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DVN » Topics » Compensation Philosophy and Objectives

This excerpt taken from the DVN DEF 14A filed Apr 24, 2009.
Compensation Philosophy and Objectives
 
Overview
 
The Company has a two-pronged operating strategy, which includes:
 
  •  the investment of a significant portion of capital in low risk development projects on our extensive North American property base, which provides reliable and repeatable production and reserves additions; and
 
  •  the investment of capital in long cycle time projects to replenish our development inventory for the future.
 
We believe that this operating strategy requires a compensation philosophy that recognizes near-term operational and financial success as well as decision making that supports long-term value creation. For these reasons, our executive compensation program is designed to strike the appropriate balance between the near-term and the long-term.
 
The goals of the program are to:
 
  •  motivate, reward, develop and retain management talent to support our goal of increasing shareholder value;
 
  •  effectively compete against other oil and gas companies for executive talent;
 
  •  consider and respond to developments within the oil and gas industry;
 
  •  provide a balance between the achievement of near-term and long-term objectives, without motivating executives to take excessive risk; and
 
  •  emphasize direct compensation over indirect compensation, such as benefits and perquisites.
 
 
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Commitment Runs Deep

Table of Contents

The following table gives a broad overview of the elements of our executive compensation program, including the description and purpose of each element and the market guidelines we target. In each case, the market guidelines refer to an element’s relative value within a group of industry peer companies for comparable executive roles (see further discussion below under “Benchmarking”).
 
             
Compensation Element     Description and Purpose     Market Guidelines
Base Salary
   
Provides fixed compensation to pay for experience, expertise and knowledge
   
At or slightly above the 50th  percentile
Annual Cash Bonus
   
Emphasizes near-term performance results and current decision-making that affects long-term value creation
   
From the 50th to 75th percentiles based on performance
Long-Term Incentive Awards
   
Aligns executives’ long-term interests with those of our shareholders

Promotes retention of executives through time-based vesting of awards

Provides for meaningful share ownership opportunities

Emphasizes long-term performance results
   
From the 50th to 75th percentiles based on performance
Retirement and Other Benefits
   
Retirement benefits provide long-term financial security

Other benefits include basic health and welfare programs that are made available to all employees

Severance benefits allow for short-term financial security in certain cases of termination
   
Provide program features competitive with the peer group
             
 
For senior executive officers, we generally target total direct compensation, which we define as the aggregate of base salary, annual cash bonus and long-term incentive awards, between the 50th and 75th percentiles of the peer group. The most recent data available to the Company in 2008 indicated that its total direct compensation for named executive officers ranged from the 50th to approximately the 75th percentile at that time.
 
Balancing Compensation for Near-Term and Long-Term Performance
 
To reinforce the goals of achieving both near-term results and long-term shareholder value, the Company provides senior executive officers both annual cash bonuses and long-term incentive awards. We believe that properly allocating these compensation elements is critical in motivating senior executive officers to carry out our two-pronged operating strategy. Overall, the value of a senior executive officer’s total compensation is weighted in favor of long-term incentives.
 
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Compensation Weighted Toward Performance-Based Compensation
 
We believe that the proportion of an employee’s total direct compensation that varies based on performance should increase as the scope of an employee’s ability to influence our results increases. Since senior executive officers have the greatest influence over our results, a significant portion of their overall compensation consists of cash bonuses and long-term incentive awards that are “at risk.” In 2008, for example, approximately 90% of the estimated value of the total direct compensation of our Chief Executive Officer was at risk. The estimated value of the total direct compensation at risk in 2008 for all other named executive officers ranged from approximately 80% to 85% of their total direct compensation.
 
This excerpt taken from the DVN DEF 14A filed Apr 28, 2008.
Compensation Philosophy and Objectives
 
Overview
 
The Company has a two-pronged operating strategy, which includes:
 
  •   the investment of the majority of our capital budget in low-risk exploitation and development projects capable of producing reliable, repeatable results over the near-term; and
 
  •   the investment of a measured amount of our capital budget in longer-term initiatives with higher-impact potential to replenish our development inventory for the future.
 
We believe that this operating strategy requires a compensation philosophy that recognizes near-term operational and financial success as well as decision-making that supports long-term value creation. For these reasons, our executive compensation program is designed to strike the appropriate balance between the near-term and the long-term.
 
The goals of the program are to:
 
  •   motivate, reward and retain management talent to support our goal of increasing shareholder value;
 
  •   effectively compete against other oil and gas companies for executive talent;
 
  •   take into consideration developments within the oil and gas industry;
 
  •   provide a balance between the achievement of near-term and long-term objectives; and
 
  •   emphasize direct compensation over indirect compensation, such as benefits and perquisites.
 
The following table gives a broad overview of the elements of our executive compensation program, including the description and purpose of each element as well as market guidelines generally targeted by us. In each case, the desired market position is relative to executives at peer companies, which is discussed in further detail below under “Benchmarking.”
 
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Compensation
 		    Description and Purpose
 		    Desired Market
Component
 		      
 		    Position Relative to
              Peer Group
Base Salary
   
Provides fixed compensation to pay for experience, expertise, and knowledge
   
At or above the 50th percentile
Annual Cash Bonus
   
Emphasizes near-term performance results and current decision-making that affects long-term value creation
   
Near the 75th percentile based on performance
Long-Term Incentive Awards
   
Aligns executives’ long-term interests with those of our shareholders

Promotes retention of executives through time-based vesting of awards

Provides for meaningful share ownership opportunities

Emphasizes long-term performance results
   
Near the 75th percentile based on performance
Retirement and Other Benefits
   
Retirement benefits provide long-term financial security

Other benefits include basic health and welfare programs provided to all employees

Severance benefits allow for financial security in certain cases of termination
   
Provide program offerings competitive with the peer group
             
 
Generally, we target total direct compensation for executive officers, which we define as the aggregate of base salary, annual cash bonus, and long-term incentive awards, between the 60th and 75th percentiles of the peer group. The most recent data available to the Company in 2007 indicated that its total direct compensation for named executive officers ranged from below the median to approximately the 75th percentile at that time.
 
Balancing Pay for Near-Term and Long-Term Performance
 
To reinforce the goals of delivering both near-term results and long-term shareholder value, the Company provides executives both annual cash bonuses and long-term incentive awards. We believe that properly allocating these pay components is critical in motivating executives to carry out our two-pronged operating strategy. Overall, the value of an executive’s total compensation is weighted in favor of long-term incentives.
 
Compensation Weighted Toward Incentive Pay
 
We believe that the proportion of an employee’s total direct compensation that varies based on performance should increase as the scope of the individual’s ability to influence our results increases. Since executive officers have the greatest responsibility for, and influence over, our results, a significant portion of their overall compensation
 
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Commitment Runs Deep

Table of Contents

consists of incentive pay that is “at risk.” In 2007, for example, approximately 90 percent of the estimated value of the total direct compensation of our CEO was at risk. The estimated value of the total direct compensation at risk in 2007 for all other named executive officers ranged from approximately 80 percent to 90 percent of their total direct compensation.
 
This excerpt taken from the DVN DEF 14A filed Apr 27, 2007.
Compensation Philosophy and Objectives
 
Our two-pronged operating strategy – investing the majority of our capital budget in individually-significant, large-scale, low-risk development projects capable of producing reliable, repeatable results over the near-term and investing a measured amount of the capital budget in longer-term initiatives with higher-impact potential aimed at providing a development inventory over the longer-term – requires a compensation philosophy that balances the utilization of objective measures of our near-term success with a more subjective evaluation of executive officer performance that supports our long-term success.
 
Overall, our executive compensation program is designed to support a high-performance culture and to closely align the interests of our executives with the interests of our stockholders. The goals of the program are to:
 
•  motivate, reward and retain management talent to support our goal of increasing stockholder value;
 
•  provide the opportunity for executives to earn total cash compensation based on performance that is competitive with executives of companies of similar size within the oil and gas industry. In some cases, this includes setting base salaries at or slightly above the median of salaries for comparable executives at the comparison companies;
 
•  provide the opportunity for executives to earn annual cash bonuses near the 75th percentile for comparable executives at the comparison companies;
 
•  provide the opportunity for executives to earn long-term incentive awards near the 75th percentile for comparable executives at the comparison companies;
 
•  provide the opportunity for executives to earn total direct compensation between the 60th percentile and the 75th percentile for comparable executives at the comparison companies;
 
•  provide rewards that take into consideration the volatility of the oil and gas industry; and
 
•  provide a total compensation program that emphasizes direct compensation over indirect compensation, such as benefits and perquisites.
 

EXCERPTS ON THIS PAGE:

DEF 14A
Apr 24, 2009
DEF 14A
Apr 28, 2008
DEF 14A
Apr 27, 2007

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