Executive Compensation in Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider. Please carefully read the entire proxy statement before voting. For more complete information regarding Valero’s 2022 performance, including 2022 growth capital investments (referred to as CapEx herein) attributable to Valero, please review our Annual Report on Form 10-K for the year ended December 31, 2022. The term “Committee” in this Compensation Discussion and Analysis refers to the Human Resources and Compensation Committee. Certain defined terms used in this Compensation Discussion and Analysis are defined earlier in this proxy statement.
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2022 CHANGES AND HIGHLIGHTS |
•Extensive engagement with stockholders including participation by the members of our Human Resources and Compensation Committee (including the chair thereof), our Lead Director, members of our Sustainability and Public Policy Committee (including the chair thereof), and/or members of our executive management team - leading to meaningful enhancements (prospectively with respect to performance share modifications) to our executive compensation program (see “2022 Robust Say-On-Pay Engagement and Response” above).
•Made performance within the Health, Safety, and Environment sub-component of the Annual Bonus Program more difficult to achieve by adjusting targets for certain metrics and through the implementation of a severity/volume enhancer feature on the Environmental Scorecard Incidents metric.
•No changes to CEO Target Total Compensation levels for 2021 and 2022 as compared to 2020 (Target Total Compensation consists of base pay, annual bonus incentive target, and annual long-term incentive target) despite determining that an increase for such years would have been warranted based on CEO performance and peer benchmarking.
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VALERO’S COMPENSATION PHILOSOPHY |
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☑ | | Tightly link company performance and executive pay | | ☑ | | Balance compensation over short- and long-term |
☑ | | Align the interests of executives and stockholders | | ☑ | | Facilitate retention of top executive talent |
☑ | | Manage risk and adopt best practices in executive pay | | ☑ | | Advance ESG objectives through executive incentives |
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COMPENSATION DISCUSSION AND ANALYSIS |
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ELEMENTS OF EXECUTIVE COMPENSATION — SUMMARY |
The primary elements of our 2022 executive compensation program are summarized in the table below.
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Element | Form | Key Characteristics |
Base Salary | Cash | •Takes into consideration scope and complexity of the role, peer market data, experience of the incumbent, and individual performance •Aligned with competitive practices in order to support recruitment and retention of top talent |
Annual Incentive Bonus Program | Performance-Based Cash | •Variable component of annual pay focused on achievement of short-term annual financial, operational, and strategic objectives that are critical drivers for safe and reliable operations, returns to stockholders, the disciplined use of capital, and achievement of ESG goals |
Long-Term Incentive Program | Performance Shares (50%) | •Measures relative TSR against an eleven-member Performance Peer Group (inclusive of Valero) across a three-year period and two unique metrics related to low-carbon goals •Incentivizes stockholder returns and commitment to our low-carbon objectives, including reductions/displacements of refinery GHG emissions and investments in low-carbon initiatives •Value delivered is driven by performance relative to relevant peers in industry and by our progress in advancing our low-carbon fuels growth strategy |
Restricted Stock (50%) | •Value delivered is driven by absolute performance of Valero stock and returns to stockholders through dividends •Aids in retention of critical talent •Vests 1/3 per year over three years |
Target Total Pay
Valero’s Human Resources and Compensation Committee administers executive compensation such that each executive’s Target Total Pay is within a reasonable range of the median of the most recently available role-specific market data provided by the Committee’s independent executive compensation consultant. Target Total Pay represents in aggregate the three primary elements of our executive compensation program as listed and summarized in the prior table (Salary, Annual Incentive Bonus, and Long-Term Incentives). Each element is administered independently with reference to competitive market data and with consideration of other factors as discussed further in this Compensation Discussion and Analysis under the heading “Benchmarking Competitive Pay Levels.” Target Total Pay for 2022 for our NEOs (as defined below) is listed in the table below.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Target Total Pay represents the pay levels administered by the Human Resources and Compensation Committee to executives before accounting for short- and long-term performance outcomes. |
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| | Salary (Dec. 31, 2022) ($) | Target Annual Incentive Bonus ($) (1) | Target Long-term Incentives (Stock Awards) ($) (2) | Target Total Pay ($) |
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Gorder | CEO | 1,800,000 | | 2,880,000 | | 11,340,000 | 16,020,000 (3) |
Riggs | President | 1,015,000 | | 1,116,500 | | 4,821,250 | 6,952,750 |
Fraser | CFO | 875,000 | | 875,000 | | 3,718,750 | 5,468,750 |
Simmons | CCO | 725,000 | | 725,000 | | 2,356,250 | 3,806,250 |
Thomas | CTO | 690,000 | | 552,000 | | 1,587,000 | 2,829,000 |
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Footnotes:
(1)Represents Salary multiplied by the executive’s target bonus percentage as described below under the heading “Annual Incentive Bonus.”
(2)Represents Salary multiplied by the executive’s target long-term incentives percentage with potential performance-related adjustments as described below under the heading “Long-Term Incentive Awards.” The values shown also represent the awarded value of the 2022 LTI grants as administered to each respective named executive officer.
(3)Mr. Gorder’s 2022 Target Total Pay (and each individual pay element as listed) remained unchanged from both 2021 and 2020 levels.
The total compensation (and certain pay values that it encompasses) for each executive as disclosed in the Summary Compensation Table in this proxy statement differ from the Target Total Pay (and certain target pay values that it encompasses) as listed in the preceding table primarily due to the following factors.
•The Target Total Pay excludes values associated with certain retirement benefits that are included in the Summary Compensation Table, which can increase or decrease significantly year-to-year due to actuarial assumptions and other factors (see the “Change in Pension Value and Non-qualified Deferred Compensation Earnings” column of the Summary Compensation Table and related footnotes). Also excluded are the “Other Compensation” perquisites and benefits disclosed in the Summary Compensation Table.
•The values disclosed in the Summary Compensation Table for long-term incentives awards are calculated in accordance with SEC disclosure requirements and can differ substantially from the values calculated for Target Total Pay, which are used for administering compensation decisions. Most notably, the disclosed values for performance shares in the Summary Compensation Table represent three different tranches from three unique awards (granted in 2020, 2021, and 2022) which include adjustments for predicted performance (see footnote (2) of the Summary Compensation Table for further details), whereas the value of performance shares embedded within the target long-term incentives element of Target Total Pay represents both the target award and the full 2022 award grant(s), which was administered based on the average closing stock price for the 15 consecutive trading days ending the day before the grant(s). For example, in 2022 the value disclosed for restricted stock and performance shares within the long-term incentives column of the Summary Compensation Table for Mr. Gorder was approximately $1.0 million higher than the comparable Target Total Pay value as recommended by the Human Resources and Compensation Committee and administered by the Board (approximately $12.3 million versus $11.3 million). Refer to the “Grants of Plan-Based Awards” table and associated footnotes in this proxy statement for more detailed information regarding the 2022 LTI grants.
Other factors contributing to differences between the disclosed values in the Summary Compensation Table and the values shown within Target Total Pay include the actual annual bonus amount earned for performance versus the target annual incentive bonus value (as discussed further below under the caption “Annual Incentive Bonus”) and, for restricted stock grants, the difference between the stock price associated with the grant date fair value of the award (as required for the Summary Compensation Table disclosure) and the stock price used to determine the number of restricted shares granted in order to achieve the target value (i.e., average closing stock price for the 15 consecutive trading days prior to grant, as previously described).
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COMPENSATION DISCUSSION AND ANALYSIS |
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EXECUTIVE PAY IN SUMMARY
The following charts summarize year-over-year changes to Target Total Pay* from 2020 through 2022 for our CEO and our four other named executive officers listed in the Summary Compensation Table above (“NEOs”) (shown in average).
*Target Total Pay includes base salary, target annual incentive bonus, and target long-term incentives value.
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Target Total Pay for our CEO remained flat from 2020 to 2021 and from 2021 to 2022, resulting in no change in Target Total Pay for our CEO over the three-year period of 2020 to 2022. |
The increase in Target Total Pay from 2021 to 2022 for the other named executive officers (as shown in average) primarily reflects pay adjustments for each of the non-CEO NEOs to ensure alignment with median market compensation, retention, and in recognition of individual performance and changes in roles, where applicable.
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PAY FOR PERFORMANCE ALIGNMENT RELATIVE TO PEERS |
Valero’s executive pay program is designed to reward executives for superior company performance. The program design emphasizes variable incentive pay (delivered through annual and long-term incentives) such that an executive’s pay ultimately realized is significantly dependent upon the achievement of both absolute and relative performance measures.
The table below shows relative performance and pay versus companies within our Compensation Comparator Peer Group over the five-year period ending in 2021 (results through 2022 cannot be determined until 2022 executive pay for all comparator companies is disclosed in 2023 proxy statements). We assess this relative performance and pay by (i) comparing our TSR relative to our peers (for measuring relative performance), and (ii) by comparing “realizable” pay for our executives relative to “realizable” pay for the executives of our peers (for measuring relative pay) as set forth below. The Committee regularly reviews additional third-party pay and performance alignment analyses to assess the pay and performance relationship and to ensure our executive compensation program is producing the desired pay and performance alignment outcomes.
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After engaging with the independent compensation consultant, we believe our executive compensation is tightly aligned with performance relative to the peers below. |
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COMPENSATION DISCUSSION AND ANALYSIS |
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| | Valero’s Percentile Ranking vs. Peers(1) | |
Timeframe | Role | Relative Performance vs. Peers | | Relative Pay(2) vs. Peers | |
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5 Years (ending in 2021) | CEO | 64th percentile | | 73rd percentile | |
Top-5 Executives(3) (including CEO) | 64th percentile | | 64th percentile | |
Footnotes:
(1)2022 Compensation Comparator Peer Group of 12 peers as described in the “Peer Group and Benchmarking Data” section of this document. Peer company Dow Inc. is excluded from the analysis as 5-year pay and performance data is not available prior to its 2019 spin-off.
(2)Represents “realizable” pay as reported in company annual proxy statements and includes: salaries; annual bonuses earned; long-term incentive awards that have vested or been exercised; the increase/decrease in long-term incentive awards that are still outstanding; and one-off payments like severance to outgoing executives and sign-on awards for incoming executives.
(3)Pay comparisons are drawn against the “Top-5” group of executives at Valero and the peers, inclusive of the CEO, the CFO, and the three highest-paid other executive officers. The calculations are conducted on the cumulative pay of each company’s five most highly compensated executives. In cases in which a company included more than five executives in their pay disclosures only the five most highly paid executives were included, in order to maintain consistency across all companies.
The following chart illustrates the CEO five-year relationship between relative pay and relative performance versus the peers through 2021 (referenced in footnote (1) above) and shows that CEO pay and company performance were aligned over this time period:
Five-year pay history reflects Mr. Gorder’s “realizable” pay during this period.
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COMPENSATION DISCUSSION AND ANALYSIS |
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The following chart illustrates the top five executives’ five-year relationship between relative pay and relative performance versus the peers through 2021 (referenced in footnote (1) above) and also shows that pay and performance for the top-five NEOs were aligned for this time period:
Five-year pay history reflects the cumulative pay of top-5 NEOs’ (including CEO) “realizable” pay during this period.
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COMPENSATION DISCUSSION AND ANALYSIS |
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EXECUTIVE COMPENSATION DESIGN ELEMENTS |
Annual Incentive Bonus Program
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Component | Metric(s) | Weight | Outcome Range |
Financial | EPS, adjusted* | 40% | 0% - 200% |
Operational | a) Health, Safety, and Environment (HSE) b) Mechanical Availability c) Refining Cash Operating Expense Management | 40% | 0% - 200% |
Strategic | Array of Initiatives, including ESG efforts and improvements | 20% | 0% - 200% |
COMBINED: | 100% | 0% - 200% |
*Earnings per share (“EPS”), adjusted excludes impairment charges and special items, as discussed in further detail below.
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| Long-Term Incentive Program |
| 50% | | | 50% | |
| Performance Shares | | | Restricted Stock | |
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| •Primary performance measure: Relative TSR vs. Performance Peer Group •Secondary performance measure: Energy Transition modifier tied to GHG emissions reduction/displacement and growth capital deployed for low-carbon initiatives •Range of payout: 0% to 200% of target •3-yr ratable vesting, with no re-testing | | | •Value ultimately realized increases/decreases with the stock price movement and dividends paid •3-yr ratable vesting | |
89 percent of CEO Total Target Pay (2020 - 2022) is at risk (variable)
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COMPENSATION DISCUSSION AND ANALYSIS |
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PERFORMANCE OUTCOMES FOR 2022 |
Significant Business and Organizational Achievements*:
•Achieved best-ever safety performance as measured through our combined employee and contractor total recordable incident rate (TRIR).
•Earned a record $29.16 per share (excluding impairment charges and special items, as discussed further below).
•Returned $6.1 billion to stockholders through stock buybacks totaling approximately $4.6 billion and dividend payments of approximately $1.6 billion.
•Successfully completed and started up the renewable diesel production capacity expansion project in Texas more than six months ahead of schedule and under budget, which increased our production capacity to approximately 1.2 billion gallons per year of renewable diesel and approximately 50 million gallons per year of renewable naphtha (used to produce renewable gasoline and renewable plastics), and allowed for additional revenue and margin capture in 2022.
•Expanded board diversity with 7 of 11 (64%) Independent Directors representing gender or racial/ethnic diversity.
•Deployed almost 50 percent of growth capital expenditures attributable to Valero (as discussed further below) (“CapEx”) for low-carbon initiatives in 2022.
•Published our 2022 TCFD Report following the recommendations of the Task Force on Climate-related Financial Disclosures and using the assumptions of the IEA’s Net-Zero by 2050 Scenario. In that report, HSB Solomon Associates LLC concludes that Valero’s overall refining portfolio would be resilient in this scenario, as applied by Solomon.
•Engagement efforts resulted in the inclusion of Valero in multiple ESG indices including (but not limited to) the S&P 500 ESG Index, MSCI USA ESG Select Index, SSGA Gender Diversity Index, and Northern Trust ESG & Climate US Large Cap Core Index.
•Completed a series of debt reduction and refinancing transactions that collectively reduced our debt by $2.7 billion, representing the final reductions needed to fully repay the $4.0 billion of incremental debt incurred in 2020 due to the global COVID-19 pandemic.
*See the disclosures under the captions “ESG and Climate-Related Disclosures and Other Matters” and “Cybersecurity, Compliance, D&I, and Human Rights at Valero” above for more details on our recent accomplishments.
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COMPENSATION DISCUSSION AND ANALYSIS |
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ESG AND EXECUTIVE COMPENSATION |
Valero has continuously included quantitative environmental and safety performance measures within its Annual Incentive Bonus Program over the past 12 years. In 2020, the Annual Incentive Bonus Program was modified to reward additional ESG efforts and improvements. In 2021, we again strengthened the ties between executive compensation and ESG priorities through the addition of a quantitative Energy Transition measure to our long-term incentive program. The following table summarizes the ESG-related components of Valero’s executive compensation program for 2022. The details of each component and 2022 results are described further in the sections of this Compensation Discussion and Analysis titled “Annual Incentive Bonus,” and “Long-Term Incentive Awards,” respectively.
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Compensation Program | Element | Weighting/ Impact | Key Characteristics |
Annual Incentive Bonus (Short-Term Incentives) | Health, Safety and Environment Metric within the Operational Component | 13.3 percent of annual bonus | •Consists of seven separately weighted measures featuring both “leading” and “lagging” indicators across three operational groups (separate from reportable segments): Refining, Ethanol, and Logistics •Leading indicator metrics promote management behaviors including progress against pre-established criteria for inspections and action-items, which have proven to result in improved environmental and safety outcomes •Lagging indicators include “Environmental Scorecard Incidents” measuring the number of incidents reportable to regulatory agencies*; and Tier 1 Process Safety Event Rate, which is a metric defined by the American Petroleum Institute (“API”) that looks at process safety events per 200,000 working hours |
Annual Incentive Bonus (Short-Term Incentives) | Strategic Execution | 20 percent of annual incentive bonus | •Includes “ESG Efforts & Improvements” as one of five key strategic areas •Significant achievements are reported and performance is subjectively assessed on five ESG initiatives: Environmental Stewardship, Sustainability, Diversity and Inclusion, Compliance, and Corporate Citizenship and Community |
Performance Shares (Long-Term Incentives) | Energy Transition Modifier | +/- 25 percentage points to final payout of the performance share component of long-term incentives | •Performance is assessed based on Valero’s progress in meeting the challenges and opportunities of expanding its low-carbon footprint, including (1) progress towards our publicly disclosed GHG emissions reduction/displacement targets, and (2) investment of growth CapEx attributable to Valero into low-carbon initiatives** |
*In January of 2022, the Human Resources and Compensation Committee approved the addition of a severity/volume enhancer feature to the “Environmental Scorecard Incidents” metrics for the 2022 Annual Bonus Program. The details of this modification are described further in the section titled “Annual Incentive Bonus.”
**In February of 2023, due to having achieved the short-term 2025 goal early, the Human Resources and Compensation Committee approved a modification to our Energy Transition modifier to make the goals more challenging to achieve and continues on to our 2035 GHG reduction/displacement target. The Committee also approved a modification to the metric utilized in assessing Valero’s continued investment into low-carbon initiatives by expanding the timeframe assessed.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Compensation Discussion and Analysis—Detail |
Adoption of Compensation Governance Best Practices
We use executive pay arrangements that are commonly recognized as best practices. Our executive pay program includes these leading practices.
•Incentive compensation (Annual Incentive Bonus and long-term incentives) represents the majority (ranging from 76 percent to 89 percent) of the 2022 targeted direct compensation of our named executive officers.
•We target 50 percent of the long-term incentive value granted to our named executive officers to be awarded in the form of performance shares tied to relative TSR performance, progress towards achievements in our low-carbon fuels growth strategy, and investment returns performance (for the final segment of the 2020 performance shares grant, as discussed below).
•We use multiple performance metrics to motivate achievements that complement one another and that contribute to the long-term creation of stockholder value.
•Our executive officers and directors are subject to meaningful Stock Ownership and Retention Guidelines, which were recently strengthened as discussed further under the caption “Stock Ownership and Retention Guidelines” below.
•We engage in stockholder outreach to solicit the input of stockholders to our pay programs, including participation by the members of our Human Resources and Compensation Committee (including the chair thereof), our Lead Director, members of our Sustainability and Public Policy Committee (including the chair thereof), and/or members of Valero’s executive management team. See “2022 Robust Say-On-Pay Engagement and Response” above for more information.
•100 percent of our long-term incentive opportunity is denominated in shares of stock.
•Incentives are balanced between absolute performance goals (rewarding the achievement of pre-established goals) and relative measures (relative TSR, linking the incentives to surpassing the TSR performance of our peers).
•We have maximum payout ceilings on both our annual incentive bonus opportunities and our performance shares.
•Our executive pay programs include design features that mitigate against the risk of inappropriate behaviors.
•Our executive pay design aligns with typical practices among Valero’s peers and in general industry.
•Valero’s revenues and market capitalization are within a reasonable range of the median revenues and market capitalization of the peer group of companies against which we benchmark our executives’ pay, reflecting that we make pay comparisons in a size-appropriate fashion.
•We benchmark against the median pay levels of the peer group for each of base pay, annual incentive bonus, long-term incentives, and total target pay.
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AVOID PROBLEMATIC PAY PRACTICES |
•We have eliminated all change of control gross-ups for potential parachute excise taxes and maintain a policy against the implementation of change of control arrangements that contain gross-ups.
•We have a policy (i) stipulating that grants of performance shares contain “double trigger” terms and conditions for vesting in a change of control context such that performance shares will not automatically vest upon a change of control and (ii) that states that the Committee may provide in the award agreement with the participant that if a participant’s employment with Valero is terminated following a change of control, any unvested performance shares will vest on a partial, pro rata basis following termination of employment (rather than vesting automatically in full upon the change of control).
•Our long-term incentive program mandates that stock options cannot be re-priced without stockholder approval.
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COMPENSATION DISCUSSION AND ANALYSIS |
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•Our executive officers and directors are prohibited from pledging shares of our Common Stock as collateral or security for indebtedness, and may not purchase, sell, or write calls, puts, or other options or derivative instruments that are designed to hedge or offset any decrease in the market value of our Common Stock.
•We have a “clawback” policy requiring the return of incentive payments in certain restatement situations.
See “Compensation-Related Policies” below.
•Our Human Resources and Compensation Committee is composed entirely of directors who meet the independence requirements of the SEC and NYSE as well as pertinent tax requirements for preserving the deductibility of executive pay.
•Our Human Resources and Compensation Committee retains the services of an independent executive compensation consultant that provides services directly to the Committee.
•We conduct an annual say-on-pay vote as recommended by our stockholders.
•We have a declassified Board; all of our directors stand for re-election each year.
•Our Board has approved a limitation on the amount of equity compensation that may be paid to our non-employee directors in any year.
•We currently have eleven independent directors (10 director nominees) who serve on four fully independent committees.
•Seven of the ten independent director nominees represent diversity of gender or race/ethnicity (including four women directors, three Black or African American directors, and one Hispanic or Latino director).
•Our bylaws grant proxy access to our stockholders.
•Our bylaws permit stockholders to call special meetings of stockholders.
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In September of 2022, Valero’s Human Resources and Compensation Committee approved several prospective executive compensation program design enhancements, including: •a performance scale design for future grants of performance shares in which achievement of target award requires relative TSR performance above the peer TSR median; and •a cap on payouts for future grants of performance shares such that vesting cannot exceed target (100%) if Valero’s TSR is negative over the performance period. In addition, in February of 2023, the Committee approved enhanced Stock Ownership and Retention Guidelines for senior executives such that stock ownership levels are now 50% higher than previous ownership levels, and require for more significant ownership levels (as a percent of salary) than the median levels among our peers and companies in the S&P 500. See “2022 Robust Say-On-Pay Engagement and Response” above and “Stock Ownership and Retention Guidelines” below for more information. |
Administration of Executive Compensation Program
Our executive compensation program is administered by our Board’s Human Resources and Compensation Committee. The Committee is composed of four independent directors from our Board (Mr. Weisenburger was appointed to the Committee following the approval of the Human Resources and Compensation Committee Report below). They do not participate in our executive compensation program. Policies adopted by the Committee are implemented by our compensation and benefits staff. In 2022, the Committee continued to retain Exequity LLP (“Exequity”) as an independent compensation consultant for executive and director compensation matters. The nature and scope of the consultant’s services are described below under the caption “Compensation Consultant Disclosures.”
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PEER GROUP AND BENCHMARKING DATA |
The Human Resources and Compensation Committee uses peer group compensation data to assess benchmarks of base salary, annual incentive compensation, and long-term incentive compensation. The Committee uses the Compensation Comparator Peer Group (further described below) to benchmark compensation for our named executive officers. This reference is sometimes referred to in this proxy statement as “compensation survey data” or “competitive survey data.”
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COMPENSATION DISCUSSION AND ANALYSIS |
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Compensation Comparator Peer Group
The Compensation Comparator Peer Group (applicable to 2022 salary, long-term incentive, and annual incentive bonus decisions) is composed of companies that either engage in U.S. domestic oil and gas operations or are large, complex companies from general industry that are representative of the scale and complexity of Valero’s operations.
The Compensation Comparator Peer Group is relevant to our business because we compete with the member companies for talent at every level from entry-level employees to senior executives. We believe that our pay comparisons are size-appropriate because the median revenues and market capitalization of the Compensation Comparator Peer Group are within a reasonable range of Valero’s revenues and market capitalization for the period covered in the pay study. Our understanding of this group’s compensation programs and levels is vitally important in order to remain competitive in the market for employee and executive talent.
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Compensation Comparator Peer Group |
Chevron Corporation | General Motors Company |
ConocoPhillips* | Halliburton Company |
Dow Inc. | HF Sinclair Corporation* |
EOG Resources, Inc.* | Marathon Petroleum Corporation* |
Exxon Mobil Corporation | Occidental Petroleum Corporation* |
Ford Motor Company | Phillips 66* |
*Also a member of the Performance Peer Group as described below.
Given Valero’s size and complexity, our employees at all levels would be qualified candidates for similar jobs at any of the companies included in this group. The Compensation Comparator Peer Group was approved by the Human Resources and Compensation Committee in October 2021 when 2022 executive pay levels were initially considered and established according to the annual pay review process as described further under the caption “Process and Timing of Compensation Decisions.”
The Compensation Comparator Peer Group was also utilized in establishing 2022 long-term incentive targets and awards as described further under the caption “Long-Term Incentive Awards.” The Human Resources and Compensation Committee established the group after considering: (i) direct competitor companies with whom Valero would either seek out executive talent or must defend our own (includes independent refining and marketing and integrated oil and gas companies with large-scale refining operations, with some consideration for oil and gas exploration and production companies and oil field services companies if similar in scale and complexity); (ii) similarly complex organizations in peripheral industries within an appropriate and comparable size based on revenues and market capitalization (generally within the range of 50% to 250% of Valero’s); and (iii) companies generally employing typical U.S.-based approaches to executive pay and within a reasonable geographic proximity. In establishing the Compensation Comparator Peer Group, the Committee looked to position Valero within a reasonable range of the peer group median revenues and market capitalization.
Our compensation and benefits staff, under supervision of the Human Resources and Compensation Committee, develops recommendations for base salary, bonuses, and other compensation arrangements using the compensation survey data with assistance from Exequity. Our use of the data is consistent with our philosophy of providing executive compensation and benefits that are competitive with companies that we compete with for executive talent. In addition, the competitive compensation survey data and analyses assist the Human Resources and Compensation Committee in assessing our pay levels and targets relative to companies in the Compensation Comparator Peer Group. See “Elements of Executive Compensation—Benchmarking Competitive Pay Levels.”
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In September of 2022, the Committee prospectively approved changes to the Compensation Comparator Peer Group for use in making executive pay determinations applicable to fiscal year 2023. As was previously disclosed in a Form 8-K furnished to the SEC on September 26, 2022, the changes include the removal of Ford Motor Company and the addition of LyondellBassell Industries N.V. (“LyondellBassell”), Raytheon Technologies Corporation, and Lockheed Martin Corporation. |
The changes to the Compensation Comparator Peer Group approved for 2023 as described above reflect an expansion of the peer group (from 12 to 14 companies) to ensure a more robust set of comparative data, inclusion of companies of similar scale and complexity from currently represented or additional peripheral industries, and with consideration of evolving business strategies of current or potential peer companies, which may be converging or diverging from Valero’s.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Performance Peer Group
We use a different peer group for purposes of determining the relative performance of Valero’s TSR. We use this relative TSR metric in our performance shares incentive program (along with additional performance measures related to our Energy Transition modifier). The 2022 Performance Peer Group was selected based on the members’ engagement in U.S. domestic refining and marketing operations or due to the members’ strong stock price correlation with Valero’s.
Our use of different peer groups for compensation and performance is based on our belief that when measuring business performance, companies with a similar business model (or with similar operations within such business model) should be included. But we also recognize that comparing the performance of Valero’s operations with those of upstream and integrated oil and gas companies can result in anomalies due to the mismatch in how similar industry-specific events can impact companies with these varying business models. Broader events such as the COVID-19 pandemic and the Russia-Ukraine conflict also affect companies differently, adding to the difficulty in formulating a peer group without anomalies in results. In addition, there are relatively few companies in our business against which clear comparisons can be drawn, rendering a peer group composition more challenging than in most industries.
In February of 2022, the Human Resources and Compensation Committee established a peer group for TSR measurement applicable to the 2022 awards of performance shares. Included in the peer group is the Energy Select Sector SPDR Fund (XLE) index, which serves as a proxy for stock price performance of the energy sector and includes companies with which we compete for capital. The change in the index price across the designated performance periods is measured as TSR. Valero is included in this peer group when results are calculated. In addition to Valero, the performance peer group for the 2022 awards is composed of the following nine companies and the XLE index.
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Performance Peer Group (for Relative TSR Comparison) |
ConocoPhillips* | Marathon Petroleum Corporation* |
CVR Energy, Inc. | Occidental Petroleum Corporation* |
Delek US Holdings, Inc. | PBF Energy Inc. |
EOG Resources, Inc.* | Phillips 66* |
HF Sinclair Corporation* | Energy Select Sector SPDR Fund (XLE) |
*Also a member of the Compensation Comparator Peer Group as described previously.
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In September of 2022, the Committee prospectively approved the addition of LyondellBassell to the Performance Peer Group beginning with the 2023 grant of performance shares. |
LyondellBassell was added to the Performance Peer Group for the 2023 grant of performance shares because of its similarities to Valero in size, complexity, and exposure to commodity pricing volatility for both its products and feedstocks. LyondellBassell also helps balance the full portfolio of performance peers by helping ensure accountability of TSR performance both within the core downstream oil and gas sector, and also in adjacent sectors that face similar challenges and opportunities.
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PROCESS AND TIMING OF COMPENSATION DECISIONS |
The Human Resources and Compensation Committee reviews and approves all compensation targets for the named executive officers each year in conjunction with Valero’s annual strategic planning meeting (October or November) and reviews and approves all incentive compensation payments (Annual Incentive Bonus and Long-Term Incentives) in the first quarter of the fiscal year after the conclusion of previously approved performance periods. The Chief Executive Officer evaluates the performance of the other executive officers and develops individual recommendations based upon the competitive survey data. The Chief Executive Officer and the Committee may make adjustments to the recommended compensation based upon an assessment of an individual’s performance and contributions to Valero, or for retention reasons. The compensation for the Chief Executive Officer is reviewed by the Human Resources and Compensation Committee and recommended to the Board’s independent directors for approval. This assessment is based on the competitive survey data and other factors described in this Compensation Discussion and Analysis, and adjustments may be made based upon the independent directors’ evaluation of the Chief Executive Officer’s performance and contributions.
We evaluate the total compensation opportunity offered to each executive officer at least once annually. The Human Resources and Compensation Committee establishes the target levels of annual incentive and long-term incentive compensation for the current fiscal year based upon its review of competitive survey data provided by Exequity (and, as applicable, other factors described in this Compensation Discussion and Analysis), and recommendations from Valero’s CEO for other officers. The Human
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COMPENSATION DISCUSSION AND ANALYSIS |
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Resources and Compensation Committee also reviews competitive survey data for annual salary rates for executive officer positions for the next fiscal year and approves (or recommends to the other independent directors in the case of our CEO) new salary rates to become effective the next fiscal year. The Human Resources and Compensation Committee may, however, review salaries or grant long-term incentive awards at other times during the year because of new appointments or promotions, or for retention or other strategic reasons. Our Human Resources and Compensation Committee does not time the grants of long-term incentive awards around Valero’s release of undisclosed material information.
Elements of Executive Compensation
Our executive compensation program includes the following material elements.
We chose these elements to foster the potential for both current and long-term compensation opportunities and to attract and retain executive talent. We believe that variable pay (i.e., annual incentive bonus and long-term equity-based incentives that do not become a permanent part of base salary)—when delivered through appropriate incentives—is ultimately the best way to drive total compensation among our executive officers.
We believe that a significant portion of the compensation paid to our named executive officers should be incentive-based and determined by both company and individual performance. Our executive compensation program is designed to accomplish the following long-term objectives:
•to provide compensation payouts that are tied to the performance of internal and external metrics both on a relative and absolute basis;
•to align executives’ pay opportunities with stockholder value creation; and
•to attract, motivate, and retain the best executive talent in our industry.
We believe that superior performance is motivated when an executive’s achievement of his or her full compensation opportunities is contingent on achieving performance results that exceed pre-established goals and/or outperforming peers.
Our annual incentive bonus program rewards are tied to:
•Valero’s attainment of key financial performance measures;
•Valero’s success in key operational and strategic measures;
•safe operations;
•environmental stewardship;
•reliable and efficient operations;
•returns to stockholders; and
•achievement of ESG goals.
Our long-term equity incentive awards are designed to tie executives’ financial reward opportunities with increased stockholder value creation as measured by:
•long-term stock price performance (both absolute and relative to the peer group);
•progress towards and achievements in our low-carbon fuels growth strategy; and
•payment of dividends.
Base salary is designed to provide a fixed level of competitive pay that reflects the executive officer’s primary duties and responsibilities, and to provide a base upon which incentive opportunities and benefit levels are established. The long-term incentive awards in our compensation program include performance shares and restricted stock. We believe that incentives that
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COMPENSATION DISCUSSION AND ANALYSIS |
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drive stockholder value should also drive executive officer pay. We note that performance shares, when issued, do not assure a payout to the executive officer unless and until stockholder value is created through both company performance as measured through TSR relative to our peers and progress and achievements related to GHG emissions reduction/displacement and growth capital deployed for low-carbon initiatives. We also believe that executive officers should hold a significant equity stake in the company to further motivate the creation of stockholder value, and that retention of our industry-leading group of top executives is critical to our ongoing success, which is why we include awards of restricted stock in our long-term incentive program coupled with rigorous Stock Ownership and Retention Guidelines, which were recently made even more rigorous as described further under the caption “Stock Ownership and Retention Guidelines.”
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BENCHMARKING COMPETITIVE PAY LEVELS |
Our Human Resources and Compensation Committee benchmarks base salaries for our named executive officers against the 50th percentile (median) of competitive compensation survey data, and may make decisions to pay above or below this target based on individual circumstances (e.g., performance of the executive, internal parity, retention, and management succession planning). We also benchmark annual bonus, long-term incentive targets (expressed as a percentage of base salary), and total targeted pay for each executive position by reference to the 50th percentile (median) benchmark of the Compensation Comparator Peer Group, and may make decisions to award above or below these targets based on individual circumstances (e.g., performance of the executive, internal parity, retention, and management succession planning). Preserving flexibility to award incentive opportunities above or below the median peer levels helps tailor the incentives to the executive and the role, resulting in a more customized match of competitive pay opportunities and pay-for-performance design attributes.
In addition to benchmarking competitive pay levels to establish compensation levels and targets, we also consider the relative importance of a particular management position in comparison to other management positions in the organization. In this regard, when setting the level and targets for compensation for a particular position, we evaluate that position’s scope and nature of responsibilities, size of business unit, complexity of duties and responsibilities, as well as that position’s relationship to managerial authorities throughout Valero.
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THE ROLE OF INDIVIDUAL PERFORMANCE AND PERSONAL OBJECTIVES |
The Human Resources and Compensation Committee evaluates the individual performance of, and performance objectives for, our named executive officers. Performance and compensation for our Chief Executive Officer are reviewed and approved by the Board’s independent directors with recommendations from the Human Resources and Compensation Committee. For officers other than the CEO, individual performance and compensation are evaluated by the Human Resources and Compensation Committee with recommendations from our Chief Executive Officer. Individual performance and objectives are specific to each officer position.
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RELATIVE SIZE OF MAJOR COMPENSATION ELEMENTS |
An executive officer’s Total Target Pay is structured so that realizing the targeted amount is highly contingent on Valero’s performance due to the executive’s level of at-risk pay. We use the term “Total Target Pay” to refer to the sum of an executive’s base salary, targeted annual incentive bonus, and the target values of long-term incentive awards. The following graphics summarize the relative target pay mix of base salary and incentive compensation for 2022 for our named executive officers.
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COMPENSATION DISCUSSION AND ANALYSIS |
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When setting executive compensation, the Human Resources and Compensation Committee considers the amount and form of compensation payable to an executive officer. The Committee seeks to achieve an appropriate balance between immediate cash rewards for the achievement of company and personal objectives and long-term incentives that align the interests of our officers with those of our stockholders. The size of each element is based on the assessment of competitive market practices as well as company and individual performance.
The Human Resources and Compensation Committee analyzes Total Target Pay from a market competitive perspective, and then evaluates each component relative to its market reference. The Committee believes that making a significant portion of an executive officer’s incentive compensation contingent on long-term stock price performance more closely aligns the executive officer’s interests with those of our stockholders.
Because we place a large amount of Total Target Pay at risk in the form of variable pay (annual incentive bonus and long-term incentives), the Committee generally does not adjust current compensation based upon realized gains or losses from prior incentive awards or current stock holdings. For example, we normally will not change the size of a target long-term incentive grant in a particular year solely because of Valero’s stock price performance during the immediately preceding years. The Human Resources and Compensation Committee recognizes that the refining and marketing industry is volatile and strives to maintain a measure of predictability consistent with a substantial reliance on variable compensation structures in furtherance of a fundamental pay for performance philosophy.
Base salaries for our named executive officers are approved by the Human Resources and Compensation Committee after taking into consideration median practices for comparable roles among the Compensation Comparator Peer Group companies. The Human Resources and Compensation Committee also considers the recommendations of the Chief Executive Officer for officers other than the Chief Executive Officer. The base salary and all other compensation of the Chief Executive Officer are reviewed and approved by the independent directors of the Board upon recommendation from the Committee. Base salaries are reviewed annually and may be adjusted to reflect promotions, the assignment of additional responsibilities, individual performance, or the performance of Valero. Salary changes resulting from the annual review are typically made effective on January 1. Salaries are also periodically adjusted to remain competitive with companies within the compensation survey data. An executive’s compensation typically increases in relation to his or her responsibilities within Valero.
We believe that the achievement of short-term financial and operational performance objectives is critical to creating long-term stockholder value. The annual incentive bonus is designed to incentivize executives to achieve industry-leading results as reflected through business-critical financial, operational, and strategic performance measures. We continue as the premier operator in the liquid fuels manufacturing and marketing industry through disciplined execution of our strategic plan and daily focus on operational excellence by our employees and management team. The annual incentive bonus design guides and incentivizes this daily focus with particular emphasis on ensuring the safety and protection of our employees, contractors and communities. Our additional focus on operating our plants reliably and at the lowest cost facilitates our goal to maximize profitability across all margin environments.
The Human Resources and Compensation Committee considers the following to determine annual incentive bonuses for each officer:
•the position of the named executive officer, which is used to determine a targeted percentage of base salary that may be awarded as incentive bonus;
•pre-established performance objectives that include a quantitative financial performance goal (Financial Performance Goal), operational performance goals (Operational Performance Goals), and qualitative objectives related to Valero’s long-term strategy (Strategic Execution) for the completed year, which are categorized under specific strategic areas including the disciplined use of capital, returns to stockholders, operational excellence, organizational excellence, and ESG efforts and improvement; and
•a qualitative evaluation of the individual’s performance.
Thus, the amount of the bonus ultimately paid to a named executive officer takes into consideration the Committee’s assessment of Valero’s and each executive’s performance in relation to the pre-established performance goals, as well as overall company performance and stockholder outcomes, as more fully described below.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Financial Performance Goal
Weighted at 40 percent of the target Annual Incentive Bonus program, the Financial Performance Goal considered for our annual incentive bonus targets is EPS, adjusted for special items and impairments that are non-recurring and/or not indicative of our core performance. These adjustments have been consistently applied in recent years. The Human Resources and Compensation Committee establishes minimum, target, and maximum levels for such EPS performance in the first quarter of the performance year. We believe that this measure appropriately reflects our business planning process and corporate philosophy regarding financial performance measurement. Valero’s performance in 2022 was $29.16 per share (versus a target of $4.51 per share), representing record adjusted EPS performance for Valero. The following table describes the adjustment to Valero’s 2022 EPS for purposes of the 2022 Financial Performance Goal:
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Earnings per common share – assuming dilution | $29.04 |
Exclude: Gain on sale of an ethanol plant | ($0.05) |
Gain on early redemption and retirement of debt | ($0.03) |
Adjustment for Renewable Volume Obligations Modification | ($0.20) |
Adjustment for an environmental reserve associated with a non-operating site | $0.04 |
Adjustment for a pension settlement charge | $0.11 |
Adjustment for foreign withholding tax | $0.13 |
Adjustment for asset impairment loss | $0.12 |
Adjusted EPS for Financial Performance Goal | $29.16 |
The adjusted EPS target of $4.51 was established in the first quarter of 2022 based on Valero’s assessment of anticipated full-year market conditions. The $4.51 per share target represents an approximate 720% increase from the prior year (2021) adjusted EPS target of $0.55 and an approximate 61% increase from the prior year actual adjusted EPS performance. Valero’s $29.16 per share performance achieved in 2022 reflects record performance and greatly exceeded the adjusted EPS target of $4.51 due to historically strong refining margins resulting primarily from product demand surpassing pre-pandemic 2019 levels while global product supply remained constrained due to capacity reductions, elevated earnings in our renewable diesel segment due to expansion, excellent operational performance while running refineries above normal rates, and our continued focus on managing costs.
Operational Performance Goals
Operating safely and reliably is one of Valero’s highest priorities and is critically important to maximizing profitability as well as protecting our employees and communities. Furthermore, maintaining our position as one of the industry’s low-cost providers of essential liquid fuels supports our objective of delivering distinctive financial results and peer-leading returns to stockholders. With a combined weighting of 40 percent of our Annual Bonus Incentive program, the Operational Performance Goals considered for our annual incentive bonuses, as established and approved by the Committee in the first quarter of the performance year, are measured against the following equally weighted sub-components:
•Health, Safety, and Environment – Measures Valero’s achievements in the areas of health, safety, and environmental stewardship through an array of metrics, including environmental scorecard incidents, process safety incidents, reportable spills, and progress against certain inspection and audit tasks;
•Mechanical Availability – Measures Valero’s achievements in improving refining competitiveness through improved mechanical availability within our refineries; and
•Refining Cash Operating Expense Management – Measures Valero’s achievements in managing refinery operating costs, with a performance scale which generally reflects industry-wide performance comparisons.
These Operational Performance Goals are set at levels deemed to be challenging to achieve and reflective of industry-competitive performance, yet are reasonably attainable with strong performance. We believe that these measures appropriately reflect key business objectives of Valero. After completion of the fiscal year, each of the Operational Performance Goals is measured against Valero’s actual performance in these areas and the minimum, target, and maximum levels established by the Human Resources and Compensation Committee. The three sub-components are further described in detail below.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Health, Safety, and Environment
Weighted at 13.33 percent of the of the Annual Bonus Incentive program, the Health, Safety, and Environment sub-component is comprised of seven unique and separately-weighted metrics as shown in the following table:
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Metric | Description | Performance Indicator Type |
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Vessel/PSV Inspections | Number of vessel and pressure safety valve (PSV) inspections that are past-due | Leading |
PHA Action Items > 2 Years (Non-Turnaround for Refining) | Number of corrective refining or logistics Process Hazard Analysis (PHA) action items identified through regulatory safety procedures reviews that are greater than 2 years old and are not yet completed | Leading |
HSE Audit Past-due Items | Number of past-due items identified through comprehensive internal audits to ensure compliance with regulations, permits and Valero standards | Leading |
Management Audits Percent | Percentage of ethanol audit items completed as identified through monthly safety and environmental program audits covering both work and confined space permitting, as well as ethanol loading | Leading |
Environmental Scorecard Incidents | Number of incidents reportable to regulatory agencies | Lagging |
Tier 1 API Process Safety Incidents/Rate | Number or rate of recordable safety incidents occurring in conjunction with a loss of process containment | Lagging |
Reliability Events | Number of events causing an ethanol plant outage of greater than one-half day | Lagging |
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In January of 2022, the Human Resources and Compensation Committee approved the following modifications to the Health, Safety, and Environment sub-component for the 2022 Annual Incentive Bonus Program:
•Performance scales for each of the Vessel/PSV Inspection and Refining PHA Action Items > 2 years (Non-Turnaround) metrics were made even more difficult to achieve.
•The Environmental Scorecard Incidents metrics now include a severity/volume enhancer feature, which increases the number of incidents recorded for annual bonus purposes when severity or volume exceeds certain thresholds. With the application of the severity/volume enhancer, more significant environmental events now receive a higher weighting according to a three-level severity scale, making performance even more difficult to achieve.
The design of the Health, Safety, and Environmental sub-component includes both leading and lagging indicator metrics, which not only rewards our performance in objective measures of environmental and safety performance (as measured through the lagging indicator metrics), but also incentivizes disciplined adherence to the inspection, audit, and maintenance programs that are reflected in our leading indicator metrics. The ongoing performance improvement across many of our environmental and safety metrics (including refinery Environmental Scorecard Incidents and refinery Tier 1 API Process Safety Incidents/Rate metrics as demonstrated in the following charts), as well as our operational reliability, results from the implementation of and ongoing focus on our robust inspection, audit, and maintenance programs.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Valero believes that investment in and rigorous management of the operational programs reflected by the leading indicator metrics differentiates our performance within the liquid fuels manufacturing industry and directly resulted in the company-record health, environmental, and safety performances achieved over the past three years. Valero’s performance in 2022 for the Health, Safety, and Environment sub-component was 200 percent versus the target of 100 percent, and represents excellent performance.
Mechanical Availability
Weighted at 13.33 percent of the of the Annual Incentive Bonus program, the Mechanical Availability sub-component incentivizes reliable operations to minimize unplanned operational outages. The performance target and scale take into consideration Valero’s history of operational excellence as well as aggregated industry performance. We believe that operational reliability, as measured through Mechanical Availability, is critically important to achieving our core business objectives as described earlier. Excellent performance in this metric reflects our ability to avoid unplanned downtime, minimize environmental events, and successfully execute planned and unplanned refinery maintenance. The Human Resources and Compensation Committee establishes minimum, target, and maximum levels for Mechanical Availability in the first quarter of the performance year. Valero’s performance in 2022 was 96.8 percent availability, which results in 158.33 percent performance versus the target of 96.2 percent. The graph below reflects Valero’s sustained highly-reliable operations:
Refining Cash Operating Expense Management
Weighted at 13.34 percent of the of the Annual Incentive Bonus program, the Refining Cash Operating Expense Management sub-component incentivizes the management of non-energy expenses within the refining operations group. The performance scale for Refining Cash Operating Expense Management is reflected in dollars per Equivalent Distillation Capacity (“$/EDC”) in order to normalize results amongst different-sized plants, and is established based on the scoring methodology from the industry-standard Solomon Associates survey, which allows for comparison to aggregated industry performance. Valero seeks to maintain its position as one of the industry’s low-cost providers through disciplined cost-management practices. The Human Resources and Compensation Committee establishes minimum, target, and maximum levels for Refining Cash Operating Expense Management in the first quarter of the performance year. Valero’s performance in 2022 was $117/EDC availability, which results in 200 percent performance versus the target of $127/EDC, and is considered first quartile industry performance.
Valero’s overall performance score for 2022 for the Operational category was 74.45 percent (representing performance at 186.11 percent of the target score of 40.00 percent). Achievement at this level reflects best-in-class operational performance. For additional details on Valero’s 2022 performance versus targeted amounts for our Operational Performance Goals, see the “Annual Incentive Bonus Performance Goals and Achievements” table that follows in this section.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Strategic Execution
This component, with a weighting of 20 percent of the Annual Incentive Bonus program, includes evaluation by the Human Resources and Compensation Committee of accomplishments related to a comprehensive array of strategic initiatives, which contribute to the overall success of Valero during the year and support Valero’s long-term strategy. The strategic objectives relating to this component are listed in the following table along with progress and a select listing of key accomplishments for 2022. Based on Valero’s exceptional progress on key initiatives, along with excellent performance and accomplishments across all five of the strategic areas, The Human Resources and Compensation Committee elected to score performance for 2022 for this category at 200 percent of target.
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Strategic Area | Initiative/Project/Objective | Progress & Key Accomplishments |
Returns to Stockholders | •Return cash to stockholders through dividends and stock buybacks | •Returned $6.1 billion to stockholders in 2022 through dividends (~$1.6 billion) and stock buybacks (~$4.6 billion) •Reduced debt by $2.7 billion through a series of debt reduction and refinancing transactions, which fortified our balance sheet and facilitated further returns to stockholders |
Disciplined Use of Capital | •Balanced utilization of sustaining and growth capital vs. target | •Almost 50 percent of growth CapEx attributable to Valero was allocated to low-carbon initiatives in 2022 (as discussed further below) |
Operational Excellence | •Execution of capital projects and turnarounds | •Completed new renewable diesel plant in Texas ahead of schedule and under budget |
•Margin improvement and market expansion | •Renewable diesel production capacity expanded to approximately 1.2 billion gallons per year |
•Cost management and expense control | •Exceeded $150 million in newly-identified cost avoidance and savings |
Organizational Excellence | •Strategic communications | •Engagement efforts with ESG indices resulted in the selection for inclusion of Valero in multiple ESG indices, including S&P 500 ESG Index, MSCI USA ESG Select Index, and others •Named by Institutional Investor magazine as among its “Most Honored Companies,” based on results across several categories of its 2023 All-America Executive Team rankings •Honored by S&P Global with awards for: Energy Company of the Year, Deal of the Year Strategic, and Corporate Impact Award Sustained Commitment |
•Succession planning and leadership development | •29 percent of Key Talent / Succession group received a developmental or promotional job change during 2022 with 100 percent of executive-level roles filled by internal promotions |
•Innovation | •Progress in development of low-carbon opportunities in sustainable aviation fuel, low-carbon hydrogen, renewable naphtha, fiber cellulosic ethanol, tailpipe CO2 onboard capture system, and other technologies |
•Public policy | •Supported aspects of the Build Back Better legislation benefiting Valero through biodiesel, sustainable aviation fuel, clean fuel production, and carbon capture tax credits |
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COMPENSATION DISCUSSION AND ANALYSIS |
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Strategic Area | Initiative/Project/Objective | Progress & Key Accomplishments |
Environmental, Social and Governance (ESG) Efforts & Improvement* | •Environmental stewardship | •Enhanced real-time ambient air monitoring at many of our refineries •Obtained third-party limited assurance on accuracy and reliability of our GHG emissions disclosures |
•Sustainability | •Published 2022 TCFD Report, including Solomon’s conclusion that Valero’s overall refining portfolio would be resilient under the assumptions of the IEA’s Net-Zero 2050 Scenario as applied by it •Published 2022 ESG Report, which includes our 2022 SASB Report on 2021 performance •Updated our climate-lobbying report and website disclosures, including our climate-lobbying alignment analysis of Valero’s trade associations as discussed therein •Disclosed Net Scope 3 Intensity metric |
•Diversity and inclusion | •Hosted most diverse summer internship class in company history (43 percent women, 43 percent minority) •Expanded Board diversity with more than 60 percent of current independent directors (and 70 percent of our 2023 independent director nominees) now representing gender or racial/ethnic diversity •Published our EEO-1 report (included within our 2022 ESG Report) |
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•Compliance | •Completed assessments of our Third-Party Risk Management programs, as well as our Data Privacy programs •Updated numerous key corporate policies to ensure integration of compliance best practices |
•Corporate citizenship and community | •Commissioned a third-party Environmental Justice audit to assess opportunities for enhancing relationships with and support for Valero’s racial equity and environmental justice commitments and refinery fenceline communities •Record fundraising for Valero-sponsored Benefit for Children fundraising event associated with the Valero Texas Open of $22 million distributed to children’s charities |
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*See the disclosures under the captions “ESG and Climate-Related Disclosures and Other Matters” and “Cybersecurity, Compliance, D&I, and Human Rights at Valero” above for more details on our recent accomplishments.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Valero’s Achievement of Performance Goals for 2022
The following table details the performance targets and final results of Valero’s achievements in 2022 for each of the sub-components of the bonus program’s Financial Performance Goal, Operational Performance Goals, and Strategic Execution Goals.
Annual Incentive Bonus Performance Goals and Achievements
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Component | Weighting | Minimum | Target | Maximum | Achieved in 2022 | Bonus Percent Earned (1) |
Financial Performance Goal | | | | | | |
I.EPS, adjusted ($/share) | 40.00% | $1.12 | $4.51 | $9.02 | $29.16 | 80.00% |
Operational Performance Goals | | | | | | |
II.Health, Safety, and Environmental (2) | 13.33% | 0.00% | 100.00% | 200.00% | 200.00% | 26.66% |
III.Mechanical Availability | 13.33% | 95.6% | 96.2% | 97.6% | 96.8% | 21.11% |
IV.Refining Cash Operating Expense Management (3) ($/EDC) | 13.34% | $150 | $127 | $118 | $117 | 26.68% |
Subtotal | 40.00% | | | | subtotal | 74.45% |
Strategic | | | | | | |
V.Strategic Execution (4) | 20.00% | 0.00% | 100.00% | 200.00% | 200.00% | 40.00% |
Total | 100.00% | Calculated Bonus Achievement: | 194.45% |
| Additional Credited Achievement Due to Record EPS and Operational/Strategic Execution: | 5.55% |
| | Final Bonus Achieved and Total Payout: | 200.00% |
Footnotes:
(1)Represents performance achieved in 2022 and component percent weighting.
(2)Consists of seven separately weighted HSE metrics across three operational groups with an aggregated performance score opportunity ranging from zero percent to 200 percent (see “Operational Performance Goals – Health, Safety, and Environment” for details).
(3)Using the Cash Operating Expense per EDC (Equivalent Distillation Capacity) metric as reported in the industry-standard Solomon Associates survey in which “Target” represents median performance (lower is better).
(4)As established by the Human Resources and Compensation Committee in consultation with the CEO, it includes a qualitative assessment of progress against a comprehensive array of strategic initiatives. Performance “achieved” was at 200 percent of target.
The Human Resources and Compensation Committee viewed the record-breaking level of adjusted EPS, together with management’s continued exceptional performance on all other aspects of operational and strategic execution, to merit additional consideration under the 2022 annual incentive bonus program. In particular, adjusted EPS in 2022 was more than three times the maximum pre-established goal, more than six times the targeted objective, and illustrates the positive impact of Valero’s comprehensive liquid fuels strategy. Based on this historic level of over-achievement, the Committee deemed the overall 2022 annual bonus to have been achieved at the 200% maximum level. The Committee believes its ability to exercise prudent judgment and exercise either positive or negative discretion to incentive awards to align the payout with the overall company performance and stockholder outcomes is a key element of the program design and governance.
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Valero’s excellent Annual Incentive Bonus achievement reflects best-in-class operational execution, record earnings and stockholder returns, and excellent progress in executing key areas of Valero’s strategy. |
The final 2022 bonus amounts paid to our named executive officers were determined primarily as a function of: (i) Valero’s performance as measured against the financial, operational, and strategic execution goals; and (ii) the Human Resources and Compensation Committee’s assessment of the named executive officers’ individual performance, company performance, and stockholder outcomes in 2022.
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COMPENSATION DISCUSSION AND ANALYSIS |
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The following table summarizes the 2022 bonus amounts paid to our named executive officers:
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| Gorder | Riggs | Fraser | Simmons | Thomas |
Base Salary (1) | $1,800,000 | $1,015,000 | $875,000 | $725,000 | $690,000 |
Bonus Target Percentage (2) | 160% | 110% | 100% | 100% | 80% |
Bonus Target Amount (3) | $2,880,000 | $1,116,500 | $875,000 | $725,000 | $552,000 |
Bonus Percentage Achieved (4) | 200.00% | 200.00% | 200.00% | 200.00% | 200.00% |
Earned Target Incentive Bonus (5) | $5,760,000 | $2,233,000 | $1,750,000 | $1,450,000 | $1,104,000 |
Bonus Amount Paid (6) | $5,760,000 | $2,233,000 | $1,750,000 | $1,450,000 | $1,104,000 |
Footnotes:
(1)Base salary is the officer’s base salary at December 31, 2022.
(2)Bonus target as a percentage of base salary.
(3)Determined by multiplying “Bonus Target Percentage” times “Base Salary.”
(4)Valero’s performance score for “Bonus Percentage Achieved” was 200.00 percent as detailed in the previous table.
(5)Determined by multiplying “Bonus Target Amount” times “Bonus Percentage Achieved.”
(6)As disclosed in the Summary Compensation Table. The actual amount paid was determined primarily based on: (i) Valero’s performance as measured against financial, operational, and strategic goals, and (ii) the Committee’s assessment of the NEO’s individual performance, company performance, and stockholder outcomes in 2022.
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LONG-TERM INCENTIVE AWARDS |
We provide stock-based, long-term compensation to our executive officers through our stockholder-approved equity plan, our 2020 Omnibus Stock Incentive Plan (“2020 OSIP"). The 2020 OSIP provides for a variety of stock and stock-based awards, including performance shares that vest (become non-forfeitable) contingent upon Valero’s achievement of objective performance goals, and restricted stock which vests over a period (at least three years) determined by the Committee. Annual long-term incentive awards were granted to named executive officers in February of 2022 under the 2020 OSIP.
For 2022, the mix of long-term incentives targeted to be awarded to our named executive officers was split evenly, on a share value basis, between grants of restricted stock and awards of performance shares. We believe that these awards create a powerful link between the creation of stockholder value and executive pay delivered. In addition, we believe that the balance between absolute performance alignment through the annual incentive bonus program and restricted shares, and the relative performance objectives underscored by the relative TSR component of performance shares (which also have an Energy Transition modifier to incentivize progress against Valero’s low-carbon fuels growth strategy), is appropriate. In order for executives to fully realize their targeted opportunities, Valero must both perform well and beat the TSR performance of the other members of the Performance Peer Group listed above under the caption “Administration of Executive Compensation Program—Peer Group and Benchmarking Data—Performance Peer Group,” and also achieve or exceed performance targets associated with our low-carbon fuels growth strategy as described below under the caption “Performance Shares—Energy Transition Modifier.”
For each officer, a target amount of long-term incentives is established and is expressed as a percentage of base salary. In establishing award sizes, the Human Resources and Compensation Committee makes primary reference to median peer company grant levels and makes individualized determinations of award sizes based on additional factors such as: each executive’s experience and contribution to company success, internal parity, retention, and management succession. In addition, an executive’s targeted award may be adjusted based upon the Human Resources and Compensation Committee’s determination of the officer’s individual performance, which (for officers other than the Chief Executive Officer) takes into consideration the recommendation of the Chief Executive Officer.
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COMPENSATION DISCUSSION AND ANALYSIS |
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When administering long-term incentives awards, the number of shares awarded to our named executive officers for each of restricted stock and performance shares is determined by multiplying the value granted to the named executive officer times the average closing stock price of the 15 consecutive trading days ending the day before the grant date. The values disclosed in the Summary Compensation Table and “Grants of Plan-Based Awards” table for long-term incentives are calculated in accordance with SEC disclosure requirements and can differ substantially from the values calculated for Target Total Pay, which are used for administering compensation decisions, including long-term incentives. The following table summarizes the targeted 2022 long-term incentive amounts awarded to our named executive officers:
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| Gorder | Riggs | Fraser | Simmons | Thomas |
Base Salary (1) | $1,800,000 | $1,015,000 | $875,000 | $725,000 | $690,000 |
LTI Target Percentage (2) | 630% | 475% | 425% | 325% | 230% |
LTI Target Value (3) | $11,340,000 | $4,821,250 | $3,718,750 | $2,356,250 | $1,587,000 |
Restricted Stock Value Granted (4) | $5,670,000 | $2,410,625 | $1,859,375 | $1,178,125 | $793,500 |
Performance Shares Value Granted (4) | $5,670,000 | $2,410,625 | $1,859,375 | $1,178,125 | $793,500 |
Total LTI Value Granted | $11,340,000 | $4,821,250 | $3,718,750 | $2,356,250 | $1,587,000 |
Footnotes:
(1)Base salary is the officer’s base salary as of the award grant date of February 22, 2022.
(2)Long-term incentives target as a percentage of base salary.
(3)Determined by multiplying “LTI Target Percentage” times “Base Salary.”
(4)Represents 50 percent of the Total LTI Value Granted.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Performance Shares
For 2022, performance share targets represent a 50 percent allocation of each executive’s long-term incentive target on a share value basis. The values disclosed in the Summary Compensation Table for performance shares are calculated in accordance with SEC disclosure requirements and can differ substantially from the values calculated for Target Total Pay, which are used for administering compensation decisions (these differences are further described under the caption “Elements of Executive Compensation – Summary”). Performance shares are payable in shares of Common Stock on the vesting dates of the performance shares. Shares of Common Stock are earned with respect to vesting performance shares only upon Valero’s achievement of (i) TSR objectives (measured in relation to the TSR of our peers), and (ii) achievement of low-carbon fuels growth strategy objectives including (1) progress towards our publicly disclosed global refinery Scope 1 and 2 GHG emissions reduction/displacement targets (GHG emissions reduction/displacement vs. target), and (2) investment of growth capital into low-carbon initiatives (low-carbon investments as a percent of growth CapEx attributable to Valero). Shares not earned in a given performance period expire and are forfeited. Performance shares are also subject to potential forfeiture if an executive terminates his or her employment prior to vesting. The performance shares awarded in 2022 are subject to vesting in three increments with the following award design. The primary performance measure is relative TSR versus a peer group, which is weighted at 100 percent. After preliminary vesting has been determined based on relative TSR performance, an Energy Transition modifier containing two additional metrics (GHG emissions reduction/displacement vs. target and low-carbon investments as percent of growth CapEx attributable to Valero) is applied, with each metric either adding or subtracting 12.5 percentage points to the preliminary vesting percentage, depending on performance. Overall final performance vesting is capped at 200 percent of target.
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In September of 2022, Valero’s Human Resources and Compensation Committee prospectively approved the implementation of a cap on payouts for future grants of performance shares such that vesting cannot exceed target (100%) if Valero’s TSR is negative over the performance period, regardless of potential over-performance versus peers. |
TSR Metric. Our relative TSR performance is compared to our peer group throughout the overall three-year performance period. Performance periods measure TSR based on the average closing stock prices for the final 15 trading days of December at the beginning and end of the performance periods, including dividends (except for the XLE index, for which the change in the index price across the designated performance periods is measured as TSR). At the end of each performance period, our TSR for the period is compared to the TSR of our Performance Peer Group.
Relative TSR Performance Scale (Percent of Target Shares Earned)
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| 200% | 200% | 175% | 150% | 125% | 100% | 75% | 50% | 25% | 0% | 0% |
Relative Rank | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
NOTE: Shown as applied to the 11-company “Performance Peer Group” referenced under the caption “Administration of Executive Compensation Program–Peer Group and Benchmarking Data,” inclusive of Valero.
As demonstrated in the graphic above, the number of shares of Common Stock earned is calculated based on Valero’s TSR performance versus the peers’ TSR. If Valero’s relative TSR ranking equals the median of the peer group, 100 percent of the target shares are earned; if Valero ranks in the first or second position among the peers, 200 percent of the target shares will be earned; if Valero ranks in the last or second-to-last position among the peers, zero percent of the target shares will be earned. TSR performance ranking between the second and second-to-last positions will result in payouts determined by straight-line interpolation (unless Valero’s TSR rank equals the median in which case 100 percent of the target shares will be earned). The shares earned based on Valero’s relative TSR performance represents the preliminary performance sub-total (see results calculation example below).
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In September of 2022, Valero’s Human Resources and Compensation Committee prospectively approved a performance scale design change for future grants of performance shares that targets relative TSR performance to be above median of the peers. |
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COMPENSATION DISCUSSION AND ANALYSIS |
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Energy Transition Modifier. In order to underscore the importance of achieving important climate-related objectives, in February of 2021 an Energy Transition performance measure was added to the performance share design as a supplemental performance-based objective. The Energy Transition modifier was again incorporated into the Performance Shares granted in February of 2022. In determining performance share payouts for this measure, the Human Resources and Compensation Committee considers Valero’s progress in advancing its low-carbon fuels growth strategy, including (i) assessing Valero’s progress towards its publicly announced Scope 1 and 2 global refinery GHG emissions reduction/displacement goals vs. an annual target and (ii) assessing management’s deployment of growth capital on low-carbon initiatives vs. an annual target. Further details regarding our refinery GHG emissions reductions/displacements targets are set forth in our 2022 ESG Report and the SASB Report included therein.
The table below more fully details the two components of the Energy Transition modifier established for applicable Performance Shares segments with performance periods ending in 2022 (segment one of the 2022 grant, segment two of the 2021 grant, and segment three of the 2020 grant), including the performance targets as approved by the Human Resources and Compensation Committee.
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| | | Adjustment to PS Sub-Total |
Metric | Description | Target | If Meet or Exceed | If Fail to Meet |
Global Refinery Scope 1 and 2 GHG Emissions Reduction/Displacements vs. Target | Final 2022 GHG emissions reductions and displacements results (compared to 2011 levels) meets or exceeds the target | ≥ 44.0%* | Add 12.5 absolute percentage points | Subtract 12.5 absolute percentage points |
Low-carbon Investments as a Percent of Growth CapEx attributable to Valero | Final 2022 percentage of growth capital spent on low-carbon initiatives meets or exceeds the target | ≥40.0% | Add 12.5 absolute percentage points | Subtract 12.5 absolute percentage points |
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*Represents the minimum of the target range (44.00% to 63.00%) of global refinery Scope 1 and 2 emissions reduction/displacements to be achieved in the target year.
The targets established for each of the Energy Transition modifier metrics reflect Valero’s commitment to the continued growth of our low-carbon fuels businesses and to ensuring sufficient progress is being made towards our publicly disclosed commitment of reducing and displacing refinery GHG emissions by 63% by 2025 and 100% by 2035.
How It Works. The Energy Transition performance measure serves as a modifier to the preliminary sub-total performance results as determined at the end of the performance period for the primary performance metric(s) of the applicable performance shares grant (for the 2022 and 2021 grants, relative TSR only; for the 2020 grant, relative TSR and Return on Invested Capital (“ROIC”), as described in our investor presentation available on our website). If performance exceeds target in both of the Energy Transition metrics, 25 absolute percentage points are added to the preliminary sub-total performance results for additional shares earned (though not to exceed the 200 percent overall performance vesting cap). If performance exceeds target on one metric but fails to meet target on the other, no change is made to the preliminary sub-total performance results. If both metrics fail to meet target, 25 absolute percentage points are subtracted from the preliminary sub-total performance results to reduce the shares earned.
Additional shares of Common Stock may be earned based on the accumulated value of dividends paid on Valero’s Common Stock during the pertinent performance period. The amount of accumulated dividends is multiplied by the aggregated common shares earned (if any) for the performance shares, and the product is divided by the fair market value of the Common Stock on the performance shares’ vesting date. The resulting amount is paid in a whole number of shares of Common Stock. The value of the dividends credited to the outstanding performance shares is paid to participants only to the extent that the underlying performance shares earn shares of Common Stock, based on Valero’s relative TSR, ROIC (if applicable), and low-carbon fuels growth strategy performance, and is paid (in shares of Common Stock) only when the underlying performance shares vest (see results calculation example below).
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COMPENSATION DISCUSSION AND ANALYSIS |
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Example Calculation of Performance Shares Earned
Target Performance Shares Granted: 1,000
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Component | Target Performance Shares <A> | Performance Result | Performance Outcome <B> | Component Weighting <C> | Sub-total of Common Stock (A x B x C) |
Relative TSR | 1,000 | Ranked 4th of 11 | 150% | 100% | 1,500 |
Energy Transition: GHG Emissions Reductions/ Displacements | 1,000 | Exceeded Target | + 12.5% | N/A | 125 |
Energy Transition: Low-Carbon Investments as Percent of Growth CapEx attributable to Valero | 1,000 | Exceeded Target | + 12.5% | N/A | 125 |
Aggregate Common Stock Earned | 1,750 |
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| Aggregate Common Stock Earned <D> | Accumulated Dividends Per Share During the Performance Period <E> | FMV on Date of Vesting <F> | Additional Shares of Common Stock (D x E ÷ F) |
Dividend Equivalent Shares | 1,750 | $7.28 | $75.00 | 170 |
Total Shares of Common Stock Earned | 1,920 |
In order to facilitate executives’ payment of taxes due upon performance shares without selling shares earned, executives can designate up to 50 percent of the value of the after-tax vested shares of Common Stock to be delivered in cash. If a cash payment is elected, the total number of after-tax shares to be delivered is multiplied by the fair market value of the Common Stock on the performance shares’ vesting date, and the product is multiplied by the cash payment election percentage designated by the award recipient. The resulting amount is paid in cash, with the remainder paid in shares of Common Stock.
Valero utilizes a three-year ratable vesting schedule for performance shares in order to align executives’ realized pay as delivered through performance shares with the most appropriate representation of company performance over the duration of the three-year performance period when compared to companies in the Performance Peer Group (and as measured through relative TSR). The volatile nature of commodity pricing that characterizes our primary feedstocks, as well as the resulting fuels and other products that are sold to customers, can result in significant swings in short-term product margins and company earnings. Valero’s ratable vesting schedule helps eliminate the risk of a payout that is disproportionately influenced (either positively or negatively) by short-term stock swings caused by these disruption events occurring at either the font-end, back-end or both, which can occur in a single segment three-year cliff vesting model.
Segments for four separate performance shares grants (granted in 2019, 2020, 2021, and 2022) had performance periods ending December 31, 2022, and vested in January of 2023. Each vesting segment utilized relative TSR as a performance metric. Vesting segments from 2020, 2021, and 2022 grants also included the Energy Transition metrics and the segment vesting from the 2020 grant additionally included ROIC versus a target.
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COMPENSATION DISCUSSION AND ANALYSIS |
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2019 Performance Shares Grant - The design for Performance Shares granted in 2019 includes one metric: relative Total Shareholder Return (TSR) versus a peer group, weighted at 100 percent. Final vesting percentage for the segment ending in 2022 is as follows:
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Performance Shares Grant (Year & Segment) | Final Percentile TSR Ranking versus Peers | Vesting Percentage of Target (Target = 100%) (Range of 0% to 200%) |
2019 (Final of 3 segments) | 5 of 11 | 125.0% |
2020 Performance Shares Grant - The design for Performance Shares granted in 2020 included two metrics: relative TSR versus a peer group, weighted at 75 percent, and 3-year average ROIC, weighted at 25 percent. After preliminary vesting is determined based on relative TSR performance and ROIC performance, an Energy Transition modifier containing two additional metrics is applied with each metric either adding or subtracting 12.5 percentage points per metric to the preliminary vesting percentage, depending on performance. The final vesting percentage for the segment ending in 2022 is as follows:
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Performance Shares Grant (Year & Segment) | Metric | Result | Weighting | Vesting Percentage of Target (Target = 100%) (Range of 0% to 200%) |
2020 (Final of 3 Segments) | Relative TSR Ranking | 5 of 11 | 75% | 125.00% |
3-Yr Avg ROIC | 15.32%* | 25% | 200.00% |
Preliminary Vesting Percentage of Target (after applying weighting): | 143.75% |
| | Results | Percent Added/Subtracted |
Energy Transition Modifier | Both metrics exceeded target threshold** | +25.00% |
Final Vesting Percentage of Target | 168.75% |
*Represents performance against target 3-year average ROIC of 9.50% and maximum performance of 10.75%.
**Further details regarding results of our Energy Transition modifier for performance periods ending December 31, 2022, is set forth below under the heading “2022 Energy Transition Modifier Results.”
2021 and 2022 Performance Shares Grants - The design for Performance Shares granted in 2021 and 2022 includes one metric: relative TSR versus a peer group, weighted at 100 percent. After preliminary vesting is determined based on relative TSR performance, an Energy Transition modifier containing two additional metrics is applied with each metric either adding or subtracting 12.5 percentage points per metric to the preliminary vesting percentage, depending on performance. The final vesting percentage for the segments ending in 2021 and 2022 are as follows:
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Performance Shares Grant (Year & Segment) | Final Percentile TSR Ranking versus Peers | Vesting Percentage of Target (Target = 100%) (Range of 0% to 200%) |
2021 (2nd of 3 Segments) | 7 of 11 | 75.00% |
Preliminary Vesting Percentage of Target: | 75.00% |
| | Results | % Added/Subtracted |
Energy Transition Modifier | Both metrics exceeded target threshold* | +25.00% |
Final Vesting Percentage of Target | 100.00% |
*Further details regarding results of our Energy Transition modifier for performance periods ending December 31, 2022, is set forth below under the heading “2022 Energy Transition Modifier Results.”
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COMPENSATION DISCUSSION AND ANALYSIS |
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Performance Shares Grant (Year & Segment) | Final Percentile TSR Ranking versus Peers | Vesting Percentage of Target (Target = 100%) (Range of 0% to 200%) |
2022 (1st of 3 Segments) | 6 of 11 | 100.00% |
Preliminary Vesting Percentage of Target: | 100.00% |
| | Results | % Added/Subtracted |
Energy Transition Modifier | Both metrics exceeded target threshold* | +25.00% |
Final Vesting Percentage of Target | 125.00% |
*Further details regarding results of our Energy Transition modifier for performance periods ending December 31, 2022, is set forth below under the heading “2022 Energy Transition Modifier Results.”
2022 Energy Transition Modifier Results - As described previously under the heading “Energy Transition Modifier,” after preliminary vesting of performance shares is determined, an Energy Transition modifier containing two additional metrics is applied with each metric either adding or subtracting 12.5 percentage points per metric to the preliminary vesting percentage, depending on performance. The final Energy Transition modifier results for the performance periods ending in 2022 are as follows:
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| Metric | Target | Results | % Added/Subtracted |
Energy Transition Modifier | Global Refinery Scope 1 and 2 GHG Emissions Reduction/Displacements vs. Target* | ≥44.00%** | Exceeded the upper end of the target | + 12.50% |
Low-carbon Initiatives as Percent of Growth CapEx*** | ≥40.00% | Exceeded the target | + 12.50% |
Total % Added/Subtracted | +25.00% |
*Further details regarding our GHG emissions reductions/displacement goals for 2025 and 2035 are set forth in our 2022 ESG Report and the SASB Report included therein.
**Represents the minimum of the target range (44.00% to 63.00%) of global refinery Scope 1 and 2 emissions reduction/displacements to be achieved in the target year.
***Reflects growth CapEx attributable to Valero as described and reconciled in our Annual Report on Form 10-K for the year ended December 31, 2022 (referred to as growth capital investments in the Form 10-K).
In 2022, due to the early completion and start-up of renewable diesel plants in Louisiana and Texas as well as reductions of GHG emissions, our performance exceeded our short-term 2025 goal of reducing/displacing refinery GHG emissions by 63% - which is three years ahead of schedule. On February 23, 2023, due to having achieved the short-term 2025 goal early, the Human Resources and Compensation Committee approved a modification to our Energy Transition modifier to make the goals more challenging to achieve. This newly elevated performance threshold requirement applies to performance shares that are tied to achievement of our 2035 GHG emissions reduction/displacement target. This Energy Transition modifier will be applied to the 2023 annual grant of performance shares awarded to officers and also to the unvested segments of 2021 and 2022 performance shares grants with performance periods ending December 31, 2023. The higher performance threshold, which now requires GHG emissions reductions and displacements performance to exceed 63% in order to receive additional shares, incentivizes continued progress towards our 2035 goal of reducing and displacing 100% of refinery GHG emissions and demonstrates prudent target setting in support of ongoing incremental performance achievements related to our low-carbon fuels growth strategy. See also “ESG and Executive Compensation” above.
The vesting outcomes for Valero’s previously granted and outstanding performance shares which had performance periods ending on December 31, 2022 effectively demonstrates the alignment of Valero’s long-term incentive program to the interests of Valero’s stockholders.
Restricted Stock
Restricted stock targets represent the remaining 50 percent of each executive’s long-term incentive target on a share value basis. Restricted stock is subject to forfeiture if an executive terminates his or her employment prior to vesting (other than upon eligible retirement, death, or following a qualified voluntary termination following a change of control). Dividends are paid on shares of restricted stock as and when dividends are declared and paid on Valero’s outstanding Common Stock.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Our mix of long-term incentives provides an appropriate balance between the pay-for-performance attributes of performance shares and the equity alignment and retentive qualities of restricted shares. This mix also generally aligns with market practices, and thus supports recruitment and retention of top-quality executive talent.
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PERQUISITES AND OTHER BENEFITS |
Consistent with our goal of providing compensation and benefits that are generally aligned with market practices among our peers, officers are eligible to receive reimbursement for club dues, federal income tax preparation, home security protection, medical concierge services, and an annual health examination, and are also eligible to receive an annual allowance for the purchase of specified health and welfare benefits, personal liability insurance coverage, excess individual long-term disability insurance coverage, and the accompaniment of Valero security personnel at certain public events. We also occasionally permit certain limited non-business use of Valero’s corporate facilities and corporate aircraft, including, for example, for a spouse to accompany an officer on certain travel. Use of corporate aircraft is subject to our corporate aircraft policy and is reviewed annually by our Chief Compliance Officer. Additionally, in connection with certain corporate meetings and functions, we often provide certain items such as meals, entertainment and small gifts (such as travel bags and golf vests) that are not directly related to the business purpose of the meeting or function. We do not provide executive officers with automobiles or automobile allowances or supplemental executive medical coverage.
In determining the total compensation payable to our named executive officers, the Human Resources and Compensation Committee considers perquisites in the context of the total compensation which our named executive officers are eligible to receive. We believe the benefit Valero receives from providing these perquisites significantly outweighs the cost of providing them. The Human Resources and Compensation Committee also periodically reviews these arrangements as needed to ensure they meet business needs and remain in line with market practices. For more information about these perquisites, including their reportable values based on the incremental costs to us, see the “All Other Compensation” column of the Summary Compensation Table and related footnotes.
We provide other benefits, including medical, life, dental, and disability insurance in line with competitive market conditions. Our named executive officers are eligible for the same benefit plans provided to our other employees, including our Thrift Plan and insurance and certain supplemental benefit plans chosen and paid for by employees who desire additional coverage.
Consistent with typical practices among our peers, executive officers and other employees whose compensation exceeds certain limits are eligible to participate in non-qualified excess benefit programs whereby those individuals can choose to make larger contributions than allowed under the qualified plan rules and receive correspondingly higher benefits. These plans are described below.
Pension Plans
We have a noncontributory defined benefit Pension Plan in which most of our employees, including our named executive officers, are eligible to participate and under which contributions by individual participants are neither required nor permitted. We also have a noncontributory, non-qualified Excess Pension Plan and a non-qualified Supplemental Executive Retirement Plan (“SERP”), which provide supplemental pension benefits to certain highly compensated employees. Our named executive officers are participants in the SERP. The SERP is offered to support recruitment and retention of critical executive talent. The Excess Pension Plan and the SERP provide eligible employees with additional retirement savings opportunities that cannot be achieved with tax-qualified plans due to Internal Revenue Code limits on (i) annual compensation that can be taken into account under qualified plans, or (ii) annual benefits that can be provided under qualified plans. These plans are further described in the disclosures under the caption “Executive Compensation—Post-Employment Compensation.”
Nonqualified Deferred Compensation Plans
Deferred Compensation Plan. Our named executive officers are eligible to participate in our Deferred Compensation Plan (“DC Plan”). The DC Plan is offered to align with competitive practices among our peers, and thereby support recruitment and retention of executive talent. The DC Plan permits eligible employees to defer a portion of their salary and/or bonus to a specified date, at least three years after the year of the deferral election. Under the DC Plan, each year eligible employees are permitted to elect to defer up to 30 percent of their salary and/or 50 percent of their cash bonuses to be earned for services performed during the following year. We have not made discretionary contributions to participants’ accounts, and currently we have no plans to do so.
All amounts credited under the DC Plan (other than discretionary credits) are immediately 100 percent vested. Any discretionary credits, if ever granted, will vest in accordance with the vesting schedule determined at the time of the grant of discretionary credits. Participant accounts are credited with earnings (or losses) based on investment fund choices made by the participants among available funds selected by Valero’s Benefit Plans Administrative Committee.
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COMPENSATION DISCUSSION AND ANALYSIS |
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Excess Thrift Plan. Our Excess Thrift Plan provides benefits to participants in our Thrift Plan whose annual additions to the Thrift Plan are subject to the limitations on annual additions as provided under Section 415 of the Internal Revenue Code, and/or who are constrained from making maximum contributions under the Thrift Plan by Section 401(a)(17) of the Internal Revenue Code, which limits the amount of an employee’s annual compensation which may be taken into account under that plan. The Excess Thrift Plan is: (i) an “excess benefit plan” as defined under Section 3(36) of ERISA; and (ii) a plan that is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.
Additional information about these plans and contributions made by Valero and each of our named executive officers under non-qualified defined contribution and other deferred compensation plans are presented in this proxy statement under the caption “Executive Compensation—Nonqualified Deferred Compensation.”
Change of Control Severance Arrangements
We have change of control severance agreements with each of our named executive officers. The agreements are generally aligned with typical practices and are intended to assure the continued availability of the officers in the event of any merger or acquisition that would likely threaten the job security of many top executives. These arrangements are also intended to maintain executive focus and productivity in a period of uncertainty. If a change of control occurs during the term of an agreement, the agreement becomes operative for a fixed three-year period. The agreements provide generally that the officers’ terms and conditions of employment will not be adversely changed during the three-year period after a change of control. For information regarding payments that may be made under these agreements, see the disclosures in this proxy statement under the caption “Executive Compensation—Potential Payments Upon Termination or Change of Control.”
Accounting and Tax Treatment
Compensation expense for our share-based compensation plans is based on the fair value of the awards granted and is recognized in income on a straight-line basis over the shorter of (i) the requisite service period of each award, or (ii) the period from the grant date to the date retirement eligibility is achieved if that date is expected to occur during the vesting period established in the award. Specific components of our stock-based compensation programs are discussed in Note 13 of Notes to Consolidated Financial Statements in Valero’s Annual Report on Form 10-K for the year ended December 31, 2022.
Section 162(m) of the Internal Revenue Code of 1986 generally limits the deductibility of compensation paid to certain top executives to $1 million. In previous years, there was an exemption from this $1 million deduction limit for compensation payments that qualified as “performance-based” under applicable regulations. However, the enactment of the Tax Cuts and Jobs Act of 2017 eliminated the performance-based compensation exemption, except with respect to certain grandfathered arrangements. We believe that outstanding stock options continue to qualify as performance-based compensation under the grandfather rules provided under the Tax Cuts and Jobs Act of 2017.
Prospectively, for pay vehicles granted and earned in 2020 and beyond, the Tax Cuts and Jobs Acts of 2017 eliminated the deductibility of most components of pay to certain top executives to the extent that such pay exceeds $1 million in a year. Consistent with Valero’s historic approach to deductibility under former Section 162(m), the Committee will continue to exercise flexibility and discretion in determining whether any given form of pay should be designed and administered to qualify for full deductibility.
Compensation-Related Policies
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POLICY ON VESTING OF PERFORMANCE SHARES UPON CHANGE OF CONTROL OF VALERO |
Our Board has adopted a policy regarding the vesting of performance shares upon a change of control of Valero. The policy provides that performance shares granted to participants in Valero’s equity incentive plans will not vest automatically upon the date of a change of control (as defined in the applicable plan) of Valero. The policy further provides that in making awards of performance shares to participants, the Human Resources and Compensation Committee may provide in the award agreement with the participant that if a participant’s employment with Valero is terminated following a change of control, any unvested performance shares held by the participant will vest on a partial, pro rata basis on the date of the participant’s termination of employment, with such qualifications for an award as the Committee may determine. The policy is available on our website at www.valero.com > Investors > ESG > Governance Documents > Governance Policies.
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COMPENSATION DISCUSSION AND ANALYSIS |
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EXECUTIVE COMPENSATION CLAWBACK POLICY |
Under our Policy on Executive Compensation in Restatement Situations, in the event of a material restatement of Valero’s financial results, the Board, or the appropriate committee thereof, will review all bonuses and other incentive and equity compensation awarded to our executive officers. The policy provides that if the bonuses and other incentive and equity compensation would have been lower had they been calculated based on such restated results, the Board (or committee), will, to the extent permitted by governing law and as appropriate under the circumstances, seek to recover for the benefit of Valero all or a portion of the specified compensation awarded to executive officers whose fraud or misconduct caused or partially caused such restatement, as determined by the Board (or committee). In determining whether to seek recovery, the policy states that the Board (or committee) shall take into account such considerations as it deems appropriate, including governing law and whether the assertion of a claim may prejudice the interests of Valero in any related proceeding or investigation. The policy is available on our website at www.valero.com > Investors > ESG > Governance Documents > Governance Policies.
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STOCK OWNERSHIP AND RETENTION GUIDELINES |
We have adopted stock ownership and retention guidelines applicable to our officers and non-employee directors. The guidelines require that non-employee directors acquire and hold during their service shares of Common Stock equal in value to at least five times their annual cash retainer. Officers and non-employee directors have five years after becoming subject to the guidelines to meet the requisite ownership threshold and, once attained, are expected to continuously own sufficient shares to meet that threshold.
As of December 31, 2022, our officers were required to meet the applicable guidelines stated below.
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Officer Position | Value of Shares Owned |
Chief Executive Officer | 5x Base Salary |
President | 3x Base Salary |
Executive Vice Presidents | 2x Base Salary |
Senior Vice Presidents | 1x Base Salary |
Vice Presidents | 1x Base Salary |
As of December 31, 2022, all NEOs, including the Chief Executive Officer, met the stock ownership requirements as described.
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In February of 2023, after consideration of feedback received from stockholder engagements in 2022, an analysis of market practices as provided by the Committee’s independent compensation consultant, and in the interest of ensuring the guidelines support the appropriate alignment of Valero officers’ equity compensation with the long-term interests of stockholders, the Human Resources and Compensation Committee recommended and the Board approved a 50 percent increase to the Stock Ownership and Retention Guidelines for senior executives. |
The guidelines applicable to our officers as of February 23, 2023 stated below require more ownership than median practices among our peers, and more broadly, among S&P 500 companies.
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Officer Position | Value of Shares Owned |
Chief Executive Officer | 7.5x Base Salary |
President | 4.5x Base Salary |
Executive Vice Presidents | 3.0x Base Salary |
Senior Vice Presidents | 1.5x Base Salary |
Vice Presidents | 1.0x Base Salary |
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COMPENSATION DISCUSSION AND ANALYSIS |
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COMPENSATION CONSULTANT DISCLOSURE POLICY |
Per the terms of our Compensation Consultant Disclosure Policy, Valero will make certain disclosures pertaining to compensation consultants in our proxy statements for annual meetings of stockholders. For any compensation consultant retained by the Human Resources and Compensation Committee to provide compensation advice with respect to the compensation disclosed in the Summary Compensation Table in the proxy statement, we will disclose (i) the total fees paid annually to the consultant for compensation-related services and non-compensation-related services, (ii) a description of any non-compensation-related services provided by the consultant, and (iii) any services that the consultant has provided to senior executives of Valero and the nature of those services. The policy is available on our website at www.valero.com > Investors > ESG > Governance Documents > Governance Policies.
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PROHIBITION AGAINST HEDGING AND PLEDGING |
Our policies prohibit our directors, officers, and employees from speculating in our stock, which includes short selling (profiting if the market price of our stock decreases), buying or selling publicly traded third-party options (including writing covered calls), hedging, or any other type of derivative arrangement that has a similar economic effect. In addition, our directors and officers are prohibited from pledging shares of Common Stock as collateral or security for indebtedness. Compliance with the guidelines is monitored by the Human Resources and Compensation Committee. The full text of our guidelines is included in our Corporate Governance Guidelines (as Article IX), available on our website at www.valero.com > Investors > ESG > Governance Documents > Governance Documents.
Our Securities Trading Policy prohibits our officers, directors, and employees from purchasing or selling Valero securities while in possession of material, nonpublic information, or otherwise using such information for their personal benefit or in any manner that would violate applicable laws and regulations.
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HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT |
The following Human Resources and Compensation Committee Report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of Valero’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this proxy statement and irrespective of any general incorporation language therein.
The Human Resources and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included under “Compensation Discussion and Analysis” above. Based on that review and discussion, the Human Resources and Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and also be incorporated by reference into our Annual Report on Form 10-K for the period ended December 31, 2022.
Members of the Human Resources and Compensation Committee:
Rayford Wilkins, Jr., Chair
Philip J. Pfeiffer
Robert A. Profusek
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| COMPENSATION CONSULTANT DISCLOSURES | |
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Our Human Resources and Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel, or other adviser, and is directly responsible for the appointment, compensation, and oversight of the work of any compensation consultant, independent legal counsel, or other adviser retained by the committee. Valero is obligated to provide appropriate funding for the committee’s retention of a consultant, counsel, or adviser.
In 2022, the committee retained Exequity LLP as an independent compensation consultant. The Human Resources and Compensation Committee directed Exequity to provide to the committee objective expert analysis and independent advice regarding executive and director compensation. For the 2022 executive and director compensation services rendered to the committee, Exequity earned professional fees of $343,490. Exequity did not provide other consulting services to the Human Resources and Compensation Committee, to Valero, or to any senior executives of Valero. Exequity is an independent adviser as determined under the SEC’s rules and the NYSE’s listing standards.
During 2022, Exequity’s executive and director compensation consulting services included:
•assistance with our 2022 say-on-pay engagement and response;
•assistance with establishing our overall executive compensation philosophy in light of our business strategies;
•assistance with selecting peer and comparator companies for benchmarking executive pay and monitoring Valero’s performance;
•assessment of competitive pay for our executives, with separate analyses of base salary, annual incentive, and long-term incentive compensation;
•assessment of, and recommendations for, our annual incentive bonus program;
•assessment of, and recommendation of enhancements to, our long-term incentive program strategy, including (i) the design of an appropriate mix of equity incentive vehicles, (ii) determination of performance measures and measurement techniques, and (iii) determination of competitive equity grant guidelines consistent with our overall pay philosophy;
•updates on trends and developments in executive compensation, new regulatory issues, and best practices;
•assessment of competitive pay for our directors; and
•assistance with proxy statement disclosures.
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| EQUITY COMPENSATION PLAN INFORMATION | |
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The following table presents information regarding our equity compensation plans as of December 31, 2022.
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| Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)(#) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b)($)(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in column (a)) (c)(2) |
Approved by stockholders: | | | |
2020 Omnibus Stock Incentive Plan | 414,725 (3) | — | 12,747,181 |
2011 Omnibus Stock Incentive Plan | 238,012 (4) | 44.40 | — |
Not approved by stockholders: | | | |
none | — | — | — |
Total | 652,737 | 44.40 | 12,747,181 |
Footnotes:
(1)With respect to the 2020 OSIP, the weighted-average exercise price cannot be calculated because all of the outstanding awards under the plan are performance shares and stock units, neither of which has an exercise price. For the 2011 Omnibus Stock Incentive Plan (“2011 OSIP”), the amount stated in column (b) represents the weighted-average exercise price of outstanding stock options; the amount stated does not include performance shares and stock units because they do not have an exercise price.
(2)On April 30, 2020, our stockholders approved our 2020 OSIP and, as a result, effective as of such date no further awards will be made under our 2011 OSIP. Securities available for future issuance under the 2020 OSIP can be issued in various forms, including but not limited to restricted stock, performance shares, stock unit awards, and stock options. The total number of securities remaining available for issuance under the 2020 OSIP as of December 31, 2022, includes shares of Common Stock previously subject to awards under the 2011 OSIP that, between April 30, 2020, and December 31, 2022, were forfeited, terminated, canceled or rescinded, settled in cash in lieu of Common Stock, exchanged for awards not involving Common Stock, or expired unexercised.
(3)Represents the gross number of shares of Common Stock subject to awards under the 2020 OSIP outstanding as of December 31, 2022, which consists of 50,977 shares of Common Stock associated with outstanding stock units, and 363,748 shares of Common Stock associated with outstanding performance shares at target.
(4)Represents the gross number of shares of Common Stock subject to awards under the 2011 OSIP outstanding as of December 31, 2022, including 112,622 shares of Common Stock associated with outstanding performance shares at target, and 125,390 shares of Common Stock associated with outstanding stock options.
Our equity plans are described further in Note 13 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.
The following tables disclose compensation paid to or earned by our named executive officers for 2022. We use captions and headings in these tables that correspond to the SEC regulations requiring these disclosures. The footnotes to these tables provide important information to explain the values presented in the tables.
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Summary Compensation Table |
This table summarizes the compensation paid to our named executive officers for fiscal years 2022, 2021, and 2020. The elements of compensation listed in the table are described in the “Compensation Discussion and Analysis” section of this proxy statement and in the table’s footnotes. The officers’ titles listed below are their current titles.
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Principal Position (1) | Year | Salary ($) | Stock Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | Total Excluding Change in Pension Value ($)(7) |
Joseph W. Gorder, Chairman of the Board and CEO | 2022 | 1,800,000 | 12,363,244 | 5,760,000 | — | 221,849 | 20,145,093 | 20,145,093 |
2021 | 1,800,000 | 13,360,052 | 5,264,064 | 2,030,418 | 237,352 | 22,691,886 | 20,661,468 |
2020 | 1,800,000 | 8,985,826 | 2,804,544 | 5,896,732 | 443,538 | 19,930,640 | 14,033,908 |
Jason W. Fraser, EVP and Chief Financial Officer | 2022 | 875,000 | 3,711,181 | 1,750,000 | — | 112,389 | 6,448,570 | 6,448,570 |
2021 | 825,000 | 3,540,493 | 1,507,935 | 2,408,782 | 104,961 | 8,387,171 | 5,978,389 |
2020 | 723,117 | 2,036,280 | 730,350 | 1,311,390 | 107,515 | 4,908,652 | 3,597,262 |
R. Lane Riggs, President and Chief Operating Officer | 2022 | 1,015,000 | 5,044,102 | 2,233,000 | — | 130,714 | 8,422,816 | 8,422,816 |
2021 | 970,000 | 6,956,013 | 1,950,263 | 3,093,788 | 172,559 | 13,142,623 | 10,048,835 |
2020 | 940,000 | 5,094,316 | 1,006,909 | 2,027,167 | 116,733 | 9,185,125 | 7,157,958 |
Gary K. Simmons, EVP and Chief Commercial Officer | 2022 | 725,000 | 2,530,639 | 1,450,000 | — | 133,480 | 4,839,119 | 4,839,119 |
2021 | 700,400 | 2,545,219 | 1,280,191 | 1,829,025 | 108,189 | 6,463,024 | 4,633,999 |
2020 | 680,000 | 1,618,614 | 662,184 | 1,371,059 | 112,244 | 4,444,101 | 3,073,042 |
Cheryl L. Thomas, SVP and Chief Technology Officer | 2022 | 690,000 | 1,655,563 | 1,104,000 | — | 98,733 | 3,548,296 | 3,548,296 |
2021 | 662,300 | 1,694,490 | 968,442 | 2,158,056 | 97,325 | 5,580,613 | 3,422,557 |
2020 | 606,250 | 1,172,125 | 500,923 | 1,117,343 | 85,221 | 3,481,862 | 2,364,519 |
Footnotes to Summary Compensation Table:
(1)The persons listed in this table are Valero’s “named executive officers” per Item 402(a)(3) of SEC Regulation S-K.
(2)The amount shown is the “grant date fair value” of stock awards (restricted stock and performance shares) computed under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation–Stock Compensation (“FASB ASC Topic 718”). The grant date fair values disclosed above are different than the target value of stock awards for each NEO due to reasons more fully described in “Compensation Discussion and Analysis” and below in this footnote. The target values of stock awards for the NEOs were: Mr. Gorder ($11,340,000), Mr. Fraser ($3,718,750), Mr. Riggs ($4,821,250), Mr. Simmons ($2,356,250), and Ms. Thomas ($1,587,000). The final value realized by each named executive officer will be determined at a later date upon award vesting. Total target pay for our NEOs is described more fully in “Compensation Discussion and Analysis—Executive Compensation in Summary—Elements of Executive Compensation—Summary—Target Total Pay.”
The grant date fair values disclosed under FASB ASC Topic 718 for our performance share awards include the values of certain tranches of unvested (as of December 31, 2022) performance shares that were awarded in years prior to the fiscal year shown in the table. The computations of grant date fair values for performance shares are more fully described in footnote (5) to the Grants of Plan-Based Awards table. The highest level of possible performance conditions are disclosed in footnote (5) to the Grants of Plan-Based Awards table.
(footnote (2) continues on the following page)
Footnotes to Summary Compensation Table (con’t.):
footnote (2) continued
The dollar values included in the “Stock Awards” column include the following components:
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| Gorder | Fraser | Riggs | Simmons | Thomas |
Restricted Stock | 5,611,902 | 1,840,224 | 2,385,862 | 1,165,997 | 785,440 |
Performance Shares | 6,751,342 | 1,870,957 | 2,658,240 | 1,364,642 | 870,123 |
Total (in dollars) | 12,363,244 | 3,711,181 | 5,044,102 | 2,530,639 | 1,655,563 |
For restricted stock awards, the disclosed grant date fair values are different than the target values for each officer due to the difference between (i) the stock price used to determine the number of restricted shares granted to achieve the target value (determined by using the average closing stock price for the 15 consecutive trading days ending the day before the grant) and (ii) the grant date fair value of the award as computed under FASB ASC Topic 718. The target values of restricted stock awards for 2022 were: Mr. Gorder ($5,670,000), Mr. Fraser ($1,859,375), Mr. Riggs ($2,410,625), Mr. Simmons ($1,178,125), and Ms. Thomas ($793,500).
For performance shares, the grant date fair values disclosed represent the aggregated fair values of three tranches from three separate award years as required under FASB ASC Topic 718 (i.e., first tranche of 2022 award, second tranche of 2021 award, and third tranche of 2020 award). These are deemed to be three separate grants for determining fair value and each is deemed to have a grant date in 2022 per FASB ASC Topic 718. As further described in footnote (5) to the Grants of Plan-Based Awards table, the expected conversion rate (probable outcome) for each of these awards determines a unique fair value per share for each tranche. The expected conversion rates are 112.57% for the 2022 award, 89.73% for the 2021 award, and 122.06% for the 2020 award. The target values for the 2022 grants of performance shares to our NEOs were: Mr. Gorder ($5,670,000), Mr. Fraser ($1,859,375), Mr. Riggs ($2,410,625), Mr. Simmons ($1,178,125), and Ms. Thomas ($793,500).
(3)Stock options were not granted to our named executive officers in 2022, 2021, or 2020. Additional information about the restricted stock and performance shares granted in 2022 is disclosed in the Grants of Plan-Based Awards table in this proxy statement. Additional information about stock awards is disclosed in “Compensation Discussion and Analysis” and in Note 13 (Stock-Based Compensation) of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.
(4)Represents amounts earned under our annual incentive bonus plan, as described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Bonus.” Our annual incentive bonus plan has performance measures established by the Human Resources and Compensation Committee, and communicated to employees, including the NEOs, at a time when the outcome of the performance is substantially uncertain, as was the case with regard to the 2022 performance period. The Human Resources and Compensation Committee must determine the level of achievement with regard to such performance measures before there is any payout to the NEOs.
(5)This column represents the sum of the change in pension value and nonqualified deferred compensation earnings for each of our NEOs. Due to increases in interest rates during 2022, the change in pension value and nonqualified deferred compensation earnings for each of our NEOs was negative: $(4,238,447) for Mr. Gorder, $(960,134) for Mr. Fraser, $(2,900,224) for Mr. Riggs, $(1,488,201) for Mr. Simmons, and $(959,160) for Ms. Thomas. There are no above-market or preferential earnings on non-tax-qualified deferred compensation amounts included in the table presented above. The NEOs participate in the same pension and non-qualified deferred compensation plans as similarly situated Valero employees (senior-level Valero executive leadership). The narrative disclosures following the Pension Benefits table describe these plans and the present value assumptions used for these calculations. Additional information about Valero’s defined benefit plans is disclosed in Note 12 (Employee Benefit Plans) of Notes to Consolidated Financial Statements in Valero’s Annual Report on Form 10-K for the year ended December 31, 2022.
(6)Amounts listed as “All Other Compensation” for 2022 are composed of the following items. Any amount in excess of $10,000 (whether or not such amount may be deemed to be a perquisite or other personal benefit) is separately quantified.
For Mr. Gorder: Valero contributions to the officer’s Thrift Plan account ($21,350) • Valero contributions to the officer’s Excess Thrift Plan account ($104,650) • Valero-provided dollars for the purchase of health and welfare benefits ($26,099) • home security ($14,403) • gross up payment for home security imputed income • personal security protection • reimbursement of club membership dues • executive physical exam and medical concierge service • individual excess liability insurance • individual disability insurance • small gifts and entertainment in connection with corporate meetings and functions • personal use of corporate aircraft • personal use of corporate facilities • imputed income for tax return preparation ($16,465) • U.S. tax gross up for imputed income for tax preparation due to foreign source trailing income.
For Mr. Fraser: Valero contributions to the officer’s Thrift Plan account ($21,350) • Valero contributions to the officer’s Excess Thrift Plan account ($39,900) • Valero-provided dollars for the purchase of health and welfare benefits ($30,507) • home security • gross up payment for home security imputed income • reimbursement of club membership dues • medical concierge service • individual excess liability insurance • individual disability insurance • small gifts and entertainment in connection with corporate meetings and functions • personal use of corporate facilities • imputed income for tax return preparation.
(footnote (6) continues on the following page)
Footnotes to Summary Compensation Table (con’t.):
footnote (6) continued
For Mr. Riggs: Valero contributions to the officer’s Thrift Plan account ($21,350) • Valero contributions to the officer’s Excess Thrift Plan account ($49,700) • Valero-provided dollars for the purchase of health and welfare benefits ($32,175) • home security • gross up payment for home security imputed income • personal security protection • reimbursement of club membership dues • medical concierge service • individual excess liability insurance • individual disability insurance • small gifts and entertainment in connection with corporate meetings and functions • personal use of corporate aircraft • personal use of corporate facilities.
For Mr. Simmons: Valero contributions to the officer’s Thrift Plan account ($21,350) • Valero contributions to the officer’s Excess Thrift Plan account ($29,400) • Valero-provided dollars for the purchase of health and welfare benefits ($32,080) • home security ($11,068) • gross up payment for home security imputed income • reimbursement of club membership dues ($11,145) • executive physical exam and medical concierge service • individual excess liability insurance • individual disability insurance • small gifts and entertainment in connection with corporate meetings and functions • personal use of corporate facilities • imputed income for tax return preparation.
For Ms. Thomas: Valero contributions to the officer’s Thrift Plan account ($21,350) • Valero contributions to the officer’s Excess Thrift Plan account ($26,950) • Valero-provided dollars for the purchase of health and welfare benefits ($26,099) • home security • gross up payment for home security imputed income • reimbursement of club membership dues • medical concierge service • individual excess liability insurance • individual disability insurance • small gifts and entertainment in connection with corporate meetings and functions • personal use of corporate facilities • imputed income for tax return preparation.
Overview of Valuation Methodology
Valero values the cost of the benefits above at the incremental cost to Valero of providing such benefits. The primary purpose of Valero’s facilities and corporate aircraft is for business and, as a result, the incremental costs associated with personal use of such items does not include fixed costs that do not change based on usage, including limited family accompaniment or use in connection with an executive’s business use. To the extent we do not incur any incremental costs, no additional compensation is included as part of the total compensation of our named executive officers. However, any incremental costs that we do incur and that are incidental to the business use of such items are included in such total. In the case of personal use of corporate aircraft, the amount reported is the incremental cost of providing the benefit, which primarily includes fuel costs and airport costs as well as any incidental costs, such as for the crew.
Valero did not provide any perquisites or personal benefits to the named executive officers in 2022, 2021 or 2020 relating to the COVID-19 pandemic, such as new health-related or personal transportation benefits, that were not provided to all employees on a nondiscriminatory basis.
(7)The values in this column represent the “Total” compensation for 2022 for each NEO when excluding the year-over-year changes to the present values of accumulated benefits under the pension and nonqualified deferred compensation plans, which can increase or decrease significantly from year-to-year due to the actuarial assumptions used in a given year (primarily the discount rates used to determine the present value of accumulated benefits).
The amounts reported in this column are calculated by subtracting the change in pension values reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column, from the amounts reported in the Total compensation column. The amounts reported in this column differ from, and are not substitutes for, the amounts reported in the Total compensation column. See also footnote (5) above.
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Grants of Plan-Based Awards |
The following table describes plan-based awards for our named executive officers in 2022.
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| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | Grant Date Fair Value of Stock and Option Awards ($) (1) |
Name | Grant Date | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Joseph W. Gorder | n/a | (2) | – | 2,880,000 | 5,760,000 | | | | |
| 02/22/2022 | (3) | | | | n/a | 64,590 | n/a | 5,611,902 |
| n/a | (4) | | | | | 64,590 | | |
| 02/22/2022 | (5) | | | | | 21,530 | 43,060 | 2,080,444 |
| 02/22/2022 | (5) | | | | | 29,250 | 58,500 | 2,252,835 |
| 02/22/2022 | (5) | | | | | 22,907 | 45,814 | 2,418,063 |
Jason W. Fraser | n/a | (2) | – | 875,000 | 1,750,000 | | | | |
| 02/22/2022 | (3) | | | | n/a | 21,180 | n/a | 1,840,224 |
| n/a | (4) | | | | | 21,180 | | |
| 02/22/2022 | (5) | | | | | 7,060 | 14,120 | 682,208 |
| 02/22/2022 | (5) | | | | | 8,513 | 17,026 | 655,671 |
| 02/22/2022 | (5) | | | | | 5,050 | 10,100 | 533,078 |
R. Lane Riggs | n/a | (2) | – | 1,116,500 | 2,233,000 | | | | |
| 02/22/2022 | (3) | | | | n/a | 27,460 | n/a | 2,385,862 |
| n/a | (4) | | | | | 27,460 | | |
| 02/22/2022 | (5) | | | | | 9,154 | 18,308 | 884,551 |
| 02/22/2022 | (5) | | | | | 11,260 | 22,520 | 867,245 |
| 02/22/2022 | (5) | | | | | 8,587 | 17,174 | 906,444 |
Gary K. Simmons | n/a | (2) | – | 725,000 | 1,450,000 | | | | |
| 02/22/2022 | (3) | | | | n/a | 13,420 | n/a | 1,165,997 |
| n/a | (4) | | | | | 13,420 | | |
| 02/22/2022 | (5) | | | | | 4,474 | 8,948 | 432,323 |
| 02/22/2022 | (5) | | | | | 5,873 | 11,746 | 452,338 |
| 02/22/2022 | (5) | | | | | 4,547 | 9,094 | 479,981 |
Cheryl L. Thomas | n/a | (2) | – | 552,000 | 1,104,000 | | | | |
| 02/22/2022 | (3) | | | | n/a | 9,040 | n/a | 785,440 |
| n/a | (4) | | | | | 9,040 | | |
| 02/22/2022 | (5) | | | | | 3,014 | 6,028 | 291,243 |
| 02/22/2022 | (5) | | | | | 3,847 | 7,694 | 296,296 |
| 02/22/2022 | (5) | | | | | 2,677 | 5,354 | 282,584 |
Footnotes to Grants of Plan-Based Awards table:
(1)The reported grant date fair value of stock awards is determined in compliance with FASB ASC Topic 718. Stock options were not granted to our named executive officers in 2022.
(2)Represents potential awards under our annual incentive bonus program. Actual amounts earned by our NEOs for 2022 are reported in the Summary Compensation Table under the column “Non-Equity Incentive Plan Compensation.” The target amounts listed in the Grants of Plan-Based Awards table are computed by multiplying base salary by 160%, 100%, 110%, 100%, and 80% for Mr. Gorder, Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas, respectively.
(3)Represents restricted stock grants under our 2020 OSIP. Dividends on the restricted shares are paid as and when dividends are declared and paid on our Common Stock. For each NEO, the dollar amount stated in the column “Grant Date Fair Value of Stock and Option Awards” is included within the amount listed in the “Stock Awards” column of the Summary Compensation Table. The restricted shares are scheduled to vest (become nonforfeitable) annually in equal one-third increments. Restricted stock awards are more fully described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Restricted Stock.”
(4)Represents the number of performance shares awarded under our 2020 OSIP to our NEOs on February 22, 2022 under our LTI awards program described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Performance Shares.” Per the awards’ terms, on a normal vesting date officers can earn, in shares of Common Stock, from 0% to 200% of the number of performance shares that are vesting, based upon Valero’s achievement of objective performance measures during the performance periods prescribed by our Human Resources and Compensation Committee.
The performance shares vest annually in one-third increments (tranches). The first tranche of performance shares vested in January of 2023, and the remaining two tranches are scheduled to vest annually in January of 2024 and January of 2025, with any resulting payout at those times conditioned upon Valero’s performance during the pertinent performance periods. Only the first tranche of these performance shares is deemed to have a “grant date” in 2022, as explained in footnote (5) below. Our disclosures referenced by footnote (4) are for information purposes only, and tie to the disclosures made by our NEOs in 2022 in compliance with Section 16 of the Exchange Act. Our disclosures in footnote (5) below are intended to comply with the requirements of Item 402 of SEC Regulation S-K with respect to “grants” of performance shares.
(5)Item 402(d)(2)(viii) of SEC Regulation S-K requires us to disclose the “grant date fair value” of equity awards “computed in accordance with FASB ASC Topic 718.” Our performance shares are awarded in three tranches, with the tranches having measurement periods (the performance period) of differing lengths. The first tranche of an award has a performance period of 12 months, the second tranche of an award has a performance period of 24 months, and the third tranche of an award has a performance period of 36 months.
The amounts referenced by footnote (5) in the Grants of Plan-Based Awards table above represent three tranches from three separate award years—namely, the first tranche of performance shares awarded in 2022 (awarded on February 22, 2022), the second tranche of performance shares awarded in 2021 (awarded on February 23, 2021), and the third tranche of performance shares awarded in 2020 (awarded on February 26, 2020). Under FASB ASC Topic 718, each of these tranches is deemed to be a separate “grant” for fair value purposes, and each is deemed to have a “grant date” in 2022, that is, the date when the Human Resources and Compensation Committee approved the peer group of companies for these tranches. The dollar amounts included in the table represent the grant date fair values from the three tranches that are deemed to have a grant date in 2022.
For each NEO, the sum of the dollar amounts stated in the Grants of Plan-Based Awards table’s column entitled “Grant Date Fair Value of Stock and Option Awards” is also included in the “Stock Awards” column of the Summary Compensation Table.
(footnote (5) continues on the following page)
Footnotes to Grants of Plan-Based Awards table (con’t.):
footnote (5) continued
The grant date fair values and the highest level of performance values for the performance shares included in the Grants of Plan-Based Awards table are summarized in the following table.
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| performance shares deemed (under FASB ASC Topic 718) to have a grant date in 2022 | grant date fair value ($) | lowest possible performance ($) | highest level of performance ($) |
Gorder | 1st tranche of 2022 award | 21,530 | | 2,080,444 | 0 | 3,865,066 |
| 2nd tranche of 2021 award | 29,250 | | 2,252,835 | 0 | 5,480,280 |
| 3rd tranche of 2020 award | 22,907 | | 2,418,063 | 0 | 4,471,446 |
| total 2022 grant date fair value | 6,751,342 | 0 | 13,816,792 |
Fraser | 1st tranche of 2022 award | 7,060 | | 682,208 | 0 | 1,267,411 |
| 2nd tranche of 2021 award | 8,513 | | 655,671 | 0 | 1,594,996 |
| 3rd tranche of 2020 award | 5,050 | | 533,078 | 0 | 985,760 |
| total 2022 grant date fair value | 1,870,957 | 0 | 3,848,167 |
Riggs | 1st tranche of 2022 award | 9,154 | | 884,551 | 0 | 1,643,326 |
| 2nd tranche of 2021 award | 11,260 | | 867,245 | 0 | 2,109,674 |
| 3rd tranche of 2020 award | 8,587 | | 906,444 | 0 | 1,676,182 |
| total 2022 grant date fair value | 2,658,240 | 0 | 5,429,182 |
Simmons | 1st tranche of 2022 award | 4,474 | | 432,323 | 0 | 803,172 |
| 2nd tranche of 2021 award | 5,873 | | 452,338 | 0 | 1,100,365 |
| 3rd tranche of 2020 award | 4,547 | | 479,981 | 0 | 887,574 |
| total 2022 grant date fair value | 1,364,642 | 0 | 2,791,112 |
Thomas | 1st tranche of 2022 award | 3,014 | | 291,243 | 0 | 541,073 |
| 2nd tranche of 2021 award | 3,847 | | 296,296 | 0 | 720,774 |
| 3rd tranche of 2020 award | 2,677 | | 282,584 | 0 | 522,550 |
| total 2022 grant date fair value | 870,123 | 0 | 1,784,398 |
2022 Award. For performance shares awarded on February 22, 2022, the grant date (per FASB ASC Topic 718) for the first tranche is deemed to have occurred in 2022. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 112.57% with a fair value per share of $96.63. The fair values of the second and third tranches will be determined on their respective FASB ASC Topic 718 grant dates.
2021 Award. For performance shares awarded on February 23, 2021, the grant date (per FASB ASC Topic 718) for the second tranche is deemed to have occurred in 2022. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 89.73% with a fair value per share of $77.02. The fair values of the third tranche will be determined on its FASB ASC Topic 718 grant date.
2020 Award. For performance shares awarded on February 26, 2020, the grant date (per FASB ASC Topic 718) for the third tranche is deemed to have occurred in 2022. The performance shares in this tranche were deemed to have an expected conversion rate (probable outcome) of 122.06% with a fair value per share of $105.56.
All Awards. For all awards, the “highest level of performance” values listed above assume achievement of the highest level of possible performance conditions (that is, vesting at 200%) per Instruction 3 to Item 402(c)(2)(v) of SEC Regulation S-K.
| | | | | | | | | | | | | | |
Outstanding Equity Awards at December 31, 2022 |
This table describes unexercised stock options, unvested shares of restricted stock, and unvested performance shares held by our named executive officers as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
| | | | | Restricted Stock | | Performance Shares |
| Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($)(1) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) |
Joseph W. Gorder | 31,770 | — | 39.665 | 11/08/2023 | 13,893 | (3) | 1,762,466 | | 19,837 | | (8) | | 3,145,747 |
| 43,810 | — | 48.565 | 10/23/2024 | 35,480 | (4) | 4,500,993 | | 22,907 | | (9) | | 4,903,900 |
| | — | |
| 39,173 | (5) | 4,969,487 | | 58,500 | | (10) | | 7,421,310 |
|
| — |
|
| | | | | 64,590 | | (11) | | 14,339,366 |
Jason W. Fraser | — | — | — | — | 5,050 | (3) | 640,643 | | 4,060 | | (8) | | | 643,815 |
| | | | | 17,026 | (4) | 2,159,918 | | 5,050 | | (9) | | | 1,081,101 |
| | | | | 21,180 | (5) | 2,686,895 | | 17,026 | | (10) | | | 2,159,918 |
| | | | | 1,083 | (6) | 137,389 | | 21,180 | | (11) | | | 4,702,066 |
R. Lane Riggs | — | — | — | — | 5,208 | (3) | 660,687 | | 6,063 | | (8) | | | 961,472 |
| | | | | 9,065 | (3) | 1,149,986 | | 8,587 | | (9) | | | 1,838,328 |
| | | | | 13,658 | (4) | 1,732,654 | | 22,520 | | (10) | | | 2,856,887 |
| | | | | 16,654 | (5) | 2,112,726 | | 27,460 | | (11) | | | 6,096,257 |
| | | | | 13,425 | (7) | 1,703,096 | | | | | |
Gary K. Simmons | — | — | — | — | 2,758 | (3) | 349,880 | | 2,707 | | (8) | | | 429,294 |
| | | | | 7,123 | (4) | 903,624 | | 4,547 | | (9) | | | 973,524 |
| | | | | 8,139 | (5) | 1,032,514 | | 11,746 | | (10) | | | 1,490,098 |
| | | | | | | | | 13,420 | | (11) | | | 2,979,307 |
Cheryl L. Thomas | — | — | — | — | 1,624 | (3) | 206,021 | | 2,347 | | (8) | | | 372,207 |
| | | | | 4,665 | (4) | 591,802 | | 2,677 | | (9) | | | 573,154 |
| | | | | 5,482 | (5) | 695,447 | | 7,693 | | (10) | | | 975,934 |
| | | | |
|
|
| | 9,040 | | (11) | | | 2,006,925 |
Footnotes to Outstanding Equity Awards table:
(1)Our equity plans provide that the exercise price for all stock options must not be less than the mean of our Common Stock’s high and low NYSE reported sales price per share on the date of grant.
(2)The assumed market values were determined using the closing market price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022. For a further discussion of the vesting of restricted stock and performance share awards (as noted in the following footnotes), see “Elements of Executive Compensation—Long-Term Incentive Awards” and “Accounting and Tax Treatment” in the “Compensation Discussion and Analysis” section above, and the Option Exercises and Stock Vested table below.
(3)The remaining unvested portion of this award vested on February 26, 2023.
(4)Of the shares listed as outstanding at year end, 50% vested on February 23, 2023, and the remaining 50% is scheduled to vest on February 23, 2024.
(5)One-third of these shares vested on February 22, 2023; the remaining two-thirds are scheduled to vest in equal installments on February 22, 2024 and February 22, 2025.
(6)The remaining unvested portion of this award is scheduled to vest on July 15, 2023.
(7)The remaining unvested portion of this award vested on February 23, 2023.
(8)These performance shares vested on January 31, 2023 at 125% of target. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents the market value of 125% (actual payout) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022.
(9)These performance shares vested on January 31, 2023 at 168.75% of target. The value shown in the column, “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents the market value of 168.75% (actual payout) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022.
(10)One-half of these performance shares vested on January 31, 2023 at 100% of target; the other half is scheduled to vest in January of 2024. The value shown in the column “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents, for the performance shares that vested on January 31, 2023, the market value of 100% (actual payout) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022, and for the remaining half, the market value of 100% (target) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022.
(11)One-third of these performance shares vested on January 31, 2023 at 125% of target; an additional one-third is scheduled to vest in January of 2024; and the final one-third is scheduled to vest in January of 2025. The value shown in the column “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested,” represents, for the performance shares that vested on January 31, 2023, the market value of 125% (actual payout) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022, and for the remaining two-thirds, the market value of 200% (max) of the performance shares at the closing price of our Common Stock on December 30, 2022 ($126.86 per share), which was the last NYSE trading day in 2022.
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Option Exercises and Stock Vested |
The following table provides information regarding (i) stock option exercises by our named executive officers, and (ii) the vesting of restricted stock and performance shares held by our named executive officers during 2022 on an aggregated basis.
| | | | | | | | | | | | | | |
| Option Awards | Stock Awards (1) |
Name | No. of Shares Acquired on Exercise (#)(2) | Value Realized on Exercise ($)(3) | No. of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(4) |
Joseph W. Gorder | 37,567 | 3,744,665 | | |
(5) | | | 69,081 | 5,744,415 |
(6) | | | 123,396 | 10,244,953 |
Jason W. Fraser | — | — | | |
(5) | | | 18,707 | 1,790,452 |
(6) | | | 25,317 | 2,101,944 |
R. Lane Riggs | 2,667 | 221,444 | | |
(5) | | | 52,526 | 4,132,963 |
(6) | | | 38,098 | 3,163,086 |
Gary K. Simmons | 1,750 | 151,533 | | |
(5) | | | 13,244 | 1,089,887 |
(6) | | | 19,582 | 1,625,796 |
Cheryl L. Thomas | — | — | | |
(5) | | | 8,940 | 743,620 |
(6) | | | 14,019 | 1,163,927 |
Footnotes to Option Exercises and Stock Vested table:
(1)Represents shares of Common Stock from the vesting of restricted stock and performance shares in 2022. For a further discussion of the vesting of restricted stock and performance share awards, see “Elements of Executive Compensation—Long-Term Incentive Awards” and “Accounting and Tax Treatment” in the “Compensation Discussion and Analysis” section above.
(2)Represents the gross number of shares received by the named executive officer before deducting any shares withheld (i) from an option’s exercise to pay the exercise price, and/or (ii) to pay applicable taxes.
(3)The reported value is determined by multiplying (i) the number of option shares, times (ii) the difference between the market price of the Common Stock on the date of exercise and the exercise price of the stock option. The value is stated before deducting payment of applicable taxes.
(4)The reported value is determined by multiplying number of vested shares by the market value of the shares on the date they became nonforfeitable or were otherwise received. The value is stated before deducting payment of applicable taxes.
(5)Represents number of shares of Common Stock and value related to vesting of restricted stock.
(6)Represents number of shares of Common Stock and value related to vesting of performance shares.
| | | | | | | | | | | | | | |
Post-Employment Compensation |
The following table describes the accumulated benefits of our named executive officers under Valero’s tax-qualified defined benefit pension plan (the “Pension Plan”), excess pension plan (“Excess Pension Plan”), and SERP (collectively with the Pension Plan and the Excess Pension Plan, the “Retirement Plans”) during 2022.
| | | | | | | | | | | | | | |
Name | Plan Name | No. of Years Credited Service (#) (1) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) |
Joseph W. Gorder (2) | Pension Plan | 32.17 | 1,171,108 | — |
| Excess Pension Plan | 20.67 | 10,224,748 | — |
| SERP | 20.67 | 19,644,300 | — |
Jason W. Fraser | Pension Plan | 23.96 | 751,260 | — |
| Excess Pension Plan | 23.96 | 1,214,085 | — |
| SERP | 23.96 | 5,011,486 | — |
R. Lane Riggs | Pension Plan | 33.92 | 1,215,938 | — |
| Excess Pension Plan | 33.92 | 3,838,505 | — |
| SERP | 33.92 | 9,039,882 | — |
Gary K. Simmons | Pension Plan | 35.52 | 1,336,071 | — |
| Excess Pension Plan | 35.52 | 3,193,214 | — |
| SERP | 35.52 | 5,953,084 | — |
Cheryl L. Thomas | Pension Plan | 38.5 | 1,696,325 | — |
| Excess Pension Plan | 38.5 | 3,612,158 | — |
| SERP | 38.5 | 5,785,412 | — |
Footnotes to Pension Benefits table:
(1)The years of credited service for our NEOs include eight years of service (9.5 years for Mr. Fraser) in our Retirement Plans’ “Cash Balance Provision” starting on January 1, 2015 (Mr. Fraser’s participation in the Cash Balance Provision commenced July 1, 2013). The remainder of the NEO’s years of service is in the “Formula Provision” of our Retirement Plans. The Formula Provision and the Cash Balance Provision are described in the narrative disclosures that follow this table.
(2)The 32.17 years of service stated for Mr. Gorder for the Pension Plan represent the sum of his participation in (a) the Valero Pension Plan since 2002 (20.67 years) and (b) the qualified pension plan of UDS (11.5 years). In 2001, Mr. Gorder received a lump sum settlement relating to prior years of service. The Pension Plan amount stated above reflects the effect of offsetting Mr. Gorder’s accrued benefit under the Valero Pension Plan by the value of his lump sum settlement in 2001. In addition, Mr. Gorder has approximately three years of service in a pension plan sponsored by an entity unaffiliated with Valero or UDS that was spun-off from a predecessor of UDS. The 20.67 years of service stated for Mr. Gorder for the Excess Pension Plan and SERP represent his participation since the date of his commencement of employment with Valero.
The present values stated above were calculated using the same interest rates and mortality tables we use for our financial reporting. Present values at December 31, 2022 were determined using plan specific discount rates (5.25 percent for Pension Plan, 5.17 percent for Excess Pension Plan, 5.25 percent for SERP) and the plans’ earliest unreduced retirement age (i.e., age 62). The present values reflect postretirement mortality rates based on the Pri-2012 mortality table projected generationally using scale MP-2021. No decrements were included for pre-retirement termination, mortality, or disability. When applicable, lump sums were determined using the minimum present value segment rates prescribed by the IRS in Notice 2023-05 and the mortality table prescribed by the IRS in Notice 2022-22 for distributions in 2023.
Pension Plan. Under our Pension Plan, an eligible employee who is at least 55 years old may elect to retire prior to the normal retirement age of 65, provided the employee has completed at least five years of vesting service. Under the plan’s early retirement provisions, an employee may elect to commence a benefit upon retirement or delay payments to a later date. Pension payments
from the Formula Provision (defined below) that begin after age 55 and before age 62 are reduced by four percent for each full year between the benefit start date and the employee’s 62nd birthday. The four percent reduction is prorated for a partial year. The formula used to calculate the benefit and the optional forms of payment are otherwise the same as for normal retirement. As of December 31, 2022, Mr. Riggs, Mr. Simmons, and Ms. Thomas were eligible for early retirement benefits, and Mr. Gorder was eligible for normal retirement.
For employees hired prior to January 1, 2010, the Pension Plan (supplemented, as necessary, by the Excess Pension Plan) provides a monthly pension at normal retirement equal to 1.6 percent of the participant’s average monthly compensation (based upon earnings during the three consecutive calendar years during the last 10 years of the participant’s credited service affording the highest such average) times the participant’s years of credited service. This is known as the “Formula Provision.” Each of our NEOs was hired prior to January 1, 2010.
For employees hired on or after January 1, 2010, the Pension Plan (supplemented, as necessary, by the Excess Pension Plan) is a cash balance benefit that provides a monthly pension at normal retirement based on annual employer contributions that are based on years of service, age, eligible compensation, and pay credits. This is known as the “Cash Balance Provision.” After a one-year waiting period, pay credits are retroactive to the participant’s date of hire and are based on years of service, age, and eligible compensation.
| | | | | | | | |
points (age and vesting service) | | annual pay credit percentage |
under 35 | | 6.0% of eligible pay |
35–49 | | 7.5% of eligible pay |
50–64 | | 9.0% of eligible pay |
65–79 | | 10.5% of eligible pay |
80+ | | 12.0% of eligible pay |
In addition to pay credits, participants will also be eligible for monthly interest credits based on the 10-Year U.S. treasury note rate with a minimum of three percent.
In 2013, we began to implement changes to certain of our U.S. qualified pension plans that cover the majority of our U.S. employees. Benefits under our primary pension plan changed from a final average pay formula (the Formula Provision) to the Cash Balance Provision with staged effective dates from July 1, 2013 through January 1, 2015, depending on the age and service of the affected employees. All final average pay benefits under the Formula Provision were frozen as of December 31, 2014. On July 1, 2013 or January 1, 2015 (as applicable), participants formerly under the Formula Provision in the Pension Plan transitioned to the Cash Balance Provision, with all future Pension Plan benefits to be earned under the new cash balance provision.
Excess Pension Plan. Our Excess Pension Plan provides benefits to those employees whose pension benefits under our defined benefit Pension Plan are subject to limitations under the Internal Revenue Code (the “Code”), or are otherwise indirectly constrained by the Code from realizing the maximum benefit available to them under the terms of Pension Plan. The Excess Pension Plan is designed as an “excess benefit plan” as defined under Section 3(36) of ERISA, for those benefits provided in excess of Section 415 of the Code. The Excess Pension Plan is not intended to be either a qualified plan under the provisions of Section 401(a) of the Code, or a funded plan subject to the funding requirements of ERISA.
Subject to other terms of the Excess Pension Plan, the benefit payable under the plan in the Formula Provision is generally an amount equal to “x” minus “y”, where “x” is equal to 1.6 percent of a participant’s final average monthly earnings (as determined under the Excess Pension Plan) multiplied by the participant’s number of years of credited service, and “y” is equal to the participant’s benefit that is payable under the Pension Plan. The benefit payable under the Excess Pension Plan in the Cash Balance Provision is generally an amount equal to “x” minus “y”, where “x” is equal to the accumulated account balance that the participant would be entitled to receive without regard to the limitations, and “y” is equal to the participant’s accumulated account balance that is payable under the Pension Plan. The Excess Pension Plan benefit is made in a lump sum (minus applicable withholding for taxes). A participant’s benefits under the Excess Pension Plan will vest concurrently with the vesting of the participant’s benefits under the Pension Plan.
SERP. An officer will become a participant in the SERP as of the date he or she is selected and named in the minutes of the Human Resources and Compensation Committee meeting for inclusion as a SERP participant. The SERP provides a benefit equal to 1.6 percent of eligible pay plus 0.35 percent times the product of the participant’s years of credited service (maximum 35 years) multiplied by the excess of the participant’s average monthly compensation over the lesser of 1.25 times the monthly average (without indexing) of the social security wage bases for the 35-year period ending with the year the participant attains social security retirement age, or the monthly average of the social security wage base in effect for the year that the participant retires. The participant’s most highly compensated consecutive 36 months of service are considered. The SERP benefit is calculated using
all years of service (a participant’s service did not freeze when the Formula Benefit described above was frozen.) The SERP benefit is reduced by the amount of the participant’s qualified pension benefit. The SERP benefit is paid in a lump sum (minus applicable withholding for taxes). A participant in the SERP will vest upon death, disability, or retirement (age 55 with at least five years of service at separation).
Compensation for purposes of the Pension Plan, Excess Pension Plan, and SERP includes salary and bonus. No extra years of credited service have been granted to any of our NEOs.
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Nonqualified Deferred Compensation |
The following table describes contributions by Valero and each named executive officer under our nonqualified defined contribution and other deferred compensation plans during 2022. The table also presents each named executive officer’s earnings, withdrawals (if any), and year-end balances in these plans.
| | | | | | | | | | | | | | | | | | | | |
| | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings (loss) in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) |
Joseph W. Gorder | Excess Thrift Plan | — | 104,650 | — | — | 2,415,069 |
Jason W. Fraser | Excess Thrift Plan | — | 39,900 | — | — | 246,186 |
R. Lane Riggs | Excess Thrift Plan | — | 49,700 | — | — | 732,228 |
| UDS Nonqualified 401(k) Plan (2) | — | — | (7,482) | — | 45,021 |
Gary K. Simmons | Excess Thrift Plan | — | 29,400 | — | — | 540,038 |
| UDS Nonqualified 401(k) Plan (2) | — | — | (44,201) | — | 136,202 |
Cheryl L. Thomas | Excess Thrift Plan | — | 26,950 | — | — | 440,120 |
| UDS Nonqualified 401(k) Plan (2) | — | — | (22,078) | — | 146,205 |
Footnotes to Nonqualified Deferred Compensation table:
(1)All of the amounts included in this column are also included within the amounts reported as “All Other Compensation” for 2022 in the Summary Compensation Table.
(2)Valero assumed the UDS Nonqualified 401(k) Plan when Valero acquired UDS in 2001. This plan is frozen.
(3)There were no earnings for our NEOs in 2022 in our nonqualified defined contribution and other deferred compensation plans that were preferential or above market under SEC rules and therefore no such amounts are included in the Summary Compensation Table. The aggregate UDS Nonqualified 401(k) Plan balances as of December 31, 2022, compared to December 31, 2021, declined by $7,482 for Mr. Riggs, $44,201 for Mr. Simmons, and $22,078 for Ms. Thomas.
(4)Amounts reported in this column for each named executive officer include registrant contributions previously reported in our Summary Compensation Table in previous years when earned if that officer’s compensation was required to be disclosed in a previous year.
Our Deferred Compensation Plan and Excess Thrift Plan are described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Post-Employment Benefits.” The following terms also apply to these plans.
Under the DC Plan, participants may elect when and over what period of time their deferrals will be distributed based on plan provisions. Participants may elect to have their accounts distributed in a lump sum on a specified date, at least three years after the year of the deferral election. Participants may, at the time of their deferral elections, choose to have their accounts distributed as soon as reasonably practical following retirement or other termination, or on the first day of January following the date of retirement or termination. Participants may also elect to have their accounts distributed in one lump-sum payment or in two- to 15-year installments upon retirement or in one lump-sum payment or five-year installments upon other termination. Upon a participant’s death, the participant’s beneficiary will receive the participant’s DC Plan balance in one lump-sum payment within 90 days following
the participant’s death. Upon a change of control of Valero, all DC Plan accounts are immediately vested in full, and distributions are thereafter made in accordance with the plan’s normal distribution provisions. None of our named executive officers participated in the DC Plan in 2022.
The Excess Thrift Plan provides benefits to participants of our qualified thrift plan whose accounts would not otherwise be credited with company matching contributions due to certain IRS limits on contributions and/or compensation. The Excess Thrift Plan is neither a qualified plan for federal tax purposes nor a funded plan subject to ERISA. The Excess Thrift Plan is: (i) an “excess benefit plan” as defined under Section 3(36) of ERISA; and (ii) a plan that is unfunded and maintained primarily for the purpose of providing benefits for a select group of management or highly compensated employees.
The UDS Nonqualified 401(k) Plan offered benefits and had terms and conditions much like those of the Valero Excess Thrift Plan. The UDS plan has been frozen to any new participation since March 31, 2002.
| | | | | | | | | | | | | | |
Potential Payments Upon Termination or Change of Control |
| | | | | | | | | | | | | | |
CHANGE OF CONTROL SEVERANCE AGREEMENTS |
Our executive officers have change of control severance agreements with Valero. The agreements seek to assure the continued availability of the officers in the event of a change of control of Valero. When a change of control occurs, the agreements become operative for a fixed three-year period. The agreements provide that the officers’ terms of employment will not be changed materially during the three years following a change of control. Each agreement subjects the officer to certain obligations of confidentiality, both during the term and after termination, for information relating to Valero that the officer acquired during his or her employment. The footnotes to the tables that accompany these disclosures further describe the terms and conditions of the agreements.
When determining the amounts and benefits payable under the agreements, the Human Resources and Compensation Committee and Valero sought to secure compensation that is competitive in our market to recruit and retain executive talent. Consideration was given to the principal economic terms found in change of control severance agreements of other publicly traded companies.
Our Board has adopted a policy regarding the vesting of performance shares in a change-of-control context. The policy provides that performance shares will not vest automatically upon the date of a change of control of Valero. Instead, the performance share agreements contain a double trigger feature, so that accelerated vesting of performance shares will not occur until the officer’s employment is terminated following a change of control. At that time, any unvested performance shares held by the officer will vest on a partial, pro rata basis, commensurate with the officer’s months of service during the applicable performance period.
Our change of control severance agreements do not contain tax gross-up benefits. In 2013, all agreements in effect at that time were amended to eliminate the gross-up benefit that formerly entitled the officers to receive a payment to make them whole for any excise tax on excess parachute payments imposed under Section 4999 of the Internal Revenue Code. Valero has adopted a policy that this benefit may not be included in any future change of control agreements.
For purposes of the agreements, “change of control” means any of the following (subject to additional particulars as stated in the agreements):
•acquisition by an individual, entity, or group of beneficial ownership of 20 percent or more of our outstanding Common Stock;
•ouster from the Board of a majority of the incumbent directors;
•consummation of a business combination (e.g., merger, share exchange).
In the agreements, “cause” is defined to mean, generally, the willful and continued failure of the officer to perform substantially the officer’s duties or illegal or gross misconduct by the officer that is materially and demonstrably injurious to Valero. “Good reason” is defined to mean, generally:
•a diminution in the executive officer’s position, authority, duties and responsibilities;
•relocation of the executive (or increased travel requirements); or
•failure of Valero’s successor to assume and perform under the agreement.
The following tables disclose potential payments (calculated per SEC regulations) to our named executive officers in connection with a change of control of Valero. If an officer’s employment is terminated for “cause,” the officer will not receive any benefits or compensation other than accrued salary or vacation pay that was unpaid as of the date of termination; therefore, there is no presentation of termination for “cause” in the following tables. Values in the tables assume that a change of control occurred on December 31, 2022, and that the officer’s employment was terminated on that date.
Mr. Gorder has a grandfathered form of agreement that was entered into in 2007. The form of agreement for Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas (entered into in 2016 and thereafter) represents the current form of agreement approved by our Human Resources and Compensation Committee. The current form of agreement requires termination of employment following a change of control (double trigger) for accelerated vesting of stock options and restricted stock (the grandfathered agreement for Mr. Gorder permits accelerated vesting of stock options and restricted stock upon occurrence of the change of control). All forms of agreement for our NEOs require a double trigger for the acceleration of performance shares. Other differences in benefits payable under the grandfathered agreement and our current form of agreement are described in the footnotes to the following table.
| | | | | | | | | | | | | | |
Potential Payments Under Change of Control Severance Agreements |
A.Termination of Employment (i) by the Company other than
for “Cause” or (ii) by the Executive for “Good Reason” (1) ($)
| | | | | | | | | | | | | | | | | |
Component of Payment | Gorder | Fraser | Riggs | Simmons | Thomas |
Salary (2) | 5,400,000 | 1,750,000 | 2,030,000 | 1,450,000 | 1,380,000 |
Bonus (2) | 17,280,000 | 1,750,000 | 2,233,000 | 1,450,000 | 1,104,000 |
Pension, Excess Pension, and SERP | 7,819,090 | — | — | — | — |
Contributions under Defined Contribution Plans | 378,000 | — | — | — | — |
Health & Welfare Benefits (3) | 287,547 | 61,014 | 64,350 | 64,160 | 52,198 |
Outplacement Services | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 |
Accelerated Vesting of Restricted Stock (4) | 11,232,946 | 5,624,846 | 7,359,149 | 2,286,017 | 1,493,269 |
Accelerated Vesting of Performance Shares (5) | 5,148,106 | 1,588,795 | 2,080,123 | 1,050,908 | 697,857 |
B.Continued Employment Following Change of Control (6) ($)
| | | | | | | | | | | | | | | | | |
Component of Payment | Gorder | Fraser | Riggs | Simmons | Thomas |
Salary, Bonus, Pension, Excess Pension, SERP, Contributions under Defined Contribution Plans, Health & Welfare Benefits | (6) | (6) | (6) | (6) | (6) |
Accelerated Vesting of Restricted Stock (4) | 11,232,946 | — | — | — | — |
Footnotes for Potential Payments Under Change of Control Severance Agreements tables:
(1)If the officer’s employment is terminated by the company other than for “cause,” or if the officer terminates his or her employment for “good reason,” the officer is generally entitled to receive the following:
(a)a lump sum cash payment equal to the sum of:
(i)accrued and unpaid compensation through the date of termination, including a pro-rata annual bonus (for this table, we assumed that the officer’s bonus for the year of termination was paid at year-end);
(ii)two times (three times for Mr. Gorder due to his grandfathered form of agreement that was entered into in 2007) the sum of (A) the officer’s annual base salary plus (B) the officer’s eligible bonus amount;
(iii)for Mr. Gorder, the actuarial present value of the pension benefits (qualified and nonqualified) he would have received for an additional three years of service due to his grandfathered form of agreement that was entered into in 2007 (Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas do not participate in this element of compensation); and
(iv)for Mr. Gorder, the equivalent of three years of employer contributions under Valero’s tax-qualified and supplemental defined contribution plans due to his grandfathered form of agreement that was entered into in 2007 (Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas do not participate in this element of compensation);
(b)continued health and welfare benefits for two years (three years for Mr. Gorder due to his grandfathered form of agreement that was entered into in 2007); and
Footnotes for Potential Payments Under Change of Control Severance Agreements tables (con’t.):
(c)up to $25,000 of outplacement services.
If employment is terminated by reason of death or disability, the officer’s estate will be entitled to receive a lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a prorated bonus amount earned per the terms of the agreement. In the case of disability, the officer would be entitled to disability and related benefits at least as favorable as those provided by Valero under its programs during the 120 days prior to the officer’s termination of employment.
If the officer voluntarily terminates employment other than for “good reason,” he or she will be entitled to a lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a prorated bonus amount earned per the terms of the agreement. See also “Long-Term Incentive Awards,” “Post-Employment Benefits” and “Accounting and Tax Treatment” under Compensation Discussion and Analysis, and “Post-Employment Compensation,” “Nonqualified Deferred Compensation,” and “Outstanding Equity Awards at December 31, 2022.”
(2)We assumed each officer’s compensation at the time of the triggering event to be as stated below. The listed salary is the executive officer’s rate of pay as of December 31, 2022. The listed bonus amount for Mr. Gorder represents the highest bonus earned by him in any of fiscal years 2020, 2021, or 2022 (the three years prior to the assumed change of control). The listed bonus amounts for Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas represent the target bonus in effect prior to the assumed change of control.
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Name | Salary | Bonus |
Joseph W. Gorder | 1,800,000 | 5,760,000 |
Jason W. Fraser | 875,000 | 875,000 |
R. Lane Riggs | 1,015,000 | 1,116,500 |
Gary K. Simmons | 725,000 | 725,000 |
Cheryl L. Thomas | 690,000 | 552,000 |
(3)The executive is entitled to health and welfare benefits for two years (three years for Mr. Gorder) following the date of termination.
(4)For Mr. Gorder, upon a change of control of Valero, the vesting periods on outstanding stock options and shares of restricted stock are automatically accelerated to the date of the change of control. For Mr. Fraser, Mr. Riggs, Mr. Simmons, and Ms. Thomas, the vesting periods on outstanding stock options and shares of restricted stock are accelerated following a change of control only upon the executive’s termination of employment (double trigger) so long as the termination is (i) other than for cause, in the case of involuntary termination, or (ii) for “good reason,” in the case of voluntary termination.
There are no values presented in the foregoing tables for accelerated vesting of stock options because all of the stock options held by our NEOs are fully vested.
For shares of restricted stock, the amounts stated in the table represent the product of (a) the number of shares for which vesting is accelerated, and (b) $126.86 (the closing price of our Common Stock on the NYSE on December 30, 2022, which was the last NYSE trading day in 2022).
(5)Outstanding performance shares do not vest automatically upon a change of control of Valero. Instead, accelerated vesting of performance shares occurs when the executive’s employment with Valero is terminated following a change of control (double trigger). In that event, the unvested performance shares held by the officer will vest on a partial, pro rata basis on the date of the officer’s termination of employment. The amounts disclosed in the table assume that a change of control occurred December 31, 2022.
For outstanding performance shares awarded, the amount included in the table represents, where applicable, a pro rata payout of common shares based upon the officer’s months of service during any shortened performance period ending December 31, 2022 (pro rata shares times $126.86, the closing price of our Common Stock on the NYSE on December 30, 2022, which was the last NYSE trading day in 2022), assuming a payout at 100%.
(6)The agreements provide for a three-year term of employment following a change of control, and generally provide that the officer will continue to enjoy compensation and benefits per the terms in effect prior to the change of control. In addition, for Mr. Gorder, all outstanding stock options and shares of restricted stock will vest on the date of the change of control (see footnote (4) above).
This table summarizes compensation earned by our directors in 2022.
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| Fees Earned or Paid in Cash ($) | | | Stock Awards ($) (1) | Total ($) |
Fred M. Diaz | 130,000 | | | 200,076 | 330,076 |
H. Paulett Eberhart | 130,000 | | | 200,076 | 330,076 |
Marie A. Ffolkes | 32,500 | | | 133,402 | 165,902 |
Joseph W. Gorder (2) | — | | | — | — |
Kimberly S. Greene | 155,000 | | | 200,076 | 355,076 |
Deborah P. Majoras | 155,000 | | | 200,076 | 355,076 |
Eric D. Mullins | 130,000 | | | 200,076 | 330,076 |
Donald L. Nickles | 130,000 | | | 200,076 | 330,076 |
Philip J. Pfeiffer | 130,000 | | | 200,076 | 330,076 |
Robert A. Profusek | 165,000 | | | 200,076 | 365,076 |
Stephen M. Waters (retired at the 2022 annual meeting) | 65,000 | | | — | 65,000 |
Randall J. Weisenburger | 155,000 | | | 200,076 | 355,076 |
Rayford Wilkins, Jr. | 155,000 | | | 200,076 | 355,076 |
Footnotes to Director Compensation table:
(1)The amounts shown represent the grant date fair value of stock unit awards granted in 2022, calculated in compliance with FASB ASC Topic 718. In 2022, each non-employee director who was re-elected at our annual stockholders meeting held on April 28, 2022, received an equity grant in the form of stock units (described below) valued at $200,000 calculated pursuant to FASB ASC Topic 718. In addition, Ms. Ffolkes received a pro-rata grant of stock units upon her initial election to the Board on October 28, 2022. Additional information about the components of our stock-based compensation programs is set forth in Note 13 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. Valero did not grant stock options to any director in 2022.
The following table presents for each non-employee director the number of outstanding stock units as of December 31, 2022. There are no outstanding stock options (vested or unvested) held by any of our non-employee directors.
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Name | Outstanding Stock Units |
Fred M. Diaz | 1,944 |
H. Paulett Eberhart | 4,993 |
Marie A. Ffolkes | 1,047 |
Kimberly S. Greene | 4,993 |
Deborah P. Majoras | 4,993 |
Eric D. Mullins | 4,993 |
Donald L. Nickles | 4,993 |
Philip J. Pfeiffer | 4,993 |
Robert A. Profusek | 4,993 |
Stephen M. Waters | 3,049* |
Randall J. Weisenburger | 4,993 |
Rayford Wilkins, Jr. | 4,993 |
*These stock units vested at the 2022 annual meeting (when Mr. Waters retired), subject to a one-year holding period. |
(2)Mr. Gorder did not receive any compensation as a director of Valero in 2022. His compensation for service as an executive officer in 2022 is presented in this proxy statement in the compensation tables for our named executive officers. Directors who are employees of Valero do not receive compensation for serving as directors.
Our non-employee directors earn an annual cash retainer of $130,000. Valero pays an annual retainer in lieu of separate meeting fees. In addition to the retainer, in 2022 directors who chaired the Audit Committee, Human Resources and Compensation Committee, Nominating and Corporate Governance Committee, and Sustainability and Public Policy Committee earned an additional $25,000 cash payment for their service as chair, and Mr. Profusek earned an additional $35,000 cash payment for his service as Lead Director. Directors are reimbursed for expenses of meeting attendance, if any. No director received perquisites or personal benefits in 2022 having a total value of $10,000 or more.
In addition to annual cash payments, in 2022 each non-employee director who was re-elected on the date of our 2022 annual meeting of stockholders received an equity grant in the form of stock units (described below) valued at $200,000 (calculated pursuant to FASB ASC Topic 718). In addition, Ms. Ffolkes received a pro-rata grant of stock units upon her initial election to the Board on October 28, 2022. These grants are made in whole shares, with fractional share amounts rounded up, which in 2022 resulted in grants with a value slightly above the $200,000 level (as pro-rated in the case of Ms. Ffolkes). Grants of equity awards supplement the cash compensation paid to our non-employee directors and serve to increase our directors’ identification with the interests of our stockholders through ownership of Common Stock. Non-employee directors are expected to hold shares of Common Stock having a value equal to five times the annual cash retainer and have five years from the date of their initial election to the Board to meet that guideline.
Each stock unit represents the right to receive one share of Valero Common Stock, and is scheduled to vest (become nonforfeitable) in full on the date of Valero’s next annual meeting of stockholders for the election of directors (or one year from the grant date in the case of Ms. Ffolkes’s pro-rata grant upon her initial election to the Board). Directors may elect to defer receipt of the shares of Common Stock for an additional one year following the vesting date of the stock units, although we have historically not permitted such deferral with respect to a grant upon a director’s initial election to the Board. The stock unit award includes a dividend equivalent award, representing the right to receive, on the vesting date (or, if applicable, the deferral period expiration date) of the stock unit award, a payment in cash in an amount equal to the cumulative amount of dividends paid to holders of Common Stock during the period when the stock unit remained outstanding prior to vesting (or, if applicable, the deferral period expiration date), calculated as if each stock unit held by the director was an outstanding share of Common Stock. Effective on the vesting of a director’s stock units (or, if applicable, the deferral period expiration date), the director may elect to receive either 22% or 37% of the fair market value of the aggregate number of shares of Common Stock to be delivered on such date in cash, with the remainder paid in shares of Common Stock.
The Board previously approved a limitation on the amount of equity compensation that may be paid to our non-employee directors in any year. As provided in our 2020 OSIP, a non-employee director may not receive in any calendar year awards payable in shares of Common Stock that have a fair market value greater than $500,000 in the aggregate. We selected $500,000 as the amount of the limitation because we believe that it places a meaningful limit on awards to our non-employee directors. While the amount of equity compensation awarded to our non-employee directors in recent years has been considerably lower than this limit, we believe that setting a limitation at this level provides us with a reasonable degree of flexibility to make adjustments that we may in the future deem appropriate or necessary for our compensation program to remain competitive in the market.
The Human Resources and Compensation Committee reviews our director compensation program at least annually with assistance and input from the compensation consultant. The annual review includes an assessment of the director compensation programs of our peers and of industry trends and developments. On September 14, 2022, following our Human Resources and Compensation Committee’s review of our non-employee director compensation program and the programs of our peers, our Human Resources and Compensation Committee determined that no changes were warranted at such time to our non-employee director compensation program. Non-employee directors are not paid extra for sitting on multiple Valero Board committees.
The median of the annual total compensation of all employees of Valero for 2022, except our CEO, was $209,277, and the annual total compensation of our CEO, Mr. Gorder, for 2022 was $20,145,093 (as disclosed in the Summary Compensation Table). As a result, our CEO’s 2022 annual total compensation was 96 times that of the median annual total compensation of all employees of Valero.
To determine the median of the annual total compensation of all employees, we first identified the median employee using the sum of base pay, additional earnings, annual bonus, and the grant date fair value of long-term incentive awards. Once the median employee was identified, we then determined the median employee’s annual total compensation as of December 31, 2022 using the Summary Compensation Table methodology set out in Item 402(c)(2)(x) of SEC Regulation S-K. In determining our pay ratio for 2022, we referred to the same employee who was identified as our median employee for 2021. We determined that there have been no changes to our employee population or employee compensation arrangements in 2022 that we believe would significantly impact our pay ratio disclosure and thus require identification of a new median employee.
The pay ratio is based on a December 31, 2021, employee total population (U.S. and non-U.S.) of approximately 9,813 employees. To determine the median employee for purposes of this disclosure, following the de minimis exemption under Item 402(u)(4)(ii) of Regulation S-K, we excluded all of our employees in Peru (117 employees) and all of our employees in Mexico (42 employees); the excluded employees represented less than 5% of our total employees. We did not exclude any employees under the data privacy exemption of Item 402(u)(4)(i).
Our pay ratio in any given year can increase or decrease due to a number of variables that make this calculation inherently subject to volatility and limit the ability to draw clear trends therefrom. These variables include, among others, the need to use a different median employee at least once every three years under SEC rules, changes in pension value, which can increase or decrease significantly from year-to-year due to the actuarial assumptions used in a given year (primarily the discount rates used to determine the present value of accumulated benefits) and may affect the median employee and the CEO differently depending on plan eligibility and age, and fluctuations in stock price or company performance which have a larger effect on CEO compensation.
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| Median Employee to CEO Pay Ratio | | | |
| Median Employee ($) | CEO ($) | | | |
Salary | 152,039 | 1,800,000 | | | |
Stock Awards | — | 12,363,244 | | | |
Non-Equity Incentive Plan Compensation | 18,245 | 5,760,000 | | | |
Change in Pension Value and Nonqualified Deferred Compensation Earnings (1) | — | — | | | |
All Other Compensation | 38,993 | 221,849 | | | |
Total Compensation | 209,277 | 20,145,093 | | | |
Median Employee to CEO Pay Ratio | 1:96 | | | | |
(1) This column represents the sum of the change in pension value and nonqualified deferred compensation earnings, as applicable. Due to increases in interest rates during 2022, the change in pension value and nonqualified deferred compensation earnings for Mr. Gorder and our median-employee were each negative: $(4,238,447) for Mr. Gorder, and $(14,493) for the median employee.
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| SEC PAY VERSUS PERFORMANCE | |
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In accordance with rules adopted by the SEC in 2022 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing the following disclosure regarding executive compensation for Valero’s principal executive officer (“PEO”) and Non-PEO NEOs and company performance for the fiscal years listed below. These SEC rules require new disclosures and calculations with respect to executive compensation metrics (such as “compensation actually paid”) and company performance measures that are separate and different from the disclosures and calculations required by the SEC in other areas of this proxy statement, including the Summary Compensation Table and the “Compensation Discussion and Analysis” section above. The Human Resources and Compensation Committee did not consider the pay versus performance disclosure or calculations reflected below in making its compensation decisions for any of the years shown.
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| | | | | Value of Initial Fixed $100 Investment Based On:(4) | | |
Year | Summary Compensation Table Total for Joseph W. Gorder(1) ($) | Compensation Actually Paid to Joseph W. Gorder(1,2,3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(1) ($) | Average Compensation Actually Paid to Non-PEO NEOs(1,2,3) ($) | TSR ($) | Peer Group TSR ($) | Net Income (loss) ($MM)(5) | Adjusted EPS (loss)(5) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) |
2022 | 20,145,093 | 35,823,343 | 5,814,701 | 10,262,307 | 158.16 | 174.61 | 11,528 | 29.16 |
2021 | 22,691,886 | 26,024,576 | 8,393,358 | 7,384,101 | 90.37 | 99.85 | 930 | 2.81 |
2020 | 19,930,640 | 10,111,711 | 6,047,117 | 3,507,113 | 64.4 | 61.45 | (1,421) | (3.12) |
Footnotes to SEC Pay vs. Performance table:
(1)Joseph W. Gorder was our PEO for each year presented. The individuals comprising the Non-PEO NEOs for each year presented are listed below.
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2020 | 2021 | 2022 |
Jason W. Fraser | Jason W. Fraser | Jason W. Fraser |
R. Lane Riggs | R. Lane Riggs | R. Lane Riggs |
Gary K. Simmons | Gary K. Simmons | Gary K. Simmons |
Cheryl L. Thomas | Cheryl L. Thomas | Cheryl L. Thomas |
Donna M. Titzman | | |
(2)The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the PEO or other NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments in accordance with Item 402(v) of Regulation S-K as described in footnote 3 below.
(3)Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718 and Item 402(v) of Regulation S-K. Amounts in the Exclusion of Stock Awards column are the totals from the Stock Awards column set forth in the Summary Compensation Table. Amounts in the Exclusion of Change in Pension Value column reflect the amounts attributable to the Change in Pension Value reported in the Summary Compensation Table. Amounts in the Inclusion of Pension Service Cost are based on the service cost for services rendered during the listed year.
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Year | Summary Compensation Table Total for Joseph W. Gorder ($) | Exclusion of Change in Pension Value for Joseph W. Gorder ($) | Exclusion of Stock Awards for Joseph W. Gorder ($) | Inclusion of Pension Service Cost for Joseph W. Gorder ($) | Inclusion of Equity Values for Joseph W. Gorder ($) | Compensation Actually Paid to Joseph W. Gorder ($) |
2022 | 20,145,093 | — | (12,363,244) | 2,036,000 | 26,005,494 | 35,823,343 |
2021 | 22,691,886 | (2,030,418) | (13,360,052) | 2,118,000 | 16,605,160 | 26,024,576 |
2020 | 19,930,640 | (5,896,732) | (8,985,826) | 1,676,000 | 3,387,629 | 10,111,711 |
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SEC PAY VERSUS PERFORMANCE |
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Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Exclusion of Change in Pension Value for Non-PEO NEOs ($) | Average Exclusion of Stock Awards for Non-PEO NEOs ($) | Average Inclusion of Pension Service Cost for Non-PEO NEOs ($) | Average Inclusion of Equity Values for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) |
2022 | 5,814,701 | — | (3,235,371) | 503,500 | 7,179,477 | 10,262,307 |
2021 | 8,393,358 | (2,372,413) | (3,684,054) | 491,750 | 4,555,460 | 7,384,101 |
2020 | 6,047,117 | (1,304,203) | (2,336,728) | 458,800 | 642,127 | 3,507,113 |
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
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Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Joseph W. Gorder ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Joseph W. Gorder ($) | Vesting-Date Fair Value of Equity Awards Granted/Vested During Year for Joseph W. Gorder ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Joseph W. Gorder ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Joseph W. Gorder ($) | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Joseph W. Gorder ($) | Total - Inclusion of Equity Values for Joseph W. Gorder ($) |
2022 | 17,787,513 | 4,003,713 | 2,181,795 | 1,657,391 | — | 375,082 | 26,005,494 |
2021 | 10,553,989 | 2,098,667 | 2,617,719 | 941,140 | — | 393,645 | 16,605,160 |
2020 | 6,820,535 | (3,183,778) | 1,939,452 | (2,556,287) | — | 367,707 | 3,387,629 |
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Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs ($) | Average Vesting-Date Fair Value of Equity Awards Granted/Vested During Year Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs ($) | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | Average Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) |
2022 | 4,813,701 | 1,320,949 | 421,582 | 480,136 | — | 143,109 | 7,179,477 |
2021 | 3,177,355 | 495,897 | 469,416 | 259,934 | — | 152,858 | 4,555,460 |
2020 | 1,493,115 | (500,958) | 419,597 | (622,691) | (256,077) | 109,141 | 642,127 |
(4)The Peer Group TSR set forth in this table utilizes a custom group of peer companies, which we also utilize in the stock performance graph required by Item 201(e) of SEC Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in Valero and in the custom group of peer companies used in our performance graph, respectively. Historical stock performance is not necessarily indicative of future stock performance. Our selected peer group comprises the following ten members: ConocoPhillips; CVR Energy, Inc.; Delek US Holdings, Inc.; the Energy Select Sector SPDR Fund; EOG Resources, Inc.; HF Sinclair Corporation; Marathon Petroleum Corporation; Occidental Petroleum Corporation; PBF Energy Inc.; and Phillips 66. The returns of each component issuer of the group have been weighted according to their stock market capitalization at the beginning of each period. The Energy Select Sector SPDR Fund (XLE) serves as a proxy for stock price performance of the energy sector and includes energy companies with which we compete for capital. We believe that our peer group represents a group of companies for making head-to-head performance comparisons in a competitive operating environment that is primarily characterized by U.S.-based companies that have business models predominantly consisting of downstream refining operations, together with similarly sized energy companies that share operating similarities to us, and that are in adjacent segments of the oil and gas industry.
(5)Net income represents net income attributable to Valero stockholders. We determined Adjusted EPS to be the most important financial performance measure used to link company performance to Compensation Actually Paid to our PEO and Non-PEO NEOs in 2022. This performance measure may not have been the most important financial performance measure for years 2021 and 2020 and we may determine a different financial performance measure to be the most important financial performance measure in future years. Adjusted EPS is a non-GAAP financial measure. See “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Bonus” elsewhere in this proxy statement for adjustments and a description of how Adjusted EPS is calculated from our audited financial statements. Adjustments for 2021 and 2020 amounts and a description of how such amounts are calculated from our audited financial statements can be found in the “Compensation Discussion and Analysis—Elements of Executive Compensation—Annual Incentive Bonus” sections of our proxy statements filed with the SEC on March 17, 2022, and March 18, 2021, respectively.
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SEC PAY VERSUS PERFORMANCE |
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Description of Relationship Between PEO and Other NEO Compensation Actually Paid and Valero TSR |
The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs, and Valero’s cumulative TSR over the three most recently completed fiscal years.
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SEC PAY VERSUS PERFORMANCE |
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Description of Relationship Between PEO and Other NEO Compensation Actually Paid and Net Income |
The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs, and our Net Income during the three most recently completed fiscal years.
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Tabular List of Most Important Financial Performance Measures |
The following table presents the financial performance measures that Valero considers to have been the most important in linking Compensation Actually Paid to our PEO and other NEOs for 2022 to company performance. The measures in this table are not ranked.
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Financial Performance Measures |
Adjusted EPS |
Relative TSR |
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Description of Relationship Between PEO and Other NEO Compensation Actually Paid and Adjusted EPS |
The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs, and our Adjusted EPS during the three most recently completed fiscal years.
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SEC PAY VERSUS PERFORMANCE |
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Description of Relationship Between Company TSR and Peer Group TSR |
The following chart compares our cumulative TSR over the three most recently completed fiscal years to that of an index of peers (that we selected) over the same period.
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| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | |
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Our Board adopted a Related Party Transactions Policy to establish procedures for the notification, review, approval, ratification, and disclosure of related-party transactions. Under the policy, a related-party transaction is a transaction, arrangement, or relationship in which (i) Valero (including any of its subsidiaries) was, is or will be a participant, (ii) the amount involved exceeds $120,000, and (iii) any “related person” had, has or will have a direct or indirect material interest. Under the policy, a related person means, generally, any person who would be deemed to be a “related person” as defined in Item 404 of Regulation S-K. Under the policy, a related-party transaction must be submitted to the Board’s Nominating and Corporate Governance Committee for review and approval. The policy is available on our website at www.valero.com > Investors > ESG > Governance Documents > Governance Policies.
We also have a Conflicts of Interest Policy to address instances in which an employee’s or director’s private interests may conflict with the interests of Valero. The policy is published on our intranet website. We have a Conflicts of Interest Committee (composed of Valero employees) to help administer our Conflicts of Interest Policy and to determine whether any employee’s or director’s private interests may interfere with the interests of Valero. Conflicts of interest are also addressed in our Code of Business Conduct and Ethics. Any waiver of any provision of this code for executive officers or directors may be made only by the Board.
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Transactions with Related Persons |
One of our named executive officers is related to two persons employed by subsidiaries of Valero (such employees are each hereafter referred to as a “Related Person”).
Ms. Thomas, our Senior Vice President and Chief Technology Officer, has a daughter, Heather Sitka, who is employed by a subsidiary of Valero in the human resources department. Ms. Sitka’s total compensation for 2022 (consisting of base salary, annual bonus, a restricted stock award, Valero-provided dollars for the purchase of wellness benefits, company match to Thrift Plan account, and other customary benefits and compensation) was approximately $208,987.
Ms. Thomas also has a son, Christopher Thomas, who is employed by a subsidiary of Valero in the wholesale marketing department. Mr. Thomas’s total compensation for 2022 (consisting of base salary, annual bonus, Valero-provided dollars for the purchase of wellness benefits, company match to Thrift Plan account, and other customary benefits and compensation) was approximately $126,382.
Ms. Thomas (i) does not share the same household with either Related Person, (ii) did not participate in the hiring of either Related Person, (iii) did not and does not supervise either Related Person, and (iv) has not participated, and is not expected in the future to participate, in performance evaluations or compensation decisions regarding either Related Person. We believe that each Related Person’s compensation and benefits are commensurate with that person’s qualifications, experience, and responsibilities and are comparable to the compensation and benefits currently paid to other employees in such Related Person’s position at Valero with similar qualifications, experience, and responsibilities.
Pursuant to our Related Party Transactions Policy, the Nominating and Corporate Governance Committee has (i) reviewed all material information regarding each Related Person’s employment relationship with us, (ii) determined that each such employment relationship is not inconsistent with the best interests of Valero, and (iii) approved and ratified our prior and continued employment of each Related Person.
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| PROPOSAL NO. 2—Ratify appointment of KPMG LLP as independent auditor | |
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(ITEM 2 ON THE PROXY CARD) |
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☑ | The Board recommends that the stockholders vote “FOR” this proposal |
The Audit Committee determined on February 23, 2023, to engage KPMG LLP (“KPMG”) as Valero’s independent registered public accounting firm for the fiscal year ending December 31, 2023. KPMG has served as Valero’s independent registered public accounting firm since 2004.
The Audit Committee is directly responsible for the appointment, compensation determination, retention, and oversight of the independent auditor retained to audit Valero’s financial statements. The Audit Committee is responsible for the audit fee negotiations and fee approval associated with Valero’s retention of the independent auditing firm.
The Audit Committee annually reviews and evaluates the qualifications, performance, and independence of Valero’s independent auditing firm, and reviews and evaluates the lead partner of the independent auditor team. In conjunction with the mandated rotation of the audit firm’s lead engagement partner, the Audit Committee is involved in the selection of the audit firm’s new lead engagement partner. To monitor auditor independence, the Audit Committee periodically considers whether there should be a rotation of the independent auditing firm.
The members of the Audit Committee and the Board believe that the continued retention of KPMG to serve as Valero’s independent registered public accounting firm for the fiscal year ending December 31, 2023, is in the best interests of Valero and its stockholders. Accordingly, the Board requests stockholder approval of the following resolution:
“RESOLVED, that the appointment of the firm of KPMG LLP as Valero’s independent registered public accounting firm for the purpose of conducting an audit of the consolidated financial statements and the effectiveness of internal control over financial reporting of Valero and its subsidiaries for the fiscal year ending December 31, 2023, is hereby approved and ratified.”
KPMG Annual Meeting Attendance. Representatives of KPMG are expected to be present at the Annual Meeting to respond to appropriate questions raised at the Annual Meeting or make appropriate statements at the Annual Meeting.
Voting Standard. The affirmative vote of a majority of the voting power of the shares present in person or represented by proxy and entitled to vote is required for adoption of this proposal. If the appointment is not approved, the adverse vote will be considered as an indication to the Audit Committee that it should select another independent registered public accounting firm for the following year. Because of the difficulty and expense of making any substitution of public accountants so long after the beginning of the current year, it is contemplated that the appointment for 2023 will be permitted to stand unless the Audit Committee finds other good reason for making a change.
The following table presents fees for services provided to us by KPMG for the years shown ($ in millions).
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| 2022 | 2021 | |
Audit Fees (1) | 8.2 | 8.7 | |
Audit-Related Fees (2) | 0.4 | 0.5 | |
Tax Fees (3) | 0.3 | 0.6 | |
All Other Fees (4) | — | — | |
total | 8.9 | 9.8 | |
Notes:
(1)Represents fees for professional services rendered for the audit of the annual financial statements included in Valero’s annual reports on Form 10-K, review of Valero’s interim financial statements included in Valero’s Forms 10-Q, the audit of the effectiveness of Valero’s internal control over financial reporting, and services that are normally provided by the principal auditor (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the SEC).
(2)Represents fees for assurance and related services that are reasonably related to the performance of the audit or review of Valero’s financial statements and not reported under the caption for Audit Fees. The fees listed above are related primarily to the audit of Valero’s benefit plans and other statutory/regulatory audits.
(3)Represents fees for professional services rendered by KPMG for tax compliance and tax consulting services. For 2022 and 2021, the fees relate primarily to property tax consulting and compliance services.
(4)Category represents fees for professional services, if any, other than the services reported under the preceding captions.
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Audit Committee Pre-Approval Policy |
The Audit Committee adopted a pre-approval policy to address the pre-approval of certain services rendered to Valero by its independent auditor. The text of that policy appears in Exhibit 99.01 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2022.
All of the services rendered by KPMG to Valero for 2022 were pre-approved specifically by the Audit Committee or pursuant to our pre-approval policy. None of the services provided by KPMG were approved by the Audit Committee under the pre-approval waiver provisions of paragraph (c)(7)(i)(C) of Rule 2-01 of SEC Regulation S-X.
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| REPORT OF THE AUDIT COMMITTEE FOR FISCAL YEAR 2022 | |
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Management is responsible for Valero’s internal control over its financial reporting process. KPMG, Valero’s independent registered public accounting firm for the fiscal year ended December 31, 2022, is responsible for performing an independent audit of Valero’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), and an audit of the effectiveness of Valero’s internal control over financial reporting in accordance with the standards of the PCAOB, and to issue KPMG’s reports thereon. The Audit Committee monitors and oversees these processes. The Audit Committee approves the selection and appointment of Valero’s independent registered public accounting firm and recommends the ratification of its selection and appointment to our Board.
The Audit Committee has reviewed and discussed Valero’s audited financial statements with management and KPMG. The committee has discussed with KPMG the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The committee has received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with KPMG that firm’s independence.
Based on the foregoing review, discussions, and other matters the Audit Committee determined to be relevant and appropriate, the Audit Committee recommended to the Board that the audited financial statements of Valero be included in its Annual Report on Form 10-K for the year ended December 31, 2022, for filing with the SEC.
Audit Committee:
Randall J. Weisenburger, Chair
H. Paulett Eberhart
Eric D. Mullins
The material in this Report of the Audit Committee is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference in any of Valero’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively, whether made before or after the date of this proxy statement and irrespective of any general incorporation language therein.
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| PROPOSAL NO. 3—Advisory vote to approve compensation of named executive officers | |
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(ITEM 3 ON THE PROXY CARD) |
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☑ | The Board recommends that the stockholders vote “FOR” this proposal |
Our Board and our stockholders have determined to hold an advisory vote on executive compensation (“say-on-pay”), as required pursuant to Section 14A of the Exchange Act, every year. Accordingly, we are asking stockholders to vote to approve the 2022 compensation of our named executive officers as such compensation is disclosed pursuant to Item 402 of the SEC’s Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and other narrative compensation disclosures required by Item 402. This proxy statement contains all of these required disclosures.
We request the stockholders to approve the following resolution:
“RESOLVED, that the compensation paid to Valero’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.”
Proxies and Voting Standard. Proxies will be voted for approval of the proposal unless otherwise specified. Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. Because the vote on this proposal is advisory, it will not affect compensation already paid or awarded to any named executive officer and will not be binding on Valero, the Board, or the Human Resources and Compensation Committee. The Board and the Human Resources and Compensation Committee, however, will review the voting results and take into account the outcome in determining future annual compensation for the named executive officers.
2022 Robust Say-On-Pay Engagement and Response. For a discussion of our engagement efforts and the enhancements we made to our executive compensation program following the results of our 2022 say-on-pay vote, please see the “2022 Robust Say-On-Pay Engagement and Response” caption under the “Compensation Discussion and Analysis” section above.
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| PROPOSAL NO. 4—Advisory vote to recommend the frequency of stockholder advisory votes on compensation of named executive officers | |
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(ITEM 4 ON THE PROXY CARD) |
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☑ | The Board recommends that the stockholders vote for the stockholder advisory vote on executive compensation to occur “EVERY YEAR” |
The SEC requires companies, not less frequently than once every six calendar years, to provide for a separate stockholder advisory vote to determine whether the stockholder advisory vote on executive compensation (as described in Proposal No. 3 above, “say-on-pay”) should occur every year, every two years, or every three years. We last presented this proposal at our 2017 annual meeting of stockholders. We are therefore re-presenting this proposal at this year’s Annual Meeting to give stockholders the opportunity to express their preferred frequency for an advisory vote on executive compensation. We have held a stockholder advisory vote on executive compensation every year since 2011. We continue to believe that say-on-pay votes should be conducted every year so that our stockholders may express their views on our executive compensation program annually.
Therefore, the Board recommends that the stockholders vote for the stockholder advisory vote on executive compensation to occur “Every Year.”
When voting on this proposal, you may make your choice among every year, every two years, every three years, or abstain, by marking the box on your proxy card or that corresponds to your choice.
Proxies and Voting Standard. Any uninstructed proxy cards will be voted in accordance with the Board’s recommendation (i.e., for an “every-year” frequency) unless otherwise specified. You are not voting to approve or disapprove the Board’s recommendation, but you are being asked to recommend to the Board your preference from among the choices stated above on the frequency of stockholder advisory votes on executive compensation. Because the vote on this proposal is advisory in nature, it will not be binding on Valero, the Board or the Human Resources and Compensation Committee. The stockholders’ recommendation under Proposal No. 4 will be determined by the highest number of votes cast at the Annual Meeting for an alternative (i.e., every year, every two years, or every three years), regardless of whether any alternative receives the affirmative vote of a majority of the voting power of such shares. The Board and the Human Resources and Compensation Committee will review the voting results and take into account the outcome in determining the frequency of future advisory votes on executive compensation. We currently anticipate that the next stockholder advisory vote on executive compensation will occur at our 2024 annual meeting of stockholders.
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| PROPOSAL NO. 5—Stockholder proposal to set different GHG emissions reductions targets (Scopes 1, 2, and 3) | |
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(ITEM 5 ON THE PROXY CARD) |
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T | The Board recommends that the stockholders vote “AGAINST” this stockholder proposal |
We expect the following proposal to be presented by stockholders at the Annual Meeting. In accordance with SEC rules, we have reprinted the proposal and its supporting statement as it was submitted by Mercy Investment Services, Inc. (“Mercy”), the lead sponsor of the proposal. The address of and number of shares of Valero’s Common Stock held by the sponsors and known to us will be provided to any stockholder upon request. Mercy’s stockholder proposal dated November 9, 2022, indicates that it has continually held at least $2,000 of Valero’s Common Stock for more than three years. We assume no responsibility for the statements made by the sponsors in connection with the proposal. After review, our management and the Board have concluded that they do not support the proposal, and the Board recommends that you vote AGAINST the proposal for the reasons explained in the opposition statement below.
Proxies and Voting Standard. Proxies will be voted against the approval of the proposal unless otherwise specified. Approval of this proposal requires the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote.
Whereas
In 2018, the Intergovernmental Panel on Climate Change advised that net greenhouse gas (GHG) emissions must fall 45 percent by 2030 and reach net zero by 2050 to limit warming below 1.5 degrees Celsius and prevent the worst consequences of climate change.1
A 2021 International Energy Agency report concluded that limiting warming to 1.5 degrees Celsius would require no new internal combustion engine sales after 2035, nearly 90 percent of global electricity generation from renewable sources by 2050, and electrification of areas previously dominated by fossil fuels.2 Wood Mackenzie concludes that “survivors in this shrinking market for refined products are coastal, primarily [national oil companies]-owned integrated refinery/ petrochemical facilities located in industrial clusters with low-carbon operations…” .3
As policymakers, consumers and companies move to tackle climate issues with growing urgency, regulation of high-carbon products will significantly increase as demand decreases. These transition risks pose fundamental challenges to companies like Valero Energy (“Valero”), the world's largest independent petroleum refiner.
While Valero has adopted short-term GHG reduction targets, it does not provide a robust decarbonisation plan ensuring a resilient business model through the energy transition, exposing the Company to reputational, regulatory and transition risks. Valero’s climate action plan includes minimal absolute emissions reductions and an overreliance on unverified “displaced emissions” with no reduction target or actions associated with scope 3 emissions.
Valero is falling behind peers in managing risks and opportunities of the energy transition and curbing its GHG emissions. Phillips 66 and Marathon Petroleum have set targets for their scope 3 emissions and are investing in multiple low-carbon technologies and fuels. Integrated producers like Shell, bp, and Equinor have announced targets to reduce emissions and plans to align capital spending with lower emissions pathways.
Valero maintains that it leads the industry in producing low-carbon renewable fuels. Ramping up the scale, pace and rigor of its climate-related initiatives could unlock further opportunities for growth in new renewable fuels, help strengthen financial resilience, and avoid investments in assets that will lose value as the global economy transitions away from fossil fuels.
Resolved
Shareholders request Valero issue a report, at reasonable expense and excluding confidential information, within a year and updated annually thereafter, on its climate transition plan to align operations and value chain emissions with a well-below 2 degrees Celsius scenario, including short-, medium- and long-term reduction targets for Valero’s full GHG emissions (scopes 1, 2, and 3).
Supporting Statement
In developing a report and assessing targets, we recommend, at management's discretion:
•Developing a robust low-carbon transition plan, taking into consideration frameworks like Climate Action 100+ Net Zero Benchmark or Net Zero Standard for Oil and Gas4, showing evidence of implementation to meet Valero’s targets;
•Including a plan for capital expenditures necessary to implement the transition plan and meet targets; and
•Consulting industry best practice and third-party experts on target setting and carbon accounting methodologies.
1 https://www.ipcc.ch/sr15/chapter/spm/
2 https://www.iea.org/reports/net-zero-by-2050
3 https://www.woodmac.com/news/the-edge/what-different-scenarios-tell-us-about-the-future-of-oil-and-gas/
4 https://www.iigcc.org/resource/net-zero-standard-for-oil-and-gas-companies/
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Board Recommendation and Opposition Statement |
Mercy seeks GHG emissions targets and reductions that can only come from refinery closures.1
Our strategy, on the other hand, is to run the most resilient refining assets, grow our low-carbon fuels production, and meet our aggressive targets by leveraging resilience and our low-carbon fuels growth strategy.
Our stockholders rejected Mercy’s substantially similar proposal at our 2022 annual meeting.
Mercy seeks to recreate our current Scope 1 and 2 GHG targets. Mercy states that our targets include “minimal absolute emissions reductions” which is indicative of Mercy’s belief that shutting down refineries is the only way to meet the goals of the Paris Agreement. The first column in our waterfall chart below already shows our realistic absolute Scope 1 and 2 GHG emissions-reduction plans in line with our resilient business strategy.2 The rest of the waterfall shows how we plan to further address a lower-carbon future.
Mercy requests that we remove our industry leading low-carbon projects and isolate them from our GHG targets. Mercy states that our strategy is overly reliant on “unverified ‘displaced emissions’.” In reality, the lower-carbon footprint from our current low-carbon projects is robustly audited by multiple countries, states and third parties, and has received independent third-party limited assurance.3 Furthermore, the IPCC4 and IEA5 agree that net-zero 2050 ambitions can only be met with substantial carbon sequestration and low-carbon fuels.
Mercy unjustifiably states that we have no “actions associated with [S]cope 3 emissions” and demands a Scope 3 target. In 2022, we disclosed our 2021 Net Scope 3 Intensity, which shows that we outperformed peers6 on this metric.
•Despite the fact that the GHG Protocol contemplates Scope 3 intensity disclosures7, Mercy rigidly insists on absolute emissions disclosures in isolation.
•Mercy requests that we remove our industry-leading position in low-carbon projects and innovation and isolate them from our Net Scope 3 Intensity metric. Mercy again implies that only emissions reductions from refinery closures will be satisfactory.
•Valero has not issued a Scope 3 target, as requested by Mercy, because the methodology is riddled with duplication and other challenges, and we do not have a clear line of sight to the use of our products by third parties. We only make commitments if we have clear plans on how we will achieve them.
Mercy mistakenly states that we are “falling behind peers” and do “not provide a robust decarboni[z]ation plan.”
•To the contrary, we were a first mover into low-carbon fuels and today we are one of the world’s leading low-carbon innovators, as demonstrated by the following projects and updates achieved and/or announced over the last 12 months8:
◦Sustainable Aviation Fuel. In January of 2023, we announced the final investment decision on a large-scale sustainable aviation fuel project at our renewable diesel plant in Texas, which is expected to be completed in 2025.9
1 Our comments with respect to Mercy’s position in this opposition statement reflect not only the explicit language included within its proposal, but also our beliefs based on engagement with Mercy with respect to its proposal.
2 Our 2022 TCFD Report contains additional information on the resilience of our business strategy.
3 Independent verification and assurance statements with respect to certain GHG emissions disclosures, including our global refinery Scope 1 and 2; Net Scope 3 Intensity; low-carbon fuels GHG inventory and 2035 GHG Emissions Target evaluation are published on our website at www.valero.com > Investors > ESG > Other Reports.
4 IPCC, 2022: Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926
5 IEA (2022), World Energy Outlook 2022, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2022, License: CC BY 4.0 (report); CC BY NC SA 4.0 (Annex A)
6 The notes at the end of our 2022 TCFD Report and 2022 ESG Report contain additional information on Net Scope 3 Intensity and peers.
7 GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, available at https://ghgprotocol.org/standards/scope-3-standard.
8 Our 2022 ESG Report contains additional information on our low-carbon fuels projects and innovation.
9 For more information on our sustainable aviation fuel project, please see the press release we issued on January 31, 2023, which is available on our website at www.valero.com > Investors > News.
◦Expansion of Low-Carbon Fuels Production. In 2022, we expanded our annual total production capacity of renewable diesel to approximately 1.2 billion gallons and renewable naphtha to approximately 50 million gallons (used to produce renewable gasoline and renewable plastics).
◦Large-Scale Carbon Capture and Sequestration. We announced that this project with BlackRock and Navigator is on track to be completed in late 2024.
◦Tailpipe CO2 Onboard Capture System. In 2022, we disclosed our support of the development of a filtration membrane that could remove more than 90% of the CO2 emissions of an internal combustion engine vehicle.
◦2025 GHG Target Achieved. In 2022, our performance exceeded our 2025 GHG target - which is three years ahead of schedule.
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If you, as our stockholders, value our leading refining and low-carbon fuels growth strategy, and our company-wide approach to climate disclosures, then we ask you to vote AGAINST this proposal. |
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| PROPOSAL NO. 6—Stockholder proposal to oversee and issue an additional racial equity audit and report | |
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(ITEM 6 ON THE PROXY CARD) |
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T | The Board recommends that the stockholders vote “AGAINST” this stockholder proposal |
We expect the following proposal to be presented by stockholders at the Annual Meeting. In accordance with SEC rules, we have reprinted the proposal and its supporting statement as it was submitted by the Service Employees International Union Master Trust (the “SEIU”), the sponsor of the proposal. The SEIU is not a labor union that represents our employees. The address of and the number of shares of Valero’s Common Stock held by the SEIU and known to us will be provided to any stockholder upon request. The materials included with the SEIU’s stockholder proposal dated November 16, 2022 indicate that it has continually held at least $2,000 of Valero’s Common Stock for at least the past three years. We assume no responsibility for the statements made by the SEIU in connection with the proposal. After review, our management and the Board have concluded that they do not support the proposal, and the Board recommends that you vote AGAINST the proposal for the reasons explained in the opposition statement below.
Proxies and Voting Standard. Proxies will be voted against the approval of the proposal unless otherwise specified. Approval of this proposal requires the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote.
RESOLVED that shareholders of Valero Energy Corporation (“Valero”) urge the Board of Directors to oversee an independent third-party racial equity audit analyzing Valero’s impacts on nonwhite stakeholders and communities of color and Valero’s plans, if any, to mitigate those impacts. Input from civil rights organizations, experts on environmental racism, and employees should be considered in determining the specific matters to be analyzed. A report on the audit, prepared at reasonable cost and omitting confidential and proprietary information, should be publicly disclosed on Valero’s website.
SUPPORTING STATEMENT
High-profile police killings of black people have galvanized the movement for racial justice. That movement, and the disproportionate impacts of the pandemic, have focused public attention on systemic racism, environmental racism, racialized violence and inequities in employment, health care, and the criminal justice system.
Several aspects of Valero’s business and operations suggest that a racial equity audit would be useful. In 2020, the Office of Federal Contract Compliance Programs found that a Valero subsidiary had used selection processes with an adverse impact on nonwhite applicants.1
Valero’s Environmental Justice Policy Statement asserts that Valero “strives to operate as a good neighbor, and looks for opportunities to work with local officials and directly with fence line neighbors to improve the quality of life for neighbors and communities.”2 But Valero has come under fire for polluting communities of color. Residents have fought to limit a Texas refinery’s emissions of hydrogen cyanide, a neurotoxin, in Latinx neighborhoods.3 The neighborhood in which another Texas refinery is located, which is 90% African American, “ranks above the 95th percentile nationally for both the EPA’s air toxics cancer risk and respiratory hazard metrics.”4
Valero ranks as the 39th worst toxic air polluter in the U.S., and 64% of those affected are nonwhite.5 It ranks as the 62nd worst water polluter6 and the 24th worst greenhouse gas polluter.7 As You Sow’s Racial Justice Scorecard for S&P 500 companies placed Valero in the bottom 10, with negative scores on the environmental racism performance indicators, meaning that it harms communities of color more than benefits them.8
A racial equity audit could also examine whether Valero’s political activities have a negative racial impact. In 2018, Valero helped defeat Washington State’s carbon tax initiative, giving nearly $1 million to the No on 1631 campaign.9 In 2019, Valero and the
1 https://www.dol.gov/sites/dolgov/files/ofccp/foia/files/2020-03-25Valero-CA-SW-Redacted.pdf
2 https://s23.q4cdn.com/587626645/files/doc_downloads/2021/09/Environmental-Justice-Policy-
Statement.pdf
3 https://www.sierraclub.org/texas/blog/2020/08/houston-community-continues-fight-against-valero-for-polluting-air-hydrogen
4 https://www.greenpeace.org/usa/valero-energy-blocking-climate-solutions-taking-handouts/
5 https://peri.umass.edu/toxic-100-air-polluters-index-current
6 https://peri.umass.edu/toxic-100-water-polluters-index-current
7 https://peri.umass.edu/greenhouse-100-polluters-index-current
8 https://www.asyousow.org/press-releases/2021/8/11/environmental-racism-metrics-as-you-sow-racial-
justice-scorecard
9 https://www.vox.com/energy-and-environment/2018/10/26/18026074/koch-industries-bp-colorado-washington-
fracking-carbon-tax
American Fuel and Petrochemical Manufacturers (“AFPM”), to which Valero belongs,10 lobbied states to criminalize pipeline protests;11 AFPM also supports rolling back fuel efficiency standards.12 Reportedly, Valero contributed $192,000 during the 2020 election cycle to Members of Congress who objected to certifying the 2020 election results,13 an action some viewed as “a direct attack on the voting rights of people of color.”14
Finally, an independent audit would provide objectivity, assurance and specialized expertise beyond what would be possible with an internal analysis.
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Board Recommendation and Opposition Statement |
Valero Recently Published its 2023 Environmental Justice Audit Report and Commissioned a Racial Equity Assessment, and has Therefore Substantially Addressed this Proposal1
At a company like Valero, racial equity and environmental justice are inherently linked. We therefore assessed our opportunities regarding both of these by engaging Montrose Environmental Group, Inc., an independent third-party consultant with expertise in social/environmental justice and community assessments, to conduct an extensive independent environmental justice audit.
There is no single, prevailing standard for assessing a company’s commitment to racial equity, including environmental justice. However, proxy voting guidelines issued by the two most well-known proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis, are useful references. As such, we also engaged a third-party civil rights expert, who reviewed this environmental justice audit and assessed our commitment to racial equity following the guidelines of these proxy advisory firms.
The environmental justice audit and racial equity assessment, as applicable, concluded that Valero:
•has robust processes to address and/or mitigate racial inequality and discrimination internally;
•publicly discloses substantive workforce diversity and inclusion metrics and programs;
•has issued numerous public statements regarding its commitment to racial justice;
•is committed to environmental protection, community engagement and investment, which are aligned with the key pillars of environmental justice, and operates as a good neighbor with fenceline communities regardless of race, color, national origin, culture or income;
•is positively viewed by surveyed fenceline communities, including minority and underrepresented neighbors;
•is effective in addressing and/or mitigating against any litigation and community controversies; and
•uses political activities to promote the advancement of liquid fuels, including low-carbon fuels, which in turn enhance stockholder value and promote good corporate citizenship.
Our environmental justice audit also identified areas to further improve Valero’s programs on community outreach.
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Valero has already implemented this proposal’s request, and a second racial equity audit would be duplicative and unnecessary. We therefore ask that you vote AGAINST this proposal. |
10 https://esg.investorvalero.com/wp-content/uploads/2021/10/July-2020-June2021_Member_Organizations_Report_DRAFT_08272021.pdf
11 https://theintercept.com/2019/08/19/oil-lobby-pipeline-protests/
12 https://influencemap.org/influencer/American-Fuel-Petrochemical-Manufacturers-cacc951ea59addfcc713fbb359e2680c
13 https://www.cnn.com/interactive/2021/01/business/corporate-pac-suspensions/
14 See https://www.nytimes.com/2021/01/15/us/politics/lankford-apology-election-biden.html; https://www.marketwatch.com/story/business-leaders-call-for-action-on-trump-after-mob-siege-at-capitol-11609976655
1 This report and assessment are available on our website at www.valero.com > Investors > ESG > Reports and Presentations.
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| 2023 ANNUAL MEETING OF STOCKHOLDERS —IMPORTANT VOTING AND MEETING INFORMATION | |
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Our Board is soliciting proxies to be voted at our Annual Meeting to be held on May 9, 2023. The accompanying notice describes the time, place, and purposes of the Annual Meeting. Action may be taken at the Annual Meeting or on any date to which the meeting may be adjourned.
Holders of record of our Common Stock at the close of business on the Record Date (March 13, 2023) are entitled to vote on the matters presented at the Annual Meeting. Our proxy materials are first being sent or made available on or about March 22, 2023, to stockholders entitled to vote at the Annual Meeting.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS |
We are furnishing our proxy materials to our stockholders primarily through notice-and-access delivery pursuant to SEC rules. As a result, on March 22, 2023, we began mailing our Notice of Internet Availability of Proxy Materials (the “Notice”) to many holders of shares of our Common Stock as of the Record Date, rather than a full paper set of our proxy materials. Using the notice-and-access method helps us to expedite stockholder access to our proxy materials, reduces the costs of printing and mailing a full paper set of our proxy materials to all stockholders, and helps contribute to sustainable practices.
The Notice provides instructions on how stockholders can access our proxy materials over the Internet and sets forth instructions on how shares can be voted. As more fully described in the Notice, stockholders may choose to access our proxy materials at www.proxyvote.com or may request a paper set of our proxy materials. In addition, the Notice and the website referenced therein provide information regarding how stockholders may request to receive our proxy materials in paper form by mail or by electronic delivery on an ongoing basis. Your choice for ongoing delivery will remain in effect unless you change it. Stockholders who previously affirmatively requested ongoing electronic delivery will receive instructions via email regarding how to access these materials electronically. Stockholders who previously affirmatively requested ongoing delivery of a paper set of our proxy materials will receive a full paper set by mail. Unless you have affirmatively requested ongoing electronic delivery, you should monitor your mail for delivery of a Notice or full paper set of proxy materials. If you receive a full paper set by mail, these proxy materials also include the proxy card or voting instruction form for the Annual Meeting. You may receive more than one Notice, proxy card, voting instruction form, email with instructions, and/or control number. See the disclosures under the caption “Shares Registered Differently and Held in More Than One Account” below for more information.
A single Notice or single copy of annual reports, proxy statements, prospectuses, and other disclosure documents may be sent to two or more stockholders sharing the same address. See the disclosures under the caption “Householding” below for more information.
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PROXIES AND PROXY STATEMENT |
What is a proxy? A proxy is your legal designation of one or more persons to vote the shares you own. The persons you designate are each called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. By submitting your proxy (by voting electronically on the Internet, by telephone, or by signing and returning a proxy card or voting instruction form), you authorize the designated persons to represent you and vote your shares at the Annual Meeting in accordance with your instructions. Such designees may also vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments of the meeting.
What is a proxy statement? A proxy statement is a document that includes specified information that SEC rules require us to provide when we ask you to submit a proxy.
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RECORD DATE, SHARES OUTSTANDING, AND QUORUM |
Holders of record of shares of our Common Stock at the close of business on the Record Date (March 13, 2023) are entitled to vote on the matters presented at the Annual Meeting. On the Record Date, 367,840,146 shares of Common Stock were issued and outstanding, and entitled to one vote per share. Stockholders representing a majority of voting power, present in person or represented by proxy at the Annual Meeting, and entitled to vote will constitute a quorum.
This year’s Annual Meeting will be held exclusively online, with no option to attend in person.
meeting site: www.virtualshareholdermeeting.com/VLO2023
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2023 ANNUAL MEETING OF STOCKHOLDERS - IMPORTANT VOTING AND MEETING INFORMATION |
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If you plan to attend the virtual Annual Meeting, you will need to visit www.virtualshareholdermeeting.com/VLO2023 and use the 16-digit control number provided in the Notice, proxy card, voting instruction form, or email with instructions in order to log into the meeting. Depending on the number of accounts through which you hold your shares, and how such shares are held, it is possible that you may receive multiple Notices, sets of proxy materials, emails with instructions, and/or control numbers. See the disclosures under the caption “Shares Registered Differently and Held in More Than One Account” below for more information.
Your vote is important! We encourage you to log into the website and access the webcast early, beginning approximately 15 minutes before the Annual Meeting’s 11:00 a.m. (Central Time) start time. If you experience technical difficulties, you may contact the technical support telephone number posted on the meeting website.
Additional information regarding the rules and procedures for participating in and voting at the virtual Annual Meeting will be provided in the meeting rules of conduct, which stockholders can view during the meeting on the meeting website. At this time, we believe that the virtual meeting format most effectively facilitates stockholder participation, although we will continue to evaluate the most effective format based on changes in facts and circumstances.
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ASKING QUESTIONS AND PARTICIPATING IN THE VIRTUAL ANNUAL MEETING |
Stockholders who provide a valid 16-digit control number will be able to participate in the virtual Annual Meeting by asking questions and voting their shares as outlined below. We intend to offer the same participation opportunities to stockholders as would be provided at an in-person meeting.
Questions may be submitted during the meeting by logging into the virtual Annual Meeting website using a valid 16-digit control number, and following the instructions on the website.
Only stockholders with a valid control number will be allowed to ask questions. Questions pertinent to meeting matters will be answered during the meeting as time allows. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition and allow time for additional discussion topics. If we are unable to respond to a stockholder’s properly submitted question, we intend to post the question or its substance and our response on our Investor Relations website. Questions will be addressed in accordance with the meeting’s rules of conduct posted on the meeting’s website.
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STOCKHOLDERS OF RECORD VS. BENEFICIAL OWNERS OF SHARES HELD IN “STREET NAME” |
Stockholders of Record. You are the stockholder of record for any shares of Common Stock that you own directly in your name in an account with Valero’s stock transfer agent, Computershare Investor Services, LLC (“Computershare”). See the disclosures under the caption “Transfer Agent” below for more information on Computershare.
Beneficial Owners. You are a beneficial owner of shares held in “street name” if your shares of Common Stock are held in an account with a broker, bank, or other holder of record as custodian on your behalf. The broker, bank, or other holder of record is considered the stockholder of record of these shares. As the beneficial owner, you have the right to instruct the broker, bank, or other holder of record how to vote your shares. If your shares of Common Stock are held by a broker, bank, or other holder of record, the Notice, proxy materials, or email with instructions are being forwarded to you by or on behalf of the broker, bank, or other holder of record, which is required to vote such shares in accordance with your instructions.
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COMMON STOCK HELD BY CERTAIN VALERO BENEFIT PLANS |
Plan Participants’ Voting Rights. If you are a participant in (i) the Valero Energy Corporation Thrift Plan (the “Thrift Plan”), (ii) the Premcor Retirement Savings Plan (the “Premcor Plan”), or (iii) the Valero Energy Corporation U.K. Share Incentive Plan, the Valero Energy Inc. Savings Plan (Canadian Plan - DPSP-RRSP-NREG), the Valero Energy Corporation Equity Services Share Incentive Plan, or the Valero Ireland Share Participation (the “Other Plans” and, collectively with the Thrift Plan and the Premcor Plan, the “Plans” and each individually, a “Plan”), you are the beneficial owner of the shares of Common Stock that are allocated to your account in such Plans, and you have the right to instruct the voting of any such shares as of the Record Date. If you own shares of Valero Common Stock through a Plan, the Notice, proxy materials, or email with instructions are being forwarded to you by or on behalf of the applicable trustee or fiduciary for such Plan, which is required to vote your shares of Common Stock in accordance with your instructions.
Uninstructed Thrift Plan Shares. If you do not timely or properly vote the shares of Common Stock allocated to your Thrift Plan account as of the Record Date, the Valero Energy Corporation Benefit Plans Administrative Committee will instruct the trustee of the Thrift Plan with respect to the voting of such uninstructed shares in accordance with its established procedures, unless otherwise required by law.
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2023 ANNUAL MEETING OF STOCKHOLDERS - IMPORTANT VOTING AND MEETING INFORMATION |
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Uninstructed Premcor Plan and Other Plan Shares. If you do not timely or properly vote the shares of Common Stock allocated to your account in the Premcor Plan or any Other Plan as of the Record Date, those shares may be voted as permitted under the applicable Plan documentation and the laws governing such Plan.
Voting Deadline and Shares Represented. Shares held through a Plan should be voted by 11:59 p.m. Eastern Time on May 4, 2023, in order to be timely processed and counted. For participants in a Plan, the proxy card and control number with respect to such shares will represent (in addition to any shares held individually of record by the participant) the shares allocated to the participant’s account in any Plan as of the Record Date. For shares held through a Plan, the proxy card or proxy votes submitted by Internet or telephone using the control number with respect to such shares will, if timely submitted, constitute an instruction to the applicable trustee or fiduciary for such Plan on how to vote those shares, and will also vote by proxy any shares of Valero Common Stock registered in your name with Computershare.
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SHARES REGISTERED DIFFERENTLY AND HELD IN MORE THAN ONE ACCOUNT |
If you receive more than one Notice, proxy card, voting instruction form, or email with instructions, that means your shares of Valero Common Stock are registered differently, and are held in more than one account. For example, you may own some shares of Valero Common Stock directly in your name in an account with Computershare, as in the case of unvested restricted shares of Valero Common Stock. However, you may also be the beneficial owner of shares of Valero Common Stock held in street name, such as shares held in a brokerage account. Additionally, the shares of Valero Common Stock that you beneficially own may be held in multiple accounts that are in turn held with one, or potentially multiple, brokers, banks, or other holders of record.
Depending on the number of accounts through which you hold your shares, and how such shares are held, it is possible that you may receive multiple Notices, sets of proxy materials, emails with instructions, and/or control numbers. To ensure that all of your shares of Common Stock are voted, please vote at least once for each control number you receive. You can vote electronically by visiting www.proxyvote.com and following the instructions on that website, or through the other methods listed below under the caption “Voting By Proxy.”
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DIFFICULTY LOCATING OR OBTAINING ONE OR MORE CONTROL NUMBERS |
The control number for each applicable account through which you hold shares of Valero Common Stock is 16 digits, in the xxxx xxxx xxxx xxxx format, and can be found on the respective Notice, proxy card, voting instruction form, or email with instructions with respect to such account and shares. As discussed above under the caption “Shares Registered Differently and Held in More Than One Account,” you may have more than one control number depending on the number of accounts through which you hold your shares, and how such shares are held.
Stockholders of Record and Plan Participants. Beginning approximately four weeks prior to the Annual Meeting, and through the close of the Annual Meeting, if you need assistance in locating a 16-digit control number for shares for which you are a stockholder of record, or for shares held through a Plan, please call Broadridge Financial Solutions, Inc. at 844-983-0876 (U.S. toll-free) or 303-562-9303 (international toll-free) for assistance.
Beneficial Owners. If you are a beneficial owner of shares held in street name, other than those beneficially owned through a Plan, you will need to contact the stockholder of record (e.g., your broker, bank, or other holder of record) for assistance with your 16-digit control number for any shares you hold in street name.
For more information on stockholders of record vs. beneficial owners, see the disclosures above under the caption “Stockholders of Record vs. Beneficial Owners of Shares Held in ‘Street Name’.”
We encourage you to vote your proxy early by Internet, telephone, or mail prior to the virtual Annual Meeting, even if you plan to attend the virtual Annual Meeting, in order to ensure that all of your shares are properly and timely voted.
To vote your shares, please follow the instructions in the Notice, proxy card, voting instruction form, or email with instructions. If you are a beneficial owner or a participant in any Plan, please carefully read the materials forwarded to you by or on behalf of the applicable Plan trustee or fiduciary (in the case of Plan participants), or your broker, bank, or other holder of record (in the case of other beneficial owners).
Stockholders can vote by proxy in three ways:
•By Internet – You can vote via the Internet by following the instructions in the Notice, proxy card, voting instruction form, or email with instructions, or by visiting www.proxyvote.com and following the instructions on that website.
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2023 ANNUAL MEETING OF STOCKHOLDERS - IMPORTANT VOTING AND MEETING INFORMATION |
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•By Telephone – You can vote by telephone by following the instructions in the Notice, proxy card, voting instruction form, or email with instructions, or by calling (800) 690-6903 (toll-free) and following the instructions.
•By Mail – You can vote by mail by requesting (which includes any previous ongoing election to receive paper proxy materials) a full set of proxy materials be sent to your home address. Upon receipt of the materials, you may complete the enclosed proxy card or voting instruction form and return it per the instructions on or included with the proxy card or voting instruction form.
If you vote by proxy, your shares will be voted at the Annual Meeting as you direct. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as the Board recommends. See the disclosures in this section under the captions “Common Stock Held by Certain Valero Benefit Plans” and “Broker Non-Votes” for information on how uninstructed beneficially owned shares may be voted.
If you are a participant in any Plan, your proxy votes must be received by no later than 11:59 p.m. Eastern Time on May 4, 2023, in order to be timely processed and counted with respect to your Plan shares. If you are a stockholder of record, the control number you receive for your shares of Valero Common Stock held through any Plan will also represent the shares of Valero Common Stock registered in your name with Computershare as of the Record Date. While you may vote such registered shares up until 11:59 p.m. Eastern Time on May 8, 2023, or by attending and voting at the virtual Annual Meeting, any votes received after 11:59 p.m. Eastern Time on May 4, 2023, will not be timely with respect to shares held through any Plan, and may only apply to the shares of Valero Common Stock registered in your name with Computershare.
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CHANGING AND REVOKING PROXIES |
Stockholders of record may change or revoke their proxy at any time before the virtual Annual Meeting by Internet, phone, or mail if received prior to 11:59 p.m. Eastern Time on May 8, 2023, or by attending the virtual Annual Meeting and following the voting instructions provided on the meeting website.
If, however, you are the beneficial owner of shares held in street name, you must follow the instructions provided by or on behalf of your broker, bank, or other holder of record for changing or revoking your proxy. If your shares are held in any Plan, please refer to the voting instructions and relevant details in the materials provided to you by or on behalf of the applicable trustee or fiduciary for such Plan. As discussed further under the caption “Voting by Proxy” above, if you are a stockholder of record, the proxy card and control number you receive for your shares of Common Stock held through any Plan will also represent the shares registered in your name with Computershare.
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VOTING DURING THE ANNUAL MEETING |
You must have the control number associated with each applicable account through which you hold shares of Valero Common Stock in order to vote the shares associated with such account. Depending on the number of accounts through which you hold your shares, and how such shares are held, it is possible that you may receive multiple Notices, sets of proxy materials, emails with instructions, and/or control numbers. See the disclosures under the caption “Shares Registered Differently and Held in More Than One Account” above for more information. Control numbers change each year and are not reusable from year to year. The control number for each applicable account through which you hold shares of Valero Common Stock is 16 digits, in the xxxx xxxx xxxx xxxx format, and can be found on the respective Notice, proxy card, voting instruction form, or email with instructions with respect to such account and shares. As discussed above, if you are a stockholder of record, the control number you receive for your shares held through any Plan will also represent the shares registered in your name with Computershare.
Stockholders of record and beneficial owners of shares held in street name (other than Plan participants with respect to shares held through any Plan) may vote shares held in a particular account during the virtual Annual Meeting by logging into the meeting website using the 16-digit control number associated with such shares and following the instructions provided on the website. If you are a beneficial owner or a participant in any Plan, please carefully read the materials forwarded to you by or on behalf of the applicable Plan trustee or fiduciary (in the case of Plan participants), or your broker, bank, or other holder of record (in the case of other beneficial owners). In order to vote all of your shares, you may need to log into the meeting website multiple times to vote the shares associated with each control number you receive. Participants in any Plan will not be able to vote the shares of Valero Common Stock held through such Plans at the Annual Meeting. However, stockholders of record will still be able to vote the shares registered in their name with Computershare at the Annual Meeting, even if the deadline for voting shares held through a Plan has passed. See the disclosures under the caption “Difficulty Locating or Obtaining One or More Control Numbers” above for more information.
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2023 ANNUAL MEETING OF STOCKHOLDERS - IMPORTANT VOTING AND MEETING INFORMATION |
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For Proposal No. 1, as required by Valero’s bylaws, each director is to be elected by a majority of votes cast with respect to that director’s election. Any director nominee who does not receive a majority of the votes cast is required to submit an irrevocable resignation to the Board, and the Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation or take other action. The Board will, within 90 days following certification of the election results, publicly disclose its decision regarding any such resignation and the rationale behind the decision.
Proposals Nos. 2, 3, 5, and 6 require approval by the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote. The stockholders’ recommendation under Proposal No. 4 will be determined by the highest number of votes cast at the Annual Meeting for an alternative (i.e., every year, every two years, or every three years), regardless of whether any alternative receives the affirmative vote of a majority of the voting power of such shares.
Shares voted to abstain are treated as “present” for purposes of determining a quorum. In the election of directors (Proposal No. 1), pursuant to our bylaws, shares voted to abstain are not deemed “votes cast,” and are accordingly disregarded. When approval for a proposal requires (i) the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy and entitled to vote (Proposals Nos. 2, 3, 5, and 6), or (ii) the affirmative vote of a majority of the voting power of the issued and outstanding Common Stock, then shares voted to “abstain” have the effect of a negative vote (a vote “against”). For Proposal No. 4, shares voted to “abstain” have no effect.
Brokers holding shares must vote according to the specific instructions they receive from the beneficial owners of the stock. If your broker does not receive specific voting instructions from you, in certain cases the broker may vote the shares in the broker’s discretion.
The NYSE does not allow brokers to vote on certain proposals without specific instructions from the beneficial owner. This results in a “broker non-vote” on the proposal. A broker non-vote (i) is treated as “present” for purposes of determining a quorum, (ii) has the effect of a negative vote when a majority of the voting power of the issued and outstanding shares is required for approval of a particular proposal, and (iii) has no effect when a majority of the voting power of the shares present in person or represented by proxy and entitled to vote or a plurality or majority of the votes cast is required for approval. For Proposal No. 4, a broker non-vote also has no effect.
Proposal No. 2 is deemed to be a routine matter under NYSE rules. A broker or other nominee generally may vote uninstructed shares on routine matters, and therefore no broker non-votes are expected to occur for Proposal No. 2. Proposals Nos. 1, 3, 4, 5, and 6 are considered non-routine matters under NYSE rules. Because a broker or other nominee cannot vote without instructions on non-routine matters, we expect an undetermined number of broker non-votes to occur on these proposals.
Valero pays the cost for soliciting proxies and conducting the Annual Meeting. In addition to solicitation by mail, proxies may be solicited by personal interview, telephone, email, electronically, and similar means by directors, officers, or employees of Valero, none of whom will be specially compensated for such activities. Valero also intends to request that brokers, banks, other holders of record, nominees, custodians, and fiduciaries, forward our proxy materials to beneficial owners, and will reimburse such brokers, banks, other holders of record, nominees, custodians, and fiduciaries for certain expenses incurred by them for such activities. Valero has also retained Innisfree M&A Incorporated, a proxy soliciting firm, to assist in the solicitation of proxies for a fee of $30,000, plus reimbursement of certain out-of-pocket expenses and variable amounts for any additional proxy solicitation services.
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Governance Documents and Codes of Ethics |
Our Code of Ethics for Senior Financial Officers applies to our principal executive officer, principal financial officer, and controller. The code charges these officers with responsibilities regarding honest and ethical conduct, the preparation and quality of the disclosures in documents and reports we file with the SEC, and compliance with applicable laws, rules, and regulations. We have also adopted a Code of Business Conduct and Ethics which applies to all of our employees and directors and covers many topics including, but not limited to, conflicts of interests, competition and fair dealing, discrimination and harassment, payments to government personnel, and employee complaint procedures.
We intend to disclose any future amendment to, or waiver from, either of these Codes by posting such information on our website.
We post the following documents on our website at www.valero.com > Investors > ESG > Governance Documents. A printed copy of these documents is available to any stockholder upon request. Requests for documents must be in writing and directed to Valero’s Secretary at the address indicated on the cover page of this proxy statement.
•Restated Certificate of Incorporation
•Bylaws
•Code of Business Conduct and Ethics
•Code of Ethics for Senior Financial Officers
•Corporate Governance Guidelines
•Conduct Guidelines for Business Partners
•Audit Committee Charter
•Human Resources and Compensation Committee Charter
•Nominating and Corporate Governance Committee Charter
•Sustainability and Public Policy Committee Charter
•Related Party Transactions Policy
•Compensation Consultant Disclosures Policy
•Policy on Executive Compensation in Restatement Situations
•Policy on Political Contributions, Lobbying and Trade Associations
•Policy on Vesting of Performance Shares
•Health, Safety and Environmental Policy Statement
•Human Rights Policy Statement
•Anti-Slavery and Human Trafficking Policy Statement
•Anti-Bribery and Anti-Corruption Policy
•Environmental Justice Policy Statement
•UK Tax Policy
•Stock Ownership and Retention Guidelines for Directors and Officers
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Stockholder Communications, Nominations, and Proposals |
Stockholders and other interested parties may communicate with the Board, its non-management directors, or the Lead Director by sending a written communication addressed to “Board of Directors,” “Non-Management Directors,” or “Lead Director” in care of Valero’s Corporate Secretary at the address indicated in the following paragraph with respect to stockholder proposals pursuant to Rule 14a-8 of the Exchange Act. The Corporate Secretary’s office will forward to the appropriate directors all correspondence, except for personal grievances, items unrelated to the functions of the Board, business solicitations, advertisements, and materials that are hostile, threatening, or profane.
In order to submit a stockholder proposal for inclusion in our proxy statement for the 2024 annual meeting of stockholders pursuant to Rule 14a-8 of the Exchange Act, our Corporate Secretary must receive your written proposal by November 23, 2023, at our principal executive office at the following address: Corporate Secretary, Valero Energy Corporation, One Valero Way, San Antonio,
Texas 78249. The proposal must comply with Rule 14a-8 of the Exchange Act, which lists the requirements for the inclusion of such stockholder proposals in company-sponsored proxy materials.
To present a stockholder proposal at the 2024 annual meeting of stockholders that is not the subject of a proposal pursuant to Rule 14a-8 of the Exchange Act, or to nominate a person for election to the Board, you must follow the procedures stated in Article I, Section 9 of our bylaws. These procedures include the requirement that your proposal must be delivered to Valero’s Corporate Secretary not later than the close of business on the 90th day or earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. If the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, your notice must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day we first publicly announce the date of the 2024 annual meeting of stockholders. In addition, stockholders who intend to solicit proxies in support of director nominees other than Valero’s nominees must also comply with the additional requirements of Rule 14a-19(b) of the Exchange Act by March 10, 2024.
An eligible stockholder, or eligible group of stockholders, that wants to nominate a candidate for election to the Board pursuant to the proxy access provisions of our bylaws must follow the procedures stated in Article I, Section 9A of our bylaws. These procedures include the requirement that your nomination must be delivered to Valero’s Corporate Secretary not later than the close of business on the 120th day or earlier than the close of business on the 150th day prior to the first anniversary of the preceding year’s annual meeting. If the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, your notice must be delivered not later than the 120th day prior to such annual meeting or, if later, the 10th day following the day we first publicly announce the date of the 2024 annual meeting of stockholders. Our bylaws are available on our website at www.valero.com > Investors > ESG > Governance Documents. Stockholders are urged to review all applicable rules and consult legal counsel before submitting a nomination or proposal to Valero.
If any matters not referred to in this proxy statement properly come before the Annual Meeting or any adjournments or postponements thereof, the enclosed proxies will be deemed to confer discretionary authority on the individuals named as proxies to vote the shares represented by proxy in accordance with their best judgments. The Board is not currently aware of any other matters that may be presented for action at the Annual Meeting.
Financial statements and related information for Valero, including audited financial statements for the fiscal year ended December 31, 2022, are contained in Valero’s Annual Report on Form 10-K. We have filed our Annual Report on Form 10-K with the SEC. You may review this report on the Internet as indicated in the Notice and through our website (www.valero.com > Investors > Financials > SEC Filings).
The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses, and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These “householding” rules, which we have adopted, are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If your shares are held by an intermediary broker, dealer, or bank in “street name,” your consent to householding may be sought, or may already have been sought, by or on behalf of the intermediary. If you prefer to receive your own set of proxy materials now or in future years, you may request a duplicate set by (i) visiting www.proxyvote.com, (ii) calling 800-579-1639, or (iii) emailing sendmaterial@proxyvote.com (if emailing, include your control number), or you may contact your broker.
If you and another stockholder of record with whom you share an address are receiving multiple copies of our proxy materials, you can request to participate in householding and receive a single copy of our proxy materials in the future by calling Broadridge Financial Solutions, Inc. at 866-540-7095 or by writing to Broadridge Financial Solutions, Inc., Attn: Householding Dept., 51 Mercedes Way, Edgewood, NY 11717. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing stockholders to consent to such elimination, or through implied consent if a stockholder does not request continuation of duplicate mailings. Because not all brokers and nominees may offer stockholders the opportunity to request eliminating duplicate mailings, you may need to contact your broker or nominee directly to discontinue duplicate mailings to your household.
Computershare Investor Services serves as our transfer agent, registrar, and dividend paying agent with respect to our Common Stock. Correspondence relating to any stock accounts, dividends, or transfers of stock certificates should be addressed to:
Computershare Investor Services
Shareholder Communications
by regular mail:
P.O. Box 43078
Providence, RI, 02940-3078
by overnight delivery:
150 Royall Street
Suite 101
Canton, MA, 02021
(888) 470-2938
(312) 360-5261
www.computershare.com
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