COMPENSATION DISCUSSION AND ANALYSIS
TSR Shares he was entitled to receive at the beginning of 2020 by
two-thirds, resulting in a grant-date value reduction of $3.5 million.
The Compensation Committee also agreed to amend
and restate the employment agreement of our CFO, Mr. Restrepo (the Amended Agreement). The Amended Agreement, which became effective at the beginning of this year, includes terms largely consistent with his previous agreement (the
Prior Agreement), other than the following: (i) the term of employment runs from January 2, 2020 until June 1, 2022; (ii) automatic twelve (12) month renewal of the Amended Agreement following the applicable
expiration date or extension date, as applicable, unless written notice is given (a) by either the Company or Mr. Restrepo at least ninety (90) days prior to such date or (b) by Mr. Restrepo at least two hundred
(200) days prior to his voluntary retirement, if such retirement occurs after June 1, 2022 (a Qualifying Retirement); (iii) the Performance Peer Group applicable to each TSR Award (as such terms are defined in agreement) shall
consist of those entities determined from time to time by the Compensation Committee in consultation with the Chief Executive Officer; and (iv) upon Mr. Restrepos Qualifying Retirement, he will be eligible to receive the same
severance payments and benefits previously available to him only in the case of his termination of employment following the expiration date of the Prior Agreement as a result of his death, Disability, Constructive Termination without Cause or by the
Company without cause (as such terms are defined in the Amended Agreement), except that in the event of Mr. Restrepos Qualifying Retirement, all unvested TSR Shares outstanding as of the date of the agreement expiration notice shall
become vested as if the performance goals with respect to relative Total Shareholder Return set forth in the applicable award agreements were achieved at maximum levels rather than target levels.
More recently, in light of the Coronavirus pandemic and the sharp drop in oil prices, the Company has instituted broad-based salary reductions. Commencing March 23,
2020, the salaries of all U.S., corporate and expatriate employees making in excess of $100,000 per year were reduced by 10 percent. Further salary reductions were put in place beginning April 6, 2020. As a result, our CEO and CFO have
received reductions in base salaries, in the aggregate, of approximately 31 percent from the amounts set forth in their respective employments agreements for the period from March 23, 2020, through the end of the year, and approximately
26 percent and 24 percent, respectively, for all of 2020.
How We Determine Annual Base Salary
Base salary is a fixed element of an executives annual cash compensation. The Compensation Committee determines an appropriate level of base salary for our CEO and
CFO by taking into account competitive and other factors and conducting a compensation comparison against a pre-selected peer group (the Peer Group), which is discussed later in this CD&A. The
Compensation Committee makes this initial determination of base salary upon the executives initial appointment and periodically reviews its determination, as it deems appropriate, taking into account various factors, including the
Companys performance, market data, industry conditions and shareholder feedback.
The Compensation Committee may also take into account certain competitive
factors, which sometimes include:
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Compensation levels of similarly-situated executives of other drilling contractors and in the oilfield services sector at
companies in our Peer Group;
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Necessary levels of compensation to attract and retain highly talented executives from outside the industry; and
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A newly hired executives salary at his or her most recent place of employment.
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❖ 2019 Annual Base Salary
Our CEOs and CFOs initial annual base salaries were reflected in each of their respective employment agreements as $1.70 million and $650,000,
respectively. In 2014, Mr. Petrello received a 3% increase in his annual base salary to $1.75 million. In 2019, our CEO agreed to a one-year 10 percent reduction in base salary, which was
extended for another year at the beginning of 2020. On March 23, our CEO received a further reduction in base salary of 10 percent, and our CFO and our Corporate Secretary received reductions in their base salaries of 20 percent and
10 percent, respectively. Further salary reductions were put in place beginning April 6, 2020. As a result, our CEO and CFO have received reductions in base salaries, in the aggregate, of approximately 31 percent from the amounts set
forth in their respective employments agreements for the period from March 23, 2020, through the end of the year, and approximately 26 percent and 24 percent, respectively, for all of 2020.
How We Determine Annual Performance Bonus
At the beginning of each year, the
Compensation Committee approves objective performance measures for the Company as a whole and establishes corresponding performance goals for each participant under the Incentive Plan, including our named executive officers. In structuring the
performance measures and goals, the Compensation Committee sets targets for achieving those goals:
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Minimum threshold before any annual performance bonus can be earned;
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Target award dollar amount to incentivize a specific desired performance level; and
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Maximum goal which sets an appropriate limit on the potential annual performance bonus that can be earned.
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2020 Proxy Statement
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