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This excerpt taken from the DVN DEF 14A filed Apr 24, 2009. Compensation
Process
Our process for reviewing and determining the compensation for
named executive officers involves the Compensation Committee of
the Board of Directors (the “Committee”), senior
executive officers of the Company and an independent
compensation consultant. The roles of these individual parties
are described further in the following sections.
Role of the
Committee and Senior Executive Officers
The Committee establishes our executive compensation philosophy
and administers the overall executive compensation program. The
Committee operates under a written charter approved by the Board
of Directors. The Charter is available at
www.devonenergy.com.
Each year, the Committee conducts an individual, in-depth
interview of each senior executive officer to discuss the
officer’s analysis of the Company’s performance for
the year and the performance within his area of responsibility.
We believe this is a unique practice among compensation
committees and a highly effective tool in the Committee’s
oversight of the executive compensation process. In addition,
the CEO and the President discuss with the Committee their
evaluation of each senior executive officer’s performance,
role, development, and potential to take on greater or different
responsibilities. The CEO and President then make
recommendations to the Committee for changes to compensation for
senior executive officers. Neither the CEO nor the President
makes any recommendation to the Committee regarding his own
compensation.
The Committee considers the CEO’s and the President’s
recommendations, the Committee’s own review of competitive
market data, the Company’s recent performance, the
Committee’s interviews with senior executive officers, the
independent compensation consultant’s input, and the
Company’s compensation philosophy. The Committee then
determines whether to accept the CEO’s and the
President’s recommendations of compensation for senior
executive officers, and in a closed session without any senior
executive officer present, sets the CEO’s and the
President’s compensation.
Compensation decisions are further discussed in the
“Compensation Decisions in 2008” section below.
Role of the
Compensation Consultant
For the 2008 compensation process, the Committee retained the
services of an independent compensation consulting firm, Hewitt
Associates LLC (the “Compensation Consultant”), to
evaluate the competitiveness of our programs and assist with
executive compensation program design. The Committee did not
direct the particular manner or method in which the Compensation
Consultant would perform these services. The Committee has the
final authority to hire and terminate the Compensation
Consultant, and the Committee evaluates the performance of the
Compensation Consultant annually. The Company’s Board of
Directors has a policy that prohibits the Compensation
Consultant from providing other services to the Company, or its
management, without prior review and approval by the Committee.
During the 2008 compensation process, the Compensation
Consultant provided no services to the Company or its management
other than the services described in this CD&A.
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Commitment Runs Deep
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Benchmarking
To successfully compete for executive talent, the Committee,
working with the Compensation Consultant, annually compares the
compensation of its executives against the compensation of
similarly-situated executives at peer companies. The Company
establishes a peer group consisting of oil and gas and energy
services companies with similar revenue levels and asset and
market values as the Company. The Company also considers the
enterprise value of companies — calculated as the
market value of a company plus (i) long-term debt
and preferred stock, minus (ii) cash and cash
equivalents — in establishing a peer group. The
Committee believes these metrics are appropriate for determining
peers because they provide a reasonable point of reference for
comparing executives with similar positions and responsibilities.
For 2008, the Committee approved a peer group consisting of the
21 companies listed below:
Anadarko Petroleum Corporation*
Apache Corporation* Baker Hughes Incorporated Chesapeake Energy Corporation* Chevron Corporation* ConocoPhillips* Dominion Resources, Inc. El Paso Corporation EnCana Corporation* EOG Resources, Inc.* Halliburton Company Hess Corporation* Marathon Oil Corporation* Murphy Oil Corporation* Nabors Industries Ltd. Occidental Petroleum Corporation* Schlumberger Limited Tesoro Corporation Transocean Inc. Valero Energy Corporation The Williams Companies, Inc.
The companies designated with an asterisk (*) are included in a
subset of peer companies focused on oil and gas exploration and
production (E&P). The Committee referred to compensation
from these peers to evaluate industry-specific executive roles.
The Committee’s benchmarking analysis consists of all
components of total direct compensation, including base salary,
annual bonus and long-term incentives. The Compensation
Consultant collected and summarized compensation data from the
Proxy Statements of the peer group and the Compensation
Consultant’s proprietary databases. The compensation data
are typically from the prior year. Thus, when setting current
compensation, the Committee works with the Compensation
Consultant to adjust the data to account for known or expected
changes in the market between the effective date of the data and
the current date. Additionally, the Committee typically excludes
from its benchmarking analysis those companies whose
compensation far exceeds the compensation found at a majority of
the peer group.
Tally Sheets and
Review of Personal Use of Corporate Aircraft
The Committee annually reviews tally sheets for named executive
officers, including potential payments under various termination
scenarios. Further detail can be found in the “Potential
Payments Upon Termination or Change In Control” section of
this Proxy Statement. The Committee also reviews both IRS and
SEC calculations in connection with the valuation of personal
use of the corporate aircraft.
The Committee has determined that the amounts reflected in these
reviews are reasonable and consistent with the Company’s
compensation philosophy. The Committee has noted that in the
case of personal use of the corporate aircraft, the values for
named executive officers were significantly less than those
reported by our peer companies.
Succession
Planning
The Company has a robust succession planning process to ensure
the development of executive talent for the near and long term.
The process and progress are reviewed with the Committee and the
Board of Directors on an annual basis.
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Table of Contents
This excerpt taken from the DVN DEF 14A filed Apr 28, 2008. Compensation
Process
Our process for reviewing and determining the compensation for
named executive officers involves the Compensation Committee of
the Board of Directors (the “Committee”), senior
executive officers of the Company, and an independent
compensation consultant. The roles of these individual parties
are described further in the following sections.
Role of the
Compensation Committee and Senior Executive Officers
Our executive compensation philosophy is established by the
Committee, which also administers the overall executive
compensation program. The Committee operates under a written
charter approved by the Board of Directors. The charter is
available on our website at www.devonenergy.com.
Each year, the Committee conducts an individual, in-depth
interview of each senior executive officer to discuss the
officer’s analysis of the Company’s performance for
the year and the performance within his or her area of
responsibility. We believe this to be a unique practice among
compensation committees. In addition, the CEO and the President
discuss with the Committee their evaluation of each senior
executive’s performance, role, development, and potential
to take on greater or different responsibilities. The CEO and
President then make recommendations to the Committee for changes
to compensation for senior executive officers. Neither the CEO
nor the President makes any recommendation to the Committee
regarding his own pay.
The Committee takes into consideration the CEO’s and
President’s recommendations, the Committee’s own
review of competitive market data, recent Company performance,
interviews with the senior executive officers and our
compensation philosophy. The Committee then determines the pay
levels for each senior executive officer. In executive session
and without any executive officer present, the Committee
determines the CEO’s and President’s pay levels.
Mr. Heatly, the Company’s vice president of
accounting, is included in the group of named executive officers
solely because he is the Company’s principal financial
officer and not because he was one of the most highly paid
senior executive officers. Mr. Heatly was not a senior
executive officer in 2007. Therefore, his salary and bonus were
determined in accordance with the compensation practices applied
to the other non-senior executive officers of the Company. For
the purposes of the discussion of executive compensation
practices set forth in this Compensation Discussion and
Analysis, the term named executive officers does not include
Mr. Heatly.
2007 pay decisions are discussed further in the
“Executive Compensation in 2007” section below.
Role of the
Independent Compensation Consultant
In 2007, the Committee retained the services of an independent
compensation consulting firm, Hewitt Associates (the
“Compensation Consultant”), to evaluate the
competitiveness of our programs and assist with executive
compensation program design. The Committee did not direct Hewitt
to perform the above services in any particular manner or under
any particular method. All of the decisions with respect to the
Company’s executive compensation were made by the Committee
alone. The Committee has the final authority to hire and
terminate the Compensation Consultant, and the Committee
evaluates the Compensation Consultant annually. The
Company’s Board has adopted a policy that prohibits the
Compensation Consultant from providing any service to the
Company, or its management, other than the services provided to
the Committee.
Benchmarking
To successfully compete for executive talent, the Company
annually compares the compensation of its executives against the
compensation of comparable executives. The Company
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Commitment Runs Deep
Table of Contents
establishes a peer group consisting of oil and gas and energy
services companies having similar asset, revenue and enterprise
value profiles as the Company. The Committee believes these
metrics are appropriate for determining peers because they
provide a reasonable point of reference for comparing similar
positions and scope of responsibility.
For 2007, the Committee approved a peer group of
21 companies listed below:
Anadarko Petroleum Corporation
Apache Corporation Baker Hughes Incorporated Chesapeake Energy Corporation Chevron Corporation ConocoPhillips Dominion Resources, Inc. El Paso Corporation EnCana Corporation EOG Resources, Inc. Halliburton Company Hess Corporation Marathon Oil Corporation Murphy Oil Corporation Nabors Industries Ltd. Occidental Petroleum Corporation Schlumberger Limited Tesoro Corporation Transocean Inc. Valero Energy Corporation The Williams Companies, Inc.
The Company’s benchmarking analysis consists of all
components of total direct compensation, including base salary,
annual bonus and long-term incentives. The Compensation
Consultant collected and summarized compensation data from the
proxy statements of the peer group and the Compensation
Consultant’s proprietary databases. The information
available in comparing compensation paid by the Company in the
past as well as setting current compensation typically is from
the prior year. Thus, when setting current compensation, the
Committee works with the Compensation Consultant to adjust the
data to account for known or perceived changes in the market
between the effective date of the data and the current date.
For 2007, the named executive officers were included in the
benchmarking analysis. The Committee did not place any
particular emphasis on the market benchmark data for
Mr. Smette, as he has a unique role relative to other
executives in the peer group. Please see the “Material
Differences in Pay Decisions for Named Executive Officers”
section for additional information.
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