26 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS
Following its review of the peer group, the Committee decided to make no changes for 2019.
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2019 Peer Group Companies
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Anadarko Petroleum Corporation*
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EOG Resources, Inc.
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Apache Corporation
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Hess Corporation
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Chesapeake Energy Corporation
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Murphy Oil Corporation
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Continental Resources, Inc.
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Noble Energy, Inc.
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Devon Energy Corporation
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Pioneer Natural Resources Company
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Ovintiv Inc. (formerly Encana Corporation)
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* Due to acquisition, Anadarko was removed from the peer group in 2019 and replaced with Cimarex Energy Co. for the 2020 peer group.
Compensation Benchmarking Process
The Committee conducts an annual comparison of the compensation of our NEOs to the compensation of executives with similar job responsibilities among companies in our peer group, based upon information gathered and provided by Meridian through surveys and public company disclosure. The Committee references this competitive market analysis in making compensation decisions for the coming year. The Committee generally targets executive total direct compensation opportunities at the 50th percentile of the peer group for average performance and adjusts total direct compensation opportunities higher or lower based on the Committee’s assessment of each executive position. We define total direct compensation as the sum of base salary, target annual cash bonus and the target grant-date value of long-term incentive awards.
In October 2019, Meridian provided the Committee a market analysis that included information regarding peer group executives’ base salaries, target annual bonus levels and the mix and level of long-term incentives. According to this analysis, NEO compensation levels varied by individual, but overall were appropriately positioned relative to 50th percentile benchmarks of comparable roles. Additionally, as part of this exercise, the Committee reviewed supporting benchmarks for the broader oil and gas industry and general industry.
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ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
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Our executive compensation program includes base salary, annual cash bonuses, long-term incentive (LTI) awards and other benefits and perquisites. By design, a significant portion of our executive officers’ overall compensation, including annual cash bonuses and LTI awards, is “performance-based,” and the opportunity to earn value is largely dependent on both Company and individual performance. The Committee determines a total compensation opportunity for each executive officer based on a review of compensation benchmarks from independent upstream companies, broader oil and gas companies, and general industry, a review of our compensation philosophy and the Committee’s subjective judgment. Because the Committee does not set fixed percentages for each element of compensation, the mix may change over time as the competitive market moves, governance standards evolve or our business needs change.
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90%
of CEO’s total target direct compensation influenced by Company performance
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Ninety percent of our CEO’s total target direct compensation is influenced by Company performance. The allocation of our compensation components, with a significant emphasis on LTI awards, aligns with the practices of our peer group. The following pie charts reflect the 2019 pay mix of total target direct compensation components for our CEO and other NEOs, respectively.
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MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 27
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2019 TOTAL TARGET DIRECT COMPENSATION OVERVIEW
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The Committee determined 2019 base salaries, target annual cash bonus opportunities and LTI awards in February 2019. The Committee determined the payment of 2019 annual cash bonuses in February 2020, after 2019 business results were known and audited.
The following table summarizes the elements of total direct compensation the Committee awarded to our NEOs for 2019 as part of our regular compensation program. The amounts shown differ from the amounts shown in the Summary Compensation Table because this table provides the target value for short-term and LTI compensation. Target LTI values reflect established compensation valuation methodologies that are similar to, but may differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table.
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Name
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Year
End Base
Salary
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Target Bonus Opportunity
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LTI Award
Target Value
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Total
Target
Compensation
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Mr. Tillman
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$1,200,000
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$1,620,000
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$9,200,000
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$12,020,000
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Mr. Little
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$600,000
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$510,000
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$2,500,000
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$3,610,000
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Mr. Whitehead
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$575,000
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$488,750
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$2,400,000
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$3,463,750
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Mr. Wagner
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$500,000
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$425,000
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$2,000,000
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$2,925,000
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Mr. Hedgebeth*
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$575,000
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$451,729
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$1,800,000
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$2,826,729
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* Due to the addition of responsibilities as Chief Administrative Officer, Mr. Hedgebeth’s bonus target was increased on a prorated basis from 75% to 85% effective August 24, 2019.
The primary purpose of base salary is to recognize and reward overall responsibilities, experience and established skills. In setting base salary, the Committee compares each NEO’s current salary to the market 50th percentile, and considers each individual’s experience and expertise, the value and responsibility associated with the role and internal pay equity. The Committee does not use a formula to calculate base salary increases for NEOs.
In February 2019, the Committee reviewed base salaries and the considerations noted above. The Committee determined to make no base salary increases for the NEOs at that time, except for Mr. Tillman who was positioned below the median of the peer benchmark at the time of the analysis. He received a base pay increase in recognition of the Company’s ongoing transformation in the prevailing commodity price environment.
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Name
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Base Salary as of
January 1, 2019
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Base Salary as of
December 31, 2019
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Mr. Tillman
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$1,150,000
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$1,200,000
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Mr. Little
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$600,000
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$600,000
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Mr. Whitehead
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$575,000
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$575,000
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Mr. Wagner
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$500,000
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$500,000
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Mr. Hedgebeth
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$575,000
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$575,000
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28 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS
The annual cash bonus rewards executives for achieving short-term financial, operational and strategic goals that drive stockholder value, as well as for individual performance during the year.
When determining target bonus opportunities for our executives, the Committee considers the range of market practices, as well as each executive’s experience, relative scope of responsibility, internal pay equity considerations and any other information the Committee deems relevant in its discretion. Our targeted performance goals, established by the Committee during the first quarter of the year, are defined to focus and challenge our NEOs to perform at a high level. Payout results may be above or below target based on actual Company and individual performance.
The Committee determined the 2019 annual cash bonus payout for each NEO based on its assessment of the following:
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•
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Quantitative company performance metrics, weighted at 70%;
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•
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Strategic company performance objectives, weighted at 30%; and
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•
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Individual performance, including achievement of pre-established goals, leadership and ethics, and overall value that the officer created for the Company.
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OFFICER BONUS FRAMEWORK
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[
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Base Salary
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x
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Bonus Target
(as % of Base Salary)
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=
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Target Bonus Opportunity
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]
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x
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Company Performance Score
70% Quantitative Performance
30% Strategic Performance
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+/-
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Individual Performance Adjustment
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=
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Annual Bonus Payout
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The quantitative and strategic performance scores can range between 0% and 200%; (target is 100%). The final payout for each NEO may be adjusted based on the Committee’s discretionary assessment of the NEO’s individual performance.
2019 Quantitative Performance Metrics
During the first quarter of 2019, the Committee established quantitative performance goals for the bonus program, representing 70% of the total bonus award opportunity, by taking into consideration key safety, financial and operational performance measures that are important indicators of success in our industry. The Company’s business strategy in 2019 focused on execution and portfolio transformation, while maintaining our disciplined approach to cost control.
Considering this strategy, the Committee made no changes to the list and weighting of quantitative bonus metrics at the start of 2019. The quantitative bonus metrics established for 2019 emphasize operational excellence and financial stewardship.
The Committee determined the target level of performance for each metric by evaluating factors such as performance achieved in the immediately preceding year, anticipated challenges for 2019, top tier peer performance, and Company strategy. The Company set steep, competitive target and stretch goals to challenge our employees and drive stockholder value throughout the year. In the case of Cash Costs/Barrels of Oil Equivalent (BOE), a stretch goal was set at the top quartile of our oil weighted peers, and in the case of EBITDAX/BOE, a stretch goal was set at the top quartile of our peers.
In early 2020, the Committee evaluated the Company’s 2019 quantitative performance against goals established in early 2019. The Company delivered results that met or exceeded those targets in the categories of Total Recordable Incident Rate, Production and EBITAX/BOE, with F&D Cost/BOE and Cash Cost/BOE just outside of target. Additionally, Total Recordable Incident Rate in 2019 was the best performance we have delivered since becoming an independent E&P company, further demonstrating our commitment to safe operations.
MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 29
The following table shows the targets and weightings established by the Committee and the performance achieved during 2019.
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Critical Capability
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Weight (%)
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Performance Measure
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Target
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Performance
Achieved
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Weighted Payout
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Operational Excellence
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10
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TRIR(1)
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0.48
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0.32
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200%
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25
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Production, MBOEPD(2)
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420
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422
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120%
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Financial Stewardship
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25
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Cash Costs, $/BOE(3)
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7.20
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7.28
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89%
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15
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F & D Cost, $/BOE Reserve(4)
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19.44
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20.80
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86%
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25
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EBITDAX, $/BOE(5)
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20.70
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21.94
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118%
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Total Payout of 70% Quantitative Bonus Opportunity
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114%
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Weighted Payout of 70% Quantitative Bonus Opportunity
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80%
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(1) Calculated by dividing (a) the Occupational Safety and Health Administration (OSHA) recordable incidents multiplied by 200,000 by (b) the total number of exposure hours. This metric includes both Company employees and contractors and is applied to Company operated properties only.
(2) Available for sale, adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
(3) Cash cost includes direct expense, indirect expense, general and administrative expense; adjusted for legal settlements, pay for performance, special items, acquisitions, and divestitures. Production denominator is recorded sales adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
(4) F&D cost includes development CapEx (excluding acquisition costs). Reserves exclude acquisitions, dispositions and impairments as a result of price impact.
(5) Earnings before interest, taxes, depreciation, amortization, and exploration adjusted for special items. Production denominator is recorded sales adjusted for pricing effects of production sharing contracts, catastrophic events, changes in business climate, acquisitions, and divestitures.
2019 Strategic Objectives
After assessing the Company’s quantitative performance metrics, the Committee evaluated the strategic objective achievements, representing 30% of the total bonus award opportunity. For 2019, the Committee clearly defined the Company’s strategic objectives across five areas to measure strategic performance. These areas included a new objective of Total Cash Return to Stockholders, which is calculated by taking the total dividend paid to stockholders and adding the total share repurchase amount. The Committee reviews and evaluates these objectives to determine their degree of achievement, but there are generally no threshold or weighting guidelines. We achieved positive results on all objectives, and in most cases, well exceeded original expectations.
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Strategic Objectives
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Performance Achieved
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Enterprise returns based on year-on-year improvement in Cash Return on Invested Capital, or CROIC; (CROIC is calculated by dividing the sum of Operating Cash Flow and after tax interest expense by invested capital, i.e., the sum of stockholders equity and net debt)
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Year-on-year underlying improvement in Cash Return on Invested Capital of 19% compared to the previous year (price normalized)
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Cash Flow Per Share Growth based on year-on-year improvement in Cash Flow per Debt Adjusted Share, or CFPDAS; (CFPDAS is calculated by dividing the sum of Operating Cash Flow before working capital and net interest after tax by total shares including debt shares)
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Year-on-year improvement underlying improvement in Cash Flow per Debt Adjusted Share of 18% compared to the previous year (price normalized)
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30 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS
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Strategic Objectives, continued
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Performance Achieved, continued
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Total resource additions (excluding dispositions)
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Through our U.S. resource capture activity, we added total resources of about 426 MMBOE generating a resource replacement ratio of 286%
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Safe, Clean, Responsible, or SCR, days (defined as no serious events, no recordable injuries, and no spills to the environment)
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Greater than 95% SCR days on average across our individual operational asset teams
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Cash returns to stockholders based on taking the total dividend paid to stockholders and adding the total share repurchase amount
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Total cash return to stockholders of approximately $510MM comprised of $160MM annual dividend and $350MM of share repurchases
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The successful achievement of these strategic objectives produced an exceptional delivery year that delivered on financial outcomes that matter, reached key milestones in our strategic portfolio transformation and drove differentiated execution.
Upon review of these strategic achievements, the Committee concluded that the Company had achieved overall performance above target expectations, resulting in a 40% weighted payout score for the strategic bonus opportunity.
2019 Individual Performance
The Committee maintains discretion to adjust individual cash bonuses to recognize critical performance factors and accomplishments that may not have been fully considered in the performance score calculation. In evaluating our NEOs’ contributions during 2019, the Committee considered each NEO’s specific contribution to our Company’s key achievements, including those discussed under “Compensation Discussion and Analysis—Executive Summary.”
Annual Cash Bonus Payouts Earned for 2019
Taking into consideration the Company’s quantitative and strategic performance, the Committee determined payout percentages of 80% from the quantitative metrics and 40% from the strategic objectives resulting in overall performance under the 2019 bonus program at 120% of target, which is down from a bonus payout of 150% in 2018.
To recognize differentiated performance in 2019, Messrs. Wagner and Hedgebeth received a differentiated individual performance factor. Final percent of target achieved for each named executive officer is listed in the following table.
Below are the actual bonus payments earned for 2019 performance.
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Base Salary as of
December 31, 2019
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Bonus Target
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Target Bonus Opportunity
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Percent of Target Achieved
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Actual Bonus Payout
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Mr. Tillman
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$1,200,000
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135%
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$1,620,000
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120%
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$1,944,000
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Mr. Little
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$600,000
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85%
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$510,000
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120%
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$612,000
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Mr. Whitehead
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$575,000
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85%
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$488,750
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120%
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$586,500
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Mr. Wagner
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$500,000
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85%
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$425,000
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138%
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$586,500
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Mr. Hedgebeth*
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$575,000
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79%
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$451,729
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132%
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$596,283
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* Due to the addition of responsibilities as Chief Administrative Officer, Mr. Hedgebeth’s bonus target was increased on a prorated basis from 75% to 85% effective August 24, 2019.
MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 31
Long-term incentive, or LTI, awards align the interests of NEOs and stockholders over the long term and are intended to represent the largest portion of the NEO’s total direct compensation. LTI is designed to incentivize executives to achieve strategic goals that will maximize long-term stockholder value and also encourage retention through continued service requirements. These awards assist NEOs in establishing and maintaining significant equity ownership and place a meaningful portion of compensation at risk based on our common stock price performance.
The Committee awards LTI based on a target award value that reflects competitive market data, each NEO’s performance and each NEO’s target total compensation. The 2019 target award value for NEOs was allocated 50% to performance units, 20% to stock options and 30% to restricted stock or restricted stock units.
Each year, the Committee grants LTI awards at its regularly scheduled February meeting, the date of which is generally set at least one year in advance. The grant date for such awards is generally the meeting date; however, for awards approved after market close, the grant date is the next trading day. The actual LTI compensation realized by each NEO depends on the price of the underlying shares of common stock at the time of vesting or exercise, and in the case of performance units, our TSR relative to that of the companies in our peer group.
2019 Long-Term Incentive Awards
After considering competitive market data, the demand for talent, cost considerations and the performance of both the Company and the individual NEOs, the Committee awarded LTI to each NEO consistent with our normal grant timeline resulting in a grant date of February 27, 2019.
The table below lists the target grant date LTI value for each NEO. The Committee’s methodologies to deliver target LTI values are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table. See the Grants of Plan-Based Awards Table for additional detail about each LTI award.
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Total 2019 LTI Awards Target Value
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Name
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Annual Target
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Mr. Tillman
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$9,200,000
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Mr. Little
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$2,500,000
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Mr. Whitehead
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$2,400,000
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Mr. Wagner
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$2,000,000
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Mr. Hedgebeth
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$1,800,000
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Performance Units
The Committee believes that a performance unit program based on TSR relative to peer companies aligns pay and Company performance. The industry peers selected for each performance cycle generally match the industry peers used for compensation benchmarking. TSR is determined by adding the sum of stock price appreciation or reduction per share, plus cumulative dividends per share for the performance period, and dividing that total by the beginning stock price per share. For purposes of this calculation, the beginning and ending stock prices are the averages of the closing stock prices for the month immediately preceding the beginning and ending dates of the performance period. The Committee generally has sole and absolute discretion to reduce the final payment associated with any performance unit award as it may deem appropriate. The 2019 performance units, if earned, will be paid in stock.
32 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS
2019 Performance Units
In February 2019, the Committee awarded the NEOs performance units that will vest based on relative TSR for the three-year performance period ending December 31, 2021. The percentage of units earned ranges from 0% to 200% of the units granted based on the payout table below. Earned awards are paid in shares of stock shortly after the completion of the performance period and the Committee has approved the payout percentage. Each NEO will receive vested shares of common stock equal to the number of units granted multiplied by the payout percentage. Dividend equivalents accrue and are paid in cash based on the number of shares earned at the end of the performance period. In the event that any companies in our peer group either cease to exist or are no longer a company for which TSR can be calculated from publicly available information, then the Committee may replace such company in the peer group. The Committee designated Cimarex Energy Co. and Concho Resources Inc. as replacement companies (in that order). Since the time of grant, Anadarko Petroleum Corporation has been acquired and was replaced with Cimarex Energy Co. in the peer group. The payout percentages for each ranking are:
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MRO TSR Ranking
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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11
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12
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Payout (% of Target)
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200%
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182%
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164%
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145%
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127%
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109%
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91%
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73%
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54%
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0%
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0%
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0%
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2018 Performance Units
The performance units granted in February 2018 have a performance period end date of December 31, 2020 and follow the payout table below. Anadarko Petroleum Corporation, which was part of the peer group in 2018, has since been acquired and was replaced with Cimarex Energy Co., as approved by the Committee in the award terms at the time of grant. See the Outstanding Equity Awards at 2019 Fiscal Year-End Table for information about the estimated payouts of those performance units.
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MRO TSR Ranking
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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11
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12
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Payout (% of Target)
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200%
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182%
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164%
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145%
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127%
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109%
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91%
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73%
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54%
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0%
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0%
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0%
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2017 Performance Units
For the performance period ending December 31, 2019, we ranked 5 out of 12 companies. In the event that any companies in our peer group either cease to exist or are no longer a company for which TSR can be calculated from publicly available information, then the Committee may replace such company in the peer group. The Committee designated Concho Resources Inc. and Cimarex Energy Co. as replacement companies (in that order). Anadarko Petroleum Corporation, which was part of the peer group in 2017, has since been acquired and was replaced with Concho Resources, as approved by the Committee in the award terms at the time of grant. In January 2020, the Committee determined final payout values for Messrs. Tillman, Little, Whitehead and Wagner, the four NEOs who received 2017 performance units. Although we ranked 5 out of 12 companies, the payout was capped at 100% due to negative TSR. The payouts, which were made on January 31, 2020, were $3,018,223, $986,356, $867,993 and $394,540 for each of Messrs. Tillman, Little, Whitehead and Wagner, respectively.
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MRO TSR Ranking
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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11
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12
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Payout (% of Target)
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200%
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182%
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164%
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145%
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127%
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109%
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91%
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73%
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54%
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0%
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0%
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0%
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Stock Options
Stock options provide a direct link between officer compensation and the value delivered to stockholders. The Committee believes that stock options are inherently performance-based, as option holders only realize compensation if the value of our stock increases following the grant date.
MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 33
Stock options granted according to our normal annual grant timeline generally have a three-year ratable vesting period and a maximum term of ten years. Additional information on these awards, including the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table.
Restricted Stock and Restricted Stock Units
The Committee awards restricted stock, or restricted stock units for individuals who are retirement eligible during the vesting period, for diversification of the LTI award mix, for consistent alignment between executives and stockholders, and for retention purposes. Restricted stock and restricted stock units provide recipients with the opportunity for capital accumulation, leading to retention and stock ownership and a more predictable long-term incentive value than is provided by performance units or stock options.
Restricted stock and restricted stock units awarded generally vest in full on the third anniversary of the grant date. Prior to vesting, restricted stock recipients have the right to vote and receive dividends on the restricted shares and restricted stock unit recipients receive dividend equivalents on the restricted stock units and do not have voting rights during the vesting period.
Perquisites
We offer limited perquisites to our NEOs. We believe these perquisites are reasonable, particularly because the cost of these benefits constitutes a small percentage of each NEO’s total compensation. The Committee assesses these perquisites at least annually as part of its total competitive review. We do not provide any tax gross-ups on these perquisites. The perquisites available to our NEOs include reimbursement for certain tax, estate, and financial planning services up to $15,000 per year, an enhanced annual physical examination and a Company-provided car service for our CEO. Limited personal use of the Company aircraft is also available to our NEOs, and family members and guests may also accompany officers on business travel. Any aggregate incremental cost to the Company resulting from the personal use of the Company aircraft would be included in the “All Other Compensation” column of the Summary Compensation Table. Our NEOs also participate in the health, retirement, matching gift program and other benefit plans generally available to our U.S. employees.
See the “All Other Compensation” column of the Summary Compensation Table and the footnotes following the Summary Compensation Table for additional details concerning the perquisites provided to our NEOs in 2019.
Retirement Benefits
We offer our NEOs the opportunity to provide for retirement through four plans.
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»
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Marathon Oil Company Thrift Plan (Thrift Plan) – A tax-qualified 401(k) plan.
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»
|
Retirement Plan of Marathon Oil Company (Retirement Plan) – A tax-qualified defined benefit pension plan.
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»
|
Excess Benefit Plan (Excess Plan) – A nonqualified plan allowing employees to accrue benefits above the tax limits, with components attributable to both the Thrift Plan and the Retirement Plan.
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»
|
Marathon Oil Company Deferred Compensation Plan (Deferred Compensation Plan) – A nonqualified plan that grows when an NEO accrues benefits above the tax limits in the Thrift Plan or when an NEO defers a portion of his or her eligible compensation.
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The Thrift Plan and the Retirement Plan are broad-based plans that are open to all eligible employees of the Company. Benefits payable under our qualified and nonqualified plans are described in more detail in “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
We also currently sponsor retiree medical plans for a broad-based group of employees, including the NEOs hired before 2017.
34 MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS
Change in Control and Severance Benefits
Our NEOs do not have employment agreements but are eligible for change in control termination benefits under the Marathon Oil Corporation Officer Change In Control Severance Plan (Change in Control Plan), as described under “Potential Payments upon Termination or Change in Control.” We believe these change in control benefits are necessary to attract and retain talent within our industry, ensure continuity of management in the event of a change in control and provide our NEOs with the security to make decisions that are in the best interests of stockholders.
Our Board may exercise discretion to make severance payments to executives on a case-by-case basis. We have a policy requiring that our Board seek stockholder approval or ratification of certain severance agreements (not including the Change in Control Plan) for senior executive officers that would require payment of certain cash severance benefits exceeding 2.99 times the officer’s base salary plus the most recent annual cash bonus paid.
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STOCK OWNERSHIP REQUIREMENTS
|
All of our officers who are “executive officers” for purposes of Section 16 of the Exchange Act are subject to our stock ownership requirements, which are intended to reinforce the alignment of interests between our officers and stockholders.
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EXECUTIVE OFFICER STOCK OWNERSHIP REQUIREMENTS
|
|
CEO’s actual
stock ownership
10x
base salary
|
Position
|
Multiple of Base Salary
|
|
Chief Executive Officer
|
6
|
|
Executive Vice Presidents
|
4
|
|
Senior Vice Presidents
|
2
|
|
Vice Presidents
|
2
|
|
Executive officers have five years from their respective appointment or promotion dates to achieve the designated stock ownership level. The Committee reviews each executive officer’s progress toward the requirements during the first quarter of each year to determine whether the market value of shares, including the value of unvested shares, satisfies our requirements. Stock options and performance units are not counted as shares owned in measuring stock ownership. Executive officers who do not hold the required level of stock ownership must hold the shares they receive upon vesting of restricted stock, restricted stock units or exercise of stock options (after payment of exercise prices and after taxes) until they have met their requirement. As of January 21, 2020, each NEO meets the requisite threshold other than Mr. Hedgebeth, who is still within the five-year window. To ensure that they bear the full risks of stock ownership, our officers, including our executive officers, are prohibited from engaging in hedging transactions related to our stock.
The Committee considers the tax effects to both the Company and the NEOs when making executive compensation decisions. While the Committee endeavors to deliver compensation in a tax efficient manner, the Committee’s priority is to provide performance-based and competitive compensation. Therefore, some compensation paid to NEOs is not deductible due to the limitations imposed by Section 162(m) of the Internal Revenue Code, which limits the deduction that we can take to $1 million per “covered employee” each year.
MARATHON OIL | COMPENSATION DISCUSSION & ANALYSIS 35
The following table summarizes the total compensation for each NEO for the years shown.
|
|
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus(1)
($)
|
Stock
Awards(2)
($)
|
Option
Awards(2)
($)
|
Non‑
Equity
Incentive
Plan
Compen-
sation(3)
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
($)
|
All
Other
Compensation(5)
($)
|
Total
($)
|
Lee M. Tillman
|
2019
|
1,189,615
|
|
—
|
|
|
8,421,294
|
|
|
1,791,293
|
|
1,944,000
|
|
|
403,012
|
|
|
301,637
|
|
14,050,851
|
|
Chairman, President and Chief Executive Officer
|
2018
|
1,139,808
|
|
—
|
|
|
6,600,008
|
|
|
1,742,669
|
|
2,242,500
|
|
|
240,620
|
|
|
245,269
|
|
12,210,874
|
|
2017
|
1,090,000
|
|
—
|
|
|
5,604,382
|
|
|
1,449,989
|
|
1,501,500
|
|
|
232,568
|
|
|
237,225
|
|
10,115,664
|
|
T. Mitchell Little
|
2019
|
600,000
|
|
—
|
|
|
2,288,392
|
|
|
486,762
|
|
612,000
|
|
|
1,205,873
|
|
|
120,042
|
|
5,313,069
|
|
Executive Vice President, Operations
|
2018
|
600,000
|
|
—
|
|
|
2,625,027
|
|
|
528,081
|
|
765,000
|
|
|
—
|
|
|
102,836
|
|
4,620,944
|
|
2017
|
600,000
|
|
—
|
|
|
1,831,517
|
|
|
473,855
|
|
586,500
|
|
|
133,820
|
|
|
90,601
|
|
3,716,293
|
|
Dane E. Whitehead
|
2019
|
575,000
|
|
—
|
|
|
2,196,851
|
|
|
467,293
|
|
586,500
|
|
|
129,892
|
|
|
111,561
|
|
4,067,097
|
|
Executive Vice President and Chief Financial Officer
|
2018
|
575,000
|
|
—
|
|
|
1,760,013
|
|
|
464,715
|
|
733,125
|
|
|
90,992
|
|
|
104,273
|
|
3,728,118
|
|
2017
|
453,365
|
|
1,270,000
|
|
|
3,935,218
|
|
|
977,250
|
|
513,190
|
|
|
40,693
|
|
|
54,151
|
|
7,243,867
|
|
Patrick J. Wagner
|
2019
|
500,000
|
|
—
|
|
|
1,830,706
|
|
|
389,408
|
|
586,500
|
|
|
133,963
|
|
|
120,294
|
|
3,560,871
|
|
Executive Vice President, Corporate Development and Strategy
|
2018
|
500,000
|
|
—
|
|
|
1,890,025
|
|
|
380,221
|
|
637,500
|
|
|
82,286
|
|
|
108,294
|
|
3,598,326
|
|
2017
|
424,808
|
|
300,000
|
|
|
732,603
|
|
|
189,542
|
|
488,750
|
|
|
98,078
|
|
|
94,340
|
|
2,328,121
|
|
Reginald D. Hedgebeth
|
2019
|
575,000
|
|
—
|
|
|
1,556,101
|
|
|
331,000
|
|
596,283
|
|
|
121,695
|
|
|
98,973
|
|
3,279,052
|
|
Executive Vice President, General Counsel and Chief Administrative Officer
|
2018
|
575,000
|
|
—
|
|
|
1,280,010
|
|
|
337,977
|
|
646,875
|
|
|
85,354
|
|
|
88,346
|
|
3,013,562
|
|
2017
|
375,961
|
|
300,000
|
|
|
588,118
|
|
|
622,149
|
|
452,820
|
|
|
33,930
|
|
|
41,826
|
|
2,414,804
|
|
(1) For Messrs. Whitehead and Hedgebeth, this column includes the one-time cash sign-on bonus amounts received upon commencement of employment. For Mr. Wagner, this column includes the one-time cash bonus received upon completion of his interim term as Chief Financial Officer.
(2) These columns reflect the aggregate grant date fair values calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. Assumptions used in the calculation of these amounts are included in footnote 18 to our consolidated financial statements in our annual reports on Form 10-K for the years ended December 31, 2019, December 31, 2018 and December 31, 2017. For 2017, 2018 and 2019, the Stock Awards column also includes the grant date fair value of the share-denominated performance units granted in February 2017, February 2018 and February 2019 respectively. Grants made in February 2017 and February 2018 will be settled in cash and grants made in February 2019 will be share settled. The value ultimately realized by the officers upon the actual vesting of the awards may or may not be equal to this determined value, as these awards are subject to market conditions and have been valued based on an assessment of the market conditions as of the grant date. The maximum (200%) payouts for the 2019 performance units using the December 31, 2019 closing stock price of $13.58 would be: for Mr. Tillman, $7,441,080; for Mr. Little, $2,022,035; for Mr. Whitehead, $1,941,152; for Mr. Wagner, $1,617,622; and for Mr. Hedgebeth, $1,374,975. See the “Grants of Plan-Based Awards Table” and “Long-Term Incentive Awards” for further detail on our performance unit program.
(3) This column reflects annual cash bonus payments, determined by the Compensation Committee and paid in the first quarter of the following year respectively, pursuant to the Company’s annual cash bonus program. These awards are discussed in further detail in our Compensation Discussion and Analysis under “Annual Cash Bonus.”
(4) This column reflects the annual change in accumulated benefits under our retirement plans. See “Post-Employment Benefits” for more information about our defined benefit plans and the assumptions used in calculating these amounts. No deferred compensation earnings are reported in this column because our non-qualified deferred compensation plans do not
36 MARATHON OIL | EXECUTIVE COMPENSATION
provide above-market or preferential earnings. In 2018 for Mr. Little, the actual change in accumulated benefit decreased by $226,165.
(5) The following table describes each component of the “All Other Compensation” column for 2019 in the Summary Compensation Table. For additional information regarding perquisites, see “Perquisites” in our Compensation Discussion and Analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Tax &
Financial
Planning(a)
($)
|
Misc.(b)
($)
|
Company Contributions to Defined
Contribution
Plans(c)
($)
|
Matching
Contributions(d)
($)
|
Total All
Other
Compensation
($)
|
Mr. Tillman
|
15,000
|
|
37,462
|
|
|
239,175
|
|
10,000
|
|
301,637
|
|
Mr. Little
|
15,000
|
|
—
|
|
|
95,550
|
|
9,492
|
|
120,042
|
|
Mr. Whitehead
|
15,000
|
|
—
|
|
|
91,569
|
|
4,992
|
|
111,561
|
|
Mr. Wagner
|
15,000
|
|
—
|
|
|
79,894
|
|
25,400
|
|
120,294
|
|
Mr. Hedgebeth
|
3,287
|
|
—
|
|
|
85,686
|
|
10,000
|
|
98,973
|
|
(a) This column reflects reimbursement for professional advice related to tax, estate, and financial planning. The maximum annual benefit is $15,000, and reimbursements are attributed to the calendar year in which services are performed. Due to processing delays, the actual amount reimbursed to an officer may exceed $15,000 in a given year.
(b) For Mr. Tillman, this column reflects access to a Company-provided car service. This benefit is offered to Mr. Tillman to allow the efficient use of his time and to provide safe transportation given the demands of his role, including travel, after hours/weekend obligations and extended work hours. We provide access to this benefit because we believe that the cost is outweighed by the convenience, increased safety and efficiency that it offers.
(c) This column reflects amounts contributed by us under the Thrift Plan and related non-qualified deferred compensation plans. See “Post-Employment Benefits” and “Nonqualified Deferred Compensation” for more information about the non-qualified plans.
(d) The amounts shown represent contributions made on behalf of the NEOs for 2019 contributions under our matching gifts programs for universities and approved not-for-profit charities.
MARATHON OIL | EXECUTIVE COMPENSATION 37
|
|
GRANTS OF PLAN-BASED AWARDS IN 2019
|
The following table provides information about all plan-based LTI awards (stock options, restricted stock, restricted stock units and performance units) granted to each named executive officer during 2019. The awards listed in the table were granted under the Marathon Oil Corporation 2016 Incentive Compensation Plan, or 2016 Plan, and are described in more detail in “Compensation Discussion and Analysis.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non‑Equity
Incentive Plan Awards(1)
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
|
All Other
Stock Awards:
Number of
Shares of
Stock or Units(2)
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying Options
(#)
|
Exercise
or Base
Price of
Option Awards
($)
|
Grant Date
Fair Value
of Stock
and Option Awards(3)
($)
|
Name
|
Type of Award
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Lee M. Tillman
|
Annual Cash Bonus
|
|
567,000
|
|
1,620,000
|
3,240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/27/2019
|
|
|
|
|
|
147,945
|
|
273,972
|
547,944
|
|
|
|
|
5,661,303
|
|
|
Stock Options
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
270,588
|
16.79
|
1,791,293
|
|
|
Restricted Stock Units
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
164,383
|
|
|
2,759,991
|
|
T. Mitchell Little
|
Annual Cash Bonus
|
|
178,500
|
|
510,000
|
1,020,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/27/2019
|
|
|
|
|
|
40,202
|
|
74,449
|
148,898
|
|
|
|
|
1,538,399
|
|
|
Stock Options
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
73,529
|
16.79
|
486,762
|
|
|
Restricted Stock
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
44,669
|
|
|
749,993
|
|
Dane E. Whitehead
|
Annual Cash Bonus
|
|
171,063
|
|
488,750
|
977,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
02/27/2019
|
|
|
|
|
|
38,594
|
|
71,471
|
142,942
|
|
|
|
|
1,476,862
|
|
|
Stock Options
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
70,588
|
16.79
|
467,293
|
|
|
Restricted Stock
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
42,882
|
|
|
719,989
|
|
Patrick J. Wagner
|
Annual Cash Bonus
|
|
148,750
|
|
425,000
|
850,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/27/2019
|
|
|
|
|
|
32,162
|
|
59,559
|
119,118
|
|
|
|
|
1,230,715
|
|
|
Stock Options
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
58,823
|
16.79
|
389,408
|
|
|
Restricted Stock
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
35,735
|
|
|
599,991
|
|
Reginald D. Hedgebeth
|
Annual Cash Bonus
|
|
158,105
|
|
451,729
|
903,459
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/27/2019
|
|
|
|
|
|
27,338
|
|
50,625
|
101,250
|
|
|
|
|
1,046,105
|
|
|
Stock Options
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
16.79
|
331,000
|
|
|
Restricted Stock
|
02/27/2019
|
|
|
|
|
|
|
|
|
|
|
30,375
|
|
|
509,996
|
|
(1) This column shows potential payout opportunity established for the 2019 performance period under the Company’s Annual Cash Bonus Program. The actual amounts paid to each NEO under the program for 2019 are disclosed in the Summary Compensation Table.
(2) Performance units, restricted stock and restricted stock units, discussed under “Long-Term Incentive Awards,” are denominated as an equivalent of one share of our common stock and, if earned, are paid in stock.
(3) The amounts shown in this column reflect the total grant date fair values of stock options, restricted stock, restricted stock units and performance units calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. The Black-Scholes value used for the stock options granted on February 27, 2019 was $6.62. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. Valuation assumptions used in the calculation of these amounts are included in footnote 18 to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2019. See “Long-Term Incentive Awards” for more information about restricted stock, restricted stock units, stock options, and performance unit awards.
38 MARATHON OIL | EXECUTIVE COMPENSATION
|
|
OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR-END
|
The following table provides information about the unexercised stock options (vested and unvested) and unvested restricted stock and restricted stock units held by each NEO as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
|
Number of Securities
Underlying Unexercised Options
|
|
|
|
Restricted Stock/Units
|
Equity Incentive Plan Awards
(Performance Units)
|
|
Name
|
Exercisable
(#)
|
Unexercisable(1)
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
Number of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested
(#)
|
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
($)
|
Lee M. Tillman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,886
|
|
|
—
|
|
|
34.65
|
|
|
8/15/2023
|
133,353
|
(2)
|
1,810,934
|
|
222,255
|
(7)
|
3,018,223
|
|
|
330,189
|
|
|
—
|
|
|
34.03
|
|
|
2/25/2024
|
170,455
|
(3)
|
2,314,779
|
|
284,091
|
(8)
|
3,857,956
|
|
|
256,591
|
|
|
—
|
|
|
29.06
|
|
|
2/25/2025
|
164,383
|
(4)
|
2,232,321
|
|
273,972
|
(9)
|
4,055,388
|
|
|
212,000
|
|
|
—
|
|
|
7.22
|
|
|
2/24/2026
|
|
|
|
|
|
|
|
|
|
161,648
|
|
|
80,825
|
|
|
15.76
|
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
99,638
|
|
|
199,276
|
|
|
14.52
|
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
—
|
|
|
270,588
|
|
|
16.79
|
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
T. Mitchell Little
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,947
|
|
|
—
|
|
|
33.06
|
|
|
5/25/2021
|
57,928
|
(2)
|
786,662
|
|
72,633
|
(7)
|
986,356
|
|
|
2,309
|
|
|
—
|
|
|
26.92
|
|
|
8/31/2021
|
66,002
|
(3)
|
896,307
|
|
86,089
|
(8)
|
1,169,089
|
|
|
5,009
|
|
|
—
|
|
|
35.06
|
|
|
2/28/2022
|
44,669
|
(4)
|
606,605
|
|
74,449
|
(9)
|
1,102,009
|
|
|
33,700
|
|
|
—
|
|
|
32.86
|
|
|
2/26/2023
|
|
|
|
|
|
|
|
|
|
56,604
|
|
|
—
|
|
|
34.03
|
|
|
2/25/2024
|
|
|
|
|
|
|
|
|
|
70,299
|
|
|
—
|
|
|
29.06
|
|
|
2/25/2025
|
|
|
|
|
|
|
|
|
|
58,667
|
|
|
—
|
|
|
7.22
|
|
|
2/24/2026
|
|
|
|
|
|
|
|
|
|
52,826
|
|
|
26,414
|
|
|
15.76
|
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
30,193
|
|
|
60,387
|
|
|
14.52
|
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
—
|
|
|
73,529
|
|
|
16.79
|
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
Dane E. Whitehead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,314
|
|
|
49,657
|
|
|
16.28
|
|
|
3/7/2027
|
84,835
|
(6)
|
1,152,059
|
|
63,917
|
(7)
|
867,993
|
|
|
26,570
|
|
|
53,141
|
|
|
14.52
|
|
|
2/28/2028
|
45,455
|
(3)
|
617,279
|
|
75,758
|
(8)
|
1,028,794
|
|
|
—
|
|
|
70,588
|
|
|
16.79
|
|
|
2/27/2029
|
42,882
|
(4)
|
582,338
|
|
71,471
|
(9)
|
1,057,928
|
|
Patrick J. Wagner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,883
|
|
|
—
|
|
|
35.91
|
|
|
5/9/2024
|
27,763
|
(2)
|
377,022
|
|
29,053
|
(7)
|
394,540
|
|
|
35,150
|
|
|
—
|
|
|
29.06
|
|
|
2/25/2025
|
47,522
|
(3)
|
645,349
|
|
61,984
|
(8)
|
841,743
|
|
|
26,667
|
|
|
—
|
|
|
7.22
|
|
|
2/24/2026
|
35,735
|
(4)
|
485,281
|
|
59,559
|
(9)
|
881,604
|
|
|
21,130
|
|
|
10,566
|
|
|
15.76
|
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
21,739
|
|
|
43,479
|
|
|
14.52
|
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
0
|
|
|
58,823
|
|
|
16.79
|
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
Reginald D. Hedgebeth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,299
|
|
|
35,150
|
|
|
15.31
|
|
|
4/26/2027
|
25,610
|
(5)
|
347,784
|
|
55,097
|
(8)
|
748,217
|
|
|
19,324
|
|
|
38,648
|
|
|
14.52
|
|
|
2/28/2028
|
33,058
|
(3)
|
448,928
|
|
50,625
|
(9)
|
749,361
|
|
|
—
|
|
|
50,000
|
|
|
16.79
|
|
|
2/27/2029
|
30,375
|
(4)
|
412,493
|
|
|
|
|
|
(1) All stock options listed in this column vest in one-third increments on each anniversary of the grant date, and expire 10 years from the date of grant.
(2) Shares of restricted stock vest, subject to certain exceptions, in February 2020.
(3) Shares of restricted stock vest, subject to certain exceptions, in February 2021.
(4) Shares of restricted stock/units vest, subject to certain exceptions, in February 2022.
MARATHON OIL | EXECUTIVE COMPENSATION 39
(5) Shares of restricted stock vest, subject to certain exceptions, in April 2020.
(6) Shares of restricted stock vest, subject to certain exceptions, in March 2020.
(7) Share-based performance units granted in 2017 and have a performance period of January 1, 2017 to December 31, 2019.
(8) Share-based performance units granted in 2018 and have a performance period of January 1, 2018 to December 31, 2020.
(9) Share-based performance units granted in 2019 and have a performance period of January 1, 2019 to December 31, 2021.
|
|
OPTION EXERCISES AND STOCK VESTED IN 2019
|
The following table provides information about the value realized by the NEOs on option award exercises and stock vesting during 2019.
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of Shares
Acquired on
Exercise
(#)
|
Value Realized on
Exercise(1)
($)
|
Number of Shares
Acquired on
Vesting(2)
(#)
|
Value Realized on
Vesting(3)
($)
|
Lee M. Tillman
|
—
|
—
|
636,769
|
13,135,666
|
T. Mitchell Little
|
—
|
—
|
236,008
|
4,470,110
|
Dane E. Whitehead
|
—
|
—
|
46,485
|
783,737
|
Patrick J. Wagner
|
—
|
—
|
93,569
|
1,888,582
|
Reginald D. Hedgebeth
|
—
|
—
|
6,402
|
111,267
|
(1) This column reflects the actual pre-tax income realized by NEOs upon exercise of stock options, which, in each case, is the fair market value of the shares on the exercise date less the grant price.
(2) Included in this column are the vesting of restricted stock, as well as the following vested performance units that were settled in cash: for Mr. Tillman, 439,151; for Mr. Little, 126,292; and for Mr. Wagner, 57,406.
(3) Calculated based on the fair market value of the shares on the vesting date and includes the following cash payments for dividend equivalents on vested performance units: for Mr. Tillman, $395,236; for Mr. Little, $113,663; and for Mr. Wagner, $51,665.
Marathon Oil offers NEOs the opportunity to save for retirement as follows:
|
|
»
|
Marathon Oil Company Thrift Plan, or Thrift Plan: a tax-qualified 401(k) plan that currently provides for company matching contributions of up to 7% of eligible earnings.
|
|
|
»
|
Retirement Plan of Marathon Oil Company, or Retirement Plan: a tax qualified defined benefit pension plan.
|
|
|
»
|
Marathon Oil Company Excess Benefit Plan, or Excess Plan: a nonqualified plan. The defined benefit portion allows participants to accrue benefits above the defined benefit tax limits, and the defined contribution portion allows participants to accrue benefits above the defined contribution tax limits.
|
|
|
»
|
Marathon Oil Company Deferred Compensation Plan, or Deferred Compensation Plan: a nonqualified plan allowing participants to defer a portion of their compensation and accrue benefits above the Thrift Plan tax limits.
|
All plans have a three-year vesting requirement for company contributions. All NEOs have met the vesting requirement.
See “Nonqualified Deferred Compensation” below for additional information on the Deferred Compensation Plan and the defined contribution portion of the Excess Plan.
40 MARATHON OIL | EXECUTIVE COMPENSATION
Retirement Plan
In general, all regular full-time and part-time employees in the United States are eligible to participate in the Retirement Plan as of their date of hire.
Benefit accruals are determined under a cash-balance formula, under which plan participants receive pay credits each year equal to a percentage of eligible compensation based on their plan points. Plan points equal the sum of a participant’s age and cash-balance service. Participants with fewer than 50 points receive a 7% pay credit percentage; participants with 50 to 69 points receive a 9% pay credit percentage; and participants with 70 or more points receive an 11% pay credit percentage. Participants are also credited with interest at a rate based on the 30-year Treasury rate with a 3.00% minimum, which in 2019 was 3.18%.
For 2019, Mr. Little received a pay credit equal to 11% of eligible compensation. Messrs. Tillman, Whitehead, Wagner and Hedgebeth received pay credits equal to 9% of eligible compensation.
Participants who began employment prior to January 1, 2010 also have a portion of their benefit calculated under a legacy final average pay formula, which is referred to as the Legacy formula. Mr. Little is the only NEO with a Legacy benefit. Up to 37.5 years of participation may be recognized under the formula, and only service earned prior to January 1, 2010 is recognized. Eligible earnings under the Retirement Plan primarily include base salary and annual cash bonuses (including Thrift Plan deferrals but excluding amounts deferred under our nonqualified Deferred Compensation Plan). LTI compensation is not included. Final average pay was frozen as of July 6, 2015, but vesting service and age continue to be updated under the Legacy formula.
The monthly benefit under the Legacy formula is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
|
1.6%
|
x
|
Final Average Pay
|
x
|
Years of Participation
|
]
|
-
|
[
|
1.33%
|
x
|
Estimated Primary SS Benefit
|
x
|
Years of Participation
|
]
|
Normal retirement age under the Retirement Plan is age 65. However, retirement-eligible participants are able to retire and receive an unreduced benefit under the Legacy formula upon reaching age 62. Retirement Plan benefits include various annuity options and a lump sum distribution option. Participants are eligible for early retirement subsidies under the Legacy formula upon reaching age 50 and completing ten years of vesting service. Mr. Little is eligible for early retirement subsidies.
We have not granted years of service in addition to the service recognized under the terms of our qualified retirement plans (applicable to a broad-based group of employees) to any NEO for purposes of retirement benefit accruals.
Excess Plan - Defined Benefit Portion
The Excess Plan for certain highly compensated employees, including our NEOs, provides benefits that participants would have received under our tax-qualified Retirement Plan but for certain Internal Revenue Code limitations. Eligible compensation under the Excess Plan includes deferred compensation contributions made by NEOs. The Excess Plan also provides an enhancement for officers based on the three highest bonuses earned during their last ten years of employment, instead of the consecutive bonus formula in place for non-officers. Distributions under the Excess Plan are paid in a lump sum following separation from service.
Pension Benefits Table
The following table shows the actuarial present value of accumulated benefits payable to each NEO under the Retirement Plan and the defined benefit portion of the Excess Plan as of December 31, 2019. These values have been determined using actuarial assumptions consistent with those used in our financial statements.
MARATHON OIL | EXECUTIVE COMPENSATION 41
|
|
|
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Number of Years of Credited Service (1)
(#)
|
Present Value of Accumulated Benefit (2)
($)
|
Payments During Last Fiscal Year
($)
|
Lee M. Tillman
|
Retirement Plan
|
6.42
|
|
|
183,436
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
6.42
|
|
|
1,446,387
|
|
—
|
|
|
T. Mitchell Little
|
Retirement Plan
|
33.00
|
|
|
1,576,515
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
33.00
|
|
|
4,241,396
|
|
—
|
|
|
Dane E. Whitehead
|
Retirement Plan
|
2.83
|
|
|
75,238
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
2.83
|
|
|
186,339
|
|
—
|
|
|
Patrick J. Wagner
|
Retirement Plan
|
5.75
|
|
|
155,398
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
5.75
|
|
|
304,842
|
|
—
|
|
|
Reginald D. Hedgebeth
|
Retirement Plan
|
2.75
|
|
|
75,183
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
2.75
|
|
|
165,796
|
|
—
|
|
|
(1) Represents the number of years the NEO has participated in the plan. However, Plan Participation Service, used to calculate each participant’s benefit under the Legacy formula, was frozen as of December 31, 2009.
(2) Assuming a discount rate of 3.13%, a lump sum interest rate of 0.63%, the RP2000 combined healthy mortality table weighted 75% male and 25% female, a lump sum election rate of 100% for the non‑qualified plan and 90% for the qualified plan, and retirement at age 62 or the age at measurement date, if older.
|
|
NONQUALIFIED DEFERRED COMPENSATION
|
We offer certain employees, including our NEOs, the opportunity to accrue benefits equal to the Company matching contributions they would have received under the Thrift Plan but for certain Internal Revenue Code limitations. Officers generally accrue these benefits in the Deferred Compensation Plan, while other employees accrue such benefits in the defined contribution portion of the Excess Plan. Both plans have a three-year vesting requirement for Company contributions. All NEOs have met the vesting requirement. Distributions from the Deferred Compensation Plan and the Excess Plan are paid as a lump sum following separation from service.
Deferred Compensation Plan
The Deferred Compensation Plan is an unfunded, nonqualified plan into which a participant may elect to defer up to 20% of his or her eligible compensation each year. Messrs. Wagner and Hedgebeth elected to defer compensation for 2019. Participants are fully vested in their own deferrals under the plan. Additionally, participants can receive company contributions into the plan equal to the maximum potential matching contribution under the Thrift Plan after they have reached defined contribution accruals under the Thrift Plan in excess of tax limits.
The investment options available under the Deferred Compensation Plan generally mirror the core investment options available under the Thrift Plan.
42 MARATHON OIL | EXECUTIVE COMPENSATION
Excess Plan - Defined Contribution Portion
Prior to becoming eligible for participation in the Deferred Compensation Plan, NEOs may have received defined contribution accruals under the Excess Plan. These contributions were available after a participant’s Thrift Plan contributions were limited due to tax requirements and equaled the matching contribution that participants would have received under the Thrift Plan but for limits imposed by tax law. Defined contribution accruals in the Excess Plan are credited with interest equal to that paid in the “Managed Income Portfolio II” option of the Marathon Oil Company Thrift Plan. The annual rate of return on this option for 2019 was 2.39%.
Nonqualified Deferred Compensation Table
The following table shows each NEO’s accumulated benefits under our Deferred Compensation Plan for 2019; the NEOs had no accumulated benefits under the defined contribution portion of our Excess Plan for 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Executive
Contributions
in Last Fiscal
Year
($)
|
Registrant
Contributions
in Last Fiscal
Year(1)
($)
|
Aggregate
Earnings
in Last
Fiscal Year
($)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance at
Last Fiscal
Year End
($)
|
Lee M. Tillman
|
Deferred Compensation
|
—
|
|
|
220,648
|
|
238,882
|
|
|
—
|
|
|
1,387,448
|
|
T. Mitchell Little
|
Deferred Compensation
|
—
|
|
|
75,950
|
|
83,237
|
|
|
—
|
|
|
572,032
|
|
Dane E. Whitehead
|
Deferred Compensation
|
—
|
|
|
71,969
|
|
20,451
|
|
|
—
|
|
|
158,503
|
|
Patrick J. Wagner
|
Deferred Compensation
|
113,750
|
|
(2)
|
60,698
|
|
155,417
|
|
|
—
|
|
|
882,482
|
|
Reginald D. Hedgebeth
|
Deferred Compensation
|
55,289
|
|
(2)
|
66,551
|
|
24,728
|
|
|
—
|
|
|
202,775
|
|
(1) The amounts shown in this column are also included in the “All Other Compensation” column of the Summary Compensation Table.
(2) Reflects elective 2019 salary deferrals under the plan and, for Mr. Wagner, also includes a 2018 bonus deferral amount that was paid in 2019.
|
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
As a matter of policy, we do not enter into employment, severance, or change in control agreements with our NEOs. Rather, we provide a Marathon Oil Corporation Officer Change in Control Severance Benefits Plan (Change in Control Plan), which is described in more detail below.
Retirement or Separation
Upon retirement or separation, our NEOs are entitled to receive their vested benefits that have accrued under our broad-based and executive benefit programs. For more information, see “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
Unvested outstanding equity awards generally forfeit upon a separation from service. Certain of our outstanding equity awards include limited exceptions in connection with retirement. If a NEO retires, unvested restricted stock awards are forfeited, except in the case of mandatory retirement (age 65). Unvested restricted stock unit awards will continue to vest based on the original vesting date if a NEO is at least age 60 with five years of service upon separation from service and certain additional requirements are met. Unvested stock options granted prior to 2019 forfeit upon retirement; all other unvested stock options vest if a NEO is at least age 60 with five years of service upon separation from service and certain additional requirements are met. Unvested
MARATHON OIL | EXECUTIVE COMPENSATION 43
performance units are forfeited upon a separation from service unless a NEO is at least age 50 with ten years of service, has worked at least half of the performance period and meets certain other requirements, in which case awards may be vested on a prorated basis at the Committee’s discretion. On December 31, 2019, Mr. Little was the only NEO who meets the retirement vesting criteria for certain awards.
Death or Disability
In the event of death or disability, our NEOs (or the beneficiary or estate, as defined by the plan terms) would be entitled to vested benefits accrued under our broad-based and executive benefits programs. LTI awards would immediately vest in full upon the death of an NEO, with performance units vesting at the target level. In the event of disability, LTI awards would generally continue to vest as if the NEO remained actively employed during the period of disability (meaning the NEO has been determined to be disabled under the Company’s long-term disability plan or can provide proof of a Social Security determination of disability). However, for restricted stock/restricted stock units and stock options granted in 2019, upon termination of employment not for cause while during a period of disability, the awards will immediately vest in full.
Change in Control
To encourage our NEOs to continue their dedication to their assigned duties where a change in control of the Company is under consideration, our Change in Control Plan provides severance benefits if employment is terminated under certain circumstances generally following a change in control.
Under the Change in Control Plan, a change in control generally will have occurred if:
|
|
»
|
any person not affiliated with Marathon Oil acquires 20% or more of the voting power of our outstanding securities;
|
|
|
»
|
our Board no longer has a majority comprised of (1) individuals who were directors on the effective date of the plan and (2) new directors (other than directors who join our Board in connection with an election contest) approved by two-thirds of the directors then in office who (a) were directors on the effective date of the plan or (b) were themselves previously approved by our Board in this manner;
|
|
|
»
|
we merge with another company and, as a result, our stockholders hold less than 50% of the surviving entity’s voting power immediately after the transaction;
|
|
|
»
|
our stockholders approve a plan of complete liquidation of Marathon Oil; or
|
|
|
»
|
we sell all or substantially all of our assets.
|
If an NEO is terminated without cause or resigns for good reason following a change in control (or prior to a change in control if the NEO reasonably demonstrates that such termination of employment was at the request of actions by a third party who has taken steps reasonably calculated to effect a change in control), he or she will be entitled to the following:
|
|
»
|
a cash payment of up to three times the sum of (1) the NEO’s base salary (as in effect immediately prior to the occurrence of the circumstances giving rise to the termination from employment or, if higher, immediately prior to the change in control) and (2) the average bonus awarded to the NEO in the three years before the termination from employment or, if higher, before the change in control
|
|
|
»
|
a cash payment equal to the NEO’s annual bonus at target level multiplied by a fraction equal to the number of days in the bonus calculation year during which the NEO was employed divided by 365; and
|
|
|
»
|
a cash payment equal to eighteen times the monthly COBRA premium in effect at the NEO’s termination from employment for the level of coverage in which the NEO participated immediately prior to his or her termination from employment.
|
These benefits are not payable if the termination is for cause (as defined in the Change in Control Plan) or due to mandatory retirement, death, disability or resignation (other than for good reason, as defined in the Change in Control Plan) by the NEO.
44 MARATHON OIL | EXECUTIVE COMPENSATION
The program includes no provisions to reimburse or “gross up” tax obligations following a change in control.
If a change in control occurs prior to the end of a performance period, unvested performance units will vest at the applicable performance percentage based on Marathon Oil’s actual relative TSR ending on the last regular trading day immediately prior to the date of the change of control.
For awards granted in 2017, if (1) a change in control occurs or (2) an NEO is terminated without cause or resigns for good reason prior to a change in control and such separation was at the request of or due to actions of a third party who has taken steps reasonably calculated to effect a change in control, unvested stock options and restricted stock vest in full. Based on its analysis of market trends, the Committee modified the Change in Control Plan, and beginning with awards granted in 2018, accelerated vesting of restricted stock, restricted stock units and stock options will occur generally only if an NEO is terminated without cause or resigns for good reason within the two years following a change in control.
The Change in Control Plan will continue in effect for two years after a change in control.
The following tables assume a termination date or change in control date of December 31, 2019, the last business day of 2019. The value of the equity awards (accelerated vesting of restricted stock awards, stock options and performance unit awards) was calculated using the December 31, 2019 closing market price for our common stock ($13.58) and based on a performance period ending December 31, 2019. The value of performance unit awards assumes that the 2017 and 2018 Performance Units would vest and both be paid out at 100% (based on the negative TSR provision in these awards that caps vesting at target) and the 2019 Performance Units would vest and be paid out at 109%.
Payments Upon a Change in Control without Termination of Employment
|
|
|
|
Name
|
Accelerated Vesting of LTI
($)
|
Lee M. Tillman
|
12,742,501
|
|
T. Mitchell Little
|
3,849,270
|
|
Dane E. Whitehead
|
4,106,774
|
|
Patrick J. Wagner
|
2,354,614
|
|
Reginald D. Hedgebeth
|
1,845,362
|
|
Payments Upon a Change in Control Followed by Termination of Employment with Good Reason or by the Company without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Accelerated
Vesting of LTI(1)
($)
|
Severance
Payment ($)
|
Welfare Benefits(2)
($)
|
Total
Payments
($)
|
Lee M. Tillman
|
17,289,601
|
|
|
10,276,500
|
|
|
36,184
|
|
|
27,602,285
|
|
T. Mitchell Little
|
5,547,028
|
|
|
4,171,500
|
|
|
36,184
|
|
|
9,754,712
|
|
Dane E. Whitehead
|
5,306,390
|
|
|
4,083,224
|
|
|
36,184
|
|
|
9,425,798
|
|
Patrick J. Wagner
|
3,625,539
|
|
|
3,393,629
|
|
|
36,184
|
|
|
7,055,352
|
|
Reginald D. Hedgebeth
|
2,706,782
|
|
|
3,826,273
|
|
|
36,184
|
|
|
6,569,239
|
|
(1) Reflects the accelerated vesting of LTI only in a “double-trigger vesting change in control” event, i.e., an event in which the executive’s employment is terminated without cause or in which the executive terminates for good reason after a change in control. Restricted Stock/Restricted Stock Units and Stock Options granted after January 1, 2018 only receive accelerated vesting in the event of a double-trigger change in control. Restricted Stock and Stock Options granted prior to January 1, 2018 receive single-trigger accelerated vesting treatment in a change in control event, vesting on the change in control.
MARATHON OIL | EXECUTIVE COMPENSATION 45
(2) Reflects an amount equal to 18 months multiplied by the monthly COBRA premium in effect at the NEO’s date of separation from service for the level of coverage in which the NEO participated immediately prior to the date of separation from service.
We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Tillman, our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner that is consistent with applicable law, regulatory and other guidance.
For our last completed fiscal year, the annual total compensation for our median employee was $144,720. The annual total compensation of our CEO, as reported in the Summary Compensation Table, was $14,050,851. Thus, we estimate that our CEO’s compensation was 97 times the median of the annual total compensation for all of our employees.
|
|
METHODOLOGY USED TO IDENTIFY MEDIAN EMPLOYEE
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To identify the annual total compensation for all of our employees for purposes of identifying our median employee, we selected October 1, 2019, as our measurement date to allow sufficient time to gather data from the two main payroll systems we use, which are located in the United States and Equatorial Guinea.
The majority of our employees are on our United States payroll, and the compensation used for employees on the United States payroll is compensation that would be reflected in Box 5 of Form W-2 for the period from January 1, 2019 to September 30, 2019.
Due to the sale of our UK asset in 2019, for a small number of employees that transferred from the UK to the US payroll in 2019, the compensation used reflects all payments made, specifically including basic pay, overtime, offshore and overseas allowances, annual cash bonus and other bonus amounts, and LTI awards that vested, during the period from January 1, 2019 through September 30, 2019.
The compensation used for employees on the Equatorial Guinea payroll reflects pay from December 16, 2018 through September 15, 2019 and includes basic pay, absence pay, overtime amounts, offshore premiums and shift differential payments, as well as annual cash bonus amounts paid on March 15, 2019, and October bonus amounts paid on October 8, 2019. These October bonus amounts were included because they reflect work done prior to October 1, and their inclusion provides Equatorial Guinea payroll information that is more consistent with the measures used for the United States payroll.
These measures of compensation were selected based on our view that each measure provides a reasonable estimate of the comprehensive compensation payments to our employees on each of the relevant payrolls. Taken in the aggregate, we believe this data provides a reasonable estimate of the annual total compensation of all employees of Marathon Oil Corporation and its consolidated subsidiaries.
As of October 1, 2019, our total employee population consisted of 1,995 employees working at Marathon Oil Corporation and its consolidated subsidiaries, which includes all full-time, part-time and seasonal or temporary employees. Of this total, 1,535 were United States payroll employees, which includes our United States payroll expatriate employees, and 460 were Equatorial Guinea payroll employees. The employees located in Kurdistan and the United Kingdom were no longer employees of Marathon Oil as of October 1, 2019 and are therefore not included in the CEO pay ratio calculation.
Using this methodology, we determined that our median employee was a salaried, full-time employee working in the United States.
46 MARATHON OIL | EXECUTIVE COMPENSATION
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TRANSACTIONS WITH RELATED PERSONS
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We have written procedures for monitoring, reviewing, approving or ratifying related person transactions. We will enter into or ratify related person transactions only when our Board, acting through the Corporate Governance and Nominating Committee, determines that the related person transaction is in the best interests of the Company and its stockholders. The primary features of these procedures are:
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Each director and executive officer must submit a list of his or her immediate family members, each listed individual’s employer and job title, each firm, corporation or other entity in which such individual is a director, executive officer, partner or principal or in a similar position or in which such person has a five percent or greater beneficial ownership interest, and any profit, non-profit charitable or trade organization for which such individual is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
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The Company maintains a list, to the extent the information is publicly available, of five percent beneficial owners, including (a) if the owner is an individual, the same information requested of directors and executive officers as noted above, and (b) if the owner is a firm, corporation or other entity, a list of principals or executive officers of the firm, corporation or entity.
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The Corporate Governance and Nominating Committee considers the facts and circumstances of each related person transaction and determines whether to approve it.
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Any pending or ongoing related person transaction is submitted to the Corporate Governance and Nominating Committee or Committee Chair, which will consider all of the relevant facts and circumstances. Based on the conclusions reached, the Corporate Governance and Nominating Committee or the Committee Chair evaluates all options, including ratification, amendment or termination of the related person transaction.
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The Corporate Governance and Nominating Committee annually reviews any previously approved or ratified related person transaction with a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Committee determines whether it is in the best interests of the Company and its stockholders to continue, modify or terminate the transaction.
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During 2019, there were no transactions in excess of $120,000 between the Company and a related person in which the related person had a direct or indirect material interest.
MARATHON OIL | SECTION 16(A) REPORTING 47