CVX » Topics » Directors Compensation

This excerpt taken from the CVX DEF 14A filed Mar 19, 2007.
Directors’ Compensation (Concluded)

(7) Amounts represent the aggregate proportionate fair value of shares of restricted stock granted in 2002 through 2006 and stock units granted in 2006 recognized as compensation costs for financial reporting purposes for the fiscal year ended December 31, 2006. The grant date fair value for each share or unit is based on the closing stock price of Chevron Stock on the date of grant. At December 31, 2006, the following Directors had the following number of shares of restricted stock, stock units from the annual grant and stock units from a Director’s deferral of cash retainer under the Non-Employee Directors’ Equity Compensation and Deferral Plan (excluding amounts deferred into accounts tracked with reference to investment funds other than the Chevron Stock fund), respectively: Mr. Armacost, 18,110, 13,987 and zero; Ms. Deily, 819, 2,474 and zero; Mr. Denham, 2,536, 7,868 and 3,673; Mr. Eaton, 4,371, 15,944 and 4,187; Mr. Ginn, 6,336, 20,918 and 5,821; Mrs. Hills, zero, 11,512, and 501; Dr. Jenifer, 4,371, 13,987 and 6,800; Sen. Nunn, 4,371, 13,987 and 4,707; Dr. Rice, 800, 2,474 and zero; Mr. Shoemate, 4,328, 13,987 and 4,146; Dr. Sugar, 1,665, 5,096 and 2,132; and Mr. Ware, 5,339, 13,987 and 303.
 
(8) For Director’s electing retainer stock options in lieu of all or a portion of the annual cash retainer, options were granted on June 29, 2005 for the retainer period July 1, 2005 to June 30, 2006 and on June 28, 2006 for the retainer period July 1, 2006 to June 30, 2007. Amounts represent the aggregate proportionate fair value for retainer options elected by certain Directors in lieu of all or a portion of the annual cash retainer for the periods 2005 and 2006 that have been recognized as compensation costs for financial reporting purposes for the fiscal year ended December 31, 2006. Costs are recognized based on the grant-date fair value determined under the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS 123R). The grant-date fair value of each option is calculated using the Black-Scholes model. Retainer options granted on June 29, 2005 have an exercise price of $56.76 and a grant-date fair value of $11.66. The assumptions used in the Black-Scholes model to calculate this grant-date fair value were: an expected life of 6.4 years, a volatility rate of 24.5 percent, a risk-free interest rate of 3.8 percent and a dividend yield of 3.4 percent. Retainer options granted on June 28, 2006 have an exercise price of $61.36 and a grant-date fair value of $13.40. The assumptions used in the Black-Scholes model to calculate this grant-date fair value were: an expected life of 6.4 years, a volatility rate of 23.4 percent, a risk-free interest rate of 5.16 percent and a dividend yield of 3.52 percent.
 
  The following Directors received retainer options for the following number of shares of Chevron Stock in 2005 and 2006, respectively: Ms. Deily, zero and 1,456; Mr. Eaton, 6,607 and 6,791; Sen. Nunn, 7,488 and zero; Mr. Shoemate, 6,607 and 6,791; and Mr. Ware, 2,643 and 1,747. At December 31, 2006, the following Directors had the following number of retainer stock options: Ms. Deily, 1,456; Mr. Eaton, 20,031; Sen. Nunn, 20,912; and Mr. Ware, 9,762.
 
  Stock options are exercisable for that number of shares of Chevron Stock determined by dividing the amount of the cash retainer subject to the election by the Black-Scholes value of an option. The 2006 options were granted on June 28, 2006, which was the date the Board Nominating and Governance Committee approved the grant. However, since the Committee used the Black-Scholes value as of June 12, 2006, the grant-date fair value calculated under FAS 123R for the table varies slightly from the value used by the Committee on the grant date. In the future, the Committee intends to use the Black-Scholes value calculated on the date of grant.
 
(9) The Director is a participant in the Directors’ Charitable Gift Program, which was established by Texaco Inc. and, following the merger of Texaco Inc. and the Corporation, has been continued by the Corporation solely with respect to former Directors of Texaco. The Program provides for the payment, upon a participating Director’s death, of $1 million to a tax exempt organization designated by the Director and that is not incompatible with the Corporation’s philanthropic philosophy. Prior to the merger, Texaco purchased insurance policies for future gift payouts for the participating Directors under which each policy covered two Directors with the Corporation receiving the $2 million insurance proceeds upon the death of the second of the two Directors covered by each policy. Participants receive no financial benefit from the program because the Company receives all insurance proceeds and charitable deductions. The Corporation did not pay any premiums in 2006 since the premiums were fully funded by the accumulated cash value of the policies. Accordingly, no compensation is deemed paid to any participating Director.
 
  At December 31, 2006, the following Directors had the following number of stock units attributed to the Texaco Inc. Director and Employee Deferral Plan: Mr. Eaton, 1,957; Dr. Jenifer, 5,933; Sen. Nunn, 7,684; and Mr. Shoemate, 6,002. Following the time the Director no longer serves as a Director, Chevron Stock will be distributed in satisfaction of outstanding stock units.
 
  The Director is a participant in the Texaco Group Personal Umbrella Liability Insurance benefit for Directors and Officers. The value of this Company paid benefit is $4,815 in 2006.
 
(10) Dr. Jenifer received, in 2006, a $16,121 distribution under the Pension Plan for Directors of Texaco Inc., which was frozen effective October 31, 1995 with no further benefits accruing after that date. At December 31, 2006, Dr. Jenifer had a remaining principal balance of $60,903.


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Table of Contents

Directors’ Compensation

 


 

ChevronTexaco believes that non-employee Directors’ compensation should provide total compensation that is competitive, links rewards to business results and stockholder returns and facilitates increased ownership of ChevronTexaco Stock.

 

ChevronTexaco does not have a retirement plan for non-employee Directors. ChevronTexaco’s Executive Officers are not paid additional compensation for their services as Directors.

 

Current compensation reflects the Company’s September 10, 2004, two-for-one stock split. The compensation for non-employee Directors granted under the ChevronTexaco Corporation Non-Employee Directors’ Equity Compensation and Deferral Plan includes the following stock and cash elements:

 

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