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EOG » Topics » Tax and Accounting Considerations

This excerpt taken from the EOG DEF 14A filed Mar 25, 2009.
Tax and Accounting Considerations
 
In setting the components of our compensation program, the Committee considers the impact of the following tax and accounting provisions:
 
  •  Code Section 162(m).  Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the principal executive officer and the three most highly compensated executive officers of a company (other than the principal executive officer or the principal financial officer), as reported in that company’s most recent proxy statement. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. Historically, we have structured the key component of our long-term incentive compensation in the form of stock option/SAR grants that comply with the statute. Our Executive Officer Annual Bonus Plan, discussed above, also complies with the statute. The Committee is committed to preserving the deductibility of compensation under Section 162(m) whenever practicable, but does grant awards that are non-deductible, such as restricted stock/restricted stock units, when it feels such grants are in the best interests of EOG and our stockholders.
 
  •  Statement of Financial Accounting Standards (“SFAS”) No. 123(R).  SFAS No. 123(R), issued by the Financial Accounting Standards Board, requires a public company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. Our equity awards to the Named Officers are structured to comply with the requirements of SFAS No. 123(R) to maintain the appropriate equity accounting treatment.
 
  •  Code Section 409A.  Section 409A of the Code provides that deferrals of compensation under a nonqualified deferred compensation plan or arrangement are to be included in an individual’s current gross income to the extent that such deferrals are not subject to a substantial risk of forfeiture and have not previously been included in the individual’s gross income, unless certain requirements are met. We structure our nonqualified deferred compensation plans and arrangements, including our Deferral Plan, executive officer employment agreements, change of control agreements, severance plans and agreements, and incentive plans, each to the extent they are subject to Section 409A, to be in compliance with Section 409A. We do not currently grant any discounted stock options to which Section 409A may apply.
 
  •  Code Section 280G and Code Section 4999.  We consider the impact of Sections 280G and 4999 of the Code in determining our post-termination compensation, and provide reimbursement for any excise tax, interest and penalties incurred if payments or benefits received due to a change of control would be subject to an excise tax under Section 4999 of the Code.


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Table of Contents

This excerpt taken from the EOG DEF 14A filed Apr 4, 2008.
Tax and Accounting Considerations
 
In setting the elements of our compensation program, the Committee considers the impact of the following tax and accounting provisions:
 
  •  Code Section 162(m).  Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the principal executive officer and the three other most highly compensated executive officers of a company (other than the principal executive officer or the principal financial officer), as reported in that company’s most recent proxy statement. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. Historically, we have structured the key component of our long-term incentive compensation in the form of stock option/SAR grants that comply with the statute. Our Executive Officer Annual Bonus Plan, discussed above, also
complies with the statute. The Committee is committed to preserving the deductibility of compensation


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  under Section 162(m) whenever practicable, but does grant awards that are non-deductible, such as restricted stock/restricted stock units, when it feels such grants are in the best interests of EOG and our stockholders.
 
  •  Statement of Financial Accounting Standards (“SFAS”) No. 123(R).  SFAS No. 123(R), issued by the Financial Accounting Standards Board, requires a public company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. Our equity awards are structured to comply with the requirements of SFAS No. 123(R) to maintain the appropriate equity accounting treatment.
 
  •  Code Section 409A.  Section 409A of the Code provides that deferrals of compensation under a nonqualified deferred compensation plan are currently includible in gross income to the extent that they are not subject to a substantial risk of forfeiture and have not previously been included in gross income, unless certain requirements are met. We structure our deferred compensation plans to be in compliance with Section 409A. We do not currently grant any discounted options to which Section 409A may apply.
 
  •  Code Section 280G and Code Section 4999.  We consider the impact of Section 280G and Section 4999 of the Code in determining our post-termination compensation, and provide reimbursement for any excise tax, interest and penalties incurred if payments or benefits received due to a change of control would be subject to an excise tax under Section 4999 of the Code.


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EXCERPTS ON THIS PAGE:

DEF 14A
Mar 25, 2009
DEF 14A
Apr 4, 2008

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