percent

 

 

Net production of 3.087 million barrels of oil-equivalent per day in 2019, excluding divestments. Annual growth rate of more than 5 percent, in the middle of our 4-7 percent external guidance range (vs. 2018)—driven by Permian growth, a full year of production from Wheatstone Train 2, and strong asset reliability, particularly at Wheatstone and Tengizchevroil.

 

 

Operating expense totaled $25.9 billion, above Plan, with a slight increase in unit costs. Since 2014, absolute costs have declined 13 percent, and unit costs have fallen 21 percent.

 

 

Refining utilization rates were below Plan by 3.7 percentage points.

 

 

Based on the preceding, the raw score range assigned to this category for the 2019 performance year was 0.95-1.05 out of a maximum of 2.0.

health, environmental and safety—15 percent

 

 

Personal Safety—Maintained industry-leading Days Away From Work rate and achieved record low Serious Injury count for the Company. Opportunity for improvement remains in preventing high-severity incidents.

 

 

Loss of containment performance and spill volume was better than Plan, with some gaps in severity.

 

 

Greenhouse gas management—on-track to achieve flaring and methane intensity reductions.

 

 

Based on the preceding, the raw score range assigned to this category for the 2019 performance year was 1.10-1.20 out of a maximum of 2.0.

 

 

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2019 NEO CIP awards

 

The MCC and the independent Directors of the Board assessed corporate and individual performance in making CIP awards based on 2019 performance. In setting individual performance adjustments for the 2019 CIP, the MCC considered a wide range of factors, including individual and business unit achievements along all four categories of CIP measurements, strategic impact in positioning Chevron for the future, collaboration across the leadership team, and role modeling The Chevron Way as stewards of the business.

Specifically, the MCC recognized and considered these accomplishments and performance gaps for each NEO when determining individual performance factors. Mr. Wirth exhibited strong leadership in meeting Chevron’s key financial and operational objectives—notably, growth in production and cash generation, leading safety and environmental performance, strong commitment to capital discipline with the decision not to engage in a bidding war to acquire Anadarko Petroleum, and continued growth in stockholder distributions. Mr. Breber made a solid transition into his new role as Chief Financial Officer, effectively managed the balance sheet, maintained strong relationships and engagements with the investment community, and was a key contributor in the Anadarko Petroleum matter. Mr. Johnson led Upstream to deliver record-high production, strong reliability and safety results, with performance gaps related to fatality prevention and Tengizchevroil FGP/WPMP cost and schedule. Mr. Geagea continued to manage capital efficiency and mitigated cost pressures, and improved functional excellence across our lines of business, with a performance gap related to Tengizchevroil FGP/WPMP cost and schedule. Mr. Nelson successfully transitioned into his new role as EVP of Downstream & Chemicals as well as demonstrated strong leadership in addressing strategic enterprise issues such as energy transition.

As a result of the performance evaluation, Mr. Wirth received an award of $2,280,000. This amount reflects the amount of his base salary ($1,600,000) multiplied by his CIP Award Target percentage of 150 percent multiplied by the Corporate Performance Rating of 95 percent. The MCC and independent Directors did not make any individual performance adjustment to Mr. Wirth’s CIP award based on their assessment of his performance, as described above.

Mr. Breber received an award of $1,045,000. This amount reflects the amount of his base salary ($1,000,000) multiplied by his CIP Award Target percentage of 110 percent multiplied by the Corporate Performance Rating of 95 percent. The MCC and independent Directors did not make any individual performance adjustment to Mr. Breber’s CIP award based on their assessment of his performance, as described above.

Ms. Yarrington received an award of $449,000. This amount reflects the amount of her pro-rated base salary up to April 30, 2019 ($429,708) multiplied by her CIP Award Target percentage of 110 percent multiplied by the Corporate Performance Rating of 95 percent. The MCC and independent Directors did not make any individual performance adjustment to Ms. Yarrington’s CIP award.

Mr. Johnson received an award of $1,231,200. This amount reflects the amount of his base salary ($1,200,000) multiplied by his CIP Award Target percentage of 120 percent multiplied by the Corporate Performance Rating of 95 percent, resulting in an award of $1,368,000. A downward adjustment of $136,800 was then made to Mr. Johnson’s award based on the MCC’s and independent Directors’ assessment of his performance, as described above.

Mr. Geagea received an award of $992,800. This amount reflects the amount of his base salary ($1,000,000) multiplied by his CIP Award Target percentage of 110 percent multiplied by the Corporate Performance Rating of 95 percent, resulting in an award of $1,045,000. A downward adjustment of $52,200 was then made to Mr. Geagea’s award based on the MCC’s and independent Directors’ assessment of his performance, as described above.

Mr. Nelson received an award of $940,500. This amount reflects the amount of his base salary ($900,000) multiplied by his CIP Award Target percentage of 110 percent multiplied by the Corporate Performance Rating of 95 percent. The MCC and independent Directors did not make any individual performance adjustment to Mr. Nelson’s CIP award based on their assessment of his performance, as described above.

 

 

long-term incentive plan

 

The key objective of our Long-Term Incentive Plan is to encourage performance that drives stockholder value over the long-term. The target value of an NEO’s LTIP award at the time of grant is determined by the MCC, with input from its independent compensation consultant and referencing external benchmark comparisons. The objective is to ensure that Chevron is competitive against its industry peer companies on the overall target compensation (cash plus equity), after allowing for appropriate differentiation based on size, scale, scope, and job responsibilities.

Each year in January, the MCC determines a target value for LTIP awards for the CEO and the other NEOs based on industry competitive data. These awards provide incentive compensation opportunities tied to Chevron’s future long-term performance.

In setting the LTIP target value for the CEO, the MCC relies on input from its independent compensation consultant and benchmark research, focusing on the form and amount of similar compensation opportunities in the Oil Industry Peer Group. The MCC also considers the CEO’s demonstrated performance, and the Company’s size, scope, and complexity relative to the comparison companies. Similarly, for the other NEOs, the MCC sets an annual LTIP target value for each salary grade as a multiple of salary, referencing median incentive opportunities for executives in similar positions at companies in the Oil Industry Peer Group.

The LTIP award represents a pay opportunity. The ultimate realized value of equity-based awards is determined by absolute and relative stock price performance over a three- to 10-year period.

 

 

44       Chevron Corporation—2020 Proxy Statement


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The LTIP program comprises the following three equity vehicles:

 

Component

 

 

 

2019
Proportion

 

 

How it works

 

 

 

Performance shares

 

 

50%

 

 

•  Payout is dependent on Chevron’s TSR over a three-year period, compared with our LTIP Performance Share Peer Group TSR. For the 2019 grant, the peer group is: ExxonMobil, BP, Shell, Total, and the S&P 500 Total Return Index.

 

   

   
     

Relative TSR ranking

 

 

1

 

 

 

2

 

 

 

3

 

 

 

4

 

 

 

5

 

 

 

6

 

       
     

2019 grant payout as a % of target

 

 

200

 

 

160

 

 

120

 

 

80

 

 

40

 

 

0

   
   
     

•  Performance shares accrue dividend equivalents that are reinvested as additional shares, to be paid at the end of the performance period and are subject to the same three year cliff vesting schedule and performance modifier.

 

•  The MCC can exercise negative discretion to reduce the payout.

 

•  Actual number of shares granted is determined by dividing the proportionate value of the NEO’s LTIP award by Chevron’s closing common stock price on the grant date.

 

•  Payment is made in cash. Refer to Footnote 2 on pages 58 and 59 for calculation details.

 

   

   

   

   

   
   
RSUs   25%  

•  Actual number of RSUs granted is determined by dividing the proportionate value of the NEO’s LTIP award by Chevron’s closing common stock price on the grant date.

 

•  Five-year cliff vesting lengthens equity holding time, which enhances retention and alignment with stockholders.

 

•  RSUs accrue dividend equivalents that are reinvested as additional units, to be paid at the time of vesting.

 

•  Payment is made in cash based on closing common stock price on the vesting date.

 

 

   

   

   

   

   
   
Stock options   25%  

•  Strike price is equal to Chevron’s closing common stock price on the grant date.

 

•  Options vest and become exercisable at a rate of one-third per year for the first three years and expire 10 years after the grant date.

 

•  Gains realized depend on the Chevron common stock price at the time of exercise compared with the strike price.

 

•  Actual number of stock options granted is determined by dividing the proportionate value of the NEO’s LTIP award by the Black-Scholes option value on the grant date, consistent with the grant date fair value calculation as presented in the Summary Compensation Table.

 

   

   

   

   

       

 

Supplemental RSUs: Supplemental RSUs are granted in extraordinary circumstances to recognize exceptional individual performance that had a direct impact on Chevron’s results and to serve as an additional retention tool for such individuals. These RSUs generally vest at the end of three

years. Supplemental RSUs, if awarded, will accrue dividend equivalents that are reinvested as additional units and paid at the end of three years. No supplemental RSUs were awarded to any NEO in 2019.

 

 

LTIP metrics

 

The MCC continues to believe that TSR is the best overall pay-for-performance measure to align our CEO’s and other NEOs’ performance with stockholder interests. TSR is the standard metric for stockholders to use in measuring the Company’s performance because it easily allows for meaningful comparisons of our performance relative to other companies within our same industry, and also allows for easy comparison with our stockholders’ other investment alternatives. It is objectively determined by third-party market participants independent of the Company’s judgment. The

MCC believes that Company performance on other measures—operational and financial, over the short-term and long-term—is ultimately reflected in TSR results.

The majority of the LTIP award derives value directly from TSR (relative and absolute). For the CEO and the other NEOs to earn the originally targeted compensation, Chevron must show sustained competitive performance, and Chevron’s stockholders must be rewarded with competitive TSR results.

 

 

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LTIP mix and timing: why a mix of performance shares, RSUs, and options

 

The MCC believes the current portfolio approach to the LTIP mix (50 percent performance shares, 25 percent restricted stock units, and 25 percent stock options) aligns with our business objectives and is consistent with industry practices. Each vehicle has its own risk-reward profile and a different time horizon. Together, these vehicles align our executives with stockholder interests over the long-term and reward them for absolute and competitive stock performance.

 

LOGO

 

 

2017–2019 performance share payout

The three-year performance period for performance shares granted in January 2017 ended on December 31, 2019. For this three-year period, Chevron ranked No. 5 in TSR when compared with the LTIP Performance Share Peer Group, resulting in a payout modifier of 40 percent. The S&P 500 Total Return Index was added as a fifth member of the peer group beginning with the 2017-2019 performance share period.

Refer to “Option Exercises and Stock Vested in Fiscal Year 2019” tables on pages 58 and 59 for details on the performance payout calculation.

 

LOGO

Note:

(1)

Per program rules, based on average closing stock price for the 20 trading days prior to the beginning of the performance period (January 1, 2017) and the last 20 trading days of the performance period (ending December 31, 2019). Figures rounded.

 

 

2019 LTIP grants

In January 2019, the independent Directors, upon recommendation of the MCC, approved the LTIP award to the CEO and ratified the following LTIP awards to the other NEOs. Ms. Yarrington’s 2019 grant was forfeited due to her retirement in April 2019.

 

Name

 

2019

LTIP target value*

 

Performance
shares

 

RSUs

 

Stock
options 

Michael K. Wirth

   

$

  15,000,000

   

 

66,370

   

 

33,180

   

 

236,900

Pierre R. Breber

   

$

3,963,120

   

 

17,530

   

 

8,770

   

 

62,600

Patricia E. Yarrington

   

$

3,963,120

   

 

17,530

   

 

8,770

   

 

62,600

James W. Johnson

   

$

5,148,000

   

 

22,780

   

 

11,390

   

 

81,300

Joseph C. Geagea

   

$

3,963,120

   

 

17,530

   

 

8,770

   

 

62,600

Mark A. Nelson

   

$

3,963,120

   

 

17,530

   

 

8,770

   

 

62,600

 

*

Number of awarded performance shares, RSUs, and stock options were determined based on the Company’s common stock price on January 30, 2019, the grant date Black-Scholes value for stock options, and a performance share factor of 100 percent reflecting expected performance at target. As these inputs may vary from those used for financial reporting, the target value shown above may not match the values presented in the “Summary Compensation Table” or the “Grants of Plan-Based Awards in Fiscal Year 2019” table in this Proxy Statement on pages 52 and 55, respectively.

 

46       Chevron Corporation—2020 Proxy Statement


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2020 LTIP grants

In January 2020, the independent Directors, upon recommendation of the MCC, approved the LTIP award to the CEO and ratified the following LTIP awards to the other NEOs. Ms. Yarrington did not receive a 2020 LTIP grant. The MCC and the independent Directors increased 2020 LTIP target value modestly by 3 percent for the CEO year-over-year and 1 percent for the other NEOs. The shares granted under performance shares and RSUs increased by 3 to 6 percent year-over-year due to a combination of higher target value and lower grant price. The shares granted under stock options increased by 23 to 26 percent year-over-year, predominantly due to lower grant date fair value. The MCC did not make any change to the share calculation methodology in determining 2020 grants.

 

Name

2020

LTIP target value*

Performance
shares

RSUs

Stock
 options 

Michael K. Wirth

 

$15,500,000

 

70,220

 

35,110

 

298,100

Pierre R. Breber

 

$  4,002,320

 

18,130

 

9,070

 

77,000

Patricia E. Yarrington

 

 

 

 

James W. Johnson

 

$  5,197,500

 

23,550

 

11,770

 

100,000

Joseph C. Geagea

 

$  4,002,320

 

18,130

 

9,070

 

77,000

Mark A. Nelson

 

$  4,002,320

 

18,130

 

9,070

 

77,000

 

*

Number of awarded performance shares, RSUs, and stock options were determined based on the Company’s common stock price on January 29, 2020, the grant date Black-Scholes value for stock options, and a performance share factor of 100 percent reflecting expected performance at target. As these inputs may vary from those used for financial reporting, the target value shown above may not match the values to be presented in the 2021 Proxy Statement’s “Summary Compensation Table” or the “Grants of Plan-Based Awards in Fiscal Year 2020” table.

retirement programs and other benefits

NEOs, like all other employees, have retirement programs and other benefits as part of their overall compensation package at Chevron. We believe these programs and benefits support our long-term investment cycle and encourage retention and long-term employment.

retirement programs

All of our employees, including our NEOs, have access to retirement programs that are designed to enable them to accumulate retirement income. The defined benefit and defined contribution restoration plans allow highly compensated employees to receive the same benefits they would have earned without the IRS limitations on qualified retirement plans under the Employee Retirement Income and Security Act. The deferred compensation plan allows eligible employees to defer salary, CIP awards, and LTIP payouts.

 

Plan name

 

Plan type

 

How it works

 

What’s disclosed

 

Chevron Retirement Plan (“CRP”)

 

 

Qualified Defined

Benefit (IRS §401(a))

 

 

Participants are eligible for a pension benefit when they leave the Company as long as they meet age, service, and other provisions under the plan.

 

 

In the “Summary Compensation Table” and the “Pension Benefits Table” in this Proxy Statement, we report the change in pension value in 2019 and the present value of each NEO’s accumulated benefit under the CRP.

 

 

Chevron Retirement Restoration Plan (“RRP”)

 

 

Nonqualified Defined Benefit

 

 

Provides participants with retirement income that cannot be paid from the CRP due to IRS limits on compensation and benefits.(1)

 

 

In the “Pension Benefits Table” and accompanying narrative in this Proxy Statement, we describe how the RRP works and present the current value of each NEO’s accumulated benefit under the RRP.

 

Employee Savings Investment Plan (“ESIP”)

 

 

Qualified Defined Contribution (IRS §401(k))

 

 

Participants who contribute a percentage of their annual compensation (i.e., base salary and CIP award) are eligible for a Company matching contribution, up to annual IRS limits.(2)

 

 

In the footnotes to the “Summary Compensation Table” in this Proxy Statement, we describe Chevron’s contributions to each NEO’s ESIP account.

 

Employee Savings Investment Plan— Restoration Plan (“ESIP-RP”)

 

 

Nonqualified

Defined
Contribution

 

 

Provides participants with an additional Company matching contribution that cannot be paid into the ESIP due to IRS limits on compensation and benefits.(3)

 

 

In the footnotes to the “Nonqualified Deferred Compensation Table” in this Proxy Statement, we describe how the ESIP-RP works. In the “Summary Compensation Table” and the “Nonqualified Deferred Compensation Table,” we present Chevron’s contributions to each NEO’s ESIP-RP account.

 

Deferred Compensation Plan (“DCP”)

 

 

Nonqualified Defined Contribution

 

 

Participants can defer up to:

 

• 90 percent of CIP awards and LTIP performance share payouts; and

 

• 40 percent of base salary above the IRS limit (IRS §401(a)(17)) for payment after retirement or separation from service.

 

 

 

In the “Nonqualified Deferred Compensation Table” in this Proxy Statement, we report the aggregate NEO deferrals and earnings in 2019.

 

(1)

IRS annual compensation limit was $280,000 in 2019.

 

Chevron Corporation—2020 Proxy Statement       47


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(2)

Participants who contribute at least 2 percent of their annual compensation to the ESIP receive a Company matching contribution of 8 percent (or 4 percent if they contribute 1 percent).

 

(3)

Participants who contribute at least 2 percent of their base salary to the DCP receive an ESIP-RP Company matching contribution of 8 percent of their base salary that exceeds the IRS annual compensation limit.

The change in pension value disclosed in the Summary Compensation Table on page 52 is not a current cash payment. It represents the increase in the NEOs’ pension value, which are paid only after retirement. The values are significantly higher in 2019 than those of past years, due to actuarial factors beyond the normal salary increases and age/service increments:

 

 

Lower interest rates which increased the present value of pension benefits;

 

 

Recent promotional pay increases, notably for Mr. Wirth who became CEO in February 2018; and

 

 

Higher 2018 CIP awards, which increased the pensionable earnings in 2019.

Pension values will continue to fluctuate up or down, in any given year until an NEO’s retirement, based on actuarial factors.

benefit programs

The same health and welfare programs, including post-retirement health care, that are broadly available to employees on our U.S. payroll also apply to NEOs, with no other special programs except executive physicals (as described below under Perquisites).

perquisites

Perquisites for NEOs consist principally of financial counseling fees, executive physicals, home security, and the aggregate incremental costs to Chevron for personal use of Chevron automobiles and aircraft. The MCC periodically reviews our practices and disclosures with respect to perquisites. In the “Summary Compensation Table” in this Proxy Statement, we report the value of each NEO’s perquisites for 2019.

 

48       Chevron Corporation—2020 Proxy Statement


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best practice in compensation governance

To ensure independent oversight, stockholder alignment and long-term sustainability, our executive compensation program has the following governance elements in place.

 

 

  What we do

 

     

 

What we do not do

 

 

 

 

 

Robust stockholder engagement plan to ensure alignment with stockholder interests

 

 

   

 

û

 

 

 

No excessive perquisites; all have a specific business rationale

 

 

 

 

 

Stock ownership guidelines for the Chief Executive Officer, six times base salary; for the Executive Vice Presidents and Chief Financial Officer, four times base salary

 

   

 

û

 

 

 

No individual supplemental executive retirement plans

 

 

 

 

 

Deferred accounts inaccessible until a minimum of one year following termination

 

 

   

û

 

 

 

No stock option repricing, reloads or exchanges without stockholder approval

 

 

 

 

 

 

 

Clawback provisions included in the CIP, LTIP, DCP, RRP, and ESIP-RP for misconduct

 

 

   

û

 

 

 

No loans or purchases of Chevron equity securities on margin

 

 

 

 

 

 

Significant CEO pay at risk (91 percent)

 

   

û

 

 

No transferability of stock options (except in the case of death or a qualifying court order)

 

 

 

 

 

 

Thorough assessment of Company and individual performance

 

 

   

 

û

 

No stock options granted below fair market value

 

 

 

 

Robust succession planning process with Board review twice a year

 

 

   

 

û

 

 

No hedging or pledging of Chevron equity securities

 

 

 

 

MCC composed entirely of independent Directors

 

   

 

û

 

 

 

No change-in-control agreements for NEOs

 

 

 

 

 

Independent compensation consultant, hired by and reports directly to the MCC

 

 

   

û

 

 

 

No tax gross-ups for NEOs

 

 

 

 

 

 

MCC has discretion to reduce performance share payouts

 

 

   

û

 

 

 

 

No “golden parachutes” or “golden coffins” for NEOs

 

 

 

 

 

Certain pre-2018 LTIP awards (i.e., performance-based compensation) intended to qualify for deduction under the grandfather rule in Section 162(m) of Internal Revenue Code

 

 

     

 

 

 

 

Annual assessment of incentive compensation risks

 

 

           

 

Chevron Corporation—2020 Proxy Statement       49


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compensation governance: oversight and administration of the executive compensation program

role of the board of directors’ management compensation committee

 

The MCC oversees the executive compensation program. The MCC works closely with its independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), and management to review pay and performance relative to the Business Plan approved by the Board and to industry peers. The MCC solicits input from the CEO concerning the performance and compensation of other

NEOs. The CEO does not participate in discussion about his own pay; and proposed change to the compensation of the CEO is recommended by the MCC and approved by the independent Directors of the Board. A complete description of the MCC’s authority and responsibility is provided in its charter, which is available on our website at www.chevron.com and in print upon request.

 

 

independent compensation advice

 

The MCC retains Meridian as an independent compensation consultant to assist with its duties. The MCC first engaged Meridian in 2014, following a comprehensive request-for-proposal process and subsequent screening and selection. The MCC has the exclusive right to select, retain, and terminate Meridian, as well as to approve any fees, terms, and other conditions of its service. Meridian and its lead consultant report directly to the MCC, but when directed to do so by the MCC, they work cooperatively with Chevron’s management to develop analyses and proposals for the MCC. Meridian provides the following services to the MCC:

 

 

Education on executive compensation trends within and across industries;

 

Recommendation regarding compensation philosophy and compensation levels;

 

 

Selection of compensation comparator groups; and

 

 

Identification and resolution of technical issues associated with executive compensation plans, including tax, accounting, and securities regulations.

Meridian does not provide any services to the Company. The MCC is not aware of any work performed by Meridian that raised any conflicts of interest.

 

 

compensation risk management

 

The MCC annually undertakes a risk assessment of Chevron’s compensation programs to determine whether these programs are appropriately designed and that they do not motivate individuals or groups to take risks that are reasonably likely to have a material adverse effect on the

Company. Following its most recent comprehensive review of the design, administration, and controls of these programs, the MCC was satisfied that Chevron’s programs are well structured with strong governance and oversight mechanisms in place to minimize and mitigate potential risks.

 

 

stock ownership guidelines

We require our NEOs to hold prescribed levels of Chevron common stock, further linking their interests with those of our stockholders. Executives have five years to attain their stock ownership guideline. Further, NEOs who have not attained their stock ownership guidelines are required to hold shares acquired under the LTIP program until such ownership requirements are met.

 

Position

  

2019 ownership guidelines    

CEO

  

    Six times base salary

Executive Vice Presidents and CFO

  

    Four times base salary

All Other Executive Officers

  

    Two times base salary

Based upon our 250-day trailing average stock price ending December 31, 2019 ($119.71), Mr. Wirth had a stock ownership base salary multiple of 9.2. All other NEOs met their respective ownership requirement and had an average stock ownership base salary multiple of 8.1. The MCC believes these ownership levels provide adequate focus on our long-term business model.

employment, severance, and change-in-control agreements

In general, we do not maintain employment, severance, or change-in-control agreements with our NEOs. Upon retirement or separation from service for other reasons, NEOs are entitled to certain accrued benefits and payments generally available to other employees. We describe these benefits and payments in the “Pension Benefits Table,” the “Nonqualified Deferred Compensation Table,” and the “Potential Payments Upon Termination or Change-in-Control” table in this Proxy Statement.

 

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compensation recovery policies

The Chevron Incentive Plan, Long-Term Incentive Plan, Deferred Compensation Plan, Retirement Restoration Plan, and Employee Savings Investment Plan–Restoration Plan include provisions permitting us to “claw back” certain amounts of cash and equity awarded to an NEO at any time if the NEO engages in certain acts of misconduct, including, among other things: embezzlement; fraud or theft; disclosure of confidential information or other acts that harm our business, reputation or employees; misconduct resulting in Chevron having to prepare an accounting restatement; and failure to abide by post-termination agreements respecting confidentiality, noncompetition, or nonsolicitation.

hedging and pledging

Under our insider trading policy, our NEOs are prohibited from hedging and pledging Chevron securities, as described in more detail on page 26.

tax gross-ups

We do not pay tax gross-ups to our NEOs. We do provide standard expatriate packages, which include tax equalization payments, to all employees of the Company who serve on overseas assignments, including executive officers.

tax deductibility of NEO compensation

For years prior to 2018, Section 162(m) of the Internal Revenue Code (as implemented by IRS guidance) limited companies’ deduction for compensation paid to the CEO and the other three most highly paid executives (excluding the CEO and CFO) to $1 million, but allowed for the deduction for performance-based compensation costs/expenses for amounts even in excess of the $1 million limit. As such, we structured our CIP and certain LTIP awards with the intention of meeting the requirements for performance-based compensation under Section 162(m). Effective January 1, 2018, the Tax Cut and Jobs Act (“TCJA”) repealed this exclusion for performance-based compensation, and expanded the class of affected executives, which means that all compensation paid to persons who in 2017, or any year following, were the CEO, CFO (in 2018 or later) or one of the other three most highly paid executives (excluding our CEO and CFO) will be subject to the cap of $1 million. For LTIP awards made on or prior to November 2, 2017, but not yet vested and/or paid out (other than time-based RSUs, which are not qualified under Section 162(m) and therefore are not deductible – unless paid after the executive terminates), we expect that the Company will still be able to deduct those amounts, provided that the Company meets the requirements in the TCJA.

 

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summary compensation table

The following table sets forth the compensation of our NEOs for the fiscal year ended December 31, 2019, and for the fiscal years ended December 31, 2018, and December 31, 2017, if they were NEOs in those years. The primary components of each NEO’s compensation are also described in our “Compensation Discussion and Analysis” in this Proxy Statement.

 

Name and

principal position

  Year  

Salary

($)(1)

 

Stock
awards

($)(2)

 

Option
awards

($)(3)

 

Non-Equity
incentive plan
compensation

($)(4)

 

 

Change in
pension

value and
nonqualified
deferred
compensation
earnings

($)(5)

 

All other
compensation

($)(6)

 

Total

($)

   

M.K. Wirth,

Chairman and CEO

   

 

2019

   

$

1,570,833

   

$

11,663,631

   

$

3,750,127

   

 

$ 2,280,000

   

 

$ 13,383,378

   

 

$ 422,693

   

$

33,070,662

   

 

 

 

2018

 

   

 

$

 

 1,468,750

 

   

 

$

 

 10,102,641

 

   

 

$

 

 3,312,399

 

   

 

 

 

$ 3,600,000

 

   

 

 

 

$   1,229,552

 

   

 

 

 

$ 927,281

 

   

 

$

 

 20,640,623

 

   

 

 

 

2017

 

   

 

$

 

1,231,050

 

   

 

$

 

3,923,035

 

   

 

$

 

1,237,856

 

   

 

 

 

$ 2,000,000

 

   

 

 

 

$   2,672,028

 

   

 

 

 

$ 605,712

 

   

 

$

 

11,669,681

 

   

P.R. Breber,

Vice President and

Chief Financial Officer(7)

   

 

2019

   

$

988,917

   

$

3,081,375

   

$

990,958

   

 

$ 1,045,000

   

 

$   5,222,222

   

 

$   91,948

   

$

11,420,420

   

 

 

 

 

2018

 

 

 

   

 

$

 

 

948,875

 

 

 

   

 

$

 

 

2,934,703

 

 

 

   

 

$

 

 

962,251

 

 

 

   

 

 

 

 

$ 1,629,600

 

 

 

   

 

 

 

 

$   1,445,807

 

 

 

   

 

 

 

 

$ 108,808

 

 

 

   

 

$

 

 

8,030,044

 

 

 

   

P.E. Yarrington,

Former Vice President

and Chief Financial

Officer(7)

   

 

2019

   

$

910,573

   

$

3,081,375

   

$

990,958

   

 

$    449,000

   

 

$   3,669,522

 

   

 

$   71,742

   

$

9,173,170

   

 

 

 

2018

 

   

 

$

 

1,133,458

 

   

 

$

 

2,934,703

 

   

 

$

 

962,251

 

   

 

 

 

$ 2,017,200

 

   

 

 

 

 

   

 

 

 

$ 111,467

 

   

 

$

 

7,159,079

 

   

 

 

 

 

2017

 

 

 

   

 

$

 

 

1,108,013

 

 

 

   

 

$

 

 

3,018,827

 

 

 

   

 

$

 

 

952,904

 

 

 

   

 

 

 

 

$ 1,700,200

 

 

 

   

 

 

 

 

$   1,283,468

 

 

 

   

 

 

 

 

$   88,641

 

 

 

   

 

$

 

 

8,152,053

 

 

 

   

J.W. Johnson,

Executive Vice President,  

Upstream

   

 

2019

   

$

1,180,458

   

$

4,003,471

   

$

1,286,979

   

 

$ 1,231,200

   

 

$   7,479,507

   

 

$ 134,015

   

$

15,315,630

   

 

 

 

2018

 

   

 

$

 

1,123,375

 

   

 

$

 

3,811,432

 

   

 

$

 

1,249,653

 

   

 

 

 

$ 2,284,100

 

   

 

 

 

$   2,263,287

 

   

 

 

 

$ 194,135

 

   

 

$

 

10,925,982

 

   

 

 

 

2017

 

   

 

$

 

1,080,750

 

   

 

$

 

3,923,035

 

   

 

$

 

1,237,856

 

   

 

 

 

$ 1,710,700

 

   

 

 

 

$   2,948,042

 

   

 

 

 

$ 124,132

 

   

 

$

 

11,024,515

 

   

J.C. Geagea,

Executive Vice President,

Technology, Projects &  

Services

   

 

2019

   

$

994,750

   

$

3,081,375

   

$

990,958

   

 

$    992,800

   

 

$   6,535,781

   

 

$ 414,139

   

$

13,009,803

   

 

 

 

2018

 

   

 

$

 

979,083

 

   

 

$

 

2,934,703

 

   

 

$

 

962,251

 

   

 

 

 

$ 1,663,500

 

   

 

 

 

$   1,210,881

 

   

 

$

 

    98,993

 

   

 

$

 

7,849,411

 

   

 

 

 

2017

 

   

 

$

 

957,825

 

   

 

$

 

3,018,827

 

   

 

$

 

952,904

 

   

 

 

 

$ 1,347,200

 

   

 

 

 

$   2,614,776

 

   

 

 

 

$ 112,790

 

   

 

$

 

9,004,322

 

   

M.A. Nelson,

Executive Vice President,

Downstream & Chemicals

   

 

2019

   

$

847,292

   

$

3,081,375

   

$

990,958

   

 

$    940,500

   

 

$   3,843,391

   

 

$ 118,017

   

$

9,821,533

   

 

    

                                                                     

 

(1)

Reflects actual salary earned during the fiscal year covered. For Ms. Yarrington, amount includes salary paid through her retirement at the end of April 2019 and also includes a final payout of her accrued, but unused vacation balance, in the amount of $480,865, which is required to be paid under California law upon termination of employment. The following table reflects the annual salary rate and effective date for the years in which each person was an NEO and the amounts deferred under the Deferred Compensation Plan (DCP). Compensation is reviewed after the end of each year, and salary increases, if any, are generally effective April 1 of the following year. Mr. Nelson received a salary increase effective March 1, 2019 upon his appointment to Executive Vice President, Downstream & Chemicals.

 

 

Name

 

 

 

Salary effective date

 

 

 

Salary

 

 

 

Total salary deferred

under the DCP

 

 

M.K. Wirth

 

 

 

April 2019

 

 

 

$    1,600,000

 

 

 

$      25,817

 

 

 

February 2018

 

 

 

$    1,500,000

 

 

 

$      23,875

 

 

 

February 2017

 

 

 

$    1,250,000

 

 

 

$      19,221

 

 

P.R. Breber

 

 

 

April 2019

 

 

 

$    1,000,000

 

 

 

$      14,178

 

 

 

April 2018

 

 

 

$       962,000

 

 

 

$      13,478

 

 

P.E. Yarrington

 

 

 

April 2019

 

 

 

$    1,170,000

 

 

 

$         2,994

 

 

 

April 2018

 

 

 

$    1,139,000

 

 

 

$      17,169

 

 

 

April 2017

 

 

 

$    1,120,000

 

 

 

$      16,760

 

 

J.W. Johnson

 

 

 

April 2019

 

 

 

$    1,200,000

 

 

 

$      18,009

 

 

 

April 2018

 

 

 

$    1,133,000

 

 

 

$      16,968

 

 

 

April 2017

 

 

 

$    1,100,000

 

 

 

$      16,215

 

 

J.C. Geagea

 

 

 

April 2019

 

 

 

$    1,000,000

 

 

 

$      14,295

 

 

 

April 2018

 

 

 

$      982,000

 

 

 

$      14,082

 

 

 

April 2017

 

 

 

$      972,000

 

 

 

$      13,757

 

 

M.A. Nelson

 

 

 

March 2019

 

 

 

$      900,000

 

 

 

$      11,346

 

 

  

We explain the amount of salary and non-equity incentive plan compensation in proportion to total compensation in our “Compensation Discussion and Analysis—Pay Philosophy and Plan Design.”

 

52       Chevron Corporation—2020 Proxy Statement


Table of Contents
 

 

executive compensation  

 

 

(2)

Amounts for each fiscal year reflect the aggregate grant date fair value of performance shares and RSUs granted under the LTIP on January 30, 2019. We calculate the grant date fair value of these awards in accordance with ASC Topic 718, as described in Note 20, “Stock Options and Other Share-Based Compensation,” to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019. These RSUs and performance shares accrue dividend equivalents. For purposes of this table only, estimates of forfeitures related to service-based vesting conditions for awards have been disregarded. Ms. Yarrington will not realize any value from her 2019 RSU and performance share grants, which were cancelled following her April 2019 retirement, in accordance with LTIP rules that provide for forfeiture of grants held for less than one year following the grant date.

 

  

For performance shares granted on January 30, 2019, the per-share grant date fair value was $119.24. We use a Monte Carlo approach to calculate estimated grant date fair value. To derive estimated grant date fair value per share, this valuation technique simulates TSR for the Company and the LTIP peer group (BP, ExxonMobil, Royal Dutch Shell, Total, and the S&P 500 Total Return Index) using market data for a period equal to the term of the performance period, correlates the simulated returns within the peer group to estimate a probable payout value, and discounts the probable payout value using a risk-free rate for Treasury bonds having a term equal to the performance period. Performance shares are paid in cash, and the cash payout, if any, is based on market conditions at the end of the performance period (January 2019 through December 2021). Payout is calculated in the manner described in Footnote 2 to the “Option Exercises and Stock Vested in Fiscal Year 2019” table in this Proxy Statement. If the maximum level of performance were to be achieved for the performance shares granted in 2019, the grant date value would be $226.02 per share (200 percent of the grant date stock price), or $15,000,947 for Mr. Wirth; $5,148,736 for Mr. Johnson; and $3,962,131 for Messrs. Breber, Geagea and Nelson.

 

  

The per-unit grant date fair value of the RSUs was $113.01, the closing price of Chevron common stock on the grant date. These RSUs earn dividend equivalents and are paid in cash upon vesting on January 31 following the fifth anniversary of the grant. Total payout will be based on the Chevron common stock closing price on the vesting date.

 

  

The material terms of performance shares and RSUs granted in 2019 are described in the “Grants of Plan-Based Awards in Fiscal Year 2019” and “Outstanding Equity Awards at 2019 Fiscal Year-End” tables in this Proxy Statement.

 

(3)

Amounts for each fiscal year reflect the aggregate grant date fair value of nonstatutory/nonqualified stock options granted under the LTIP on January 30, 2019. The per-option grant date fair value was $15.83. We calculate the grant date fair value of these stock options in accordance with ASC Topic 718, as described in Note 20, “Stock Options and Other Share-Based Compensation,” to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019. Stock options do not accrue dividends or dividend equivalents. For purposes of this table only, estimates of forfeitures related to service-based vesting conditions for awards have been disregarded. Ms. Yarrington will not realize any value from her 2019 stock option grant, which was cancelled following her April 2019 retirement, in accordance with LTIP rules that provide for forfeiture of grants held for less than one year following the grant date.

 

  

The material terms of stock options granted in 2019 are described in the “Grants of Plan-Based Awards in Fiscal Year 2019” and “Outstanding Equity Awards at 2019 Fiscal Year-End” tables in this Proxy Statement.

 

(4)

2019 amounts reflect CIP awards for the 2019 performance year that were paid in March 2020. Ms. Yarrington elected to defer 1 percent of her CIP award to the DCP, or $4,490. Mr. Nelson elected to defer 25 percent of his CIP award to the DCP, or $235,125. See “Compensation Discussion and Analysis—Components of Executive Compensation—Annual Incentive Plan (CIP)” for a detailed description of CIP awards.

 

(5)

2019 amounts represent the aggregate change in the actuarial present value of the NEO’s pension value for the Chevron Retirement Plan (CRP) and the Chevron Retirement Restoration Plan (RRP) from January 1, 2019, through December 31, 2019, expressed as a lump sum. The DCP and ESIP-RP do not pay above-market or preferential earnings and are not represented in this table. For purposes of this disclosure, we have used the same amounts required to be disclosed in the “Pension Benefits Table” in this Proxy Statement. Ms. Yarrington retired April 30, 2019, elected a single life annuity under the CRP and received total payments of $99,216. The present value of Ms. Yarrington’s CRP on December 31, 2019 was $2,434,994, and the value of her RRP on December 31, 2019, before reduction for taxes, was $20,580,668, a total change of $3,669,522 from the CRP and RRP aggregate values reported in the 2019 Proxy Statement.

 

  

2019 changes in the actuarial present value of an NEO’s pension value are attributable to five factors:

 

  

Increases in highest average earnings (“HAE”)

 

    

HAE is the highest consecutive 36-month average base salary and CIP awards. A significant portion of the changes in Messrs. Wirth and Nelson’s pension values were due to large increases in salary and CIP awards tied to recent promotions. In addition, CIP awards were above target for the 2017 and 2018 performance years which increased pensionable earnings for all NEOs.

 

  

Interest rate impact

 

  

Generally, a higher interest rate produces a lower pension value, and a lower interest rate produces a higher pension value. The lump sum interest rates for determining the actuarial present values of the pension benefit are based on the Pension Protection Act of 2006 lump sum interest rates, and such rates were lower in 2019 than those used in 2018 by an average of 1.10 percentage points. In addition, the 2019 discount rate used to discount pension values from age 60 to the NEO’s current age (if lower), 3.1 percent, is lower than the 2018 discount rate of 4.2 percent.

 

  

An additional year of age

 

  

The CRP and RRP provide an unreduced benefit at age 60 for eligible participants. Generally, being a year older results in an increase in pension value due to a shorter discount period from the current age to the assumed retirement age of 60. Once an NEO reaches age 60, the discount rate no longer applies. Furthermore, the pension value can be negatively impacted when the assumed duration of future payments is shorter based on age and actuarial assumptions.

 

  

An additional year of benefit service earned in 2019

 

  

All of the NEOs except Ms. Yarrington worked for a full year in 2019; as a result, their pension benefits increased because they earned an additional year of benefit service.

 

  

Demographic assumption changes

 

  

Current mortality tables project shorter life spans; as a result, pension benefits decrease.

 

    

The following table provides a breakdown of the percent of change in the NEO’s pension, including the return credited to Ms. Yarrington’s RRP after her retirement:

 

              

 

Factors

 

Name

 

 

 

Total percent

change in

pension value,

Jan.-Dec. 2019(a)

 

     

 

Higher HAE

 

 

 

Interest rate

impact

 

 

 

One additional
year of age

 

 

 

One additional

year of service

 

 

 

Demographic  
assumption  
changes  

 

 

M.K. Wirth

 

   

 

 

 

 

74.5

 

 

%

 

       

 

 

 

 

38.5

 

 

%