CNX Resources Corp DEF 14A 2016
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
CONSOL Energy Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
1000 CONSOL Energy Drive
Canonsburg, Pennsylvania 15317
Telephone (724) 485-4000
Annual Meeting of Shareholders May 11, 2016
April 1, 2016
You are cordially invited to attend CONSOL Energy Inc.s 2016 Annual Meeting of Shareholders on May 11, 2016 at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231.
CONSOL is a leader in the energy industry regarding operations, governance and shareholder-friendly practices. As you will find, our core values of safety, compliance, and continuous improvement are applied in everyday decision making to drive shareholder value, and we deliver these messages on a regular basis through our shareholder communications and outreach program. The following key concepts exemplify who we are.
CONSOLs transformation into an E&P company continues, ushering in a new era for our Corporation. CONSOL has been transparent about its intent to separate the Coal and E&P business, which we believe will increase long-term value. In 2015, we took another step toward this separation by creating CNX Coal Resources LP (NYSE: CNXC) to own interests in our Pennsylvania thermal mines.
While 2016 will undoubtedly continue to present challenges from a macro standpoint, CONSOLs focus will remain squarely on controlling the factors that are within our power to control. That means continuing to intensely manage costs and wisely deploy capital; evaluate opportunities to monetize non-core assets as CONSOL maintains its focus on the durability of the balance sheet and a sound liquidity position; continually assess its business model and adjust appropriately through the ongoing evolution of the energy industry; and, through our enterprise risk management efforts, relentlessly practice risk-informed decision making in order to further its strategic goals.
As a result of aggressive actions taken in 2015 to contend with a very challenging macro environment, and equipped with an industry-leading acreage footprint in the Marcellus and Utica shales, CONSOL boasts a strong competitive posture and is poised to capitalize as markets improve, driving long-term value for all of our stakeholders.
Thank you for your investment in CONSOL and hope you will be able to join us at this years Annual Meeting.
J. Brett Harvey
Chairman of the Board
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 11, 2016
10:00 a.m. (EST)
Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231
Notice is hereby given that the Annual Meeting of Shareholders (the Annual Meeting) of CONSOL Energy Inc. (CONSOL or the Corporation) will be held on May 11, 2016, at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231, for the following purposes:
By resolution of the Board of Directors, we have fixed the close of business on March 14, 2016 as the record date for determining the shareholders of CONSOL entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or by internet (as described in the enclosed proxy card or voting instruction card) or by completing and returning the enclosed proxy card or voting instruction card, which requires no postage if mailed in the United States. Your prompt response will be helpful and your cooperation is appreciated. If you attend the Annual Meeting, you may withdraw your proxy and vote in person, if you so choose.
April 1, 2016
Stephanie L. Gill
Vice President, General Counsel and
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on May 11, 2016: The Proxy Statement, form of proxy, Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and related materials are available at www.edocumentview.com/CNX or may be obtained by contacting the Investor Relations Department at the address and phone number above.
This Proxy Summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement carefully before voting.
WHERE, WHEN AND WHO?
PROPOSALS REQUIRING YOUR VOTE
Your vote is very important to us and to our business. Please cast your vote immediately on all of the proposals to ensure that your shares are represented.
The following table provides summary information about each director nominee as of March 14, 2016. Each director nominee is elected annually by a majority of votes cast.
WHO WE ARE AND WHAT WE STAND FOR
One of the cornerstones of our legacy has been the ability to adapt, innovate, and reinvent over many decades. The capacity to navigate through constantly changing external conditions has led CONSOL to more than 150 years of successful operation.
CORPORATE GOVERNANCE AND COMPLIANCE HIGHLIGHTS
CONSOL Energy Inc.
1000 CONSOL Energy Drive
Canonsburg, Pennsylvania 15317
Telephone (724) 485-4000
INFORMATION ABOUT THE ANNUAL MEETING
April 1, 2016
The enclosed proxy is being solicited by the Board to be voted at the Annual Meeting of Shareholders (the Annual Meeting) to be held on May 11, 2016, at 10:00 a.m., Eastern Time, at the Hyatt Regency Pittsburgh International Airport, Wright Room, 1111 Airport Boulevard, Pittsburgh, Pennsylvania 15231.
The specific proposals to be considered and voted upon at the Annual Meeting are summarized in the Notice of Annual Meeting of Shareholders. Each proposal is described in more detail in this Proxy Statement.
The persons named as proxies on the accompanying proxy card have informed CONSOL Energy Inc. (CONSOL or the Corporation) of their intention, if no contrary instructions are given, to vote the shares represented by such proxies as follows:
The Board does not know of any other business to be brought before the Annual Meeting other than as indicated in the Notice of Annual Meeting of Shareholders.
Record Date and Vote Required for Approval
The record date with respect to this solicitation is March 14, 2016. All holders of record of CONSOL common stock as of the close of business on March 14, 2016 (the Record Date) are entitled to vote at the Annual Meeting and any adjournment or postponement thereof. As of March 14, 2016, the Corporation had 229,363,247 shares of common stock outstanding. Each share of common stock is entitled to one vote. Shareholders do not have cumulative voting rights. The holders of a majority of the outstanding shares of common stock of the Corporation as of the Record Date entitled to vote generally in the election of directors, represented in person or by proxy, will constitute a quorum at the Annual Meeting.
If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may be treated as broker non-votes. Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and such instructions are not given. Brokers that have not received voting instructions from their clients cannot vote on their clients behalf on non-routine proposals, such as Proposal Nos. 1, 3, 4, 5 and 6, although they may vote their clients shares on routine matters, such as Proposal No. 2. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Abstentions have the same effect as votes against the matter, except in the case of Proposal No. 1, where abstentions would not have an effect on the outcome. Proxies received but marked as abstentions and broker non-votes will be counted for quorum purposes.
The voting instruction form also serves as the voting instructions for the trustees who hold shares of record for participants in the CONSOL Energy Inc. Investment Plan for Salaried Employees. If voting instructions representing shares in this plan are not received, those shares will not be voted.
Director Resignation Policy
Our Amended and Restated Bylaws provide that if an incumbent director is not elected at a meeting for the election of directors and no successor has been elected at such meeting, the director must tender his or her resignation promptly to the Board. The Nominating and Corporate Governance Committee of the Board will make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Nominating and Corporate Governance Committees recommendation, and publicly disclose its decision and the underlying rationale in a press release, a filing with the Securities and Exchange Commission (the SEC) or other broadly disseminated means of communication within 90 days from the date of the certification of the election results.
Revocation of Proxy
If you are the owner of record of shares of our common stock as of the close of business on the Record Date, you can revoke your proxy at any time before its exercise by:
If you hold your shares through a bank, broker or other nominee, you must follow the instructions found on your voting instruction card, or contact your bank, broker or other nominee in order to revoke your previously delivered proxy.
If a proxy is properly executed and is not revoked by the shareholder, the shares it represents will be voted at the Annual Meeting in accordance with the instructions provided by the shareholder. If a proxy card is signed and returned without specifying choices, the shares will be voted in accordance with the recommendations of the Board. Attendance at the Annual Meeting without a request to revoke a proxy will not by itself revoke a previously executed and delivered proxy.
All costs relating to the solicitation of proxies will be borne by CONSOL. Georgeson LLC has been retained by CONSOL to aid in the solicitation of proxies at an estimated cost of $8,500 plus reimbursement of out-of-pocket expenses. Proxies may also be solicited by officers, directors and employees personally, by mail, or by telephone, facsimile transmission or other electronic means. Upon request, CONSOL will pay brokers and other persons holding shares of common stock in their names or in the names of their nominees for their reasonable expenses in sending soliciting material to, and seeking instructions from, their principals.
Secrecy in Voting
As a matter of policy, proxies, ballots and voting tabulations that identify individual shareholders are held confidential by CONSOL. Such documents are available for examination only by the inspectors of election and certain employees who assist in the tabulation of votes. The vote of any individual shareholder will not be disclosed except as may be necessary to meet applicable legal requirements.
Attendance at the Meeting
Subject to space availability, all shareholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Because seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration will begin at 9:00 a.m. Shareholders who attend may be asked to present valid picture identification, such as a drivers license or passport, and may be issued a ticket for admission to the meeting. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. Please also note that if you hold your shares in street name (that is, through a bank, broker or other nominee), a copy of a brokerage statement reflecting your stock ownership as of the Record Date must be provided during check-in at the registration desk at the Annual Meeting. If you require directions to the Annual Meeting, please contact CONSOLs Investor Relations Office at (724) 485-4000.
CONSOL will provide to any shareholder, without charge and upon the written request of the shareholder, a copy (without exhibits, unless otherwise requested) of CONSOLs Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Annual Report) as filed with the SEC. Any such request should be directed to CONSOL Energy Inc., Investor Relations Department, 1000 CONSOL Energy Drive, Canonsburg, PA 15317.
Board of Directors
The business and affairs of CONSOL are managed under the direction of our Board. We do not have a policy regarding directors attendance at our annual meetings of shareholders; however, all directors are encouraged to attend. All of then-currently serving members of our Board, except Mr. Baxter, attended the 2015 annual meeting.
Board Leadership Structure
Mr. Harvey, our former Chief Executive Officer, currently serves as our non-employee Chairman of the Board. He and Mr. DeIuliis, our current President and Chief Executive Officer, provide the Board and the Corporation with the skills, leadership and direction that CONSOL needs as it continues to execute on its strategic business plan. Mr. Harvey assumed the position of Executive Chairman at the conclusion of the annual meeting held on May 7, 2014 and had served as the Chief Executive Officer until May 2014 and a director of CONSOL since January 1998. In connection with Mr. Harveys retirement from the Board at the conclusion of the Annual Meeting, the Board has elected Mr. Thorndike to be Chairman of the Board commencing immediately thereafter. Mr. Thorndike is a current independent director on our Board.
The combined depth of experiences of Messrs. Harvey and DeIuliis at the helms of our Board and the Corporation promoted decisive, thoughtful and well-reasoned leadership during a time when CONSOL was engaged in a series of significant and transformational transactions including, without limitation: the sale of five coal mines to Murray Energy Corporation for $3.5 billion in December 2013 (the Murray Transaction); the acquisition of 100,000 Marcellus Shale acres; through our joint venture arrangement with Noble Energy, the successful launch of CONE Midstream Partners LP, a master limited partnership (MLP), in 2014 which owns, operates, develops and acquires natural gas gathering and other midstream energy assets to
service rapidly growing production in the Marcellus Shale in Pennsylvania and West Virginia; the successful closing of the initial public offering in 2015 of common units of CNX Coal Resources LP (CNXC), a MLP for the Corporations thermal coal business which will own interests in CONSOLs thermal coal properties and related mining operations located in Pennsylvania, resulting in total net proceeds from this transaction and related transactions to CONSOL of approximately $342.8 million; and the announced sale of the Buchanan Mine and other assets for $420 million in February 2016.
By selecting an independent director as the next Chairman of the Board after the conclusion of the Annual Meeting, our Boards leadership structure, consistent with the significant changes occurring at the Corporation, will move the Board into its next phase and continue to ensure clear accountability and enhance the Corporations ability to communicate a clear and consistent message and strategy to shareholders, employees, customers and suppliers.
At the time Mr. Harvey was appointed Chairman of the Board, the Board also had determined that it was appropriate and necessary to have a Lead Independent Director, defined as an independent director who has served for at least one year with the Corporation. CONSOLs corporate governance guidelines state that the Lead Independent Director has the following duties and authority:
The Board appointed Mr. Baxter to this position in June 2010 and has re-appointed him each year thereafter. With Mr. Baxters service as a long-standing member of the CONSOL Board and as former chairman of the board of directors of CNX Gas, the Board determined that he was ideally suited for the position of Lead Independent Director. Following the Annual Meeting, the Chairman of the Board will be an independent director and, as such, the Board will not appoint a new Lead Independent Director upon Mr. Baxters retirement from the Board at the conclusion of the Annual Meeting.
Our Board is composed of more than a majority of independent directors and after the Annual Meeting, assuming all of the nominees are elected, all of the Board members (except the Chief Executive Officer) will be independent. In addition, as indicated below, each of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, described below in Committees of the Board of Directors, is composed entirely of independent directors, including the chairperson of each respective committee. We believe that the number of independent directors that comprise our Board, along with the independent oversight of the Board provided by our Lead Independent Director and Chairman of the Board (following the conclusion of the Annual Meeting), benefits the Corporation and our shareholders.
Boards Role in Risk Management
Our management team is responsible for the management and assessment of risk at the Corporation and its subsidiaries and communicating those risks to our Board. Through regular presentations to the Board and the appropriate committees (as determined by the subject matter of the particular risk), management identifies and discusses the risks affecting the Corporation, its subsidiaries and our business. In 2015, our management team performed a comprehensive risk analysis that included a review of the material risks that could affect the Corporation and communicated the results of the analysis to the full Board.
Under our Corporate Governance Guidelines, the Board is charged with assessing major risks facing the Corporation and reviewing options for their mitigation with the assistance of the various committees. Even when a risk has been delegated to a particular committee, the Board as a whole continues to monitor such risk through its receipt and review of reports provided by the respective committee chairpersons at each regularly-scheduled Board meeting.
The Audit Committee assists the Board in its general oversight of, among other things, the Corporations policies, guidelines and related practices regarding risk assessment and risk management, including the risk of fraud. As part of this endeavor, the Audit Committee reviews and assesses the Corporations major financial, legal, regulatory, environmental and similar risk exposures and the steps that management has taken to monitor and control such exposures. The Audit Committee also reviews and assesses the quality and integrity of our public reporting, compliance with legal and regulatory requirements, the performance and independence of our independent auditors, the performance of our internal audit department, the effectiveness of disclosure controls and procedures, and the adequacy and effectiveness of our risk management policies and related practices.
Our Finance Committee is charged with monitoring and evaluating risks affecting the Corporation consistent with its charter, specifically through its review of our asset mix, potential mergers and acquisitions, capital structure and policies, financial position and policies, financing activities, compliance with debt covenants, dividend policies and material investments and contracts.
Our Health, Safety and Environmental Committee addresses various risks associated with health, safety, the environment and security, and reviews (i) any material compliance issues with health, safety and environmental laws, (ii) any material pending or threatened administrative, regulatory or judicial proceedings regarding health, safety, environmental or security matters, and (iii) managements response to the foregoing legal matters.
Our Nominating and Corporate Governance Committee addresses risks associated with our management structure by reviewing, among other matters, the qualifications and backgrounds of our directors on an annual basis to ensure that our Board is composed of capable individuals who provide appropriate oversight and insight to our executive management team in light of the Corporations business.
Finally, our Compensation Committee reviews and comments on our succession planning and assesses whether our compensation policies and practices incentivize excessive risk-taking. See Compensation Policies and Practices As They Relate To CONSOLs Risk Management on page 41 for a discussion of the Compensation Committees findings and conclusions with respect to the Corporations compensation policies and practices.
Committees of the Board of Directors
Our Board has five standing committees: Audit, Compensation, Nominating and Corporate Governance, Finance and Health, Safety and Environmental. Actions taken by our committees are reported to the full Board. In January 2016, the Board determined that all members of each of the Audit, Compensation and Nominating and Corporate Governance Committees are independent under the current listing standards of the NYSE and other applicable regulatory requirements. See Determination of Director Independence on page 27 for additional information regarding the Boards independence determinations with respect to its members.
Our Audit Committee, which currently consists of three directors, provides assistance to our Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, financial reporting, internal control and compliance functions of the Corporation and its subsidiaries. Our Audit Committee retains on behalf of CONSOL an independent registered public accounting firm to audit the financial statements of CONSOL and its subsidiaries and perform other assigned duties. Further, our Audit Committee provides general oversight with respect to the accounting principles employed in financial reporting and the adequacy of CONSOLs internal controls. In discharging its responsibilities, our Audit Committee may rely on the reports, findings and representations of the Corporations auditors, legal counsel, and responsible officers. Our Board has determined that all members of the Audit Committee are financially literate within the meaning of SEC rules and under the current listing standards of the NYSE. Our Board has also determined that each of the members of the Audit Committee, Messrs. Davis, Mills and Baxter, qualify as an audit committee financial expert. A copy of the audit committees report for the 2015 fiscal year is set forth in this Proxy Statement.
Our Compensation Committee, which currently consists of four directors, establishes executive compensation policies consistent with the Corporations objectives and shareholder interests. Our Compensation Committee also reviews the performance of our executive officers and establishes, adjusts and awards compensation, including incentive-based compensation, as more fully discussed below. In addition, our Compensation Committee generally is responsible for:
Our Compensation Committees charter generally permits it to delegate its authority, duties and responsibilities or functions to one or more members of the Compensation Committee or to the Corporations officers, except where otherwise prohibited by law or applicable listing standards. The terms of our Equity Incentive Plan (the Plan) also permit our Compensation Committee to delegate its power and authority under the Plan to our officers. In accordance with applicable law, in January 2015, the Compensation Committee authorized our Chief Executive Officer to grant up to 770,000 shares of our common stock (in the form of equity incentive awards) to our non-executive employees in compliance with the terms and conditions of such delegation, the Plan and applicable laws and regulations.
Our Compensation Committee periodically reviews the compensation paid to our non-employee directors and the principles upon which their compensation is determined. The Compensation Committee also periodically reports to the Board on how our non-employee director compensation practices compare with those of other similarly situated public corporations and, if the Compensation Committee deems it appropriate, recommends changes to our director compensation practices to our Board for approval.
In October 2013, the Compensation Committee retained Towers Watson to assist it with its evaluation of our compensation programs for executive officers and directors. The scope of the consultants work for the Compensation Committee included, among other matters:
Before retaining Towers Watson, the Compensation Committee considered the factors set forth in the NYSE rules regarding the independence of advisors from management and other relevant factors. After such review, the Committee determined that no conflict of interest arose out of the retention of the Towers Watson consulting team. Towers Watson did not provide any services to the Corporation in 2015, other than to the Compensation Committee.
For additional information regarding the Compensation Committees processes and procedures for reviewing and determining executive officer compensation, see Compensation Discussion and Analysis on page 29.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee, which currently consists of four directors, monitors our corporate governance system, assesses Board membership needs, makes recommendations to the Board regarding potential director candidates for election at annual meetings of shareholders or in the event of any director vacancy, and performs any other functions or duties deemed appropriate by the Board. Each of the director nominees was recommended by our Nominating and Corporate Governance Committee to our Board for nomination for election at the Annual Meeting.
In making director recommendations, the Nominating and Corporate Governance Committee will consider for nomination candidates whose names are submitted by shareholders. In 2016, Messrs. Lanigan, Platt and Roberson were recommended for election to our Board by certain shareholders. After the Board and management conducted interviews with them, considered their qualifications to serve on the Board, and completed thorough conflicts and background checks, the Nominating and Corporate Governance Committee recommended their nomination for election to the Board at the Annual Meeting.
Shareholders wishing to submit names of candidates for election as directors should submit the names of candidates to the Corporate Secretary, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317. See Additional Matters on page 84 for more information on making director nominations. In assessing the Boards membership needs, the Nominating and Corporate Governance Committee generally seeks to maintain a Board that is comprised of individuals who are competent in the following areas:
Nominees and directors must have or have had experience in positions with a high degree of responsibility and leadership experience in companies or institutions with which they are or have been affiliated. Nominees and directors are selected based upon contributions that they can make to CONSOL. The Nominating and Corporate Governance Committees process for identifying and evaluating director nominees is as follows:
CONSOL does not maintain a separate policy regarding the diversity of its Board members. However, consistent with its charter, the Nominating and Corporate Governance Committee, and ultimately the Board, seeks director nominees with diverse personal and professional backgrounds, experience and perspectives that, when combined, provide a diverse portfolio of experience and knowledge that will well serve the Corporations governance and strategic needs.
Our Finance Committee, which currently consists of four directors, monitors and provides advice and counsel to our Board and management regarding our asset mix, potential mergers and acquisitions, capital structure and policies, financial position and policies, financing activities, compliance with debt covenants, dividend policies and material investments and contracts.
Health, Safety and Environmental Committee
Our Health, Safety and Environmental Committee, which currently consists of three directors, provides oversight of the Corporations policies and management systems with respect to health, safety and environmental matters. Our Health, Safety and Environmental Committee generally is responsible for:
Corporate Governance Web Page and Available Documents
We maintain a corporate governance page on our website at www.consolenergy.com. The following documents are currently included on the corporate governance page of our website:
We also will provide a printed copy of any of these documents free of charge upon request to shareholders who contact the Investor Relations department in writing at CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, Pennsylvania 15317. These documents address important principles and corporate governance processes, including a retirement age policy that generally provides that no member of the Board who has attained the age of 75 shall be nominated for re-election or re-appointment to the Board at the next Annual Meeting of Shareholders.
Membership and Meetings of the Board of Directors and its Committees
In 2015, all of the incumbent directors attended no fewer than 96% of the aggregate of:
Committee membership as of April 1, 2016 and the number of meetings held during 2015 are shown in the following table:
During 2015, the non-management directors held 6 executive sessions of the Board. The presiding director for the executive sessions was Mr. Baxter, our Lead Independent Director.
Communication with the Board of Directors
Shareholders and other interested persons who wish to communicate with the Board may do so by writing to the Board at Corporate Secretary, CONSOL Energy Inc., 1000 CONSOL Energy Drive, Canonsburg, PA 15317, or by sending an e-mail to email@example.com. The Corporate Secretary will relay all such communications to the Board in their entirety or to individual directors (as appropriate) at the next regularly scheduled Board meeting (or earlier as necessary) except for spam, junk mail, mass mailings, solicitations, resumes, job inquiries or other matters unrelated to the Corporation. Communications that are intended specifically for the Chairman of the Board or the independent directors should be sent to the street address or e-mail address noted above, to the attention of the Chairman of the Board or the independent directors, as intended. Information concerning how to communicate with the Board is also included on CONSOLs website at www.consolenergy.com.
DIRECTOR COMPENSATION TABLE 2015
The following table sets forth the compensation of our directors for the 2015 fiscal year:
As of December 31, 2015, the number of RSUs held by our current non-employee directors was: 4,555 for Messrs. Baxter, Carpenter, Davis, Hardesty, Harvey, Lanham, Mills, Powell, Thorndike and Ms. Lally-Green. In addition, as of December 31, 2015: (i) Messrs. Hardesty and Powell each had 24,101 deferred RSUs; (ii) Mr. Mills had 20,903 deferred RSUs; (iii) Mr. Davis had 19,621 deferred RSUs; (iv) Ms. Lally-Green had 6,776 deferred RSUs; and (v) Messrs. Lanham and Thorndike had 2,394 deferred RSUs. In addition, Mr. Lanham had 5,486 deferred stock units and Mr. Thorndike had 5,466 deferred stock units outstanding.
UNDERSTANDING OUR DIRECTOR COMPENSATION TABLE
We generally use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our Board. Each of our non-employee directors is entitled to receive annual fees for their service, any portion of which may be deferred at such directors election. In lieu of all or any portion of the annual retainer otherwise payable to our non-employee directors, directors may elect to receive deferred stock units, which carry dividend equivalent rights. We also reimburse directors for customary travel and related expenses for their attendance at Board or committee meetings. A description of the fees and awards paid to our non-employee directors is set forth in greater detail below.
CONSOL Non-Employee Director Annual Fees and Awards
Our non-employee director compensation program is set forth in the following table:
The compensation structure adopted by our Board was the result of a competitive assessment of board compensation provided to the Compensation Committee by its compensation consultants in December 2013.
CONSOL Non-Employee Director Stock Options
Prior to October 2006, our non-employee directors received nonqualified stock options to acquire shares of the Corporations common stock. All of these options have fully vested. Subject to the provisions of the particular nonqualified stock option agreement and the Plan, the holders of these options may exercise all or any part of their options at any time prior to the tenth anniversary of the grant date, which is the expiration date. If a directors service is terminated for cause, all options held by such director, if any, will be forfeited as of the termination date.
CONSOL Non-Employee Director RSUs
Each RSU represents the right to receive one share of common stock following the vesting date of that unit. Non-employee director RSU awards vest in full one year from the grant date. A director is not entitled to shareholder rights, including voting rights and/or dividend rights with respect to the shares underlying a RSU award, until such shares become vested and are issued to the director. Should a regular cash dividend be declared on the Corporations common stock at a time before the shares subject to a RSU award become vested and are issued, then the holder of the RSU will be entitled to dividend equivalent rights equal to the cash dividend declared on the shares. Dividend equivalent rights are converted into shares underlying the RSUs in accordance with a pre-established formula. The additional shares resulting from this calculation will be subject to the same terms and conditions as the unissued shares of common stock to which they relate under the award.
The non-employee director RSU award agreements provide that in the event of death or disability or upon the completion of a change in control (as defined in our Plan), all shares subject to such award will vest automatically and be delivered to the director immediately, or as soon as administratively practical thereafter (but in no event later than the 15th day of the third month following that date). If a directors service is terminated for cause (as defined in our Plan) or he or she ceases to provide services to the Corporation for any reason other than death, disability or in connection with a change in control, such directors award will be cancelled with respect to any unvested shares, and the number of RSUs will be reduced accordingly. The director will then cease to have any rights or entitlements to receive any shares of common stock under those cancelled units.
As a condition to a directors right to receive shares subject to a RSU award, the director must agree to abide by the terms and conditions of the proprietary information covenant included in the award agreement and must return any materials belonging to the Corporation upon termination of service on the Board. See Equity Incentive Plan Definitions on page 60 for definitions under our Plan.
CONSOL Non-Employee Directors Deferred Fee Plan (adopted 2004)
The CONSOL Directors Deferred Fee Plan was adopted on July 20, 2004 to allow non-employee directors of the Corporation to defer payment of all or any portion of their annual cash Board retainer and director meeting fees. Participation in the plan is at the election of the particular director. Upon the Corporations receipt of a deferral agreement from a director, an account is established by the Corporation on behalf of such director and is credited with all fees selected by the participating director. Prior to February 21, 2006, the account of each participant in the Directors Deferred Fee Plan was credited, on a quarterly basis, with interest based on the interest rate in effect on the last day of the applicable quarter. On February 21, 2006, our Board approved an amendment to the CONSOL Directors Deferred Fee Plan, which provides that a participants account will be adjusted by an amount equal to the amount that would have been earned (or lost) if amounts deferred under the plan had instead been invested in hypothetical investments designated by the participant based on a list of hypothetical investments provided by the plan administrator from time to time or, in the event that a participant fails to designate such hypothetical investments, the participants account will earn interest as provided in the plan. Earnings are credited to the participants account on a quarterly basis. The amount payable to a director participant will be paid in cash as soon as administratively practicable after the earlier of: (i) the directors termination of service as a director or (ii) the date selected by such director, which date must be at least two years after the end of the plan year for which fees are deferred. The CONSOL Directors Deferred Fee Plan is an unfunded and unsecured liability of the Corporation and benefits will be paid from our general assets. Accordingly, participants are general unsecured creditors of the Corporation with respect to any benefits to be received by them under the plan. At this time, there are no participants in the Directors Deferred Fee Plan.
CONSOL Non-Employee Director Deferred Stock Units
Under the terms of our Plan, non-employee directors may elect to receive deferred stock units in lieu of all or any portion of their retainer fees otherwise payable to such director in cash, or to defer receipt of shares to be paid to them in the form of deferred stock units. The deferred stock units have dividend equivalent rights. Deferred stock units that have vested are paid following the earlier of: (i) the directors separation from service or (ii) the date selected by the director on his or her payment date election form previously filed with the Corporation. Upon a change in control, unvested deferred stock units will accelerate and vest.
A director is not entitled to shareholder rights, including voting rights and actual dividends, with respect to the shares subject to an award until the director becomes the record holder of the shares following their actual issuance. Should a regular cash dividend be declared on the Corporations common stock at a time when the director holds deferred stock units, he or she will be entitled to dividend equivalent rights equal to the cash dividends declared on the shares. Dividend equivalent rights are converted into additional deferred stock units based on a pre-established formula. The additional deferred stock units resulting from this calculation will be subject to the same terms and conditions as the deferred stock units subject to the award.
If a director ceases to be a director on account of death, disability or retirement at normal retirement age for directors, all unvested deferred stock units granted to such director will automatically vest and become non-forfeitable. If the directors service is terminated for cause or ceases to provide services for any reason other than death, disability or retirement at a normal age, all unvested deferred stock units and any rights to the underlying shares will be immediately forfeited for no consideration. In addition, in the event of a termination for cause (as defined in our Plan) or a breach of the proprietary information covenant contained in the deferred stock unit agreement, the director will also forfeit all of his or her right, title and interest in and to any shares that have vested under his or her award. See Equity Incentive Plan Definitions on page 60 for definitions of cause and disability under our Plan. Deferred stock units are structured to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the Code). At this time, Messrs. Lanham and Thorndike are the only non-employee directors who have elected to receive deferred stock units in lieu of their retainer fees.
CONSOL Stock Ownership Guidelines for Directors
Our Board has adopted stock ownership guidelines for our directors to further align their interests with those of our shareholders and to ensure that they maintain an appropriate financial stake in CONSOL. The stock ownership guidelines provide, among other things, that our directors hold CONSOL common stock (not including shares issuable upon the exercise of options) with a value equal to three times the annual Board cash retainer on or before the fifth anniversary of becoming a Board member. As of December 31, 2015, each Board member was in compliance with our stock ownership guidelines or is expected to be within the five-year period.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information with respect to the beneficial ownership of the Corporations common stock by:
Amounts shown below include options that are currently exercisable or that may become exercisable within 60 days of March 14, 2016 (i.e., May 13, 2016) and the shares underlying deferred stock units and the shares underlying RSUs that will be settled before May 13, 2016. Unless otherwise indicated, the named person has the sole voting and dispositive powers with respect to the shares of CONSOL common stock set forth opposite such persons name.
Brokerage account agreements may grant security interests in securities held at the broker to secure payment and performance obligations of the brokerage account holder in the ordinary course. Shares shown in the table for the directors and executive officers may be subject to this type of security interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporations directors, executive officers and persons who beneficially own more than ten percent of a class of the Corporations registered equity securities to file with the SEC and deliver to the Corporation initial reports of ownership and reports of changes in ownership of such registered equity securities. To our knowledge, based solely upon a review of Section 16 filings with the SEC, written representations that no other reports were required, and on CONSOLs records, we believe that during 2014, the Corporations executive officers, directors and greater than ten percent shareholders complied with all applicable Section 16(a) filing requirements, except as specified below. A late filing of a Form 3 was made on behalf of former Controller and Vice President Lorraine L. Ritter due to the misunderstanding about whether Ms. Ritter was considered to be an officer for reporting purposes pursuant to Section 16(a) of the Securities Act of 1934, as amended. A Form 3 was filed to reflect Ms. Ritters beneficial ownership as of the date she was appointed as the Corporations principal accounting officer, which occurred March 1, 2013, as reflected in the Current Report on Form 8-K filed by the Corporation on March 7, 2013. A late filing of a Form 4 was made relating to Director William N. Thorndike, Jr.s contractual arrangement with a third party that holds shares of the Corporations stock. Mr. Thorndike may be deemed to have a pecuniary interest with respect to 50,000 shares resulting from the July 30, 2015 purchase of 100,000 shares by the third party, which shares are held in the third party account. Due to the shares having been purchased in a third partys account, Mr. Thorndikes acquisition of pecuniary interest therein was inadvertently not reported on a timely basis.
PROPOSAL NO. 1ELECTION OF DIRECTORS
The eleven nominees for election as directors for 2016 are identified below. Each director who is elected will hold office until the next annual meeting and until the directors successor is elected and qualified. All nominees are current members of the Board, except for Messrs. Lanigan, Platt and Roberson, who are being nominated by the Board for election at the Annual Meeting. If any nominee should for any reason become unable to serve, all shares represented by valid proxies will be voted for the election of such other person as the Board may designate as recommended by the Nominating and Corporate Governance Committee. Alternatively, the Board may reduce the number of directors to eliminate the vacancy.
Biographies of Nominees
The following biographies include information concerning the nominees for director, including their recent employment, positions with CONSOL, other directorships, board committee memberships and ages as of March 14, 2016.
NICHOLAS J. DEIULIIS
Background: Nicholas J. DeIuliis has been our Chief Executive Officer since May 7, 2014 and our President since February 23, 2011. Mr. DeIuliis was Executive Vice President and Chief Operating Officer of CONSOL from January 16, 2009 until February 23, 2011. He previously served in various positions at CNX Gas Corporation, including President, Chief Executive Officer and Chief Operating Officer. He is currently Chairman of the Board of CNX Coal Resources GP LP. Additionally, he has previously held the following positions at CONSOL: Senior Vice President Strategic Planning (November 1, 2004 to August 2005); Vice President Strategic Planning (April 1, 2002 until November 1, 2004); Director Corporate Strategy (October 1, 2001 to April 1, 2002); Manager Strategic Planning (January 1, 2001 to October 1, 2001); and Supervisor Process Engineering (April 1, 1999 to January 1, 2001). Mr. DeIuliis is also a member of the board of directors of the U.S. Chamber of Commerce, the University of Pittsburgh Cancer Institute, the Center for Sustainable Shale Development and the Allegheny Conference on Community Development. He is a registered engineer in the Commonwealth of Pennsylvania and a member of the Pennsylvania Bar.
Qualifications: As our current President and Chief Executive Officer, Mr. DeIuliis has a unique and in-depth understanding of our business with over 25 years of experience with CONSOL. He provides our Board with direct operational insight through his leadership in the development and execution of our strategic priorities, and his understanding of our business, challenges and the material risks facing the Corporation.
ALVIN R. CARPENTER
Background: Alvin R. Carpenter joined the CONSOL Board in June 2013. Mr. Carpenter currently serves as Chair of the Compensation Committee and a member of the Finance Committee. He retired from CSX Corporation (CSX), a railroad company, in February 2001, where he had served as vice chairman from July 1999 until his retirement. From 1962 until February 2001, he held various positions with CSX, including President and Chief Executive Officer of CSX Transportation, Inc. from 1992 to 1999 and Executive Vice President-Sales and Marketing of CSX Transportation, Inc. from 1989 to 1992. Mr. Carpenter served as a director of Stein Mart, Inc., a retail company, from 1996 to 2015, where he served as chairman of its compensation committee and as a member of the corporate governance committee. Mr. Carpenter serves as a director of Regency Centers Corporation, an owner and developer of dominant, grocery-anchored retail centers, since 1993, where he serves as a member of its audit, compensation and nominating and corporate governance committees. He served as a director of Lender Processing Services, Inc. from 2009 until it was sold to Fidelity National Financial, Inc. in January 2014, where he had served as its lead director, chairman of the corporate governance and nominating committee and as a member of the compensation committee. Additionally, he previously served on the boards of PSS World Medical, Inc., Barnett Bank, Inc., Nations Bank, American Heritage Life Insurance Company, Blue Cross & Blue Shield of Florida, One Valley Bancorp of West Virginia and Florida Rock Industries, Inc. He also chaired Governor Jeb Bushs Commission on Workers Compensation Reform and served on Governor Bushs Advisory Council on Base Realignment and Closure.
Qualifications: Mr. Carpenter brings over 50 years of business experience to our Board, including 40 years of experience in the railroad industry where he has served in a wide variety of operating, planning and sales and marketing positions. In addition to the business expertise he developed while employed in the railroad industry, Mr. Carpenter has developed significant expertise in the areas of corporate governance, compensation and audit matters through his service on various public company boards.
WILLIAM E. DAVIS
Background: William E. Davis joined the CONSOL Board in January 2004. He currently serves as Chair of the Nominating and Corporate Governance Committee and as a member of the Audit Committee. From November 2007 until December 2010, Mr. Davis was a director of AbitibiBowater Inc., which produced a broad range of forest products marketed around the world, and served on its governance, finance and audit committees. Mr. Davis was a director of Abitibi Consolidated Inc., which produced newsprint and commercial printing paper, from April 2003 to November 2007, and served on its audit and nominating and governance committees. Mr. Davis was also the chairman of the board of directors and Chief Executive Officer of Niagara Mohawk Power Corporation, an electricity and natural gas utility located in upstate New York, from May 1993 to February 2002. Following the sale of Niagara Mohawk in February 2002, and until his retirement in April 2003, Mr. Davis served as chairman of National Grid USA and as an executive director of National Grid (UK), owner and operator of the electricity transmission network in England and Wales. He served as Chairman and Chief Executive Officer of the Metropolitan Development Foundation of Central New York until December 2008.
Qualifications: Having served as Chairman and Chief Executive Officer of Niagara Mohawk Power Corporation, a major investor owned gas and electric utility, for nine years, and as chairman of National Grid USA and executive director of National Grid (UK), Mr. Davis provides our Board with substantial insight into the energy industry. Mr. Davis also contributes significant knowledge with respect to corporate governance matters acquired through his years of multiple board service and a unique corporate governance insight having graduated from the National Association of Corporate Directors certification course.
MAUREEN E. LALLY-GREEN
Background: Maureen E. Lally-Green joined the CONSOL Board in June 2013. Ms. Lally-Green currently serves as Chair of the Health, Safety and Environmental Committee and as a member of the Nominating and Corporate Governance Committee. She has served on the board of Federated Mutual Fund Complex since August 2009 and was appointed to serve on its audit committee in May 2013. Ms. Lally-Green has served in various legal and business roles and directorship positions throughout her career. She previously served as Associate General Secretary, Diocese of Pittsburgh (retired August 2015), a member of the Superior Court of Pennsylvania (retired 2009), and as a Professor of Law, Duquesne University School of Law, where she continues to teach in an adjunct capacity. Other relevant experience includes her service as a consultant to the Supreme Court of Pennsylvania, counsel in the law department at the former Westinghouse Electric Corporation and counsel at the Division of Trading and Markets and Enforcement at the Commodity Futures Trading Commission. She also holds the following positions: member, Pennsylvania State Board of Education; Director and Chair, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; Director, Saint Vincent College; and Director and Chair, Cardinal Wuerl North Catholic High School, Inc. Ms. Lally-Green also has held the positions of: Director, Auberle; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Pennsylvania Bar Institute; and Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc. She is a member, among others, of the Pennsylvania Bar Association and the Allegheny County Bar Association.
Qualifications: Ms. Lally-Green brings over 40 years of legal experience to our Board that includes a diversity of experience while serving as a Judge on the Superior Court of Pennsylvania State appellate court, her service with a major corporation and the federal government, her activities in the state-wide and local legal communities, and her experience with, among other things, corporate governance due to her service on a number of boards of non-profit entities and the for-profit Federated Mutual Fund Complex.
GREGORY A. LANHAM
Background: Gregory A. Lanham has served on the CONSOL Board since October 2014. Mr. Lanham currently serves as a member of the Compensation Committee and the Health, Safety and Environmental Committee. From November 2013 to October 2015, he served as the Chief Executive Officer of FTS International, Inc. (FTSI), the largest private oil field service company in North America, and served as a member of the FTSI board of directors from May 2011 until October 2015. Previously, Mr. Lanham was the Managing Director and global head of energy and Managing Director of Investments for Australia and New Zealand at Temasek Holdings (Private) Limited, an investment company owned by the Government of Singapore. Prior to joining Temasek, Mr. Lanham spent 20 years with Anadarko Petroleum Corporation in positions of increasing responsibility, including President and General Manager of Anadarkos Asian subsidiary. He previously held director positions at Venari Resources LLC and Black Gold Energy LLC, and is currently a director of the United Way of Tarrant County, Texas.
Qualifications: Mr. Lanham brings over 25 years of experience in the energy industry in both operations and investments. His extensive international experience in the energy industry, including his expertise in strategic planning and portfolio investment management, is a significant asset to the Board.
BERNARD LANIGAN, JR.
Background: Bernard Lanigan, Jr. has been nominated for election to the Board by our Board at the Annual Meeting. He founded and has served as Chairman and Chief Executive Officer of Southeast Asset Advisors, Inc., an investment advisor and wealth management company, since 1991. He also founded and has served as Chairman of Lanigan & Associates, P.C., a certified public accounting and consulting firm, since 1974. Mr. Lanigan currently serves on the boards of directors of Ruby Tuesday, Inc. since 2011 and Rayonier Inc. since 2015, as well as various non-public companies, including Lykes Brothers, Inc. and various endowments and private foundations. Previously, Mr. Lanigan served on the board of directors of Texas Industries, Inc.
Qualifications: Mr. Lanigan brings over 40 years of leadership experience with large, complex and diverse organizations. He has been a certified public accountant for more than 40 years and has over 35 years of experience in financial, tax, accounting, investment advising, strategic consulting, risk assessment, valuations and mergers and acquisitions matters, including as both advisor and principal.
JOHN T. MILLS
Background: John T. Mills joined the CONSOL Board in March 2006. Mr. Mills currently serves as Chair of the Audit Committee and as a member of the Compensation Committee. From December 2007 until August 2015, he served on the board of directors of Cal Dive International Inc., a marine contractor providing manned diving, derrick, pipelay and pipe burial services to the offshore oil and natural gas industry, where he served as lead independent director, and as a member of the audit, compensation, and corporate governance and nominating committees. From January 2008 through June 2010, Mr. Mills was a member of the board of directors and audit, conflicts and risk management committees of Regency GP, LLC, the general partner of Regency GP, LP, the general partner of Regency Energy Partners LP, a natural gas gathering, processing and transportation master limited partnership. Mr. Mills joined the board of directors of Horizon Offshore, Inc., a marine construction company, in June 2002 and served as the chairman of the board of directors from September 2004 until December 2007, when Horizon Offshore, Inc. was acquired by Cal Dive International, Inc. Mr. Mills was the Chief Financial Officer of Marathon Oil Corporation, an integrated energy company, from January 2002 until his retirement in December 2003. In 2011, Mr. Mills attended the Harvard Business School program Making Corporate Boards More Effective.
Qualifications: As a licensed attorney with over 40 years of business experience, including 16 years as an officer of Marathon Oil Corporation and U.S. Steel Corporation, Mr. Mills brings significant knowledge and experience to our Board. In particular, Mr. Mills brings an in-depth understanding of the evaluation of organic growth capital projects and acquisition and disposition opportunities, and the importance of maintaining a competitive capital structure and liquidity. In addition, having previously served as Senior Vice President, Finance and Administration, and later Chief Financial Officer of Marathon Oil Corporation, Mr. Mills has developed a wealth of financial knowledge with respect to the oversight of (i) the preparation of consolidated financial statements, (ii) internal audit functions, and (iii) public accountants, skills which are critical to our Corporation and particularly our Audit Committee.
Background: Joseph Platt has been nominated for election to the Board by our Board at the Annual Meeting. He is the general partner at Thorn Partners, LP, a family limited partnership, a position he has held since 1998. Mr. Platts career at Johnson and Higgins, a global insurance broker and employee benefits consultant (J&H), spanned 27 years until 1997, when J&H was sold to Marsh & McLennan Companies. At the time of the sale, Mr. Platt was an owner, director and executive vice president of
J&H. Mr. Platt has served on the board of directors of Greenlight Capital Re, Ltd., a property and casualty reinsurer, since 2004 and has been its lead independent director since 2007, and also serves as an independent director of BlackRocks Open End & Liquidity Funds and on the boards of various other nonpublic companies and not-for-profit institutions.
Qualifications: Mr. Platt brings to the Board significant financial, compensation and risk management expertise.
WILLIAM P. POWELL
Background: William P. Powell has served on the CONSOL Board since January 2004. He currently serves as Chair of the Finance Committee and as a member of the Nominating and Corporate Governance Committee. Mr. Powell previously was a director of Cytec Industries, a global specialty chemicals and materials company, from 1993 until its merger with Solvay SA in December 2015, where he served as lead independent director, chair of the governance committee and as a member of the audit committee. Until May 2007, Mr. Powell was a Managing Director of William Street Advisors, a New York City-based merchant banking boutique. Mr. Powell resigned from William Street Advisors to establish a family office, 535 Partners LLC, where he serves as Managing Partner. Prior to his time at William Street Advisors, he served as a Managing Director of UBS Warburg LLC and its predecessor Dillon, Read & Co. Inc. since 1991.
Qualifications: With an MBA degree and over 30 years of financial, management and investment experience, Mr. Powell brings a wealth of knowledge to our Board. Having served on multiple public company boards for over 20 years, Mr. Powell also has significant expertise in corporate governance matters.
EDWIN S. ROBERSON
Background: Edwin S. Roberson has been nominated for election to the Board by our Board at the Annual Meeting. He currently serves as Chief Executive Officer of Christ Community Health Services, a health system of eight clinics providing high quality healthcare to the underserved in the Memphis, Tennessee community, a position he has held since 2014. Prior to that, Mr. Roberson served as Chief Executive Officer of various cancer research and biotech firms, and as President of Beacon Consulting, LLC, a business consulting firm, from 2006 to 2011. From 1991 to 2006, he worked at Conwood LLC, the nations second-largest manufacturer of smokeless tobacco products and a major seller and distributor of tobacco products manufactured by third parties, where he served in several roles, including Chief Financial Officer and, ultimately, President. After serving in the Army from 1969 to 1971, where he was awarded two Bronze Stars in Vietnam, Mr. Roberson began his professional career at KPMG, an international accounting and consulting firm, where he was a tax partner until 1991. Mr. Roberson also serves on the board of directors of Protea Biosciences, Inc. where he is chairman of the audit committee, and has served on the board of Paragon National Bank, where he was chairman of the audit committee. He also serves on the board of directors of several private corporations and currently serves or has served as a board member for a number of educational, religious, civic and charitable organizations, including Duke University Divinity School, the Boy Scouts of America, and Chairman of Methodist Le Bonheur Healthcare.
Qualifications: Mr. Roberson brings to the Board significant leadership skills and financial, accounting and strategy expertise. Further, Mr. Roberson is a certified public accountant.
WILLIAM N. THORNDIKE, JR.
Background: William N. Thorndike, Jr. has served on the CONSOL Board since October 2014. Mr. Thorndike currently serves as a member of the Compensation Committee and the Finance Committee. He founded Housatonic Partners, a private equity firm, in Boston, MA in 1994 and has been a Managing Director since that time. Prior to founding Housatonic Partners,
Mr. Thorndike worked with T. Rowe Price Associates and Walker & Company, a publishing company, where he was named to the board of directors. Mr. Thorndike has served as a director of over 30 companies since founding Housatonic Partners. He is currently a director of Alta Colleges; Carillon Assisted Living, LLC; Lincoln Peak Holdings, LLC; OASIS Group Ltd.; QMC International, LLC; and White Flower Farm, Inc. Mr. Thorndike briefly served on the board of LeMaitre Vascular, Inc., a former portfolio company, after it went public. He also serves as a Trustee of Stanford Business School Trust, and WGBH, a public broadcaster serving southern New England, and is the Chair of the Board of Trustees of the College of the Atlantic. Mr. Thorndike is the author of The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success.
Qualifications: Mr. Thorndike brings over 20 years of investment and board experience to the CONSOL Board. He has extensive leadership experience in evaluating strategic alternatives and helping to build value for shareholders across a variety of industries. He has a breadth of financial, strategic and human resource knowledge with specific expertise in the areas of capital allocation and compensation.
Related Party Policy and Procedures
Our Audit Committee adopted a written Related Party Policy and Procedures for the review and approval or ratification of related party transactions with directors, nominees for director, executive officers and certain family members (related persons). A copy of the policy is available on our website at www.consolenergy.com.
Under the policy, prior to entering into a potential related person transaction (which is generally a transaction in excess of $120,000 involving the Corporation and a related person), the related person must notify our chief financial officer and general counsel of the material facts regarding the transaction. If our chief financial officer and general counsel determine that the proposed transaction is in fact a related person transaction, the details of the transaction are presented to our Audit Committee (or if it is not practicable or desirable to wait until the next Audit Committee meeting, to the chairman of the Audit Committee) for approval. The Audit Committee or Chairman, as applicable, will consider all relevant facts and circumstances including the terms of the transaction and terms that would be available to unrelated parties, the benefits to us and, if the transaction involves an independent director, any impact the transaction would have on such directors independence. The Audit Committee or Chairman, as applicable, will also inform our Nominating and Corporate Governance Committee of any related person transactions involving directors or nominees. Since the SECs related party regulation also applies to directors and executive officers family members, as well as entities in which they may be deemed to have an indirect material interest, it is possible that related person transactions could occur without a director or executive officer being aware of them and seeking approval in accordance with the policy. When we become aware of a related person transaction that has not been previously approved, the policy provides that the details of the transaction will be presented to our Audit Committee or Chairman, as applicable, for ratification or other action. Our Audit Committee also reviews, on an annual basis, ongoing related person transactions having a remaining term of more than six months or that are in excess of $120,000. We also require that officers and directors complete annual director and officer questionnaires and adhere to written codes of business conduct and ethics regarding various topics, including conflicts of interest, the receipt of gifts, service in outside organizations, political activity and corporate opportunities. Officers and directors must certify compliance with these codes in writing each year.
Mr. Hardesty, a member of the Board during 2015, has a daughter who is a partner at Bowles Rice LLP (Bowles Rice). Bowles Rice rendered legal services to the Hess joint venture and the Noble joint venture, both of which the Corporation participates in as a 50% joint venture partner. Bowles Rice was paid approximately $3.9 million for these legal services in 2015. CONSOLs portion of those expenditures (including the 50% portion attributable to the joint venture work) amounted to approximately $1.95 million, or approximately 5.4% of its total legal spend. CONSOL engaged Bowles Rice many years prior to Mr. Hardesty becoming a member of the Board. Mr. Hardesty was not involved in the decisions to utilize Bowles Rice.
The Audit Committee reviewed and approved the above transaction.
Determination of Director Independence
Our Board is required under the NYSE rules to affirmatively determine the independence of each director on an annual basis and to disclose this determination in the Proxy Statement for each annual meeting of shareholders of CONSOL. Based on the independence standards set forth in our Corporate Governance Guidelines, which are described below, our Board has determined that each of our directors, other than Mr. DeIuliis (who is the Chief Executive Officer of CONSOL) had no material relationship with CONSOL (either directly or indirectly, including as a partner, shareholder or officer of an organization that has a relationship with CONSOL) and are independent under our Corporate Governance Guidelines and the corporate governance rules of the NYSE codified in Section 303A of the NYSE Listed Company Manual. The Board also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the
NYSE listing standards and the SEC rules, and considered the additional factors under the NYSE rules relating to members of the Compensation Committee before determining that each of them is independent.
The Board has established the following standards for determining director independence, which are reflected in our Corporate Governance Guidelines that are available in the Corporate Governance section of the Corporations website at www.consolenergy.com.
A director will not be deemed independent under CONSOLs Corporate Governance Guidelines if:
Any related person transaction required to be disclosed under SEC Regulation S-K, Item 404, shall be considered in determining the independence of a director or nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ABOVE-NAMED NOMINEES FOR THE BOARD OF DIRECTORS.
This Compensation Discussion and Analysis section (the CD&A) is designed to provide our shareholders with an explanation of CONSOLs executive compensation philosophy and objectives, our 2015 executive compensation program and the compensation paid by CONSOL to the following named executives in 2015:
The contents of this CD&A are organized into five sections: Section 1 Summary; Section 2 Pay for Performance; Section 3 Compensation Setting Process; Section 4 Compensation Decisions for 2015; and Section 5 Other Compensation Policies and Information.
This CD&A contains references to one or more financial measures that have not been calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each disclosed non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in Appendix A to this Proxy Statement.
SECTION 1 - SUMMARY
Our executive compensation program is designed to attract, motivate and retain key executives who will promote both the short- and long-term growth of CONSOL and create sustained shareholder value. To this end, we take a pay-for-performance approach to our executive compensation program that ties the majority of the compensation payable to our named executives to CONSOLs stock price and operational performance, and promotes equity ownership among the named executives to greater align their interests with those of our shareholders. Some of the highlights from 2015 include:
Managerial decisions over time drive a companys financial performance. CONSOLs financial and non-financial performance has been consistently solid over the years despite the volatile economy and volatile commodity prices. This conclusion is underscored by our 2015-2016 Business, Compensation and Corporate Governance Highlights, as described on pages 3-6.
SECTION 2 - PAY FOR PERFORMANCE
We consistently place a substantial portion of our named executives compensation at-risk. As demonstrated in the following chart(s), more than a majority of our named executives compensation is in the form of annual and equity incentive-based compensation.
Because a substantial amount of the compensation of our named executives is at-risk, there is a strong alignment between their compensation and the long-term interests of our shareholders. In short, the named executives compensation is highly correlated with stock price performance if value is not delivered to our shareholders, as measured by stock price, their compensation will be adversely affected.
For further reference, the chart below shows Mr. DeIuliis total direct compensation in 2015 against our 1-year stock price performance, as measured by total shareholder return (TSR), in each case relative to a peer group of companies (as defined on page 32). As you will find, the vertical axis of the chart shows that Mr. DeIuliis total direct compensation was in the 25th percentile of the peer group for 2015 and the horizontal axis of the chart shows our relative TSR was similarly ranked around the 25th percentile during the same period thus showing alignment between Mr. DeIuliis compensation and CONSOLs TSR performance relative to its peers.
SECTION 3 - COMPENSATION SETTING PROCESS
Compensation Philosophy and Objectives
Our executive compensation program is designed to attract, motivate and retain key executives who drive our success and industry leadership. We achieve these objectives through compensation that:
Key factors affecting the Compensation Committees executive compensation judgments include: (i) the nature and scope of an executives responsibilities; (ii) an executive officers performance (including contribution to the Corporations financial results); and (iii) the Compensation Committees outside compensation consultants report(s) on survey and/or proxy data for compensation paid to executives with similar responsibilities at other similarly situated companies.
Results of 2015 Shareholder Vote on Named Executive Compensation
CONSOL maintains a practice of engaging in discussions with our major shareholders on various topics, including the compensation of our named executives. The insight we have gained over the years through these discussions has been helpful to the Compensation Committee as it considers and adopts compensation policies relating to our named executives.
Approximately 97.45% of the shares voted at our 2015 Annual Meeting of Shareholders approved our 2014 executive compensation program. We believe this vote outcome was positively impacted by our active engagement with our shareholders over the years and our continued efforts to structure our executive compensation programs to better align the interests of our named executives and shareholders. We understand from our shareholders that the changes we have made to our executive compensation programs and business have, in fact, more closely aligned our programs with their expectations. This vote result indicated to the Compensation Committee that no significant changes needed to be made to the executive compensation program going forward.
We will continue to actively engage in discussions with our shareholders on executive compensation matters and consider shareholder views about our core principles and objectives when determining the compensation of our named executives.
Use of Peer Group and Other Benchmarking Data
A primary factor that the Compensation Committee considers in determining the total compensation opportunity available to each of our named executives is whether such total compensation opportunity is competitive with the total compensation opportunities offered to similarly situated executives by our competitors.
Since we are unique in that we are both a coal and gas producer, the Compensation Committee uses a peer group of companies that includes a mix of both coal and gas companies, against which the Compensation Committee measures our overall compensation program. The scarcity of companies similar to CONSOL means that it is difficult for the market to value our diverse holdings of coal and gas assets, which leads to a more complex business model than most, if not all, of our peers. In selecting the below companies, the Compensation Committee also considered CONSOLs revenue and market capitalization relative to these peers and their business segment revenue.
In consideration of the above, the following peer companies were used to help establish 2015 compensation for our named executives (collectively, the peer group):
The Compensation Committees long-term philosophy is to set the compensation for our named executives, including our Chief Executive Officer, near the median of the peer group to be consistent with CONSOLs revenue and market capitalization relative to our peer group. On average, our current named executives are at the 27th percentile of the peer group. With respect to the average percentile ranking for the named executives total direct compensation compared to the peer group, the Compensation Committees compensation consultant found the following when evaluating the 2015 compensation packages for our named executives in late 2015:
CONSOL Percentile Rankings Among Peer Group
In connection with the preparation of the 2015 compensation program, the compensation consultant benchmarked the proposed compensation packages for the named executives against (i) proxy data available for the peer group and (ii) published survey data.
The Compensation Committee uses the compensation consultants benchmarking studies to determine the market pay practices of executives at comparable companies who are similarly situated to our executives. The Compensation Committees policy is to use the data prepared and presented by the compensation consultant as a reference point or guideline. Our named executives actual compensation may be higher or lower than the compensation paid to executives in similar positions at comparable companies based on CONSOLs financial performance and a subjective, qualitative review of individual performance.
Role of Compensation Consultant
The Compensation Committee engaged Towers Watson to assist with the development of our 2015 executive compensation program. The compensation consultant is retained by the Compensation Committee and works with the Committee in coordination with management. A representative of Towers Watson generally attends Compensation Committee meetings and is available to participate in executive sessions. Aside from its retention by the Compensation Committee for the foregoing purposes, Towers Watson provided no other services to CONSOL during 2015. In order to assure Towers Watsons independence, it is the Compensation Committees practice to pre-approve any work unrelated to executive compensation that may be proposed to be provided by Towers Watson. In addition, the Compensation Committee also considers all factors relevant to Towers Watsons independence from management, including those factors mandated by the listing standards of the NYSE.
The Compensation Committee looks to the compensation consultant to review the elements of our compensation program, including the appropriate mix of short- and long-term incentives, and for any recommendations of modifications thereto, based on their review of the market practices of a peer group of companies and the Corporations compensation objectives. The consultant also provides ongoing input on the design of our incentive programs and the underlying performance metrics.
Process for Evaluating Compensation
Generally, in the first quarter of each year, the Compensation Committee meets to establish the base salaries, incentive opportunities and related performance goals of the Corporations compensation programs. To establish compensation for a particular named executive (other than our Chief Executive Officer), the Corporations human resources personnel make an initial assessment and submit it to our Chief Executive Officer for review. This assessment considers relevant industry salary practices, the complexity and level of responsibility associated with the particular named executives position, the positions overall importance to the Corporation in relation to other executive positions, and the competitiveness of the named executives total compensation. Our Chief Executive Officer may make appropriate changes to this assessment based on his determination of such named executives past performance. The Compensation Committee then reviews:
After considering the factors described above, and in consultation with the Chief Executive Officer and Towers Watson, the Compensation Committee and the Board approved the named executives 2015 compensation packages.
To establish compensation for our Chief Executive Officer, the Compensation Committee reviews:
After considering these factors, the Compensation Committee and the Board typically approve the compensation of our Chief Executive Officer. Our Chief Executive Officer does not participate in, and is not present for, any approvals relating to his compensation.
SECTION 4 - COMPENSATION DECISIONS FOR 2015
Elements of Executive Compensation Program
In 2015, we continued to compensate our named executives through the following elements of our executive compensation program:
2015 Base Salary
The Compensation Committee reviewed the base salaries of our named executives in January 2015. As a result of the Compensation Committees review of named executives base salaries as compared to that of the peer group, annual base salaries for 2015 were moderately increased, as follows:
(1) Executive STIC
The STIC is designed to deliver annual cash awards when CONSOL and our named executives are successful in meeting or exceeding established performance targets and to pay less, or nothing at all, when CONSOL and/or our employees fall short of these targets. The STIC provides incentive compensation (measured at target) that is comparable to compensation provided by companies with which CONSOL competes for executive talent. The STIC bonus pay-outs for 2015 were determined based on a strict application of the following formula:
Each of Coal and Gas results are measured independently, with scores ranging from 0-200% for each component, with a 100% score indicating target performance and a higher score (up to a maximum of 200%) indicating above-target performance. If the threshold, or minimum, score of 50% is not reached for a particular goal, a score of zero is recorded for that goal. The weighted scores for Coal results and Gas results are aggregated and multiplied by the TSR modifier. All corporate goals were derived from the annual Board-approved profit objective for the year. For 2015, the Performance Factor was calculated based on the three components of Coal Results, Gas Results and TSR, as follows:
Based on the results of each of the three components above, the Performance Factor for 2015 was calculated at 81.3% of the target payout. Accordingly, the ultimate payouts to our named executives for 2015 performance were as follows:
STIC Payout Information
Our LTIC program is designed to create a strong incentive for our named executives to achieve our longer-term performance objectives in CONSOLs strategic plan and to align managements interests with those of our shareholders.
In January 2015, the Compensation Committee determined that each named executive would receive his entire 2015 long-term incentive opportunity in the form of PSUs and RSUs, with 55% of each named executives target long-term incentive opportunity in the form of PSUs, and 45% in the form of RSUs.
(1) 2015 PSUs
The PSUs vest, if earned, after the end of a three-year performance period (January 1, 2015 through December 31, 2017).
The Compensation Committee believes that our PSU awards align the interests of our employees with those of our shareholders because the vesting of such awards is tied to the achievement of pre-approved three-year performance goals. The vesting of the named executives 2015-2017 PSU awards will be calculated at the end of the performance period based on the following pre-established, equally-weighted goals (if the threshold EBITDA performance condition is achieved):
The Compensation Committee has determined that the EBITDA performance condition and the ROCE target number constitute confidential information, disclosure of which would result in competitive harm to CONSOL. When the EBITDA performance condition and ROCE goal were established, the Compensation Committee believed that they were set at challenging, yet achievable levels based upon a review of CONSOLs performance in the prior three-year period and its business goals and objectives for the 2015-2017 performance period. EBITDA performance condition and ROCE goal will be calculated as described on Appendix A. The EBITDA performance condition and ROCE goal will be disclosed in the 2018 proxy once the performance period has been completed and any earned awards are reported.
The Compensation Committee approved the following 2015 PSU awards for the named executives (in the dollar amounts shown below):
(2) 2015 RSUs
In order to retain key executive talent, the Compensation Committee approved awards of time-based, three-year ratable vesting RSU awards to all of the named executives.
The 2015 RSUs granted to each of the named executives were as follows:
(3) Payout of CSUs Covering 2013-2015 Performance Period
In January 2013, the Compensation Committee approved the award of CSUs to our named executives and other key employees at that time, which had a performance period from January 1, 2013 through December 31, 2015. For the CSU awards that were granted in 2013 to be earned, both of the following threshold goals had to be satisfied at the end of the performance period:
Following the performance period, the Compensation Committee determined the stock price performance goal of the 2013 CSU awards had not been achieved (e.g., the Ending Price did not equal or exceed the Beginning Price) and, as a result, no pay-outs were made to the Chief Executive Officer and other grantees of the CSU awards.
Additional information regarding the 2013 grant of the CSUs is included in CONSOLs definitive proxy statement filed on March 28, 2014.
SECTION 5 - OTHER COMPENSATION POLICIES AND INFORMATION
Retirement Benefit Plans
CONSOL maintains retirement benefit plans, including supplemental retirement plans, which are intended to attract and retain key talent. CONSOL also continues to move toward a defined contribution strategy to deliver retirement benefits to its employees. In 2014, we froze the retirement plan for certain employees and eliminated retiree medical for all active employees, including our named executives.
Change in Control Agreements
We have change in control agreements with each of our named executives who are currently employed by us, which we refer to as CIC Agreements). The CIC Agreements provide for a double trigger requirement, in that each named executive will receive severance benefits only if such named executives employment is terminated or constructively terminated after, or in connection with, a change in control (as defined in the respective CIC Agreements) and such named executive enters into a general release of claims reasonably satisfactory to us. Under these circumstances, the named executives would be entitled to receive a lump sum cash severance payment equal to a multiple of base pay, plus a multiple of incentive pay (as defined in each named executives respective CIC Agreement) as follows:
Additionally, benefits would be continued for 24 to 30 months (as set forth in the applicable CIC Agreement) and equity grants would accelerate and vest in connection with a change in control. The Compensation Committee believes that providing change in control benefits in the CIC Agreements and equity award agreements would motivate executives to take actions in the event of a proposed change in control that are in the best interests of CONSOL and its shareholders, while reducing the distraction of the potential impact of such a transaction on the named executive personally. To protect the business interests of CONSOL, the CIC Agreements and equity award agreements also contain confidentiality obligations, a one-year non-competition covenant and a two-year non-solicitation covenant. Additional terms of these agreements are more fully described in Understanding Our Change in Control and Employment Termination Tables and Information on page 56.
In connection with the Compensation Committees objective to provide compensation opportunities that will attract and retain superior executive personnel who will make significant contributions to CONSOL, our CIC Agreements that were entered into prior to 2009 provide for tax gross-ups in the event of a change in control (the CIC Agreements of Messrs. Khani, Dugan and Grech, which were entered into more recently, do not contain change in control tax gross-ups). If it is determined that any payment or distribution by CONSOL or CNX Gas (in the case of our Chief Executive Officer and Chief Administrative Officer) to or for the disqualified persons benefit would constitute an excess parachute payment, CONSOL or CNX Gas (in the case of our Chief Executive Officer and Chief Administrative Officer) will pay to the disqualified person a gross-up payment, subject to certain limitations, such that the net amount retained by the disqualified person after deduction of any excise tax imposed under Section 4999, and any tax imposed upon the gross-up payment, will be equal to the excise tax on such payments or distributions. In connection with incorporating gross-up provisions in the CIC Agreements entered into prior to 2009, the Compensation Committee determined that such gross-up payments were consistent with general market practice at that time such that each executive would receive the intended level of severance benefits unencumbered by the 20% excise tax. It is CONSOLs policy not to provide tax gross-ups in future CIC Agreements, as evidenced by the more recent agreements with Messrs. Khani, Dugan and Grech.
The Compensation Committee and Board approved the adoption of an executive compensation clawback policy, which provides that the Compensation Committee may seek to recover performance-based cash and equity incentive compensation awarded in 2014 and thereafter that was paid to an executive officer in the three years prior to a restatement as a result of CONSOLs material non-compliance with the financial reporting requirements of the securities laws if (i) such officer is responsible for such restatement and (ii) the amount paid to the officer would have been lower had it been calculated based on such restated financial statements.
Stock Ownership Guidelines for Executives
The stock ownership guidelines provide that all employees designated as officers for purposes of the policy should own shares of the Corporations stock, the value of which is a multiple of that employees base salary. The guidelines provide each officer with a five-year period from their appointment as an officer to achieve the applicable ownership level. Shares issuable upon the
exercise of stock options or settlement of PSUs held by an individual are not counted for purposes of determining whether an individual has satisfied the ownership guideline requirement which is as follows:
Our stock ownership guidelines were implemented by the Compensation Committee to further align our named executives interests with those of our shareholders and to comply with what we believe are best practices. CONSOL reviews named executives compliance with the stock ownership guidelines annually. As of December 31, 2015, all of our named executives had satisfied their stock ownership guidelines, or are expected to within the five-year period.
No Hedging/Pledging Policy
Our Insider Trading Policy prohibits directors, officers (including named executives) and employees from engaging in any of the following activities with respect to securities of CONSOL (except as otherwise may be approved in writing by the General Counsel): (i) purchases of CONSOL stock on margin; (ii) short sales; (iii) buying or selling options (other than the grant and exercise of compensatory stock options by CONSOL to directors, officers and employees), including buying or selling puts or calls or other hedging transactions with CONSOL securities; or (iv) pledging CONSOL stock (provided, however, that brokerage account agreements may grant security interests in securities held at the broker to secure payment and performance obligations of the brokerage account holder in the ordinary course). As disclosed in the Beneficial Ownership of Securities table above, as a result of Mr. Thorndikes contractual arrangement with a third party who acquired shares in a margin account, Mr. Thorndike may be deemed to own 50,000 shares that were acquired on margin. Mr. Thorndike has indicated he will use commercially reasonable efforts to pay down the margin.
Stock Retention Requirements
In December 2012, the Committee implemented stock retention requirements for CONSOL Stock Unit awards granted after December 31, 2012 to provide that 50% of the shares relating to such awards must generally be held until the earlier of (i) ten years from the time of award share settlement or (ii) normal retirement. Additionally, the Compensation Committee implemented stock retention requirements applicable to certain of our employees and officers (including the named executives) for regular annual cycle PSU and RSU awards granted after December 31, 2014 in which 50% of vested shares (after tax) must be held until the earlier of: (i) 10 years from grant or (ii) age 62.
We provide our named executives and other senior officers with perquisites that we believe are reasonable, competitive and consistent with CONSOLs compensation program. Our principal perquisite programs include club memberships, financial planning assistance (in mid-2015 this benefit was discontinued for our named executives), de minimis personal usage of company purchased event tickets and a vehicle allowance. These programs are more fully described in the footnotes to the Summary Compensation Table and Understanding Our Summary Compensation and Grants of Plan-Based Awards Tables on page 57. In early 2009, management and our Board collectively decided to eliminate tax gross-ups on CONSOL-provided perquisite programs for our named executives.
Tax, Accounting, and Regulatory Considerations
We consider the effect of tax, accounting and other regulatory requirements in designing and implementing our compensation programs, and while these factors may impact plan designs, ultimately decisions reflect the pay strategy of the Corporation and program intent.
With some exceptions, Section 162(m) of the Code limits CONSOLs deduction for compensation in excess of $1 million paid to certain covered employees (generally our Chief Executive Officer and the three next highest-paid executive officers).
Compensation paid to covered employees is not subject to the deduction limitation if it is considered qualified performance-based compensation within the meaning of Section 162(m) of the Code. In order to serve the interests of our shareholders, awards made under our STIC and PSU awards are structured to comply with Section 162(m) of the Code to maximize our tax deductions. For a description of the Section 162(m) components of our 2015 STIC and 2015-2017 PSU programs, see Appendix A.
Although the Compensation Committee strives to provide the named executives with compensation packages that will preserve deductibility of significant components of those packages to the extent reasonably practicable or consistent with our compensation objectives, the Committee believes that shareholder interests are best served by not restricting the Committees flexibility in structuring, determining and ultimately approving payment with respect to these compensation programs (even if the programs or such decisions may result in certain non-deductible compensation).
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with CONSOLs management and, based upon such review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement. The Compensation Committees charter is available on our website at www.consolenergy.com.
Members of the Compensation Committee:
Alvin R. Carpenter, Chairman
Gregory A. Lanham
John T. Mills
William N. Thorndike, Jr.
The foregoing Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of CONSOL under the Securities Act of 1933 or the Exchange Act, except to the extent that the Corporation specifically incorporates the Report by reference therein.
COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO CONSOLS RISK MANAGEMENT
Our compensation program is designed to motivate and reward our employees and executive officers for their performance during the fiscal year and over the long-term and for taking appropriate business risks.
In January 2016, the Compensation Committee reviewed an assessment of the risks, if any, to CONSOL associated with our compensation policies and practices. The Compensation Committee, with management, reviewed and discussed the design features, characteristics, performance metrics and approval mechanisms for all of our various compensation components, to determine whether any of our compensation policies or programs could create risks that would be reasonably likely to have a material adverse effect on the Corporation. The assessment was also reviewed by our Internal Auditors and Human Resources Department. Based on this review, management, the Compensation Committee and the full Board identified the following risk mitigating components, which, in their opinion, would be likely to reduce incentives for excessive risk-taking and mitigate any incentives to maximize short-term results at the expense of long-term value:
Based on its review of the Corporations internal controls and the risk mitigating components of the Corporations compensation programs identified in the management teams risk assessment, together with the assistance of its outside compensation consultant, it was determined that the Corporations compensation policies and practices do not encourage our executives or our other non-executive employees to take excessive risks that are reasonably likely to have a material adverse effect on the Corporation.
SUMMARY COMPENSATION TABLE 2015, 2014 AND 2013
The following table discloses the compensation for Mr. DeIuliis, the principal executive officer of CONSOL, Mr. Khani, the principal financial officer of CONSOL, and the other three most highly compensated executive officers of CONSOL serving at fiscal year-end 2015: Mr. Johnson, the Chief Administrative Officer, Mr. Grech, the Chief Commercial Officer, and Mr. Dugan, Chief Operating Officer E&P.
GRANTS OF PLAN-BASED AWARDS - 2015
The following table sets forth each grant made to a named executive in the 2015 fiscal year under plans established by CONSOL.
Executive Summary of CONSOL Plans and Agreements with Named Executives
In addition to their base salaries, our executive officers receive a mix of at-risk compensation, both short- and long-term, for their services. Pursuant to various plans which have been adopted by the Corporation, our executive officers are eligible to receive annual cash incentive awards based on the achievement of certain performance targets, and long-term equity awards generally in the form of stock options, RSUs, and/or PSUs. Each of these elements of compensation and the plans under which they are awarded are discussed below in greater detail.
To be eligible to receive an annual award under the STIC, a named executive must be an active, full-time employee on December 31 of the year in which the award was granted, have worked for at least three months of that same year and be an active employee on the date the annual award is paid out unless the named executive is an early, normal or incapacity retiree in which case the named executive must only be an active, full-time employee on December 31 of the year in which the award was granted. For more information on the STIC, see Compensation Discussion and Analysis on page 29.
RSUs are granted under our Plan. Our Compensation Committee determines the number of RSUs to be granted to each participant, the duration of such awards, the conditions under which the RSUs may be forfeited to CONSOL, and the other terms and conditions of such awards. RSUs are structured to comply with Section 409A of the Code. Accordingly, distributions shall be made only upon a permissible distribution event, including upon separation from service. The timing and implementation of deferral elections must occur as prescribed by Section 409A of the Code.
The PSU awards, including the CONSOL Stock Unit awards, represent a contingent right to receive shares of CONSOL common stock to the extent such units are earned and become payable pursuant to the terms of the Plan and related award documents. For more information on the PSU awards, see Compensation Discussion and Analysis on page 29.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2015
The following table sets forth all unexercised options, and unvested RSU and PSU awards that have been awarded to our named executives by CONSOL and were outstanding as of December 31, 2015.