- Corporate Responsibility
- Royalty Owners
2019 EXECUTIVE COMPENSATION HIGHLIGHTS
OUR CEO’S COMPENSATION ALIGNS WITH THE SHAREHOLDER’S EXPERIENCE
In 2019, paralleling energy stocks in general, our price per share declined 29%. The performance units granted to our CEO for the period of 2017 – 2019 have no value because the performance threshold adopted by the Compensation Committee provided no payout on the performance units for this time period, and our CEO’s total realized pay from 2019 was 44% lower on December 31, 2019 than target pay, which is a more significant decrease than in our one-year total shareholder return (“TSR”).
In the chart above, “CEO Target Pay” refers to the target compensation opportunity offered to our CEO in 2019. Target Pay includes base salary, the annual incentive target compensation opportunity and the grant date value of long-term incentive (“LTI”) awards in 2019, as reported in the summary compensation tables (“SCT”) in this proxy statement.
In the chart above, “Realized Pay” refers to the corresponding amounts earned, or on track to be earned, from the 2019 Target Pay as of December 31, 2019. Realized Pay includes base salary, annual incentive compensation actually earned and the value of the LTI awards based on the Company’s closing stock price on December 31, 2019.
91% OF OUR CEO’S 2019 COMPENSATION IS AT RISK
We embrace a pay-for-performance philosophy. Thus, the vast majority of our chief executive officers’ total direct compensation is at risk, as noted in the graphic below.
We listened to shareholders regarding compensation and responded by adding a return metric to our 2019 executive compensation program
In 2018, our “Say-on-Pay” proposal received 69.2% support, which was below the Company’s historical support levels that averaged 92.3% in favor from 2013 to 2017. The Compensation Committee (the “Committee”) responded by directing an expansion of our regular engagement with shareholders, and upon an evaluation of our business strategy and portfolio following the divestiture of our Fayetteville assets in December 2018, we replaced the cash flow per debt adjusted share (“CFPDAS”) metric with a return on average capital employed (“ROACE”) metric for the 2019 long-term incentive (“LTI”) awards. The 2019 “Say-on-Pay” vote of 91.27% was in line with the recent, historical average.
What We Do
- Alignment with Shareholders. Long-term incentive awards vest over periods of several years to reward sustained Company performance over time.
- Share Ownership Guidelines. Our named executive officers (“NEOs”) must hold equity of a value equivalent to multiples of their base salaries (two times for senior vice presidents, three times for executive vice presidents and six times for our CEO).
- Clawbacks. If we restate our financial statements, other than as a result of changes to accounting rules or regulations, we may recover incentive compensation that was paid or granted in the three-year period prior to the restatement, regardless of whether misconduct caused the restatement.
- Double-Trigger Severance. Cash severance in connection with a change in control is paid only if an actual or constructive termination of employment also occurs.
- Annual Risk Assessments. The Compensation Committee evaluates the influence of executive compensation on corporate risk.
- Peer Group Comparison. With the help of independent compensation consultants, we compare executive compensation against industry compensation practices.
- At-will employment. Each of the NEOs is employed at-will and is expected to demonstrate exceptional personal performance to continue serving as a member of the executive team. None of the NEOs has a severance arrangement other than in the context of a change in control.
- Decisions by Independent Compensation Committee. Executive compensation is determined by the Compensation Committee of the Board, which is comprised solely of independent directors and approved by the full Board (only independent directors in the case of CEO compensation).
- Independent Compensation Consultant. The Compensation Committee retains its own independent consultant to advise on compensation matters.
What We Do Not Do
- No Tax Gross-Ups in Change in Control Agreements. Our severance agreements apply only in case of termination following a change in control and contain no tax gross-ups for NEOs.
- No Automatic Base Salary Increases. Our NEOs’ base salaries are reviewed annually, and decisions are based on demonstrated individual performance, business conditions and external market data provided by our independent compensation consultants.
- No Hedging and Pledging of Company Stock. Our policies prohibit the pledging and hedging of our stock by our executives and directors.
- No Repricing of Stock Options. We do not permit the repricing of stock options without shareholder approval.