Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
(e)
2021 Executive Compensation Review
On January 27, 2021, the independent Directors of the Board of Directors (the
"Board") of Chevron Corporation ("Chevron") conducted an annual review of the
compensation of Chevron's executive officers, including Michael K. Wirth,
Chairman and Chief Executive Officer, Pierre R. Breber, Vice President and Chief
Financial Officer, and the other named executive officers of Chevron identified
in Chevron's 2020 proxy statement, James W. Johnson, Executive Vice President,
Upstream, Joseph C. Geagea, Executive Vice President, Technology, Projects and
Services, and Mark A. Nelson, Executive Vice President, Downstream & Chemicals
(collectively, the "Named Executive Officers"). Following such review, the
independent Directors of the Board approved no change to the annual base salary
or the 2021 target percentage under the Chevron Incentive Plan ("CIP") for
Mr. Wirth and ratified the decision of the Management Compensation Committee of
the Board (the "Committee") to make no changes to the annual base salaries or
2021 CIP target percentages for the other Named Executive Officers. Further, the
independent directors of the Board, after considering the recommendation of the
Committee, determined that Mr. Wirth and the other Named Executive Officers
would not receive bonuses under the CIP for the 2020 performance cycle.
2021 Equity Awards to Named Executive Officers
On January 27, 2021, the independent Directors of the Board also approved the
grant of 87,870 performance shares, 317,100 stock options, and 43,930 standard
restricted stock units to Mr. Wirth and ratified the following grants by the
Committee under the Long-Term Incentive Plan of Chevron Corporation ("LTIP"):
(i) Mr. Breber, 22,690 performance shares, 81,900 stock options, and 11,340
standard restricted stock units; (ii) Mr. Johnson, 29,460 performance shares,
106,300 stock options, and 14,730 standard restricted stock units; (iii)
Mr. Geagea, 22,690 performance shares, 81,900 stock options, 11,340 standard
restricted stock units, and 18,150 special restricted stock units; and (iv)
Mr. Nelson, 22,690 performance shares, 81,900 stock options, and 11,340 standard
restricted stock units. Mr. Geagea received a grant of special restricted stock
units in recognition of his extraordinary contributions and leadership in
managing Chevron's global COVID-19 pandemic response, integrating Noble Energy,
Inc., and leading the enterprise-wide business restructuring in 2020.
The stock options were awarded under the form of non-qualified stock options
agreement previously approved by the Committee. These options have a ten-year
term, and one-third of the options granted vest on each of January 31, 2022,
January 31, 2023, and January 31, 2024, except as described further herein. The
exercise price for the stock options is $88.20 per share, the closing price of
Chevron's common stock on January 27, 2021, the date of grant. The number of
stock options granted was determined based on grant date inputs, including stock
price and Black-Scholes valuation.
The restricted stock units were awarded under the forms of standard restricted
stock unit award agreement and special restricted stock unit award agreement
previously approved by the Committee. The standard restricted stock units and
special restricted stock units vest on January 31, 2026, and January 31, 2024,
respectively, will pay out in cash based on the closing price of Chevron common
stock on the date of vesting (or, if not a trading day, on the last preceding
trading day), and will accrue dividend equivalents that will be reinvested as
additional restricted stock units, except as described further herein.
Effective January 26, 2021, the Committee approved a new form of performance
share award agreement to be used for the award of performance shares under the
LTIP on a going-forward basis to executive officers and other eligible employees
of Chevron, including the awards to the Named Executive Officers
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described below. This new form of agreement provides that relative Return on
Capital Employed ("ROCE") improvement be added as a second performance metric,
with payout weighted 70 percent based on relative Total Shareholder Return
("TSR") as measured against BP p.l.c., Exxon Mobil Corporation, Royal Dutch
Shell p.l.c., Total S.A., and the S&P 500 Index (collectively the "LTIP
Performance Share Peer Group"), and 30 percent based on relative ROCE
improvement as measured against the large-cap integrated energy companies BP
p.l.c., Exxon Mobil Corporation, Royal Dutch Shell p.l.c., and Total S.A.
(collectively, the "ROCE Competitor Group"). A copy of the form of performance
share award agreement is filed as Exhibit 10.1 hereto and is hereby incorporated
by reference herein. Corresponding changes were made to the rules governing
awards under the LTIP, with effect as of January 27, 2021.
The performance shares may result in a cash payout at the end of the three-year
performance period (January 1, 2021 through December 31, 2023) (the "Performance
Period") depending upon Chevron's relative performance as follows:
Relative ranking 1 2 3 4 5 6
TSR Modifier (1) 200% 160% 120% 80% 40% 0%
(70% weight, ranking includes S&P 500 Index)
ROCE Improvement Modifier (2) 200% 150% 100% 50% 0% n/a
(30% weight, ranking excludes S&P 500 Index)
1.Chevron's TSR for the Performance Period as compared to the TSR of the LTIP
Performance Share Peer Group. The TSR Modifier is based on Chevron's TSR ranking
for the three-year Performance Period compared to the TSR of each competitor in
the LTIP Performance Share Peer Group (from best TSR to lowest TSR) as set forth
in the table. If the difference between Chevron's TSR and the TSR of any higher
or lower competitor of the LTIP Performance Share Peer Group is less than one
percentage point (rounded to one decimal point), the results will be considered
a tie, and the TSR Modifier will be the average of all of the TSR Modifiers for
Chevron and for such other competitors of the LTIP Performance Share Peer Group
that fall less than one percentage point (rounded to one decimal point) higher
or lower than Chevron.
2.Chevron's ROCE improvement ("ROCE-I"), measured by percentage point change, as
compared with the ROCE-I for the ROCE Competitor Group. The ROCE-I Modifier is
based on Chevron's ROCE-I ranking for the three-year period commencing with the
quarter preceding the beginning of the Performance Period and ending one quarter
prior to the end of the Performance Period, compared to the ROCE-I of each
company in the ROCE Competitor Group (from best ROCE-I to lowest ROCE-I) as set
forth in the table. In the event Chevron's measured ROCE-I is less than one half
of a percentage point of the nearest member(s) of the ROCE Competitor Group, the
results will be considered a tie, and the ROCE-I Modifier will be determined by
dividing the sum of the ROCE-I Modifiers in the tied positions by the number of
members of the ROCE Competitor Group in the tie.
The performance shares will accrue dividend equivalents that will be reinvested
as additional performance shares and will vest on December 31, 2023, subject to
the payout modifiers, except as described further herein. The cash payout, if
any, will occur in an amount equal to the number of performance shares granted,
including dividend equivalents, multiplied by the 20-day trailing average price
of Chevron common stock at the end of the Performance Period, multiplied by a
performance share multiplier, which is the weighted average of (a) the TSR
Modifier (70 percent weight); and (b) the ROCE-I Modifier (30 percent weight),
each of which is determined as described above. The Committee may, in its
discretion,
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adjust the cash payout of performance shares downward if it determines that
business or economic considerations warrant such an adjustment.
Under the LTIP award terms, if these individuals' employment terminates for any
reason prior to January 31, 2022, the above-described stock option, performance
share, and restricted stock unit awards will be forfeited. Since Messrs. Wirth,
Johnson, Geagea and Nelson each have reached 90 points (the sum of years of age
and years of service) under the LTIP rules, on January 31, 2022, 100 percent of
the unvested portion of the above-described stock options will vest upon the
termination of their employment on or after that date for any reason other than
for misconduct (as defined under the LTIP rules), and such options will be
exercisable through the remainder of the original 10-year term. In addition, 100
percent of the unvested portion of the above-described performance share awards
will continue to vest upon the termination of their employment on or after
January 31, 2022, for any reason other than for misconduct (as defined in the
LTIP rules) but will not be fully vested and will not be paid out prior to
December 31, 2023. Further, 100 percent of the unvested portion of the
above-described standard restricted stock unit awards will continue to vest upon
the termination of their employment on or after January 31, 2022, for any reason
other than for misconduct (as defined under the LTIP rules) but will not be
fully vested and will not be paid out prior to January 31, 2026. With respect to
the special restricted stock unit awards granted to Mr. Geagea, under the LTIP
award terms, 100 percent of the unvested portion of such awards will be
forfeited if his employment terminates prior to January 31, 2024, for any
reason.
Since Mr. Breber has more than 75 points but less than 90 points (the sum of
years of age and years of service) under the LTIP, on January 31, 2022, a
portion of the unvested portion of the above-described stock option will vest
upon the termination of his employment on or after that date for any reason
other than for misconduct (as defined under the LTIP rules) and remain
exercisable for five years from the date of termination or the remaining term of
the award, if less. A portion of the unvested portion of Mr. Breber's
above-described performance share awards will continue to vest upon the
termination of his employment on or after January 31, 2022, for any reason other
than for misconduct (as defined in the LTIP rules) but will not be vested and
will not be paid out prior to December 31, 2023. Further, a portion of the
unvested portion of the above-described restricted stock unit awards will
continue to vest upon the termination of his employment on or after January 31,
2022, for any reason other than for misconduct (as defined under the LTIP rules)
but will not be vested and will not be paid out prior to January 31, 2026. The
portion of Mr. Breber's unvested stock options that will vest will be determined
by multiplying the number of stock options granted, as applicable, by the number
of completed months from the grant date to the date of termination, up to a
maximum of 36 months, divided by 36 months, and the rest will be forfeited. The
portion of Mr. Breber's unvested performance shares that will vest will be
determined by multiplying the number of performance shares granted, as
applicable, by the number of completed months from the Performance Period start
date to the date of termination, up to a maximum of 36 months, divided by
36 months, and the rest will be forfeited. The portion of Mr. Breber's unvested
restricted stock units that will vest will be determined by multiplying the
number of restricted stock units granted by the number of completed months from
the grant date to the date of termination, up to a maximum of 60 months, divided
by 60 months, and the rest will be forfeited.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number Description
10.1 Form of Performance Share Award Agreement under the Long-Term Incentive
Plan of Chevron Corporation
104 Cover Page Interactive Data File, formatted in Inline XBRL
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