Devon Energy (DVN)

and longevity with the Company. In order to attract and retain such executives, their base salaries must be competitive with the base salaries of executive officers of peer companies with whom we compete for executive personnel. Therefore, the primary driver for setting base salaries is market competitiveness. We believe that targeting base salaries at or slightly above the market median enables us to compete successfully and allows us to emphasize variable compensation appropriately.

 

The 2007 benchmarking indicated that base salaries for the named executive officers would generally meet the Company’s market objective on an overall basis, with individual salaries ranging from slightly below the median to above the 75^th percentile of the benchmarking data.

 

Please refer to the Summary Compensation Table for further information on the base salaries of named executive officers.

 

 

The Committee reviews and determines, on an annual basis, the base salaries of our Chief Executive Officer, J. Larry Nichols, and our other executive officers. In each case, the Committee considers the scope of responsibility and experience of each executive, in light of competitive analysis provided by the Compensation Consultant. In determining the appropriate base salary for Mr. Nichols, the Committee meets in executive session and reviews the goals for the past year, our performance against those goals, Mr. Nichols’ leadership in guiding our operations, and the changes in salaries of other chief executive officers at comparable companies. The Committee reviews competitive compensation information provided by the Compensation Consultant and discusses trends with the consultant. The Committee also reviews the competitive position and trends of our other executives to ensure appropriate internal equity. Based on this data and considering our overall compensation strategy, the Committee determines Mr. Nichols’ base salary.

 

Each year, the Committee individually interviews each executive officer to discuss the officer’s analysis of our performance for the year in general and the performance within his or her area of responsibility. In addition, the Chief Executive Officer discusses with the Committee his evaluation of each executive officer’s performance, which includes a review of contributions and performance over the past year, an assessment of the strengths and weaknesses of the executive officer and the development plans and succession potential of the executive. Mr. Nichols makes recommendations to the Committee for changes to base salaries based on his assessment of the executive’s performance, internal equity considerations, and external market forces and data, including the competitive market information provided by the Compensation Consultant. Taking into consideration Mr. Nichols’ recommendation, the Committee’s own review of competitive market data, interviews with the executive officers and our compensation philosophy, the Committee determines the base salary for each executive.

 

Available data indicates that Mr. Nichols’ base salary has been near the market median, and that our other executive officers as a group have earned salaries that are approximately 111% of the market median. These salary levels are consistent with the compensation philosophy of setting base salaries at or slightly above the median of salaries for comparable executives at the comparison companies.